Legislative Issues: EPA - New Small Business Compliance Policy

EPA's new Small Business Compliance Policy is designed to encourage small businesses to discover areas of non-compliance on their own, voluntarily disclose the non-compliance and take corrective action.

The Environmental Protection Agency (EPA) may be the federal agency that businesses in the ceramic industry fear most (though the the Internal Revenue Service and the Occupational Safety and Health Administration may not be far behind). The EPA: administers numerous statutes dealing with clean air, water, land use, waste disposal, etc., and the agency has issued thousands of pages of regulations implementing these various statutes.

The EPA has the power to impose penalties that can amount to millions of dollars-plus require expensive cleanups-and criminal violations of EPA-administered statutes can result in prison terms. All of this presents a legal minefield for businesses as they try to conduct their activities without violating any of the myriad EPA standards. Considering that many of these standards are inherently confusing or highly technical, unintended violations can occur. This is a particular problem for small businesses that may not have the resources to keep abreast of changing developments.

An Updated Policy

In April of this year, to assist small businesses in their efforts to comply with the range of its requirements, the EPA updated, expanded and clarified its Small Business Compliance Policy. Basically, the policy is designed to encourage small businesses to discover areas of non-compliance on their own, voluntarily disclose the non-compliance and take corrective action. The EPA is often criticized for failing to consider the needs of small business when it establishes policies. The EPA Small Business Compliance Policy is an attempt to appear to be more small business friendly.

The EPA also feels that since the program involves the waiving of penalties, its enforcement job will be easier because small businesses will be anxious to self-report when a problem area is self-discovered. Under the policy, the EPA will eliminate or reduce monetary civil penalties against small businesses if the small business has taken certain actions. It will not, however, reduce any sums required to correct or clean up the situation.

The policy applies to businesses that employ 100 or fewer persons. This includes everyone at every facility, no matter where it's located. The employee limit is considered 100 or fewer full-time equivalents calculated on an annual basis. It includes contract employees, as well as traditional (or W-2) employees. Full-time equivalent employees means 2,000 hours of work in the business per year. On that basis, two part-time employees, each working 20 hours per week for 50 weeks in the year, would equal one full-time equivalent. If a company has more than 100 full-time equivalent employees, it does not qualify for the program.

Does Your Business Qualify?

In order to qualify, the small business must first discover the violation on its own. It cannot claim the benefits of the policy if the EPA or a state agency discovered the problem first. The small business will still qualify for the program if its discovery of the problem was through an environmental audit, the work of a consultant or through participation in a mentoring program. If the violation is discovered through legally required monitoring or sampling activity, the policy will not apply. In addition, if the problem would amount to a criminal violation of the environmental laws, the small business cannot take advantage of the program.

Second, the small business must voluntarily disclose the specific violation to the EPA within 21 calendar days after the small business has discovered the violation. The disclosure must be complete and in writing. The EPA indicates that once the small business is aware of such facts that would reasonably lead it to believe a violation has occurred, it should be reported. This could be tricky, because the policy is unclear as to what level within a business the knowledge of a violation must be before the business is considered to be "aware."

Third, the violation must be corrected. The EPA will expect the small business to correct the situation in as short a time as is practical. Corrective actions include remediating any harmful effects associated with the violation. The small business must also put into place procedures to prevent such a violation from happening again. Corrective action does not have to be completed at the time the violation is reported to the EPA, but the small business should be prepared to present the EPA with a timetable for corrective action.


The EPA policy will not apply at all if the business has a history of non-compliance over the previous three years. This can involve EPA warning letters, citations, actions by a state, or even a citizen suit. It will also not apply if actual serious harm to the public health, safety or the environment occurred because of the violation. The policy is unclear as to exactly what EPA will consider to be serious.

When an environmental problem is discovered, a qualifying small business may want to consider utilizing this EPA program. It could result in no penalties being imposed by the EPA.

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