Can Small Business Survive Federal Regulation?

It has always been tough to start a business, but as Niall Ferguson points out in his excellent article “How America Lost Its Way” in the Wall Street Journal, it’s getting tougher. According to an annual survey by the World Bank, in only 20 countries has the red tape to start a business increased since 2006. The sixth-worst such case on earth? The United States, where the regulatory process is now calculated at 433 days. That puts us in competitive company like Zimbabwe, Burundi and Yemen.

It’s also tough to write a piece about business regulation without it sounding like a political rant. That’s not my intention. Laissez-faire economics has its drawbacks, and there are certainly issues of fair trade and public safety that fall to the Federal Government, which is tasked directly by the Constitution with regulating interstate trade.

There are two developments that came to my attention last week that scare me, however.

First, the Equal Employment Opportunity Commission (EEOC) has filed Federal lawsuits against BMW of North America and Dollar General Stores. The claim is that they unnecessarily check criminal records of those applying for employment. Unless they can prove that something about the job creates legitimate concern regarding prior criminal activity, this is illegal.

business criminalTheir argument rests not on the overall fairness to criminals however. Thankfully, they do not yet claim that criminals as a group should be a protected class. Instead, the suit points out that since African-Americans have proportionately higher conviction rate than other ethnicities, using criminal records as a hiring disqualifier is de facto racial discrimination.

Put aside for the moment the government’s implied position regarding racial bias in the justice system. That isn’t an employer’s fault, nor is it his responsibility. Discrimination is favorable treatment of one class of workers against another. Don’t law-abiding employees have the right not to work with criminals every day?

Federal law widely recognizes that those convicted of a crime lose certain rights. They are confined against their will. They have to report their whereabouts, at least while on probation. They can’t vote. They can’t buy guns. They carry a record for life. That is all part of the punishment for committing a crime. Reducing job opportunities isn’t discrimination against a race, it’s discrimination against criminals – which is pretty much the point of the whole system. Why should employers be denied the rights that the government gives to itself and everyone else? That sounds like discrimination to me.

The second regulatory issue isn’t new, but businesses are just becoming aware of it. Large sections of the Soviet-named “Affordable Healthcare Act” (no one on the planet claims it makes health care more affordable), are due for implementation on January 1, 2014. According to multiple industry and government surveys, thousand of service industry employers are preparing to reduce the hours of many employees below the 30 per week that triggers eligibility for coverage in preparation.

Now we are becoming aware of the “Retaliation clause” of the ACA. It confers “whistle-blower” status on  those who claim their hours were reduced to avoid paying for health care coverage. Such status gives the whistle-blower a substantial cut of any damages, lets the government pay the litigation costs, and can result in the tripling of any award for what will now be a criminal activity.

I realize that there is no regulation protecting the right of a business owner to make a profit. There is no law saying that shareholders can’t have their investments destroyed by regulatory confiscation (we’ll decide what you spend – you just pay it) in support of social policy. There is no statute that says, as Ayn Rand did, that the pursuit of financial success should be protected as long as it doesn’t harm anyone else.

But there should be.

On the bright side, at least those employers driven out of business by ACA convictions should be able to get a job…

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2 Responses to Can Small Business Survive Federal Regulation?

  1. Jeff Ostroff says:

    Totally agree with the criminal background check. not just a right but practically a necessity. who would want to hire an embezzler to be your accountant, right? we get to check everything else on a resume’ or application, but not whether they broke the law? By the time an employer does the background check they have already passed the point of a judgement based on color, race, etc if in fact they were narrow minded enough to allow that to enter into their hiring decision.

    Disagree on healthcare. everyone deserves it and while the current law sucks it was the best our representatives could come up with considering their primary objective is always political, not about the people they represent. A lot of great ideas were shot down based solely on rhetoric, unsupported assumptions and lies as facts. (BTW, i pay 90% of my employees’ healthcare)

    • John F. Dini says:

      Good for you, Jeff. I also pay the cost of my full time employees’ health insurance. I’ve been to countries where there is nothing provided for the poor, and they aren’t places I would choose to live. My problem is with criminalizing an employer’s decision to contain expenses (pointing out that the law includes provisions to cover those who don’t come under their employer’s policy, which is then paid through taxes). I have 2 part-time employees. If I had to pay their coverage as well, I’d have to pay substantially less to everyone. At the very least, I’d be less able to attract the quality of folks that currently work for me. I think those should be my decisions.

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