[House Hearing, 118 Congress] [From the U.S. Government Publishing Office] BURDENSOME REGULATIONS: EXAMINING THE EF- FECTS OF DOL RULEMAKING ON AMERICA'S JOB CREATORS ======================================================================= HEARING BEFOROE THE COMMITTEE ON SMALL BUSINESS UNITED STATES HOUSE OF REPRESENTATIVES ONE HUNDRED EIGHTEENTH CONGRESS FIRST SESSION __________ HEARING HELD OCTOBER 19, 2023 __________ [GRAPHIC NOT AVAILABLE IN TIFF FORMAT] Small Business Committee Document Number 118-031 Available via the GPO Website: www.govinfo.gov ________ U.S. GOVERNMENT PUBLISHING OFFICE 54-099 WASHINGTON : 2024 ----------------------------------------------------------------------------------- HOUSE COMMITTEE ON SMALL BUSINESS ROGER WILLIAMS, Texas, Chairman BLAINE LUETKEMEYER, Missouri PETE STAUBER, Minnesota DAN MEUSER, Pennsylvania BETH VAN DUYNE, Texas MARIA SALAZAR, Florida TRACEY MANN, Kansas JAKE ELLZEY, Texas MARC MOLINARO, New York MARK ALFORD, Missouri ELI CRANE, Arizona AARON BEAN, Florida WESLEY HUNT, Texas NICK LALOTA, New York NYDIA VELAZQUEZ, New York, Ranking Member JARED GOLDEN, Maine KWEISI MFUME, Maryland DEAN PHILLIPS, Minnesota GREG LANDSMAN, Ohio MORGAN MCGARVEY, Kentucky MARIE GLUESENKAMP PEREZ, Washington HILLARY SCHOLTEN, Michigan SHRI THANEDAR, Michigan JUDY CHU, California SHARICE DAVIDS, Kansas CHRIS PAPPAS, New Hampshire Ben Johnson, Majority Staff Director Melissa Jung, Minority Staff Director C O N T E N T S OPENING STATEMENTS Page Hon. Roger Williams.............................................. 1 Hon. Nydia Velazquez............................................. 2 WITNESSES Mr. Paul J. Ray, Director, Thomas A. Roe Institute for Economic Policy Studies, The Heritage Foundation, Washington, DC........ 3 Mr. Mario Burgos, Chief Strategy Officer, Prairie Band, LLC, Albuquerque, NM, testifying on behalf of Associated Builders and Contractors................................................ 5 Mr. Ric Suzio, Vice President, The Suzio York Hill Companies, Meriden, CT, testifying on behalf of the National Stone Sand and Gravel Association (NSSGA)................................. 6 Mr. Frank Knapp Jr., President & Chief Executive Officer, South Carolina Small Business Chamber of Commerce, Columbia, SC, testifying on behalf of the South Carolina Small Business Chamber of Commerce............................................ 8 APPENDIX Prepared Statements: Mr. Paul J. Ray, Director, Thomas A. Roe Institute for Economic Policy Studies, The Heritage Foundation, Washington, DC............................................. 21 Mr. Mario Burgos, Chief Strategy Officer, Prairie Band, LLC, Albuquerque, NM, testifying on behalf of Associated Builders and Contractors................................... 33 Mr. Ric Suzio, Vice President, The Suzio York Hill Companies, Meriden, CT, testifying on behalf of the National Stone Stand and Gravel Association (NSSGA)....................... 39 Mr. Frank Knapp Jr., President & Chief Executive Officer, South Carolina Small Business Chamber of Commerce, Columbia, SC, testifying on behalf of the South Carolina Small Business Chamber of Commerce......................... 48 Questions for the Record: Questions from Hon. Velazquez to Mr. Burgos and Answers from Mr. Burgos................................................. 51 Questions from Hon. Chu to Mr. Knapp and Answers from Mr. Knapp...................................................... 53 Additional Material for the Record: Engine....................................................... 55 National Association of Realtors (NAR)....................... 58 BURDENSOME REGULATIONS: EXAMINING THE EFFECTS OF DOL RULEMAKING ON AMERICA'S JOB CREATORS ---------- THURSDAY, OCTOBER 19, 2023 House of Representatives, Committee on Small Business, Washington, DC. The Committee met, pursuant to call, at 10:02 a.m., in Room 2360, Rayburn House Office Building, Hon. Roger Williams [chairman of the Committee] presiding. Present: Representatives Williams, Luetkemeyer, Meuser, Salazar, Molinaro, Alford, Crane, Bean, Velazquez, Landsman, McGarvey, Scholten, Thanedar, and Davids. Chairman WILLIAMS. Before we get started today--first of all, good morning to everybody--I want to recognize Congresswoman Salazar from the great State of Florida to lead us in the pledge and the prayer. If you will all rise, please. Ms. SALAZAR. Thank you, Mr. Chairman. And, Dear Lord, we come to your throne in the name of Jesus. And we ask you to bring peace to Congress, to the Republican Conference, to Israel, to everything that is occurring in the Middle East, and to make this hearing a very successful one. We ask in your name, Jesus. Amen. Thank you. We pledge---- All. I pledge allegiance to the flag of the United States of America and to the Republic for which it stands, one nation, under God, indivisible, with liberty and justice for all. Chairman WILLIAMS. Good morning, everyone. I now call the Committee on Small Business to order. Without objection, the Chair is authorized to declare a recess of the Committee at any time. I now recognize myself for an opening statement. And I want to welcome you to today's hearing, which will focus on examining the effects of the Department of Labor's rulemaking on Main Street America. First, I want to thank the witnesses, all of you, for being here today. I know you have traveled to be here with us this morning, and we appreciate you taking the time to do that. As our nation's job creators continue to fight difficult economic headwinds, agencies such as the Department of Labor continue to implement overreaching regulations that create expensive new compliance costs and make it harder for our nation's job creators to hire more workers and expand their operations. So, with that, I will yield to our distinguished Ranking Member from New York, Ms. Velazquez. Ms. VELAZQUEZ. Thank you, Chairman Williams, for convening this hearing so we can learn more about the impact that the Department of Labor's regulations are having on small businesses. I would like to take this opportunity to thank all of the witnesses for being here. Let me say at the outset that I understand that complying with federal, state, and local regulations can be onerous for small-business owners. Small businesses don't always have the resources that larger companies do to monitor regulatory actions. That is why Congress passed the Regulatory Flexibility Act, RFA, and created the Office of Advocacy. The Office of Advocacy serves as an independent voice for small businesses, and it works to educate agencies about the effect the rules have on small businesses. The office also seeks to find targeted solutions that are less burdensome while achieving the desired results. Ninety-nine-point-nine percent of all U.S. businesses today are considered small. Some of these small firms can have 1,500 employees and up to $47 million in receipts, depending on the industry. That is why it is vitally important to make this distinction during our discussion today and make sure that big businesses are not hiding behind the guise of small businesses to promote an anti-regulatory agenda. Contrary to what we will hear today, federal regulations can and do benefit small businesses and boost our economy. I know that we are short on time, so let me say that the bottom line is this: smart, well-crafted, commonsense regulations have the potential to unleash innovation and provide critical health and safety protections. Thank you, and I yield back. Chairman WILLIAMS. Thank you. And I will now introduce our witnesses. Our first witness here with us today is Mr. Paul J. Ray. Thank you, Mr. Ray, for being here. Mr. Ray is the director of the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation, located here in Washington, D.C. So, Mr. Ray, again, thank you for joining us, being with us. Our next witness with us today is Mr. Mario Burgos. Mr. Burgos is the chief strategy officer at Prairie Band, LLC, located in Holton, Kansas. Prairie Band, LLC, was created in 2010 by the Potawatomi nation to create economic stability by diversifying, managing, and expanding the economic interests of the nation. So, Mr. Burgos, thank you for joining us today. We appreciate that very much. Our next witness here with us today is Mr. Ric Suzio--I said it right, didn't I, Ric?--Suzio--who is vice president of The Suzio York Hill Companies, located in Meridian, Connecticut. The company got its start over a century ago when the L. Suzio Construction Company was founded by a Leonardo Suzio, an Italian immigrant, which we talked about. Great story. Now in its third generation, the company is still a family business, with his grandchildren playing an active role in management, including having over 33 years at his family's business himself. So I want to recognize and thank you very much for being here today. I now recognize the Ranking Member from New York, Ms. Velazquez, to briefly introduce our last witness. Ms. VELAZQUEZ. Thank you, Mr. Chairman. It is my pleasure to introduce Mr. Frank Knapp, the President and CEO of the South Carolina Chamber of Commerce. He also serves on the advisory board for the South Carolina Small Business Development Center and was recognized by the SBA as the 2014 South Carolina Small Business Financing Advocate of the Year. From 2015 to 2017, Mr. Knapp served on the SBA's Region IV Regulatory Fairness Board, an advisory body to the SBA Office of the National Ombudsman. Welcome, Mr. Knapp, and thank you for being here with us today. Chairman WILLIAMS. Thank you. And we appreciate all of you being here today. Again, I would like to say that. Now, before recognizing witnesses, I would like to remind them that their oral testimony is restricted to 5 minutes in length. If you see the light in front of you turn red in front of you, that means your 5 minutes is up and you have concluded, and you should wrap up your testimony shortly thereafter. With that in mind, I now recognize Mr. Ray for his 5-minute opening remarks. Mr. Ray? STATEMENTS OF PAUL J. RAY, DIRECTOR OF THE THOMAS A. ROE INSTITUTE FOR ECONOMIC POLICY STUDIES, THE HERITAGE FOUNDATION; MARIO BURGOS, CHIEF STRATEGY OFFICER, PRAIRIE BAND, LLC; RIC SUZIO, VICE PRESIDENT, THE SUZIO YORK HILL COMPANIES; AND FRANK KNAPP, JR., PRESIDENT AND CHIEF EXECUTIVE OFFICER, SOUTH CAROLINA SMALL BUSINESS CHAMBER OF COMMERCE STATEMENT OF PAUL J. RAY Mr. RAY. Thank you, Chairman Williams, Vice Chairman Leutkemeyer, Ranking Member Velazquez. It is an honor to be hear today with you. Thank you for the kind invitation. I don't need to tell the Members of this Committee about all the good things small businesses do for their owners and workers, their customers and communities, and our country. The small-business record speaks for itself. Almost half of all Americans work in a small business, and small businesses have created two of every three new jobs in the United States in the last 25 years. Small businesses are responsible for many of the breakthroughs that make American life what it is today and for the prosperity that even in our current business climate makes America the envy of the world. But a small business does not merely achieve results; it also opens a path for a dignified life of initiative, creativity, and service. Millions of Americans feel the desire to put their own ingenuity and initiative to work, making their communities and world a better place, and small business provides an opportunity to do just that. To do their important work, our small-business owners and workers need a legal and regulatory system that allows them to navigate the present and plan for the future. Unlike their larger peers, small businesses do not have armies of lawyers and compliance officers to analyze regulations; nor do they have squadrons of lobbyists to advise on how those regulations can change; nor do they often have large profit margins or cash reserves that let them respond with agility to surprising regulatory developments. This is why small businesses need regulatory stability, clarity, and certainty. But our regulatory system fails to give small businesses what they need. Consider stability. The American Founders placed an immensely high value on legal stability. As James Madison put it, quote, ``It will be of little avail to the people that the laws are made by men of their own choice if the laws undergo such incessant changes that no man who knows what the law is today can guess what it will be tomorrow,'' end quote. Madison knew that rapid legal change privileges ``the sagacious, the enterprising, and the moneyed few''--again Madison's words-- ``over the industrious and uninformed mass of the people.'' Unfortunately, today's regulatory system is subject to precisely the, quote, ``incessant change'' that Madison worried about. Agencies issue hundreds of pages of new regulations, amendments to regulations, and other administrative materials every business day. On many issues of importance to small business, such as labor and employment, regulations change dramatically with every change in White House control. There are now even Republican and Democratic versions of many important regulations which the agencies toggle between based on who is in power. But even when regulations hold steady, small businesses often have great trouble knowing what those regulations require of them. This is because federal regulations are many, complex, and obscure. The Code of Federal Regulations is over 185,000 pages long and regulates everything from the electrical grid down to the diameter of spaghetti. To make matters worse, many important regulatory documents cannot even be found in the Code of Federal Regulations. Instead, they are scattered across agency websites or archives in the form of guidance, regulatory preambles, adjudicatory decisions, and other kinds of documents. It is hard for many small-business owners, busy enough just running their own businesses, to discover all the mandates they must comply with, let alone what those mandates mean for them. Even putting these issues aside, our regulatory system fails to give small businesses the certainty they need on account of the way the agencies enforce their regulations--an enforcement process that too often is worse than the penalties it threatens. Governing law leaves agencies enormous discretion in how they enforce the regulations they administer, and agencies too often have failed to conduct investigations or adjudications in a way that is fair, accurate, and prompt. Too often, agencies leave small-business owners in legal limbo, as they did to the poor Boucher family, Indiana farmers who cut down a few trees on their own land in 1994 and in 2019 were still stuck in litigation against the USDA. Some of the problems small-business owners face are baked in to the way we regulate, but Congress could help. For instance, the REINS Act would impose more robust procedures on rulemaking and so slow the pace of regulatory change. The GOOD Act would demand that agencies make their regulatory materials more easily accessible by small businesses. And legislation after the pattern of Executive Order 13924, section 6, would require agencies to create and stick to fair and prompt procedures in investigations and adjudications. There are other measures, too, that Congress could take, which I would be happy to discuss in questions. Thank you. Chairman WILLIAMS. Thank you very much. And I now recognize Mr. Burgos for 5-minute opening remarks. STATEMENT OF MARIO BURGOS Mr. BURGOS. Chairman Williams, Ranking Member Velazquez, and Members of the U.S. House Committee on Small Business, thank you for the invitation to testify this morning on the Department of Labor's rulemaking and what impact it is having on the job creators across the country and the concerns that the recent surge of federal regulations have raised during my own personal small-business journey. My name is Mario Burgos, and until July of this year I was the president and CEO of Burgos Group, headquartered in Albuquerque, New Mexico. This is a company I founded in 2006 and grew, along with my brother, as a small-business federal prime contractor. We primarily focused on general and electrical construction. And in July of this year, we made the decision to sell our company to Prairie Band, LLC, a company which was founded in 2010 to contribute to the long-term economic stability of Prairie Band Potawatomi nation, located in the State of Kansas. I now serve as the chief strategy officer of Prairie Band, LLC. To understand why we chose to exit our business, the business that we labored to build over a decade and a half, I think it is important to provide you with some background. In 2009, at the height of the Great Recession, our family business--we pivoted. We pivoted to focus on the federal construction opportunities made possible under the American Recovery and Reinvestment Act, which was signed into law by President Barack Obama. Our company became a vehicle for realizing the American Dream of two brothers who are first- generation Americans. Our father emigrated from Ecuador. Under the Obama and Trump administration, our company grew from the two brothers to 195 employees, with a track record of completing over 100 projects doing sustainability, renovation, modernization. These projects were done for 13 different federal agencies from coast to coast. Our growth landed us on the Inc. 5000 Fastest-Growing Private Companies--on that list 6 years in a row. Now, that is something that less than 3 percent of those companies that are on that list ever make. We were recognized in 2015 as the SBA Small Business Prime Contractor of the Year for Region VI, which is the region with Texas and the States that surround it. And in 2017, I was honored to be the SBA Small Business Prime Contractor of the Year--I am sorry--Small Business Person of the Year for the State of New Mexico. Unfortunately, the number of rapidly changing and ever- increasing federal and state regulatory requirements affecting the construction industry led us to conclude that our most prudent action would be to exit the business that we had labored to build. The recent Department of Labor updates to the regulations implementing the Davis-Bacon and related acts is just the latest example of additional burdens and barriers being erected that make it difficult for small businesses to participate in the economic investments of the bipartisan Infrastructure Investment and Jobs Act or to support our nation's essential national defense missions. In my written testimony, I have provided specifics on how requirements for the construction under the Davis-Bacon and related acts have harmed my business by creating significant confusion and costing critical dollars. The construction industry now grapples with an avalanche of new and impending regulations, most of which have either been finalized or are poised for imminent execution, effectively creating a new tax on countless businesses that now must choose to either struggle to comply, sell, or cease operations. It is my sincere hope that this Committee will consider the testimony that I am making and take the actions that will remove barriers and simplify compliance for America's small businesses. Thank you again for the opportunity to serve as a witness for this hearing, and I look forward to answering any questions you may have. Chairman WILLIAMS. Thank you very much. And I now recognize Mr. Suzio for 5-minute opening remarks. STATEMENT OF RIC SUZIO Mr. SUZIO. Chairman Williams, Ranking Member Velazquez, and distinguished Members of the Committee, thank you for having me today. I am Ric Suzio, representing both The Suzio York Hill Company and the National Stone, Sand, and Gravel Association. NSSGA is the leading voice and advocate for the aggregate industry, representing over 450 producers of crushed stone, sand, and gravel across the United States as well as the equipment manufacturers and service providers that support these industries. We are essential to the growth of our nation, providing 2.5 billion tons of materials needed to build communities, homes, deliver clean water, produce energy, and modernize our transportation networks, as well as providing good-paying careers. I am privileged to work for my family company, which has deep roots in Connecticut's construction history for over 125 years. Our story is not just about construction; it is about being deeply embedded in the community. I am here to represent hundreds of small producers, bringing forth concerns and triumphs of countless businesses like mine. We have great concern with the ever-changing regulatory environment which poses challenges to small businesses. We often lack the resources to interpret, comply, and adapt to these regulations, leading us to hire expensive consultants. Many times, these regulations are solutions looking for a problem and do nothing to address actual challenges we face, like finding the skilled workforce needed to build our nation's infrastructure. Over time, this financial burden risks driving consolidation within our industry, overshadowing the essential role of small businesses. The Suzio York Hill Company is a multigenerational family operation founded in 1898 that boasts a dedicated team of 93 employees. We are proud to have second-generation coworkers with unmatched loyalty and dedication. Several of our coworkers have retired after serving the company for over 40 years. We are engaged with the International Union of Operating Engineers' Apprenticeship Training Program, showcasing our commitment to professional growth and training. In my full testimony, I highlighted eight new policies that are making it hard for our industry to build America's infrastructure and communities, but I would like to take this time to highlight two acute challenges. The Mine Safety and Health Administration is working to update the existing occupational exposure limit for silica, reducing it to the Occupational Health Safety Administration's 2016 standard. While a safe silica exposure limit is paramount to protecting miners, we are concerned that the proposed rule establishes a new one-size-fits-all regulatory criteria that will result in the misallocation of limited resources and fails to adequately protect the health of many of our nation's miners. The vast majority of mining in America occurs in above- ground, non-metal mines, where there is little risk of exposure. However, MSHA's rule seems to apply new standards in reporting that is meant to address challenges faced in underground coal-mining, which accounts for a small percentage of overall mining operations. As the rule is finalized, we need more flexibility for metal/non-metal and the MSHA rule to confirm with OSHA standards that are already in place and working. Historically, small businesses have relied on the flexibility of hiring independent contractors, not just to manage their costs but to effectively adjust to the dynamic market demands. The simpler criteria provided by the 2021 independent contractor rule gave clarity and certainty to these businesses. With its potential repeal, many small enterprises face the dual challenges of increased costs and bureaucratic complexities. In the aggregates industry, where independent contractors are integral, businesses frequently mobilize such contractors daily. Imposing more rigid classification leads to added taxes, fees, and administrative burdens, increasing the cost of essential materials during an already-inflationary period. In conclusion, I would like to extend my gratitude to the Committee Members for allowing me the opportunity to testify on these issues, and look forward to your questions. Thank you. Chairman WILLIAMS. Thank you very much. I now recognize Mr. Knapp for opening remarks. Mr. Knapp? STATEMENT OF FRANK KNAPP, JR. Mr. KNAPP. Thank you, Chairman Williams, Ranking Member Velazquez, and Members of the Committee. I am Frank Knapp, the president and CEO of the South Carolina Small Business Chamber of Commerce. We are a statewide advocacy organization working at both the State and federal levels with 5,000-plus supporters. I co-founded our organization over 23 years ago, and good regulations at the state and federal level has long been an issue we have championed. Nine years ago, my organization worked to pass our State's Small Business Regulatory Flexibility Act, modeled after the federal law. I am also a small-business owner, and, from 2015 to 2017, I served on the SBA Regulatory Fairness Board, which advises the SBA National Ombudsman on matters of federal regulatory concern to small businesses. I want to be very clear: We expect every federal agency to fully comply with the law. That is the way we make sure that real small businesses have their voices heard and considered when new rules are being made. No one wants to unnecessarily burden small businesses in order to comply with regulations. If there are less onerous ways of achieving the goals of new regulations, then those ways should be adopted. But make no mistake about the need for regulations. They are the rules that give small businesses a level playing field to compete with each other and with big businesses. They help protect our environment so all of us can have healthier lives. They protect a small business's most precious asset, their employees, who we don't have enough of today. And they try to protect our economy to avoid cataclysmic events. I have never heard an entrepreneur say that they decided not to start a business because of federal regulations. Now, this doesn't mean that new federal regulations might not put some financial burden on existing real small businesses. But big cost estimates have been generated for years for their shock value and dire warnings that federal regulations are crushing small businesses. However, the definition of what constitutes a small business ends up showing that 99 percent of all businesses are small businesses, even some with up to 1,500 employees. We and I believe most people recognize businesses with less than 100 employees as real small businesses, and those are the ones the RFA should focus on. Plus, all we hear about is the cost of proposed regulations; we never hear about the benefits. We don't get real regulatory analysis in which benefits are supposedly taken into consideration. All of us should understand that proposed regulations have benefits; otherwise, they wouldn't be proposed. Regulations address the health and well-being of workers, the local community, and the entire country. This creates a healthier economy for small and all businesses to prosper. Good regulations create opportunities for entrepreneurs and small businesses to innovate and grow by creating new products and services, which create new jobs. These benefits might be difficult to quantify, but totally ignoring them only serves the purpose of those who oppose regulations or those who want to cast aspersions on an administration acting responsibly. Our nation's economy is strong. The Federal Reserve has been trying to slow its growth. The problems that small businesses have had with growth have been due to the lack of workers and access to capital, not federal regulations. But we do need improvements in the rulemaking process if we are serious about agencies proposing good regulations with minimal cost to small businesses. Agencies should do a better job of reaching out to small businesses across the country and not just talk with Washington-based trade associations often controlled by big businesses. Agencies should project costs for real small businesses with fewer than 20 employees and fewer than 100 employees. Agencies should project direct benefits of proposed regulations to the impacted small businesses and local economy. If agencies need more resources to implement these recommendations, they should get them. And one more thing: With all this concern about proposed new regulations, there is far too little concern with helping a small business comply with existing federal regulations, a process that is intimidating, confusing, and too time- consuming. All of those who have testified here have expressed concern about this issue. Let's simplify this process by having one federal agency be a resource for all small businesses regarding regulatory compliance concerns, an agency that could work with the appropriate federal agency and ensure that the concerns have been successfully addressed. The SBA National Ombudsman's Office is already set up for this responsibility and has a successful track record of this regulatory compliance assistance. Empower and fund this office for a more efficient and small-business-friendly process. Legislation has previously introduced in Congress to do just this. There may be some coming down the road this session. And I recommend that such a bill be passed. Thank you for the opportunity to speak before you today, and I welcome any questions the Committee may have. Chairman WILLIAMS. Thank you very much. And we will move into Member questions now, but I would ask the Members, since we are under a timeframe here, let's keep our questions limited so we can hear answers from the witnesses. Mr. Ray, during your time as the Administrator of OIRA, your office played an important role with the Trump administration to reduce the regulatory burden on America's creators. So my question is, can you describe how the regulatory process could be improved so we can better take small-business interests into account? Mr. RAY. Thank you, Mr. Chairman. I appreciate the question. Yes. So I think it is very helpful to break the question down into two parts: how the regulatory process can be improved with respect to individual rulemakings and how it can be improved with respect to the regulatory system writ large. I recall one of the most interesting conversations I had as Administrator during the Trump years with a representative of the small-business community. I asked him: Which rulemaking has been most helpful for your Members, unlocking their potential to thrive and create jobs and economic growth? And he said: Well, it is not any one regulation that has been so helpful; it is the knowledge that there is stability and certitude across the board. Our Members know that we are not going to face new regulations coming down the pike, changing the rules of the game, so we don't have to hold, basically, cash reserves in place to respond to new regulatory developments. And I thought it was a very interesting comment. It seems to me that the best thing that could be done to make the regulatory process as a whole more responsive to the needs of small business would be to slow the pace of regulatory growth across the board. So one thing the Trump administration did to do that was, of course, the Two-for-One Executive Order as well as the provision of the same order that required cost caps. I think the most important thing that could be done to the regulatory process with respect to small business is to slow the growth across the board and create greater stability. Chairman WILLIAMS. Okay. Thank you. Mr. Burgos, you have talked about you ultimately decided to sell the business that you created with your brother after regulations became too costly to deal with. So can you walk us through, quickly, how you came to this conclusion? You talked a little bit about it, but remind us again what made you come to the conclusion to sell the family business. Mr. BURGOS. Yes, Mr. Chairman. So the biggest reason was, we had an experience where we were a subcontractor on one of the border-wall projects in Arizona. And at the end of December, right before Christmas, we received a note from DOL saying that they had been directed to audit all border-wall subcontractors and contractors, and they gave us a list of 15 documents that we needed to provide. And of those 15 documents, we had until January, the first week in January, to provide them. To respond to those 15 documents, just to give everybody an idea of what the burden of paperwork is, it required us to put together 800 pages of documentation--800 pages of documentation. So we provided those 800 pages of documentation. And this went on until April of 2022, is when the decisions were finally decided. And during that time, we had interesting conversations with the Department of Labor. They came back and they told us, for example, 5 months later: Hey, this is great. You guys are obviously a good contractor. You put together all this documentation. You put it together--you didn't do a data dump. You actually put it together in a nice order for us to review. Unfortunately, did you call the union before you decided how to comply with the Davis-Bacon wage rates? And we said: No, we didn't call the union. I have been doing this for a long time, and the Davis-Bacon wage rates spell out exactly how you go about doing this, and I wasn't aware that you needed to call the union. And they actually said: Well, you don't, but, unfortunately, even though the Davis-Bacon wage rates say that there is a pipe-layer category--which is somebody who touches pipe; and conduit is what we were putting in the ground, which is pipe--they said: Unfortunately, the electricals union prevailed over the laborers union, and, therefore, you needed to pay everybody on your job site as an electrician. And then they turned around and told us that was $685,000 that we owed in back wages, and they would be happy to hold that in trust in order to continue having discussions with us. Then they increased it to $950,000 several months later, almost a million. And then when we asked them, how are you coming up with this, they kept changing what the rules were. And, ultimately, they said the analysis was that they looked at our contract and our contract noted that we were going to have switchgear and transformers and light poles and pull wire. And we had that 30 percent of our labor force were electricians and 70 percent were ``other''--operators and laborers and other designations that were on the wage rate determination. And so we said, that is correct. And in January the President issued his executive order stopping our work. And in April we took delivery of the switchgear and the transformers and the rest of the wire and the other things that were electrical components. And they said: Oh. Okay. Well, then we will reconsider that. And ultimately we settled for 300-and-some-odd-thousand dollars. And we just can't continue to afford to do that. Chairman WILLIAMS. Thank you. My time is up. I now recognize the Ranking Member for 5 minutes of questions. Ms. VELAZQUEZ. Thank you, Mr. Chairman. Mr. Knapp, the size standard for some industries allows small firms to have receipts up to $47 million and 1,500 employees. In regard to the Regulatory Flexibility Act, are these size standards overly broad? Mr. KNAPP. Absolutely. The criteria for a small business can go up to 1,500 employees, and that means 99 percent of all businesses in the country are considered a small business. The term becomes useless. Ms. VELAZQUEZ. Should there be specific changes to the RFA or the Office of Advocacy to better address the concerns of the smallest of small businesses? Mr. KNAPP. Yes, absolutely. Congress passed laws to protect small businesses. If most small businesses--well, half of them have four or fewer employees. Eighty-five percent probably have less than 20 employees. I would like to say a small business is up to 100 employees. That is where Advocacy and the RFA should focus. Ms. VELAZQUEZ. Should the RFA be amended to require the Office of Advocacy to take into consideration the benefits of regulations on small businesses? Mr. KNAPP. Absolutely they should. If Advocacy is only looking at the cost, they are missing the big business picture. And if they are making recommendations based just on cost and not on a true cost-benefit analysis, then the recommendations and comments to you as decision-makers is not all the information. You can't make a good decision unless you know really what the cost-benefit is. Ms. VELAZQUEZ. Can you give us some of the benefits of these Labor rules on small businesses? Mr. KNAPP. Well, yes. The rules are there to protect employees. They are there to have a healthier workforce. Every business wants a healthier workforce, no question about that, and regulations strive for that. They also create the lay of the land, the playing field, this level for everybody to compete. If you don't have rules-- if you don't have rules, if football games don't have rules, it is a mess, and it is unfair, and it gives the advantage to people who are willing to do unsavory things. So thank you. Ms. VELAZQUEZ. Thank you. You are based in South Carolina, right? Mr. KNAPP. I am. Ms. VELAZQUEZ. How important is outreach by federal agencies to ensure agencies hear directly from small businesses rather than Washington trade groups? Mr. KNAPP. Yeah, look, the agencies need to get out of Washington. They need to quit relying just on trade associations that often are controlled by big businesses. They need to get out there and to talk to these gentlemen here about how this is going to affect you, before the rule goes into place. That is how you are going to collect good information. The people out in the field, the small-business owners, they are the experts. Ask them. Ask them for their input. Listen to what they say. Ms. VELAZQUEZ. Thank you. Mr. Suzio, it is important for the Office of Advocacy and the Office of the Ombudsman to travel throughout the country to hear directly from small businesses like yours. Can you share instances when the Department of Labor conducted similar outreach around the country? And did it lead to positive changes within your business? Mr. SUZIO. Actually, with the Department of Labor, I can't address that, but what I can say is, we had a very good experience with MSHA. Several years ago, there was quite a few fatalities in our industry, and MSHA went around and did a ToolBox Talk, coffee- hour talk, with our employees. It wasn't punitive. It was educational and informative. And it was very helpful to us and them. And it built a great rapport, where no one felt threatened. Ms. VELAZQUEZ. Thank you. Mr. Paul Ray brought up the issue of certainty for small businesses. Do you agree that a government shutdown is bad for small businesses and that it will delay critical Infrastructure Investment and Jobs Act funding for your industry? Mr. SUZIO. Without a doubt. And we rely on federal funding. The States have matching funds. They will not release work until they know that there is a secure package. And the short- term CRs kill our industry and keep us from building roads for the citizens of America. Ms. VELAZQUEZ. Well, sir, here we are, only 29 days before a shutdown, and we still don't have a Speaker. I yield back. Chairman WILLIAMS. Thank you, Ms. Velazquez. I now recognize Chairman Luetkemeyer from the great State of Missouri for 5 minutes. Mr. LUETKEMEYER. Thank you, Mr. Chairman. And thank all of you for being here today, especially our small-business owner for taking time away from your businesses. One of the things that concerns me is that, since President Biden took office, 677 final rules have passed. This has cost American businesses $430.5 billion. Now, this figure is come up with by adding the cost--every time they do a rule, the government is supposed to also put a cost to implementing that rule. So this isn't my number. This isn't the Chairman's number. This is the government agency's number, themselves, when they initiate a rule. $430 billion in a little over 2.5 years, and 215 million (ph) hours of paperwork. In fact, as projected, President Biden's current regulatory framework will cost Americans $1.5 trillion over the next decade. Mr. Burgos, you talked about this in your testimony with regards to the cost of continuing to comply, continuing to go through the rigmarole of trying to be compliant with the new rules and regulations and moving of the goalposts and the moving targets that they are continuing to go after. You know, Mr. Knapp talked about the benefits of these rules and regulations. There may be some. But when you weigh all this, your testimony tells me that there is not a lot of benefits to some of this stuff here if you are going to keep moving the goalposts on folks. Would you like to comment on that? Mr. BURGOS. I would. And thank you very much. It is impossible for a small business to comply when the regulations are constantly being changed. And I would actually, respectfully, say that the cost to small business and business in general is much, much higher. For example, for the Department of Labor's newest revisions to the Davis-Bacon and related acts, they estimate it is going to cost, I believe, $255 for a business to comply. So, if you take that number, just as an example, what they say is, essentially, it is 5 hours of a human-resource person to read the 800 pages of documentation---- Mr. LUETKEMEYER. Speedreader, huh? Mr. BURGOS. That is correct, sir. It would take you 16-plus hours if you read at a--at a pace. And then trying to understand it. It is all in legalese. So the additional cost of that. You know, $50 an hour? I have yet to find an attorney that will work for me for $50 an hour. I have looked. I can't find one. They cost several hundred dollars now. And they don't charge you 1 hour to read 800 pages. Mr. LUETKEMEYER. One of the concerns that I have--and I have been here a long time, and I have seen these rules and regulations go on. And one of the biggest problems that I have with them is this power grab by the bureaucracy to take more power to themselves and away from all of you small-business guys. They want to control what you do even more. And unfortunately for small business, it doesn't level the playing field. It makes an unlevel playing field. Mr. Suzio, would you like to comment on that from the standpoint of you having to compete as a small business against the big guys with regards to these rules and regulations? It is costing numerous--those guys can spread this cost out over a lot more revenue compared to what a small business can do. Mr. SUZIO. Correct, sir, without a doubt. And the margins in our industry are so minimal that, when I ask friends of mine or other counterparts around the country why they chose to no longer be a family-owned business, the number-one answer I get is there was no succession plan or the family was fighting, but close right behind it is we could not compete anymore. And that is why the big boys keep getting bigger. Because companies like ours, we don't have an engineer, we don't have a legal department. We rely on our national associations to bring a lot of this forward to us. And it is just impossible to compete. And, as I said, the large companies have a huge advantage over those of us that truly are small, family-owned businesses. Mr. LUETKEMEYER. It seems to me that you need a tiered system here. If you have a small business, you need to have a different set of rules that you have to comply with versus the big guys. Otherwise, the little guys are never going to be able to compete. Mr. SUZIO. Yes. Mr. LUETKEMEYER. One of the things that concerns me is--I have been here, again, a long time, and this particular administration continues to weaponize guidance. And it just drives me up the wall, from the standpoint of: You have laws, and you have rules to implement the laws, and you have guidance to clarify the rules. Guidance is not enforceable. It is not enforceable, period. And yet this administration continues to allow its bureaucracies to go out here and intimidate the business community by issuing guidance and then trying to go out and enforce it and threaten them with lawsuits if they don't comply with their guidance. Have you guys seen that kind of activity in your world, Mr. Burgos or Mr. Suzio? Mr. SUZIO. Yes, we have. And we don't mind when government comes in in a cooperative way to educate us and be a resource. But when they automatically come in and are punitive or looking for fault within an organization that tries to do everything right, it is very frustrating. Mr. LUETKEMEYER. Thank you, gentlemen, very much. Appreciate your time here. And when you are away from your business, I know it is a sacrifice. Thank you so much. Mr. Chairman, I yield back. Chairman WILLIAMS. I now recognize Representative McGarvey from the great State of Kentucky for 5 minutes. Mr. MCGARVEY. Thank you, Mr. Chairman. Thank all of you guys for being here today. I want to reframe a little bit about what we are doing. Because, actually, what you see in this Committee is a whole bunch of people who are interested in helping small businesses succeed. They are the backbone of the economy in all of our districts. And as we talk about this process, sure, we have heard about overreach. We want to be able to help our small businesses with that. But let's also talk about the process of rulemaking and how and why it is important. Not every rule is overreach. Not every rule is unnecessary. You know, I believe that our workers deserve fair compensation. I believe that our workers deserve a safe working environment. And I don't think it is in any way radical to propose legislation in this environment that makes that possible. Just look at my district in Kentucky. Just recently, the DOL's Wage and Hour Division uncovered a company that was employing 11- and 13-year-olds at a distribution center and allowing them to work the forklift. Just recently in my district, in Louisville, Kentucky, Wage and Hour Division discovered 10-year-olds working until 2:00 a.m. at a McDonald's, with one operating the deep fryer. And what made that crackdown possible? This process here. And so I have always been a believer. And what we are doing here today is important, because we want our small businesses to succeed. You can be pro-worker without being anti-business. So, Mr. Knapp, you touched on how well-crafted regulations have the ability benefit the economy by leveling the playing field, incentivizing innovation, and protecting health. Can you give us some examples of regulations that do that? Mr. KNAPP. Let me first say, on your comments regarding some of your businesses in your State, those people are breaking the rules, right? And, therefore, they have an unfair advantage in competition with other small businesses. And that is why rulemaking is important. Because they do level--if everybody has to follow the same rules, then it does create that level playing field. Even things that--there was an NPR story the other day about the climate rule changes. A company called Corteva in Indiana, they make seeds and chemicals, and here was their comment: ``There is money to be made producing things like biofuels to power ships and airplanes with less climate pollution. Often, rules then inspire innovation, and they inspire a different process of delivering services that moves everything forward and benefits all of us.'' Mr. MCGARVEY. I appreciate that. And you are right; it does give an unfair advantage sometimes when people break the rules, and why some of this is necessary. One of the things I would love to have a conversation about in this Committee is about how we can improve the rulemaking process. Because, again, we don't want unnecessary burdens on our small businesses. We want our small businesses to succeed. But we also know that rules are necessary and part of that. So, Mr. Burgos, I understand your concerns with the updated Davis-Bacon regulations. And I understand that a lot of those concerns, based on what you have told us today, are on compliance costs. And I get that. If I find an attorney for $50, I will send him your way, but you might not want to use him. So is there a way for us to reduce burdens on businesses while still carrying out the intent of Davis-Bacon, which is higher wages for our construction workers? Mr. BURGOS. Absolutely. The simplest way is to streamline the paperwork requirements. The examples you provided, for example, in Kentucky, I am pretty sure those examples are against the law already. That is very simple to--so it doesn't require a Davis-Bacon wage-rate revision. As far as--and the other thing we need to do is remove the subjective nature. So, as my testimony, my written and verbal testimony demonstrated, there is a subjective nature. There is not a clear-cut rule. If there was a clear-cut rule that said--which we did, for example, in our issue, is follow the Davis-Bacon wage rate and pay the wage rate that was determined. But then there are other things like the Frye act that was passed--that was a court case from the 1970s. DOL's response, when I said, ``Well, I don't know what that is,'' they said, ``Well, Google it from the 1970s,'' and it doesn't apply, and it is not answered in the revisions that were done and put out. So, if we really want to make a difference, we would take 800 pages and put it down to very simple rules. ``Here is the wage rate''--for example, ``Minimum wage, here is the wage rate you are going to pay.'' That is, like, one line. It doesn't require a whole lot of--800 pages of narrative to support. Mr. MCGARVEY. No, I appreciate that input from you. And my time is going to run out. I would love to ask another question about how we could do that, whether the Ombudsman could be more involved with the SBA's Regulatory Fairness Board, how we could work that process together, but I have 6 seconds left. And, Mr. Chairman, I yield back. Chairman WILLIAMS. All right. I now would like to recognize Representative Crane from the great State of Arizona for 5 minutes. Mr. CRANE. Thank you, Mr. Chairman. As a small-business owner myself and somebody who represents a bunch of small businesses in Arizona's Second Congressional District, I, too, am concerned about the overreach and the increasing size of the bureaucracy. And, Mr. Burgos, as I listen to your story, it really bothers me to hear that. To listen to how you came here, you and your brother started this company, and then you grew it to--what did you say? 190 employees? Mr. BURGOS. 195. Mr. CRANE. That is impressive, sir. Congratulations. And then to hear that you ended up deciding to sell your company because of all the red tape and regulation, it is completely disappointing, to say the least. What year, sir, were you guys audited, and what year did the overreach begin that you were talking about? Mr. BURGOS. It was December '20 is when we were--so right before Christmas. Mr. CRANE. Can you talk about the impact to the employees that you had and their families when you guys started going through--you know, had to file that 800-page document to answer these questions. Mr. BURGOS. The impact was twofold. First off, first was, the President's executive order required us to lay off 135 employees. It stopped our work. And we were under a pay-when-paid contract, which really put a lot of fiscal strain on our company. Because, to date, the agencies are still negotiating with the prime contractors. Which, all prime contractors had a 35-percent-or-greater small-business subcontracting requirement, and those subs often weren't paid unless the prime contractor is paid, and they haven't been paid yet. And so that required additional layoffs at our company---- Mr. CRANE. Yeah. Mr. BURGOS.--while we were also then turning around and taking our dollars to spend with attorneys to go ahead and ultimately settle with the Department of Labor. Mr. CRANE. Yeah. Another thing that one of my colleagues pointed out a second ago is how sometimes these bureaucracies can become weaponized. Have you seen that as well, sir? Mr. BURGOS. I have. Because, in this case, there was no individual who had--Department of Labor was very clear, there was not an individual who said we were not paying the correct rates. At no point during the investigation did they come up with anything that said that. What it was was, ``Hey, we have just determined that you need to pay more.'' And I found it interesting that I have done over 100-plus projects and this one was selected because it was tied to the border wall. Mr. CRANE. Yeah. So it was political, wasn't it. Mr. BURGOS. I couldn't say who directed the Department of Labor. Mr. CRANE. Yeah. Mr. BURGOS. I just have never been told that---- Mr. CRANE. Well, it is funny, because I have my own experience with that. I ran a small business for about a decade, a veteran-owned small business, where we manufactured our products in the United States of America. And the very week I announced that I was running for Congress, I was driving to work, I got a call from one of my employees, and he said, ``Hey, you need to get down here ASAP. OSHA is down here to do a surprise inspection.'' Never happened before. Never happened before. And that is one of the things that American citizens, they are terrified about. They are seeing this government that is supposed to protect them and represent them become weaponized against them. And so I do agree with what my colleague, I think Mr. McGarvey, said, that you can be pro-worker and also pro- business at the same time, but you also--we also have to recognize how things play out. Like, I have seen a lot of my colleagues fight for standardizing minimum wages, right, and saying that that is pro-worker. But what they don't realize is, often, if they don't increase the amount of profits that a business owner is making, often regulations like that negatively impact workers. Because employers are like, ``Well, you are saying I have to pay these guys more money now, but you are not increasing the amount of money I am making,'' so they end up having to lay off people. Have you seen anything like that, Mr. Burgos, in your business experience? Mr. BURGOS. There is absolutely an impact when we just continually raise rates. It has an impact on what benefits we are able to offer. And I think what everybody needs to remember is, in a family-owned business like the one I had, you know, our employees are also part of that family. Mr. CRANE. Yeah. Mr. BURGOS. I mean, we are not a large, huge company. Even at 195 employees, I was in the field to make sure that our business didn't fail. Mr. CRANE. Thank you. I yield back, Mr. Chairman. Chairman WILLIAMS. Thank you very much. I now recognize Representative Meuser from the great State of Pennsylvania for our final questions. Mr. MEUSER. I appreciate that, Mr. Chairman. Yeah, unfortunately, all, we have to get to another meeting, but greatly appreciate you all coming in and sharing your stories. I do apologize for missing some of your opening, but I will read it, because what you have to say is very compelling and very important. We are here as the Small Business Committee to serve as your advocates, your voice in Congress, and I hope we can keep the dialogue going. You know, you have all been dealing with Bidenomics, you know, not to get political about it, but, I mean, let's face it. The highest inflation in our lifetimes, or some of us anyway, since the 1970s. Energy--losing our energy independence. Gasoline, groceries are certainly affected. Interest rates have an enormous effect on small businesses. I mean, I had a small business recently, and this company did about $75 million in sales, but their line of credit was about $15 million. And the interest-rate increases have added almost $2.5 million to their bottom line. And their margins, their net income, is barely $3.5 million. So, you know, either they are engaged in inflation raising prices; meanwhile, they are trying to compete--it is an American-based company--you know, with the rest of the world. So some serious issues there. And, by the way, from the federal government standpoint, less net income means less net revenue in taxes, right? And what a big surprise. Look at our revenues for personal income tax, for passthroughs. It is enormously down. In fact, we are going to be down as a federal government about $100 billion just in small-business income tax because of that inflationary squeeze. So your sales are up; your net revenues are down. You are dealing with--and now we throw, you know, all the regulations-- not just throw them in. That is what this hearing is about. So, as Mr. Luetkemeyer brought up, it is not a fair playing field. And I know it very well. Over 20 years in business, we went from a small business to a larger business. And, you know, from the 1990s to the early 2000s or even late 2000s, the 2010s, the level of compliance and regulations, we had a roomful of people. If we would have had to do that in the late 1980s or early 1990s, we never would have gotten off the ground. So it is getting a lot worse. And as our colleague brought up a little while ago, he was talking about underage workers and people being forced to, you know, work extended hours. Those laws have been on the books for 80, 90 years against that, okay? We are not talking--that is an enforcement issue, okay, and, clearly, a bad apple running that company. So, quickly--I promised our Chairman I was going to be quick--federal or state, which are more of a problem to you, from a regulatory standpoint? Mr. Suzio? Mr. SUZIO. I would definitely say federal, because they are more overbearing and, also, they tend to pass it with a paintbrush for all businesses, whereas at the State they are more looking at the local and the size and the reactions to them. Mr. MEUSER. Who do you call when you are running into these federal issues? Largely, you probably handle it yourselves, or you have your compliance guy or, you know, whoever it might be--environmental. Who do you call? Mr. SUZIO. In our case, we call our national associations. That is who have the resources to help us, guide us through it. If we did not have them, we would not be sitting here today. Mr. MEUSER. I am going to have to yield back. Thank you very much. Chairman WILLIAMS. Thank you. And I will yield a minute, 17 to my colleague from Michigan. Mr. THANEDAR. Thank you, Chairman. Thank you so much for your kindness. I will just be quick and not take much time. I just wanted to know--we are less than 30 days away from a possible government shutdown. And I just want to know, any witnesses, how they perceive a likely shutdown will impact our hardworking small businesses. Mr. SUZIO. In our case, being a construction materials supplier that does work with the State of Connecticut, it will affect us tremendously and adversely affect our employees with the number of hours they can work. Because the State will not let any work out unless they have a true funding mechanism. And CRs are not reliable and are inconsistent, and they lead to stagnation in our industry. Mr. THANEDAR. Thank you. Chairman WILLIAMS. Anybody else? Mr. THANEDAR. I yield back, Chair. Chairman WILLIAMS. All right. I now yield the time to Ms. Scholten, 1 minute, from the great State of Michigan. Ms. SCHOLTEN. Thank you. Thank you so much, Mr. Chair, I really appreciate it. And thank you so much to the witnesses today. I have read and reviewed your testimony. Incredibly important to the work that we are trying to do today. And I thank my Republican colleagues for holding such an important hearing. I hear consistently from small businesses across west Michigan and throughout our State. They are the backbone of our economy in west Michigan. Most small businesses don't have attorneys, accountants, other resources to learn every federal regulation and figure out how to be competitive in this space. I am the Ranking Member on the Government Contracting Subcommittee. I am going to take my response for the record, because I know we are limited in time. But, Mr. Burgos, in particular, in your testimony, you mentioned that the lack of small contractors in the defense industry is a national security issue. I couldn't agree with you more. What regulatory reforms do you think could increase the competitiveness of small businesses versus larger businesses with advantages in this space? Mr. BURGOS. So we have set-asides already. What we need now is we need the burdensome nature of the regulations to be streamlined so that businesses can understand. Next week, I am going to actually be speaking to the Hispano Chamber, to those small businesses that are interested in entering the small-business sector. And what they are is overwhelmed by how to go ahead and enter the sector, and we need to streamline that. Ms. SCHOLTEN. Thank you. Thank you. Chairman WILLIAMS. Thank you very much. I would like to thank our witnesses here today. We have a last-minute scheduling problem. As you know, we have to elect a Speaker. But we will have to adjourn the meeting a little earlier. But I want to thank all of the witnesses for taking time to be up here today. And all Members will have 5 legislative days to submit any questions that were not asked in writing to the witnesses. And, with that being heard, this hearing is adjourned. Thank you. [Whereupon, at 11:02 a.m., the Committee was adjourned.] A P P E N D I X [GRAPHICS NOT AVAILABLE IN TIFF FORMAT] [all]