"Paperwork Inflation--The Growing Burden on America" Testimony of James Wordsworth, President, J.R.'s Goodtimes, Inc.

Testimony of James Wordsworth, President, J.R.'s Goodtimes, Inc. , on Behalf of the
U.S. Chamber of Commerce Before the Subcommittee on Energy Policy, Natural Resources and Regulatory Affairs of the Committee on Government Reform United States House of Representatives
 

April 11, 2002

Good morning Mr. Chairman and distinguished members of the Subcommittee. Thank you for asking me to testify before you today. I commend you for your efforts to reduce the paperwork burden on small employers and for holding a hearing on this important issue.

I am Jim Wordsworth, president of J.R.'s Goodtimes, Inc. and the owner of several small businesses. I am here to speak with you today on behalf of the U.S. Chamber of Commerce. The Chamber is world's largest business federation, representing an underlying membership of more than three million businesses and organizations of every size and in every industry sector and region of the country. Ninety-six percent of the Chamber's members are small businesses with fewer than 100 employees. I have been a member of the Chamber since 1990 and have served on its Labor Relations Committee since 1993. I was elected to the Chamber's Board of Directors in June of 2001 and also serve as a member of its Council on Small Business.

Small business has been a common thread throughout my entire life. I grew up in North Carolina where I worked in a number of small businesses owned by my father, mother, grandfather, and uncles. I moved to the Washington, DC area in 1970 to work as a large computer system's Account Manager for Burroughs Corporation.

In 1974, while working with Burroughs, I took my life savings and a small business loan and opened J.R.'s Steak House of Virginia, a small 130-seat fine dining restaurant. As the Steak House proved successful, in 1978, I opened J.R.'s Stockyards Inn, a 250-seat fine dining restaurant in Tysons Corner, Virginia, and resigned my twelve-year career with Burroughs. Since that time, I have opened a number of other small businesses including two corporate picnic facilities in McLean and Leesburg, Virginia, an off-premise catering company, a marina in Stafford County, Virginia, and a company that designs and builds modular prisons. Along the way, I have also served as general partner in several small limited partnerships that acquired raw land, then planned, zoned, and developed subdivisions featuring amenities such as golf courses and waterfronts.

Any one of these diverse business endeavors comes with its own particular set of rules and regulations specific to the industry and, I might add, that some regulations are necessary to protect public well being. In fact, we could not do business without regulations, requirements, and disclosures that protect the integrity of transactions for all parties.

The problem with regulations, however, is their cost. Plain and simple, regulations cost business money; money spent on lawyers, money spent on accountants, and, yes, money spent on paperwork. Unfortunately, every year, federal, state, and local governments pass and promulgate more legislation, rules, and regulations. Frankly, the sheer number of legal requirements through which a business must navigate is dumbfounding. To illustrate, I submit, along with my testimony, an 8 ½ x 14 document that lists the names of Federal and State Regulations with which restaurant owners in Virginia are required to comply. Please note that the list fills both sides of the document, and, remember, almost each and every one of these laws and regulations requires some form of paperwork.

While I could discuss the paperwork problems for every aspect of running my business, your time is valuable, so I will limit my testimony to some aspects of the vast amount of paperwork created by the many of labor and immigration laws and regulations.

In its 2002 draft report to Congress on the Cost and Benefits of regulations, the Office of Management and Budget reports that Department of Labor regulations alone imposed over 181 million hours of paperwork on business in fiscal year 2001. Unfortunately, this is not an anomaly – but rather a trend. According to the OMB 2000 and 2001 reports, DOL created over 181 million hours of paperwork for fiscal years 1999 and 2000 as well. While the number itself, 181 million hours, is astounding; also notable is that in all three reports, 2000, 2001 and 2002, the DOL had the dubious honor of being second only to the IRS in creating paperwork burdens for American business.

The cost of this paperwork on business is phenomenal. OMB estimates that processing the paperwork costs business $30 per hour. Thus, DOL's regulations cost American business a whopping 5.43 billion – with a b – dollars in paperwork expenses alone! Unfortunately, as both OMB and Congress have recognized, small businesses bear a disproportionate amount of the regulatory costs and burdens. In fact, a recent study sponsored by the Small Business Administration shows the total per employee cost of regulation can be as much as 60% greater for small employers.

Frankly, these costs are strangling businesses – especially fledgling companies. It's hard enough for a new business to make it. Take the restaurant industry for example: national statistics on restaurant viability say that 80% close within twenty-four months of opening, and only 7% will last five years under their original financial structure.

While I understand that some of this paperwork is a necessary by-product of the DOL's need to collect information, it appears that much of it may be unnecessary.

A good example is Fair Labor Standards Act regulation "541." It sets forth a series of indecipherable tests employer must use to determine which employees are exempt from the overtime requirements. Because the tests are incomprehensible, employers often avoid possible noncompliance by classifying employees as nonexempt even though the employee is probably exempt. This can greatly increase an employer's paperwork burden because they are required to keep significantly more records for nonexempt employees.

The Family Medical Leave Act regulations also generate quite a bit of paperwork for employers. Under the regulations, an employer may have to process over 17 documents for every employee who takes leave. The employer must keep each of the documents along with a collection of other FMLA records for at least three years. There must be something DOL can do to reduce this burden.

Every business owner, operator or manager will join me in complaints about Occupational Safety and Health Act's regulatory record keeping requirements. Although the agency recently made significant improvements to those requirements, they are still a major source of paperwork burdens. They required that, for every event in my workplace that arguably could impact an employee's health or safety, I determine whether the event must be recorded by applying a complex multi-factor test just to determine whether the event (or change in employee health condition) is "work-related." Then, assuming I have determined it is work-related, there are another dozen factors I must assess to determine whether the event or condition must be recorded on an OSHA form.

While I could go on and on, time is limited, so I will present you with one final example: sponsoring legal alien employees for permanent residence. Over the years we have sponsored many employees. The amount of redundant, superfluous, historical and/or irrelevant paperwork to multiple agencies in this process is incredible. If I may, I would like to recite theses procedures the step-by-step.

Alien Petition for Employment and Residence Process

Phase 1: DOL Employment Certifications.

As the employer, I must:

• petition DOL to certify the employee as a skilled worker before INS application can begin.
• complete and submit to DOL an information/application form to an immigration attorney to serve as a prospective employer/sponsor.
• submit to DOL a letter to confirm employee's current employment, job description, employment history, tenure etc., with copies of W-2's to verify.
• submit to DOL a notarized affidavit, again detailing employment, job description and specific duties, rate of pay, history, etc.
• submit to DOL a completed Notice of Entry as Attorney or Representative form to identify and authorize the representative/attorney for employee.
• submit to DOL a completed Application for Alien Employment Certification, where I identify the job offer, detail job description (to minute detail), skill level, work schedule, hours of business operation. specific education requirements, specific experience requirements, specific offered rate based on State survey of prevailing rates for specified job.
• Commonwealth of Virginia conducts random employment surveys to determine employment trends and prevailing rates/benefits. If, during the duration of the DOL certification process, a new survey determines that there has been a change in the prevailing rate of the proffered job, then all new letters, affidavits, applications, etc., must be resubmitted.
• If all the above goes well, then the DOL issues a letter of permission to proceed. If there are any errors or omissions, the paperwork must be resubmitted until it is all complete and correct. All paperwork reviews can take anywhere from several weeks to a couple months.
• Once the DOL has issued a Letter of Certification, I must then run an employment "help wanted" ad for 3 consecutive days in a local newspaper. (Previously 3 days in 2 consecutive weeks i.e. Sunday, Wednesday, then Sunday again to count as second week).
• I must also post the employment ad prominently in the workplace for 10 consecutive days. I must then submit a sworn affidavit that the ad was posted as specified and required.
• The employment ad in the newspaper and the one posted in the workplace must disclose all details of job offer, including prevailing wage offer, skill level and requirements.
• Only American citizens or lawful residents can be considered for the job.
• I must keep records of all inquiries (in person, phone, email, fax), all applications, all interviews, and all communications with applicants - all information regarding the interviewing and hiring process.
• I must then submit all employment advertising information along with all the application and interview documentation and results.
• If the evidence/affidavits prove that no American worker applied or accepted the proffered job, then the DOL can now issue a Certification of Skilled Worker for the petitioning employee.
• Time frame for this phase is 6 months to 1 year.

Phase 2: Employee petitions to INS for employment certification.

• After the DOL has issued the Certification of Skilled Worker, I must then petition the INS for the employment certification/visa, on behalf of the employee.
• All the above letters, applications, affidavits and documentation must be re-certified and resubmitted.
• I must then submit tax returns or annual reports or some financial reporting evidence (certified by a CPA) that the company has the specific job available and that the company can afford to pay the prevailing/offered wage for the specific job proffered.
• After a lengthy review process, the INS will then issue a Notice of Approval to proceed. This enables the employee to proceed with their application to adjust their status and apply for Permanent Residence.
• Time frame for this phase is another 6 months to 1 year.

Phase 3: Employee applies for Permanent Residence.

• I must now resubmit all the above information again to the INS.
• If the employee decides to apply for a visa outside the U.S. then all their information must be submitted to National Visa Center (NVC), which is under the Department of State.
• Timeframe for this last phase is 6 – 18 months of mostly waiting.

I must store and maintain all paperwork as current (now 2 – 3 years old) and continue to proffer employment and/or continue actual employment of the petitioning employee.

Now bear in mind, this is one application for one employee.

Unfortunately, while there has been a lot of talk about paperwork reduction – there has not been a lot of action. Since the original "Paperwork Reduction Act of 1980," there have been a myriad of Congressional, Administration, and OMB studies, hearings, and directives aimed at reducing the paperwork load placed on business. Despite all the studies, hearings, and directives, here we are in 2002, "the electronic age," and we still have stacks of manual documents to file, many times with redundant information, to Federal, State, and Local bureaucracies, that can't or don't communicate with one another. There must be something that can be done that would allow business to return to producing goods and services, rather than filling out an endless stream of paperwork.

On a positive note, it's my understanding the current administration is taking action with regard to regulatory reform. For example, OMB's 2002 draft report states that DOL and the Equal Employment Opportunity Commission are considering revising some of the regulations that have created this paperwork problem. I urge you to encourage OMB and the Agencies in continuing this effort and to urge them to revise these regulations as well as the many others that impose needless paperwork.

Thank you for your time and interest. I would be glad to answer any questions you might have.