On June 17, 2008 Governor Strickland signed H.B. 285 which requires agencies to waive fines and penalties for paperwork violations that are first time offenses committed by a small business.  I certainly agree that that this is welcome relief for the small business owners that must navigate a myriad of federal, state and local paperwork requirements.  However, be careful if you are a small business owner, the bill doesn’t give a free pass for all paperwork violations.

First, you better make sure you are considered a small business.  You may think you are, but under the bill a series of federal government regulations really decides whether you are classified as a small business.  (Isn’t it somewhat ironic that a bill trying to address paperwork requires you to consult a forty-four page table of industrial classifications to determine whether your business constitutes a small business)  Small business classifications are based upon the North American Industry Classification System (NAICS) and the cutoffs are either annual revenue or the number of employees. 

Second, was it really a paperwork violation?  The bill says a "paperwork violation" is the violation of a law that mandates the collection of information by a state agency.  Sounds simple enough, but as a lawyer I think this is a vague definition. 

CAUTION:  I doubt a violation of permit or needed authorization is going to be considered paperwork under this definition.  As an example, the most common violation Ohio EPA takes enforcement against is for failure to provide notice of demolition or construction activities for purposes of asbestos compliance.   In 2007, Ohio EPA imposed 13 fines against companies for failure to file the notice.  Better make sure you keep filing those notices whether you are the owner of the property or a primary contractor for the project.

Third, even if you get by the first two steps, if your paperwork violations are related to environmental compliance you may still be in hot water.  The bill allows Agency’s to still impose fines if, among other exceptions, the following apply to your situation:

• The violations is considered to present a direct danger to public health or safety….or presents "the risk of severe environmental harm", as determined by the head of the state agency
• The violation is a failure to comply with a federal requirement for a program that has been delegated to a state agency for enforcement and the state is required to impose a fine
• Also, a fine may be reinstated if you have subsequent violations

When I was at Ohio EPA all enforcement actions had to come across my desk prior for approval.  In my experience, it was uncommon to impose a fine for purely paperwork violations if a small businesses was at fault.  In the instances we did impose a fine, it certainly could fall within one of the exceptions discussed in this post.