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Small business definition (Formal, Conclusion, Administrative)

EPA used the definition of small business provided in the Small Business Compliance Policy.  A small business is defined in the Small Business Compliance Policy as “a person, corporation, partnership, or other entity that employs 100 or fewer individuals (across all facilities and operations owned by the small business).”  This policy further states that “The number of employees should be considered as full-time equivalents on an annual basis, including contract employees.” and references 40 CFR 372.3.  40 CFR 372.3 states, “(f)ull-time employee means 2,000 hours per year of full-time equivalent employment.  A facility would calculate the number of full-time employees by totaling the hours worked during the calendar year by all employees, including contract employees, and dividing that total by 2,000 hours.”

 

Parent-Subsidiary Relationships

 

Determining the size of a business can sometimes involve looking at parent-subsidiary relationships.  A subsidiary of a larger corporation may still qualify as a small business under certain circumstances.  It will depend upon how much the subsidiary is operating like an independent company.  If the subsidiary is minimally controlled by the parent and does not share many of the parent’s resources, then it may be appropriate to look at the subsidiary in the same way one would look at an independent business.  Such an inquiry would, of course, be very fact-specific.

 

            Additional information on determining various corporate relationship issues can be found in EPA’s various guidances on making ability to pay determinations, such as the

December 11, 1998 General Policy on Superfund Ability to Pay Determinations.

 

            Inspector Inquiry as to Number of Employees

            Inspectors are often the first enforcement contact a business has with the Agency.  In fact, under the Small Business Enforcement Fairness Act, (SBREFA), 5 U.S.C. § 601, upon the Agency’s first enforcement contact with a small entity, it must inform the entity of its rights under SBREFA  As a matter of policy, EPA’s inspectors and EPA authorized inspectors hand out the SBREFA Fact Sheet (U.S. EPA Small Business Resources, June 2003)  if there is a question as to whether the entity is covered under SBREFA.  Similarly, an efficient way to ascertain whether the entity meets the Agency’s definition of “small” for SBPRA purposes would be to have the inspector make an inquiry, record the information in the case file and ensure that information is entered into ICIS upon commencement of an enforcement action.  For instance, Emergency Planning and Community Right-to-Know Act (EPCRA) inspectors often inquire pre-inspection over the phone as to the number of employees at a facility (EPCRA Section 313 Inspector Training Manual).  If advance notice of an inspection is given, it is recommended that inspectors inform businesses of the computation information found in 40 CFR 372.3, to allow businesses time to prepare information on its full-time employee numbers.  Otherwise, this information may be obtained at the time of or after the inspection. 

 

            Using Data Sources to Identify Small Businesses

 

            Inspectors, case developers or other compliance and enforcement or other personnel may want to reference  Dun and Bradstreet which contains information on the number of employees.  EPA has licenses for on-line use of  Dun and Bradstreet and the Office of Environmental Information assigns identification numbers to access the data. For more information, contact Michelle Torreano at (202) 566-2141.  Other resources such as corporate directories, state manufacturing directories, and the SEC’s Edgar database () may also be useful tools to clarify parent/subsidiary and other information related to size of the business.

 

See Also

            SBREFA Data Reporting Guidance

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