1% Safe Harbor for Qualifying Small Businesses

The proposed safe harbor is inconsistent with the intent of Congress and the language of the ADA requiring case-by-case analysis;
A blanket formula is less fair and less effective than case-by-case analysis;
SBA standards for “small business” are too expansive and unworkable as a civil rights standard
The proposed safe harbor would allow one year of token spending to erase years of obligation accumulated through inaction;
The proposed safe harbor would discourage planning to remove significant barriers and provide meaningful access

If, despite these flaws, the Department elects to adopt these standards, significant safeguards must be added to prevent abuse.

Comment:

The Department proposes a very significant change to the Title III "readily achievable barrier removal" requirement for existing facilities. We register the strongest possible opposition to this change, which would create a safe harbor that declares "a qualified small business has met its obligation to remove architectural barriers where readily achievable for a given year if, during that tax year, the entity has spent an amount equal to at least one percent (1%) of its gross revenue in the preceding year on measures undertaken in compliance with barrier removal requirements," for the following reasons.

The proposed safe harbor is inconsistent with the intent of Congress and the plain language of the Act . Section 301 (9) of the ADA defines "readily achievable" and establishes a set of factors to be considered in determining whether an action is readily achievable. Every one of the factors prescribed by Congress for consideration in determining whether and action is readily achievable focuses on the particular circumstances of the individual covered entity, or on the particular act in question. It is clear that Congress intended that the question of what is or is not readily achievable be settled through an individualized case-by-case assessment. As the legislative history makes clear, “What the ‘readily achievable’ standard will mean in any particular public accommodation will depend on the circumstances, considering the factors” in the definition. H. Rep. 101-485, pt. 2 at 110, 1990 U.S.C.C.A.N. 303, 393. The proposed safe harbor would exempt a very large and extremely diverse class of businesses from performing such individual assessments and from providing the level of access for people with disabilities that was mandated by Congress by relieving that class of businesses of the obligation to remove barriers to access, when, in many cases, removing those barriers would have been readily achievable, as defined by Congress. The Department is taking it upon itself to eliminate the factors Congress set forth, and replace those factors with two of its own creation, for which there is no basis in the statute -- the SBA Size Eligibility Provisions and Standards, and the spending cap.

A blanket formula is inherently less fair and less effective than the current case-by-case determination for whether an action is readily achievable . Applying the factors set forth by Congress to a case-by-case analysis of what actions are readily achievable provides better, more consistent consideration of the particular needs of individual smaller, poorer or more stressed businesses, than the proposed safe harbor, while also ensuring that people with disabilities are afforded the level of access mandated by Congress.

The SBA standards for small business concerns are so expansive that adopting this proposal would be a de facto abandonment of the principle of case-by-case determination for whether an action is readily achievable . On its web site, the SBA uses a simplified definition of "small business" that excludes many of the businesses that are included under the Size Eligibility Provisions and Standards, to claim that 99.7 percent of all firms in the United States that have employees are small businesses. The Size Eligibility Provisions and Standards serve to delineate the size and make up SBA's domain and constituency, so the Administration strives to ensure that they are as inclusive as it can make them. These standards embrace a wide range of businesses which no reasonable person would consider to be small, or in need of such a safe harbor, including businesses in many categories that have up to 1,500 employees. Convenience stores, supermarkets, department stores, and gas stations with convenience stores, can each have average annual receipts of $25M and still be "small" businesses under these standards. Hospitals and specialty hospitals can have average annual receipts of $31.5M, nursing care facilities $12.5M and private residential facilities for people with developmental disabilities $9M. Banks, savings and loans and credit unions with assets of up to $165M each are "small" businesses under these standards. This proposal would create a safe harbor so vast that it would be likely to shelter nearly all places of public accommodation except for the handful of national chains in which the properties are owned and controlled by the central corporation.

The SBA definition of a small business concern is unworkable as a civil rights standard. In fact it is not a single standard. SBA's Size Eligibility Provisions and Standards are 1,200 different industry specific standards, some of which are based on annual receipts, some on the number of employees and yet others on assets, each of which is subject to change without reference to the others. These standards are not known in the business community, except among those businesses that have applied for an SBA program, and they not widely understood by any community. It is unconscionable to propose that people with disabilities be required to navigate through these labyrinthine provisions that set separate standards for, for example, men's clothing stores, women's clothing stores, and children's clothing stores, in order to determine what access rights they might have with a particular public accommodation.

The class of businesses included under the SBA Size Eligibility Provisions and Standards is huge and vastly diverse. It includes many businesses that have up to 1,500 employees, $31.5M in average annual receipts, or $165M in assets. Such a business should not be considered a small business for the purposes of the readily achievable barrier removal standard!

The relationship between a business' gross revenue and its available resources is equally variable. Some businesses depend on a very high volume of trade and may have profit margins dropping below 1%, while others, including those providing high end luxury goods or services, tend toward low volume, but with very high profits. Case-by-case consideration of the factors delineated by Congress ensures that those individual variations are accounted for in determining a business' level of obligation. The proposed safe harbor would bury all of that diversity under a single imposed formula that has not been shown to be appropriate for any of the businesses it would cover!

The inescapable result would be that the wealthiest of these businesses, the ones that could most easily afford to meet their obligations to provide access for people with disabilities, will have a substantial portion of those obligations waived by an arbitrary spending cap, while the poorest, most fragile businesses, those most in need of protection and individual consideration, will be further burdened by what, for them, will amount to an arbitrary spending floor.

The proposed safe harbor would allow one year of token spending to erase years of obligation accumulated through inaction. Readily achievable barrier removal is a continuing obligation. A public accommodation that has habitually failed to take those steps to remove barriers that were readily achievable for it has accumulated a growing disparity between the level access it provides and the level of access mandated by Congress. The proposed safe harbor would ignore a covered entity's history of action or inaction in removing barriers to access over the full course of its obligation, by maintaining that its obligation for the current year has been met if it spent an amount equal to 1% of its previous year's gross receipts on barrier removal. This would amount to a tremendous gift to those businesses which could have been removing barriers and improving access, but have chosen to ignore the law and do nothing. That gift would be at the expense of people with disabilities who will have been denied the level of access to those businesses that was mandated by Congress. And it would be a slap in the face to those business that have been responsible and conscientious in identifying and removing barriers to access as it became readily achievable to do so.

The proposed safe harbor would discourage planning to remove significant barriers and provide meaningful access . If a business' barrier removal obligations are met by spending 1% of its gross receipts in discrete, annual allotments, that business would never have an obligation to remove any significant barrier that cost more than its annual spending cap. A business that tried to save up for a larger project, or to spread the cost of that project over a few years, as it could under the current requirements, would lose its protection under the proposed safe harbor. As a result, businesses wanting to maintain this shelter would dole out their spending for barrier removal in annual 1% increments. Once the goal of the spending becomes reaching the annual cap in order to maintain coverage, any impact that spending has on improving access to the goods and services becomes a secondary issue. When the cost of removing a significant barrier does not fit the spending pattern established by the safe harbor, the business will leave that barrier alone and focus instead on a string of minor, possibly meaningless projects, simply to meet its spending lid. In effect, the proposed safe harbor would have these businesses paying what would amount to an annual protection fee.

Mitigating the harm of the proposed safe harbor

The Department must reject this safe harbor, which would largely eviscerate Title III’s existing facility provisions, due to all the important reasons stated above.

If, in spite of these fatal flaws, the Department insists on adopting the proposed small business exemption, we strongly urge the following measures to bring the safe harbor closer to the intent of Congress and the language of the Act.

The Department could limit the scope of the safe harbor without conflicting with the Small Business Act, by not defining small business at all, and instead offering the safe harbor only to businesses that are eligible for the ADA Small Business Tax credit under Sec 44 of the IRS Code. It is crucial that the Department not use a definition of small business that brings with it the enormous complexity of the SBA standards and includes many businesses that no reasonable person would consider to be small, or in need of such a safe harbor, including businesses that have up to 1,500 employees and include department stores and banks.

The spending level that triggers the safe harbor should be cumulative, reflecting the continuing nature of the readily achievable barrier removal obligation. A business should not be able to erase years of obligation accumulated through inaction, or insufficient action by spending up to the safe harbor threshold for one year. Thus, a qualified small business should not be entitled to the safe harbor unless it has spent 1% of its gross revenues on barrier removal every year since the applicable effective date of the ADA.

A written barrier removal plan should be required for any business seeking to use the safe harbor . The plan should contain a prioritized list of significant access barriers, a schedule for their removal, and a description of the methods used to identify and prioritize those barriers, including documentation of any involvement by disability organizations or people with disabilities. Only spending consistent with the plan should count toward the safe harbor threshold. The Department has consistently supported such plans as evidence of a good faith effort. A safe harbor based on a barrier removal plan rather than a spending cap would be more consistent with the language of the Act.

A business seeking access to the safe harbor should be required to apply for any tax credits or deductions that might reasonably be available for the spending it intends to apply against the threshold, and the value of any such deduction or credit obtained should be subtracted from the countable spending .

A business’ compliance with the requirements of the proposed safe harbor should serve only as rebuttable evidence that the business has met its readily achievable barrier removal obligations. This would allow the possibility that a person with a disability could show that what is readily achievable for a particular place of public accommodation is so substantially greater than the safe harbor that applying the safe harbor in that instance would be inconsistent with the Act. Further, if this safe harbor is adopted, the Department should make very clear that, in any litigation concerning barrier removal, the business has the burden of proving that it complied with this standard.

A business asserting that it has met the requirements of the safe harbor should be required to maintain and provide upon requests records of its gross receipts, amounts spent on barrier removal, tax deductions and credits sought and obtained, its barrier removal plan, and any other documents a person with a disability might need in order to evaluate that business’ claim. People with disabilities should not have to file suit to learn whether a business is or is not in compliance. Financial and barrier removal information must be provided upon request.