What happens if a government agency or employee allows regulatory policies for a business to be violated? That’s a question that many small business owners ask themselves every day. After all, the very purpose of these policies is to protect the rights of consumers and the financial stability of businesses.
If this occurs, what happens?
First, an organization must prove it was notified of and allowed to enforce its own regulations. Most enforcement agencies will require a formal notice of violation. Then, an organization has to show it was engaged in bad behavior. To do this, the business will need to produce records demonstrating that it was in breach of the policy. If it can’t do this, the company can still argue that the enforcement was unwarranted given the fact that it wasn’t being subjected to undue duress or pressure.
Once all of this analysis is complete, the next step usually involves an administrative hearing. At this point, a judge will preside over the dispute. In the past, the hearing usually consisted of a written statement from the regulatory body that questioned the facts or circumstances underlying the case. More commonly, however, judges now prefer oral testimony from one of the enforcement officials involved in the case. This allows the judge to get a real sense of what really occurred.
During the hearing, the business may have to prove that the enforcement agency relied on in-house counsel or grossly misused resources when it decided to impose the enforcement action in the first place. In many cases, courts require the enforcement agency to supply internal documents as evidence that its actions were based on sound business principles.
What happens if regulatory policies for a business are violated?
Sometimes, business owners simply are not able to overcome the errors and omissions that caused the violations in the first place. Unfortunately, these same errors and omissions inevitably come into play when the company is again inspected. As you can see, these inspections become a continual affair for business owners. While some inspectors may be willing to consider modifying the current inspection to make the business meet government standards once again, many enforcement agencies will not.
As you can see from the above example, there are often significant penalties associated with even the smallest of errors and omissions. These penalties do not usually deter offending businesses. Instead, these companies often choose to contest the penalties in an effort to defeat or avoid them. The result is a situation where a business owner is forced to re-apply for a government loan or credit facility based upon new and incorrect assumptions about how the agency actually assessed the business prior to the enforcement action.