Federal, state and local regulations have always existed for businesses. But in recent years, some jurisdictions have implemented regulations that carry higher penalties for noncompliance. This is often in the interest of public safety, but it can also be an attractive source of revenue for many public agencies. Small businesses have limited time and resources to commit to compliance, but the exorbitant penalties — some of which have been assessed to NCG member co-ops — require that compliance be taken seriously to reduce the risk and cost of noncompliance.

Regulations with serious implications for noncompliance

A few of the regulations that NCG has identified that are applicable to our members and can have serious implications for noncompliance are the following:

• Organic standards set by the Organic Foods Production Act require that 1) voluntarily certified retailers follow the standards for certified retailers; and 2) non-certified retailers selling certified products must follow organic regulations. Noncompliance could result in suspension or revocation of the retailer’s ability to sell products labeled as organic, financial penalties, civil lawsuits and reputational damage.
• GMO labeling standards set by the National Bioengineered Food Disclosure Act require monitoring a list of potentially bioengineered foods and ensuring proper labeling. Many parties feel these regulations are poorly written, so compliance can be difficult, but regulated entities can be exposed to civil lawsuits for noncompliance (not to mention reputational damage).
• PAGA, the Private Attorneys General Act of California, allows employees to sue their employers on behalf of the state for labor code violations. At least two NCG members have incurred substantial payouts.
• Beneficial Ownership Reporting by the U.S. Financial Crimes Enforcement Network (FinCEN) requires small businesses to timely report certain information about their beneficial owners to promote corporate transparency. The requirement has been subject to lawsuits and court-imposed injunctions, but should reporting ultimately be required, willful noncompliance could be punishable by fines and potential prison time.
• A price transparency law in Minnesota requires advertised prices to consumers to include all mandatory fees that cannot reasonably be avoided by the consumer. Penalties for noncompliance can be significant, including civil penalties of up to $25,000 per violation.

These represent only a sample of regulations co-ops must grapple with, and in the past, NCG has provided information and occasional assistance to our members in understanding and preparing for regulatory compliance. Going forward, NCG will continue to provide information to members on relevant regulations where possible. But each co-op will need to create its own culture of compliance — especially to maintain awareness of state and local regulations — to reduce the risk of noncompliance.

Actions co-ops can take to address and remain compliant with regulations

A small business can do the following to proactively address and remain compliant with regulations:

• Identify regulations relevant to your co-op and remain updated on changing laws. State websites and many local and state business associations often provide information to help small businesses be aware of laws and regulations.
• Establish clear policies and procedures for compliance at your co-op, documenting policies outlining how you will follow compliance standards.
• Regularly train employees on co-op policies and compliance requirements to ensure they understand their responsibilities.
• Designate someone within your co-op to oversee compliance efforts and monitor adherence to regulations.
• Monitor for potential compliance gaps and address issues proactively through a periodic review of business practices.
• Use compliance tools to automate processes and recordkeeping.
• Review contracts to ensure any vendor agreements align with compliance requirements.
• Maintain thorough records of compliance activities, including training materials, audit reports and policy updates.
• Regularly report to your board of directors on compliance challenges or issues.

Additional external resources can offer support 

In addition to the internal preparation work above, there are external resources you can tap for support:

• Develop a relationship with a lawyer that can proactively send you notices of regulations applicable to your business. A lawyer can also help strategize a plan for compliance.
• Join your state chamber of commerce to receive general applicable information and resources from the state about upcoming regulations.
• Look for NCG resources, including articles in the DR Update, single-purpose email updates, group webinars on specific subjects, and relevant threads in the DR Discussion Forum.