Wider World of Business

Question: What’s the best way to handle things when a state or local regulator shows up at our business? IRS audits are bad enough, but we also get surprise on-site inspections for safety and compliance.

Stay positive. Welcome officials and ask to accompany them on inspections. If you absolutely can’t take the time to do so, explain why not and ask them to come back later. Be friendly and respectful and make sure you understand the purpose of any visit. “Remain calm, attentive, and professional. It is reasonable to ask under whose authority they are working and request credentials. You have the right to ask for specific orders granting them authority to inspect the premises,” says Charles Kellogg, director of risk management at BBSI, a company that handles personnel issues and risk management for more than 3,000 small and midsized businesses nationwide.Answer: Code enforcement officers, safety inspectors and other regulators often show up unannounced — and at the worst times for business owners. Their presence can spark fear and frustration if you don’t know how to handle their visits. I posed this question to three experts and came up with this list of dos and don’ts:

Think of a site visit as chance to build a relationship, and realize that your attitude can make or break it, says Amy Handlin, a New Jersey state legislator who is associate professor of marketing at Monmouth Univ. “The key is for business people to recognize that they are not powerless in these situations,” she says. “How they communicate and follow up with officials can make the difference between a contentious, time-wasting encounter and one that is, if not pleasant, at least constructive on both sides.”

Answer questions and follow up promptly. Some code violations can trigger daily fines and other penalties, Handlin notes in her book, Be Your Own Lobbyist: How to Give Your Small Business Big Clout with State and Local Government (Praeger, 2010). If you don’t deal with them as soon as possible, the money can quickly add up. Much of the time, it’s not difficult to fix problems that are uncovered during a site visit. “For the most part, these inspections are relatively harmless. They need to find something, but it’s usually pretty simple: Chemical safety instructions need to be posted or a fire extinguisher or smoke detector is out-of-date,” says Michael E. McGrath, a Dallas business consultant and author who owns several small businesses that are inspected regularly.

If safety hazards exist at your company, knowing about them and correcting them will improve your bottom line. “When an employee has been injured on the job, worker’s compensation insurance pays their medical bills and wages. Premiums for worker’s compensation are typically related to claims against the policy. The more claims, the greater the cost,” Kellogg notes.

Take advantage of free help. The Occupational Safety and Health Administration offers a free consultation service for small business owners. Those who use it may be able to qualify for a 1-year exemption from routine inspections. “The consultations take place on site, by professionally-trained staff and are confidential. You will be expected to correct serious job safety and health hazards, but the benefits in terms of safety and avoiding a future incident are significant,” Kellogg says.

Don’t panic if the visit doesn’t go well. “Sometimes, the inspector may be on their own mission or [they] are arrogant and make demands,” McGrath says. “If you run into a problem with the state, you can usually complain to your state rep — and if it’s a federal issue, to your congressman. They will usually try to help.” Acting angry and resentful, complaining about government intrusion, or obstructing access to your premises will only make the situation worse, Handlin says. Definitely do not try to curry favor or offer the inspector gifts.

Don’t hesitate to involve professionals if needed. If serious problems are alleged by the inspector, ask to be told the exact nature of the alleged violations, how they were measured and what your options are — whether they involve paying a fine, attending a hearing or going to mediation, Handlin says. “If you received a legal order compelling you to take some corrective action which is extremely burdensome, expensive or in your view unfair, consult an attorney.” Many companies bring in safety consultants to create a plan that addresses the concerns revealed in an inspection, Kellogg says. “An additional consideration for many companies is to implement a safety incentive program with rewards for achieving milestones with no injuries or safety violations.”