HUBZone proposal said to ease worker residency requirement

Residency redefined; recertifications would be annual

      The Small Business Administration is tackling one of the HUBZone program’s most criticized requirements--that 35% of the HUBZone firm’s employees must live in the HUBZone.

      But instead of reducing the percentage, as was attempted in a Senate bill last year, the SBA recently proposed two modifications in regulations to potentially ease compliance with the employee residence requirement.

      First, the SBA would modify how HUBZone residency is defined to make it easier for employees to meet the definition. And second, HUBZone firms would be allowed to recertify that they meet the employee-living-in-zone requirement--and all other HUBZone requirements--once a year, instead of each time they bid on a contract.

      The proposed rule also makes a number of changes to clarify and update policies. HUBZone regulations have been amended at least eight times since 1998.

      Comments are due by Dec. 31.

Definition of residency

      According to the SBA, HUBZone firms have difficulty meeting the employee residency requirement that 35% of their employees must live in a HUBZone. For small firms in particular, the loss of one employee could mean losing HUBZone status.

      To address this problem, the proposed rule would tweak how HUBZone residency is defined.

      Under the proposed rule, an individual would be considered a HUBZone resident if:

• the individual worked for the HUBZone firm, and;
• the individual resided in a HUBZone at the time the concern was certified or recertified as a HUBZone small business concern, and;
• the individual continues to work for that same HUBZone firm, even if the area where the individual lives no longer qualifies as a HUBZone, or the individual continues to work for the same HUBZone firm, but has moved to a non-HUBZone area.

Annual recertifications

      Another measure on the table to ease burdens on HUBZone firms is to soften the requirements regarding certification and recertification.

      Under the new rule, a firm would certify initially and then be allowed to recertify annually. Currently, it must recertify its HUBZone eligibility at the time of each offer for a HUBZone contract and also at the time of award.

Attempt to maintain residency

      The SBA has proposed that if HUBZone employee residency falls below 20%, the agency would deem the company to be out of compliance with the employee residency requirement and propose decertification of the firm. However, there would be an opportunity .for the company to hire more HUBZone employees and avoid decertification.

SBA seeks comments

      SBA is seeking comments on several issues recommended by the small business and tribal communities, including:

• Should seasonal workers be allowed to count as employees, even if they are not currently on the payroll?
• How should SBA consider workers living in HUBZones who work for more than one firm?
• Should the SBA consider Full-Time-Equivalent employees to fulfill the residency requirement?
• Should SBA consider part-time employees in fulfilling the HUBZone residency requirement?
• Should SBA in some cases consider workers who are paid “in kind” to be employees of HUBZone firms?

More information:
Federal Register proposed rule: https://bit.ly/2RtmDMC
Read more about the new HUBZone rule on page 4: Big Changes in HUBZone Program...

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