Agency oversight as "whac-a-mole": the challenge of restricting agency use of nonlegislative rules.

Author:Shapiro, Stuart
Position:The Conflict Between Executive Discretion and the Rule of Law
 
FREE EXCERPT

INTRODUCTION

When agencies want to compel private entities to act, they face a complex array of choices. The Administrative Procedure Act (APA) gives agencies a series of options for pursuing their preferred policy. (1) At one extreme is the possibility of formal rulemaking. Formal rulemaking, requiring a quasi-judicial proceeding, is rarely used by agencies. It is extremely burdensome for them and, after a period of initial experimentation with the approach, agencies have largely abandoned it altogether. (2)

At the other extreme, agencies can choose not to make policy with any general pronouncements, but rather to rely on case-by-case enforcement actions to implement their preferences. Although these actions are judicially reviewable, the cost for the regulated party to seek redress is significant, and agency penalties often withstand judicial scrutiny. Professor Todd Rakoff, however, cites three reasons why agencies moved toward more general approaches in the 1960s. (3) First, ensuring a consistent enforcement approach is costly for agency management. Second, case-by-case enforcement produces laws that are often vague and contradictory. Finally, as the age of the most far-reaching regulatory statutes dawned, agencies were confronted with policy problems that lent themselves particularly well to more general approaches. (4)

The most well-known of these approaches is informal rulemaking, as described in section 553 of the APA. (5) Informal rulemaking, or "regulation," (6) as it is more commonly known, allows agencies to set policies that apply to vast swaths of the economy to protect public health, govern financial transactions, or decrease the likelihood of a terrorist attack. Although on occasion courts do overturn agency regulations, in general they are deferential to agencies' interpretations of the laws that they are charged with implementing. (7)

Because of its ability to make far-reaching policies and often withstand judicial review, informal rulemaking proliferated. This growth in turn led to a reaction from those who oppose regulation, either on ideological grounds, or because regulation typically places burdens on industry. (8) Beginning in the late 1970s, Congress and the President began requiring regulatory agencies to undertake procedures significantly beyond those required in the APA when they pursued informal rulemaking. Agencies were required to analyze the impact of their regulations on small businesses, (9) measure the information-collection burden their regulations would impose, (10) and conduct Regulatory Impact Analyses of their more significant regulatory efforts. (11) The requirements imposed on agencies engaged in informal rulemaking have continued to increase over the past several decades, and courts have insisted that some of those requirements, such as notice-and-comment, must be strictly followed. (12)

The growing complexity of the informal rulemaking process led some scholars to predict that agencies would begin to turn away from it as a means of setting policy. (13) Professor Thomas McGarity and others have argued that the burden of issuing regulations (which they describe as the "ossification of rulemaking") (14) would eventually push agencies to resort to less formal methods, known in the APA as interpretative rules and general policy statements (15) and, more generally, as guidance documents and enforcement manuals (collectively, "nonlegislative rules"). (16) Although there is scant evidence that agencies have abandoned informal rulemaking, (17) there are an abundance of agency actions that rely on these less formal means. (18)

Proposals to restrict agency usage of "guidance documents" and other similar policy instruments have been discussed for decades. An executive order even implemented one such proposal (albeit briefly) in 2007. (19) The Regulatory Accountability Act, (20) a piece of legislation currently pending in Congress, would echo many of the requirements of that executive order. At the state level, the Model State Administrative Procedures Act adopted in 2010 also has provisions that address nonlegislative rules. (21) Would any of these proposals actually curb agency use of these informal means of setting policy? Or would they push agencies toward even more informal instruments? In this Article, I use a series of recent actions by the Department of Labor to argue that agencies are likely to react to a restriction on one type of policymaking activity (to the extent that the restriction works at all) by moving to even more difficult-to-monitor methods of setting policy.

Many of these policymaking approaches can be characterized as the movement of information from agency managers to other parties. When an agency describes how it is interpreting its regulation, it is sharing information on its views with regulated parties. This sharing of information with regulated parties is well-covered in the literature on nonlegislative rules, as is the dissemination of information from agency management to enforcement personnel so as to improve or alter the enforcement of regulations. As discussed below, however, agencies also collect information from the regulated community and share information with regulatory beneficiaries and other parties, all in the service of improving or altering regulatory implementation without changing regulations.

What influences an agency to choose one method of setting policy rather than another? How would restricting one type of nonlegislative rule (as many have proposed) change agency incentives to use other methods? This Article looks at the agency choice between informal rulemaking and even more informal means of setting policy--usually consisting of the dissemination of information. Once agencies decide not to pursue rulemaking to achieve a policy goal, there are still many options for the agency. Restrictions on one or more types of action may lead to a "Whac-a-Mole" (22) effect. A restriction on one type of agency policymaking approach would lead the agency to try a different approach. This latter approach is at least as likely to be more difficult for elected officials to oversee (and hence less normatively desirable) as it is to be easier to oversee. Indeed, significant restrictions could lead to more of the much more informal and difficult-to-oversee case-by-case enforcement oversight that led to the demand for rulemaking in the first place.

In the next two Parts of this Article, I review the literature on two subjects: in Part II, agencies' decisions to use nonlegislative rules to set policy, and in Part III, the proposals to oversee these approaches. Part II is written from the perspective of the regulatory agencies. It is critical to understand the motivations of agencies so as to predict how they will react to attempts to restrict the use of nonlegislative rules. In Part IV, I use a series of recent actions by the Department of Labor to illuminate the vast array of approaches to policy at regulatory agencies, and to show that many of them can be characterized as transfers of information. I draw concluding observations about attempts to oversee agency use of nonlegislative rules in Part V.

  1. WHY WOULD AGENCIES AVOID RULEMAKING?

    The informal rulemaking process outlined in section 553 of the APA has numerous advantages for agencies. Chief among them is the establishment of a preferred policy that is likely to receive significant deference from the courts. (23) Rulemaking also allows a presidential administration to make far-reaching policies that do not require legislative action. (24) Regulations can also be used by agencies (or the President) to get credit for taking action in a particular policy area.

    Yet, despite these advantages, agencies frequently turn to nonlegislative rules to set policy. According to some scholars, the use of nonlegislative rules actually dwarfs that of rulemaking. (25) As I discuss further below, one also can characterize most choices that avoid rulemaking as using information provision to set policies.

    The two most common types of nonlegislative rules discussed in the literature are "guidance documents" or "interpretations"--which can be seen as the provision of information from agencies on the interpretation of their regulations to regulated parties--and "compliance manuals"--which can be seen as the provision of similar information from agency managers to their enforcement personnel. The factors that lead an agency to avoid rulemaking when addressing a policy problem have been well documented in the literature; the discussion below is a summary.

    It may be helpful to think of the choice of policy instrument as a continuum from informal rulemaking (or from the rarely used mechanism of formal rulemaking, if you prefer) to adjudication. As we move along the continuum away from rulemaking, we see decreasing scope and increasing use. (26) Other scholars have posed the choice in more discrete terms. Professor Robert Anthony hews closely to the three categories listed in the APA: legislative rules (which have gone through informal rulemaking) at one end of the spectrum, interpretive rules in the middle, and policy statements at the other end. (27) Strauss, while calling the choice a continuum, groups all non-rulemaking activity into a category he calls "publication rules." (28) Professor Ronald Levin sees the key distinction as between legislative rules (promulgated through formal or informal rulemaking) and nonlegislative rules (everything else). (29) Whether one sees the policy choice as a continuum or a discrete choice, the question facing the agency is similar: Why move away from rulemaking and toward other alternatives?

    1. Saving Resources

      Informal rulemaking is costly. Although one can debate whether the process is "ossified" (30) or whether agencies have been deterred from engaging in rulemaking, there is little argument that using informal rulemaking to issue a legislative rule of any...

To continue reading

FREE SIGN UP