Nonrule policy and the legislative preference for rulemaking.

• Author: Sellers, Cathy M.
• Position: Florida's administrative agencies

Historically, Florida's administrative agencies have developed policy in two ways: on a case-by-case basis through adjudication (nonrule policy) or through the use of formal rulemaking procedures that include significant opportunities for public participation.(1) In 1991, the Florida Legislature announced its preference for rulemaking over development and application of nonrule policy through adjudication, by enacting a clear rulemaking mandate applicable except in limited circumstances. However, this mandate contained loopholes that allowed agencies to continue to avoid the rulemaking mandate with little consequence.

Accordingly, in 1996 the legislature again addressed the rulemaking mandate as part of comprehensive revisions to the Administrative Procedure Act. This time, the legislature further restricted the agencies' ability to rely on nonrule policy in adjudicatory proceedings, added new provisions under which agency nonrule policies may be challenged, and imposed stringent penalties for an agency's failure to comply with the rulemaking mandate.

This article reviews the legislative and case law background leading to enactment of the 1996 provisions addressing unadopted rules, summarizes the unadopted rule provisions in the 1996 amendments to the APA, and examines how courts have interpreted these provisions to date.

Legislative and Case Law Background

When the legislature amended the APA in 1974, it created a detailed rulemaking process for state agencies.(2) It did not, however, expressly require agencies to use the rulemaking process to formalize policy positions into rules before applying these policies in specific cases. The initial judicial reaction was to force rulemaking by permitting a person against whom an unadopted policy was being applied to challenge the validity of the policy in a rule challenge proceeding.(3) If the policy was found to be a "rule" as that term was defined in the APA, and if the policy had not been adopted as a rule following the prescribed rulemaking procedures, then the policy was invalidated and could not be used as a basis for agency action until it was properly adopted.(4)

In McDonald v. Department of Banking & Finance, 346 So. 2d 569 (Fla. 1st DCA 1977), the court created an exception to the general rule that the formal rulemaking process must be used when an agency seeks to implement delegated authority. In McDonald, the court held that state agencies are not required to adopt all of their emerging or "incipient" policies as rules. The court reasoned that agencies may choose not to adopt those policies as rules and, instead, may explain, support, and defend such policies in each case in which the policies are applied. However, as the late Professor Pat Dore observed, the limited McDonald exception soon "swallowed the rule" because the courts allowed the agencies themselves to determine whether and when they were ready to proceed to rulemaking.(5)

In 1991, the legislature amended the APA to create F.S. [sections] 120.535. That section provided that rulemaking is not a matter of agency discretion, and it required agencies to adopt their policies through rulemaking as soon as "feasible and practicable."(6) That section also provided a remedy that enabled substantially affected persons to challenge agency statements that were not formally adopted as rules.(7) The enactment of [sections] 120.535 was a substantial step toward ensuring that agency policies were codified as rules once they were sufficiently developed so as to be susceptible to rulemaking. However, under [sections] 120.535 agencies were allowed to continue to apply their nonrule policies during the pendency of rulemaking, provided they were able to "prove up" those policies in individual administrative adjudicatory proceedings. Furthermore, because attorneys' fees were available only in very limited circumstances, agencies had little incentive to adhere to the rulemaking mandate.

Against this backdrop, in 1996 the legislature reaffirmed its preference for rulemaking by adding teeth to the remedies that were designed to force agencies to adopt their policies as rules.(8)

* What is a "Rule"?

These new remedies require the petitioner to show that the challenged policy is both "unadopted" and a "rule." Determining whether the statement has been "adopted" in accordance with the rulemaking requirements of the APA is simple. The more difficult question is whether the statement is, in fact, a "rule." The APA defines a "rule" as "each agency statement of general...