Rulemaking

1
Rulemaking

• Part I

2
Jargon Alert

• Legislative rule (regulation)
• Has the effect of law
• Generally just called a rule or regulation
• Non-Legislative rule
• Has no legal effect, but shows what the agency
  thinks the law is
• Many names - interpretive rule, guidelines,
  guidance document, anything but rule or regulation

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Administrative Rules

• The Legislature can delegate the power to make
  rules to the agency
• Some agencies do not have rulemaking authority
• Rules cannot exceed the authority in the agency's
  enabling legislation or the Constitution
• Properly promulgated rules have the same effect
  as statutes

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The Agency as Legislature

• The shift from adjudications to rulemaking
  started in the 1950s
• The courts try to allow an agency to make rules
• Parallels the growth of state and federal agencies

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The Impact of Rules

• Congress often delegates details to agencies
  because the issue is a political hot potato
• Wetland policy is mostly driven by regulations
  based on vague statutory authority and permissive
  court decisions
• The EIS process is based on regulations
• Thus agencies may develop and implement the most
  intrusive or controversial policies
• Is this good policy?

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How do you make a Rule?

• Publish the proposed rule and what it is based on
  for public comment
• The Federal Register and LA Register are where
  rules are published first
• Review and address public comments and publish
  these along with any modifications in the rule
• Codify the rule after it is effective
• Rules are Codified in Code of Federal Regulation
  and the LA Administrative Code

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Why Make Rules?
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Participation and Generality

• Allow Public Participation
• Adjudications are limited to the parties
• Allow Political input
• Rulemaking is a public process which allows
  politicians input
• Appropriate Procedure
• Adjudications are tied to specific facts and
  parties
• Rules are generally applicable, although they may
  be very specific

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Uniformity

• Adjudications, like trials, are driven by
  specific facts and can treat similar situations
  differently
• Rules set up a general framework that treats all
  parties uniformly
• Rules are the fairest way to make big regulatory
  changes

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Adoption of National Standards

• National standards can be adopted through agency
  rules, harmonizing practice across jurisdictions
• National building codes
• CDC guidelines on food sanitation
• Recommendations of the Advisory Committee on
  Immunization Practices
• LA and building codes

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Agency Efficiency

• While a rulemaking can be expensive and time
  consuming, it can settle issues across a large
  number of adjudications
• Rulemaking can also eliminate many hearings by
  resolving factual questions
• In disability cases, rules can be used to
  establish what constitutes a disability, rather
  than making it as case by case determination.

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Better Guidance for the Public

• Rules are published and codified
• State rules were hard to find, but the Internet
  is making this better
• Agency adjudications, especially at the state
  level, are often not published
• There may be no transcript of the full
  adjudication
• Rules are binding on everyone, not just the
  parties

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Agency Oversight

• You can control the outcome of rulemaking much
  easier than that of adjudication
• Not Dependant on ALJs
• Why is this especially important in LA?
• More input from across the agency
• Directly controlled by agency policy makers

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Downside of Rulemaking

• Adjudications can be more flexible in the
  individual cases
• Rules can be so abstract or overbroad that they
  are expensive or difficult to follow
• Like statutes
• Adjudications are useful when you are not sure
  what the rule should be and need more info and a
  chance to experiment
• Does not do away with the need for adjudications

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Rulemaking Ossification

• Rulemaking has gotten so complex and time
  consuming it has lost some of its value
• Rulemaking can go on for years
• What is the legal value of a proposed rule that
  has not been finalized?
• This was the problem for the anti-kickback
  regulations
• Complicated by regulatory conflict and
  incompetent agency practice
• The courts and legislature have increased the
  burden on rulemaking

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What is a Rule?
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Definition of a Rule

• APA 551(4)
• (4) 'rule' means the whole or a part of an agency
  statement of general or particular applicability
  and future effect designed to implement,
  interpret, or prescribe law or policy or
  describing the organization, procedure, or
  practice requirements of an agency and includes
  the approval or prescription for the future of
  rates, wages, corporate or financial structures
  or reorganizations thereof, prices, facilities,
  appliances, services or allowances therefor or of
  valuations, costs, or accounting, or practices
  bearing on any of the foregoing
• Not a clear definition
• Things that are not adjudications or licensing

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LA Definition

• 6) "Rule" means each agency statement, guide, or
  requirement for conduct or action, exclusive of
  those regulating only the internal management of
  the agency and those purporting to adopt,
  increase, or decrease any fees imposed on the
  affairs, actions, or persons regulated by the
  agency, which has general applicability and the
  effect of implementing or interpreting
  substantive law or policy, or which prescribes
  the procedure or practice requirements of the
  agency.
• "Rule" includes, but is not limited to, any
  provision for fines, prices or penalties, the
  attainment or loss of preferential status, and
  the criteria or qualifications for licensure or
  certification by an agency. A rule may be of
  general applicability even though it may not
  apply to the entire state, provided its form is
  general and it is capable of being applied to
  every member of an identifiable class. The term
  includes the amendment or repeal of an existing
  rule but does not include declaratory rulings or
  orders or any fees.

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Functional Definitions

• Critical term is general applicability
• Remember the standards for a hearing?
• If you do not get a hearing, and there is no
  special exception such as an emergency or
  national security, it is probably a rule

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If it is Retrospective, it Should be an
Adjudication

• Retroactivity
• Adjudications are based on things that have
  already happened
• Adjudications can be treated as treated as
  precedent, but this is not binding
• Adjudications are driven by the available cases
• Rules are prospective
• Not bound by existing facts

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Which are Retrospective?

• National Highway Traffic Safety Administration
  finds that cars do not protect against side
  impacts
• Proposes rule require engineering changes or side
  air bags
• OSHA finds auto paint shops are inadequately
  ventilated
• Proposes ventilation rule and requires paying for
  health screening of employees who have been
  working in the badly ventilated shops
• What is the rule says testing is to monitor
  future harm?

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Legislative v. Nonlegislative Rules(Rules v.
Guidance)

• A notice and comment rule is only necessary if
  the rule changes the legal environment
• In many cases, agencies issue explanations of
  what they believe their enabling legislation
  means
• These guidelines do not need notice and comment
  because they do not change the legal environment,
• Can be challenged if they create new legal duties
• More later on this.

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Rules v. OrdersNarrowing the Scope of
Adjudications

• FCC must determine if granting a TV station
  license is in the public interest
• This is a matter of fact that must be determined
  in a hearing
• Agency promulgates a rule that it is not in the
  public interest to own more than 5 TV stations
• How does this change the facts to be decided at
  the license hearing?

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Food Handling Standards

• If there were no rules on food handling in
  restaurants, what would to be established during
  an adjudication before a restaurant could be
  cited for not keeping the soup at 140 degrees or
  hotter?
• How does the adoption of comprehensive national
  code allow the adjudication to take the form of
  an inspection?

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Beginning Rulemaking

• What drove rulemaking in the Regulators?
• If the agency has the power to make rules, but no
  legislative direction as to when to make them,
  can you force the agency to make a rule?
• 5 U.S.C. 553(e)
• (e) Each agency shall give an interested person
  the right to petition for the issuance,
  amendment, or repeal of a rule.
• We will explore this more in Mass. v. EPA

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Formal Rulemaking

• Widely used when the APA was passed, usually in
  rate making proceedings
• Not typical, in that they were more like
  adjudications
• Trial type
• Very time consuming
• Seldom used
• Must be required by statute

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Informal Rulemaking - Notice and Comment

• Most rulemaking
• Governed by the APA

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Publication Rules

• Rules that do not require comment to become
  effective

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Extra-APA Requirements

• Notice and comment rulemaking is not
  constitutionally mandated
• Congress can establish additional or alternative
  procedures
• Congress could allow agencies to make rules
  without comment or public input

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Non-APA Requirements

• APA is only the default if there is no other
  statutory guidance
• National Environmental Policy Act imposes
  requirements if the rule affects the environment
• Regulatory Flexibility Act - small business
• Executive Order 12866 - more 100M impact
• The book calls these hybrid rulemaking, do not
  confuse this with court imposed hybrid rulemaking
  as in Vermont Yankee

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Exemptions to Notice and Comment Requirements

• Is notice and comment a constitutional
  requirement?

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Military and foreign affairs

• Why exempt these?
• Limiting the term of residence for Iranian
  nationals after the hostage incident
• National security issues?
• Extending asylum to persons subject to
  reproductive restrictions in China
• Was this just an individual benefit or part of a
  foreign policy?

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Agency Procedures

• Like the code of civil procedure
• Does not change the substantive rights of the
  parties
• Does not change the regulated behavior, only the
  process in agency procedures

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Actions where Secrecy is Important

• Wage and price controls
• Bidding on contracts
• Negotiations on land purchases and sales

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Emergency Proceedings

• Emergency Rules
• http//www.state.la.us/osr/osr.htm
• Interim Final Rules
• Published and in effect, but will be modified
  after comments are in.
• Calculations and other non-discretionary rules
• Technical corrections
• Can require notice and comment if the correction
  causes a different result

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553(b) - Exceptions to Notice Requirements

• 1) Interpretative rules, general statements of
  policy, and rules of agency organization,
  procedure, and practice and
• 2) Rules when the agency finds for good cause
  that notice and public procedure are
  impracticable, unnecessary, or contrary to the
  public interest.
• No notice means no comment under 553(c)

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Exception 1 - Interpretative Rules

• It is only explaining the law or providing
  guidance for action
• Prosecution guidelines
• IRS audit guidelines
• Since they do not change the law, they have no
  legal effect
• Does that mean you can ignore them?

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How do you know if it an Interpretive Rule or a
Legislative Rule?

• Why would an agency want to use an interpretive
  rule rather than a legislative rule?
• What is the risk to the agency if they do and the
  court disagrees?
• What is the benefit to the regulated parties of
  interpretive rules?
• What if the agency is prevented from providing
  guidance documents?

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The Nature of the Enabling Act

• Very general laws
• Little effective guidance in the statute
• Makes any interpretative rule more likely to been
  seen as a legislative rule
• Very specific laws - like the ADA
• No room for legislative rules
• Everything is guidance

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EPA Example - Wetlands

• EPA makes a rule that states that the term
  waters of the United States (which defines the
  jurisdiction of EPA under the Clean Water Act)
  includes wetlands that potentially provide
  habitat to migratory birds.
• Is this an interpretative rule or a legislative
  rule?
• Can we tell just looking at the rule?
• Will the agency say that the rule is binding?

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The Substantial Impact Test

• How might this rule affect the buyers of
  wetlands?
• Is this a substantial impact?
• What is the agency's defense?
• Is the substantial impact test circular?

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The Legally Binding or Force of Law Test

• What is the enforcement test?
• What do we need to know to tell whether the
  agency can enforce the law without this rule?
• Is the agency required to define wetlands?
• Was the agency doing enforcement before this
  rule?
• Under this test, is this an interpretative rule?
• What if statute allows the agency to define toxic
  substances that cannot be dumped into lakes?
• Would a list of these substances be legislative?