A persistent criticism of government is that it unfairly imposes obscure requirements on individuals, organizations, and companies that can lead to inappropriate prosecution and penalties. Last October, the Trump administration issued two executive orders (EOs) intended to prevent that from happening.
Federal agencies must develop rules to implement congressional mandates. The Administrative Procedure Act (APA) requires agencies to follow a precise regulatory roadmap with notice to the public and an opportunity to comment— "notice and comment" —before rules become final. The APA process can be cumbersome and take years to complete, especially if political influences intervene.
To simplify and expedite such government intervention, agencies often use less formal, non-binding "guidance documents," which describe an agency's policies, procedures, and requirements in the absence of formal rules. Guidance documents can be variously designated "proposed," "draft," or "final." Policies can also be established via announcements, speeches, various government documents, and the like.
Guidance documents can be a boon to regulated entities that wish to understand the current thinking of regulators, and they can provide much greater flexibility for agencies than formal rulemaking. However, they also offer the temptation for bureaucratic abuse because they can be created without an opportunity for the public to comment on them, and because they can provide the basis for enforcement actions.
Trump EOs / A pair of EOs issued October 9, 2019 by the Trump administration police the policy content of guidance documents and rein in opportunities for their abuse in enforcement. The EOs very broadly define a "guidance document" to include all regulation-related documents and communications that are "intended to have future effect on the behavior of regulated parties," with several exceptions.
The EOs strengthen the oversight of executive branch agencies by the White House Office of Management and Budget, while providing the OMB discretion to waive various requirements. They also direct the OMB to issue memoranda and even regulations in order to implement the EOs. And they require that issued guidances be signed personally by the agency head or the head of an agency component appointed by the president instead of delegating that work to lesser officials, which is intended to ensure that new guidances will conform to administration-approved policies.
One of the Trump EOs, entitled "Promoting the Rule of Law through Improved Agency Documents," has two sets of requirements. The first seeks to ensure transparency by:
· expanding the number of "significant" guidance documents subject to OMB review to include not only those with annual effect on the economy of $100 million or more, but many others, including those with novel legal or policy issues arising out of legal mandates and the president's priorities,
· requiring each agency to have on its website a single, searchable, indexed database with links to all its guidance documents, and
· requiring agencies to review their guidance documents and rescind those no longer in effect.
The second set of requirements is for the promulgation of agency guidance documents:
· Each agency must have final regulations establishing processes and procedures for issuing guidance documents.
· Each guidance document must state that it does not bind the regulated entities.
· Agencies must establish procedures for the public to petition for the withdrawal or modification of a guidance document.
· "Significant" guidance documents (unless exempt) require notice and public comment as well as a public response by the agency to concerns raised in the comments.
The second EO, "Promoting the Rule of Law through Transparency and Fairness in Civil Administrative Enforcement and Adjudication," establishes specific requirements for these actions:
• It prohibits enforcement actions that rely solely on guidance documents instead of a statute or regulation.
• When taking administrative actions, an agency may apply only those standards of conduct that have been publicly stated.
• Any agency decision or document relied upon by the agency to assert a new or expanded jurisdiction must be published and available on the agency's website.
• Before an agency takes any action that has legal consequences for a regulated person, such as a no-action letter or notice of noncompliance, the agency must give the person an opportunity to be heard regarding the agency's legal and factual determinations except when protecting against serious threat to health and safety, or other emergency, or otherwise authorized by statute.
• Agencies can offer reductions or waiver of civil penalties when regulated parties voluntarily report regulatory violations.
The OMB may take several months to complete implementing requirements for the EOs, after which agencies will have 10 months to complete or update their procedures for issuing guidance documents. Agencies must also review their existing guidance documents for consistency with the law and create or update their online databases with information about them.
The EOs are designed to combat regulatory agencies' potential excesses because of the additional authority granted to the OMB and the reduced discretion available to the agencies to generate guidance documents and to rely on them for enforcement. It is difficult, however, to predict their ultimate effect and no statistical baseline offers a way to compare the "before" and "after" effects of the EOs.
The Trump EOs would not have been necessary if the OMB had had success with its 2007 effort to exert control over guidance documents, which followed a couple of years of public and agency discussion. That effort established policies and procedures for the development, issuance, and use of significant guidance documents by executive branch departments and agencies. Like the EOs, the 2007 initiative was intended to improve the quality and transparency of agency guidance practices.
The OMB may find that its resources are too limited to aggressively monitor all guidance documents; delving deeply into the minutiae of highly specialized regulatory technicalities poses a formidable and unrewarding task. The EOs offer discretion to the OMB to waive the EOs' requirements, which might moderate the extent to which the EOs' aspirational goals are met. Also, depending on the perceived success of the EOs and the burden they impose, future presidential administrations could repeal or amend the EOs and the OMB could change its implementing requirements.
Bureaucracies tend to follow paths of least resistance when seeking to achieve agency objectives. Thus, if guidance documents lose their attractiveness as an expeditious, useful vehicle, agencies may shift to other approaches, such as "enforcement discretion" or proposed guidances that languish and never become final.
Yale law professor Nick Parrillo, writing on the Yale Journal on Regulation blog, observed that realistically the regulated community will follow the wishes of an agency regardless of its particular documentation formality:
Regulated parties are going to try to follow the agency's wishes regardless of the format in which those wishes are expressed, or the formality with which they're expressed. If officials issue draft guidance for public comment, but then don't have the time or resources to process the comments and write a response, the guidance may remain in "draft" for a really long time, and regulated parties may nonetheless treat it as gospel because they expect the agency (if only implicitly) to follow the sentiments in the draft guidance in individual proceedings that decide licenses, grants, etc.
We are skeptical that the EOs alone will effect significant change in the long term. Only continuing vigilance by Congress, the White House, astute regulators, the regulated community, and the general public will prevent regulatory excesses.
John J. Cohrssen, an attorney and psychologist, served in senior positions for White House agencies including the Office of the Vice President. He also was minority staff director of the Aging Subcommittee of the Senate Committee on Health, Education, Labor, and Pensions and counsel for the House Committee on Energy and Commerce. Henry I. Miller, a physician and molecular biologist, is a senior fellow at the Pacific Research Institute. He was the founding director of the U.S. Food and Drug Administration's Office of Biotechnology.