Aegis Compliance and Ethics Center, LLP
The Future of Administrative Law
The Regulatory Accountability Act of 2017 (the “Act”) is a bill that passed the House earlier this year and now awaits Senate deliberation. The Act would reverse Chevron deference, make significant changes to the rulemaking process under the Administrative Procedure Act (“APA”) and likely influence the ways in which administrative agencies make policy decisions.
Creation of Administrative Agencies
Congress created administrative agencies because the legislature cannot monitor every statute it enacts. Administrative agencies administer congressionally-created programs and provide specialized expertise. While the Constitution prohibits Congress from delegating its legislative power, Congress can grant agencies authority by providing an intelligible principle to guide them. Many argue that the nondelegation doctrine is now dead because any intelligible principle can pass muster. Congress often grants agencies broad discretion and the Supreme Court has long recognized the necessity for agencies to promulgate rules that fill in these gaps and the lower courts have historically given great deference to administrative agencies.
Why Give Deference?
Congress leaves administrative agencies great discretion when giving agencies authority to make rules or hold adjudicatory hearings under an ambiguous statutory scheme. Congress even allows some agencies to evade judicial review when the enabling statute precludes judicial review or the agency action is committed to agency discretion by law. Where a statute is silent, courts will determine whether the agency acted within its scope of discretion by creating a reasonable interpretation and considering the degree of agency expertise, the complexity of the question at issue, and the existence of rulemaking authority.
Chevron U.S.A. v. Natural Res. Def. Council (1984)
Chevron was not the first case giving deference to agency interpretations. The Chevron opinion explained that the Court had “long recognized that considerable weight should be accorded to an executive department’s construction of a statutory scheme it is entrusted to administer, and the principle of deference to administrative interpretations.” The late Justice Antonin Scalia emphasized this history of deference when he quoted a report, which formed the basis for the APA: “‘[T]he administrative interpretation is to be given weight—not merely as the opinion of some men or even of a lower tribunal, but as the opinion of the body especially familiar with the problems dealt with by statute and burdened with the duty of enforcing it…’” Although courts have a long history of permitting agency interpretations, Chevron is still one of the most important landmark cases in administrative law because it established a two-part test for greater uniformity in review of agency actions.
When a court reviews an agency’s construction of the statute, the court must ask:
- “Whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear…[the court] must give effect to the unambiguously expressed intent of Congress.”
- If Congress has not addressed the question at issue, “the court does not simply impose its own construction on the statute…the question for the court is whether the agency’s answer is based on a permissible construction of the statute… Such legislative regulations are given controlling weight unless they are arbitrary, capricious, or manifestly contrary to statute.”
Consequences of Regulatory Accountability Act of 2017
The Act would require courts to review all agency actions de novo. The courts have great expertise in interpreting the law, but lack the subject-matter expertise required to administer congressional programs in certain areas, such as healthcare and education. For instance, it would be very difficult for courts to interpret the dense Social Security Act without giving any weight to the Centers for Medicare and Medicaid Services. Case records often rely on expert testimony. It seems counterintuitive to prevent courts, reviewing any agency action, from giving deference to the administrative agencies with subject-matter expertise.
In addition to providing more uniformity than the pre-Chevron case-by-case analysis, Chevron is advantageous because it permits flexibility by allowing agencies to change policies based on the current environment or under different administrations. Alternatively, judicial review will set case precedent, which remains resistant to change. However, this flexibility is lost if changes in agency interpretation become suspect.
Agency discretion also benefits Congress. When Congress enacts vague statutes, it can avoid political backlash from lobbyists and the public. Administrative agencies are not held to the same level of accountability because they are not publicly elected officials.
The Act also introduces substantially more requirements for the notice-and-comment procedures for rulemaking. These requirements lead to agencies creating more interpretative rules or general policy statements, rather than legislative rules. Further, current and future administrations could find it more difficult to change rules or implement new rules when directed by Congress.
The Act could also shift greater burden onto Administrative Law Judges through increased litigation. The Act emphasizes the importance of allowing individuals to petition regulations which could lead to greater review of agency actions. People may also increasingly seek agency appeal actions since they will no longer be entitled to any deference.
Proponents of the Regulatory Accountability Act of 2017
The bill aims to reduce regulatory burdens on businesses and in turn promote innovation and economic growth. Legislators have expressed concern that agencies are running amok or have too much power. Regulations can harm industries where compliance requires greater administrative and fiscal resources and the penalties for violations can be harsh. Regulations also cost the federal government—adding up to approximately $1.86 trillion a year. Some say Chevron is to blame when agencies get out of control because agencies now hold too much power. Courts also apply Chevron inconsistently which has created a new complex area of case law.
But some misconceptions remain about the courts’ application of Chevron. Some mistakenly believe that courts must always agree with administrative agencies under Chevron and that the Act contains unnecessary language emphasizing that agency interpretations are not binding. But these decisions have never been binding on courts. When agency interpretation conflicts with a statute, Chevron instructs courts to review the action de novo. Where Congress is silent, courts still have the power to determine whether an agency interpretation is reasonable. Additionally, the courts have strayed from Chevron for cases with great political and economic influence. Courts remain the final arbiters of the law, and thus, it remains in question whether a separation of powers issue exists.
It may be difficult to completely overturn Chevron. The bill must first pass the Senate. Justices may also hesitate to overturn Chevron’s precedent against which Congress has continued legislating for many years. But counsel in highly-regulated industries should monitor any new developments on this legislation and keep it in mind when advising clients on compliance or litigation strategies. It may be better to stay away from deference arguments while this issue remains in flux.