Understanding the regulatory significance of the 2016 Presidential election focuses on both the authority of the current President of the United States (POTUS) and the President-elect of the United States. The current POTUS, quite naturally, will seek to institutionalize his legacy while the incoming POTUS will seek to undo his predecessor’s regulatory actions that are anathemic to his own policies and make an immediate imprint on the regulatory process. A nuanced review illuminates options and issues often misunderstood.
“Midnight” Regulations: The concept regulations pushed through in haste in the waning days of an Administration to protect that Administration’s position has been much debated and now will come directly into play with the election of a new President of a different political party. Indeed, the current Administration should be expected to ramp up regulations to institutionalize as much policy as possible.
As of election night, the Office of Management and Budget (OMB) Office of Information and Regulatory Affairs (OIRA) docket contained 162 regulatory actions under review – a substantial increase from earlier in the year after OMB took concerted action to reduce that docket, and that number has since grown even more to 166. Eliminating proposed rules as “just too late” reduces the docket by 57. Of the remaining 105 regulatory actions, only 19 are deemed economically significant, and some are implementing notices that have legal or policy significance as regulatory actions, even if not final rules. In effect, the Administration now has less than 10 weeks to finalize, as best possible, their regulatory legacy, but subject to distinct limitations and substantial risks. The ability to complete review that will survive future executive actions and judicial review, however, is limited. Certainly, any Administration will seek to finalize significant rules, even outside the current OMB docket, significant or not.
End Date Not Good Cause: Some of the final rules already pending at OMB are denominated as interim final rules (IFR), presumably without regard to the end-of-Administration timing issue. The Administrative Procedure Act (APA) authorizes an agency to bypass the detailed and time-consuming advance notice and an opportunity for public comment for “good cause” if that process is impracticable, unnecessary, or contrary to the public interest – colloquially, an IFR. The end of an Administration, however, does not qualify under any of these definitions and departure from office is not a reason for cutting corners – indeed, after eight years in office, the Administration may not now claim that its departure from office constitutes the “emergency” required for impracticability. Any outgoing Administration should be cautions of such devices because any failure to comply with the law can be seized upon not only by an incoming Administration but by anyone else to eviscerate a now-defenseless regulation.
Planning’s End: The election results also may have thrown preparation of the Fall 2016 Unified Agenda of Regulatory and Deregulatory Actions into turmoil. A new Unified Agenda may or may not be issued – it is largely irrelevant as a planning document. The Regulatory Flexibility Act (RFA), on the other hand, requires agencies to publish semiannual regulatory flexibility agendas in the Federal Register each April and October. For the moment, agendas may not matter.
Post-Inauguration Effective Dates: Promulgating a final rule is hardly the end. The APA requires a minimum 30-day delayed effective date, subject to an agency finding of good cause to shorten that time – and here good cause is not separately defined, so the notion should be informed by the limitations on exceptions to public comments noted above. Subtracting thirty days from inauguration leaves an operating deadline for Federal Register publication little more than a month away.
The Congressional Review Act (CRA) provides that a major rule may not become effective until at least 60 days after publication in the Federal Register. (ignoring the report “received” by Congress requirement and the “latter” temporal tripwire). The CRA defines that “major rule” as a not unfamiliar economic threshold: “any rule that the Administrator of [OIRA] finds has resulted in or is likely to result in – (A) an annual effect on the economy of $100,000,000 or more…,” which sounds like “economically significant.” The purpose of the extended effective date was to permit Congress to attempt to enact a joint resolution of disapproval, but President Obama successfully vetoed every joint resolution of disapproval. The joint resolutions of disapproval are not the issue presented to the next Administration; the issue here is delayed effective date of major rules for their own sake and that operating deadline is imminent.
Specific statutes may vary the requirement, and some rule have long effective dates. The Department of Health and Human Services (HHS) Food and Drug Administration (FDA) restaurant calorie labeling rule, for example, is currently scheduled to become effective in May 2017, after a number of delays, and may be delayed permanently.
Stay of Effective Dates: Until the effective date, an agency may stay that rule effective date. New Presidents have frequently directed subordinate agencies to stay rules at the beginning of an Administration for further review. A simple notice in the Federal Register is more than sufficient – such a notice is not “required,” but it is needed to effectuate a public constructive notice and to ensure that the Government Printing Office (GPO) either withholds codification of affected regulatory language in the (official) printed Code of Federal Regulations, or notices dual language and the existence of the stay.
The incoming transition team is likely to write that stay directives – and even specific stay notices for signature by the incoming agency head.
Stays and Voluntary Remands: A substantial amount of the present Administration’s legacy is locked up in court and regulations are stayed by judicial order. For example, controversial regulations that have already been stayed in the courts include the Environmental Protection Agency (EPA) and Army Corps of Engineers’ Clean Water Act: Definition of “Waters of the United States” (pending in the United States Court of Appeals for the Sixth Circuit), and EPA’s Clean Power Plan (pending en banc review by the United States Court of Appeals for the District of Columbia Circuit and stayed by United States Supreme Court (SCOTUS)).
The incoming Administration may request voluntary remand of any rule that is pending review in the courts, but voluntary remand is most important when a stay is already in effect because it abates further review of the stayed rule while the Administration decides what changes should be made. Courts generally grant voluntary remand because they prefer to allow agencies to cure their own mistakes – it is simply more efficient. A court may remand an agency decision when an agency has raised substantial and legitimate concerns in support of remand, and a change in legal position alone may be acceptable. Courts should, however, take into account whether the party opposing voluntary remand will be unduly prejudiced, but when an agency seeks a remand to take further action consistent with correct legal standards, courts should permit such a remand in the absence of apparent or clearly articulated countervailing reasons. This is not an up or down agency decision, but a nuanced evaluation and, again, the change in a basic legal posture when the rule has not taken effect may be sufficient.
Preliminary Injunctions: A more complicated are those cases where a court has entered a preliminary injunction – an order that does not bar the legal effect of a rule but bars officials from taking actions to enforce the rule. A number of cases are pending summary judgment or appellate review where a district court has issued a preliminary injunction against enforcement of a final rule, but the rules remain intact and effective (or about to become effective). A final judgment might provide that the rules be vacated and set aside under the APA, and a new Administration can certainly influence the content of such a final judgment.
The stay / preliminary injunction distinction could be critical to how a new Administration reacts in those cases where the regulation affects statutorily created private rights of action – such as the Department of Labor (DOL) Fiduciary Rule that became effective last June. Even if DOL is enjoined from enforcing or administering new standards in any of the three district court cases (one court has denied a preliminary injunction), the rule is already in effect and compliance dates will apply without further action, setting up the predicates for private rights of action to enforce those standards. Unfortunately, a number of cases involving DOL appear to suffer from the stay / preliminary injunction distinction problem.
Confession of Error and Vacatur: In some instance, the incoming Administration, through DOJ, may also accede to summary judgment (judgment on the administrative record) and vacatur (setting aside) of a final rule. The oft-complained-of yet ne’er-established notion that an Administration may be pleased to be sued by its allies in order to negotiate a favorable settlement (be sued and settle; to put it pejoratively: collusion or conspiracy) comes into play. Confessing error is not uncommon – even before SCOTUS – but does require a notion of past error.
The court’s judgment setting aside a rule ends the process without more, unless some intervenor acquires a stay of that order pending their own appeal. Such a final order could be effectuated by a notice removing the set aside language, although such a notice is technically a final rule adopted without advance notice and an opportunity for public comment because the agency has no discretion regarding the order and removal; public comment is therefore unnecessary.
Guidance Rescission: Guidance, a preferred evasion to the procedural requirements of regulations, is the likely target of rapid rescission by the new Administration – and as guidance does not require any process to promulgate, so too does its demise.
Under a new Administration, for example, the Department of Education (ED) and DOJ could simply rescind the transgender bathroom Dear Colleague letter that forms part of SCOTUS’s consideration of Gloucester County School Board v. G.G. DOJ’s Civil Rights Division (CRT) argued that the United States Court of Appeals for the Fourth Circuit should give deference to an agency interpretive letter, which the Fourth Circuit did in holding that sex under the Civil Rights Act included gender self-identification. Shortly thereafter, ED and DOJ published the more formal Dear Colleague letter, which was challenged and preliminarily enjoined. SCOTUS has not yet invited the Solicitor General to present the views of the United States, but the Solicitor General is not bound by CRT’s prior position, and, under a new Administration, may abandon prior support. Moreover, the new Administration may even issue new guidance that takes the opposite view that “sex” means precisely birth sex, not gender self-identification. Briefs already before SCOTUS have clearly noted that the Dear Colleague letter has been preliminarily enjoined nationwide as contrary to the language of Title IX of the CRA and the ED’s own regulations, and as a substantive rule that was procedurally defective for failure to follow the APA notice and comment requirements. Rescission of the Dear Colleague letter could undercut the importance of the limited deference issues presented, and a well-formed and procedurally sufficient contrary position might warrant deference supporting reversal.
The Department of Homeland Security (DHS) could also rescind many of the memoranda that constituted the Administration’s Immigration Executive Action, particularly those that granted deferred action, but reliance is likely to be raised to some degree as a defense to removal proceedings. The memorandum setting forth the classwide benefits for employment authorization documents has, of course, been the subject of a district court preliminary injunction, affirmed by the United States Court of Appeals for the Fifth Circuit, and affirmed by an equally divided SCOTUS in United States v. Texas. Rescission without more would appear to be legitimate.
Full Regulatory Review: Any rule, old or new, is subject to full regulatory review – indeed, the current Administration has made a point of retrospective review and the incoming Administration is likely to increase pressure for such review. Some controversial topics are likely at the forefront of that full regulatory review process. The contraceptive mandate – subject of much litigation before SCOTUS and the lower courts – likely requires a full advance notice and an opportunity for public comment rulemaking, no matter what posture the new Administration wishes to take.
Such a “full” rulemaking process may be quite abbreviated for recently promulged rules. First, the agency already possesses a full administrative record on the subject – a federal record that not only survives the change in Administration, but should be a permanent record of agency action that has at least some historical significance destined for the National Archives and Records Administration (NARA) – even if that record was constructed to support a specific policy. Second, the APA requires only that an agency’s proposed rule provide “either the terms or substance of the proposed rule or a description of the subjects and issues involved.” A new proposed rule on a recent final rule may only need to ask whether the rule is supported by sufficient facts or law. Third, the APA does not stipulate a default “minimum” amount of time for public comment; 30 days seems to be the logical minimum for “fair notice.”
Thus, new review of a recent final rule need not be particularly onerous. The new final rule must, however, show consideration of the relevant data and provide a rational explanation of the decision required by long-standing precedent in State Farm – a case borne of failure to properly navigate the nuances of the regulatory process during a transition of Administrations. A change in Administration does not obviate the arbitrary and capricious or abuse of discretion standards.
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