For an event honoring the scholarship of Professor Bill Funk, another contributor to this on-line symposium, I have written an essay, Domesticating Guidance, summarizing my thinking about the use and misuse of agency guidance documents. No one doubts that that the soft law of guidance documents, which do not require notice and comment under the APA, should not veer into the hard law of legislative rules, which generally do require that procedure. Unfortunate confusion, though, arises from lower court concerns that purported guidance documents may be “binding in practice” — thus, they reason, functionally, an invalid legislative rule that must be vacated for want of notice and comment. A central thesis of Domesticating Guidance is that this approach, treating impact on agency staff and impact on outsiders as equivalent, is badly mistaken and counterproductive. To have agency staff regard guidance as a form of internal administrative law to which they are expected to adhere, and to have outsiders understand it as a promise about agency behavior that will be kept absent a demonstrable reason for change, are both positive goods. It is just a mistake to regard reliable agency indications how its staff will treat the issues that may come before them as possible only if the formalities of notice and comment rulemaking are followed. Professor Parrillo’s empirical investigation provides some powerful support for this view.
Guidance documents provide information to agency staff, regulated parties, and regulatory beneficiaries regarding how an agency interprets and intends to implement its statutes and regulations. Using responsible bureaus, without necessary engagement of the agency head who must sign off on regulations, agencies can inexpensively produce guidance that can be tremendously useful to all concerned. By providing instructions from central HQ to agency staff, guidance documents promote agency policies and guard against arbitrary front-line discretion. They also provide valuable information to regulated parties craving certainty how to comply with regulatory obligations. Precisely because this information is so valuable, it often has potent effects on conduct—if an agency declares in a guidance document that regulated parties can comply with a regulatory requirement by doing X, then regulated parties will have a strong incentive to do X. Agency staff will properly regard this as internal administrative law, governing their conduct and even backed by the possibility of some sanction for disregarding it. Still, guidance documents remain soft law— not requiring notice and comment under the APA—so long as the standards they set are not themselves enforceable against the outside world. It is statutes and legislative rules that a regulated party must obey as a matter of law, not the soft law guidance elaborating on them.
Regrettably, some precedents hold that a guidance document has improper power if it effectively has controlling force within an agency. The D.C. Circuit’s opinion in Community Nutrition Institute v. Young, 818 F.2d 943 (D.C. Cir. 1987), has long been a leading example of this approach. Readers will recall that, in CNI, the D.C. Circuit held that guidance that the FDA issued to structure its staff’s enforcement of limits on aflatoxin concentrations in grain required notice and comment, because these instructions to staff had “present, binding effect.” Of course, had any grain been seized the issue would have been whether it was contaminated in terms statute or regulation forbade, and not whether staff had followed instructions about when they should enforce. The Community Nutrition Institute had a proper concern whether FDA had set the enforcement trigger too high; but that issue should have been faced on the merits — as it might have been, given the effective finality of these staff instructions, could they have credibly established a present threat to members’ health. The Fifth Circuit’s action in Texas v. DHS, enjoining DHS guidance respecting the treatment of illegally present immigrants, 809 F.3d 134 (5th Cir. 2015), aff’d 136 S.Ct. 2271 (2016) (equally divided Court), similarly confused internal agency law, which warrants support, with the external regulation requiring notice and comment to be used. The effect on “rule of law” concerns is perverse, depriving guidance documents of one of their most valuable functions—an ability to create and publicize the “internal administrative law” of an agency at an acceptable cost. As I wrote in Domesticating Guidance:
Having internal administrative law effective and known to all conduces to regularity and predictability in agency action, essential elements of the “rule of law.” Knowing an agency’s internal administrative law has great value to those it regulates, to those it is responsible to protect, and to the public and political overseers, Congress and President. Given their limited resources, agencies cannot be expected often to engage in notice-and- comment rulemaking to adopt their internal administrative law, and the APA is clear that they are not required to. Thus, the realistic alternatives to having seriously intended guidance documents is leaving discretion unstructured – permitting field agents to reach their own, varying and probably secret understandings of the agency’s regulatory requirements; enforcing those requirements for reasons that may be secret and unpredictable; and leaving the regulated on their own to find the means of complying with regulatory standards. All of these impacts reflect departures from the rule of law.
Happily, Professor Parrillo went to a far better source than the limited case law to investigate the power of agency guidance to “practically bind.” With the support of the Administrative Conference of the United States, he interviewed 135 people—from agencies, industry, and NGOs—who work with guidance all the time. While concluding that guidance does often influence the behavior of the regulated as well as agency staff, he found little reason to think agencies use guidance as part of a nefarious plan to bind regulated parties without going through the procedural requirements of notice and comment. Agencies strive for consistency that those they regulate want and expect. It is a proper consideration in deciding whether to permit an individual firm an exception from the policy stated in a guidance document that “other firms in the industry—the competitors of the firm that obtained the departure—may not be happy” as they “may see themselves being put at a competitive disadvantage.” (Id. at 232.) As one interviewee reported, “industry does not want discretion”—it “wants a level playing field.” (Id. at 233.) Along these lines, a former FDA official similarly observed that regulated parties generally want “certainty” and that complaints that a reviewer was not following guidance “were far more common” than complaints that guidance was being followed inflexibly. Nor are representatives of industry the only people who expect consistency from agencies. Professor Parrillo documents that NGOs, the media, and Congress all look askance at inconsistency which can, of course, smack of favoritism. (Id. at 238-239). Agencies themselves desire consistency not just for the rule of law and administrative values it serves, but also to avoid opening floodgates; allowing one exception may invite many others. (Id. at 240-242.)
The interview responses that Professor Parrillo recounts neatly confirm a point that should be obvious—agency consistency and predictability are generally very good things that should be encouraged rather than discouraged by the courts. We should want agency heads to give instructions to staff that “bind” in the sense of confining their discretion and that thus can serve as “internal administrative law.” Of course, an agency must leave open a sufficient chance for interested persons to contest guidance before the agency itself, lest it veer into the hard law for which the APA demands notice-and-comment. And, to guard against bad guidance, a proper party should be able to contest guidance that satisfies the pragmatic approach to finality of National Automatic Laundry & Cleaning Council v. Schultz, 443 F.2d 689 (D.C. Cir. 1971).
A short posting here cannot do justice to Professor Parrillo’s lengthy and rich article, which you should read now, if you have not already done so. Those wishing to read more of my views on guidance can find them in Domesticating Guidance.
Peter L. Strauss is the Betts Professor of Law Emeritus at Columbia Law School.
This post is part of a symposium on federal agency guidance. The rest of the posts in this symposium can be viewed here.