The Problem with Agency Guidance – or Not, by Mark Seidenfeld
Nicholas Parrillo has written a most fair-minded evaluation of federal agency guidance. He is careful to point out the great benefits guidance provides to agencies, the public and even to regulated entities, in the form of increased consistency and accountability in agency discretion in implementing statutes, as well as increased notice to regulated entities about how the agency will exercise such discretion. Perhaps more uniquely, he critically reviews and rejects claims that agencies abuse guidance with the intent of having them bind regulated entities or create regulatory safe harbors without using statutorily specified processes for creating binding rules. But he also concludes that guidance is problematic because agencies can issue it without using and comment rulemaking proceedings and yet pragmatically guidance frequently has binding effect because it induces regulated entities to treat it as if it is a legislative rule. Parrillo concludes that we should consider, in the short term, managerial fixes that encourage greater agency flexibility and, in the long term, structural alterations to how the federal regulatory system creates incentives for regulated entities to comply with guidance, and agencies to apply it as if it is binding.
Despite the fairness of Parrillo’s analysis, I take issue with it because I believe he (along with most others) mischaracterizes why the Administrative Procedure Act permits agencies to issue guidance without using notice and comment. This mischaracterization leads Parrillo to view practical bindingness of agency guidance as the metric by which to evaluate guidance, as if such bindingness is inherently a problem. I understand guidance’s exception from required notice and comment as reflecting that guidance does not have what I term “independent force of law.” That is, an agency cannot take action against an entity merely for violating guidance, but instead must show that the violation of guidance in any particular circumstance permits the agency to act against the entity in accordance with the agency’s authorizing statute and legislative rules. In the usual context of guidance that purports to require an entity to engage in specific conduct to avoid a fine or other punitive action, the agency must show that noncompliance with guidance in the particular factual circumstances constitutes violation of the underlying statute or regulation. But, to the extent that the agency has already determined that, in a specified set of factual circumstances, guidance reflects the best means of implementing its statutory mandate, I see no evil in the agency applying the guidance rigidly.
The metric I would use to evaluate agency use of guidance documents is whether it leads to “good governance.” In other words, does the agency use of guidance generate outcomes that fail to reflect what I take to be fundamental goals administrative law – that agency actions comply with the rule of law and follow from careful deliberation that takes into account the preferences and values of stakeholders. Guidance provides a challenge to notions of good governance in three ways. First, agency guidance might coerce a regulated entity to behave in a manner that is beyond the agency’s legal authority to order. Second, agency guidance might allow an agency to act without carefully considering the consequences of its action because it need not follow procedures that encourage such deliberation. Third, agency guidance might ignore the preferences and values of certain stakeholders because there is no mechanism to ensure those stakeholders access to the agency decision-making process.
Undoubtedly these potential problems with use of guidance can be addressed in the long run by Congress altering the federal regulatory system. But, I am skeptical of suggesting such fundamental change. Better the devil we know than the devil we don’t. Moreover, fortunately courts can ameliorate all three of my good governance concerns by altering some doctrines regarding review of guidance documents. As I indicated in a prior article, the problem of guidance that is beyond agency statutory authority can be checked by judicial review of such guidance when it is issued. To assure such review, courts need only modify in non-radical fashion the doctrines of prudential ripeness and finality of agency action to allow courts to review action that has practically binding effect but does not technically alter legal rights and obligations. With respect to claims that guidance coerces conduct that an agency did not have legal authority to order, the APA currently instructs reviewing courts to set aside agency action that is “in excess of statutory authority.” With respect to ensuring deliberation, courts already apply hard look review, which mandates that an agency explain how its decision follows from relevant factors. Given that agencies cannot predict the perspective from which a reviewing court will view any particular guidance document, hard look review strongly encourages agencies to deliberate about how all potentially relevant considerations impact its decision.
The most difficult concern for courts to address is that stakeholders have access and the potential to influence guidance because the lack of notice and comment procedures eliminates any publicly created record for a court to review. The problem of stakeholder access, however, can be reduced by mandating that agencies explain guidance in terms of factors that are relevant and alternatives that are plausible given the state of knowledge available to the agency when it acted. Reviewing courts could also consider arguments presented by those who sue to challenge guidance that call into question the accuracy of data and the plausibility of analyses on which the agency relied. Facing reasoned decision-making review of guidance that potentially could address arguments and data that the agency did not have before it will encourage the agency to seek out all relevant data and to make some effort to involve stakeholders in the decision-making process, if for no other reason than to give the agency forewarning of what it will face upon judicial review.
Mark Seidenfeld is the Patricia A. Dore Professor of Administrative Law at Florida State University College of Law.
This post is part of a symposium on federal agency guidance. The rest of the posts in this symposium can be viewed here.