This post is part of a symposium on federal agency guidance. The rest of the posts in this symposium can be viewed here.
Nick Parrillo’s publications are like Robert Caro’s – so synoptic, and so exhaustively researched, that it’s inconceivable that anyone could do a better job. As a result, it’s a daunting prospect to quibble with any of his conclusions and recommendations – much less to dispute them fundamentally. What’s more, as a practitioner – and one of his 135 interviewees – I have a bias toward work that is so solidly empirical, particularly in a field where doctrines can become more “real” than the world that they are meant to reflect. As a result, I have no strong disagreements with anything he has written in Federal Agency Guidance and the Power to Bind – or with its older sibling, Federal Agency Guidance: An Institutional Perspective, written in support of what became ACUS Recommendation 2017-5. I believe the newer article lends further support for a recommendation of the earlier one: that agencies “should solicit an appropriate level of public participation before adopting” a guidance document. Indeed, I believe the articles provide ample support for a stronger recommendation: that agencies should be required to provide notice and an opportunity to comment on drafts of sufficiently momentous guidance documents. It may well be that such a mandate would lead to a shift in agency use of guidance versus rulemaking. But such a shift may also be an appropriate and salutary step in the evolution of the regulatory process. In my view, Nick’s articles provide sufficient basis to have confidence in taking that step.
The thrust of the new article is that (i) there are plenty of reasons arising out of institutional dynamics for regulated entities to want, or feel compelled, to follow guidance documents and for agencies to want to hew to them; and thus (ii) it’s unfair – and unnecessary – to attribute these agency tendencies principally to a conscious and nefarious intent to avoid notice and comment rulemaking. From almost 35 years of experience helping regulated entities interact with regulators in a range of substantive areas, I think Nick has accurately sussed out the factors that tend to create pressure on regulated entities to abide by guidance documents and the factors that lead agencies to be inflexible. And as I’ve written about previously, regulated entities frequently have reasons to want agencies to proceed via guidance rather than rulemaking, particularly where time is of the essence and the subject is highly technical and likely to change.
In Part III of the article, Nick focuses on the problems of deregulatory safe harbors, one of which is that regulatory beneficiaries (and their representatives) have no means of challenging them (besides filing a rulemaking petition). He concludes that “significant deregulatory effects [are] one of the strongest factors counseling in favor of soliciting public participation before the document is adopted.” He also notes that “[h]ow to assess the costs and benefits of this participation, and whether and when to invite it, are questions that I address in depth [in the ACUS report].” That report recommended that, “[w]hen an agency is contemplating adopting a guidance document, it should solicit an appropriate level of public participation before adopting the document, which may include outreach to selected stakeholder representatives, stakeholder meetings or webinars, advisory committee proceedings, or notice and comment (with or without a response to comments).” As it does all too often, ACUS softened this recommendation to “should consider whether to” do these things. That’s too bad – Nick’s ACUS report actually makes a very compelling case for why it would be good, on balance, if agencies were required to do notice and comment on sufficiently important guidance documents.
The relevant portion of Nick’s ACUS report begins by explaining the many reasons why conducting notice and comment on guidance documents has imposed (or could impose) far fewer burdens on agencies than rulemaking. OMB review of guidances, which has been OMB policy since the early 1990s, has proven to be far less demanding than OMB’s review of rules – in substantial part because it does not entail cost-benefit analysis. Because policy statements, at least, are not normally subject to judicial review, agencies do not need to develop massive administrative records, preambles and response-to-comments documents like they do for rules. Guidances receive fewer comments than rules. They’re easier to draft than CFR text. And stakeholders do not gear up to resist them to the same degree.
The report also describes the benefits that the notice and comment process can provide in the formulation of a guidance document: better technical information, better political intelligence, greater legitimacy, and – as noted earlier – an opportunity for NGOs and other representatives of regulatory beneficiaries to have input.
The report largely determines that the burden on agencies from reviewing comments would not be undue, especially if agencies are not required to prepare a response-to-comments document. The one counterexample focuses on OSHA, which as I’ve written before is a sui generis administrative law basketcase among agencies, in part due to the OSH Act. There is no doubt, however, that OSHA would have saved time and resources if it had sought public comment on the major guidances that it issued under the Obama Administration. In the space of about a month in 2015, OSHA issued three “enforcement policy” memos interpreting aspects of its Process Safety Management (PSM) rule, and was promptly sued over all three. It settled the suit over the first two the following year, issuing revised guidances (here and here) that were more flexible and accommodating of prior interpretations. It litigated the third to a judgment, and suffered a devastating defeat when the D.C. Circuit issued a stunning opinion [837 F.3d 60] holding that there is no such thing as an “interpretive rule” under the OSH Act, only “standards” and “regulations,” and that so long as an OSHA pronouncement is directed at correcting some hazard (as opposed to just gathering information or finding violations), then it’s a “standard” and has to go through OSHA’s long and involved rulemaking process for standards. This is true even if the OSHA pronouncement would have been considered an “interpretive rule” if issued by any other agency. Even more amazing, the court held there was no “interpretive rule” exception to the requirement of notice and comment for OSHA standards because the notice and comment process for these standards is governed by Section 655(b) of the OSH Act, not the APA — even though an earlier D.C. Circuit decision [174 F.3d 206] had proceeded on the basis that notice and comment for OSHA standards is governed by the APA, at least for purposes of establishing exceptions from the requirement, and so the exceptions for procedural rules and policy statements in ABA § 553(b)(3)(A) do apply. Even more amazing, the first opinion discusses the second, but never notes this glaring inconsistency. Even more amazing, the opinion was a unanimous decision by three Democratic appointees (two by Obama and one by Clinton). And the court denied rehearing en banc. By contrast, when OSHA issued three more PSM guidances in 2016, it sought public comment, and the result one year later was final guidances (here, here and here) that appear to satisfy all concerned, rather than lawsuits.
Nick’s ACUS report then discusses whether, in light of the foregoing, agencies should be required to do notice and comment on their guidance documents, noting that the 2007 OMB Bulletin for Agency Good Guidance Practices (still in effect) requires it for economically significant guidance documents – but that there are vanishingly few of these (for example, apparently only two between 2011-2015). It focuses on the risk that agencies will just leave guidances in draft form, noting that FDA’s median time between draft and final is around two years, and that EPA has a 27-year-old draft guidance. As the report notes, however, draft guidances still serve the purpose that guidance is supposed to serve, since they signal the agency’s view on a topic in a way that is not legally binding. And agencies could certainly be required either to finalize guidances within some finite period of time or to withdraw them (or they could simply be declared ineffective).
The report concludes by recognizing that a requirement to do notice and comment on significant guidances could “marginaliz[e] legislative rulemaking” – as appears to have happened at FDA, upon which Congress imposed such a requirement in 1997. It quotes Professor Todd Rakoff’s prophetic 2000 comment that “[i]t would not be far-fetched to rephrase [the new requirement] by saying that the FDA now proposes to issue its important regulations mostly in accordance with the notice-and-comment rulemaking procedure set forth in the APA, as it was understood before 1970.” On the other hand, the administrative law professoriate has been largely agreed for almost thirty years now [cite: E. Donald Elliott, Remarks at the Duke University School of Law Symposium: Assessing the Environmental Protection Agency After Twenty Years: Law, Politics, and Economics (Nov. 15, 1990)] that legislative rulemaking has become so ossified that it cannot serve the role for which Congress originally intended it. Putting OSHA aside, my personal view is that most agencies (especially EPA) are still able to issue rules quickly when they set their mind and resources to it, and that the things that slow rules down are salutary on balance. But the critics have a point, and the ideal solution in my mind would be what Nick describes in his recent article as “a kind of ‘Rulemaking Lite,’” where agencies are free to issue guidance documents on significant topics, subject to prior notice and comment.
The notice and comment obligation could be imposed by Congress or an administration. Given the “profound and portentous” nature of this step [Parillo ACUS report at 184], it would be better (in the abstract, at least) for an administration to do so, via an executive order or OMB bulletin (for example, an update of the 2007 Bulletin). In particular, an administrative approach would allow for notice and comment on the optimal metes and bounds of the requirement, which seems only appropriate given the topic. I would propose that agencies not be required to respond to comments, at least not for guidances that are not economically significant. They should also not be required to conduct cost/benefit analyses on guidances (again, except for economically significant ones). I would also propose, as noted earlier, that agencies be required to finalize all drafts within a finite time (e.g., one year), backed up by the sanction that older drafts would be deemed expired and ineffective. The most difficult issue to resolve would be how to formulate the threshold below which notice and comment would not be required, since notice and comment for all guidance documents would be mostly unnecessary, staggeringly disruptive, and, with experience, highly unpopular. The standard applicable to the FDA would be a good starting proposal; i.e., guidances that “(i) Set forth initial interpretations of statutory or regulatory requirements; (ii) Set forth changes in interpretation or policy that are of more than a minor nature; (iii) Include complex scientific issues; or (iv) Cover highly controversial issues.” [21 C.F.R. § 10.115(c)(1).] It may be that (ii) is adequately addressed by (iv) – comments could be sought on that question.
Legislative rulemaking would continue to play a (more) central role in agency practice under this regime. For one thing, Congress frequently requires it. Also, assuming Congress gets involved here, existing case law should be preserved, so that only legislative rules could be written as legally binding, or applied in an inflexible way. Controversies would continue to arise about whether guidance documents were being applied in a way that had the practical effect of being legally binding – but at least those controversies will now be informed by the tremendous research and reflection embodied in Nick’s latest article.
Jamie Conrad is the Principal of Conrad Law & Policy Counsel in Washington, D.C. He has spent most of his career representing trade associations on regulatory topics – though these views are his own. Before the Internet, he used to collect guidance documents like normal people collect baseball cards or stamps.