The Path Forward on Agency Guidance
Over the past decade or so, increasing attention has been paid to agency guidance, the role it serves, and whether it has begun to supplant legally binding regulation as a governing tool. To place more parameters around its use, President Trump issued Executive Order 13891. President Biden rescinded that order upon taking office, and agencies are in the process of unwinding actions taken to implement the order. On Friday, June 18, the Federalist Society’s Regulatory Transparency Project hosted a panel discussion on agency guidance – what it is, how and why it is issued, the pros and cons of current guidance practices and E.O. 13891, and the potential future of guidance reform.
As always, the Federalist Society takes no position on particular legal or public policy issues; all expressions of opinion are those of the speaker.
Although this transcript is largely accurate, in some cases it could be incomplete or inaccurate due to inaudible passages or transcription errors.
[Music and Narration]
Nate Kaczmarek: Hello and welcome to today’s Regulatory Transparency Project webinar. I’m Nate Kaczmarek, Vice President and Director of RTP. As always please note that all views and opinions expressed on today’s program are those of our guests. This afternoon we’ve picked a timely topic. Agency guidance is an important aspect of every modern administration, and it’s clear that the Biden administration is no exception. I’m pleased to say that we’ve gathered an all-star group of experts for our discussion.
To help us with this conversation, we’re happy to have an excellent moderator in Daniel Flores. Daniel is the Senior Counsel for the House Committee on Oversight and Reform. Prior to his current position, he served as Chief Counsel for the House Subcommittee on Regulatory Reform, Commercial, and Antitrust Law for the Committee on the Judiciary, and he has been the chief counsel for several other important house committees. If you’d like to learn more about Daniel’s background and read the full bios of our other speakers today, you can visit our website at regproject.org. That’s R-E-G-project.org.
In a moment I will turn it over to Daniel. Once our panel has completed their discussion, we’ll have audience Q & A, so please think of the questions you’d like to ask them. Our Zoom audience members can ask a question by using the raised hand function, and Daniel will do his best to call on folks in the order that you do so. Please bring your tough queries for our answers — to stump our experts today.
With that, Daniel, Bridget, Karen, and Paul, thank you very much for being with us today. Daniel, the floor is yours.
Daniel Flores: Thanks again, Nate, and thank you everybody for joining us. We hope this is a informative and helpful forum for you. I look forward to getting questions from the audience. We hope we trigger some useful questions for you. We’d love to field them as we get to the end of the forum.
As Nathan mentioned, guidance is a highly important topic in the regulatory sphere. Over the past decade or so, increasing attention has been paid to it and to the roll it serves, whether it has begun to supplant legally binding regulation as a governing tool, and what increases in transparency could help the public know better, what views agencies have expressed in guidance documents, of which there are thousands. To place more parameters around the use of guidance, President Trump issued Executive Order 13891. President Biden rescinded that order upon taking office, and agencies are in the process of unwinding actions taken to implement the order.
Today, we’d like to look at in depth at the questions surrounding agency guidance. What is guidance, and how many different forms can it take? How is it issued? Why is it issued? There are differing reasons for that. What are the key reasons to favor or disfavor current guidance practices? What did E.O. 13891 do? And what are the most common views for or against it? And lastly, what is the future of guidance reform following President Biden’s rescission of President Trump’s order?
Here to discuss this important topic for you are Paul Ray, Senior Advisor of Patomak Global Partners and former Administrator of the Office of Information and Regulatory Affairs under President Trump; Karen Harned, Executive Director of the National Federation of Independent Business Small Business Legal Center; and Bridget Dooling, Research Professor at the George Washington University’s Regulatory Studies Center and former Deputy Chief, Senior Analyst, and Attorney at the Office of Information and Regulatory Affairs, and also a former member of the Agency Review Team for OMB for the Biden-Harris administration.
I’m Daniel Flores, your moderator, as Nate mentioned. I currently serve as Senior Counsel on Committee on Oversight and Reform at the House of Representatives. Today I’m here in my personal capacity though, and my comments are my own and not made on behalf of the Committee. With that introduction, let me turn it over to our panelists. Paul, let’s start with you.
Paul Ray: Great. Well, thanks Daniel. It’s a pleasure to join you all here today. Thank you for everyone who’s on the line with us. And Nate, thanks to you for your leadership on the RTP initiative writ large. It’s an honor to work with all of you.
In my very brief remarks today, I want to do three things. First, I want to explain what guidance is and how it’s currently used for those who may not know about it. Second, I want to outline a few common criticisms on the one hand and defenses on the other of current guidance practices. And third, I’ll make a brief case for establishing an aisle crossing consensus around three principles that should inform OMB’s recommendations for reforms guidance practices as directed under President Biden’s memo on modernizing regulatory review.
When we were preparing Executive Order 13891 on good guidance practices, I and others were frequently asked by non-lawyers, “Well, what is guidance exactly anyway?” I’m sure that we’re joined mostly by lawyers today, but for non-lawyers among us, as well as for lawyers who are not specialists in administrative law, I’ll briefly explain what guidance is.
A good working definition of guidance is that it’s an agency statement of policy or legal interpretation that lacks force of law. Now, as the first part of that definition indicates, guidance can cover any sort of topic from the meaning of statutory or regulatory texts to best practices for regulating industry or explanations of agency enforcement priorities and basically anything else you can think of. What sets guidance apart, then, is not it’s subject matter, but it’s lack of legal force. Guidance cannot be enforced against regulated entities as statutes and regulations can.
Now to be clear, this is not to say that guidance never affects the rights and obligations of regulated parties because governing case law affords deference to guidance in certain circumstances. Under Auer and Seminole Rock, guidance can, as a practical matter, alter the meaning the courts give to particular regulatory provisions and hence can alter the rights and obligations that those regulations confer. The key is that guidance, unlike a statute or a regulation, cannot create rights or obligations by virtue merely of its own command. That’s what sets guidance apart.
Because guidance lacks the force of law, it is not subject to the APA’s notice and comment procedures, and it’s generally not reviewable in court. These two facts together mean that guidance is much easier and less costly to issue than regulations. Regulations have to address comments and undergo a consensus process designed to strengthen them against legal challenge. And that’s why agencies often rely on guidance where regulations would prove too costly or cumbersome to issue.
“How often?” you ask. Well, we don’t know how many guidance documents agencies have issued. We can gain some notion of the scope of guidance issuance by the fact that as of today, a single agency, the Department of Labor, has some 8,500 guidance documents on its guidance portal, and that appears to be after the agency rescinded several thousand guidance documents in response to Executive Order 13891. And again, that’s just one agency.
I’d like to shift now and outline again, very, very briefly, some common criticisms and defenses of agency guidance practices as they exist today. I’m not going to be exhaustive, by any means, and I’m not even going to try to do justice to the particular criticisms or defenses that I mention. Hopefully, we can explore all of that later in the presentation. The idea here is basically to help situate those who are unfamiliar with the debate about guidance and some of the issues that are discussed.
Probably the most common criticism of guidance is that it is rulemaking in disguise. The argument is that while guidance is technically non-binding, agencies issue it for a reason, and that’s because parties comply with it. They comply because, I mentioned earlier, guidance may receive deference but probably more because guidance constitute kind of safe harbor against agency enforcement. Indeed because administrative investigations or enforcement can be as painful, maybe even more painful, than any resulting penalties, parties who are in theory free to disregard guidance are in practice bound to follow it to avoid investigations and enforcement. So guidance, so the theory goes, is therefore a way for agencies to get compliance without the costs and legal exposure of rulemaking.
And as if that were not enough, critics point to several instances in which particular guidance had legal effect and therefore should have undergone a full regulatory process. In other words, agencies unlawfully designated regulations as guidance. These instances, combined with the foregoing, suggest that guidance is ripe for abuse.
Now, defenders of guidance response that private parties comply with guidance because they freely choose to do so. Indeed, agencies often issue guidance precisely because private parties want to know the agency’s views on particular legal policy questions. And so we shouldn’t be too concerned about agency guidance when the regulated parties themselves seek it out.
It’s also hard to imagine how a government could operate if it had to go through full dress, notice and comment rulemaking anytime it wished to communicate about questions of legal interpretation of policy. Guidance, on this theory, serves important efficiency interests. And it promotes transparency, too, by creating an easy way for the government to inform the public of its own internal interpretations, enforcement priorities, etc.
As for cases in which agencies have unlawfully designed regulations as guidance, defenders of guidance argue that these cases are the exceptions that prove the rule. Following agency guidance is purely optional, and courts are there to ensure it stays that way.
Now, as you may be able to tell from my summary, I think both the critics and the defenders of guidance make some important points. Hopefully, we can explore those points later in the program. What I’d like to do now, though, is turn from differences to common ground. In particular, I’d like to argue that regardless of one’s views on the grounds of contention I’ve just outlined, there is a reasonable consensus around at least a just three basic points. I’ll then suggest that three principles of reform for agency guidance practices follow logically from these consensus points, although the principles that I propose themselves have not heretofore been the product of consensus. But I think they should be.
First, I think there’s consensus that everyone should have equal access to agency guidance. A person’s practical ability to locate and study guidance shouldn’t depend on his or her retention of sophisticated legal counsel. And so agencies should do all they can to level the playing field between individuals and small businesses on the one hand and large companies on the other where access to guidance is concerned.
The first principle of guidance reform that flows from this what I believe to be a consensus position is that agencies should make guidance documents easy for unsophisticated members of the public to find. One way to do this was found in Executive Order 13891, which Daniel mentioned. That order directed agencies or departments within agencies to create guidance portals on which all currently effective guidance documents may be found in searchable format. At least some agencies, I know, continue to upload guidance to these portals as guidance is issued, notwithstanding the fact that President Biden has revoked E.O. 13891. There might be other ways to address the need for equal access, but continued use of these guidance portals seems a pretty good path forward to me.
Second, there seems to be consensus that guidance has real world impacts. Critics and defenders of guidance may differ about the extent of compliance with guidance. They may differ about whether the efficacy of guidance, whatever it may be, is due to the free choice of regulated parties or agency coercion, but I don’t think it’s really controversial that agencies issue guidance because it’s worth their while to do so, that is to say because a significant number of regulated parties do what guidance says.
Now, one of the foundational principles Executive Order 12866, which President Biden has reaffirmed, is that agencies should account transparently for the costs and benefits of regulations. And given that guidance certainly also has impacts, I would offer, as a second principle for guidance reform, that agencies should attempt to estimate the cost and benefits of their guidance where appropriate. Now I say where appropriate because there are real challenges to understanding the impacts of guidance. Where those challenges simply cannot be overcome, then an agency, of course, can’t tell us what the impacts of its guidance are. Agencies can’t do the impossible, but in cases where impacts can be accessed, they should be.
Executive Order 13981 pursued this goal by applying the E.O. 12866 cost benefit analysis framework to guidance. Now, there are certainly other ways to pursue that goal. The important thing, to my mind, is that agencies should attempt to disclose to the public the costs and benefits of their guidance.
The third consensus point is I think there’s agreement that at least some guidance implicates interagency equities. So let’s take an example which is January guidance on COVID safety in the workplace which was updated a few days ago, sometime this month. That guidance makes recommendations for workplaces in industries that are regulated by a number of agencies, such as the Departments of Transportation, Agriculture, Education, and others to name a few. Those departments may well have had information that’s very useful to OSHA in making the guidance as effective and efficient as possible. And guidance like this, therefore, implicates interagency equities just as surely as regulations of a similar mature do.
A third principal of guidance reform, then, would be that guidance should be subject to interagency coordination as needed. Now typically, of course, interagency coordination means a OIRA review, and that’s the approach that E.O. 13891 took, although there may be other ways to achieve this objective.
These three principles, equal access, assessment of impacts, and interagency coordination, should be taken into account in any future guidance reform efforts, including those contemplated by the Modernizing Regulatory Review memo.
So, those are the three points that I wanted to address, and with that, I will turn things back over to Daniel.
Daniel Flores: Thanks, Paul, for those great comments. And let me turn now to Karen.
Karen Harned: Hi. Thank you, Daniel. Thank you, Paul. And I appreciate everyone spending their Friday afternoon with us on this topic. So I, as Daniel mentioned, run the National Federation of Independent Business Small Business Legal Center. And, as Paul alluded to, small business owners have a particular interest in agency guidance. The small business owners that I represent and we target our work for on average have five or ten employees or fewer, so they really are main street America. They’re your local dry cleaner, your local little pub, your specialty gift shop, all of those bakery. Those are the type of folks that I’m thinking about when I’m looking at this issue.
And for them, we have learned over decades of research and surveys and anecdotal evidence all pointing to one thing, which is regulatory burdens for small business owners are much higher than they are for our Fortune 100 companies in the country, which is not surprising because it’s the small business owner, it is the person that opened that dry cleaner, that is actually having to learn about what regulations exist and familiarize him or herself with it and come into compliance.
The more complicated those regulations are, the more likely they are to hire an outside consultant, but when you’re netting as little as a $100,000 a year, which many small business owners actually — that is — they want the freedom. That’s why they started their business. But they’re not sitting on a bunch of cash. They are drawing a good salary, but not an extraordinary salary in many instances. So that’s money that they’re going to have to pay out of their pocket to get that information on the regulatory process.
So with all that to say, I’ve done administrative law for decades now and know easily how to look at the Federal Register and see what rules are out there. Small business owners typically are going to hear this from their colleagues in the same industry, their small industry trade group, bigger associations, business associations of which they’re affiliated like NFIB or the Chamber. But that’s for the regulations where you doing notice and comment.
Guidance documents, it really is the savvy main street small business owner that’s really even going to know these exist. And that’s going to be probably because they tripped on it. They tripped over it. They found out maybe through an inspector, maybe through a call to one of their business organizations. And so I wanted to spend some time on that because I wanted people to understand that I really liked all of Paul’s points there, his principles, but the access to guidance is a huge one because understanding what their legal obligations are in this day and age is very, very hard for the average small business owner because there’s so many legal obligations they need to be aware of.
Now, that makes it sound like I think — I do have a healthy skepticism for guidance. I will say that because I do think notice and comment is very important as often as that can be done because that’s how you prevent unintended consequences in regulation. But I will also say that we answer, in addition to the litigation that I do at my job for small business on behalf of them, we also answer literally thousands of small business owner calls throughout the year on everything from OSHA regulation to wage an hour to transportation issues, EPA issues, you name it. And what we have seen after doing this for two decades now is there are some examples out there of guidance that truly is guidance and extremely helpful.
Examples of that I would point to you are Department of Labor, which is a big agency in any small business owner’s life because if you’ve got employee you’ve got to care about what they’re saying, has these fantastic things called these fact sheets that are one to two pagers. They’ll go through everything from how to calculate hours worked to who’s an executive exempt employee versus who’s not. And they do it by plain English. You look at them. They’re very easy to read. You do not have to be an attorney to understand them. They often provide multiple examples of what they’re talking about, which examples are huge for a small business owner just trying to figure what the bottom line is that he or she needs to do to stay in compliance with the law. So those are an example of an excellent resource.
With coming off the pandemic, another time we saw guidance as extremely critical was as the Small Business Administration and the Treasury Department were putting forward the parameters of how to participate in the payment protection program loan program. And that is what was a lifeline for many small business owners, I would say, a majority of them across the country throughout COVID. It allowed them to get a loan and stay in business, since the government had basically told them they couldn’t have their business open, and then also get that loan forgiven. There were so many details surrounding that, and it would have just been impossible to do all that through notice and comment, answering the types of questions that were coming up daily.
SBA and Treasury, to their credit, churned out guidance almost daily, especially at the beginning of the program, that really was quite useful and helped small business owners understand, helped banks that were lending to them understand what their obligations were, what was going to happen. So those are two examples I think of where guidance can be very, very useful.
I think the big concern I have for guidance other than just the access point because small business owners, like I said, are not trolling the Federal Register. They don’t have lobbyists in D.C. They just don’t know all these things that are always happening as they’re happening. But I would say my bigger concern is that I have encountered over my career instances where those that are tasked with enforcing the laws for an agency, a field investigator for example, really is making that guidance — in their mind, it’s legally binding. Let’s just put it that way. And a small business owner may not know and many times doesn’t know that they can push back on that assertion. So that is another thing is how it’s used by the agency and how agency staff is trained when dealing with the different guidances that they have developed for that agency.
With that, that’s my presentation. I’ll turn it over to Bridget.
Daniel Flores: Thanks, Karen. Bridget, take it away.
Bridget Dooling: All right. Thank you both for teeing up so many good issues for us today. So thanks so much. I appreciate the opportunity to be here with you. I’m a research professor at the GW Regulator Studies Center. And I came here after over 10 years on the career staff at the Office of Information and Regulatory Affairs. As Daniel mentioned, I served on the Biden-Harris transition team, but just to be clear, I don’t speak for the transition or the administration, and I’m here today representing my own views with gratitude to FedSoc for inviting me today.
So I had already left the career staff at OIRA when E.O. 13891 was issued. That’s the guidance executive order that Paul introduced at the top. So my comments are based on basically what I could observe from the outside. Now the E.O. directed agencies among other things to stand up centralized websites to house guidance and also to issue rules governing the issuance of guidance documents, which sounds pretty reasonable, right? Well, it’s really the details that matter on this one. I’ll focus my remarks on why I think the E.O. probably had to go, but why that doesn’t mean this is the end for the federal executive branch policy making on guidance.
I’ll set the websites aside because I think they’re a good idea. I agree with Paul unequivocally on that point. Helping the public locate guidance that is in effect is just an absolute no brainer to me.
The rules that were required by the E.O., on the other hand, turned out to be a bit much. Now, I’m all for good process. I think it’s important that lots of folks in an agency and across the executive branch have eyes on a document before it goes out the door. I support the use of public comment periods for guidance, when appropriate, as well as a OIRA review and cost benefit analysis and distributional analysis of guidance documents.
These guidance rules, however, created three types of concerns that ultimately, I think, led to their demise. So first is the scope. As we’ve discussed, guidance is such a broad concept covering so many types of agency behavior that distilling it down to one word, guidance, flattens out a whole lot of nuance here. The core challenge is that in many contexts, guidance, as has been mentioned before today, is generally quite sought after by stakeholders and the regulated community. And it’s really hard to categorically separate good guidance from bad guidance in advance. So it makes it really hard to write good policy covering guidance. And this has been a challenge for many administrations, not just the most recent two.
So second, the restrictiveness, I think, is one of the reasons why the Executive Order 13891 was pulled down. I think the core challenge for issuing rules that apply to guidance builds on that last point, which is that in many cases guidance is requested by the public. And taken together, the rules apply additional control to the issue of guidance. And even if you think that’s a good thing, you have to admit that it adds time and complexity to the internal development process. Indeed in some ways, that is the point to actually allow for better and higher quality internal review. But the rules also introduce new choke points. So for example, Department of Education’s rules required that the general counsel sign off on all guidance documents, all of them. And I’m someone who really like good process, but too much process is just no longer a good thing.
So the third thing I’d raise is the timing of these changes. The E.O. was issued in October 2019, and that’s more than a year before the presidential election. Most agencies that did rules in response to the E.O. published them in final form at some point in the second half of 2020, including many after the election. Now, I take no issue with that as an administration runs up through an inauguration day and rulemaking takes time, so it’s reasonable that an E.O. issued towards the end of 2019 would have to be implemented over the course of 2020. But as a practical matter, this meant that many of the restrictions these rules applied to a relatively short — sorry — that many of the restrictions of these rules applied to a relatively short amount of time in the Trump administration with at least one of the rules going into effect only once the Biden administration had begun.
Camile Chambers, who’s a fabulous legal intern at our center, the Regulatory Study Center, will map this timeline out in a commentary coming out soon, so we’ll have something soon for you in the coming weeks that just gives you a nice visual for how these rules went into effect.
But this timing may have just doomed the whole enterprise. I’m doing some research now on the idea of what it takes for new policy ideas to become institutionalized. And without getting too deeply into it, let me just say that issuing an E.O. is generally not enough because E.O.s are issued with the stroke of a pen, they just don’t guarantee long-term results because they can be revoked with the stroke of a pen.
All of this was happening at a time when the incoming administration was ready to hit the ground running with a whole host of actions to respond to the pandemic, the economic crisis, racial equity, climate, and more, and the philosophy that—I don’t think it will surprise anyone to say—supports a stronger role for the federal government in responding to issues like these.
Now, the new guidance rules included waivers and other ways to respond to emergencies, but that wouldn’t cover everything, and even that process of seeking waivers does create additional process within an agency. So in sum, asking the administration to be bound to a series of discretionary, procedural controls imposed by the prior administration and imposed in just enough time to apply mostly to the incoming team, well, it probably just wasn’t going to work.
But I suspect this isn’t the last that we’ll see of guidance policy. The Presidential Memorandum on Modernizing Regulator Review nods in this direction. Issued on the same day that E.O. 13891 was revoked, it calls on OIRA to determine an appropriate approach with respect to the review of guidance documents. And in guidance issued by OMB in April 2021, acting director Shalanda Young wrote about OIRA’s continuing coordination of guidance documents related to COVID-19, a process that began in the Trump administration. I took that as a good sign that OIRA review was helping the new administration achieve its objectives and that guidance is still very much in scope.
So, to wrap up, the main point I make is that while guidance is a long running issue for the reasons that Paul and Karen have ably teed up and it definitely needs ongoing attention, I’m comfortable that revoking 13891 was for the best, on balance, for now.
Back to you, Daniel.
Daniel Flores: Thank you, Bridget. Terrific comments from our panelists. I hope the audience finds them to be. Let me just suggest we’re just past the half hour mark. I’d like to leave a healthy 20 minutes for audience questions. I already have a couple that have come in, and I’m sure we’re going have some good responses to them. I’d like to see if we could take 10 minutes at the most for some cross panel discussion and then get into the audience question.
I’m wondering if you all might agree if it makes sense to start the cross panel discussion with your thoughts about Paul’s three points of proposed consensus and proposed principles. To what degree do you think there really is consensus around those in government, both in the executive branch and in Congress, and in the stakeholder community and elsewhere? Anybody should feel free to jump in and start the discussion.
Karen Harned: I’m happy to start. I definitely agree with each of the principles. I think that Paul was — I also feel like what Paul was advocating is not over the top, as in it’s as it’s possible on cost benefit because not all guidances are the same. There are some that really do —and I think the Trump administration was trying to get at this as previous administrations attempt to—the bigger ones that are going to have a broader impact, I definitely think if there’s ability to figure out cost benefit that’s always a good thing because whether it’s guidance or regulation, I do believe that the more you can do on that assessment, the less likely you are to have as many unintended consequences. I don’t know that you’ll ever alleviate completely, but I do think that can really help with that problem.
I had happy to hear that everybody on this panel agrees that it’s good to have easy access to these documents, especially in the day when we’ve got such a strong internet platform and Google and all sorts of ways to find these. Remarkably, there are still a few out there that are against it, but I would like to think that there is broad consensus there.
I also am a big proponent of the work that Paul and Bridget did at OIRA. I just think that OIRA is invaluable. And again, it doesn’t need to be for every guidance document, but when you’ve got some that are really dealing with big patches of a regulatory scheme that’s already complicated and just trying to take it down a little bit more and put some more clarity there, I think that it is better to have more eyes on it, and I would advocate that. So, I personally was in favor of those three principles.
Bridget Dooling: Yeah. I’ll just build on to say, I agree. I think my only quibble would be that I would probably broaden the second analytical point to include more than just benefit cost analysis and probably consider other forms of analysis too. But I think I would consider that a friendly amendment on Paul’s three. I will let him confirm. But in general, equal access to guidance is just a no brainer. That’s absolutely something that we should be striving for. I agree wholeheartedly with the idea that guidance has real world impact, and in fact, that’s why agencies issue it, and that why folks sometimes clammer for it on the outside because they really need to know the answers to these questions.
On the interagency equity question, it is pretty straightforward to me too. You’d rather work out disconnects within the federal government before something goes life and just creates confusion out on the street. So I think that’s right. I think there’s definitely people on the left who are more skeptical of the role of OIRA review, skeptical of the role of tools like cost benefit analysis. I just don’t happen to be one of them. I tend to think benefit cost analysis is a yes and, that we should do it as well as doing other forms of analysis, all to the goal of helping inform the decisions that policy makers are making in the executive branch.
Also, I think OIRA plays a pivotal role in that interagency review. So while I know Paul nodded to the idea that another entity could probably pull it off, I think it would have to be something new. I’m not aware of another entity in the executive branch that could do as good a job as OIRA does with interagency review.
Daniel Flores: Thank, Bridget. Paul, any responsive thoughts?
Paul Ray: Yeah. No. Thank you both. I agree with everything that y’all just said. And Bridget, to your point, yes, I certainly would support extending the impact analysis to more than cost benefit, certainly distributional analysis. I’d love to see for quite significant guidance documents alternatives assessed as well where it’s feasible. So, yes, I think that’s exactly right.
Daniel Flores: Thank you. We have about five minutes until when I wanted to start the audience questions, so let me ask a question of my own and get some discussion on, and then let’s turn to the audience questions.
My question is about where we are at this moment in time. I’d like to ask all of our panel members to offer some thoughts on their views on the specific importance of guidance, guidance transparency, and guidance reform as we all emerge from the COVID-19 pandemic. Karen, since this is a key issue for small businesses trying to recover, let me ask you to start and then for Bridget and Paul to chime in.
Karen Harned: I think we did get, again, some really good lessons learned through COVID. Again, how guidance can be a great tool to get quick and understandable information out to the regulated community, that was huge. I do think that as far as where we are in this time, I don’t know. I feel like these regulatory issues are so tricky on the Hill in particular. I do think that a lot of what Paul’s advocating for, we’re in agreement, and the devil’s in the details to some degree. But even on the access point, unfortunately, I just don’t even know if we can get there right now just because I feel like it’s just hard to get anything in this space done because everybody’s too skeptical of the other side. That’s just my take based on what I’ve seen, but I’m anxious to hear what others say as far as where we are on guidance and what might happen in the future.
Daniel Flores: Bridget, Paul, any thoughts?
Bridget Dooling: Yeah. I would add that — so what I’ve been just paying attention to is the way the hand off between the two administrations. We’re only about six months into this administration, and so that initial handoff was something that we were working very hard on in the transition to figure out how to make sure that policy review and responsiveness to emerging issues, particularly related to the pandemic, were seamless, and that the incoming team has what they needed to hit the ground running and get done what they needed to do. So when I saw that memo come out from the acting director in April signaling that there continues to be a very robust process for handling, expediting, but still reviewing COVID related materials, including guidance, I was really encouraged by that because it just shows me that what I suspected was happening on the inside is indeed happening, and that the coordinated review continues to be robust.
Daniel Flores: Great. That is very good to know. The first audience question is from Greg. He says, “Hi. Thanks. And what have or are we learning about these issues from litigation on them? And what are the major points in case law in pending cases?” Anybody want to take a whack at that? Bridget, Paul, perhaps since you’re lawyers we should start with one of you.
Bridget Dooling: I should have an answer on this. I actually don’t. I haven’t looked at the case law on guidance in a while. Paul, do you have anything?
Paul Ray: Yeah. For folks interested in reading on the topic, I think you could start with the Perez which talks about interpretive rules under U.S.C. 553. Obviously, there’s a lot of guidance documents that are not interpretive rules, but some of them are, and so I think that’s fine place to start. You could also read Allina. It’s probably the most recent Supreme Court decision that’s relevant to the guidance question. One of my personal favorites of the genre is Appalachian Power. It’s a D.C. Circuit opinion from 2000 and basically discusses in some detail the way guidance interacts with the enforcement processes of agencies. Actually Appalachian Power is an instance in which a guidance document the court found it ought to have gone through the regulator process because it did in fact have the force of law. So those are a few of the more salient cases on the topic.
Daniel Flores: Thanks. One term that comes to mind from this area of case law is the term non-rule rule. A lot of the D.C. Circuit case law and such clusters around that kind of common sense handle for talking about well, when something’s in guidance, what is really a rule? What ought we to do with it, as Paul mentioned. The solution is to require it to go through notice and comment if it’s a non-rule rule. Great question. Bridget, do you want to add anything on that or should we move on to the next one?
Bridget Dooling: Nope. Let’s move on.
Daniel Flores: Okay. Next is from Jordan who asks, “Recently I’ve seen a phenomenon where agencies will issue FAQs, frequently answered questions documents, that have the force of regulations without going through the normal notice and comment period. For example, SBA’s PPP program initially had a small IFR, information request, but a large FAQ that would have make signification changes to who was eligible for the loans. Have you see the same? Are there any rules regarding FAQs going around the traditional public rulemaking process?
Karen, this is a topic you alluded to in your comments. Let me ask you to kick this off.
Karen Harned: Yeah. So that is some of the — that PPP was just a mess, quite frankly, just as far as trying to get it done quickly and get people information they needed. So I view that one as more of a one off. I do think we did see, not just at the federal level but at the state level, FAQs that really did — businesses felt like that definitely had to follow them—I’ll just put it that way—despite the fact that guidance isn’t legally binding, especially when it came to the OSHA, the CDC guidance for how to keep your workplace safe and those types of things.
I just think we have to be really careful on that because I have seen over my years where again an inspector will basically make the business owner think that if they don’t do this, they could get cited, that what is required in an FAQ or a guidance document is required by law. If a small business owner doesn’t push back on that and just does it, they’re giving up their rights in that instance. So I just think the agencies have to be very careful, very careful on how they train. Again, I just think guidance really should be helping the regulated community, not imposing more burdens on them or making it seem like they have more legal obligations than they otherwise would have. I think that is to me what true good guidance is is when it’s just helping clarify what a regulation means and what it means in real life.
Daniel Flores: Thanks. Paul, Bridget, either of you want to add some comments?
Bridget Dooling: Yeah. I’d love to add just that I think it’s a great question because I alluded earlier to the idea that what counts as guidance is such a capacious concept, guidance. And FAQs are guidance. Press releases can be guidance. Speeches can be guidance. Letters can be guidance. There are so many forms of guidance out there. So what we’ve been talking about this whole panel basically FAQs are in scope, and the question is what type of policies and processes should the government have that govern the development and issuance of those guidance, the review of those guidance, how transparent those guidance documents are, and the limits of what can go in them.
So if they really are restricting access to a program based on the content of an FAQ, there’s probably some legal issues wrapped up in that too. So mostly just to validate the instinct of the commenter, which is that FAQs are definitely guidance, and so they’re in scope for what we’ve been talking about today.
Daniel Flores: Paul?
Paul Ray: Nope, nothing to add.
Daniel Flores: Okay. Let’s do the next question then. This is a question in from Jeffrey, and he asks, “What about the Brand Memo at the Department of Justice and its incorporation into the U.S. Attorney’s manual?” It’s referenced to a memo issued by former associate attorney general Rachel Brand on guidance in the enforcement context. And he asked whether there are similar restrictions on the enforcement of guidance adopted by agencies under the Trump administration, for example, whether the Department of Health and Human Services adopted a similar policy.
Paul, do you want to take a whack at that?
Paul Ray: Yeah, sure. So that was a focused effort in the Trump administration. There’s an Executive Order 13892, which was a companion executive order to 13891, which we discussed at some length today, that, among other provisions, forbade agencies from imposing a penalty on the basis only of guidance. The agency had to cite and prove the violation also of the underlying statute or regulation. And then that principle was reiterated in Executive Order 13924 Section 6 from the middle of 2020. So that absolutely was a focus of effort. Obviously, then those have been rescinded.
I suppose we can put together another list of consensus positions on the use of guidance and enforcement. I suspect there’s a similar consensus that guidance standing alone shouldn’t be used to show a violation, that it has to be shown on the terms of a statute or regulation. But I could be wrong about that.
Daniel Flores: Bridget or Karen, any further thoughts on this question?
Bridget Dooling: I actually just looked up the DOJ reg agenda entry for the guidance document rule revocation. And just to give a small update that they’ve at least got it scheduled for revocation in June of this year, but as we know, that’s now. So I don’t know if we’ll see it this month. That’s what they said in the agenda. The agenda’s non-binding, so it’s hard to say, but it’s possible that the revocation of that rule is tangled up in the question that the questioner’s asking here in the chat.
Daniel Flores: Gotcha. Karen?
Karen Harned: I’m good. I don’t have anything further.
Daniel Flores: Okay. We have another couple of questions. I would encourage any audience members out there thinking of one to go ahead and send it in.
We have a question from Ruben, who says, “I assume that a majority of this guidance conversation focuses on rulemaking,” I suppose that’s issues related to rules, to rulemaking, “but should agencies consider separate guidance policies for adjudication to the extent that agencies have adjudicatory divisions?”
Karen, any thoughts on that? Or anybody else want to chime in?
Karen Harned: I actually have not thought about this at all. So I’d be curious if somebody else has any thoughts on this one.
Paul Ray: Yeah. I can jump in on that. I do think that it’s important for agencies to address the procedures and standards that will applied in adjudication enforcement. I would rather see them do it in regulations, rather than in guidance documents, because I think that imparts greater certainty to the public that has to operate and live under the adjudicatory standards and procedures at issue. So I would rather see it done that way where that’s possible.
Daniel Flores: Bridget, any thoughts?
Bridget Dooling: Yep. I was going to say something along those same lines that certainly adjudicatory bodies have a need to issue guidance, and parties coming before those bodies have the need to receive guidance. And so I think the questions that Paul raises is a good one. Is the nature of the guidance that’s being given appropriate for your guidance or is it more of a rule? And that’s probably enough to fill a whole other webinar on the distinction between guidance and rules.
Daniel Flores: Yep, may well be. The next question is from Susan. She is a law professor or a professor of public affairs and political science. She’s asking, “On Tuesday, June 22nd, the IBM Center for the Business of Government will be releasing a paper of hers called ‘Guidance on Regulatory Guidance: What the Government Needs to Know and Do to Engage the Public.’ It makes recommendations to increase the transparency in public engagement of guidance development. It also provides new quantitative analysis on FDA guidance making and provides an implementation analysis of the former Trump order.” She wants to let everybody in the group know and those in the audience and thanks for the panel.
I want to ask a follow up question on this which is regarding public involvement in the development of guidance. Often guidance comes in on a one off basis from a company that has a particular issue. They’re seeking guidance so they can manage it and get that safe harbor that Paul mentioned earlier. But sometimes the agency wants to do something that’s more comprehensive but sub regulatory, and guidance is the path it wants to take. Any thoughts from anyone on the right way to approach public engagement in the formulation of that kind of guidance?
Paul Ray: Yeah, sure. I’ll speak to that. I’m interested to read this study that Susan mentions, in particular since it addresses FDA guidance. FDA probably has the most robust and articulated set of guidance procedures in the federal government. And they had regulations on point before Executive Order 13891. I think FDA’s approach on guidance with respect to public engagement is a pretty good one. FDA will typically issue a guidance document for public comment in draft form just like it would for regulation, and then it will often respond to the comments received. That’s the kind of procedure that E.O. 13891 contemplated for significant guidance. So yeah, I think that’s a good approach. I think it can be very important. I don’t see a reason to distinguish between regulations and guidance with respect to the important role the public comment should play.
Daniel Flores: Karen? Bridget?
Karen Harned: I just have to comment. It is so funny that to me, as a former FDA lawyer, that FDA is now a good example on how to do guidance right because quite frankly they used to be the poster child in my opinion for how to do it wrong. Bridget had mentioned a speech could be guidance. I remember working at the law firm, and the speech was like a guidance. You had to cover every speech. You had to cover these things called pink sheets. I just would think about y little small business owners if they were doing anything in this space, how they would even know to do any of those. So they definitely go a hold of the problem and handled it very well. It’s funny now to see that they really are an example for the others.
Bridget Dooling: Yeah. I’m thrilled to know that the great Susan Yackee is studying this. I’ll be really excited to see her report next week. And I love the choice of FDA as a unit of analysis here because as folks have mentioned, they have these rules that Congress required them to write about how they issue guidance that includes a comment period for people to weigh in on the content of guidance.
That’s an interesting example because I recall when Executive Order 13891 was issued, in other sectors that aren’t accustomed to having guidance go through draft form, it was quite shocking the idea that guidance documents would be put out for public comment. Well, FDA’s been doing it for quite some time, and they issue plenty of guidance. On the other hand, I think there’s folks in the regulated community at FDA and maybe even within FDA itself who would say that they have lots more guidance they’d like to get out to people. There’s just this tension here between additional procedure and how much guidance actually ends up emerging from an agency. So just to reinforce the point that I think studying FDA is a great idea, and I look forward to seeing what Professor Yackee finds because I think that’s a perfect example of the types of tensions that exist in this space.
Daniel Flores: Great. At this point I’m informed there are a couple of folks with their hands up. I don’t see the individuals on my screen, so let me ask Nate or one of his colleagues if they can open the mics and call on — oh, I’m seeing now. It’s Justin and Barbara. If either of you want your mic open so you can articulate your question, please let us know.
Justin Pearson: I think I’m unmuted now, so if you can hear me, I’ll go ahead. This is Justin Pearson. I’m a lawyer at the Institute for Justice. For those of you who don’t know IJ’s work, I spend most of my time providing pro bono representation to small business owners challenging unconstitutional and anti-competitive regulations. One of the issues that keeps popping up on my cases is giant businesses will intervene or at the very least write amicus briefs opposing our lawsuits because they were the ones that pushed for the law. So I’m very aware of the fact that many of these regulations are swords pushed for by giant businesses to hurt smaller businesses. I’m wondering whether the panelists — and by the way, thank you all. This has been great. I’ve enjoyed it. But I’m wondering whether any of the panelists are concerned that the guidance process exacerbates this problem of giant businesses using regulations as a swords against their smaller competitors.
Daniel Flores: Great question. Karen?
Karen Harned: Well, I think they can. That’s, again, that’s why I think we also need to get a better definition of what we consider to be guidance. Again, I am very strong on I think guidance should be clarifying and making it very easy to understand for the non-lawyer what the regulation is telling you what to do, using examples, things like that. I’m confident that others have a much broader interpretation of guidance, but I do think that that is what you see. Honestly, again, for the small business owner, they’re the ones trying to navigate this, and that is why big businesses with their team of attorneys and HR and compliance, they really have the advantage. So we have seen over the years that they will use regulation as a sword to keep competition out. So that is very much a concern that we have.
Daniel Flores: Okay. We have four minutes left. We have one more person in the queue, Barbara. Paul, Bridget, if either of you have a quick comment on Justin’s point, let’s hear it. And if not, let’s move on to Barbara.
Bridget Dooling: Yeah, just a quick response. I think that the point that the caller raises is one that is met at least somewhat by Paul’s notion of having analytical requirements that attach to guidance documents because that’s part of what we’re trying to assess when we use those analytical tools. What’s the effect of this guidance document going to be, intended and otherwise? If we tried to do our best to peer into the future and think about how this guidance is going to affect operations on the ground, what can we reasonably expect?
So although procedures like that do slow the issuance of guidance, they also help the government have a better sense of what the consequences of their actions will be along the lines of what the caller suggested.
Daniel Flores: Paul, any thoughts?
Paul Ray: Nope, couldn’t have said it better.
Daniel Flores: Okay. Super. Let’s then go to Barbara. Barbara, is your mic open? Perhaps we’re having a technical problem. Let me ask, we’ve just got three minutes left, let me ask you while we’re trying to get Barbara up if the three of you would like to offer any quick closing comments to highlight any one thing or two before we break. And Barbara, if you come on, we’ll break for you when you come in.
Bridget, you do want to start this one?
Bridget Dooling: Sure. I’m so grateful for the opportunity to talk about these issues today. I want to let you know that we’ll have a little bit more coming out in the next week or maybe two to describe how these rules are being revoked in practice. There’s this interesting asymmetry that only 31—if my count is right and Camile will have the proper number in her report when she issues it—31 agencies issued these rules coming out of E.O. 13891. And we’re somewhere around 17 rules having been revoked at this point. It’s sort of interesting to look at which agencies didn’t implement guidance rules on the front end, and then also comparing of those agencies that are in the middle of trying to revoke them, where they are in the process.
I see Wayne Cruz on the participant list here too. He’s got a great tracker that covers the websites. So if you’re curious about the status of agency websites, I think Wayne is covering that over at CEI, so that could be another resource for you, too.
Daniel Flores: Great. Let me ask Paul and Karen to bear with us. We have two more hands up now. We have Justin. I’m sorry, we have Barbara who may have come on the mic now, and then we have Taboa (sp). Do we have time, Nate?
Nate Kaczmarek: Yes. We can squeeze it in if Barbara’s available.
Daniel Flores: Okay. Let’s start with Taboa while we wait for Barbara. It looks like it’s still not working. Paul, would you like to add a closing comment?
Paul Ray: Yeah, sure. What I would say is I think it’s hopeful that it sounds like there is consensus on the three points that we’ve been talking about. And given that OMB has been directed to propose procedures for addressing guidance documents and any needed reforms to those guidance documents, under Modernizing Regulatory Review, I hope that OMB’s proposals are robust. And I would certainly welcome proposals from OMB that could then be implemented in a timely manner and perhaps by the agencies and perhaps could be the nucleus of a kind of consensus approach that would last across administrations ala 12866. I think that would be a real service to regulated parties in the country.
Daniel Flores: Okay. Karen?
Karen Harned: I’d like to say thank you for the opportunity. I do think this is an important issue. Guidance is — our regulatory state has gotten so big, and guidance is now a very big part of it. I think making sure that all of the regulated community knows what’s out there. And also there’s really a lot of good work done interagency review, cost benefit, and other reviews prior to issuing guidance, I think we’re there. I think that needs to happen, and I’m glad to hear that on the fundamental points, there seems to be agreement.
Daniel Flores: Okay. Fantastic. We’re still not with Barbara, Taboa with us, so let me ask, Nate, if you would like to take it back?
Nate Kaczmarek: Yes. I think it’s been a great discussion. I promised at the outset that we had an all-star panel, and I think the delivered a very insightful discussion this afternoon. We certainly look forward to inviting each of you back with us again soon. To our audience, we welcome your feedback by email at firstname.lastname@example.org. With that, thank you all for joining us and have a great day.
George Washington University Regulatory Studies Center
National Federation of Independent Business Small Business Legal Center
Patomak Global Partners
Senior Counsel, Committee on Oversight and Reform
U.S. House of Representatives