House Subcommittee Hears On Need for Fair Warning on Agency Action

Administrative Law Practice Group Newsletter - Volume 3, Issue 2, Summer 1999

August 1, 1999

Alec D. Rogers

On June 29, 1999, the House Subcommittee on Commercial and Administrative Law held hearings on H.R. 881, the Regulatory Fair Warning Act, introduced on March 1, 1999 by subcommittee chair Rep. George Gekas (R-Pennsylvania). Under H.R. 881, a federal agency could not impose sanctions for violating a federal rule where: (a) the rule was unavailable or unknowable to the public; (b) the rule did not give fair warning of what it prohibited or required; or (c) official and written information from the agency had misled the alleged violator about its meaning.

The purpose of the bill, according to Rep. Gekas, is to help ensure that members of the public are treated fairly, in accordance with their right to due process under the Fifth Amendment. "The government and all its agencies should provide citizens with fair warning of what the law and regulations require. Likewise, citizens should be able to rely on information received from the government and its agencies," Rep. Gekas stated at the hearing's opening.

Testifying before the panel were Professor Ernest Gellhorn of George Mason University law school, an author of several books on antitrust and administrative law, Robert Hahn, Director of the American Enterprise Institute-Brookings Joint Center for Regulatory Studies and Barbara Somson, Deputy Legislative Director of the International Union, United Automobile, Aerospace, and Agricultural Implement Workers of America (UAW). Several private sector representatives also related specific cases in which their companies had encountered the kinds of problems with agencies that H.R. 881 would address.

Professor Gellhorn noted that H.R. 881 essentially codifies current Administrative Procedure Act (APA) principles and court interpretations of the requirements of due process and public notice. To the degree that it formally expresses congressional intent that rules should give fair warning and that affected persons should be able to rely on written advice, H.R. 881 would be advantageous because it would strengthen existing APA provisions that require publication of, and opportunity to comment on, proposed rules. However, to the extent that H.R. 881 would preclude an agency from changing, in court, its interpretation of a rule which it had given a private party but which it later determined to be in error, it would have several unpalatable effects such as discouraging agencies from giving advice and hindering private parties' ability to obtain useful planning tools, such as Internal Revenue Service (IRS) private letter rulings. Gellhorn noted that under current practice, courts have applied the traditional common law doctrine of estoppel in an administrative setting where appropriate, citing Heckler v. Community Health Services, 467 U.S. 51 (1984) as an example. Gellhorn recommended the subcommittee redraft H.R. 881 to clarify several unresolved issues.

AEI's Hahn also suggested that H.R. 881 be enacted with some modifications. He endorsed H.R. 881's principles that regulations should be more accessible and understandable and that affected parties should be able to rely on written agency communications. Hahn noted that "policy makers have not been very successful at making regulations simple and clear for the regulated community" and that many of the interest groups involved actually had an interest in making rules complicated and ambiguous. Further, Hahn suggested, Congress should create a new agency dedicated to examining agencies' justifications for rules and making cost-benefit analyses of rules, as well as repeal those laws that specifically prohibit the consideration of cost-benefit analyses.

Ms. Somson of the UAW testified that the Constitution already provided for due process in the regulatory arena, and that H.R. 881 "goes well beyond existing law to place onerous new burdens on agencies and to give lawbreakers new defenses." Parties are protected in cases in which the agency fails to clearly and publicly articulate governing legal standards or affirmatively misleads a regulated party as to appropriate standards of conduct, stated Somson. H.R. 881, however, would provide an "incentive for ignorance" in contravention of the established legal doctrine that ignorance of the law is no excuse for non-compliance. Under H.R. 881, according to Somson, an agency could not prosecute a party under a rule not known to the party. She suggested that such an interpretation might not be the intent of the bill, but instead is the result of unartful drafting. In addition, she noted that the bill's ambiguous language regarding what constitutes "fair warning" could result in more litigation. Finally, the new approach to regulation —promulgating general outcomes and giving employers flexibility in method of implementation —could be threatened if agencies feared that such ambiguity could render a rule unenforceable. She suggested that rather than passing H.R. 881, Congress should hire more employees in the Occupational Safety and Health Administration (OSHA) to expand education and outreach activities. H.R. 881, she concluded, would "undermine enforcement of existing health and safety and other government protections."

Alec D. Rogers is Legislative Director to U.S. Rep. Nick Smith (R-Michigan) as well as the vice chair (publications) of the Administrative Law and Regulatory Affairs Practice Group. Any views expressed herein are solely his own.