New Trump Orders: Guidance Should Be A Shield, Not A Sword

President Trump signed two executive orders yesterday aimed at constraining agencies’ use of “guidance documents.” The first, Promoting the Rule of Law Through Improved Agency Guidance Documents, sets forth standards for developing new guidance and making existing guidance accessible online. The second, with the weighty title Promoting the Rule of Law Through Transparency and Fairness in Civil Administrative Enforcement and Adjudication, establishes principles for using guidance in civil enforcement.

What is guidance?

These actions are the latest attempt to ensure that the guidance agencies provide regulated parties is informative without being binding, or legally enforceable. Agency guidance, or “regulatory dark matter” as Forbes contributor Wayne Crews has dubbed it, can refer to a variety of different policy statements and interpretive rules, including manuals, opinion letters, and even blog posts. They can provide valuable information on how an agency interprets regulations and statutory law, providing a safe harbor on which regulated parties can rely. But there has long been concern that agencies sometimes use guidance inappropriately to make binding policy without going through transparent rulemaking steps.

Since 1946, the Administrative Procedure Act (APA) has required agencies to develop a supporting record and seek public comment before issuing binding final rules. Complying with these procedures can be cumbersome and sometimes takes years. Since the APA excludes some policy statements from its requirements, “guidance” can be an appealing vehicle for issuing policy quickly. While that’s fine for informing regulated parties of agencies’ interpretations of policy or responding quickly to questions that might arise, it becomes problematic if agencies treat noncompliance with the guidance as an illegal act. In other words, guidance is valuable as a shield, but should not be used as a sword.

Guidance should be shields not swords

As a shield, guidance can “articulate the agency’s understanding of how a statute or regulation applies to particular circumstances,” providing a safe harbor for regulated entities that follow identified practices. But law and policy experts have worried about the abuse of guidance for decades. In 1992, the Administrative Conference of the United States (ACUS) raised concerns that while valuable, guidance was sometimes treated as “binding and dispositive of the issues they address.” Over the last five years, ACUS—an independent federal agency—has developed at least four sets of recommendations regarding different aspects of how guidance is used and shared. In 2007, the Office of Management and Budget (OMB) issued a memorandum to agencies calling for greater public notification and engagement and for interagency review of significant guidance.

Recently, both Congress and the executive branch have focused more attention on agency use of guidance. The Government Accountability Office and Senate Parliamentarian have opined that guidance documents are “rules” within the definition of the Congressional Review Act, meaning they are subject to congressional disapproval. OMB issued a memorandum earlier this year reinforcing that interpretation and OMB’s role in determining the significance of rules and guidance documents. The Department of Justice issued two memos limiting use of guidance documents in enforcement—the 2017 “Sessions Memo” and 2018 “Brand Memo.”

Latest salvo aimed at abuse of guidance documents

Yesterday’s two executive orders are the latest salvo aimed at guidance and they address two concerns. The Improved Agency Guidance order requires agencies to seek public input when developing significant new guidance and to make all their guidance available online “in a single, searchable, indexed database that contains or links to all guidance documents in effect.” Agencies must seek public comment on significant guidance documents and comply with Executive Order 12866, which means engaging in interagency review led by OMB’s Office of Information and Regulatory Affairs (OIRA) and analyzing alternatives, benefits, and costs. According to Yale Law Professor Nick Parrillo, this will be more challenging for some agencies than others.

The Transparency and Fairness in Civil Proceedings order attempts to prevent agencies from bringing civil administrative enforcement or adjudicative actions against people based solely on policies laid out in guidance. To avoid “unfair surprise,” an agency may reference guidance in an enforcement action only if it has previously provided public notice, but even then, the guidance cannot be the sole expression of a policy. Further, agencies must provide anyone subject to a legal action an opportunity to contest its legal and factual determinations, and they must respond to parties’ comments in writing. The order also directs agencies to offer reduced penalties in exchange for voluntary self-reporting and information sharing.

Implementing the orders

Agencies have a short window in which to comply with the two orders. The Improved Agency Guidance order directs OMB to issue a memorandum to agencies on implementing the order, after which agencies have 120 days to post their guidance and rescind those they determine should no longer be in effect. Any guidance not posted is considered rescinded. Agencies have 300 days to establish procedures for eliciting public notice and engaging interagency review. The Transparency and Fairness in Civil Proceedings order immediately prohibits the use of guidance in enforcement actions and gives agencies 120 days to publish procedures governing inspections.

These executive orders build on decades of recommendations and lend presidential weight to an issue that may not make front page news but is nevertheless important to the rule of law. The challenge in setting policy on guidance documents has always been to ensure transparency and adequate notice of agency policy without quashing valuable information sharing between agencies and the public. Regulatory scholars will watch the implementation of these orders with interest to see how well they achieve that balance.

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I am director of the George Washington University Regulatory Studies Center and distinguished professor of practice in the Trachtenberg School of Public Policy and Publi...