As a small company, you might be resigned to regulation as a necessary cost of doing business. You appreciate the rules designed to keep bad actors out of your industry and you support protecting consumer health and safety. On the other hand, some regulations may seem illogical, overly complex, and too costly for the stated good being achieved. In those cases you may feel frustrated or even powerless, especially if you are a small business. What else can you do but adapt your business, pay the costs, and comply? It may surprise you that, on the Federal level, Congress shares similar frustration as it often finds itself in the role of spectator on the sidelines watching the Administration implement policy using its regulatory authority.
Earlier this month, the Speaker of the House unveiled a policy plan for revitalizing the economy as part of his “A Better Way” initiative. The proposal’s first suggestion is for regulatory reforms that seek to both rework existing regulations and revamp the process by which regulations are written. The focus on regulatory reform provides a window into the consternation of the legislative branch as it sees the executive branch create new rules without congressional buy-in.
So, what is the current balance of power on regulatory matters and should it change?
Executive Branch Prerogative
We all remember our grade-school civics class — Congress (or the legislative branch) makes the laws and the Administration (or the executive branch) executes the law. In doing so, the Administration has to interpret the law and in some instances clarify how the law will be applied. Congress sometimes purposefully or explicitly lays out in statute where the executive branch needs to fill in the blanks through the regulatory process. That process is a fairly demanding one with many steps required to arrive at a lawful regulation, including notifying the public and seeking comment. Yet, despite the hoops that the agencies must jump through, many regulations are controversial. In a divided government, when the branches are not ideologically in sync, we may see intent misconstrued. liberties taken, and advice eschewed. But, the executive branch has a fair amount of leeway as the courts will defer to the agency’s interpretation of the law if it is deemed “reasonable.”
Congressional Tools
TECHPol has provided information on a number of the regulations proposed by the current Administration that update the way certain statues will be applied (e.g., overtime exemptions, fiduciary standards, union organizing practices). When regulated industries take issue with rules, they may appeal to their representatives in Congress. But even if Congress believes that the Administration’s actions are misguided, undermine congressional intent, or are overzealous, what can be done?
Clarify the Law: Perhaps the most obvious answer to a regulation that offends congressional sensibilities would be to pass a new law or amend the law to make it crystal clear what Congress intends, leaving less or no room for interpretation. For example, in response to new rules on overtime exemptions, legislation was introduced to nullify the rule and set terms for what analysis is required before any similar rule can be proposed and what the time line for implementation must be. But, the legislative process by design is not quick, and it is made more difficult if the executive and legislative branches are controlled by different political parties.
The Congressional Review Act (CRA): The CRA allows Congress to nullify Federal agency regulations if it acts within specified time periods. To achieve this result, both the House and Senate have to pass a resolution and the President has to sign it, which may seem unlikely since the President would most likely support his own administration’s rules. If a CRA resolution is vetoed, an override requires the support of two-thirds of the House and Senate — a high bar. Just last week the House failed to override the President’s veto of a CRA resolution (H.J.Res. 88) to nullify the fiduciary rule.
The Power of the Purse: Congress passes annual appropriation bills to fund the executive branch and can add policy riders or “limitation” amendments that tell the agencies how they may not use resources. You may recall past blog posts on the controversy around the FCC’s net neutrality regulations. The House Appropriations Committee added some language to the bill funding the FCC that would prohibit the FCC from implementing the net neutrality order until certain court cases are resolved. On other FCC matters that displease the appropriators, the bill requires the FCC to make proposed regulations publicly available for 21 days before a Commission vote, prohibits the FCC from regulating broadband rates, and requires the completion of a study before the FCC may further pursue its rule on set-top boxes. If the provisions make it through the legislative process, surely the Administration will take issue with such restrictions. While the leverage of funding carries some weight, failure to enact a bill to fund government agencies due to policy squabbles doesn’t go over well with the public.
Hearings: Probably the easiest tactic for Congress to use, but one without the force of law, is oversight hearings. Public hearings can be used to put agencies on the spot and make them answer for their actions. Congressional committees not only can force agency officials to appear, but also can invite other witnesses who can comment on (and point to flaws in) regulation. The public relations pressure may hold varying degrees of sway with regulating agencies depending how set they are on a course of action and the integrity of the path they’ve taken to achieve their policy objectives.
Tipping the Scale — Regulatory Reform
The Speaker’s plan outlines a number of suggestions for changing the regulatory climate. Some of the reforms being proposed would prevent the Federal government from regulating in areas where states have already done so, require Congress to approve all rules with an annual economic cost of more than $100 million, require agencies to adopt the least costly regulatory option, implement sunset dates for regulatory programs, make the government data used to support regulations transparent to ensure sound science is used, and establish an independent commission to look at past regulations to see what has become outdated and identify rules that can be taken off the books.
As TECHPol has reported, recently Congress has pursued a number of bills that would achieve some of the Speaker’s objectives, such as:
The REINS Act: Major rules, with an economic impact of $100 million or more, would require an up-or-down vote by both the House and the Senate and the signature of the President before they can take effect. (House passed, pending in Senate)
The SCRUB Act: A regulatory review commission would be established to make recommendations on rules that should be repealed for a variety of reasons, such as if they are obsolete, duplicative, or unnecessarily costly. (House passed, pending in Senate)
The RFA Improvements Act: The Regulatory Flexibility Act would apply to all agencies, requiring an analysis of whether a substantial number of small businesses would be affected by their regulations and, if so, how such rules can be written in the least costly way. More small businesses would have input into the process as well. (House passed, pending in Senate)
And, the next one on the docket is the Separation of Powers Restoration Act, or SOPRA, which is ready for a House vote. The bill would enhance judicial review of regulations so that the deference currently given to agencies on how they interpret statutes is curtailed.
The is no shortage of ideas on how to check the power of Federal agencies, but whether Congress can add its weight to tip the scale in their own direction any time soon will depend on whether the political balance shifts this fall.
If you have questions or comments about the regulatory reforms, feel free to contact us.