NFIB Legal Center Director Testifies on Underground Regulation

Date: March 20, 2018

The NFIB Legal Center has long advocated for simple and concise small business regulatory guidance. But at the same time we’ve fought against “underground regulation.” By this we mean, guidance that doesn’t simply explain existing regulations but goes further and announces new regulatory standards that haven’t gone through proper notice-and-comment process, as required by the Administrative Procedures Act.

The NFIB Small Business Legal Center’s Executive Director, Karen Harned, talked about the problems with underground regulation in testimony before the House Oversight and Regulatory Reform Committee on March 14, 2018. Harned explained that the APA’s notice-and-comment process ensures transparency and allows for more rationale decision-making. She also commended Attorney General Jeff Sessions for issuing a memorandum prohibiting agencies from issuing guidance documents purporting “to create rights or obligations binding on persons or entities outside the Executive Branch…”

While DOJ’s memo is a crucial step forward in stopping underground regulations, Congress also needs to act and discourage agencies from playing fast and loose with the APA. If Congress does not act, the problem of underground regulations will resurface in the future. Of course, the NFIB Legal Center will urge courts to consistently slap-down agencies that issue new and substantive regulatory burdens in guidance, blog posts and other informal documents. But under existing law, agencies often feel that they have wiggle-room to announce controversial interpretations of law that have not been approved by the courts or vetted through public comment.

On a related note, NFIB secured a significant win in 2017 when a lawsuit prompted the U.S. Department of Labor to rescind a rule that the Occupational Safety & Health Administration imposed illegally. The so-called Union Walk Around Rule—pronounced in a mere letter, and later incorporated into agency field documents—purported to require businesses to allow a third-party union representatives during OSHA inspections. After NFIB won a preliminary victory in federal court, DOL rescinded the Union Walk Around Rule. For more on that victory, check-out this prior post.

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