President Issues Two New Executive Orders Aimed at Trimming Regulatory Burdens
This week, President Donald Trump signed twin executive orders aimed at reigning in executive agency regulatory powers. The first, "Promoting the Rule of Law Through Improved Agency Guidance Documents" (the Guidance EO) seeks to limit the power of guidance documents and requires federal agencies to centrally post guidance documents on their websites. The second, "Promoting the Rule of Law through Transparency and Fairness in Civil Administrative Enforcement and Adjudication," (APA EO) seeks to bring more transparency to agency enforcement actions and adjudications by restricting agencies' reliance upon "guidance documents" that impose penalties on regulated parties. In signing the executive orders, President Trump remarked:
For many decades, federal agencies have been issuing thousands of pages of so-called "guidance" documents — a pernicious kind of regulation imposed by unaccountable bureaucrats in the form of commentary on how rules should be interpreted. All too often guidance documents are a backdoor for regulators to effectively change the laws and vastly expand their scope and reach.1
Together, these executive orders could have a dramatic impact on how the government deals with contractors moving forward.
With the Guidance EO, the president is seeking to limit the reach of guidance issued by agencies. Currently, there is a fear (which is sometimes realized) that agencies utilize guidance as a way to put further burdens on contractors without going through the Administrative Procedure Act required notice and comment period. The Guidance EO seeks to accomplish this in a number ways, including:
- First, within 120 days of the implementing order of the EO from the Office of Management and Budget, agencies will be required to create and maintain a searchable database of all agency guidance.
- Second, agencies will be required to review all guidance to determine whether they should still be in force and effect.
- Third, agencies will be required to update their own regulations on the promulgation of guidance consistent with the Guidance EO. Those regulations will require agencies to make clear that guidance is not binding on the general public (which includes contractors) and require a 30-day notice and comment period for new guidance. In addition, new guidance will have to undergo a process similar to the process for regulations including a review by the Office of Information and Regulatory Affairs and compliance with executive orders regarding the issuance of new regulations.
It will be interesting to observe what, if any, guidance is rescinded and whether the pace of the issuance of new guidance slows down. Further, how an agency categorizes statements that are arguably "guidance" will be worth watching because the definition of "guidance" in the Guidance EO is very broad. The definition includes statements of "general applicability" which set "forth a policy on a statutory, regulatory, or technical issue, or an interpretation of a statute or regulation…" See Guidance EO, Sec. 2. There may be divergent interpretations as to what "guidance" is between agencies, within agencies, or even between an agency and the U.S. Office of Management and Budget (OMB).
The APA EO also notes that agencies "have not always complied" with the requirements of the Administrative Procedure Act, which governs how agencies propose and establish rules, or the Freedom of Information Act, which is designed to increase accountability in federal agencies through transparency. Under the APA EO, agencies are required to act "transparently and fairly . . . when engaged in civil administrative enforcement action or adjudication."
The APA EO seeks to reduce "unfair surprise" – defined to mean "a lack of reasonable certainty or fair warning of what a legal standard administered by an agency requires" – by instructing agencies only to apply standards of conduct in administrative enforcement actions that have been publicly announced so as to provide fair warning. Under the APA EO, agencies may not use guidance documents "to impose new standards of conduct" and are prohibited from taking action of legal consequence against a person, without affording that person an opportunity to be heard, to which the agency must respond.
In general, this could be a positive development for regulated entities. Requiring agencies to publicize standards of conduct, such that regulated entities have "fair warning" of deemed violations, is a step toward eliminating unfair or unexpected penalties.
Holland & Knight will continue to monitor the implementation of these executive orders and the practical implications for contractors and provide updates where appropriate.