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Federal Regulations Advisor Insight and Commentary on U.S. Government Regulatory Affairs

Monday Morning Regulatory Review – 9/2/13

Posted in Agency Authority, Judicial Review & Remedies, Regulatory Process

The week before Labor Day – the final week of summer vacation – the Government might be expected to slow down, but the contrary was true.  The Consumer Financial Protection Bureau (CFPB) published an obscure “ratification” of its Director’s previous acts, further raising questions of the efficacy of those acts.  The Internal Revenue Service, on the other hand, published final rules on the individual health care tax / penalty under the Patient Protection and Affordable Care Act (ACA).  The Office of Management and Budget (OMB), Office of Information and Regulatory Affairs (OIRA) completed a number of regulatory reviews, reducing its docket to a point that invites agencies to submit rules under its new Unified Agenda and Regulatory Plan instructions.  A close look at the breadth of completed reviews suggests that OMB has attempted to move many of these rules under the radar portending a busy Fall.

Ratification & Litigation:  The Director of the CFPB, in a move that is either wise planning or cynical,  issued a “Notice of Ratification” of all of his acts during his recess appointment made legally dubious by Noel Canning, its siblings, and the pending United States Supreme Court (SCOTUS) litigation.  The “notice” is so terse that the link really isn’t needed – the entire content:

The President appointed me as Director of the Bureau of Consumer Financial Protection on January 4, 2012, pursuant to his authority under the Recess Appointments Clause, U.S. Const. art. II, § 2, cl. 3.  The President subsequently appointed me as Director on July 17, 2013, following confirmation by the Senate, pursuant to the Appointments Clause, U.S. Const. art. II, § 2, cl. 2.  I believe that the actions I took during the period I was serving as a recess appointee were legally authorized and entirely proper.  To avoid any possible uncertainty, however, I hereby affirm and ratify any and all actions I took during that period.

This “ratification” could be a strategic move by the CFPB to forestall constitutional challenges to its regulatory and enforcement authority, but it also raises a question of efficacy:  can such a short and opaque blanket statement actually ratify years of actions?  The CFPB provided no contemporaneous explanation to support its conclusion that this blanket ratification resolves “any possible uncertainty” increasing the uncertainty of its efficacy.

Doth the Director protest too much?  Ratification of unauthorized acts is not uncommon in federal acquisition law although it presumes, first, that the act is unauthorized.  In other administrative law contexts, the Administrative Procedure Act (APA) provides only a minimum framework for administrative law, not an encyclopedic ukase.  The National Labor Relations Board (NLRB) ratified many of its unauthorized decisions after SCOTUS decided, in New Process Steel v. NLRB, that the NLRB lacked a quorum, and this may be the CFPB’s inferred reasoning.  Unstated reasoning leaves future assertions to be little more than post-hoc rationalizations that are not judicially acceptable, so perhaps the Director hath protested both too much and too little.

Individual Mandate:  The IRS published its final rule for individual taxpayer liability under the Internal Revenue Code for the shared responsibility payment for not maintaining minimum essential health care insurance coverage under the ACA.  The Administration has delayed the application of the employer mandate, so one might think that more individuals may run afoul of this penalty or tax.  The ongoing confusion and the soon to be stood up health care exchanges raise many more questions than the Administration has answered, leaving the door open for more litigation and political fallout.  The rule applies to each months beginning in 2014.

The final rule, according to the IRS, adds an estimated average of .21 hours of work for 36,000,000 respondents, totaling 7,500,000 estimated total annual reporting burden hours to the country’s Paperwork Reduction Act (PRA) workload.  The form and recordkeeping requirements must be substantially simpler than the IRS regulations because it takes an hour just to read the regulation.  In short, the IRS’ calculation is impossibly low.

Fall 2013 Unified Agenda:  OMB recently released its instructions for the Fall 2013 Regulatory Plan and Unified Agenda of Federal Regulatory and Deregulatory Actions, which were due to be submitted on August 29, 2013.  OIRA Administrator Howard Shelanski may be attempting to get the UA back on track, though the timing makes this a close question.

Wage Methodology:  Following up on last week’s submission to OMB, OMB completed review on August 26, 2013, and the Department of Labor (DOL) published on August 30, 2013, its final Wage Methodology for the Temporary Nonagricultural Employment H-2B Program.  The final rule delays indefinitely the effective date of the 2011 version of the wage methodology rule, “in order to comply with recurrent legislation that prohibits [DOL] from using any funds to implement it.”  In theory, this issue will not arise again soon, but, in reality, the final agency action creates another opportunity for litigants to engage on the potential conflict between court orders and appropriation riders.

OMB Completed Reviews:  In the days before the three-day holiday weekend, OMB completed review of a number of agency regulatory actions that will have impact.  Whether OMB sought to keep these moves out of the press or they were all simply coincidences remains a mystery, but some of the broader regulatory actions last week include completed reviews of diverse subjects:

  • Energy Conservation Standards for Commercial Refrigeration Equipment and Energy Conservation Standards for Walk-In Coolers and Walk-In Freezers proposed rules (economically significant minimum efficiency standards reviews);
  • Program Integrity: Exchange, SHOP, Premium Stabilization Programs, and Market Standards final rule (ACA audits and fraud detection);
  • Machine Guns, Destructive Devices and Certain Other Firearms; Background Checks for Responsible Persons of a Corporation, Trust or Legal Entity With Respect to the Making or Transferring of a Firearm proposed rule (to pierce entity structures to reach the individual registrant);
  • Implementation of the ADA Amendments Act of 2008 (Title II and Title III of the ADA) proposed rule (updating Americans with Disabilities Act (ADA) anti-discrimination provisions);
  • Affirmative Action and Nondiscrimination Obligations of Contractors and Subcontractors Regarding Individuals with Disabilities final rule (economically significant implementation of amendments to the Vietnam Era Veterans’ Readjustment Assistance Act of 1974); and
  • Lease and Interchange of Vehicles; Motor Carriers of Passengers proposed rule (ensuring that a bus or truck actual operator is regulated).

OMB completed more reviews than these seven (and any completions on August 30 will not become apparent until tomorrow); some were not included because of the narrow scope, even if the action was economically significant (such as a Gulf Coast recovery (i.e. Deepwater Horizon) trust fund program).  OMB’s docket is down to 126 pending regulatory actions, but that number will rise again.

Happy Labor Day!