Michael Greve recently wrote a great post about how administrative agencies abuse their authority and impose harm on private parties. They are able to do this in a variety of different areas where their actions are not effectively subject to review by the courts.
Greve’s example is a letter sent by the Labor Department to businesswoman, Rhea Lana Riner, claiming that people she regarded as volunteers were actually employees and therefore had to be paid the minimum wage and overtime. The Department sent Riner a demand letter, ordering her to pay the volunteer/employees or threatening “hundreds of thousands of dollars in civil penalties.” According to Greve, the Department has “placed Riner in regulatory purgatory.” While the Department has threatened Riner, a federal court has ruled that there is no judicial review because the Department has not yet issued a formal complaint. And Greve notes that the Department may never issue such a complaint, “because then, they’d have to defend their position in court.”
This appears to be another example of administrative agency action cynically taken in a way to avoid judicial review. I have written about this in the past, including in the context of the Department of Education, which has largely transformed sexual assault rules on campuses through guidances that are used to threaten universities but are not subject to effective review in court.
It is essential to the rule of law to develop reforms that will prevent administrative agencies from engaging in this type of behavior. In the context of guidance documents, which claim not to be binding regulations but nonetheless often have similar effects, I believe there is a solution. The solution is to allow judicial review of challenges to guidance documents that harm parties. While the details of this harm standard would need to be worked out, it would in general focus on situations where a guidance document induces a party to behave differently than he would otherwise behave in its absence. This would tend to occur in situations where there are significant penalties – legal or practical – that would result by violating the guidance.
While this standard would work in the context of guidance documents, which function like regulations, agencies take a great variety of actions and it seems apparent that a single rule or procedure will not sensibly govern all of them. Greve understands this and his post is an attempt to start to think about the underlying principles that are needed to address these issues – a first step toward developing specific reforms.
Here, I want to briefly discuss the possibility of a reform of the specific practice that Greve discusses – the demand letter issued in the Riner case. Normally, actions prior to the issuance of a complaint in court or before an agency takes action are not subject to judicial review. These are deemed to be part of the decisionmaking process that will only have significant effects on private citizens once the agency files a lawsuit or makes an administrative decision. And it makes sense not to allow judicial interference before an agency has even decided to act.
But perhaps there are exceptions. Consider the following reform. There will be judicial review of an agency’s action prior to the issuance of a complaint or administrative decision if (1) the agency makes a claim that a private party is in violation of the law, (2) the consequences of that violation is not simply injunctive relief, but may result in damages or civil penalties, and (3) the agency does not issue the complaint or take the administrative action within a specified time period (such as 180 days). Under those circumstances, one might then allow judicial review of the legal interpretation offered by the agency (but not the factual claims).
This reform would appear to address the problem of the Riner case, where the agency was threatening significant civil penalties. But it is obviously a narrow exception designed to deal with one type of problem. Ultimately, the rule of law will require the development of other specific reforms as well as the articulation of legal principles governing the abuse of agency authority.