During civics classes in high school, most adults learned that there are three branches of government-the legislative, the executive, and the judicial. These are the branches of government provided for in the Constitution. Often, it is said that there is also a fourth-the administrative agencies. While this is not formally true (you won't find the Internal Revenue Service [I.R.S.] mentioned in the Constitution), it has become increasingly true in practice-administrative agencies such as the Internal Revenue Service, the Environmental Protection Agency, and the Occupational Safety and Health Administration are increasingly the source of the laws that govern the day-today activities of business, with less and less hands-on regulation directly by the executive and legislative branches of government. On both the state and federal levels, a large number of such agencies administer the law in a wide variety of areas.
Most information management professionals are at least vaguely aware of the power and reach of administrative agencies. The agencies mentioned all have an effect on business every day, and businesses are obligated to spend considerable time and effort responding to their mandates. This impact extends to the business's records management. Agency rules frequently include recordkeeping requirements, and an audit or investigation by an agency almost invariably will involve a review of the organization's records.
However, while most people are generally aware that agencies such as the I.R.S. are powerful, few know much about the scope or source of that power. This article will attempt to clear up some of the mystery and confusion that surrounds these agencies.
THE SOURCE OF AGENCY POWER
On both the state and federal levels, administrative agencies gain whatever power they have by delegation-that is to say, they have no inherent, constitutionally mandated power to act. Rather, another, higher level of government-normally the legislature-must delegate some of its own power to the agency.
How much power is that? It depends. In order for an agency to exist, it must first be created by enabling legislation. This statute is a device that sets up the basic framework for the agency, and the set of rules and limitations by which it must live. These may include a variety of things, including organizational matters, staffing, salaries and procedures for conducting business. One of the most important is the delegation of power and its limitation. The delegation may be quite broad, giving the agency virtually complete power within an area (e.g., all taxation matters within a jurisdiction), or it may be quite specific and restrict the agency's authority to a very narrow range of activities, such as operating a single toll road.
An agency may only exercise authority within the delegation of authority provided for in its enabling legislation, or subsequent legislation granting specific additional power. This specified authority is all the authority the legislature has "handed over" to the agency, and since the agency has no inherent authority outside of this "handed over" authority, there is no other authority to wield. In addition, agencies are bound by the mandates-executive decrees, statutes, and case decisions-of superior levels of government, which limit their powers.
Many records managers are undoubtedly aware of one example of a subsequent legislative act significantly restricting the power of agencies-the Paperwork Reduction Act. Prior to the Act, federal agencies were free to impose any sort of paperwork burden they chose upon regulated parties. Now, agencies must submit these proposed requirements to the Office of Management and Budget for review and approval.
The limitation of agency power is an important concept, since actions taken by an agency which turn out to be outside the scope of its authority are not binding. A good deal of litigation between agencies and regulated parties concerns the question whether the agency acted within the scope of authority delegated to it, or whether it has acted in a manner contrary to an act of a superior branch of government.
Since the delegating body has such a wide degree of latitude in deciding how much power to delegate, there is no absolute rule as to how much power an agency has. If the question arises, the first step is to read the enabling legislation or decree, and subsequent grants or restrictions of authority. These define the parameters of the agency's power. However, since, in most cases, the whole point of creating the agency was to get the legislature out of the business of day-today management of some area of activity, delegations of power tend to be fairly broad. For example: 4121.121 Duties of the Administrator.
The administrator of workers' compensation is responsible for the management of the bureau of workers' compensation and for the discharge of all administrative duties imposed upon the workers' compensation board and the administrator in this chapter and Chapters 4123., 4127., and 4131. of the Revised Code, and in the discharge thereof shall do all of the following:
(A) All acts and exercise all authorities and powers, discretionary or otherwise, which are required or vested in the bureau or any of its employees in this chapter and Chapters 4123., 4127., and 4131. of the Revised Code, except the acts and exercise of authority and power which is required of and vested in the industrial commission pursuant to those chapters....1
This grant of authority is obviously intended to confer this agency and its administrator considerable power in overseeing those matters entrusted to it.
THE RULE-MAKING PROCESS
A legislature governs by enacting statutes. In similar fashion, an administrative agency governs by enacting regulations-the power to do so is normally a part of the delegation of authority to it:
71-3507. Licenses or registration; rules and regulations; exemptions; reciprocity; department; right of entry; surveys and inspections.
(1) the department shall adopt and promulgate rules and regulations for the issuance, amendment, suspension, and revocation of general and specific licenses....2
Most of us are familiar with at least some of these rules: I.R.S. regulations governing our income tax, and OSHA regulations requiring various safety procedures in the workplace. There are noteworthy differences between the legislative process and the regulatory one, however.
The most obvious is that a legislature is elected and therefore presumably responsive to the will of the populace. In contrast, agency regulations are written by anonymous bureaucrats who are not elected and who are not directly accountable to the citizenry. Another crucial difference is that legislatures pass statutes after public debate and a vote. In contrast, debate within an agency is not subject to public scrutiny, and the agency does not usually vote, at least publicly, on adoption of its regulations.
At first glance, these differences might seem fatal to agency authority-public votes and elected decisionmakers would seem to be a constitutional necessity to pass a valid law. Indeed, during the formative stages of the administrative law process, this objection was often raised. The delegation of the power to pass laws from elected officials to anonymous bureaucrats was seen as offensive to a representative system of government and thereby constitutionally impermissible.
These objections have been overcome in a variety of ways. Courts have concluded that the delegation does not remove elected officials from the lawmaking process because the legislature still retains the power to scrutinize and control the agency-it may retract or limit the delegation of power, order the agency to take or refrain from specified actions, reduce or eliminate funding for the agency, and otherwise manage it. Thus, in this view, elected officials, and by extension, the governed populace, retain control over the agency's lawmaking process.
THE ADMINISTRATIVE PROCEDURE ACT
As an additional check on agency activity, the federal government and most states have adopted one version or another of the Administrative Procedure Act. This legislation is designed to provide public input and accountability, and to prevent agencies from acting in an arbitrary or capricious manner. The Act sets forth in considerable detail the steps an agency must follow in enacting a rule. Its main requirements are:
Notice-Prior to enacting a regulation, the agency must give the regulated public notice of its intention to enact a rule. Most commonly, this is by publication of the text of the proposed rule and a discussion of why it is needed in a government publication specifically devoted to government notices, rules, and other, similar matters. On the Federal level, this publication is the Federal Register. It is published every business day of every year and contains notices for large numbers of proposed rules. Many states also have a register or similar publication. Publication in a register constitutes constructive notice to the world of the agency's intentions. This means that even if you have not read the register you are deemed to have had the opportunity to do so and are held accountable in the same manner as though you had.
On a practical level, notice in a register is problematic. Registers are not widely available, and few people read them. Even an interested person who attempts to do so is likely to have problems; the Federal Register runs to about 70,000 pages a year, and is very poorly indexed. Finding material of interest to you can be difficult indeed if you have much else to do. In order to provide real notice to the interested public, agencies often supplement register notices by sending notice to interested parties via mailing lists, by publication in print and broadcast media, and other means calculated to disseminate information effectively about the agency's activities. Many agencies now also have internet sites for dissemination of information about their activities.
Public Comment-Prior to adopting a proposed rule, an agency must solicit and consider public comment to the proposed rule. This is usually done by soliciting written comment in the notice of proposed rulemaking. Sometimes a FAX line or telephone line for recorded comment may be made available, and recently, many agencies have begun taking comments via e-mail. If the issue is one which is unusually important or controversial, or if the agency' s governing legislation requires it, public hearings may be held. Interested parties may attend, and parties in favor of or opposed to the rule who have arranged to do so may present testimony and evidence. There is often a sign-up sheet, where anyone in attendance may sign up to speak. If the topic is one of general public interest, anyone may get involved in the comment process. If the topic affects only a few well-defined individuals or entities, the agency may restrict participation to those actually likely to be affected.
Consideration of the comment and evidence received-Prior to adopting the rule, the agency must consider the comments and evidence, publish its response, and if it deems it appropriate to do so, make changes prior to adoption of the final rule.
Appeals-After adoption of the rule, parties who believe the rule was improperly adopted may file exceptions, and if the exceptions are rejected by the agency may further appeal through a specified series of administrative levels. If administrative appeals are exhausted, the case may be taken into a regular court. The appeals process within the administrative system is mandatory. A party who wishes to take the matter to court must first completely exhaust that process; failure to do so usually precludes subsequent judicial appeal.
As the Act' s name implies, these steps are all procedural. This places significant limits on the review of an agency's actions if the matter subsequently winds up in court: Judicial review will focus on whether the agency remained within the scope of its delegated authority, and whether it followed the steps set forth in the Act in good faith. Further, since the agency is deemed to have considerable expertise, its view of things will likely be granted considerable deference.
Therefore, litigation surrounding adoption of rules tends to have very little to do with the actual merits of the rules. Instead, the details of the required procedures are scrutinized to ensure that they were followed to the letter, and that no part of the agency's actions was done in a manner which created essentially sham compliance.
If a party makes allegations concerning substantive aspects of the rule, they are likely to go nowhere. A standard judicial doctrine in this area is that agencies are deemed to have a high degree of expertise in their area, and courts will not usually consider second-guessing the merits of the agency's actions so long as proper procedure was followed. One court expressed its attitude toward agency interpretation of statutes this way:
"Although we are not bound by an administrative construction of a statute, such a construction will not be lightly disregarded."3
THE ADMINISTRATIVE PROCEDURE ACT AS A CHECK ON AGENCY POWER
One aspect of the Act that does stand as a substantial check on agency power is its provision that agency actions, including adoption of rules, that are taken without compliance with its provisions, are void and unenforceable. This means that, before imposing some requirement or burden upon the public or a class of regulated parties, the agency must first go through all of the notice and comment steps outlined above.
In practice, this eliminates some outcomes of concern to information management professionals:
agencies are prohibited from enforcing their informal opinions about what records ought to be kept, or what media they may be kept on;
agencies are prohibited from adopting requirements by some informal process that doesn't provide for notice to, and input by, the regulated public, of that the agency is up to;
agencies or auditors cannot simply impose penalties because they "don't like" the way information is being managed;
agencies cannot impose an enforceable requirement by simply expressing an opinion or position in the news media or in an informal communication.
In each of these cases, if the agency wishes for its position to become an enforceable regulation, it must take that intention through the formal process so that it can be adopted as a regulation.
AGENCY ADVISORY OPINIONS
Notwithstanding the statements above, agencies can and do express their views in a variety of ways other than by enacting regulations. They may issue interpretations of statutes or their own regulations, informal rulings on proper practice for regulated entities, or simply state their views in press conferences, letters or other venues. The Internal Revenue Service, for example, issues a wide variety of such things-revenue procedures, revenue rulings, interpretive bulletins, and more.
Generally, such communications are not themselves enforceable as laws. However, in addition to whatever guidance they provide on ambiguous provisions of law, they may also constitute the agency's statement of what its position would be should a dispute arise and the issue litigated. They should therefore be viewed in light of the precise wording of whatever statutes and regulations are actually in force, as well as judicial attitudes toward the agency's interpretations of its statutes and regulations and the regulated party's need to maintain good relations with the agency. This may mean that, on occasion, such a statement may be safely ignored because it is contrary to some clearly set forth provision of law. However, at other times, an agency's view may have to be taken as the interpretation of the law most likely to be adopted by a court. As such, it cannot simply be disregarded.
THE VALUE OF PUBLIC INPUT
Notwithstanding their limitations, the notice-and-comment requirements of the Administrative Procedure Act allow for a substantial degree of public input into agency decisionmaking processes. Certainly, there is the possibility that an agency will scrupulously go through all of the steps and then simply ignore all public input. However, agencies are often quite sensitive to public opinion, if for no other reason than they don't want citizens complaining about them to elected officials. Thus, they usually take the notice-and-comment process quite seriously. After Federal agencies receive and consider comment, they frequently publish an article in the Federal Register containing an extensive analysis of them. Often the proposed rule will be extensively changed prior to adoption.
AFFECTING THE REGULATORY PROCESS
As any record manager in a regulated industry is well aware, many agency rules impose a significant information collection burden-data capture, mandatory reporting and mandatory recordkeeping, often of voluminous data, are common regulatory requirements. Because of the expense and inconvenience associated with it, this burden is one of the most common areas of concern in comments on proposed regulations. Therefore, organizations and records managers seeking to rationalize that burden may find it well worth their trouble to become involved in the regulatory process. Often, getting started involves no more than a phone call or letter to the agency, requesting to be put on the notice-and-comment list. The agency then sends notices of proposed rulemaking, hearing dates and locations, and other information necessary to become involved. Phone numbers and addresses for federal agency contacts, as well as notices about proposed rules, can be found in the Federal Register. When a proposed rule is published, it can be reviewed and appropriate comments submitted to the agency.
Lest the reader consider that this would not be a profitable use of time, consider the ARMA International's involvement with the Office and Management and Budget and the Paperwork Reduction Act. The Association's involvement was undoubtedly a significant factor in reenactment of the Paperwork Reduction Act, and thereby a significant factor in ensuring that future information collection requirements are carefully scrutinized before being imposed on the public. Other industry associations such as the Association for Information and Image Management (AIIM) are involved in the rulemaking process of a wide variety of agencies, as are a wide variety of interest groups ranging from environmental organizations to business groups to individuals. In many cases, these groups have developed close working relationships with agencies, thus allowing them input into the scope and wording of regulations that is often quite substantial. This frequently includes even the opportunity to participate in drafting of the language of proposed regulations. Obviously, this provides an enormous opportunity for a person or organization desiring to influence the regulatory process.
The process by which agencies regulate business and other activities is neither arbitrary nor mysterious. The law provides significant checks on the arbitrary exercise of agency power, as well as significant opportunity for the regulated public to provide input on those regulations they will ultimately have to live with. The key to the success of this process is information. Regulated entities can and should inform themselves of the scope of regulation and the substantive requirements of those regulations imposed upon them, and they should take an active interest in the regulatory process. When this occurs, the potential outlined by the Administrative Procedure Act and other legislation is realized, and the regulatory process becomes what it was intended to be-a dialogue between the government and the governed.
1. Enabling legislation of the Ohio Industrial Commission, Bureau of Workers' Compensation, 4121.121, O.R.C.A.
2. Nebraska Radiation Control Act, 713507, N.R.S, authorizing the Nebraska Department of Health to oversee a radiation safety management program.
3. Robins vs. Board of Trustees, 523 A.2d 1376, 1379 (Maine 1976).…