Background:  The National Labor Relations Board (NLRB) has been plagued with quorum problems.  In the Representation—Case Procedures rule, a three-member Board (out of five) preliminarily voted 2-1 in favor a new rules that would have substantially shortened the time for union representation elections and made other changes.  A draft rule circulated to the Board, however, netted only a 2-0 vote in favor of adopting the rule.  The Chamber of Commerce and the Coalition for a Democratic Workplace sued, claiming that the NLRB could not act through only two members.  Plaintiffs complained also that the rule failed to adequately respond to substantive comments under the Administrative Procedure Act (APA), and failed to consider the impact of the rule on small businesses under the Regulatory Flexibility Act (RFA).

New Process Steel:  The Supreme Court held in New Process Steel that Congress meant what it said in the National Labor Relations Act (NLRA), 29 U.S.C. § 153(b), that “three member of the Board shall, at all times, constitute a quorum of the Board….”  When the Board fell to two members because the President and Senate could not agree on acceptable Board Members, the NLRB could not act.

Application:  The court did not reach the other APA issues posed in the complaint because jurisdiction to act – in this case the procedural requirement of a quorum – renders all other questions unnecessary.  The court decided only whether a third Board Member could be considered to have participated by previously voting on procedural resolutions and whether his “presence” was sufficient to constitute the quorum.  On process,

Although within the confines of the APA and its governing statute an agency is general free to devise its own procedures … it cannot evade the statutorily mandated quorum requirement simply by designating interlocutory decisions as final actions.  The NLRB, in other words, may not transform a procedural order into the relevant final action merely by its say-so.

More complicated was the issue of “participation” to make up a quorum in an electronic environment.  As the court reflected, this issue is complicated by modern technology:

But whether the standard is “mere presence” or “participation,” the difficulty is in applying the standard to an online vote.  When the very concept of a quorum seems designed for a meeting in which people are physically present in the same place, what does it mean to be present or to participate in a decision that takes place across wires?  In other words, how does one draw the line between a present but abstaining voter (who may be counted toward a quorum) and an absent voter (who may not be) when the voting is done electronically?  Even if “mere presence” is enough, the translation of that physically-based concept to the [NLRB’s electronic voting] process, which “automatically calls for an electronic vote when drafts are circulated” … is not obvious.

Here, the third member did not respond to the electronic poll, and the rule was sent to the Federal Register the same day.  Judge Boasberg followed the Supreme Court’s lead: “a member may not be counted toward a quorum simply because he holds office.”  Silence was not abstention, which would have required an affirmative act.

This blog expected this decision sooner – the rule took effect on April 30, 2012.  Any NLRB acts taken under the rule (or otherwise) in the past two weeks on only two affirmative votes and nothing more violate the quorum requirements.  The NLRB must vacate any such acts unless the same actions could have been taken under the previous rules.

The NLRB again overstepped the boundaries of authority it was granted.  It is axiomatic that an administrative body can not act beyond its authority, whether assuming jurisdiction that it has not been granted, or acting in a way that has not been permitted.  That violation of fundamental APA requirements clearly illustrates that the NLRB needs to learn administrative law.

Petroleum Refineries:  The Office of Management and Budget (OMB) completed review of the Environmental Protection Agency (EPA)’s economically significant final rule to complete the Petroleum Refineries – New Source Performance Standards (NSPS)–Subparts J and Ja interim final rule.  EPA has previously promulgated new source standards for refineries, then granted reconsideration of, and stayed, specific issues.  This final rule may address all of the issues presented by the petitions, but unless the final rule comports with the petitions, and even if it does, expect litigation.

Independent Benefit / Cost Analysis Advice:  The Commodity Futures Trading Commission (CFTC) will seek assistance from the OMB Office of Information and Regulatory Affairs (OIRA) on benefit / cost analysis for its rulemakings, according to the Wall Street Journal.  The independent agency’s move comes amid litigation against the CFTC questioning the quality of their statutory consideration of economic effects of regulations.

Litigation:

Deference to Agency Briefs – Never Mind:  The United States Court of Appeals for the Seventh Circuit found that pharmaceutical sales representatives fell under the unambiguous administrative exception to the Department of Labor (DOL)’s Fair Labor Standards Act (FLSA) regulations in Schaefer-LaRose v. Eli Lilly & Co., avoiding the Christopher v. SmithKline Beecham deference-to-agency-amicus-briefs fray argued and pending decision before the Supreme Court and resolving an interdistrict conflict.  The court addressed the issue of considering DOL’s amicus briefs (on the outside sales representative exception to overtime) only as a fact of filing below, minor discussion of DOL’s argument, and a passing disposition (fn. 20), finding its task to be simply the application of an unambiguous regulation (on the administrative exception) to the particular facts.  The Seventh Circuit decision, and the labor law issues distinct from the administrative law issues in Christopher, caught the attention in The Wage and Hour Litigation Blog, Wage & Hour Insights, and the Labor & Employment Law Blog.

Wild Horses & Administrative Records:  The United States District Court for District of Columbia expanded the administrative record of an agency decision on judicial review when the agency was being entirely unreasonable about the documents in American Wild Horse Preservation Campaign v. Salazar.  The Department of Interior (DOI), Bureau of Land Management (BLM) had adverse expert declarations from previous, related litigation on another herd management action.  The expert declarations were also extensively cited and quoted in timely comments.  BLM refused to consider the documents as not timely filed (two hours later), and the agency computer firewall apparently rejected the documents based on their size.  The Department of Justice (DOJ) even filed a motion to strike the declarations from plaintiffs motion, but Judge Howell, rightly, I think, would have none of it, and decided the expert declarations must be part of the record on review.  BLM may have been “technically correct” under administrative record doctrine, but BLM (and DOJ) were certainly not reasonable.

• Telling agencies to invite public suggestions and publicly releasing retrospective analyses of regulations and supporting data;
• Prioritizing initiatives that will produce significant quantifiable monetary savings or significant quantifiable reductions in paperwork burdens (while protecting public health, welfare, safety, and our environment) – and include cumulative effect of regulations; and
• Report to the Office of Management and Budget (OMB), Office of Information and Regulatory Affairs (OIRA) bi-annually.

The Executive Order, announced by OIRA Administrator Cass Sunstein at the American Bar Association Eighth Annual Administrative Law and Regulatory Practice Institute today, institutionalizes previous OMB guidance, particularly on cumulative effect of regulations.

Several benefits are clear from the new Executive Order:

• OMB issued guidance to agencies on conducting retrospective reviews under Executive Order 13563 and on the cumulative effect of regulations.  Including this guidance into an Executive Order provides greater stability and continuity.  These requirements will continue to apply across Administrations until altered by another Executive Order (that continuity being a prime benefit of an Executive Order).
• The new Executive Order more clearly establishes a two-way street of communication on retrospective reviews.  Identification of regulations that are obsolete after being fully implemented, overtaken by events (OBE), no longer serving the purpose for which the regulations were promulgated (or any purpose at all), or for other reasons, is clearest to those being regulated, just as the burdens are clearest to those bearing the burdens.  Public involvement is critical to the success of retrospective review.

Several things are also missing that would have improved the Executive Order even more.

• The Executive Order verbalizes its content with the inherently ambiguous “shall” – which could mean that the agencies “may” or the agencies “must” – depending on the interpreter.  Such ambiguity is the product of Executive caution and the hardly unitary or thought-homogenous nature of Executive Branch.  An Executive needs to execute and insist that his managers manage.  This Executive Order does not do so.
• An example lies in the structure of reporting to OMB:  no enforcement provision creates adverse consequences for the appointees or the agencies directed to report.  Perhaps a better approach would have been to require that OMB review retrospective review report in conjunction with budget submissions (which can bite).
• The Executive Order leaves unresolved whether or how agencies may withhold supporting analyses under exceptions to the Freedom of Information Act (FOIA).  This question is a variant on a contention that has existed since President Clinton promulgated Executive Order 12866’s provision that agencies are to release publicly communications with OMB on regulations.

Whether one agrees with the Obama Administration’s priorities, comparative analysis of their success against prior administrations, benefit / cost assumptions, estimates, or analyses, public statements, or politics is not the issue.  The Obama Administration should be commended for trying – each step is an improvement – but many more steps are needed to make regulatory development more effective and regulations minimally onerous to accomplish legitimate needs.

A second House Appropriations Committee bill and report would bar using FY2013 funds to “develop, adopt, implement, administer, or enforce a change or supplement to” the Army Corps of Engineers’ rules or guidance on the definition of waters under the jurisdiction of the Federal Water Pollution Control Act.  The provision, if enacted, would freeze the regulations and guidance for FY2013 in light of Sackett v. EPA.

Limitations on an agency’s use of appropriation bills to limit rulemaking are more common than most realize and touch upon the delegation doctrine under the U.S. Constitution, so a short review is in order.

This blog previously discussed the Department of Labor (DOL) H-2B Wage Methodology Rule funding bar and litigation.  Together, these are all part of a much larger pattern of Congressional intervention and withdrawal of previous constitutional legislative delegations.  Often Members of Congress may perceive that an agency has “gone too far” with congressionally delegated authority, but the real issue is whether those Members can force a compromise that includes such a bar.

Congress created a detailed and complex mechanism for disapproving regulations – a joint resolution (also a law by another name) – in the Congressional Review Act (CRA).  Congress enacted the CRA in response to the United States Supreme Court decision, in INS v. Chadha, striking down as unconstitutional the “one-House veto” and with it over 200 provisions of various laws.  Congress used the CRA only once – to disapprove the Clinton Administration ergonomics rule.  Most recently, the Senate failed to approve S.J. Res. 36, a joint “resolution of disapproval” of the National Labor Relations Board (NLRB) Representation – Case Proceedings, a joint resolution that the President had threatened to veto in any event.

The simpler method, however, is to enact a funding prohibition in an appropriation.  An appropriation, of course, is a law like any other law – approved by the House and the Senate, and signed by the President.  Congress may, unquestionably, withdraw or limit a delegation made by a previous Congress in a previous law.  The dynamics of this law-making function are very different because the stakes vested in the ultimate decision are much greater.  An appropriation limitation is more viable for disabling a rule than the joint resolution under the CRA because

1. appropriations are “must” legislation that “must” be negotiated (it’s self-effecting: if the appropriation is not enacted or is vetoed, the agency withers, not just the rule), and
2. appropriations can apply much more broadly than to just CRA major rules or to a specified rule.

The massive Consolidated Appropriations Act, 2012, currently funding the vast majority of the Government for FY2012, illustrates the breadth and depth of regulatory defunding in a dozen such limitations:

• Many words on a regulation of a small program on loaning Executive Branch employees to the Legislative Branch (§ 730, 125 Stat. 936);
• A disappointment for those who prefer to escape reality because there will be no rules lessening penalties under schedule I under the Controlled Substances Act for tetrahydrocannabinols (read: marijuana)  (§ 810, p. 942);
• Industry-specific rules on permitting under the Clean Air Act for carbon dioxide, nitrous oxide, water vapor, or methane emissions resulting from biological processes associated with livestock production (§ 426, p. 1046);
• Or more pungently, no rules requiring reporting of greenhouse gas emissions from manure management systems (§ 427, p. 1046);
• No Occupational Safety and Health Administration (OSHA) rules applicable to small farms that do not maintain a temporary labor camp (p. 1059);
• No definition of ‘‘Fiduciary’’ by the DOL Employee Benefits Security Administration (EBSA) (§ 109, p. 1064);
• No (previously mentioned) DOL Wage Methodology for the Temporary Non-Agricultural Employment H–2B Program (§ 110, p. 1064);
• No OSHA Occupational Injury and Illness Recording and Reporting Requirements — Musculoskeletal Disorders (MSD) Column (§ 111, p. 1064);
• And sometimes rambling detail that is perhaps unconstitutionally, no Lowering Miners’ Exposure to Coal Mine Dust until the Government Accountability Office makes certain findings  (§ 112, p. 1064);
• Or quite bluntly, no funds may be used to administer or enforce “29 CFR 779.372(c)(4)”  (§ 113, p. 1064);
• Or by subject when a discrete regulations can’t be identified, such as no funding to the NLRB to issue any new administrative directive or regulation that would provide employees any means of voting through any electronic means in an election to determine a representative for the purposes of collective bargaining; (§ 405, p. 1107); and
• And, in case you want to apply, no regulation or any action to limit the submission of applications for benefits under the Demonstration Cities and Metropolitan Development Act of 1966 (p. 1141).

This catalogue illustrates a variety of sizes, shapes, and styles of funding limitation.  We should expect funding limitations as the Appropriators roll through the 13 bills to fund (hopefully) the United States Government for FY2013.  The Congress will never be consistent with how it withdraws delegations by defunding, and often-arcane appropriation language makes the issue daunting.

Congress may defund regulations and regulatory delegations and likely will use that authority even more in the future.  Although often limited to a single fiscal year, once adopted, these defunding restrictions also often recur in subsequent appropriations, becoming semi-permanent.

Extended Review:  An unfortunate anniversary may occur this week, not because of substance, but just because of time.  The Environmental Protection Agency’s (EPA) Chemicals of Concern List proposed rule will turn 2 years old – 2 years pending in OMB review – on May 12, 2012.  The proposed rule would add several chemicals – including bisphenol A, or BPA; a chemical in drinking bottles and other packaging – to a list of chemical substances under the Toxic Substances Control Act (TSCA) that EPA would find presents or may present an unreasonable risk of injury to human health or the environment.  BPA, in particular, has been the subject of a range of administrative actions, including petitions for rulemaking.  The Food and Drug Administration (FDA), for example, denied a Natural Resources Defense Council (NRDC) petition on March 30, 2012 (after NRDC sued), as reported in the Food Liability Law Blog and the media.  Although EPA has believed its proposed rule is not economically significant, some issues seem to be holding up the Administration’s decision on TSCA application.

Balancing:  OMB held the line on its docket of pending reviews (164) – completing review on slightly fewer regulations than it received.

• EPA sent OMB the economically significant Formaldehyde Emissions Standards for Composite Wood Products proposed rule and the legal / policy significant Portland Cement Manufacturing NESHAP and NSPS — Proposed Amendments as a Result of Reconsideration (read: “litigation”) proposed rule.
• OMB completed review of the Department of Transportation (DOT) National Highway Traffic Safety Administration’s economically significant Electronic Stability Control Systems for Heavy Vehicles proposed rule after extended review.

The Regulations:  The WSJ does not identify the regulations with specificity, but Department of Commerce (DOC) Bureau of Industry and Security (BIS) regulations pending OMB review make clear that a broad program of export control regulations is under review.  The stylized proposed rules include:  “Revisions to the Export Administration Regulations: Control of _____ Articles the President Determines No Longer Warrant Control Under the United States Munitions List” and the relevant fill-in-the-blank subjects being;

• Firearms and Related Articles (Proposed Rule submitted to OMB January 4, 2012);
• Guns and Armament and Related Articles (January 4, 2012);
• Ammunition and Ordinance (January 4, 2012);
• Auxiliary and Miscellaneous Items (March 9, 2012);
• Protective Personnel Equipment, Shelters, and Related Items (March 9, 2012); &
• Military Training Equipment and Related Items (March 22, 2012).

None of these proposed rules was signaled to be under consideration in the Unified Agenda published in January even though the first three were already pending review at OMB.  None of these proposed rules has been deemed to be economically significant, although their legal and policy issue significance is quite clear.

Background:  DOC’s regulatory plan provides the background for the export control review:

In August 2009, the President directed a broad-based interagency review of the U.S. export control system with the goal of strengthening national security and the competitiveness of key U.S. manufacturing and technology sectors by focusing on the current threats and adapting to the changing economic and technological landscape.  In August 2010, the President outlined an approach under which agencies that administer export controls will apply new criteria for determining what items need to be controlled and a common set of policies for determining when an export license is required.  The control list criteria are to be based on transparent rules, which will reduce the uncertainty faced by our Allies, U.S. industry and its foreign customers, and will allow the Government to erect higher walls around the most sensitive export items in order to enhance national security.

BIS’s efforts are described clearly in the regulatory plan:

BIS also proposed a rule that provides a framework for controlling militarily less significant defense articles, largely generic parts and components, on the Commerce Control List (CCL) rather than the [highly restrictive export limit] United States Munitions List [USML].  In the immediate future, BIS will work with other agencies to implement transfers of such items to the CCL and to make the CCL a more positive list.  Looking further ahead BIS will work with other agencies to place items on the CCL into one of three tiers, corresponding to different levels of sensitivity.

BIS is less clear as to whether it proposed to work with other agencies before or through the OMB review process, although wise agencies usually present the fruits of interagency discussions to OMB for review.

The OMB Process:  “OMB review” of regulations is governed by Executive Orders 12866 and 13563, and others.  The Executive Orders provide certain political thresholds for review and require analysis, but do not explain what OMB actually does in the review process.  OMB review actually consists of several different processes:

1. review by interested agencies to determine whether their agencies have equities in the rule and by the agencies’ political appointees for conflicting views (if necessary);
2. OMB Office of Information and Regulatory Affairs (OIRA) review of the agency rule development, completeness, logic, language, and particularized regulatory economics; and
3. , the most expected, review by White House (and its various offices) and OMB political appointees and staff (including Program Associate Directors and Resource Management Offices (read “budget”) for consistency with the President’s program.

These are routine and useful steps for the development of consistent regulations that have a desired impact, without unintended consequences.  This process occurs normally within a 90-day window, but may be extended, as is the case with the first three regulations noted above.  Extension is usually a signal that significant issues exist in the rule as submitted to OMB.

“Conflicting” Agencies:  Conflicting agencies often are not conflicting at all, but negotiating the parameters of a path forward that ensures programmatic consistency and reduces conflicting regulations.  A classic example of the failure of this review occurs when different agencies adopt regulations on the very same subject but with different definitions, requirements, and reporting, such as the three “service animals” rules.

Values of Review:  Much has been made recently of OMB review causing “unwarranted” delay or evisceration of desired program results – such as regulations by the Occupational Safety and Health Administration (OSHA) and the Environmental Protection Agency (EPA).  More than anything else, these are complaints that the originators are not getting what they want.  In reality, OMB review serves a useful function in reducing unnecessary burdens, conflicting duties, and idiosyncratic requirements.   OMB review is the last “reality check” on the regulatory process, including meetings by affected parties with OMB and the agencies.

At bottom, the flare of the interagency discussions in public is what becomes unusual; the fact of the discussions, the debate, and the argument is normal and useful.

One final thought – OMB will meet with interested, affected parties if given a good reason.  These listening sessions (also criticized) give OMB and the agencies a last opportunity to be educated on how a regulation will affect the public – a reality check.  That opportunity should not be overlooked, but should be used.

POTUS reiterated his view in the complex of regulatory policy development, to “protect public health, welfare, safety, and our environment while promoting economic growth, innovation, competitiveness, and job creation.”  Some would reverse that order of preference, but that is the normal political discourse.

The importance of the Executive Order lies in the regulatory puzzle’s new Obama Administration emphasis that

In meeting shared challenges involving health, safety, labor, security, environmental, and other issues, international regulatory cooperation can identify approaches that are at least as protective as those that are or would be adopted in the absence of such cooperation.  International regulatory cooperation can also reduce, eliminate, or prevent unnecessary differences in regulatory requirements.

Many will fear – and herein lies the real question – a globalization of regulatory process that embraces more European regulatory “at least as protective” social equation.  The concerned voiced here is whether the United States will slip further down the slippery slope toward Grecian default.

Much of the Executive Order emphasizes greater concern and more consultation, with few substantive impositions.  POTUS’s Regulatory Working Group, originally established by President Bill Clinton’s Executive Order 12866, is charged to serve as a “forum” to “discuss, coordinate, and develop a common understanding” for international cooperation in domestic regulatory actions.  These words are important, but not so important as the six reiterations of the limitations of domestic law – agencies are bound first by what Congress has delegated.

Cass Sunstein, as the locus of activity as the Administrator of the Office of Management and Budget (OMB) Office of Information and Regulatory Affairs (OIRA), has filled in a few blanks in his blog post by inviting review of the United States / Canada released the United States-Canada Regulatory Cooperation Council (RCC) Joint Action Plan and the United States-Mexico High-Level Regulatory Cooperation Council (HLRCC) Work Plan.  These documents should be reviewed by businesses and trade organizations with cross-border interests.

Sunstein went one step further in extolling the Administration’s virtues in a Wall Street Journal opinion piece, The White House vs. Red Tape, addressed to the business community more directly by reversing the priority order and focusing on divergent requirements for car headlights, or the labeling of food, or standards for container sizes.  The Wall Street Journal’s audience is told that the Executive Order has “a simple goal: to promote exports, growth, and job creation by eliminating unnecessary regulatory differences across nations.”  Sunstein sold many of the same focus points in a speech to the Chamber of Commerce covered by Businessweek and others.

Audience is important, and many audiences may be served by a single action.  Here, however, the Executive Order has little substance and much process that is inherently discretionary.  The selling of the Executive Order has more substance and less consistency.  None is surprising – what will be surprising is any substance that comes out of the Executive Order because an Executive Order is not a substitute for good analysis and decisionmaking – it can only foster that analysis and decisionmaking.  Welcome, if small, addition – with concerns.

OMB also completed review of economically significant rules for the Department of Education’s (DOEd) Pell Grant Program, and the Department of Health and Human Services’ (HHS) (1) Home and Community-Based State Plan Services Program and Provider Payment Reassignments, and (2) Community First Choice Option.

Legislation:

The Senate failed to approve S.J. Res. 36, a resolution of disapproval of the National Labor Relations Board Representation – Case Proceedings on Tuesday, April 24.  As discussed last week, litigation is still pending, but there will be no legislative intervention (POTUS had threatened to veto a resolution in any event).

After the hearing the Securities and Exchange Commission’s (SEC) aversion to regulatory analysis reported here, the Financial Services Committee filed a report on April 25, 2012, recommending (to the Committee of the Whole House), H.R. 2308, to improve the consideration by the Securities and Exchange Commission of the costs and benefits of its regulations and orders, with an amendment (H. Rept. 112–453).

Litigation:

The United States District Court for the District of Columbia will hear cross motions to dismiss / summary judgment in National Restaurant Association [NRA] v. Solis, D.D.C. No. 11-cv-1116, on whether the Department of Labor (DOL) gave the public adequate notice and an opportunity to comment in its 2008 proposed rule of notice requirements to employees that tips would be offset against minimum wage requirements that were ultimately contained in the 2011 final rule.  NRA claims that the 2011 final rule is a significant revision of (and detrimentally unnoticed increase in) the level of information that employers are required to provide to tipped employees, which itself is a reversal of DOL’s position from adhering to prior court decisions (2008) to rejecting those decisions (2011).  (Note also the change in Administration between proposed and final rule).

This may be a close “logical outgrowth” case, but the change and rationale (to the extent it exists, is rather dramatic.  Plaintiffs also raise a significant Regulatory Flexibility Act (RFA) claim that DOL improperly certified that the rule would not have a significant impact on a substantial number of small entities.   Fortunately, plaintiffs appear to have dropped some of their more problematic contentions about executive management, which can only be raised in a much more intricate Administrative Procedure Act (APA) claim.

Short version this week because I’m on travel.

In short, the regulations would amend DOL regulations that have governed nonimmigrant aliens admitted to the United States on a temporary basis to perform temporary non-agricultural labor or services.  The underlying statute and regulations set up a system for certifying that a labor shortage exists for the skills needed and DOL certifying that shortage to the Department of Homeland Security (DHS) for purposes of admitting an alien worker.  .

Plaintiffs claimed that (1) DOL lacked legal authority to issue the rules – that regulatory authority over H-2B visas rests with DHS, not DOL, (2) DOL failed to comply with the Regulatory Flexibility Act (RFA), and (3) the regulation is arbitrary and capricious, for example, because DOL’s definition of “temporary” is inconsistent with the definition in DHS regulations.

Chief District Judge Rodgers needed to reach only the first, critical, dispositive issue:

“[i]t is axiomatic that an administrative agency’s power to promulgate legislative regulations is limited to the authority delegated by Congress.”  Bowen v. Georgetown Univ. Hosp., 488 U.S. 204, 208 (1988); see American Library Ass’n v. F.C.C., 406 F.3d 689, 698 (D.C. Cir. 2005) (noting that a federal agency “‘literally has no power to act . . . unless and until Congress confers power upon it’”) (quoting La. Pub. Serv. Comm’n v. F.C.C., 476 U.S. 355, 374 (1986)).  DOL acknowledges that it has no express Congressional grant of authority to engage in legislative rule making under the H-2B program and that such authority was vested instead in the Secretary of the Department of Homeland Security (“DHS”).  DOL argues, however, that its authority can be inferred from three provisions of the INA; that DHS delegated rule making authority to it; and that Congress has acquiesced in its rule making.  At least at this stage of the proceedings, the court is not persuaded by DOL’s arguments.  Specifically, there is no language in the statutory provisions upon which DOL relies from which the court can plainly infer legislative rule making authority.

The order enjoined enforcement of the newly promulgated rules and did not go further.

If DOL lacks authority to promulgate rules for an H2B program, then not only are the rules challenged by Bayou Lawn invalid, but the entire regulatory scheme adopted by DOL would be invalid.  Perhaps recognizing this scope, Chief Judge Rodgers included scheduling requirements for the parties to brief summary judgment motions to bring the litigation to a conclusion, and set off an expected appeal.  Doing so makes a great deal of sense because of the potential effect of a decision.  The court is right to demand the parties move swiftly.

Together with a Congressional bar to the DOL’s temporary non-agricultural worker wage rate rule, which DOL concedes bars that rule, no significant changes in the program are expected.  The District Court could decide whether DOL has authority for the program regulation as early as July; the appropriation act provision terminates September 30, although such provisions are usually renewed.  Uncertainty is the certainty.

1. a provision of the Internal Revenue Code of 1939, interpreted in the Supreme Court’s decision in Colony, Inc. v. Commissioner, 357 U. S. 28 (1958), was not changed by amendments to the Internal Revenue Code containing “materially indistinguishable language,”
2. the statute is not ambiguous, and
3. therefore, the Court need not consider the implication of changing Internal Revenue Regulations because the regulations were not due deference in the first place in light of the unambiguous language of the statute.

Justice Breyer wrote for the Court to the point that the statute was unambiguous, which was sufficient to decide the case with Justice Scalia concurring up to the point that the Court found the statute unambiguous and concurring in the judgment.

Justices Breyer and Scalia continue their debate over deference to regulations – with Justice Scalia continuing his stance that once a statute is found to be unambiguous, it “should be the end of the matter” and joining no discussion of regulatory process.

Justice Kennedy, for a minority of four Justices, considered the statute to be ambiguous and would have deferred to the interpretation in IRS regulations, as amended.

Background:  The underlying issues in Home Concrete were discussed previously:

(1) whether the statutory language covers particular overstatements of tax basis, even though the Court previously construed the same language in a predecessor statute to not apply to this type of case; and,

(2) if the statute is ambiguous despite the prior decision, whether the Court should defer to a recent Treasury regulation that adopts the Treasury’s preferred interpretation.

Deciding on question (1), a splintered Court considered the issue of deference to the regulations and the changes in the regulations during litigation only in dicta (editorializing).  Unfortunately, the decision does not assist in resolving the issue of changing regulatory interpretations under the Administrative Procedure Act (APA).

For the Court:  Justice Breyer stated the Court’s result succinctly:

In our view, Colony determines the outcome in this case. The provision before us is a 1954 reenactment of the 1939 provision that Colony interpreted.  The operative language is identical.  It would be difficult, perhaps impossible, to give the same language here a different interpretation without effectively overruling Colony, a course of action that basic principles of stare decisis wisely counsel us not to take.

The Government’s Position:  Justice Breyer summarizes the Government’s position:

The Government points out that the Treasury Regula­tion constitutes “an agency’s construction of a statute which it administers.”  Chevron, U. S. A. Inc. v. Natural Resources Defense Council, Inc., 467 U. S. 837, 842 (1984).  See also Mayo Foundation for Medical Ed. and Research v. United States, 562 U. S. ___ (2011) (applying Chevron in the tax context). The Court has written that a “court’s prior judicial construction of a statute trumps an agency construction otherwise entitled to Chevron deference only if the prior court decision holds that its construction fol­lows from the unambiguous terms of the statute . . . .”  National Cable & Telecommunications Assn. v. Brand X Internet Services, 545 U. S. 967, 982 (2005) (emphasis added).  And, as the Government notes, in Colony itself the Court wrote that “it cannot be said that the language is unambiguous.” 357 U. S., at 33.  Hence, the Government concludes, Colony cannot govern the outcome in this case.  The question, rather, is whether the agency’s construction is a “permissible construction of the statute.”  Chevron, supra, at 843. And, since the Government argues that the regulation embodies a reasonable, hence permissible, construction of the statute, the Government believes it must win.

The Bottom Line:  The Court holds that the Government’s argument fails because:

In our view, Colony has already interpreted the statute, and there is no longer any different construction that is consistent with Colony and available for adoption by the agency.

Limitations on the Opinion:  And from here, Justice Breyer’s view represents only a plurality of the Court.  Justice Scalia adds the fifth vote by concurring in the judgment, but not Justice Breyer’s discussion of the reationale for deference to agency regulations.

Justice Kennedy’s Dissent:  Justice Kennedy’s dissent makes clear the limits of the decision to one of statutory construction and precedent:

In the instant case the Court concludes these statutory changes are “too fragile to bear the significant argumenta­tive weight the Government seeks to place upon them.” ….  But in this context, the changes are meaning­ful.  ….  The statutory revisions, which were not considered in Colony, may not compel the opposite conclu­sion under the new statute; but they strongly favor it.  As a result, there was room for the Treasury Department to interpret the new provision in that manner.

From this point, the dissent would find that the Department of the Treasury had sufficient authority to adopt a reasonable interpretation  of the statute.

The concurrence and dissent rejoin all of the debate over Chevron and Brand X, but the decision leaves it to be just that, debate, not precedent.  At bottom, Home Concrete adds more to debate than law.

Two final points:  The splintering of the Court in this specific case does not undercut the underlying proposition that the courts defer to agency construction of ambiguous statutes in regulations, even new regulations after long quiescence.  Eight votes appear to so suggest, and Justice Scalia, skeptical in the past, does not reach the question and editorializes about editorializations.

Colony was decided by the Court because of an intercircuit split (when there were many fewer of them), which is usually a sign of statutory ambiguity since we presume that judges of differing interpretations may reasonably differ.  But together with the consideration of pre-Chevron cases under a Chevron standard, historical indicia of ambiguity may not be so reliable