FEDERAL RULES: WHAT BUSINESSES NEED TO KNOW

With slim majorities in both the US House and Senate, Democrats have no room for error if they want to enact their ambitious legislative agenda. If Democrats end up riven by internal divisions, their best attempt at successfully enacting their agenda lies with President Biden and how shrewdly he can wield his authority using executive orders and agency rulemaking. And as Biden demonstrated with his wide-ranging July 9 executive order, he is willing to use every available executive-branch tool to accomplish the Democrats’ agenda.

Biden’s executive order set detailed directions for federal agencies to adopt policies and rules to promote competition across a range of industries and to empower consumers and workers. As a result of Biden’s order, businesses can expect a flurry of agency rules to be proposed and adopted throughout the rest of Biden’s term. If businesses want to prepare for new regulations and not be caught flatfooted, they should closely track and comment on the incoming gamut of federal rules that run across almost every economic sector, ranging from health care to transportation. But businesses don’t necessarily need a lawyer to help them shape the regulations. Instead, businesses should learn how to navigate the federal rulemaking process.

Publishing a proposed rule

Federal rulemaking—consisting of a daily stream of agency regulations, large and small—may appear daunting, but it is quite simple. For example, when a federal agency wants to or is required to adopt a new rule, the agency must first propose the rule in the Federal Register, the government’s official publication of executive-branch documents and actions. When an agency proposes a rule, businesses should look for two key items.

First, businesses should look for the agency’s notice of proposed rulemaking, which announces and explains the agency’s rule and shows the rule text or describes the rule in a narrative form. As part of its notice, the agency (1) summarizes its rule, (2) explains why the rule is necessary, (3) analyzes how the rule affects the public and key agency stakeholders, and (4) determines the rule’s regulatory impact.

Second, businesses should note the comment period in which the public can comment on the rule. This comment period is generally 30 days, but it can be longer. For businesses, commenting on an agency’s rule is the best chance to influence an agency’s rule. If there is overwhelming opposition, for example, an agency may withdraw its proposed rule.

More important, an agency must meaningfully respond to public comment—that is, the agency must follow a “reasonable standard” by stating the main reasons for the agency’s decision and explaining how it reached its decision. One way an agency can run afoul of this standard is by failing to reasonably consider comments as they relate to the agency’s rule. When an agency flunks the reasonable standard, the agency becomes vulnerable to a lawsuit and the subsequent possibility that a federal court will strike the rule down as arbitrary and capricious.

For example, a federal court decision in March 2020 showed how agencies that flout the reasonable standard can have their rules struck down. The proposed rule from the Department of Agriculture would have allowed meatpacking plants to eliminate line speeds. When unions argued that the rule compromised worker safety, the department did not reasonable consider the objections. Using the reasonable standard, the court ruled that the department was unreasonable in rejecting submitted comments on worker safety and thus had failed to engage in reasoned decision-making.

Overall, the reasonable standard requires an agency to articulate the rationale for its proposed rule and what methods or evidence it is relying on. So when a business is affected by a proposed federal rule, the business should scrutinize the rule and the agency’s evidence and rationale. If the business believes the rule is unreasonable, the business should express that concern during the public-comment period. Businesses should not hesitate to comment: all well-thought-out public comments can significantly affect a proposed rule.

How to affect a rule

To monitor or search for agency actions and rules, businesses need only go to federalregister.gov. While the Federal Register contains loads of information, businesses can search by federal agency, date, or keyword. Better yet, go to regulations.gov, a newly improved federal website where businesses can—and should—comment on federal rules. Easily searchable and navigable, the site promotes public engagement and also offers helpful videos and explanations of federal rulemaking.

While a business’s comments can sway and even derail a proposed rule, as long as the agency relies on evidence and has a reasonable explanation for its regulatory choice, a business can expect the rule to withstand judicial scrutiny. That is not to say that a business or groups of businesses can’t sue the agency in federal court. But businesses could pursue a less-costly and time-consuming route and lobby Congress to overturn the new rules.

For example, if any of Biden’s new rules are considered “major,” Congress can review the rule and disapprove it. A rule is considered major for several reasons, including if it is likely to result in (1) an annual effect on the economy of $100 million or more, or (2) significant adverse effects on competition, employment, investment, productivity, or innovation. Regardless, businesses must be ready for a new era of executive-branch regulation and find the vigor to participate in the rulemaking process for rules that may affect their bottom line.