Procedures of Administrative Agencies - Module 2 of 5




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Module 2: Procedures of Administrative Agencies

Requirements for Agency Procedures

The most important federal statute concerning the operations and function of federal administrative agencies is the Administrative Procedure Act, or the “APA.” It was passed in 1946, at the time of great expansion of federal agencies, to standardize the procedures employed by the agencies and to provide for Congressional oversight and transparency to the public. The APA requires agencies to keep the public informed of their organizations, procedures and rules; to provide for public participation in the rulemaking process; to establish uniform standards for the conduct of formal rulemaking and adjudication; and to define the scope of judicial review.[1]

The APA provides that agency “rules,” or statements designed to implement law or policy, must follow the prescribed process of agency rulemaking. It also defines an agency “order” as an agency’s final disposition of a matter through the process of adjudication.[2]  

The provisions of the APA apply to all federal agencies, which are defined as any agencies under the authority of the government of the United States, aside from Congress, the courts and the President.[3] The APA does not apply to state agencies, though each state has enacted equivalent legislation governing state authorities.

Governmental bodies, including administrative agencies, make decisions which impact the lives and welfare of citizens, including decisions which impose costs, restrict rights, and deny access to government benefits. Under the 5th and 14th amendments to the Constitution, the government must afford due process to any individual who is to be deprived of “liberty” or “property.”[4]

This means that, at minimum, the government must provide a hearing before an impartial judge, with adequate notice, at which the claimant has a right to be heard.[5] The right to due process may require procedural protections beyond this minimum in some cases. The extent of the required due process depends on a number of factors, including the nature and importance of the interests impacted by government action, the interest of the government in pursuing the course of action, and the administrative burden which extensive procedural protections would place on government functioning.[6] These Constitutional protections exist over and above the procedural protections dictated by statute in the APA or the internal rules of agencies.

Note that, while due process requires a hearing to adjudicate the claims, such a hearing need not be in the form of a judicial trial or setting.[7]  

However, not every government action that negatively impacts someone requires due process. Due process only applies to particularized actions, impacting a small number of people on individualized grounds. These cases are amenable to determinations based on specific facts and so are best determined in adjudicative proceedings. By contrast, when the impact of a governmental act stems from a generalized action, applying to many people on the basis of broad policy considerations, due process protections do not apply. Rather, recourse for such legislative-type decisions are only available through the political process.[8]

So, for example, a government condemnation of a series of private houses on a street to use the space for a highway is a particularized action made in individualized grounds. It requires due process. But if the government passes a zoning law stating that people can’t use their properties to grow certain types of produce, this is a generalized action and does not require due process. Rather, people who don’t like the rule can fight it through the normal political process.

The landmark cases that established this distinction involved actions by city and state governments to raise revenue. In one case, a city ordinance levied a tax on property owners for road improvement, imposing specific costs on property owners based on the benefit received by each property.[9] In the other case, the state instituted an across-the-board increase in the valuation of all taxable property in the city.[10]  

The Supreme Court distinguished between the two cases, holding that a hearing was only required on due process grounds in the first case. The Court reasoned that, whereas the latter case involved a city-wide generalized policy, the first city ordinance only impacted a limited number of people, and the claimants could point to individualized facts specific to their circumstances which were relevant to adjudicating the city’s action.

These cases also helped to establish the distinction between the two types of agency actions, which were later codified in the APA. When an agency acts to promote a broad policy based on generalized facts, it is engaging in rulemaking, whereas when it makes narrow determinations based on individualized facts, it is engaged in adjudication. One important difference is that while a hearing is required for agency adjudications, such hearings are not required for rulemaking.

Due Process for Administrative Actions

Aside from the Constitutional requirement of due process, Congress may require that agencies provide adjudicatory hearings for those impacted by agency policy. In such cases, the hearing is mandated whether or not the circumstances would qualify for due process protections under the Constitution. 

The APA sets out the framework for these hearings with formal adjudication provisions that govern agency actions. However, these provisions apply only when two conditions are met. First, the agency process in question must meet the APA’s definition of an “adjudication.” [11] Second, there must be a statute that specifically states that the adjudication must be determined on the record after the opportunity for an agency hearing.[12]  

This means that it is up to Congress to specify by statute, generally in the enabling act establishing the agency, which agency adjudications require a “hearing on the record.” This language in a statute will trigger the APA’s formal adjudication provisions, requiring the hearing to comply with the extensive process detailed in the APA.

If Congress does not use the language of “hearing on the record,” the formal adjudication process is not required. However, all agency adjudications are required to follow some procedure to ensure a fair process. These non-statutory hearings are known as informal adjudications, and they are generally not the trial-type hearings used for formal adjudications. Instead, the APA provides minimal requirements for such hearings. These include the right to appear before the agency and be represented by counsel, a timely conclusion to the matter under dispute and an agency explanation to be given when a petition or request is denied.[13]  

In the context of administrative law, the most relevant Constitutional due process protections in connection with deprivations of property stem from denial or revocation of government entitlements. Entitlements are monetary benefits received by people in accordance with statutory or administrative standards. Government welfare programs, such as those for needy families or supplemental nutrition assistance, constitute property interests. As such, a person who receives such benefits because they meet eligibility criteria defined by law or agency rule are considered to have property rights to such benefits. To terminate such benefits, the responsible governmental agency must provide notice of the planned termination and hold a hearing prior to terminating the benefits.[14]

Another important area in which deprivation of property will trigger due process protections arises in the context of government employment. To foster a professional workforce, federal law has established that certain jobs in the government are protected positions, which means that those who hold such positions can only be removed for cause. This protection creates a property interest for the jobholder. As such, the removal from such a position is a deprivation of property, requiring due process.[15]

Examples of governmental jobs which have been deemed to constitute property interests include civil service positions hired on the basis of professional merit. Similarly included are jobs which allow for the possibility of tenure, such as a teaching position at a state university.  

In both examples, continued employment is not dependent on the pure discretion of government supervisors, and so the rights to the position are considered to belong to the employee. However, with regard to government positions that allow for termination for any reason, or when an employee has not met eligibility requirements, such as a teacher who has not earned tenure, due process protections would not apply.[16]

Professional licenses are also considered to be “property” for the purpose of due process. If an applicant has met the criteria specified by statute or agency rule to be entitled to a license, such as a license to practice medicine or law, then the state must hold a hearing before denying a license to the applicant.[17] The nature of the hearing and the extent of the processes associated with it depend on the balance of the state interests involved against the interests at stake for the claimant.[18]

Liberty is, of course, also protected by the Constitution, and it means more than just freedom from physical constraints. A range of rights, including the right to contract, to choose a profession, and to marry and raise children, are protected by the Due Process clause.[19] Any state action that deprives someone of these Constitutionally protected rights triggers the due process protections.  

Case law has extended the “liberty” interest protected by due process to a range of areas in which the government operates, including in the employment context,[20] confinement to mental health institutions[21] and to students expelled from public schools.[22] As with property interests, the form that due process proceedings take depends on a range of factors.  

For example, a student who is to be expelled from a public college for disciplinary reasons must be afforded a hearing and the right to present evidence. However, if the grounds for expulsion is for academic deficiencies rather than disciplinary concerns, then no hearing is required - only notice of the pending expulsion and the opportunity to improve academic performance. The difference is that the latter case involves objective data about academic performance which do not generally require fact-finding or adjudication.[23]

The Hearing

Generally, when the law requires a hearing to determine whether state action improperly deprives someone of liberty or a property right, the hearing must be held prior to the deprivation of rights. Permitting state action such as the denial of welfare benefits to proceed without waiting for a hearing may cause irreparable harm regardless of the eventual result of a hearing.[24]

However, in exigent circumstances, government action may be permitted before a hearing. For example, city health inspectors are permitted to order the destruction of unsafe food which poses a health risk to the public without waiting to hold a formal hearing.[25] Likewise, when there is a strong state interest to act without waiting for a hearing, and the risk of improper state action is low, hearings may be held subsequent to state action. Such cases include the termination of disability benefits, suspension of a government employee and the suspension or revocation of a driver’s license from a driver with a history of unsafe driving.[26]

When due process does require a hearing, the right to a hearing entails a set of elements. First, the person must receive timely notice of the proposed government action and the opportunity to raise objections at a hearing.[27] Notice will be considered adequate if it is reasonably calculated under the circumstances to inform the party of the pending action, even if the notice is not ultimately received.[28]

Second, those who are to be deprived of protected interests must be afforded the opportunity to present witnesses, submit evidence on their own behalf and confront opposing witnesses.

Third, the hearing must be before an impartial decision-maker. A decision-maker is impartial if he or she has no record of bias or conflict of interest and was not previously involved in the decision-making process.[29]

When the decision-maker arrives at a conclusive determination, the reasons for the ruling, as well as the evidence relied on, must be stated.

Finally, those impacted by state action may have a right to have legal counsel at administrative hearings. However, under certain circumstances, such as when the proceedings are non-adversarial, the right to counsel may not be applicable.[30]

 Rulemaking and Adjudication

The two means through which administrative agencies operate are through issuing binding rules and through case-by-case adjudicatory orders. Each method has its own advantages. Rulemaking may be more efficient because it is forward-looking and establishes giving notice to the public of a change in federal policy. Moreover, a rule cannot be appealed, unlike an adjudication.

On the other hand, adjudication allows for flexibility. It takes case-specific circumstances into account, and may be applied retroactively to remediate past matters, unlike rulemaking which can only apply to future actions. Likewise, adjudication is faster than rulemaking and can be reversed more easily than can rule-making, making adjudication more responsive to the need for changes.

Agencies have broad discretion as to how they choose to proceed with implementing policy changes.[31] However, the courts have imposed some limits to agency discretion. First, if the action the agency seeks to implement is prospective, with a primary purpose of broadly changing policy for future circumstances, the agency should not operate through adjudication. Instead, the agency should employ the rulemaking process, with all the procedural protections the APA requires for making new rules.[32]  

Still, while agencies may employ adjudication hearings which have retroactive effect, courts have limited this discretion.  The courts have demonstrated that they may overturn the results of an agency adjudication if the court believes that retroactive application of the policy would have serious adverse consequences. An agency’s using adjudication to have retroactive effects when prospective rulemaking could accomplish the same goals for the future may be considered an abuse of agency discretion.[33]

For example, in one case, the National Labor Relations Board ruled in an adjudicatory hearing that a company that refused to rehire workers after a strike must rehire the workers and award backpay. The federal court ruled that requiring backpay went against long-standing precedent that the employer reasonably relied on, and so retroactively changing the policy in such dramatic fashion to punish the employer was an abuse of discretion.[34]

To serve its function as a policy-making body, issuing rules and adjudicatory orders, agencies must be able to obtain relevant information from individuals and companies. While such information is generally obtained voluntarily, agencies may be authorized to use compulsive means to acquire information necessary for the agency to meet its mandate.

The APA provides a process for such investigations.[35] However, agencies do not have inherent power to compel the disclosure of information as the power to subpoena documents and witness testimony must be conferred by statute.[36] Thus, the agency must seek a court order for a subpoena. A court will endorse an agency subpoena request as long as the subpoena is reasonable, specific with regard to what is sought and relevant to the subject matter the agency is authorized to investigate.[37]

Agencies may also conduct physical inspections when authorized by statute. These inspections are considered searches under the “searches and seizures” clause of the Fourth Amendment. As such, the inspections must be reasonable and undertaken pursuant to a valid warrant where applicable.[38] However, states may pass laws to authorize warrantless searches of businesses that are “pervasively” regulated. For example, laws that allow for inspections of liquor stores and gun stores without a warrant have been upheld as constitutionally valid.[39]

Though we introduced rulemaking and adjudication in this module, we’ll go into more detail on both in the next 2 modules. In module 3, we’ll focus on various types of agency rulemaking and rulemaking procedures.