Sundown for the SUNSET Rule?
In January 2021, the Department of Health and Human Services (“HHS”) finalized its SUNSET Rule. Section 610 of the Regulatory Flexibility Act (“RFA”) requires agencies to have a written plan to review their significant regulations every ten years to determine their impact on small entities (and to determine whether the regulations should be amended or rescinded based on the findings of the review). Because HHS found it was not reviewing all its significant regulations, it issued the SUNSET Rule to better incentivize review. Under the SUNSET Rule, all HHS regulations must be assessed every ten years to determine whether they are significant under the RFA and if they are, the review called for by the RFA must be performed. If the assessment or review of a regulation is not conducted every ten years, the regulation would expire.
Critics of the rule argue that committing HHS to reassessing the economic impacts of many of the department’s existing regulations is a large undertaking and it establishes an extreme penalty for noncompliance. Last fall, HHS issued a notice of proposed rulemaking to rescind the SUNSET Rule, and reports suggest a final repeal may be near. This webinar discussed the SUNSET rule, the effort to repeal it, and possible future actions in this area.
Although this transcript is largely accurate, in some cases it could be incomplete or inaccurate due to inaudible passages or transcription errors.
[Music and Narration]
Jack Derwin: Hello, and welcome to this Regulatory Transparency Project virtual event. My name is Jack Derwin, and I’m Assistant Director of RTP at The Federalist Society. Today, we’re pleased to host a panel discussion titled “Sundown for the SUNSET Rule?” To discuss this topic, we have a great three-person panel joining us.
I’ll keep intros very brief right now. But if you’d like to view their full bios, they’re available at RegProject.org. I’ll turn it over to Karen to introduce our other two speakers, but our moderator today is Karen Harned. She’s Executive Director of the National Federation of Independent Business Small Business Legal Center, a post she has held for 20 years as of next month. Congrats, Karen. Previously, Karen was a private sector attorney specializing in food and drug law.
After opening statements and discussion between our panelists, we’ll go to audience Q&A if time allows. So please enter any questions you have for our speakers into the Q&A function at the bottom right of your Zoom window. Finally, I’ll note that, as always, expressions of opinion are those of the guest speakers joining us today. Without further ado, Karen, the floor is yours.
Karen Harned: Thanks so much for having me. And we are going to have a great discussion today between Jonah and Bill on the HHS SUNSET rule, which was a rule that the Department of Health and Human Services proposed at the end of the Trump administration that, among other things, would have incentivized the agency to do retrospective reviews of all the regulations the agency had on the books, because, if they didn’t get that done within certain time periods, those regulations would sunset. And Jonah is going to get into more of that as our first speaker.
So I want to start by introducing Jonah. And then I’ll introduce Bill when his time comes. But Jonah is — Hecht — is a litigator in the Healthcare Fraud and Compliance Counseling Practice, the Securities and Complex Commercial Litigation Practice, and the White Collar Defense, Investigation and Compliance Counseling Practice at the firm of McGonigle.
And, he, of note to us, was Deputy General Counsel at the Department of Health and Human Services under the Bush — I mean, I’m sorry — under the Trump administration, and handled many legal matters relating to COVID-19 HIPAA compliance, but then also saw the development of this regulation we’re going to be talking about today. He’s very accomplished, academically, of course, graduating from Cornell undergrad, and then cum laude from — cum laude from Harvard’s Law School.
And, with that, I’m going to turn it over to Jonah to set the table on this regulation, tell us a little bit behind it, and his thoughts, and then we will move on to Bill. So, with that, Jonah.
Jonah Hecht: Thank you, Karen. And thank you to The Federalist Society for having us today. I should just say at the outset that views expressed by me today are my own views and not those of my firm or HHS or any other entity. So I’m going to start by providing some background on the impetus for the SUNSET rule, a summary of what the rule says, and the recent steps toward repeal.
So, just at a high level, the SUNSET rule is largely an attempt by HHS to address how to make sure its regulations continue to work as well as possible as time goes on and technology and society change. And the rule was, in many ways, the outgrowth of a process that goes back to at least 1980. That was the year that a democratic Congress unanimously passed, and President Carter signed, the Regulatory Flexibility Act.
And I think a lot of us probably are familiar with the Regulatory Flexibility Act in other contexts. But something that’s less well known about it is that the act actually requires agencies to publish a written plan for the review, every ten years, of the regulations that have a significant economic impact on a substantial number of small entities.
And, Section 610, which is the section that addresses this, says the purpose of these reviews is to determine if the rule, or if these rules, should be kept without change, amended, or rescinded. And there’s a series of factors that the act specifies that agencies should consider when they do these periodic reviews every ten years.
And this is — in fact, Congress felt strongly enough about this desire to see agencies review the regulations every so often that when Congress amended the RFA in the 1990s, it provided for a judicial review of an agency’s failure to comply with Section 610. And, for a variety of reasons, which we can get into later, there have actually been almost no lawsuits under this section, which is sort of an interesting fact we can talk about in a little bit.
But, in addition to Congress, a number of presidents have also called on agencies to periodically review their regulations. In particular, presidents Carter, Reagan, Clinton, and Obama have issued executive orders calling for agencies to have plans to periodically review significant regulations. And I think we can all sort of understand why it would be important for agencies or for somebody to sort of, every so often, take a look back at regulations to see if they’re actually working as — as they’re intended.
I think someone who put this a little better than me is Michael Greenstone, who was President Obama’s first Chief Economist. And he said that one of the most significant problems with our current regulatory system is “that most regulations are subject to a cost/benefit analysis only in advance of their implementation. That is the point when the least is known. And any analysis must rest on many unverifiable and potentially controversial assumptions.”
And so I think we can all understand that once a regulation has been in effect for a period of time — say, ten years — we could look at its real-world effects and determine if it’s benefiting society. Now, so, despite all this, despite the statutes and these presidential executive orders, we saw at HHS that the agency was conducting look-back reviews on some regulations, but perhaps not on all or most regulations that were having a significant economic impact on a substantial number of small entities, as that term is understood in the Reg Flex Act.
And the agency became increasingly concerned that some of its regulations were being outdated and maybe were no longer sort of having the impacts they were expected to when they were initially promulgated. So, for example, in 2019, the agency did sort of an artificial intelligence review of its regulatory code, which determined that 85 percent of HHS regulations that were created before 1990 had not been edited or amended since then.
And the department had nearly 300 so-called broken citation references in the CFR, and this means sections of the CFR that reference other sections that no longer exist. And the AI review also found that there were at least 50 examples where regulations required the submission of paper documents in triplicate or quadruplicate, which maybe makes sense when the regulation was first implemented. But in the more technologically savvy age where a lot of communication is done online, maybe that was, in some cases, not as needed as when the –those regulations were initially implemented.
So I think the agency’s conclusion from all of this was that many regulations would benefit, not just from this AI review, but also from periodic review by humans. And, yet, despite the statute and the executive orders, large numbers of significant regulations were going unreviewed and remaining unchanged for many, many years. So, for all these reasons, in 2020, HHS proposed the so-called SUNSET Rule. And it issued the final rule in January of 2021.
And, at a high level, SUNSET review has two steps. So, first, it requires that the agency do a preliminary assessment on most of its regulations. There’s some exceptions that we can get into a little bit later. But, for the most part, the agency is required to do a preliminary assessment on its regulations ten years after they were promulgated to determine if they have this significant economic impact on a substantial number of small entities.
And, if the regulation does have that kind of impact, HHS has to do the review, using the factors spelled out in the Regulatory Flexibility Act, to determine if the regulation should be kept as it is, amended, or rescinded.
And, as part of this review process, the public would be able to submit comments. And if the review determined that a regulation had to be or should be amended or rescinded, the agency would then have two years to undertake the rulemaking to amend or rescind the regulation. And, as Karen mentioned earlier, sort of the — I guess the strong incentive here, and what, sort of, perhaps, is the more controversial part about the SUNSET Rule is that if HHS didn’t timely do the assessment and the review — so, if after ten years it didn’t do this review — the regulation that wasn’t reviewed would expire.
And the theory was that the statutes and the executive orders and the academic literature on the benefits of periodic review were not causing the agency to review as many regulations as HHS thought it should. And so this SUNSET mechanism would be a way to sort of further incentivize the agency to make sure it does these reviews.
That being said, the final [inaudible 00:11:37] provided for the HHS Secretary to, on a one-time basis, extend the deadline for review of a regulation by a year. In case time constraints or other workflow meant that it couldn’t be done on time, there could be a sort of a one-year grace period. But, beyond that one year, regulations would have to be reviewed. And if they weren’t, they would expire.
And I think the folks at the agency sort of came up with this idea. They were not starting from scratch. And, I think, just to some of us who were largely focused on federal, federal law and federal regulations, this seems — it’s a little bit shocking or like it comes out of nowhere. But it turns out that a lot of states and European countries do have sunset provisions baked into a lot of their regulations that require periodic review or sunsetting of rules. And, at least in the experience of those places, is that there’s not sort of large-scale expiration or disappearing of, of regulations.
Now, that being said, federal agencies have to comply with the Administrative Procedure Act, which states and European countries don’t have to comply with. So, I think, since many of us are lawyers, a natural question is whether this is all legal. And we can get into this a little bit more later on. But I think there are just two primary challenges to the SUNSET Rule that we saw that I’ll just sort of put out there at the onset.
And the first issue is can an agency say that its regulations will expire if some future condition is not met? I think we’re sort of generally familiar with the idea that rules can only be rescinded via the same rulemaking process that promulgated the rule in the first place. So if that’s — so if a rule was initially issued via notice-and-comment rulemaking, can it be rescinded without notice-and-comment rulemaking? And I think what the agency concluded on this was that there are a lot of regulations that, when they’re initially promulgated, it says that the rule can terminate if a future condition is met.
And so some examples at HHS were regulations that were issued during the pandemic that say they would expire when the public health emergency ends. And I think the agency’s view was that the SUNSET Rule was sort of just another application of this concept that when a regulation is issued, you can provide for its expiration if a condition comes into effect.
And there’s also a question about whether this is all arbitrary and capricious to, in one fell swoop, amend most of an agency’s regulations to say that they’re going to sunset if some — if a review isn’t done in the future. And the rule had a pretty robust explanation for why it was thought it was appropriate to amend most regulations in this way, based off of sort of this experience over the past decades. But that’s — quite frankly, that’s an open question and one that I think courts would have addressed if it got that far.
Now, I’ll just, quickly, before I turn it back over to Karen, I think I’ll just note that the — in October of 2021, HHS actually did issue a proposal to rescind the SUNSET Rule. And I think we can all sort of imagine what the bases for that would be. And I think HHS now concluded that it was going to be very burdensome for the agency.
They review lots of regulations. And there would be regulatory uncertainty, because regulated entities wouldn’t know if a regulation was going to be kept or if it was going to expire. And perhaps many regulations would inadvertently expire. And this was sort of unduly costly, both to the agency, in time and resources, and, perhaps, to regulated parties as well.
The comment period is now closed on that proposed rescission. But it seems fairly likely that repeal is going to happen at some point in the future. Just, for example, a lawsuit was implemented last year challenging the SUNSET Rule. And that was paused while the proposed rulemaking to rescind the rule went on. But the agency actually, just this month, said it’s further delaying the effective date of the SUNSET Rule to allow for the consideration of comments on the rescission, which is perhaps some further suggestion that the rule is going to be rescinded at some point in the future.
So the jury is still out on that. But this is a — so this is an area of the law where things are a little bit in flux. But I’ve been talking for a little while now, so I’ll turn it back over to Karen. There’s obviously a lot more we can discuss during the Q&A process, on this. So, Karen? I think you might be on mute still.
Karen Harned: Yep. Oh, I thought I got it unmuted. Sorry. So, thank you, Jonah. That was excellent. We really appreciate your careful explanation of the rule and where we are right now and your reasons behind it.
So now we’re going to move to Professor William Funk. He goes by Bill. And he’s Lewis and Clark Distinguished Professor of Law Emeritus. As a law student, you may have used his casebook, Administrative Procedure and Practice: Problems and Cases. And he also had administrative law examples of explanations in the Federal Administrative Procedure Sourcebook. He is a longtime administrative law guru that we all have read at one point or another, very well respected.
He was a Senior Fulbright Scholar at the University of Heidelberg. And, then, prior to teaching, he actually worked in the agencies. He worked as Assistant General Counsel at the U.S. Department of Energy. And then he also worked on — he was a staffer on the Legislation Subcommittee of the House of Representatives Permanent Select Committee on Intelligence, and was instrumental in drafting the Foreign Intelligence Surveillance Act. And then he also was in the Office of Legal Counsel at the U.S. Department of Justice as a staff attorney.
So he has a very broad career checking the Congressional and administrative boxes there, and then as a distinguished professor. He has a great note that he did for the journal, Yale Journal on Regulation, on this. It’s a blog talking about — it was in December 1, 2020’s “HHS Proposes to Sunset Regulations It Fails to Review Retrospectively.” I commend it to you. It’s a short read. But he puts forth some thoughtful questions, which I’m confident he will raise with us today. So, with that, I will turn it over to Bill.
William Funk: Thank you, Karen. It’s a pleasure to be here and to be the counterpoint to the point, as it were, in this discussion. I’m going to say that the proposed rescission rule, the repeal of the SUNSET Rule, is both a good idea and lawful, and, because the original SUNSET Rule was, I’m going to argue, was both bad policy and illegal. And it may take some time to talk about it all, but I think we’ll get through it in our hour.
But let’s be clear that what we’re talking about here is not just the HHS SUNSET Rule. We’re talking about sunset rules, generally. There’s nothing specific about the HHS rule that makes it particularly bad or good, or one way or the other. It’s a generic concept. Are sunset regulations like this a good idea or not? Are they legal or not?
Now, also, this is not to say that the retrospective view of rules is not a good idea. Of course, it is a good idea. It should be done. And it is being done, to a large extent. And it’s required by the Regulatory Flexibility Act for some categories of rules, and for executive orders for other categories of rules. So there’s substantial reason why there should be retrospective review of rules in a large scale.
Now, what Jonah has said is that HHS found it difficult complying with these requirements for retrospective review. And all these studies have confirmed that. There’s no doubt about that. The question is why? Why was it that HHS, in this case — or any agency, for that matter — did not do what the Regulatory Flexibility Act required or what the Executive Orders required? And the answer is, is really quite simple. And it’s what all the studies show, is that because of limited time and resources in an agency, other matters had a higher priority. And so the lower priority matters were put down the line and didn’t get done.
Now, agencies have engaged in substantial retrospective review of regulations. And they did so because the regulations that they were looking at were important. And they thought there was a need to do retrospective review of those rules. So it’s not like agencies have some sort of a — don’t want to do retrospective review. They want to do it like they want to do all things, which is to comply with the law and comply with the policy of the agency. But, like everything else, it’s a matter of priorities. How high a priority is it?
And for some regulations, doing that retrospective review is super important, and agencies do it. And for other regulations, it’s not very important, and agencies don’t do it, even though it might be required by the executive order or by the Regulatory Flexibility Act. HHS, for example, itself, in its SUNSET regulation, exempted a large category, a large number of rules which it decided was, well, they just didn’t need to be reviewed. I’m talking about the definition of milk, for example, and the definition of cheese in the Food and Drug regulations.
And these probably qualify under the Regulatory Flexibility Act. The definition of milk applies to small entities as well as large entities. But the feeling was these rules really didn’t need to be reviewed. So, okay. That’s, I think, a good idea. I think an agency should be able to say, well, some rules just shouldn’t — don’t need to be reviewed as often, or at all, perhaps. At least, especially if no one complains about them.
So the idea that doing review of some rules is a good idea, doing review of all rules, according to some absolutely arbitrary set deadline, is not a good idea, because it makes the agency do things of lesser importance, rather than things of greater importance.
And the fact that the Regulatory Flexibility Act does provide for judicial review of the agencies’ failure to comply with its — the requirement to make retrospective review, the fact that no one has actually utilized this — I found one case in which somebody raised it as one of a number of different actions as — of complaint. And it was knocked down because the rule was not one that had a substantial, a significant impact on a substantial number of small entities. But the idea is that this is — the people aren’t complaining about it, at least in terms enough to bring a lawsuit.
And if the people complained enough about it, my guess is the agencies would, in fact, review them. That’s — agencies aren’t exactly politically responsive. But they are, in a very real sense, politically responsive. And it they get a lot of complaints about something or requests for review, that will certainly make it more likely to get reviewed. Make it a higher priority.
Agencies can and should do better in identifying which rules should be reviewed. And the administrative conference of the United States is — I made several recommendations, indeed, the latest one just late last year, on giving guidance to agencies on how to identify rules that should be reviewed and how that review ought to go forward and various ways to deal with it.
So there are different ways of dealing with a retrospective review of rules. But the administrative conference, in all of its studies and all of its reporters, none have ever suggested sunsetting as a way to incentivize or to get the best retrospective review.
Sunsetting has actually been tried from time to time, as Jonah mentioned, both in states and other countries. And, actually, a federal agency, at least one federal agency, has tried it on a limited set of rules. And it abandoned it because it found that it was counterproductive, in fact. And most of the, even the states have rejected it, because what happens is that it doesn’t actually result in a meaningful review.
What it means is, as the time crunch comes up, what you do is a meaningless review, in order to make sure that the review has been done. That’s the incentive. The incentive is to stamp “it’s been done,” not to actually do the review. And, so, therefore, that’s the artificial incentive of, of sunsetting. It just doesn’t result in what one might like to have it do.
So sunsetting regulations, sunsetting regulation simply because an agency did not review it according to some arbitrary deadline is not good policy, but it’s also illegal. Now, why is the HHS SUNSET Rule illegal? It’s not because — probably not because of some procedural difficulty in adopting that regulation. There were some claims of that in the litigation. But I don’t think — I don’t think they had very much merit, really. The real issue is simply the question of whether or not it’s illegal to sunset a regulation because of some indeterminate determined benefit of — resulting from incentivizing a review of rules.
Now, under the Administrative Procedure Act and American administrative law, you can’t eliminate a regulation without determining that it’s reasonable to repeal that regulation. Now, Jonah mentioned that there are lots of cases in which regulations have been adopted with a termination date stated in the regulation. But that’s because, in that regulation, they’ve determined it’s reasonable to terminate the regulation at a certain time, such as the example that Jonah gave that we are adopting these temporary regulations that deal with Covid pandemic. And these regulations should expire when that pandemic public health emergency expires. Now that’s reasonable. That’s a reason why we should, indeed, get rid of that regulation.
But if somebody adopted a regulation and said — adopted a regulation that didn’t have an expiration date, and then later says, “Well, we’re going to terminate that regulation for some reason totally unrelated to the reason why that regulation is there,” that wouldn’t be reasonable. And it’s simply, really no question what would happen if that was then challenged in court, that termination.
Now, the question is can you challenge the sunset regulation that Jonah was responsible for, or at least participated in in great detail? Can you challenge it now, all right? Because that regulation doesn’t actually do any sunsetting right now. It only will sunset a regulation if a regulation actually doesn’t get reviewed. And, according — in the preamble to the regulation, it’s implied, if not actually stated, “Don’t worry. There never will be a termination, because there will never be a rule that isn’t reviewed. We’ll always review them. And, look, we even put in the final rule this safety net of a one-year extension by the secretary if, if necessary.”
Now, okay, if, indeed, all right, the prediction that no rule ever terminate, because no rule ever go unreviewed — if that’s an accurate prediction, then no harm no foul. There would be no illegal action, no illegal termination. So it becomes a question of whether you can challenge it now, before — the rule, generally, before there’s been an actual termination, or whether you have to wait till it would actually be a termination, if there ever was one.
Now, the question is, would there ever be one? Well, there’s two reasons why there might be one. One, you might have an administration — oh, just, let’s use our imagination — that’s hostile to government regulation. Maybe it’s hostile to something like the Affordable Care Act. It doesn’t like the Affordable Care Act, would like to get it repealed by Congress. Damn, can’t do it. All right? Well, maybe, maybe we can just repeal the regulations. Oh, well, can’t do that, because that would be struck down by the courts because the statute says there’s supposed to be regulations. And, so, therefore, there should — has to be regulation. We can’t just repeal it and say we don’t like it and, therefore, we’re going to repeal it.
But, wait, there’s a solution. We just wait and don’t review it according to the timetable, and the Affordable Care Act goes away. A wonderful — what a terrific benefit from this SUNSET regulation. Now, imagine that happened. Imagine that that imaginary administration did that horrible thing. Somebody would challenge it.
And they would challenge it and say, “That termination was illegal, because it was arbitrary and capricious. The only reason we’re getting rid of the Affordable Care Act is because it wasn’t reviewed according to a certain timetable that was set some years ago that had nothing — didn’t consider the impacts on the healthcare system of terminating the Affordable Care Act. And the question is of course a court would overturn that termination.
So that’s what makes it illegal. Now the other possibility why it might actually terminate, not because of bad faith and bad planning by the administration, but just because, as a matter of fact, there are thousands upon thousands of, in HHS, sections of regulations — which is what actually ends up getting defined as a regulation — that have to be reviewed. And the question is, well, why didn’t HHS do the review it was supposed to do during Jonah’s period there? HHS apparently was committed to doing retrospective review, but, low and behold, they didn’t do all the ones they were supposed to do. Why not? Why didn’t they? They were committed to it. They had an incentive to do it, because that was an important thing to them. Well, they didn’t.
Another question is why would this termination change that? What is it? They didn’t — there was no, nothing in the regulation that said they were going to use, get more money, more personnel to do the job. They said not to worry, we can do it with existing people. But what were those existing people doing for the four years of the, of the Trump administration, when they weren’t? I mean, they weren’t doing their retrospective review. They were doing something else.
And the question is what would they be giving up to do that retrospective review? And, maybe, indeed, the agency would say, well, actually, it’s so important that we keep doing what we’re doing, as opposed to the retrospective review for this rule, which probably isn’t that important a rule. The world won’t die. Well, we’ll just let it terminate.
Well, if that was the case, that would be challenged, perhaps would be challenged as well. And, again, it would be determined to be arbitrary and capricious, because nobody would ever have considered whether that rule that was being terminated was a reasonable cost for the incentivizing of the, of the general retrospective review.
So the idea that this would be legal if there was a termination, really is not even, I think, a close question. The real question is whether there would actually be a termination. Maybe not. But, then, again, why do we want to spend resources on things that really aren’t that important? Why not have agencies make decisions about which ones should be reviewed and which ones should not be, in light of the resources and time they have and the roles that Congress gives them to do on an ongoing basis? Thank you.
Karen Harned: Great. This was wonderful. And, thank you, Jonah and Bill, not only for your great remarks, but for leaving us some good time for questions and answers. So, with that, I’m going to say we’ve got two good questions already. But I’m going to hold those, because I want Jonah to be able to respond to Bill, and Bill to Jonah. And then I may have a question. And we will then move to yours.
But while you’re listening to this and considering your reactions to the panelists, go to the, either the — preferably the Q&A, but chat works just as well, to put your question in for the panelists. And we’re going to get to as many of those as we possibly can. So, Jonah, I’ll turn it back over to you for any reactions that you have to Bill’s talk there.
Jonah Hecht: Thank you. I’ll tell you, I think Professor Funk raises a lot of valid points and legitimate points. There was a lot there. I’ll just try to briefly address a couple issues. And I think one has to do with the prioritization issue, the idea that reviews aren’t being done because they’re just lower priority and other things are more important and there’s limited time and resources in the day. And I think — I think he’s right that this largely is a question of what do you want to prioritize as an agency? And, obviously, reasonable minds can differ about how to prioritize various tasks.
But I think, at least in the prior HHS, maybe things are a little bit different now, but I think their conclusion that they had reached after a number of years was that this should be a priority, that there are, as a result of artificial intelligence review and the academic literature that’s out there and sort of how the estimated impacts of regulations turn out to be very different, either for better or for worse, but different from the real-world impacts of those regulations after a period of time goes by, I think those things cause the agency to conclude that, perhaps, a serious periodic review of significant regulations should be a higher priority than it previously had been.
And there was sort of a need to further incentivize that beyond what had already been directed by Congress and executive orders, because more of these reviews should be done than were, in fact, being done. So I think that was — that was a conclusion about what should be prioritized that I think the policy folks at the agency came to after a few years in these sort of various artificial and other analyses that were done.
There was also a question — and Professor Funk raises a point about, well, sometimes folks outside the agencies will ask the agency to review a regulation. And there already is a — and it’s true that there is a procedure under the APA to petition agencies to sort of look — look at regulations and decide if, what should be rescinded. And that’s something that’s been in the law for many years now. But I — and occasionally, the agencies will act upon that. But I think there — I think what folks found was that there were a lot of instances where outsiders would petition the agency and that would sort of fall on deaf ears or nothing would happen or the agency wouldn’t get around to looking at it for a while.
And perhaps that was because the agency had more important things to do, or perhaps it was for another reason. And so I think there was a sense that sort of relying on — and again, there’s also questions about, there’s this sort of, sometimes nefariously referred to as “regulatory capture,” but it’s this sort of sense that agencies are more responsive to certain groups outside the agency than to others. And we want to make sure that sort of is examination of a wider variety of regulations than just ones that certain groups bring to the agency’s attention. And this sort of forcing the agency to, to look at a broader range of its regulations via the sunset mechanism was a way to accomplish that goal.
Now, as far as some of the legal points, I — look, there are some open questions out there about this. This is — hasn’t been done on this scale before. But what I would say, and — is that — and, yes, there are some very interesting questions about standing and who can sue and when can you sue. Do you have to wait? Do you not have to wait? But, as far as sort of the basic question about can we cause a regulation to expire, based on something that is sort of not related to the initial purpose of the regulation, I think that’s sort of, generally, what Professor Funk was saying. Maybe he said it more articulately than I am.
But when you have a regulation that is in effect for the duration of the pandemic that — and then it expires, that’s related to the purpose of the regulation in a way that, perhaps, just sunsetting is not. And, I think, I think what the agency would have said about that was that as sort of at a macro level, it’s important that our regulations are reviewed at a period of time after they go into effect. Let’s, for purposes of this conversation, say ten years. Because we — we know that in a lot of cases, the impact of the regulation that was estimated when it was promulgated is going to be different from its real-world effects.
And so — and, over time, technology and society might change. So we want, on a broad scale, our regulations to be reviewed, because, for any regulation, we think that over time there’s a risk that its impacts are going to be different than what we initially thought. And so there’s this — so we need to sort of — we need to — so, so, in that sense, the review is related to the regulation. And we think there’s a good chance that in ten years the regulation is not going to have the impact that it was initially expected to have. And so we want these reviews to occur. And they relate to the initial purpose of the regulation.
That’s — I think that’s an argument that some people will probably find more satisfying than others. But I think that was the, the rationale for tying the sunset to almost all the regulations. And, again, as Professor Funk mentioned, there were a host of regulations that were exempt from the SUNSET Rule because it was determined that there were just — there wasn’t a need for periodic review. We all know what the definition of milk is. That’s probably not going to change in ten years. And so we don’t have to review things like that.
But for other regulations where there’s a risk that they might become obsolete over time, we think there’s a need to review them. So there were — so those are some initial reactions to a few of the points that Professor Funk raised. And I’ll — it looks like we’re getting some more questions in. And I’m sure, Karen, you see that as well.
Karen Harned: Yeah. No, so I do want Bill to be able to respond. And then we will move to questions, because we have some really good ones coming in.
William Funk: Well, first of all, I want to say nobody’s arguing that retrospective review isn’t a good idea. I think it’s a good idea. And I think it’s most important for the kinds, the very kinds of regulations that have, when they were adopted, significant impacts on the economy, or significant benefits to public health and safety, but always on the basis of estimates of how that would be. And, so, therefore, the idea that you should review them and see whether or not the benefits are as high or lower than we thought, whether the regulation needs to be changed in some way, is very important.
And whether it should wait ten years, as opposed to five years, is — I’m not sure that it should wait ten years. Maybe it should be faster than ten years for a very important regulation. On the other hand, as you recognize, the definition of milk, you say, well, that’s not going to change. Well, I understand it’s illegal to sell soy milk, because milk is defined by the FDA as the lacteal effusion of a bovine species, or something like that. I’m not quite quoting it quite correctly. But it’s got to come from a cow or at least a bovine animal. And so soy milk can’t be milk. And you can’t say it’s milk, because the FDA says milk means this.
Now, I think that ought to be reconsidered. All right? But you took it off the — off the list as one of things, because, well, you don’t need to — I think the reason it got taken off the list was a little bit hidden more in the weeds about how these rules get adopted in the first place, through formal adjudication, formal rulemaking, and, also, who is, who is complaining about it. But, be that as it may, no complaint about doing retrospective reviews. No complaint about an agency saying that we should give it a higher priority than we’ve given it before.
My only problem is the sunset as being the incentive. You want an incentive, say, “If these rules don’t get reviewed, the person responsible for these rules is fired. On that date, he loses his job.” Now that actually makes sense. All right? Because if the agency says, “This is a high priority,” the secretary says, “I want this done,” you don’t get it done, you’re gone, not the regulation is gone. We don’t know if the regulation is bad or good. It hasn’t been reviewed. All right? Get rid of the person who didn’t do their job, makes a lot more sense to me. So that’s — that’s my response.
Karen Harned: That’s great.
William Funk: Let’s go to your questions.
Karen Harned: Yeah. So let’s go to some questions here now. One of the — the first one, I have to say, I’m also very curious about, too, Jonah. So, you had mentioned, now you’ve mentioned several times, AI reviews of regulations. And, I guess, first of all, I’d love to know, are a lot of agencies using that? That is not part of this question. But it — regardless, there’s a question associated with AI reviews. Are there any legal concerns about having — and Professor Funk may want to weigh in on this too — having AI conduct periodic retrospective review of agency regulations. Is than in — for example, is it in conflict with principles of transparency and explainability that are set forth in the APA?
Jonah Hecht: That’s a fair point. I’ll just say, I’m not — I just think there are a couple other agencies that have done some sort of AI reviews. I don’t know if it’s — I can’t say exactly how widespread it is. But I think there’s a little bit of that going on at other agencies. As far as the question about concern about AI doing reviews, I think those are valid concerns about transparency and democratic accountability. Obviously, we want — there’s always some debate about how politically accountable agencies are, but, presumably, they are more accountable than a computer might be.
And, I think, just at a more fundamental level, I think an AI review can be effective for certain objective things. So, for example, the AI review found that there were 300 regulations that were citing to portions of the CFR that no longer exist. Now, that’s a sort of, just a sort of objective statement of fact. And I think AI can be helpful for that. But I don’t know if AI can tell us what is sort of an appropriate regulation or not. It can’t tell us, as a sort of normative matter, what’s good for society or what’s bad for society.
So, I think it can be, maybe, a helpful initial step at sort of identifying certain objective things. But whether a regulation should exist, or whether, or whether and how it should be amended, I think are probably decisions that a human has to make.
Karen Harned: Great. Bill, do you have anything you’d like to comment on?
William Funk: Yeah. I mean, what I know about the AI, with respect to retrospective review, is it’s being mainly used for prioritization to decide which regulation should come first. In other words, by being able to use artificial intelligence to determine which of the regulations were having — were likely to trigger, be changed by technology or facts, or something that would make a reason for raising the priority for a particular regulation being reviewed.
I don’t see any problems, under the Administration Procedure Act, for using AI, because it’s all internal to the agency. We’re not talking about adopting a regulation on the basis of AI, just a question of either what you will review, or, perhaps, some portion of a review that is still internal, to decide whether or not you would then go through a public process. And, of course, even with AI, you can — it’s possible, at least, to make algorithms public to tell people what it is, as your AI. Usually you don’t want to do that for some sort of copyright reasons or something. But, in any case, it’s, it’s possible, at least, you can make AI publicly available.
Karen Harned: Great. Yeah, I think it actually could be very helpful. And, hopefully, also, I would think it could be helpful in getting rid of regulatory underbrush, like regs that haven’t been enforced in decades. I would — get them off the books, as far as I’m concerned.
So here we’ve got two questions. The first is, “Is there a good mechanism for what might be called a meta-regulation, which would be something that would be introduced via notice-and-comment, and in a provision applicable across all or most of the department’s regulations.” I guess, I don’t know if he means one department, or two departments, I mean, all the departments, like a procedural one. I don’t — I am a little confused by this question. Do you all know what he’s getting at here?
William Funk: I can’t say that I do. I mean, certainly, it depends on what that meta-regulation is regulating, is really what it comes down to. If it’s regulating a bunch of different things, then it has to consider those bunch of different things when it adopts the regulation. The whole point of notice-and-comment and reasoned decision-making is you consider the facts and circumstances and law, applicable to whatever it is you’re doing. So if you’re dealing with a lot of different things, you’re going have to deal with a lot of different things in order to justify that regulation.
Karen Harned: Yeah. And then the second question he has is kind of future sunset rule. And I thought this one did it. So, Jonah, maybe I was mis-remembering that, but, “Could it be approved if the agency was required to introduce, prior to any rescission, an analysis along the lines of an A-4 regulatory analysis of the need for the regulation, and only if this was done and the current need was proven inadequate, could a rescission occur?”
But I thought you would have to re-undo it that way, right, through notice-and-comment, under the sunset. Is not — is that not correct?
William Funk: Yes. I mean, in other words, in essence, that’s what the person seems to be suggesting, is you do an analysis that would suggest that this regulation wasn’t necessary anymore, but that you do that analysis. But then that analysis would essentially be your proposed rulemaking, a proposed rule to rescind that unnecessary rule. And, then, after a comment period, everybody agrees, no problem against, rescind it on the grounds of what you said.
But that’s — and that’s the right way to do it. That’s — you do the review. Your review suggests it ought to be rescinded. Then you go and propose to rescind it or amend it, either make it less costly or more beneficial or whatever.
Jonah Hecht: Right. That’s correct. The sunset part is only for rules that warrant review at all. So if a regulation is reviewed and it’s determined that it needs to be amended in some way, or rescinded, the agency would issue a notice of proposed rulemaking, explaining why the rule needs to be amended or rescinded. And then there would be a public comment period. And then it would be — and then the final rule would be issued the same way in any other case.
Karen Harned: All right. No, that’s good. But the point’s well taken. Yeah, that’s good. Now, “The GA office found that agencies do perform voluntary regulatory reviews which are not legally required, and that those voluntary reviews tend to be of higher quality than those that are compelled by legal requirements. How can we incentivize or otherwise encourage agencies to do more of these voluntary reviews?” Anyway, and he does not think the SUNSET Rule accomplishes that. Do you all have any thoughts on that?
William Funk: Well, I — the reason — I’m going to say voluntary reviews, and that’s precisely as I suggested, that agencies recognize the need to do retrospective reviews. But they do them for the ones that they think are important to do. And that’s why they do them. And so that’s — you could say that’s voluntary. They’ve decided this is a good idea to review this, because of its impact. Now, the question is how, how many rules do you want to do that retrospective review for?
And the answer — one side is all rules, right, and the other side is, well, some rules may need it more than others. We have limited time and resources for all government activity. And, therefore, we ought to use our, our time and resources for those that need it the most. And, so, therefore, we ought to have a system for deciding which are the ones that we need the most. And that’s what the administrative conference’s recommendations go about doing.
Now, bottom line, these will only get done if there’s pressure from the head of the agency. The political appointee is the agency to do it. If they want it done, it will be done, all right, at least within the resources and time that the agency has. But it ultimately is a political issue, in the sense of does the agency want to have this as a high priority, a middle priority, or a low priority?
Now, Congress, Congress could pass a law. I mean, Congress could pass a law that did something along these lines. And one could say they did it in the RFA, the Regulatory Flexibility Act, by saying all these rules that have a substantial impact, significant impact on a substantial number of small entities, have to be reviewed. The trouble was, that was a shotgun approach to something that needed a little bit more finesse.
Jonah Hecht: I’ll say, I think that ACUS recommendation is a reasonable one. It does sometimes become hard, in practice, to know which regulations should be reviewed, and how to prioritize them. And one approach is to say, well, let’s see what outside groups tell us to do. But the RFA was issued to try to help small entities. And, I think, just as a practical matter, small entities tend to not comment or petition agencies as much as, as larger ones, or sort of special, so-called special interest groups.
And, so, relying on outside groups to tell the agency what to review can be a little bit difficult. And the agency might sometimes have its own structural biases about which ones should be reviewed. So, that’s not to say that every single regulation always needs to be issued. And, in fact, the SUNSET Rule sort of said we’re only going to do a very preliminary assessment of most regulations. It’s only ones that have a significant economic impact on small entities where the full review would need to be done. And, obviously, look, reasonable minds can differ about how many need to be reviewed. But, again, I think it is a little bit different. It can be difficult to determine to — which ones to review and to prioritize, which I think is why the agency took the, the view that it did.
Karen Harned: Yeah. And I — and so, while we’re on this — well, I don’t know if it completely follows, but what we had talked about earlier, or the question had come up. You know 610 does allow for judicial review on a litigator of the RFA. And, I have to say, we haven’t done a lawsuit on 610. I can — I can guess as to why that’s happening. Part of it is — a large part is truthfully, probably resources, and what kind of victory do you ultimately get here?
Though, it makes me think, maybe this is something. I don’t know if it was Jonah or Professor Funk that referenced there had been a lawsuit where it was one of a number of claims, that maybe litigants should think about, do I have a 610 claim here? Should I at least raise that in this lawsuit I would otherwise be bringing, so we can get some law on the books with regards to that, and start getting the agencies to take it more seriously? I don’t know if you all have any thoughts on the litigation, or lack thereof, with regards to 610 reviews.
William Funk: Well, I was going to leave it to Jonah to start off on this, because he indicated earlier that there was some issue about that.
Jonah Hecht: Sure. So I think there’s probably a couple reasons I can think of why this hasn’t been done more. I think one is probably a lot of folks don’t know about this. I think a lot of folks are familiar with the idea of the Regulatory Flexibility Act requires agencies to do a certain type of economic analysis on rules that have a significant economic impact on small entities. But I’m not sure how many practitioners are familiar with the idea that it also requires the agencies — well, it arguably requires the agencies to do periodic reviews.
And the reason I say “arguably” is that, if you read 610 carefully, it requires the agency to have a written plan to review significant regulations every ten years. And perhaps a lot of agencies have a written plan on the books from many, many years ago. They may not be actually doing every review that is described in the plan or in the Regulatory Flexibility Act. But, if there is a plan query, whether you could win under a 610 lawsuit, I think a litigator might say, well, if you have a written document, but you’re not actually reviewing anything, do you really have a plan?
Or Congress presumably wanted these reviews to occur, they didn’t just want a written document. And those are things that could be argued. But it’s because there’s only been one lawsuit on this that that’s an open question. I think another factor is what, what is your remedy, right? If you win the lawsuit, it doesn’t mean the regulation is going to go away. It just means the agency just has to do a review. And maybe they’ll — and maybe they’ll just do a review at that point that concludes the agency is appropriate. And so you’re left in a situation where you’ve spent the time and resources to litigate a lawsuit for a pyrrhic or a minor victory.
Karen Harned: Right.
Jonah Hecht: So, I think when Congress put in judicial review, they probably did that because they wanted reviews to occur. But it’s a sort of — your remedies are a little bit uncertain, and might not be worth the time for a lot of litigators.
Karen Harned: Right. Professor, do you think —
William Funk: — Yeah. Let me say, it’s the small businesses themselves, or the small entities themselves, usually are members of organizations like NFIB or other organizations which do look out for these things. And we might also mention the Small Business Administration, which is allowed to be a amicus curiae in any case brought under the Regulatory Flexibility Act by a small entity. And if you wanted to talk about it, you could talk about amending the law to allow to allow them, not only to be an amicus, but to bring a case, so that that would be another way of, perhaps, incentivizing, as it were, agencies to comply.
But, again, it — what we were talking about is priorities, right? Whether it’s priorities for NFIB, what cases it brings; or priorities for the agencies, what rules to review; and priorities for the businesses, who is it really worth my time and effort to get this review rule — this rule reviewed? Is this rule really a problem for me or not? If not, then do I really care that much if it gets reviewed or not? It’s a, something of a, “I’d rather it wasn’t there, but I’ve lived with it for a while. It’s not that big a deal. It’s just not worth it for my time and resources.” So, again, priorities.
Karen Harned: Yeah. Now that is true. I think we’ve got time for one more here, and then we’ll go. “Should there be a statistical test used when determining which rules need to be reviewed? This seems like it could eliminate unnecessary reviews while basically helping with the priorities.” I guess my question would be on that, if there was such a statistical test, what, what do you think should be weighted the most?
William Funk: Well, costs and benefits, right? That’s the, I think, the easiest one, is the maxim you go down your regulations and see which ones are projected to have the biggest costs and biggest benefits. And the ones that have the biggest costs and biggest benefits ought to be looked at to see whether the costs are too high or low or the benefits are too high or too low. And that’s — whether that’s statistical or — it’s something that the administrative conference has recommended, so, with a little bit more, again, finesse, than I have put into this. So, but yeah, that’s definitely correct.
Karen Harned: Right. Anything from you, Jonah?
Jonah Hecht: Yeah. Look, I think that’s right. I mean, you would want to prioritize the ones that are going to be the most costly. A wrinkle there is that when most regulations are issued, the economic analysis of companies, it’s — will suggest that the benefits outweigh the costs. And so if you’re trying to look back at those sort of preliminary analyses to see which are the most costly with the least benefits, you might not find much. But, yeah, I think, as a principle, you would want to prioritize the ones that are the most costly, whether that’s because of what the initial analyses suggested, or because, perhaps, because of what outside studies have said in more recent years.
I think that would probably be a good place to start, if you look at it. So one other thing you might want to consider is maybe starting with older ones. Maybe ones that are from the 60s should be reviewed before ones from a few years ago. I think that might be another factor to balance against cost benefits. Those would probably be a good start, at least.
Karen Harned: Great. Well, this has been an excellent discussion. Do either of you have any closing thoughts that you haven’t raised that you want to leave us with before we close it out for today?
William Funk: No, thank you.
Karen Harned: Great. Thank you so much. Okay, turning it back over to you, Jack.
Jack Derwin: Thank you Karen. And thank you, Jonah and Bill for a fantastic discussion. And thanks to our audience for a number of great questions and for tuning in to today’s event. You can check out our website at RegProject.org, or follow us on any of the major social media platforms at FecSocRTP to stay up to date. With that, we are adjourned. Thank you.
Karen Harned: Thank you. Great.
Lewis & Clark Distinguished Professor of Law Emeritus
Lewis & Clark Law School
Harned Strategies LLC
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