Challenging Agency Regulations through Defects in the Rule-making Process

California law requires administrative agencies to comply with the California Administrative Procedure Act (“APA”) (Government Code §§ 11340, et seq.) when adopting regulations.  A regulation that does not go through this process is called an “underground regulation” and is subject to legal challenge in the courts.  Further, a regulation that makes it through this process, but results from some deficiency in the process may also be invalid and subject to challenge in court.
Administrative Rule-making Process
An agency is required by law to adopt regulations and to go through the rulemaking process contained in the APA.  The following is a brief overview of this process:

    1. The Legislature grants the agency the authority to adopt regulations in a statute;
    2. The agency issues its Notice of Proposed Rulemaking and its Initial Statement of Reasons which articulate the need for the rules;
    3. The agency then issues the proposed text of regulations;
    4. After these preliminary steps, the agency then issues a Notice of Public Hearing which must allow for a minimum of 45 days for public (and industry comment);
    5. After the public hearing, the agency has three alternatives depending on how it may change its proposal:
    6. If the agency makes major changes as the result of the hearing, then it must offer at least another 45 day comment period;
    7. If the agency makes substantial changes which are sufficiently related to the regulatory subject matter, then it has to allow an addition comment period of at least 15 days;
    8. If the agency makes no changes or only non-substantial changes, then the agency issues its Final Statement of Reasons which includes its summary and response to the public comments.
    9. The agency submits the regulations to the Office of Administrative Law (“OAL”) for final review and approval.  OAL has 30 working days to review the rulemaking record and make a determination that the regulations satisfied the requirements of the APA. OAL looks for compliance in six areas: (1) Authority; (2) Reference; (3) Consistency: (4) Clarity; (5) Nonduplication; and (6) Necessity.

Challenging Regulations
To comply with California law in adopting these regulations, an agency must demonstrate to the Office of Administrative Law (“OAL”) that it has followed the above process and met all requirements.  In general, the regulations must meet the following overriding requirement of the Administrative Procedure Act, Government Code § 11342.2:
Whenever by the express or implied terms of any statute a state agency has authority to adopt regulations to implement, interpret, make specific or otherwise carry out the provisions of the statute, no regulation adopted is valid or effective unless consistent and  not in conflict with the statute and reasonably necessary to effectuate the purpose of the statute.
Typically, the best argument to challenge any regulation is that it conflicts with the statute that authorizes the agency to make rules or is not necessary to effectuate the purpose for which the Legislature created the agency.
More specifically, when OAL examines these regulations, it will measure them against the following standards:
1.  Authority:  Each regulation adopted, to be effective, shall be within the scope of authority conferred and in accordance with standards prescribed by other provisions of law. (Government Code Section 11342.1.)
2.  Reference:  “Reference” means the statute, court decision, or other provision of law which the agency implements, interprets, or makes specific by adopting, amending, or repealing a regulation. (Government Code § 11349(e).) Not only must the agency have legal authority to enact each regulation, but it must cite the specific statute which it believes gives it the authority to adopt each regulation.
3.  Consistency:  “Consistency” means being in harmony with, and not in conflict with or contradictory to, existing statutes, court decisions, or other provisions of law. (Government Code § 11349(d).) While many argue that a proposed regulation is inconsistent with a statute when the regulations requires certain tasks not specifically set out in statute, this situation does not present a Consistency problem so long as the regulation requires things reasonably designed to aid a statutory objective and does not alter, amend, enlarge or restrict any statutory provision.  Thus, the agency in its regulations can require extra things not spelled out in a statute, as long as the extra requirements promote the purpose of the statute.
4.  Clarity:  Clarity means written or displayed so that the meaning of regulations will be easily understood by those persons directly affected by them. (Government Code § 11349(c).)
5.  Nonduplication:  Nonduplication means a regulation does not serve the same purpose as a state or federal statute or another regulation. (Government Code § 11349(f).)
6.  Necessity:  “Necessity” means the record of the rulemaking proceeding demonstrates by substantial evidence the need for a regulation effectuate the purpose of the statute, court decision, or other of law that the regulation implements, interprets, or makes taking into account the totality of the record. For purposes standard, evidence includes, but is not limited to facts, studies, expert opinion. (Government Code § 11349(a).)
This means that the rule-making record must contain the level of evidence a reasonable person would expect to justify the need for a regulation. Simas & Associates, Ltd. has represented numerous clients in this rule-making process and also in filing court challenges to agency regulations that do not comport with it. Please call us for further information.