ADMINISTRATIVE LAW AND PROCEDURE

ADMINISTRATIVE LAW AND PROCEDURE

Administrative law is the body of law that allows
for the creation of public regulatory agencies and
contains all of the statutes, judicial decisions, and
regulations that govern them. It is created by
administrative agencies to implement their powers
and duties in the form of rules, regulations, orders,
and decisions. Administrative procedure constitutes
the methods and processes before administrative
agencies, as distinguished from judicial
procedure, which applies to courts.

The Administrative Procedure Act (5
U.S.C.A. §§ 551–706 [Supp. 1993]) governs the
practice and proceedings before federal administrative
agencies. The procedural rules and regulations
of most federal agencies are set forth in
the CODE OF FEDERAL REGULATIONS (CFR).
The fundamental challenge of administrative
law is in designing a system of checks that
will minimize the risks of bureaucratic arbitrariness
and overreaching, while preserving for the
agencies the flexibility that they need in order to
act effectively. Administrative law thus seeks to
limit the powers and actions of agencies and to
fix their place in our scheme of government and
law. It contrasts with traditional notions that the
three branches of the U.S. government must be
kept separate, that they must not delegate their
responsibilities to bureaucrats, and that the formalities
of due process must be observed.

Separation of Powers

The U.S. Constitution establishes a threepart
system of government consisting of the
Legislative Branch, which makes the laws, the
EXECUTIVE BRANCH, which carries out or
enforces the laws, and the Judicial Branch, which
interprets the laws. This system of checks and
balances is designed to keep any one branch
from exercising too much power. Administrative
agencies do not fit neatly into any of the three
branches. They are frequently created by the legislature
and are sometimes placed in the Executive
Branch, but their functions reach into all
three areas of government.

For example, the SECURITIES AND
EXCHANGE COMMISSION (SEC) administers
laws governing the registration, offering, and
sale of SECURITIES, like stocks and bonds. The
SEC formulates laws like a legislature by writing
rules that spell out what disclosures must be
made in a prospectus that describes shares of
stock that will be offered for sale. The SEC
enforces its rules in the way that the Executive
Branch of government does, by prosecuting violators. It can bring disciplinary actions against broker-dealers, or it can issue stop orders against
corporate issuers of securities. The SEC acts as
judge and jury when it conducts adjudicatory
hearings to determine violations or to prescribe
punishment. Although SEC commissioners are
appointed by the president subject to the
approval of the Senate, the SEC is an independent
agency. It is not part of Congress, nor is it
part of any executive department.

Combining the three functions of government
allows an agency to tackle a problem and
to get the job done most efficiently, but this
combination has not been accepted without a
struggle. Some observers have taken the position
that the basic structure of the administrative law
system is an unconstitutional violation of the
principle of the SEPARATION OF POWERS.

Delegation of Authority

The first issue that is encountered in the
study of administrative law concerns the way in
which Congress can effectively delegate its legislative
power to an ADMINISTRATIVE AGENCY.
Article I, Section I, of the U.S. Constitution provides
that all legislative power is vested in Congress.
Despite early resistance, the U.S. Supreme
Court gradually accepted the delegation of legislative
authority so long as Congress sets clear
standards for the administration of the duties in
order to limit the scope of agency discretion.
With this basic principle as their guide, courts
have invalidated laws that grant too much legislative
power to an administrative agency. President
FRANKLIN D. ROOSEVELT learned just how
far the Court would go in allowing the delegation
of authority, in two cases that stemmed
from his administrative-agency actions to support
his NEW DEAL program.

The NATIONAL INDUSTRIAL RECOVERY ACT
(15 U.S.C.A. § 701 et seq., 40 U.S.C.A. § 401 et
seq. [1933]) authorized the president to prohibit
interstate shipments of oil that had been produced
in violation of state board rules that
attempted to regulate crude-oil production to
match consumer demand. The Panama Refining
Company sued to prevent federal officials from
enforcing the prohibition, known as the “hot
oil” law (Panama Refining Co. v. Ryan, 293 U.S.
388, 55 S. Ct. 241, 79 L. Ed. 446 [1935]). The U.S.
Supreme Court found the law to be unconstitutional.
Congress could have passed a law prohibiting
interstate shipments of hot oil, but it
did not do so; instead, it gave that power to the
president. This has been called a case of delegation
run amok because the law had no clear
standards defining when and how the president
should use the authority that the statute delegated
to him.

Four months later, the Court invalidated a
criminal prosecution for violation of the Live
Poultry Code, an unfair-competition law that
President Franklin D. Roosevelt had signed in
1934 pursuant to another section of the
National Industrial Recovery Act. This was the
case of SCHECHTER POULTRY CORP. V. UNITED
STATES, 295 U.S. 495, 55 S. Ct. 837, 79 L. Ed.
1570 (1935). The problem in this case was not
that the delegation of authority was ill-defined,
but that it seemed limitless. The president was
given the authority to “formulate codes of fair
competition” for any industry if these codes
would “tend to effectuate the policy” of the law.
Comprehensive codes were created, establishing
an elaborate regulation of prices, minimum
wages, and maximum hours for different kinds
of businesses. But there were no procedural safeguards
from arbitrariness or abuses by enforcement
agencies. Someone who was charged with
a violation was not given the right to notice of
the charges, the right to be heard at an agency
hearing, or the right to challenge the agency’s
determination in a lawsuit. The Court struck
this law down, stating that the unfair procedures
helped strong industrial groups to use these
codes to improve their commercial advantage
over small producers.

As a result of Panama Refining and Schechter
Poultry, when Congress delegates authority to
agencies, it also sets out important provisions
detailing procedures that protect against ARBITRARY
administrative actions.

Due Process of Law

The Fifth and Fourteenth Amendments
guarantee that the federal government and the
state governments, respectively, will not deprive
a person of his or her life, liberty, or property
without DUE PROCESS OF LAW. An administrative
agency thus may not deprive anyone of life,
liberty, or property without a reasonable opportunity,
appropriate under the circumstances, to
challenge the agency’s action. People must be
given fair warning of the limits that an agency
will place on their actions. Federal courts routinely
uphold very broad delegations of authority.
When reviewing administrative agency
actions, courts ask whether the agency afforded
those under its jurisdiction due process of law as
guaranteed by the U.S. Constitution.

The U.S. Supreme Court has held it
improper for a state agency to deny WELFARE
benefits to applicants who meet the conditions
for entitlement to those benefits as defined by
the legislature. The state must afford due process
(in these cases, an oral hearing) before it can terminate
benefits (Goldberg v. Kelly, 397 U.S. 254,
90 S. Ct. 1011, 25 L. Ed. 2d 287 [1970]). Likewise,
when a state grants all children the right to
attend public schools, and establishes rules specifying
the grounds for suspension, it cannot suspend
a given student for alleged misconduct
without affording the student at least a limited
prior hearing (Goss v. Lopez, 419 U.S. 565, 95 S.
Ct. 729, 42 L. Ed. 2d 725 [1975]).

Political Controls Over Agency Action—Legislative and Executive Oversight

Government institutions that set and
enforce public policy must be politically
accountable to the electorate. When the legislature
delegates broad lawmaking powers to an
administrative agency, the popular control provided
by direct election of decision makers is
absent—but this does not mean that administrative
agencies are free from political accountability.
In many areas, policy oversight by elected
officials in the legislature or the Executive
Branch is a more important check on agency
power than is JUDICIAL REVIEW.

Federal agencies are dependent upon Congress
and the president for their budgets and
operating authority. An agency that loses the
support of these bodies or oversteps the bounds
of political acceptability may be subjected to
radical restructuring. In the 1970s, the Atomic
Energy Commission (AEC) took the politically
unpopular position of promoting NUCLEAR
POWER, while underemphasizing safety and
environmental protection. It paid the price
when some of its promotional functions were
transferred to a newly created DEPARTMENT OF
ENERGY, and the AEC was restructured into the
NUCLEAR REGULATORY COMMISSION, which was
responsible for the former agency’s regulatory
duties.

Federal administrative agencies must be
responsive to legislative and executive oversight
mechanisms. During the 1970s, many members
of Congress began to feel that the normal
process of legislation was too cumbersome for
effective control of administrative action. They
devised a solution called the legislative VETO.
Legislative vetoes took a variety of forms, but
most of them directed agencies to transmit final
administrative rules to Congress for review
before they became effective. Just as this
approach was gaining in popularity and use, the
U.S. Supreme Court declared the legislative veto
unconstitutional. This ruling involved the
Immigration and Nationality Act (8 U.S.C.A. §
1101 et seq. [1995]), which allowed either house
of Congress to nullify a decision by the attorney
general suspending deportation of an alien.
Jagdish Rai Chadha brought suit when the
House of Representatives exercised this power in
his case. The Court held, in INS v. Chadha, 462
U.S. 919, 103 S. Ct. 2764, 77 L. Ed. 2d 317 (1983),
that the legislative veto was essentially a onehouse
veto, and, therefore, it violated Article I,
Section 7, of the Constitution, which states that
no legislation is valid unless passed by both
houses of Congress and signed by the president
(or, if the president vetoes it, repassed by twothirds
of each). The Court said that in Chadha,
the House veto of the attorney general’s decision
was a legislative action, and therefore Article I,
Section 7, applied. The Chadha decision invalidated
all of the nearly 200 legislative-veto provisions
that were on the books.

Another important legislative-oversight
mechanism is the annual appropriations
process. Congress determines the budget and
appropriates money for the various administrative
agencies. An administrative agency that
angers Congress, or a key member of either
house, could find itself with less money to work
with in the next year, or could even see certain
programs eliminated. A legislature may also
enact a SUNSET PROVISION, which provides for
automatic termination of an agency after a
stated time unless the legislature is convinced
that the need for the agency continues. Sometimes,
a sunset provision is written into the
statute that creates a particular agency, but a
general sunset law may terminate any agency
that cannot periodically demonstrate its effectiveness.

A useful agency can always be revived
or retained by the enactment of a new statute.
Like Congress, the president uses a variety of
powers and techniques to oversee and influence
the operations of administrative agencies. The
Appointments Clause of the Constitution
(art.II, §2, cl. 2) states that the president may
generally appoint all “officers of the United
States,” with the advice and consent of the Senate.
Under the authority of this provision, presidents
often appoint agency heads who share
their political agenda. The president’s power to remove an agency head depends on whether the agency is an independent agency or a cabinet
department. Independent agencies tend to be
multimember boards and commissions, like the
Securities and Exchange Commission, FEDERAL
COMMUNICATIONS COMMISSION (FCC), and
NATIONAL LABOR RELATIONS BOARD (NLRB),
which are run by officials who are appointed for
a fixed period that does not correspond to the
president’s term of office. There also may be
statutes protecting the commissioners from
arbitrary removal during their terms of office.
The heads of cabinet-level agencies, called secretaries,
serve at the pleasure of the president and
may be removed at any time. (Appointments of
cabinet secretaries must be confirmed by the
Senate.)

The president also reviews agency budgets,
through the OFFICE OF MANAGEMENT AND BUDGET
(OMB). A president’s disapproval of agency
initiatives can block appropriations in Congress.
The president may also use an EXECUTIVE
ORDER, a formal directive, to direct federal agencies
or officials. One technique that has been
used frequently is the president’s authority to
modify the organizational structure of the
bureaucracy. Under the Executive Reorganization
Act (5 U.S.C.A. §§ 901–912 [Supp. 1993]),
the president may submit a REORGANIZATION
PLAN to Congress, transferring functions from
one department to another. This law recognizes
that although responsibility for the organization
and structure of the Executive Branch is vested
in Congress, the president needs flexibility to
carry out executive duties.

Public opinion is another forceful weapon
against unbridled agency action. Some jurisdictions
of the United States have created special
public offices to investigate complaints about
administrative misconduct. Investigators holding
these offices, called OMBUDSMEN, usually
have broad authority to evaluate individual
complaints, to intercede on behalf of beleaguered
victims of red tape, and to make reports
or recommendations.

The Development of Administrative Procedure Law

Administrative agencies were established to
do the government’s work in a simpler and more
direct manner than the legislature could do by
enacting a law, and than the courts could do by
applying that law in various cases. Because they
pursue their actions less formally, agencies do
not follow the CIVIL PROCEDURE that is set up
for courts. Instead, the law of administrative
procedure has developed to ensure that agencies
do not abuse their authority even though they
use simplified procedures.

Although administrative agencies have
existed since the founding of the United States,
the early twentieth century saw a growth in the
number of agencies that were designed to
address new problems. During the Great
Depression, a host of new agencies sprang up to
meet economic challenges. Antagonism toward
bureaucracy increased as existing dissatisfactions
were multiplied by the number of new
bureaucrats. In 1939, President Franklin D. Roosevelt
appointed a committee to investigate the
need for procedural reform in the field of
administrative law. Although the comprehensive
and scholarly report of that committee was not
enacted into law, a later version of it was enacted
in 1946 when Congress unanimously passed the
Administrative Procedure Act (5 U.S.C.A. §§
551–706) (APA). The statute made agencies’
methods more fair so that there would be less
reason to object to them. It also limited the
power of the courts to review agency actions and
to overturn them.

Judicial review of agency action furnishes an
important set of controls on administrative
behavior. Unlike the political oversight controls,
which generally influence entire programs or
basic policies, judicial review regularly operates
to provide relief for the individual person who is
harmed by a particular agency decision. Judicial
review has evolved over a period of years into a
complex system of statutory, constitutional, and
judicial doctrines that define the proper boundaries
of this system of oversight. The trend of
judicial decisions and the Administrative Procedure
Act is to make judicial review more widely
and easily available.

How far can a court go in examining an
agency decision? The reviewing court may be
completely precluded from testing the merits of
an agency action, or it may be free to decide the
issues de novo, that is, without deference to the
agency’s determination. In general, administrative
agencies make either formal or informal
decisions, and courts have different standards
for reviewing each type.

Informal Agency Action

Most of the work done by agencies is accomplished with informal procedures. For example, a person who applies for a driver’s license does not need or want a full trial in court in order to be found qualified. So long as the motor vehicle department follows
standard, fair procedures, and processes the application promptly, most people will be
happy. Agencies take informal action in a variety
of settings. The Social Security Administration
reviews over four million claims for benefits
annually, holding hearings or answering challenges
to their decisions in only a small number
of cases. Most transmitter applications before
the Federal Communications Commission are
approved or disapproved without any formal
action. The INTERNAL REVENUE SERVICE
processes most tax returns without formal proceedings.
It also will provide informal opinions
to help people avoid making costly mistakes in
their financial planning.

Anyone who objects to the informal decisions
made by a government agency can invoke
more formal procedures. Someone may believe
that standards are unclear and that they should
be promulgated through formal agency rule
making. Or someone may feel that the decision
in a particular case is unfair and may demand a
formal adjudicatory hearing. If one of these formal
procedures does not satisfy a party, the
agency’s decision may be challenged in court.

Formal Agency Action

Most formal action
taken by administrative agencies consists of rule
making or adjudication. Rule making is the
agency’s formulation of policy that will apply in
the future to everyone who is affected by the
agency’s activities.Adjudication is for the agency
what a trial is for the courts: It applies the
agency’s policies to some act that already has
been done, so that an order is issued for or
against a party who appears for a decision. Rule
making looks to the future; adjudication looks at
the past. Where either of these formal procedures
is used, the agency will usually give interested
or affected persons notice and an
opportunity to be heard before a final rule or
order is issued.

Rule making

Administrative agencies promulgate
three types of rules: procedural, interpretative,
and legislative. Procedural rules
identify the agency’s organization and methods
of operation. Interpretative rules are issued to
show how the agency intends to apply the law.
They range from informal policy statements
announced in a press release to authoritative
rules that bind the agency in the future and are
issued only after the agency has given the public
an opportunity to be heard on the subject. Legislative
rules are like statutes enacted by a legislature.
Agencies can promulgate legislative rules
only if the legislature has given them this
authority.

The Administrative Procedure Act sets up
the procedures to be followed for administrative
rule making. Before adopting a rule, an agency
generally must publish advance notice in the
Federal Register, the government’s daily publication
for federal agencies. This practice gives
those who have an interest in, or are affected by,
a proposed rule the opportunity to participate
in the decision making by submitting written
data or by offering views or arguments orally or
in writing. Before a rule is adopted in its final
form, and 30 days before its effective date, the
agency must publish it in the FEDERAL REGISTER.
Formally adopted rules are published in the
Code of Federal Regulations, a set of paperback
books that the government publishes each year
so that rules are readily available to the public.

Adjudication

The procedures that administrative
agencies use to adjudicate individual
claims or cases are extremely diverse. Like trials,
these hearings resolve disputed QUESTIONS OF
FACT, determining policy in a specific factual
setting and ordering compliance with laws and
regulations. Although often not as formal as
courtroom trials, administrative hearings are
extremely important. Far more hearings are held
before agencies every year than are trials in
courts. Adjudicative hearings concern a variety
of subjects, such as individual claims for
worker’s compensation, welfare, or SOCIAL
SECURITY benefits, in addition to multimillion-dollar disputes about whether business mergers
will violate antitrust rulings. These proceedings
may be called hearings, adjudications, or adjudicatory
proceedings. Their final disposition is
called an administrative order.

Many administrative proceedings appear to
be just like courtroom trials. Most are open to
the public and are conducted in an orderly and
dignified manner. Typically, a proceeding begins
with a complaint filed by the agency, much as a
civil trial begins with a complaint prepared by
the plaintiff. After the respondent answers, each
side may conduct discovery of the other’s evidence
and prehearing conferences. A HEARING
EXAMINER, sometimes called an administrative
law judge (ALJ), presides over the hearing, giving
rulings in response to a party’s applications
for a particular type of relief. The agency presents
its evidence, usually through counsel, either
by a written report or in the question-andanswer
style of a trial, and then the respondent
offers his or her case. Witnesses may be called
and cross-examined. The examiner gives a decision,
usually with written findings and a written
opinion, shortly after the hearing.

The Executive Branch of the federal government
employs federal ALJs. When Congress
originally enacted the APA, it addressed concerns
about the relationship between ALJs and
their respective agencies by providing independence
to the ALJ. The U.S. Office of Personnel
Management (OPM) makes most of the decisions
regarding the tenure and compensation of
ALJs, and ALJs are exempted from many of the
performance reviews that apply to other civil
service employees. An agency may remove an
ALJ only for cause and after a hearing conducted
by the MERIT SYSTEMS PROTECTION BOARD.

Because administrative hearings do not use
juries, an ALJ makes both factual determinations
and legal decisions based upon the evidence
presented and the law governing the
dispute. The specific duties of an ALJ in an individual
agency depend upon the powers delegated
to the agency in the respective enabling
statute and procedural regulations promulgated
by the agency. For instance, the Office of Inspector
General is empowered to impose civil penalties
against a person who makes false statements
or representations with respect to Social Security
benefits. Under regulations promulgated by
the Social Security Administration [20 C.F.R. §
498.204 (2002)], the ALJ may make a number of
decisions regarding the submission of evidence
or the examination of witnesses; rule on
motions and other procedural matters; and render
a SUMMARY JUDGMENT where appropriate.
However, the ALJ may not rule as invalid a federal
statutory or regulatory provision, enjoin
agency officials, or review discretionary acts by
the inspector general. An ALJ’s decision is often
subject to review by a board or commission of
the entire agency before parties may appeal the
decision to a federal court. For example, labor
disputes governed by the National Labor Relations
Act are first heard by ALJs of the National
Labor Relations Board (NLRB). The ALJ’s decision
may be appealed to the five members of the
NLRB for review. Only after review by the
NLRB, upon which it renders a decision and
issues an opinion, may a party appeal the decision
to a U.S. court of appeals.

Unlike a trial, an administrative hearing has
no jury. The hearing examiner, or administrative
law judge, is usually an expert in the field
involved and is likely to be more concerned with
overall policies than with the particular merits
of one party’s case. The Administrative Procedure
Act affords parties who appear in administrative
hearings involving federal agencies the
right to notice of the issues and proceedings, the
RIGHT TO COUNSEL, and the right to confront
and cross-examine witnesses.

Judicial Review of Agency Actions

When someone believes that she or he has
been the victim of administrative error or
wrongdoing and seeks to have the actions of the
responsible agency reviewed in a court of law,
the reviewing court is faced with two questions:
Does the court have a right to review the agency
action? And if it does, what is the scope of that
court’s review?

The Right to Have a Court Review an Agency’s Decision

Whether someone has the
right to ask a court to review the action taken by
an agency depends on the answers to several
questions. The first question is whether the person
bringing the action has standing, or the legal
right to bring the suit. Section 702 of the
Administrative Procedure Act allows court
review for any person who is adversely affected
or aggrieved by agency action within the meaning
of a relevant statute.When the U.S. Supreme
Court reviewed section 702 in Association of
Data Processing Service Organizations v. Camp,
397 U.S. 150, 90 S. Ct. 827, 25 L. Ed. 2d 184
(1970), the Court said that for the plaintiff to
have standing to seek judicial review of administrative action, two questions must be answered
affirmatively: (1) Has the complainant alleged
an “injury in fact”?; and (2) Is the interest that
the complainant seeks to protect “arguably
within the zone of interests to be protected or
regulated by the statute or constitutional guarantee
in question”?

Even though an agency’s decision is reviewable
and the plaintiff has standing to litigate, the
plaintiff still may be unable to obtain judicial
review if he or she has brought the action at the
wrong time. The aggrieved person must exhaust
all other avenues of relief before the dispute is
ripe for judicial determination. The doctrines of
EXHAUSTION OF REMEDIES and RIPENESS
require a person who deals with an agency to
follow patiently all of the available steps within
the agency’s procedures before resorting to
court action. These rules are essential to prevent
overloading the courts with questions that
might not even be disputes by the time the agencies
determine what their final orders or rulings
will be.

The Scope of a Court’s Review

If an aggrieved party can convince a court that he or
she has standing, that all available administrative
remedies have been exhausted, and that the
case is ripe for judicial review, the court will hear
the case, but the scope of its review is limited.
The law seeks to give agencies enough freedom
of action to do their work, while ensuring that
individual rights will be protected. The Administrative
Procedure Act provides that courts may
not second-guess agencies when the agencies are
exercising discretion that has been granted to
them by statute. A court is generally limited to
asking whether the agency went outside the
authority granted to it; whether it followed
proper procedures in reaching its decision; and
whether the decision is so clearly wrong that it
must be set aside. The court also may set aside
an agency decision that is clearly wrong.

The court usually will accept the agency’s
findings of fact, but it is free to determine how
the law will be applied to those facts. It will look
at the whole record of the administrative proceeding
and will take into account the agency’s
expertise in the matter. The court will not upset
agency decisions for harmless errors that do not
change the outcome of the case. If the question
at issue has been committed to agency discretion,
the court may consider whether the agency
has exercised its discretion. If the agency has not
done so, then the court may order the agency to
look at the situation and make a decision. The
Administrative Procedure Act allows courts to
overrule an agency action that is found to be
“arbitrary, capricious, an ABUSE OF DISCRETION,
or otherwise not in accordance with
law.”

FURTHER READINGS
Lubbers, Jeffrey S., ed. 2003. Developments in Administrative
Law and Regulatory Practice (annual). Chicago, Ill.: Section
of Administrative Law and Regulatory Practice,
American Bar Association.

Rosenbloom, David H. 1997. Public Administration and Law.
2d ed. New York:M. Dekker.

CROSS-REFERENCES
Administrative Conference of the United States; Federal
Budget; Veto. See also entries for specific federal agencies
(e.g., Food and Drug Administration).