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The Art of “Rulemaking” in US Law

Published:  June 20, 2018

It may sound crazy, but most Americans don’t know where the law comes from. Most people mistakenly assume that all laws are created through legislation. However, American law can be created in numerous different ways.

The most foundational laws are created by founding documents, such as the United States Constitution and the constitutions of the various states. Some laws are created through the familiar legislative process. A very large portion of the law comes from the judicial opinions, or quasi-judicial opinions. Because it is nearly impossible for legislation to predict every possible problem that will arise under a new law, the judicial system serves to interpret, apply, and by doing so clarify, the law. Although judicial opinions are great for clarifying specific issues, it also takes a great deal of time. Trials typically last several months to years, and judicial opinions are subject to appeals, particularly when the ruling changes the way others interpret the law. In most cases, it can be several years before judicial opinions have a real effect.

However, there is a lesser known way to create law, which still has major effects on people’s day-to-day life. The unimaginatively titled “Rulemaking” is the process by which a government agency adds, removes or amends regulations. The Administrative Procedure Act requires federal government agencies to follow a certain procedure before making new rules or regulations. These requirements enable the public to voice concerns prior to making new rules or regulations. The government agency must publish a “Notice of Proposed Rulemaking,” which notifies the public of the subjects, issues, and/or terms of proposed regulations. This notice allows the public to submit written comments, or in some cases, participate in the rulemaking. This process is called “notice-and-comment” rulemaking. The agency may make modifications based on public input. Once the agency has complied with all the requirements of the administrative procedures act, the agency issues a final rule, which is codified in the Code of Federal Regulations.

Recently, the National Labor Relations Board announced its intention to utilize this procedure to clarify a policy that had been subject to some controversy with competing Board decisions. In 2015, the NLRB, then comprised primarily of members appointed by President Obama, issued a decision in Browning-Ferris Industries case, which expanded “joint employer” liability to situations where a business had potential control or indirect control over employees. This decision was controversial, and would likely have had a massive impact on litigation in franchisee situations. However, the decision did not stand for long. In December 2017, the NLRB, now primarily comprised of members appointed by President Trump, overruled the Browning Ferris Industries decision in the Hy-Brand International Contractors case. The Hy-Brand decision reinstated the “direct control” joint employment standard. However, the Hy-Brand decision was subsequently vacated because a board member had not recused himself over a conflict of interest.

In light of this recent history, the Board announced it was contemplating the rulemaking process to settle this issue. In June, Board Chair Ring announced that the Board would proceed with notice-and-comment rulemaking on this issue. Board Chair Ring has voiced disapproval of the Browning-Ferris Industries standard in the past.

It is widely expected that, after the notice-and-comment rulemaking process, the Board will issue a final regulation that is mostly consistent with the vacated Hy-Brand International Contractor ruling.

 

If you have any questions regarding the NLRB, the Administrative Procedure Act, or any other aspect of labor and employment law, please contact the attorneys at Royal, P.C.

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