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Chapter 43
Administrative Agencies
INTRODUCTION
Previous chapters were concerned primarily with constraints on business arising from court decisions and
state statutes. This unit deals primarily with constraints arising from federal statutes and administrative regulations.
Most administrative agencies are part of the executive branch and are subject to the authority of the
president; some exist as independent regulatory agencies, and their officials cannot be removed without cause. Most
agencies have a broad range of authority that seems legislative, judicial, and executive in nature and that engenders
much controversy. These topics are discussed in this chapter.
CHAPTER OUTLINE
I. The Practical Significance of Administrative Law
Congress delegates some authority to make and implement laws, particularly in highly technical areas, to
administrative agencies.
A. ADMINISTRATIVE AGENCIES EXIST AT ALL LEVELS OF GOVERNMENT
There are federal, state, and local administrative agencies, and they affect all aspects of business—
capital structure and financing, employer-employee relations, production and marketing, and more.
The 1960s and 1970s saw a subtle shift in the focus of regulation. Earlier regulation was primarily
some of the discomfort that results when markets work in a dynamic and impersonal way. New regulation
sought to deal with what are principally social issues: health, the environment, poverty, and discrimination.
regulatory agencies were created between 1970 and 1979, including the Environmental Protection Agency in
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B. AGENCIES PROVIDE A COMPREHENSIVE REGULATORY SCHEME
Agencies at different levels of government may cooperate to create and enforce their regulations. These
regulations can have benefits but also entail costs for businesses. Businesses—and others—thus have a
strong incentive to influence administrative agencies’ decisions.
ADDITIONAL BACKGROUND—
American Administrative Law
American administrative law is a youthful creature. The modern era of administrative law began only
about 120 years ago. Administrative agencies, historically, have been created in response to a sudden crisis
or serious social problem. Politics have been a major factor: the government has often met a public demand
that “something be done” by creating a new agency or by expanding the powers of an existing one.
corporations and anticompetitive monopolies gave rise to such agencies as the Interstate Commerce
Commission (ICC). The ICC was the first governmental organization created in the United States that could
accurately be characterized as a regulatory agency. Created in 1887 to regulate the railroad industry, its
capital assets (stocks and bonds). Also created in 1934 was the National Labor Relations Board. Initially, its
task was to safeguard unions and their members from employer abuses in the processes of organizing and
members from unscrupulous union behavior whenever it occurred. (These amendments came in the form of
Agencies were created or expanded during World War II to mobilize manpower and production, and to
During its early years, the United States was a predominantly rural society with a relatively simple,
nonindustrial economy. As the economy developed and society became more complex, demands for
regulation arose. Near the turn of the nineteenth century, concern over perceived abuses of powerful
Another impetus to the development of administrative law has been technology. As the technical
advances of this century have brought new services and products to consumers, so too new problems have
arisen. As in the past, the government’s response has been to create new agencies. Radio and television
broadcasting and nuclear power are but a few of the new technologies supervised and sometimes promoted
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Commission in 1972.
controversial area of law. The controversy is likely to continue for a long time to come.
During the later part of the 1970s, negative feelings about government generally, and the apparent
II. Agency Creation and Powers
Enabling legislation specifies the name, purposes, functions, and powers of an agency (state or federal).
A. ENABLING LEGISLATION—AN EXAMPLE
The Federal Trade Commission (FTC) Act created the Federal Trade Commission with the power to—
• Create rules and regulations to carry out the FTC Act.
ADDITIONAL BACKGROUND—
Bureau of Consumer Financial Protection
New agencies are often created in response to a crisis. The Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010, Pub L. No. 111-203, created a new government agency—the Bureau of
Consumer Financial Protection (BCFP)—to oversee consumer credit products, including mortgages. The
BCFP consolidated the consumer protection functions of several other federal agencies and operates under
the auspices of the Federal Reserve Board.
The BCFP—
• Issues rules and regulations for many financial products.
• Has far-reaching powers to prohibit abusive products and practices.
• Oversees banks, mortgage lenders, and credit firms.
(5) issuing rules, orders, and guidance implementing Federal consumer financial law; and
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Comptroller of the Currency, the Office of Thrift Supervision, and the Department of Housing and Urban
Besides mortgages, the BCFP has oversight of credit cards, student loans, payday loans, and other
consumer financial products. According to the act, the BCFP’s purpose, objectives, and functions are as
follows:
SEC. 1021. PURPOSE, OBJECTIVES, AND FUNCTIONS.
services are fair, transparent, and competitive.
(b) OBJECTIVES.—The Bureau is authorized to exercise its authorities under Federal consumer financial
law for the purposes of ensuring that, with respect to consumer financial products and services—
(1) consumers are provided with timely and understandable information to make responsible decisions
about financial transactions;
(2) consumers are protected from unfair, deceptive, or abusive acts and practices and from
(3) outdated, unnecessary, or unduly burdensome regulations are regularly identified and addressed in
order to reduce unwarranted regulatory burdens;
(a) PURPOSE.—The Bureau shall seek to implement and, where applicable, enforce Federal consumer
financial law consistently for the purpose of ensuring that all consumers have access to markets for
(4) Federal consumer financial law is enforced consistently, without regard to the status of a person as a
depository institution, in order to promote fair competition; and
(5) markets for consumer financial products and services operate transparently and efficiently to facilitate
access and innovation.
(c) FUNCTIONS.—The primary functions of the Bureau are—
(1) conducting financial education programs;
(2) collecting, investigating, and responding to consumer complaints;
of such markets;
(3) collecting, researching, monitoring, and publishing information relevant to the functioning of markets
consumer financial law;
(4) subject to sections 1024 through 1026, supervising covered persons for compliance with Federal
(6) performing such support activities as may be necessary or useful to facilitate the other functions of the
Bureau.
B. TYPES OF AGENCIES
There are two basic types of agencies. The significant difference between the two is theoretically in the
accountability of the regulators.
C. AGENCY POWERS AND THE CONSTITUTION
Administrative agencies exercise powers that are normally divided among the three branches of
government (rulemaking, rule enforcement, and adjudication).
1. The Delegation Doctrine
Article I of the Constitution is generally held to authorize delegating power to administrative agencies.
• Section 1 grants all legislative powers to Congress and requires Congress to oversee the imple–
Under the delegation doctrine, Congress has the power to establish agencies that can create
legislative rules to implement those laws and interpretive rules to declare policy.
ADDITIONAL BACKGROUND—
The Delegation Doctrine
The courts have seriously considered the extent to which Congress can delegate its powers to third
parties only in this century. In 1904, the United States Supreme Court first declared that the test of whether a
delegation is proper is if Congress establishes ascertainable “standards” that outline the limits of the
agency’s discretion.
This attitude changed with the 1929 stock market crash and the onset of the Great Depression. The rapid
disintegration of the national economy caused the unemployment rate to rise to 25 percent, and bank failures,
Supreme Court decisions in the 1920s held that Congress could delegate only gap-filling powers to
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Schechters were not be liable for violations of the poultry code. The Court characterized the NIRA as “a
A trade group in the poultry industry proposed a “poultry code,” and President Roosevelt approved it.
Aaron and Alex Schechter were wholesale kosher poultry dealers in Brooklyn, New York. They refused to
comply with the code and consequently were charged with violating it. At their trial in federal district court,
Many legal scholars have viewed Schechter and associated cases of that era as exceptions to the
general tendency of the courts to rubber-stamp delegations of power by Congress. In a series of cases that
appeared in the 1950s, the courts altered their approach to avoid the delegation issue altogether. By the
1970s, the approach had shifted to ensure the accountability of regulatory agencies to Congress. Using this
2. Executive Controls
The executive branch exercises control over agencies through the president’s powers to appoint
federal officers and through the president’s power to veto enabling legislation or congressional at–
tempts to modify an existing agency’s authority.
3. Legislative Controls
Congress exercises authority over agency power through enabling legislation and subsequent leg-
4. Judicial Controls
The APA provides for judicial review of most agency decisions. According to the exhaustion doctrine,
a party must have used all potential administrative remedies before filing a suit.
CASE SYNOPSIS—
Case 43.1: Loving v. Internal Revenue Service
Responding to concern about the performance of some paid tax-return preparers, the Internal Revenue
Service (IRS) issued a new rule. The rule required paid preparers to pass an initial certification exam, pay
annual fees, and complete fifteen hours of continuing education courses each year. As authority for the rule,
the IRS relied on a statute enacted in 1884 that authorizes the agency to “regulate the practice of
representatives of persons before the Department of the Treasury.” Three preparers filed a suit in a federal
district court against the IRS, contending that the rule exceeded the agency’s authority. The court ruled in the
plaintiffs’ favor.
agency] for the first time to regulate hundreds of thousands of individuals in the multi-billion dollar tax-
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Notes and Questions
Considering the reasoning of the court in the Loving case, are there any subagencies within the
Department of the Treasury that could regulate tax-return preparers based on the statute at the center
of the dispute? No, under the reasoning of the court in the Loving case, there are not likely any subagencies
within the Department of the Treasury that could regulate tax-return preparers based on the statute at the
center of the dispute.
in the multi-billion dollar tax-preparation industry.” The court found nothing in the statute’s text, history,
structure, or context that “contemplates that vast expansion of the IRS’s authority.”
With that reasoning in mind, it is not likely that there are any other subagencies within the same executive
department that the court would have held could so interpret the statute to use it as authority for regulating
tax-return preparers.
According to the court, under the IRS’s interpretation of the statute that it cited as authority for issuing the
D. THE ADMINISTRATIVE PROCEDURE ACT
Administrative process is the administration of law by administrative agencies. The Administrative
Procedure Act (APA) of 1946 imposes procedural requirements that all federal agencies must follow in
their rulemaking, adjudication, and enforcement functions.
1. The Arbitrary and Capricious Test
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The APA provides that courts should set aside agency decisions that are “arbitrary, capricious, an
abuse of discretion, or otherwise not in accordance with the law.” This includes such factors as—
• Failure to provide a rational explanation for a decision.
• Change in prior policy without an explanation.
ADDITIONAL CASES ADDRESSING THIS ISSUE —
Arbitrary and Capricious
Cases involving the courts considered the application of the arbitrary and capricious standard to
agency actions include the following.
• Modesto Irrigation District v. Gutierrez, __ F.3d __, 2010 WL 3274499 (9th Cir. 2010) (National Marine
Fisheries Service (NMFS) sufficiently recognized and explained its decision to depart from its past practice of
applying its own policy and to instead apply a policy developed by NMFS with the Fish and Wildlife Service in
determining whether to list populations of West Coast steelhead as a threatened species).
• Air Transport Association of America, Inc. v. National Mediation Board, __ F.Supp.2d __, 2010 WL
25272685 (D.D.C. 2010) (a new rule issued by the National Mediation Board, providing that, in representation
• Handley v. Chapman, 587 F.3d 273 (5th Cir. 2009) (Federal Bureau of Prisons (BOP) complied with the
Administrative Procedure Act when it reclassified felon–in-possession convictions to be categorically ineligible
for early-release incentives—the BOP’s actions constituted a policy change, the BOP had the statutory
authority, there was an obvious public safety rationale for the change, the agency’s path could be readily
discerned from its prior rules, program statements, and consistent litigation position, and, by changing course,
the BOP sought to apply its regulation with uniformity).
• Water Quality Insurance Syndicate v. United States, 632 F.Supp.2d 108 (D.Mass. 2009) (For wholesalers
that sold electricity in regions where they had market power but electricity was ultimately used in regions
where they did not have market power, Federal Energy Regulatory Commission (FERC) sufficiently explained
policy change applying point-of–sale test to ensure that wholesalers sold electricity at cost-based rates).
2. Fair Notice
The APA includes many requirements concerning the notice that regulatory agencies must give to
those affected by its regulations.
III. The Administrative Process
Administrative agencies exercise powers that are normally divided among the three branches of government
(rulemaking, rule enforcement, and adjudication).
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A. RULEMAKING
In enabling legislation, Congress confers an agency’s power to make rules. The text cites the
Occupational Health and Safety Administration (OSHA) and the Occupational Safety and Health
Administration Act of 1970. The text also mentions interpretive rules. The text traces the procedure of
notice-and-comment rulemaking.
1. Notice of the Proposed Rulemaking
2. Comment Period
Interested parties can express their views on the proposed rule in writing or, if a hearing is held,
3. The Final Rule
4. Failure to Follow Rulemaking Procedures
If an agency failed to follow proper rulemaking procedures, the rule may not be binding.
5. Informal Agency Actions
B. ENFORCEMENT
During the rulemaking process, an investigation obtains information about a certain individual, firm, or
industry to avoid issuing a rule that is arbitrary and capricious and instead is based on a consideration of
relevant factors. After final rules are issued, agencies conduct investigations to monitor compliance.
1. Inspections and Tests
An on-site inspection may be the only way to obtain evidence to prove a regulatory violation.
Sometimes, an inspection or test is used in place of a formal hearing to correct or prevent an
undesirable condition. If a firm or individual refuses to cooperate with a request for an inspection or
for information, an agency may use a subpoena or a search warrant.
ENHANCING YOUR LECTURE—
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WHAT TO DO WHEN OSHA
INSPECTS YOUR COMPANY
Occupational Safety and Health Administration (OSHA) issues. There are literally hundreds of OSHA
standards covering all aspects of the workplace: ladders, stairs, exits, noise, safety devices, and so on.
To determine whether an employer is complying with the standards, an OSHA inspector can enter a
only postpones the inevitable—the inspector can obtain a search warrant and return.
When an OSHA inspector arrives, he or she must show official credentials, including identification with a
the employer a copy of any employee complaints.
The Occupational Safety and Health Act of 1970a requires employers to furnish a workplace free of
hazards likely to cause death or serious injury and to comply with safety and health regulations that the
KEEP YOUR RECORDS AND WORKPLACE IN ORDER
What the inspector looks at, where in the workplace he or she goes, and how long he or she is there is up
to the inspector. Typically, an inspector reviews an employer’s records of deaths, injuries, and illnesses—
records that the employer is required to keep. An inspector may tour the workplace, checking the display of
OSHA posters and other materials and looking for compliance with other regulations.
SELECT A COMPANY REPRESENTATIVE
An employer can choose anyone—typically a manager or supervisor—to accompany an OSHA inspector
during an inspection. A representative of the employees can also accompany the inspector. The inspector
may talk with employees about working conditions, but work disruptions must be minimal. Also, trade secrets
and business conditions are confidential under both state and federal law. Any such information that an
inspector discovers cannot be disclosed outside OSHA and the workplace.
KNOW THE PROCEDURE FOR VIOLATIONS
If an inspector finds a violation, he or she may informally discuss it with the employer or issue a formal
citation. Even a violation that can be corrected immediately may be the basis for a citation and a penalty. A
citation—which may be issued any time within ninety days of an inspection—normally includes an allegation
of a violation, a proposed penalty, and a deadline for correcting the violation.
A citation must be posted in the area of the violation for at least three days. Violations must be corrected,
and OSHA must be notified of the corrections. If an employer decides to fight a citation, a penalty, or a
correction deadline, he or she has fifteen business days after receipt of the citation to advise OSHA. An
appeal may be made to the Occupational Safety and Health Review Commission (OSHRC).
The OSHRC may grant the employer a temporary variance for up to a year (which may be renewed twice)
or a permanent variance. The employer must show that it cannot make a correction because of a lack of
personnel, materials, equipment, or a need to alter facilities. The employer must also show that what it is
doing is safe and healthful.
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CHECKLIST FR OSHA INSPECTIONS
or she is NOT an official OSHA inspector.
1. Insist on proper identification, which should include a serial number and a photograph of the OSHA
3. If a citation is issued, post it, but if a correction is not possible, or if the condition is already safe and
healthful, seek a variance from compliance.
a. 29 U.S.C. Sections 651–678.
2. Subpoenas
There are two basic types of subpoenas: the subpoena ad testificandum (an ordinary subpoena,
compelling a witness to appear at a hearing) and the subpoena duces tecum (compelling an
individual or organization to hand over books, papers, records, or documents). Agency demands are
limited by—
• The purpose of an investigation (an improper purpose is harassment).
3. Searches during Site Inspections
Agency investigations often involve on-site inspections.
4. Search Warrants
• The Fourth Amendment protects against unreasonable searches and seizures by government
officers. In most instances, a physical search for evidence must be conducted under the authority
of a search warrant.
C. ADJUDICATION
Most administrative actions are resolved through negotiated settlements at their initial stages, without
formal adjudication.
1. Negotiated Settlements
2. Formal Complaints
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3. The Hearing
4. The Role of an Administrative Law Judge
• An ALJ presides over a trial-like hearing, with the power to administer oaths, take testimony, rule
5. Hearing Procedures
Hearing procedures vary from agency to agency. Disputes are often resolved through informal
6. Agency Orders
Either party may appeal the ALJ’s decision to the board or commission that governs the agency. If
CASE SYNOPSIS—
Case 43.2: Craker v. Drug Enforcement Administration
Lyle Craker, a professor at the University of Massachusetts, applied to the U.S. Drug Enforcement
Administration (DEA) to make marijuana for clinical research into its medical uses. An administrative law
judge recommended that Craker’s application be granted, but a DEA Deputy Administrator denied his
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CHAPTER 43: ADMINISTRATIVE AGENCIES 13
Notes and Questions
agency action, which includes litigation expenses (plus whatever sanction, in the case of a loss), or as in this
case the cost of the consequences of an agency decision. The party may lose his or her investment in
whatever the agency disallows (or requires). Essentially, taking the initiative avoids these costs (and the initial
predicament of having to choose whether or not to conform to an agency’s rule.
Suppose that Craker had expected his application to be denied and had petitioned for relief before
that occurred. Why might some individuals or organizations prefer to sue an agency before it takes
formal action? Individuals or organizations may prefer to take the offensive to gain such advantages as the
What sort of relief is sought in a preenforcement action for review? Declaratory and injunctive relief.
Unlike other areas of the law, in administrative law the courts are willing to save a regulated entity from the
dilemma of enduring costly compliance measures or risking penalties or other negative effects.
IV. Judicial Deference to Agency Decisions
Courts generally defer to an agency’s factual judgment on a subject within the area of its expertise and its
interpretation of its legal authority.
A. THE HOLDING OF THE CHEVRON CASE
When reviewing an agency’s interpretation of law, a court should ask (1) whether the enabling statute
directly addresses the issue and if not (2) whether the agency’s interpretation is reasonable.
B. WHEN COURTS WILL GIVE CHEVRON DEFERENCE TO AGENCY INTERPRETATION
The extent of this deference has been much debated. If an agency’s decision has resulted from formal
rulemaking, it is more likely to be subject to deference.
CASE SYNOPSIS—
Case 43.2: Olivares v. Transportation Security Administration
with intent to distribute controlled substances. His airman’s certificate had been revoked. He had been
deported to Venezuela but was later reported to have a U.S. address. He was also a suspected international
trafficker in firearms. The TSA concluded that Olivares was a “Threat to Transportation/National Security” and
denied his application. He filed a petition for review.
Aliens—citizens of foreign countries—who seek training and certification from the Federal Aviation
Administration (FAA) to operate large, U.S.-registered aircraft must first secure clearance by the
The U.S. Court of Appeals for the District of Columbia Circuit denied the petition. “Congress has
entrusted TSA with broad authority over civil aviation security * * * . Therefore, in cases of this sort, we must
defer to TSA actions that reasonably interpret and enforce the safety and security obligations of the agency.
* * * Courts do not second-guess expert agency judgments on potential risks to national security. Rather, we
defer to the informed judgment of agency officials whose obligation it is to assess risks to national security.”
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Notes and Questions
balances, it is only reasonable that the decisions of agencies should likewise be subject to some review.
Should the courts defer entirely to the decisions of administrative agencies on all matters within
the agencies’ purview? Why or why not? No. To always and entirely defer to administrative agencies
V. Public Accountability
Several laws make agencies more accountable through public scrutiny.
CHAPTER 43: ADMINISTRATIVE AGENCIES 15
A. FREEDOM OF INFORMATION ACT
Enacted in 1966, the Freedom of Information Act (FOIA) requires federal agencies to disclose certain
“records” to “any person” on request. An agency’s failure to comply may be challenged in a federal
district court. All federal agencies must make documents available electronically within a year after their
creation and provide a clear index.
B. GOVERNMENT IN THE SUNSHINE ACT
Enacted in 1976, the Government in the Sunshine Act requires “every portion of every meeting of an
agency” to be open to “public observation.” Closed meetings are permitted when—
C. REGULATORY FLEXIBILITY ACT
Under the Regulatory Flexibility Act (passed in 1980), whenever a new regulation will have a “significant
impact upon a substantial number of small entities,” an agency must conduct a regulatory flexibility
analysis. The analysis must measure the cost that the rule would impose on small businesses and must
consider less burdensome alternatives. (This relieves some record-keeping burdens for small
businesses, especially with regard to hazardous waste management.)
D. SMALL BUSINESS REGULATORY ENFORCEMENT FAIRNESS ACT
Among the provisions of the Small Business Regulatory Enforcement Fairness Act (SBREFA) of 1996,
the SBREFA allows Congress to review new federal regulations for at least sixty days before they take
effect.
TEACHING SUGGESTIONS
1. This chapter is somewhat different from preceding chapters and the other chapters in this unit. The
material is more difficult to make come alive for students. You might provide specific examples of agency and
2. What are the advantages of a long-standing bureaucracy consisting of agencies made up of
individuals who hold their jobs regardless of changes in the political winds? What are the
disadvantages?
3. What role does common sense play in the application and review of administrative rulings?
Cyberlaw Link
Should the use of the Internet be regulated by the same agencies that regulate other aspects of
our lives (for example, the Federal Communications Commission regulates telephones), or should a
new agency be set up? How do the Freedom of Information Act and other open-government laws
apply to cyberspace?
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DISCUSSION QUESTIONS
1. How is an administrative agency created? To create an agency, Congress passes enabling legislation,
2. What is “the administrative process”? Enforcement, rulemaking, and adjudication are the basic functions
3. How does an agency use its investigative powers? Agencies need information concerning activities and
organizations that they oversee. An agency may compel the disclosure of information through a subpoena or a
search and seizure. (A subpoena duces tecum may compel the turning over of books, papers, records, or
4. Why are most disputes resolved at, or soon after, the investigatory stage of an agency action? Most
5. What is a major advantage of agency rulemaking? The major advantage of rulemaking is that it can
6. Given that an administrative law judge is a member of the agency prosecuting a case, what safe–
guards promote fairness? Under the APA, an administrative law judge (ALJ) is separated from the investigative
7. How do courts hold agency authority in check? Under the APA, courts provide a direct avenue for review
8. Identify and briefly describe laws that make agencies more accountable through public scrutiny.
Freedom of Information Act. The Freedom of Information Act (FOIA) of 1966 requires the federal government to
reveal certain “records” to “any person” on request. A request may consist of no more than a reasonable description
9. Is it ethical for an administrative agency to reverse or otherwise alter its policy when the change
increases the financial burden on the regulated parties? An agency may act within ethical—and legal—bounds
when it alters a policy, and the change does not necessarily indicate that the previous policy was “wrong.” A change
10. Some individuals or organizations prefer to sue an agency before it takes formal enforcement action.
Why? Individuals or organizations may prefer to take the offensive to gain such advantages as the choice of forum.
ACTIVITY AND RESEARCH ASSIGNMENT
Historical and political information is easier to understand than much of the material in this chapter and for
that reason may help to bring some of the concepts to life. Have students bring to the class news articles about
current business-related problems being dealt with by agencies. This can illustrate the relevancy of the material.
EXPLANATIONS OF SELECTED FOOTNOTES IN THE TEXT
Footnote 5: The Federal Communications Commission (FCC) polices “indecent” speech—“language that
describes, in terms patently offensive as measured by contemporary community standards for the broadcast medium,
sexual or excretory activities and organs.” The FCC had long ignored “fleeting expletives.” During a broadcast of the
In Federal Communications Commission v. Fox Television Stations, Inc., the United States Supreme
Court reversed and remanded. “A court is not to substitute its judgment for that of the agency” and should “uphold a
decision of less than ideal clarity if the agency’s path may reasonably be discerned.” An agency must show good
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Today, children are likely exposed to indecent language in various media far more often than they
were in the 1970s, when the Federal Communications Commission first began to sanction indecent speech.
Does this mean that we need more—or less—stringent regulation of broadcasts? Explain. The answers to this
question given by the Second Circuit Court of Appeals and the United States Supreme Court, respectively, are
illustrative. The Court of Appeals argued that the greater likelihood that today’s children would hear indecent speech
Technological advances have made it easier for broadcasters to “bleep out” offending words in the
programs that they air. Does this development support a more stringent—or less stringent—enforcement
policy by the Federal Communications Commission? Explain. The fact that it is now easier for broadcasters to
bleep out offending words was one of the reasons given by the Federal Communications Commission for expanding
Should an administrative agency be locked into its first interpretation of a statute? Why or why not?
No, an administrative agency should not be locked into its first, or any subsequent, interpretation of a statute. A
settled, or consistent, course of conduct indicates an agency’s judgment that, in following that course, it is carrying out
Did the U.S. Court of Appeals for the Second Circuit reject the FCC’s reasons for its actions because
the court disagreed with those reasons? Explain. No, the U.S. Court of Appeals for the Second Circuit did not
reject the FCC’s reasons for its actions because the court disagreed with those reasons. The court explained that it
CHAPTER 43: ADMINISTRATIVE AGENCIES 19
rejected the agency’s reasons for its change of course because those reasons had no support in the record. The
agency “has failed to set forth the required reasoned explanation because its proffered rationale remains unsupported
by any record evidence.” The court also noted that the agency’s “rationale is disconnected from the actual policy
implemented.”
Footnote 12: The Federal Insurance Contributions Act (FICA) requires employees and employers to pay
Social Security taxes on all wages. FICA excludes from its definition of employment any service for a school
“performed by a student who is enrolled and regularly attending classes.” The U.S. Treasury Department issued a
In Mayo Foundation for Medical Education and Research v. United States, United States Supreme Court
affirmed. FICA does not define student nor does it state whether a medical resident qualifies as a student. Congress
Should the courts defer entirely to the decisions of administrative agencies on all matters within the
A number of students work full time to pay for their education. Is it fair to require them to pay FICA
taxes when they would not have to do so if they worked only thirty hours per week? It might seem somewhat
Would the United States Supreme Court have deferred to the Treasury Department’s full-time
employee regulation even if it had disagreed with the rule? The United States Supreme Court found that the
Treasury Department’s regulation qualified for Chevron deference because the FICA statute did not define student
and was ambiguous as to whether medical residents are students. It would not have mattered if the Court had
