Who Decides What Administrative Rules Mean?

ScalesMuch of modern law is made not by legislatures but by administrative agencies. The executive branch of government cannot enact statutes, but it can create rules and regulations that have the force of law if the legislature has given an executive agency that authority.

Unfortunately, the task of creating a perfectly clear regulation is difficult. By its nature, language is imprecise. More importantly, it is difficult for the authors of rules to envision all the circumstances to which a rule might apply. Nor is it always clear how a rule should apply to changing circumstances in an ever-changing world.

When the legislature enacts a statute, courts are often asked to resolve ambiguities in its meaning and application. When an administrative agency enacts a rule, ambiguities are typically resolved in enforcement proceedings by administrative law judges who work for the agency.

An administrative law judge’s ruling can typically be reviewed by a court. Over the years, courts have struggled to decide whether the reviewing court should apply its own understanding of the rule or should defer to the agency’s interpretation of its own rule. While courts generally favor deference, they have adopted a set of standards to guide decisions about when and how much deference is due.

The business community generally opposes deference because agencies tend to interpret rules in ways that allow the agency to accomplish its regulatory mission. Businesses often hope that courts will interpret administrative rules in a way that is more friendly to the business. Immigrants and union members might also hope that a court will interpret regulations more favorably than the agency that enforces them.

The Supreme Court recently revisited the standard it has fashioned to govern the interpretation of administrative regulations. If the business community was expecting a wholesale revision of precedent, the 5-4 decision was a disappointment.

Kisor v. Wilkie

James Kisor applied for veteran’s disability benefits in 1982, alleging that he acquired post-traumatic stress disorder during his service in Vietnam. The Veteran’s Administration denied the application.

In 2006, Kisor asked the VA to reopen his case. The VA agreed to do so. The VA granted his claim for benefits but declined to make the award retroactive to 1982. An administrative appeals agency known as the Board of Veterans’ Appeals affirmed that decision based on its interpretation of an agency rule governing retroactivity. A court that handles appeals from VA decisions affirmed that decision.

The case was appealed to the Court of Appeals for the Federal Circuit. Applying two precedents — Auer v. Robbins and Bowles v. Seminole Rock & Sand Co. — the Court of Appeals deferred to the interpretation of the rule that was adopted by the Board of Veterans’ Appeals.

The Auer and Seminole Rock decisions recognized that administrative agencies are better positioned than courts to interpret ambiguous regulations that the agencies are charged with enforcing. Agencies better understand the policies that underlie their own regulations and are well situated to reconstruct the intent of a regulation that could be read in different ways.

Kisor asked the Supreme Court to overrule Auer and Seminole Rock. While the Court agreed to vacate the Court of Appeals’ decision against Kisor, a majority declined to overrule the precedents that require deference to an agency’s interpretation of its own rules.

Kisor Reaffirms Auer Deference

The Court’s decision is a bit messy because only a portion of Justice Kagan’s opinion commanded a majority vote. A majority agreed that deference is appropriate only when a regulation is truly ambiguous. When the traditional tools that help courts understand a statute or rule point to a plain interpretation, there is no need for deference because there is no true ambiguity. Those tools include a close analysis of the text, structure, history, and purpose of a regulation.

Even when the rule is truly ambiguous, deference is only appropriate when the agency’s interpretation of the regulation is reasonable. And even then, a court should defer to an agency only when the agency is stating its official position, when the interpretation requires the agency to exercise its expertise, and when the interpretation reflects a “fair and considered judgment.” The Court also suggested that consistent interpretations that have been held for some time are entitled to greater deference than a new interpretation that is likely to surprise regulated parties.

Having reaffirmed those standards — all of which are supported by lower court or Supreme Court precedent — the Court found no reason to overrule Auer or Seminole Rock. While not expressly stated, Justice Kagan’s reasoning made clear that a change of personnel on the Court should not be a sufficient reason to disturb settled precedents.

The two newest justices, Kavanagh and Gorsuch, declined to join the majority opinion, perhaps signaling their belief that substituting their own opinions of what the law should be rather than following settled precedent is exactly why they were appointed to the Court. Chief Justice Roberts, on the other hand, joined the majority opinion, perhaps signaling his conservative belief that settled law should generally remain settled, particularly when overruling precedents would upend an entire field of law.

In the end, all the justices agreed that the decision should be vacated. The majority concluded that the Court of Appeals deferred too quickly, without first deciding whether the regulation was truly ambiguous and without deciding whether the administrative interpretation was reasonable. The Court remanded the case so that the Court of Appeals could carry out that task.

Reaction to Kisor Decision

The Kisor case was closely watched by the business community, which had no interest in whether Kisor received retroactive veterans’ benefits. Rather, regulated industries that are charged with violating administrative regulations often challenge the agency’s interpretation of those regulations. Since some federal judges are perceived as business-friendly, businesses often hope to receive a more sympathetic hearing from judges than they might receive from the agencies that regulate them.

The libertarian and anti-regulation Cato Institute, which filed a brief in support of Kisor, put a positive spin on the decision. While Cato argues that the majority adopted “big limitations” on Auer deference, the decision merely summarized widely-accepted precedent that explains why deference is appropriate in some circumstances and inappropriate in different circumstances. The decision changes little and is far from the win that Cato claims. Courts have always had plenty of wiggle room to avoid deferring to interpretations with which they disagree.

In a brief filed on Kisor’s behalf, Sen. Sheldon Whitehouse wrote that opponents of Auer deference were “part of a larger strategy to disable public interest regulation.” As a Bloomberg analysis recognized, the decision squarely “rejected contentions that federal agencies have grown too powerful and that judges should have the primary responsibility for interpreting unclear regulations.”

In the end, Auer and its progeny have always given federal judges considerable leeway to avoid deferring to administrative interpretations that, in the judge’s opinion, are “unreasonable” or contrary to a regulation’s unambiguous intent. Judges who try to follow the law rather than their own policy-driven preferences will find that Kisor changed the law very little, while judges with a more activist bent will seize upon the decision’s language to justify substituting their own interpretations of regulations for those adopted by administrative agencies.

Even if successful, the attempt to shift interpretive authority entirely to courts would not have resolved the reality that different judges frequently interpret identical language in different ways. Auer deference encourages uniformity of interpretation, but only if judges are willing to agree that interpretations with which they disagree are nevertheless reasonable.

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