On October 9, 2019, President Trump issued the Executive Order on Promoting the Rule of Law Through Improved Agency Guidance Documents (the “Order”). The Order significantly alters the executive branch’s practice regarding guidance documents. Affected federal agencies must take various steps to improve public access to such documents. The Order also reinforces that such documents are not legally binding. The Order should not only improve certainty for regulated entities and government contractors but also limit the pressures to treat non-binding agency guidance as legally binding. The procedures called for under the Order, which include reviewing existing guidance documents to see whether each guidance should be withdrawn, also provide an opportunity for regulated parties to advocate for the abandonment of ill-conceived or outdated guidance.
Scope of the Order
The Order only applies to “guidance document[s],” not to rules, agency organization and procedure, or other types of formal agency documents. In addition to certain baseline requirements for all guidance documents, the Order establishes additional requirements for “significant guidance document[s],” which are those anticipated: to have some material effect on the economy, environment, society, or government; to seriously interfere with the actions of another agency; or to raise novel legal or policy issues. The Order applies to “each agency or agency component, as appropriate;” but excludes independent regulatory agencies. Therefore, several influential agencies (e.g., the Federal Energy Regulatory Commission, Occupational Safety and Health Review Commission, Securities and Exchange Commission, and Federal Trade Commission) fall outside the Order’s directions.
Requirements for Affected Agencies
Covered agencies must establish new procedures to identify relevant guidance documents, notify regulated entities that the documents are non-binding, and provide for public input on whether to withdraw or modify existing guidance documents and before implementing new guidance documents. The Order should bring clarity to guidance, reduce redundancy and eliminate conflict. Within 120 days of the issuance of a forthcoming Office of Management and Budget (“OMB”) implementation memorandum, each agency or agency component must establish a searchable, indexed database containing copies of, or links to, all guidance documents in effect for that agency or component. Within the same time frame, existing guidance documents must be affirmatively reviewed and either included in the database or rescinded. For guidance documents that are kept in effect, agencies must submit a report justifying their retention to OMB within 240 days of the issuance of the implementing memorandum. The Director of OMB may extend the deadline for compliance with these requirements or waive compliance altogether.
Once compiled, agencies may not rely on guidance documents that are not in the database. Additionally, agencies must promulgate procedures for issuing new guidance documents. Such procedures must include (1) a requirement that each document clearly state that it does not bind the public, except as authorized by law or as incorporated into the contract, and (2) procedures for the public to petition for an existing guidance document’s withdrawal or modification. If an agency already has issuance procedures in place, it must amend or finalize such regulations as necessary to be consistent with the Order.
Additional procedures are required for “significant” guidance documents. Most notably, such significant guidance documents must go through a period of public notice and comment (similar to that for the rulemaking process) of at least 30 days.
Build-Up to the Order
This is not the first time that the Trump Administration has looked at the treatment of guidance documents. In 2018, Department of Justice (DOJ) Associate Attorney General Rachel Brand issued a memorandum (the “Brand Memo”), building on an earlier memorandum from Attorney General Jeff Sessions, curtailing the DOJ’s use of guidance in litigation. The Brand Memo forbade DOJ litigators from “us[ing] noncompliance with guidance documents as a basis for proving violations of applicable law” in cases seeking to impose penalties for violations of certain categories of federal laws (most notably here, those involving health, safety, or the environment). The Order extends the principle of not relying on guidance as an official, binding interpretation of regulations to all affected agencies and to circumstances outside of litigation.
Effect on Regulated Companies and Government Contractors
The Order both curtails and streamlines the treatment of guidance documents by agencies within its scope. This will help regulated entities to more easily identify the relevant guidance documents available to them while clarifying that such guidance is non-binding. Additionally, once the procedures required by the Order are established, the regulated public will have a greater ability to engage with agencies to shape and direct any significant guidance documents, much as is currently the case in the rulemaking process. In the meanwhile, the review process mandated for existing guidance provides an opportunity for regulated parties to engage with the relevant agencies to urge the abandonment of outdated or flawed guidance. Before relying on the Order in discussions with federal agencies, an individual or entity should confirm that the agency is covered by the Order.
Government contractors, in particular, are the subject of a variety of guidance documents that fall within the scope of the Order, particularly non-regulatory Department of Defense Instructions, guidance issued by the Defense Contract Management Agency, and the Defense Contract Audit Agency’s Contract Audit Manual and Audit Guidance Memoranda. Government Contracting Officers routinely make decisions based on these guidance documents that directly affect the rights and obligations of contractors. The Order makes clear that it is not concerned with guidance documents that are expressly incorporated into a contract, which bind the contractor under contract law. Instead, the Order is concerned with guidance documents that are implemented generally without incorporation into a particular contract. Government contractors should therefore pay close attention to the guidance documents that are incorporated into their contracts and those that are not, and should consider leveraging the Order in disputes involving the latter.