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INSIGHT: Small Businesses Want Supreme Court to Rein in Agency Power

June 14, 2019, 6:55 PM

Any American who followed the last two U.S. Supreme Court confirmation hearings likely heard a lot about the administrative law doctrine, Chevron deference. Although simple, Chevron has massive implications on small and independent businesses.

The doctrine directs judges to give federal regulators the benefit of the doubt when there is a question about what a statute requires. To varying degrees, Supreme Court Justices Neil Gorsuch and Brett Kavanaugh expressed skepticism over whether Chevron is rooted in the Constitution.

Therefore, it came as no surprise when the Supreme Court decided to revisit another long-standing, judicially-created administrative law doctrine known as Auer deference.

Auer deference is named after the 1997 case, Auer v. Robbins, and is similar to Chevron in that it once again directs judges to give federal agencies the benefit of the doubt. The difference is that while Chevron directs judges to defer to an agency’s interpretation of an ambiguous statute when it promulgates a regulation, Auer tells judges to defer to an agency’s interpretation of its own ambiguous regulation.

Ultimate Power

As a result, a tremendous amount of power resides in the hands of federal bureaucrats as they have the ability to write the rules, they, in turn, enforce with no meaningful check on their actions.

Kisor v. Wilkie concerns whether a Vietnam veteran suffering from post-traumatic stress disorder is due disability benefits. Citing the doctrine of Auer deference, the Federal Circuit Court of Appeals deferred to the U.S. Department of Veterans Affairs’ own reading of the term “relevant” included in the regulations the VA, itself, wrote. Not surprisingly, they denied the veteran disability benefits.

NFIB actively surveys its members to determine the policies we engage in and the cases we take up.

While many regulations were rolled back in the last two years, they remain a top problem for small businesses, according to NFIB research. As a result, the NFIB Small Business Legal Center filed an amicus brief in Kisor since the outcome of the case will undoubtedly affect the future of federal regulation. In our brief, we urge the Supreme Court to abandon Auer deference.

Justification to Dump Auer Deference

There are three primary reasons America’s small businesses think Auer deference should be overturned.

First, the Auer doctrine is contrary to fundamental principles of separation of powers since it allows federal agencies to both write and interpret the law without any effective oversight by the judicial branch.

Second, the doctrine violates fundamental principles of due process because it creates an incentive for agencies to write broad regulations that they can later interpret expediently with no public input.

Finally, Auer deference leads to uncertainty and the inability of small businesses to plan for the future because they never know when an agency is going to change its interpretation of a regulation.

Interestingly, Auer doesn’t seem to have a vigorous defender when you look at the parties to the case—even the federal government argues that there are problems with the doctrine. Rather than overruling it, however, the government urges the court to narrow Auer through the application of a multi-part test it proposes.

The few advocates defending Auer, including several administrative law scholars, argue that the complaints lodged against Auer are overblown. They challenge the assertion that Auer incentivizes agencies to write vague rules, knowing they always can make “clarifications” later with little, if any, judicial oversight. Moreover, they say that in practice Auer deference doesn’t result in an unreasonably high win rate for federal agencies.

However, this is simply not true. There are numerous examples pointing to the significant costs that judges’ adherence to Auer deference has imposed on the regulated community.

For example, a farmer’s conservation contract with the U.S. Department of Agriculture was abruptly ended after nearly a decade due to the USDA’s arbitrary reinterpretation of the term “mixed hardwoods,” a decision that cost the farmer significantly in litigation fees and lost income.

A decision in Kisor is expected in June. It could tell us a great deal about how this current Supreme Court views the administrative state and the judicially created doctrines that have aided and abetted in its growth. America’s small and independent businesses are hoping the court decides in a way that stymies decades of agency expansion.

This column does not necessarily reflect the opinion of The Bureau of National Affairs, Inc. or its owners.

Author Information

Karen Harned serves as executive director of the National Federation of Independent Business Small Business Legal Center, a post she has held since April 2002. Prior to joining the Legal Center, Harned was an attorney at a Washington law firm specializing in food and drug law, where she represented several small and large businesses and their respective trade associations before Congress and federal agencies.