© 2007 prentice hall, business law, sixth edition, henry r. cheeseman1 chapter 43 administrative...

© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman

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Chapter 43 Administrative Law


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Administrative Agencies• Created by federal, state, and

local agencies• Regulate businesses and

individuals• Governed by administrative law• Established by the legislative,

executive, and judicial branches


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Federal Administrative Agencies• Administrative agencies that are

part of the executive, legislative, or judicial branches of government.

• The majority of federal administrative agencies are part of the executive branch of government.

• Administrative agencies created by Congress are independent of the executive branch.– They have broad regulatory powers

over key areas of the national economy.


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State Administrative Agencies• Administrative agencies that

states create to enforce and interpret state law.– Have a significant effect on

business.– Corporations department, fish and

wildlife, licensing boards

• Local governments and municipalities create administrative agencies to administer local law.– Zoning commissions, liquor boards


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General Government Regulation

• Businesses and industries are subject to general government regulation that applies to many businesses and industries collectively.– NLRB oversees labor union

and management activity, – OSHA regulates safety and

health standards for workers– FDA establishes standards for

drugs, food, and alcohol


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Specific Government Regulation

• Many industries are subject to specific regulation that regulates companies in that industry.– Banking (Federal Reserve)– Television (FCC)– Railroads (FRA)– Commercial airlines (FAA)


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Administrative Law• Administrative Law is a

combination of substantive and procedural law.

• Each federal administrative agency is empowered to administer a particular statute or group of statutes.– These statutes are the

substantive law that is enforced by the agency.


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Administrative Procedure Act• Establishes certain

administrative procedures that federal administrative agencies must follow in conducting their affairs.– notice and hearing requirements– rules for conducting agency

adjudicative actions– procedures for rule making

• Most states have enacted administrative procedural acts that govern state administrative agencies.


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Administrative Law Judge• ALJs preside over

administrative proceedings.– Decide questions of law and

fact concerning the case.– No jury.– The ALJ is an employee of the

administrative agency.– ALJ issues decisions in form of

an order.• Appealed first to agency for

review, then to appropriate court.


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Delegation of Powers• When an administrative agency

is created, it is delegated certain powers.– Legislative powers– Executive powers– Judicial powers

• If an administrative agency acts outside the scope of its delegated powers, it is an unconstitutional act.


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Delegated Legislative Powers

• Substantive rule making• Interpretive rule making• Issuing policy statements• Granting licenses


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Rule Making• Federal agencies may issue

substantive rules– Has the force of law.– Must be adhered to by

covered persons and businesses.

– Violators may be held civilly or criminally liable.

– All substantive rules are subject to judicial review.


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Substantive Rule Making• Must follow APA procedures:

– Notice of proposed rules must be published in Federal Register.

– Interested parties must be given an opportunity to participate.

– Informal rule making:• All public input must be reviewed.• Notice-and-comment rule making

– Formal rule making:• Agency conducts trial-like hearing.

– Agency then can announce its final rule making.


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Interpretive Rules• Rules issued by administrative

agencies that interpret existing statutory language.

• These rules do not establish new laws.

• Neither public notice nor public participation is required.


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Statements of Policy• A statement issued by

administrative agencies.– announces a proposed course

of action that an agency intends to follow in the future.

• These statements do not have the force of law.

• Public notice and participation are not required.


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Licensing Power• Statutes often require the

issuance of a government license before a person can enter certain types of industries or professions.

• Most administrative agencies have:– power to determine whether to

grant licenses to applicants.– Power to suspend or revoke

licenses.• Subject to judicial review:

– Courts usually defer to agency’s expertise.


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Judicial Power• Many agencies have the judicial

authority to adjudicate cases through an administrative proceeding.

• Initiated when an agency serves a complaint on a party for violation of a statute, administrative rule, or order.

• Agency must comply with the Due Process Clause.– Must give proper and timely notice.– Must allow an opportunity to present

evidence.


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Executive Power• Executive powers may be

granted to agencies.– Investigation and prosecution of

possible violations of statutes, administrative rules, and administrative orders.

• May obtain information– Voluntarily – Administrative subpoena

• Can seek judicial enforcement if party fails to comply.


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Administrative Searches• Physical inspections are subject

to Fourth Amendment protection– No unreasonable search or

seizures– Reasonable searches:

• Party voluntarily agrees.• Pursuant to valid search warrant.• Business or industry which is

covered by warrantless searches provisions.


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Administrative Searches, continued

• Warrantless searches automatically valid:– Liquor sales– Firearms sales

• Hazardous industries– Statutes provide for non-arbitrary

warrantless search:• Coal mines• Certain chemicals and gases• Explosives factories and stores

• Evidence from unreasonable search and seizure inadmissible.


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Judicial Review of Administrative Agency Actions

• Many federal statutes expressly provide for judicial review.

• Where no enabling statute, the APA authorizes judicial review of federal agency actions.

• The party appealing the decision is the petitioner.

• Decisions of federal administrative agencies are appealed to the appropriate federal court.

• Decisions of state administrative agencies may be appealed to the proper state court.


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Judicial Review • The case must be ripe for

review.• The petitioner must have

exhausted all administrative remedies.

• Final order rule– The decision of the administrative

agency must be final before judicial review can be sought.


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Appeal of a Federal Administrative Agency Rule, Order, or Decision

AdministrativeAdministrative Law JudgeLaw Judge

(ALJ)(ALJ)

Federal Federal Administrative Administrative

AgencyAgency

U.S. District U.S. District CourtCourt

U.S. Court of U.S. Court of AppealsAppeals

U.S. Supreme U.S. Supreme CourtCourt

Whether the appeal from the Federal Whether the appeal from the Federal Administrative Agency is to the U.S. Administrative Agency is to the U.S. District Court or the U.S. Court of District Court or the U.S. Court of Appeals is determined by the federal Appeals is determined by the federal law in question.law in question.


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Standards of Judicial Review of Administrative Agency Decisions

• Questions of Fact

• Questions of Fact

•Questions

of Law•Questions

of Law


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Questions of Law• If the administrative agency has

decided a question of law: – Reviewing court is free to substitute

its own judgment for that of the administrative agency.

– interpretation of statutory language


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Questions of Fact• If the administrative agency has

decided a question of fact: – Not easily overturned.– Reviewing court usually defers to

the agency’s fact-finding.

• APA specified standards for review of fact-finding:– The arbitrary, capricious abuse of

process test.– The substantial evidence test.– The unwarranted by the facts test.


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Disclosure of Agency Administrative Actions

• Public concern over possible secret agency actions induced Congress to pass several statutes that:– Promote public disclosure.– Protect parties from overly abusive

agency actions.


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Freedom of Information Act• Requires that documents of

federal administrative agencies be open to the public.

• Requires agencies to publish their proceedings, rules, regulations, and other information in the Federal Register.

• Specifies time periods for agency response to information requests, sets limits on copying charges, and provides for disciplinary action against employees that refuse to honor requests


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Freedom of Information Act (continued)

• Documents exempt from disclosure:– Those classified as in the interest of

national security.– Those that are statutorily prohibited.– Records whose disclosures would

interfere with law enforcement proceedings.

– Medical, personnel, and similar information.

– Papers containing trade secrets, confidential, or privileged information.

• All decisions not to disclose requested documents are subject to judicial review.


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The Government in theSunshine Act

• Requires that most meetings of federal administrative agencies be open to the public.

• Exceptions include meetings:– Where a person is accused of a

crime.– Concerning an agency’s issuance of

a subpoena.– Where public attendance would

frustrate the implementation of an agency action.

– Concerning daily operations.• All decisions not to close a

meeting to the public are subject to judicial review.


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The Equal Access to Justice Act• Protects private parties from

harassment by federal administrative agencies.– Must be subject to an

unjustified federal administrative agency action

– Party has the right to sue. – May recover attorneys’ fees

and costs.– Courts have held that the

actions must be extremely outrageous to get an award.


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Privacy Act• Individual’s privacy

– Requires that federal administrative agencies maintain only information that is relevant and necessary.

– Must be needed to accomplish a legitimate agency purpose.

• Gives individuals access to these records and a right to correct the records.