Delegation, the Administrative State, and the Powers of Federal Agencies in the United States
The idea of separation of powers is something that is often learned in grade school and, in theory, is the means by which the U.S. federal government is intended to operate. However, this traditional way of thinking often ignores the role of the federal bureaucracy in modern governance and how it may disrupt the separation of powers. This article will demonstrate howthe bureaucracy is possessed of all three governmental powers, raise questions as to whether the modern bureaucracy distorts traditional notions of separation of powers, and address other issues concerning bureaucratic governance in a technologically complex society.
The Federal Bureaucracy and the Bureaucrat
The experience of the colonists with the British crown led the framers of the Constitution to be skeptical of a strong centralized government. This skepticism is what led the framers to create mechanisms by which they could create a centralized national government, but one that was limited in the use of the powers it could exercise. One of these mechanisms, borrowed from the works of Mon-tesquieu, was the use of separation of powers, or the idea that governmental power should be divided up among three branches of government: the legislature, the executive, and the judiciary. The division of governmental power would, in turn, provide limits on the use of governmental power by designing a system that was intended to be inefficient by requiring coordination of multiple branches.
The federal bureaucracy is hardly mentioned in the United States Constitution. Article II, Section 2 states, “he [the president] may require the opinion, in writing of the principal officer of each of the executive departments, upon any subject relating to the duties of their respective offices…” and Article II, Section 3 states, “he shall take care that the laws be faithfully executed, and shall commission all the officers of the United States.” In spite of these rare mentions, these references make it clear that the framers realized there would be a federal bureaucracy that would provide advice, support, and expertise to the president of the United States. In 1789, the administration of George Washington would already include the Departments of Treasury, War, and State. Since this time, the federal bureaucracy has grown tremendously in size to include 15 cabinet-level departments, over thirty independent agencies, and roughly 3,000,000 civil servants. Why was there such a tremendous growth in the size of the federal bureaucracy over time and what does it mean for modern governance in the United States?
In early American history, the United States was largely an agrarian society and, as such, the need for detailed technical expertise was not a required skill for those working in government. Most received their positions through election, nepotism, or reward for political support of elected officials. The industrial revolution in the 19th century in the United States would change all of that as the growth in technology would lead to a need for governmental expertise to understand and regulate these new technologies in a society that was becoming increasingly complex. The problem was that legislators often did not possess the level of expertise necessary to understand the detailed intricacies of these technologies. The result was that legislators could not fully deal with many of the policy issues facing the nation. Inevitably, this would lead to the need for Congress to delegate authority to newly formed federal agencies filled with expert bureaucrats to create more detailed policies surrounding new technologies.
Delegation of Power
The issue of delegation of power from Congress to the bureaucracy has been a contentious issue since the very early history of the United States. In his Second Treatise (§141), John Locke said, “The Legislative cannot transfer the Power of Making Laws to any other hands. For it being but a delegated Power from the People, they who have it, cannot pass it over to others.” This idea, known as delegate potestas non potest delegare or “a delegated power cannot itself be delegated” would later become known as the rule of nondelegation. In short, the question becomes whether Congress can delegate a legislative power that has been delegated by the Constitution to Congress to the federal bureaucracy. Does this delegation inherently violate the separation of powers created in the Constitution? The Supreme Court first addressed this issue in 1825 in the case of Wayman v. Southard (23 U.S. 10). Here, Congress vested the courts with the ability to “make and establish all necessary laws” for the conduct of judicial business in the Judiciary Act of 1789. Chief Justice Marshall would establish a standard whereby Congress could delegate authority so long as it provided the general purposes and provisions of the law that could be filled in by bureaucratic bodies. This principle would be later reaffirmed in J.W. Hampton & Company v. United States (1928) by Chief Justice Taft stating that Congress could delegate legislative power so long as Congress established an “intelligible principle” to guide the body in which such power was vested. But the issue of delegation and separation of powers was far from settled.
In Panama Refining Co., et al. v. Ryan et al. (293 U.S. 388, 1935) and A.L.A. Schechter Poultry Corporation v. United States (295 U.S. 495, 1935), the Supreme Court would strike down New Deal programs of President Roosevelt as unconstitutional delegations of power by Congress to the president. Many scholars believe these decisions represented aberrations that were motivated by anti-New Deal justices, as this would mark the last time the Court would strike down delegations of power by Congress as a violation of the separation of powers. While this would pave the way for continued delegation of legislative power to bureaucracy, the issue of the limits of such delegations as potential violations of the separation of powers still continues to arise in more recent cases such as Mistretta v. United States (488 U.S. 361, 1989) and Whitman v. American Trucking Association (531 U.S. 457, 2001). In the latter case, the Court decided that the authority to create standards for determining air quality that had been delegated by Congress to the director of the Environmental Protection Agency did not violate the separation of powers under the Constitution. Here the Court relied on the “intelligible principle” standard and again reinforced the idea that delegation was considered acceptable.
While the Court seems to continue to reinforce the idea that delegation is acceptable even in light of separation of powers, the issue of delegation certainly raises interesting questions. Does delegation interrupt the separation of powers intended by the framers of the Constitution? Is delegation a necessary component of a complex society in which generalist legislators do not possess the expertise necessary to create detailed rules and regulations? Does the slow pace and fragmentation along party lines in Congress make reliance on bureaucrats to create policy inevitable? Regardless of one’s answer to these questions, the clear result is that the federal bureaucracy is now vested with a quasi-legislative power whereby federal agencies now become policy- making entities.
Policy-Making and Adjudication
The formalization and recognition of this quasi-legislative power possessed by the bureaucracy would occur with the passage of the Administrative Procedure Act of 1946 (PL 79-404). The policy-making function of agencies would come to be known as rulemaking. The Administrative Procedure Act (APA) defines a rule as “an agency statement of general or particular applicability and future effect designed to implement, interpret or prescribe law or policy…” (§551). One can see a clear recognition of a policy-making function of agencies as described in the definition. In fact, each year, agencies pass thousands of rules that become codified in the Code of Federal Regulations (CFR) under the rulemaking procedures prescribed in the APA. Rules cover a wide variety of policy areas, from requirements of food manufacturers to provide nutritional information for consumers to regulation of the exact candlepower of the headlights of locomotives. While these rules have the power of law, none have to follow constitutional procedures of how a bill becomes a law. This raises questions about unelected bureaucrats making policy in a democracy. To help alleviate this concern, the APA requires agencies to provide notice of proposed rules and to allow for a minimum of 30 days for the public to comment on proposed rules. Members of the public can send comments to agencies noting objections, agreement, or other concerns. The government has even set up a website, www.regulations.gov, where the public can submit comments electronically on rules proposed by federal agencies. This increases the ability of the public to participate in this policy-making process, thereby making it more democratic. But should the American public still have concerns about policies being made by unelected government officials? This question continues to be debated, as it again pits the need for expert bureaucrats who rely on technical information to inform decision-making against the need for accountability in a democratic society. Ultimately, it returns to the question of delegation in a system based on separation of powers.
The rulemaking, or quasi-legislative, function of federal agencies is not the only governmental power that has been delegated to the federal bureaucracy. The federal bureaucracy has also been vested with a quasi-judicial function referred to as adjudication. Sections 554–558 of the APA outline the adjudication process for federal agencies as a means of determining whether parties have violated the law or the rights of other parties. Adjudication is differentiated from rulemaking in that rules have “general applicability,” while adjudication matters involve an individual or set of individuals that have been “exceptionally affected” by an agency action. Two seemingly similar cases help to illustrate the difference between these two types of agency actions.
In the case of Londoner v. Denver (210 U.S. 373, 1908), a small group of residents in the City of Denver were assessed a tax to cover the cost of repaving a street on which the group of residents resided. The taxing body, the State Board of Equalization, provided these residents no type of hearing, whether formal or informal, in order to present their views regarding the assessment of the special tax. These residents were only afforded the opportunity to send in written comments noting their objections to assessment. The Supreme Court stated that the procedures of agency were inadequate and ordered that residents be provided some type of hearing in front of the agency in order to express their views orally. In the case of Bi-Metallic Investment Company v. State Board of Equalization (239 U.S. 441, 1915), the City of Denver’s State Board of Equalization increased the valuation of all taxable property by 40% in order to bring property values in line with current valuation. In this case the tax was assessed on all property owners in Denver. Bi-Metallic argued that they should be afforded a hearing, as was the case in Londoner, in order to note objections orally, but the Court rejected this argument. Why, in light of what was decided in Londoner, a case with seemingly similar facts, would the Court decide differently?
The Court explained that the facts in Londoner represented a judicial action of an agency because only a small group of residents was affected by the agency action (i.e., “exceptionally affected”), whereas in Bi-Metallic all residents were equally affected (i.e., the rule had “general applicability”) there-by representing a legislative action of agency. For the Court, it is “impractical” to give every resident affected by a general legislative action the opportunity to be heard, as it would prevent government from ever passing any type of legislation. Thus, in these two cases the Court delineated the difference between legislative actions of agencies and judicial actions of agencies and the procedures that were necessary for each of these two types of actions. This would provide the basis for the APA, which also distinguishes between these two types of actions: rulemaking and adjudication. So what do judicial actions of agencies look like in the modern context?
Some federal agencies, like the National Labor Relations Board (NLRB), rely very heavily on adjudication, as opposed to rulemaking, as a means of agency decision-making. While adjudication can range from very informal to formal, the most formal adjudication is almost indistinguishable from procedures and characteristics of other federal courts. Thus, many federal agencies have their own courts and impartial referees by which to resolve disputes or enforce rules created by the agency. These courts are just like any other court in that they involve adversarial legal style, burdens of proof, presentation of evidence, testimony from witnesses, an impartial decision-maker, and the creation of a factual record on which a decision is made. In short, formal adjudication by agencies most heavily resembles a non-jury civil trial presided over by a single judge. These courts have often been referred to as “the hidden judiciary” as most of the American public is unaware of the existence of such courts or judges.
Administrative Law Judges
Previously referred to as hearing officers or trial examiners, the position of administrative law judge (ALJ) was created by the APA in 1946 to act as an impartial referee during the adjudication process. The ALJ represents a unique actor in that they are both bureaucrat and judge at the same time. Unlike Article III judges who are nominated by the president and confirmed by the Senate, ALJs are hired and placed by the Office of Personnel Management (OPM) as merit employees through specifically designed, competitive examinations as is the case with other federal merit employees (bureaucrats). But the ALJ also plays the role of judge, as ALJs possess many of the same roles and functions as other federal judges. They can administer oaths and affirmations, issue subpoenas, determine the admissibility of evidence, develop a record of evidence, and make findings of facts. Thus, the role of the ALJ is one of both bureaucrat and judge.
Currently, there are over 30 federal agencies that employ nearly 2,000 administrative law judges. This number represents over twice the number of judges in the federal court system. The vast majority (1,500) of these judges are employed by the Social Security Administration (SSA), but collectively ALJs issue tens of thousands of decisions across a wide variety of policy issues every year. These policy areas include environmental policy, labor disputes, disability benefits, licensing of television and radio stations, consumer protection, anti-trust, and many, many other policy areas. It is often said that the average U.S. resident is more likely to have a case in front of an administrative law judge than any Article III federal court. This demonstrates that this largely-ignored actor plays a tremendous role in the daily operation of the government.
Because of the importance of the role of the ALJ, ensuring impartiality is crucial to the function of the ALJ. The APA provides great independence to ALJs in order to ensure impartiality in their decision-making. The pay of ALJs is not determined by the agency by which they are employed, rather the Office of Personnel Management (OPM), the agency responsible for all hiring in the federal government, is charged with setting pay rates for ALJs. This ensure that agencies cannot force ALJs to render more favorable decisions by reducing their pay. In addition, ALJs cannot be removed from office unless they have first been afforded a hearing in front of the Merit Systems Protection Board, a federal agency responsible for monitoring federal merit employees. ALJs are thus given a great deal of independence to ensure impartiality in their decision-making. In short, this is an important judicial actor, vested with a great deal of decisional independence, responsible for making thousands of decisions across a wide variety of policy areas.
Big Questions for the Future
Perhaps for these reasons, the position and hiring procedures of ALJs have recently gained attention and generated heated debate in the federal courts. The 10th Circuit Court of Appeals recently ruled that the hiring process of the Securities and Exchange Commission for ALJs was unconstitutional (see Bandimere v. SEC, 844 F. 3d 1168, 2016). However, the D.C. Circuit of Appeals ruled that the SEC’s hiring practices were constitutional (see Lucia v. SEC, 832 F. 3d 277, 2016). The general debate surrounds whether ALJs are inferior officers of the United States and thus require that they be appointed by the president. On a larger scale, this means that the position of ALJ itself may be unconstitutional in its current form. Because of the inter-circuit conflict of outcomes, this question is likely to be addressed by the United States Supreme Court. If the position were to be declared unconstitutional, this would raise questions as to how tens of thousands of cases decided by federal agencies would be handled. Would this burden be placed on the federal court system? Would this lead to a larger federal judiciary?
At this point, it should be clear that the federal bureaucracy is possessed of all three powers of government. It possesses a legislative power through its rulemaking function, a judicial power through adjudication, and, by default as an executive actor, the executive power. The question over whether this represents a violation of the separation of powers persists, but few answers are to be found in the Constitution and the Supreme Court seems to have accepted the realities and necessities of delegation in a technologically complex society. Even the framers realized the need for bureaucracy as even the earliest administrations relied on bureaucratic actors. However, questions surrounding the separation of powers, delegation, and the role of the bureaucratic actors such as the ALJ demonstrate that these issues will persist for many years to come. These issues represent the struggle and seemingly paradoxical desire to maintain values of democracy while realizing the need for bureaucratic expertise.