How Agencies Should Use Waivers and Exemptions

Think of administrative agencies, and you often think of their efforts to enforce the law, such as environmental regulators fining polluters or financial regulators taking inside traders to court. In fact, agencies sometimes do just the opposite: They excuse parties from compliance. Agencies can use either prospective waivers or exemptions to excuse regulated entities from compliance. How and when agencies use these tools is the subject of a set of recommendations recently adopted by the Administrative Conference of the United States (ACUS).

The topic can be tricky. On the one hand, waivers and exemptions can be good things. After all, agencies often need to grant flexibility when circumstances require. Emergencies like Hurricane Sandy, for instance, have prompted the Federal Transit Administration to issue “blanket waivers for several statutory and regulatory provisions.” New technologies, like “unmanned aircraft systems,” or drones, similarly demand adaptability. In more established settings, such as mining operations, general rules do not always fit particular situations. And agencies sometimes just do not have the resources for full enforcement. Waivers and exemptions thus often make a great deal of sense.

Unfortunately, waivers and exemptions also present risks. When abused, they may result in arbitrariness and unfairness. They can also undermine predictability and public safety. Additionally, there is a danger that insiders may have greater access to waivers and exemptions than new market entrants. Further exacerbating these risks, agencies may succumb to the temptation to rely too heavily on waivers and exemptions rather than amending outdated regulations.

Waivers and exemptions thus present a significant challenge: How can we gain their benefits while minimizing their costs?

Thankfully, ACUS exists to tackle tough topics. In particular, ACUS can convene those working inside and outside of government to bring their collective knowledge to bear, uniting agency staff, appointed officials, practitioners, academics, and many others with regulatory experience. The result, hopefully, is a set of best practices that reflect both practical and theoretical insights. The question of when agencies should use waivers or exemptions is precisely the sort of puzzle that ACUS is designed to untangle.

For over a year, ACUS has been hard at work on this puzzle. The result is a series of recommendations reflecting the input of many contributors, including our respective roles as the project’s consultant and report author and the chair of ACUS’s Administration and Management Committee.

Following the report’s preparation, the committee hashed out multiple draft recommendations over the course of two meetings. The results were then passed onto the ACUS Council, which voted to place them on the agenda of the December 2017 Plenary Session, where they were adopted. Throughout this process, individuals with wide-ranging viewpoints and experiences wrestled with how to balance agencies’ need for adaptability and experimentation with weighty normative goals like transparency and consistency. Many members were also rightly concerned with legal constraints and the need for underlying statutory authorization.

The recommendations are divided into three parts. The first deals with the scope of an agency’s authority by suggesting that agencies ensure that waivers and exemptions have congressional blessing and are not necessitated by vague regulations or statutes.

The second part states that agencies should establish standards and internal procedures, to the extent practicable, for seeking and approving waiver and exemptions. Equal treatment of parties, absent extenuating circumstances, is also important. So is clearly announcing the duration of waivers or exemptions in advance.

Finally, the last part encourages agencies to consider soliciting public comments to inform its decisions and decision-making procedures. It also encourages explanations for decisions and representative examples to the extent practicable and consistent with legal or policy concerns, such as privacy.

The language of the recommendations was carefully developed during a very lengthy process, so it is difficult to summarize them in a way that does total justice to their nuances. We thus hope that agency officials and staff will review these recommendations and, where appropriate, incorporate them into agency practice. Scholars and commenters, too, may see in them ideas in need of further development.

Waivers and exemptions are a critical part of administrative law and merit serious thought. We hope these recommendations are a step in the right direction.

Aaron L. Nielson is an Associate Professor of Law at Brigham Young University. He served as a consultant to ACUS and authored the report, Waivers, Exemptions, and Prosecutorial Discretion: An Examination of Agency Nonenforcement Practices.

Jennifer Nou is the Neubauer Family Assistant Professor of Law at the University of Chicago Law School, and serves as the chair of ACUS’s Administration and Management Committee.