By Randolph J. May
Legal Times, February 7, 2000

Beware of regulation by agency advisory opinion or guideline. That's a good lesson to draw from last month's brouhaha surrounding the issuance-and speedy withdrawal-of the Occupational Safety and Health Administration's advisory opinion on work-at-home employees.

At best, such informal agency advice confuses regulated entities and the public. At worst, such advice is a heavy-handed attempt by an agency to achieve indirectly what it cannot achieve by more direct action. So when an agency issues informal advice, my advice is to pause and try to figure out what's really going on.

Here's what went on in the telecommuting controversy. On Nov. 15, OSHA, an agency within the Department of Labor, issued a six-page "letter of interpretation," in response to an inquiry by CSC Credit Services about the applicability of federal safety and health rules to employees' home offices. In its letter, OSHA advised CSC that the Occupational Safety and Health Act does apply to home employees. Thus, the letter stated that, in some circumstances, reasonable diligence "may necessitate an on-site examination of the working environment by the employer" so the employer can take steps to eliminate home safety and health hazards. By way of example, the letter warned: "If work is performed in the basement space of a residence and the stairs leading to the space are unsafe, the employer could be liable if the employer knows or reasonably should have known of the dangerous condition."

Now note two important facts. The OSHA advisory letter was issued by the agency's director of compliance programs more than two years after the CSC inquiry was received. So it is highly improbable the OSHA response was conceived hastily. And the letter was posted on the Labor Department's Web site shortly after it was issued. So OSHA wasn't adverse-at least initially-to widespread dissemination of the interpretative letter.

Confusion and Consequences

That all changed Jan. 4 when The Washington Post reported the existence of the OSHA advisory. In the ensuing firestorm, the Post reported the next day that Labor officials were explaining "that they weren't proposing any new regulations, only applying existing ones, and didn't plan to take enforcement actions." Also on Jan. 5, The Wall Street Journal reported that Secretary of Labor Alexis Herman said that the letter was meant as guidance "only" for CSC, not as a sweeping decision for all U.S. industry. But at the same time DOL officials stated that the advisory raised issues vital to employers. And Herman acknowledged that OSHA would perform a minimal number of home inspections each year.

By the end of Jan. 5, after numerous telephone calls between Herman and the White House, DOL "withdrew" its advisory letter in one of the speedier turnabouts in agency history. Herman explained that the letter had caused "widespread confusion and unintended consequences."

Indeed, the confusion over OSHA's letter has prompted a House subcommittee to summon DOL Solicitor Henry Solano for a Feb. 10 hearing to explain the legal implications of all advisory letters issued by DOL agencies since 1996.

To understand how agencies sometimes go about the business of regulation, it's useful to explore the sources of the "confusion" and "consequences" that Herman referred to. Agencies issue "nonlegislative rules" in many forms and under many monikers: bulletins, circulars, guidance, manuals, press releases, policy statements, staff memorandums and instructions, and letters of interpretation (such as the OSHA document).

The key point is that all of these agency utterances are legally nonbinding. This is because either they are not issued pursuant to a grant of delegated authority by Congress or they are not issued in accordance with the Administrative Procedure Act's publication and notice-and-comment requirements. Rules that meet these requirements are "legislative rules" and have the force of law. (Anyone wishing to delve more deeply into the intricacies of nonlegislative and legislative rules should consult the work of Professor Robert Anthony of George Mason University Law School, particularly his 1992 Duke Law Journal article, "Interpretative Rules, Policy Statements, Guidances, Manuals, and the Like-Should Federal Agencies Use Them to Bind the Public?")

Although it took two years to respond to the CSC inquiry, OSHA issued its interpretative letter without following the APA rule-making requirements. Therefore, the interpretation was not legally binding on anyone-not even CSC.

But note the practical effect of OSHA's action. Any employer that was aware of the letter-and OSHA certainly promoted awareness by posting it on its Web site-would be concerned about potential liability for home hazards. Such employers would not want to risk heavy-handed enforcement by OSHA and would likely cut back on work-at-home opportunities. To use Herman's word, this is one of the predictable "consequences" of this type of OSHA action.

Another recent example of informal agency advice is the Department of Education's issuance of a "draft guidebook" concerning the use of the SAT and other standardized tests in college admission decisions. This may be another case where an agency is using informal guidance to achieve a result it couldn't through more formal action. The draft guidelines, still subject to revision, suggest that these tests may violate federal civil rights laws because, on average, certain minorities score less well than white students. Of course, colleges found by the Education Department to be violating the civil rights laws are subject to enforcement actions that may result in a loss of federal funds. So the guidebook, while legally nonbinding, could have a practical effect on college admissions decision making.

Unclear Motivation

In the work-at-home controversy, OSHA's true motives are unknown. Perhaps the agency wanted to scare employers into reducing work-at-home opportunities to assuage its strong union constituency. Perhaps, for what it considered to be benevolent (if paternalistic) reasons, OSHA was trying to extend its reach into the home, surmising that it could not do so if it attempted to promulgate a legislative rule. Or perhaps the agency was simply trying to be helpful by providing its own interpretation of the law to an inquiring company. We can't be sure, but I'd bet on some combination of the first two motives.

What we can be sure of (as Herman acknowledged) is that the OSHA letter created confusion, as is often the case with nonlegislative rules. Before the letter was withdrawn, Sen. Joseph Lieberman (D-Conn.) predicted lots of lawsuits "to block this extension of the rule." He did not believe the letter was merely an interpretation of existing law, as OSHA proclaimed. And if the letter was a statement of existing law, why did OSHA "withdraw" it? And what is the practical effect of withdrawing a letter that is said to be merely an interpretation of existing law?

There are occasions when it is appropriate for agencies to issue interpretative guidance, particularly when the advice relates to some esoteric area of the law (e.g., a complex section of the Internal Revenue Code) and is likely to affect a relatively small number of people. But as the OSHA experience indicates, if the administrative action is likely to have an impact on large segments of the public and appears to extend the agency's authority or is otherwise controversial, the agency should follow the APA's legislative rule-making procedures.

That way the agency can be educated by public comment concerning the various pros and cons of the proposed rule. For instance, with regard to work-at-home employees, there are obvious economic and social trade-offs to be considered concerning worker protection, pollution prevention, and family-friendly objectives. The other benefit from following the APA procedures is that the confusion concerning the import of the agency's action is eliminated. The public knows that the resulting rule has the force of law.

Hopefully, the controversy engendered by OSHA's work-at-home advisory will make other agencies more cautious about using informal guidance for inappropriate regulatory cajoling. It may make courts more careful about giving undue deference to informal agency guidance. And, finally, it may make regulatees and the public more aware that not every utterance of the "fourth branch" has the force of law.

Randolph J. May is a senior fellow and director of communications policy studies at the Progress & Freedom Foundation in Washington, D.C. The views expressed are his own and do not necessarily reflect the views of the foundation.

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