Seyfarth Synopsis: Two new Executive Orders and a corresponding decision in the Supreme Court effectively limit how agencies can utilize guidance against private parties—the agency must rely only on guidance that is fully consistent with the governing statute.
Employee benefit lawyers, including employee benefit litigators, have historically been inclined to rely on federal agency guidance that does not technically have the force of law. Lawyers have followed this practice to appease the agency—the first line of potential opposition—and thus allow a client to re-focus quickly on business goals. Another reason is that the federal courts have for years given deference to federal agencies. So why not reflexively back away from a fight when the agency is likely to win in court anyway?
The difficulty with a "guidance-as-gospel" approach is that federal agency officials and regulators are not elected and thus cannot enact legislation. Deference may operate as a shield for guidance that is outside what Congress has legislated, and is based on an executive-branch political agenda.
This is the view of the Trump administration.
One of the new executive orders attempts to stop reliance on guidance that goes beyond a statute, or notice and comment regulations (which have the force of law, if consistent with the governing statute). The other order requires agencies to establish a single, searchable toolbar that links to all of the already issued guidance. Additionally, the website must note that the guidance does not have the force and effect of law, unless as authorized by law or incorporated into a contract. The new executive orders direct that enforcement action cannot be based only on guidance. Enforcement must be based on the governing statute.
The force of the new executive orders may extend beyond the life of the Trump administration.
Federal courts increasingly question the wisdom of the historic deference given to guidance. Noteworthy is Kisor v. Wilkie, 139 S. Ct. 2400 (2019), wherein a veteran sought PTSD disability benefits from the Department of Veterans Affairs. The agency partially denied his claim and the Court of Appeals for the Federal Circuit affirmed by deferring to the agency's interpretation of what it said was an ambiguous regulation. The Supreme Court reversed and remanded the case back to the Court of Appeals. Justice Elana Kagan wrote the majority opinion, and stated that a court should defer to the agency only after satisfying itself that the regulation is "genuinely" ambiguous, and if so, "reasonable." The Court added that the agency's interpretation must be an official position, as opposed to an ad hoc statement, must implicate its substantive expertise, and be otherwise "fair and considered."
To be sure, Kisor does not involve guidance, but its holding—federal courts must not reflexively defer to agency action—applies with the same (or greater) force to guidance. So, employers and fiduciaries should rely only on guidance they believe is fully consistent with a careful analysis of the governing statutory law.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
