November 2016

Questions Concerning Federal Regulations during the Obama-Trump Transition

7 min

This client alert answers some frequently asked questions about the status of federal regulations during the transition between the Obama and Trump administrations. These questions arise in four major areas: Executive Orders, Midnight Rules, application of the Congressional Review Act, and ongoing judicial reviews of major regulations.

Executive Orders

Most Executive Orders are "politically enforceable" only. This means that they are not enforceable in court and do not grant any legal rights to third parties. Most Orders are statements of the President's policy priorities, expressed as a formal directive to agency heads who have been delegated actual implementation authority by Congress.

  • An Order in this broad category can be repealed immediately by a new President, by the simple act of issuing a new Order invalidating it. But the new President need not repeal an Order he disagrees with. He can simply tell his staff to instruct the agency heads to ignore his predecessor's Order and not to take political enforcement action against an agency that does not comply with the now outdated policy. This silent repeal of a prior Order happens relatively frequently, when a new President does not want to take the political heat for formally and visibly abandoning a policy of his predecessor.
  • There are some relatively rare situations where the President implements by Executive Order authority delegated directly to him by statute, such as management of federal lands in the west. The most important area of direct presidential implementation of a statute by Executive Order involves economic sanctions under the International Emergency Economic Powers Act. In issuing or revoking Orders that implement authority expressly delegated to him, the President must follow the procedures established by the statute.

Under the vast majority of Executive Orders, the most important step is not the issuance of the Order itself, but the actions taken by the agency under the powers delegated to it by Congress to carry out the President's policies.

The President cannot, by Executive Order or other executive fiat, invalidate or modify the final actions taken by an agency to implement his policy directives. Those actions remain in full force and effect unless revoked or amended by the agency under the authorizing statute and the Administrative Procedure Act, or unless overturned by a court.

Midnight Rules

From now until January 19, the Obama administration will, like its predecessors, promulgate a series of economically significant regulations, commonly known as "Midnight Rules." Many of these rules were ready for publication prior to the election but were held back to avoid creating political issues during the campaign.

Shortly after noon on January 20, President Trump's chief of staff will issue a Memorandum to the heads of all Executive agencies subject to presidential direction, instructing them (1) to withdraw any rules signed by their predecessor that are sitting at the Federal Register waiting to be published; and (2) not to submit any additional rules to the Federal Register without White House authorization.

The Obama administration anticipated this action and established a planning process to avoid this fate. On December 15, 2015, the head of OMB's regulatory review process sent a letter to the agencies subject to White House control, setting forth the administration's plans for handling major rules in its last 70 days. Agencies were instructed to give OMB early warning of their regulatory priorities, and OMB has prioritized its review of these rules so that they would be ready for promulgation shortly after the election.

The critical factor governing these Midnight Rules is that they must be published in the Federal Register on or before January 19. Under the Administrative Procedure Act, a rule is formally issued only when it is actually published in the Federal Register.

Much turns on the date of publication. A rule that has been signed by the agency head but has not been published in the Federal Register is not a final agency action, and has no legal force and effect. Such a regulation could be recalled by the Trump administration with a letter to the head of the Federal Register withdrawing the rule and instructing the Federal Register not to print it. Such an action is not subject to judicial review.

Once a rule has been published in the Federal Register, however, it is a final agency action and has legal force and effect. After publication, the rule can be revoked or amended only if the agency undertakes a new notice and comment rulemaking. The result of that second rulemaking would be subject to judicial review.

The Obama administration understands that if not planned carefully, the rush of regulatory submissions to the Federal Register after the election could cause a logjam and prevent rules from being published and becoming effective before the new administration takes office.

Congressional Review Act

The first skirmish concerning the regulatory process broke out on November 17 and involves the Congressional Review Act.

Under the CRA, economically significant rules (those with an annual economic effect of more than $100 million) adopted by an agency during the lame duck period can be overturned by adoption under expedited procedures (including no filibuster in the Senate) of a Joint Resolution of disapproval, passed by Congress within 60 days after the 15th day of business of the new Congress that will convene on January 3, and signed by the President (or, if the president vetoes, the veto is overridden). Opponents of individual Midnight Rules and other major rules adopted since last June are seeking to have a Republican Congress adopt resolutions of disapproval and forward those laws to President Trump for signature.

The CRA has been successfully invoked only once before, at the end of the Clinton administration, to disapprove a rule regulating keyboards to prevent carpal tunnel syndrome.

The major constraint on greater use of the CRA during the lame duck and the first weeks of the Trump administration is the scarcity of floor time. A resolution of disapproval of a rule has to compete with all other policy priorities before Congress in the lame duck and in the first 100 days of the new administration, such as passing an appropriations bill, confirmation of senior Trump appointees, infrastructure funding, revising the Tax Code, and modifying the Affordable Care Act.

The Obama administration has been counting on the fact that congressional leadership likely would have many other priorities higher than invalidation of agency rules during the period when the CRA is applicable to the Midnight Rules. The view was that even if one or two Midnight Rules were invalidated under the CRA, many other major agency rules would become law and go into effect, which is not a bad batting average.

On November 17, the House adopted a bill that would amend the CRA to permit a block vote to disapprove all Midnight Rules in one vote. Such a major measure presumably should be able to command floor time. This bill is unlikely to be signed by President Obama, but it is a shot across the bow to indicate the steps that the House is prepared to take once President Trump is sworn in.

Judicial Review in Court

Many major Obama administration regulatory initiatives are currently under review in the federal appellate courts, such as the legality of the EPA's regulation of greenhouse gas emissions from existing coal-fired power plants and the constitutionality of the structure of the Consumer Financial Protection Bureau.

Once in office, the Trump administration theoretically could decide to drop the legal defense of controversial rules issued by the Obama administration and support the challengers instead. Such a "confession of error," based on the outcome of the presidential election and an ensuing change in Executive Branch policy, has rarely happened in prior transitions.

  • The Trump administration would have to take full political responsibility for the abandonment of an Obama rule. For political reasons, this generally is considered an unattractive option by a new administration, as it would thereby take permanent ownership of any resulting adverse developments. In this transition, however, the Trump administration may see political benefits to be gained from switching sides and taking a position in court that is adverse to an Obama administration regulation it ran against.
  • The positions taken by the Obama administration in defending a rule typically are supported by private sector intervenors that would have full authority to continue defending the agency action in court. The litigation over the legality of a rule thus would continue, even if the Trump administration were to change sides or withdraw. The intervenors would argue that the interpretation of the authorizing statute adopted by the agency under Obama is correct, and that the change in position advocated by the Trump administration is politically motivated and incorrect, and should be rejected. If the court were to uphold the Obama administration action, the Trump administration would have taken all the political heat for little gain.

Regardless of the outcome of the litigation, the Trump administration would always have the fallback option of seeking to implement its policy preferences by having its appointed head of the agency conduct a comprehensive new rulemaking to change the regulation.