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Authority for Administrative Agency Functions

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What authority exists for creating and vesting authority in administrative agencies?

The Constitution is silent with regard to the creation of administrative agencies. Congress passes statutes authorizing the creation of administrative agencies. The statutes are known as, “enabling statutes”. Congress’s authority to create agencies is inferred from its role as legislator. The ability of the executive branch to oversee the operations of administrative agencies is inferred from its responsibility to execute the laws of the United States. The authority to vest quasi-legislative and quasi-judicial authority in the administrative agencies has come under attack at various points in history. The US Supreme Court has reviewed these allocations in a number of situations and generally deemed the allocation of authority valid.

  • Delegation of Legislative Functions – One of the earliest challenges to the authority of Congress to delegate quasi-legislative responsibilities to administrative agencies came in Wayman v. Southard. In this case, the Supreme Court held that administering a statute requires the ability to delegate the responsibility of filling in details to subordinate officials. This based the legislative authority of agencies on the President’s authority to execute the statutory law. In 1935, the US Supreme Court reviewed the authority of Congress to delegate authority to the President, which is then delegated to the President’s cabinet. The Court recognized that such a delegation is valid if Congress provides sufficient statutory instruction to guide (and limit) the President in the execution of such authority. Since that time, a few attempted delegations of power to the Executive has been overturned as too broad, while many others have been found to be constitutionally valid.
  • Delegation of Judicial Functions – In 1935, in Humphrey’s Executor v. United States, the Supreme Court held that administrative agencies may carry out quasi-judicial and quasi-legislative functions in the execution of laws as agents of the legislative and judicial branches. Congress’s grant of authority to administrative agencies to issue sanctions to individuals was pursuant of the agency’s regulatory function. In 1909, the Supreme Court in Oceanic Steam Navigation Co. v. Stranahan, upheld this practice as constitutional.

Congress maintains the authority to control and limit agency authority. Further, Congress can pass statutes that criminalize activities regulated by agencies. Enforcement of such statutes would necessarily be the role of the executive branch, while determination of challenges to these statutes would be the role of the judicial branch.

Discussion: Are you convinced that the legislative and executive functions of agencies are contemplated within the constitutional authority granted the executive and legislative branches?

Discussion Input

  • It’s very difficult to determine what was contemplated by the authors of the Constitution. Originalists will go do this line of reasoning when determining agency authority. Others may argue that the Constitution was drafted with the purpose of allowing continued interpretation. As such, the role of administrative agencies is a natural evolution of an increasingly complex government.

Practice Question: Darian owns a payday and title loan agency. He makes loans to individuals secured by a lien on the borrowers paychecks or vehicle title. He recently expanded his operations to include making unsecured student and training loans in exchange for a percentage of future wages post graduation. His operations are generally regulated by the Consumer Financial Protection Bureau (CFPB). The agency investigates Darian’s new business practice and seeks to levy on fine on his business for failing to make the required consumer disclosures. What are Darian’s options for challenging the authority of the CFPB to regulate his business activity?

Proposed Answer

  • For one, Darian can go through the administrative court process. If this fails, he can bring a legal action challenging the CFPB’s actions. At trial, he can argue that regulating this type of activity is beyond the scope of the CFPB’s enabling statute or argue that the administrative agencies actions are unconstitutional based upon their functions.

Constitutional Authority for Agencies

Pildes, Richard H., Separation of Powers, Independent Agencies, and Financial Regulation: The Case of the Sarbanes-Oxley Act. NYU Journal of Law and Business, Vol. 5, p. 485, 2009; NYU School of Law, Public Law Research Paper No. 10-01. Available at SSRN: https://ssrn.com/abstract=1514585

Coglianese, Cary, Presidential Control of Administrative Agencies: A Debate Over Law or Politics? (February 10, 2012). University of Pennsylvania Journal of Constitutional Law, Vol. 12, p. 637, 2010; U of Penn Law School, Public Law Research Paper No. 12-07. Available at SSRN: https://ssrn.com/abstract=2002958

Mascott, Jennifer, Constitutionally Conforming Agency Adjudication (Fall 2017). 2 Loyola Journal of Regulatory Compliance 22 (2017); George Mason Legal Studies Research Paper No. LS 17-14. Available at SSRN: https://ssrn.com/abstract=2992874

Froomkin, A. Michael, Note, In Defense of Administrative Agency Autonomy (1987). Yale Law Journal, Vol. 96, 1987. Available at SSRN: https://ssrn.com/abstract=2715762

Emerson, Blake, Administrative Answers to ‘Major Questions’: On the Democratic Legitimacy of Agency Statutory Interpretation (January 9, 2017). Minnesota Law Review, Vol. 102, No. 5, 2018. Available at SSRN: https://ssrn.com/abstract=2818786 or http://dx.doi.org/10.2139/ssrn.2818786

Marisam, Jason, The President’s Agency Selection Powers (March 18, 2013). Administrative Law Review, Vol. 65, p. 821, 2013. Available at SSRN: https://ssrn.com/abstract=2235088

Walker, Christopher Jay, Inside Agency Statutory Interpretation (October 14, 2014). Stanford Law Review, Vol. 67, pp. 999-1079, 2015; Ohio State Public Law Working Paper No. 277. Available at SSRN: https://ssrn.com/abstract=2501716

Metzger, Gillian E., Federalism and Federal Agency Reform (October 2010). Columbia Law Review, 2010; Columbia Public Law Research Paper No. 10-250. Available at SSRN: https://ssrn.com/abstract=1690689

Rao, Neomi, A Modest Proposal: Abolishing Agency Independence in Free Enterprise Fund v. PCAOB (April 27, 2011). Fordham Law Review, Vol. 79, No. 6, pp. 2541-2575, May 2011; George Mason Law & Economics Research Paper No. 11-19. Available at SSRN: https://ssrn.com/abstract=1824665

Brown, Keith S. and Candeub, Adam, Independent Agencies and the Unitary Executive Debate: An Empirical Critique. MSU Legal Studies Research Paper No. 06-04. Available at SSRN: https://ssrn.com/abstract=1100125 or http://dx.doi.org/10.2139/ssrn.1100125

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