As government grows so, too, does its so-called “fourth branch” made up of administrative agencies? In theory, these agencies are the law’s enforcers, tasked with implementing and executing legal commands. In practice, they do much more. They may also be the law’s creators, its interpreters, and its adjudicators – all at the same time. They speak first when drafting rules and speak last when deciding disputes (subject only to deferential judicial review).
Few commercial activities remain free of government agency supervision and control. As such, businesses and professionals may end up spending more time worrying about regulatory compliance than they do anything else. The costs and burdens of regulation are real, yet, for better or worse, the current system enjoys strong political support.
Although most people accept the need for regulated commerce, they rarely realize all that it entails. More often than not, regulators use their authority to grant individuals and businesses the privilege to operate, not the right to do so. As part of the bargain for this revocable privilege, the licensee agrees to abide by all rules, now and in the future. The regulators must also follow the rules, including providing adequate due process, but they are granted broad power to investigate and sanction as necessary. Ultimately, the regulators hold the keys to the kingdom: the power to deny permission to operate and the power to shut down operations, perhaps permanently.
In many respects, the administrative-law regime operates somewhere in the twilight between civil and criminal law. Like a civil plaintiff, a regulator may seek financial satisfaction, sometimes by even “standing in the shoes” of an aggrieved private party. Like a criminal prosecutor, a regulator may also seek non-monetary relief, such as revoking a license, barring one from certain activities or requiring stringent reporting and extra scrutiny.
Unfortunately, it is nearly impossible to foresee when this heavy regulatory hammer will fall. Anticipating a collision with the regulatory state is like anticipating your next traffic ticket. Regulatory intervention into your professional or business life is both unpredictable and inevitable. But you can minimize the threat of an adverse regulatory action by doing the following:
- Make sure you are aware of licensing and entitlement rules before beginning a new business or profession.
- Know the obligations of any license or entitlement you receive.
- Participate in the legislative process and any official agency rulemaking. Not only will you have the chance to make the law better, but you can also develop a record that could be useful in future disputes.
- When the rules are changed, change with them, if necessary.
- To the extent possible, be aware of official investigations and adjudications against others in your industry or profession. The regulatory ratchet may be cranked up on all because of the misbehavior of a few.
- Although tempting, resist the urge to break the rules just because such rule-breaking seems widespread. The defense that “everyone else is doing it” will no more get you out of regulatory trouble than it will criminal trouble.
- When faced with an inquiry or investigation, know your rights.
- Fight contested matters, where appropriate, through all available legal channels. The stakes may be too high to acquiesce to agency demands.
Like it or not, there are simply too many points of contact between government and commercial life to avoid friction permanently. No one can eliminate regulatory risk entirely. But by being vigilant, engaged and knowledgeable you can manage the risk so that your next interaction with the regulatory state is not your last.
Daniel H. Stewart, Partner, Hutchison & Steffen
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