The Department of Labor Puts Limits on “Guidance” — And Employers and Fiduciaries May Get More Interpretative Flexibility

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Synopsis:  On August 28, 2020, the federal Department of Labor (DOL) issued a final rule entitled “Promoting Regulatory Openness Through Good Guidance” (the “PRO Rule”) that establishes a data base with far fewer “Guidance” documents, thus placing a greater focus on statutory and regulatory interpretation.

Effective September 28, 2020, the DOL is changing the way it treats Guidance documents.  In response to President Trump’s Executive Order 13891, which directed federal agencies to treat Guidance issued outside of the context of formal rule-making as non-binding, the DOL issued the PRO Rule, 85 Fed. Reg. 168, to establish requirements for issuing Guidance and to make all Guidance available to the public. “Guidance” is defined as an agency statement of general applicability intended to affect the future behavior of regulated entities and persons that sets forth a policy on a statutory, regulatory, or technical issue, or an interpretation of a statute or regulation. It includes opinion letters, memoranda, bulletins, and advisory opinions.

The PRO Rule provides that well-crafted Guidance can provide valuable means for an agency to interpret existing law or clarify how it intends to enforce the law.  However, Guidance may not establish new requirements that the agency treats as binding unless it is issued pursuant to applicable notice and comment requirements of the Administrative Procedure Act or other law.

The PRO Rule requires all DOL Guidance to be made available to the public in a searchable database. In creating this database, the DOL rescinded almost 3,200 Guidance documents.  What remains as DOL Guidance thus occupies a more limited universe.  And the PRO Rule allows the public to shrink this universe further by petitioning the DOL to withdraw or modify included Guidance.

All Guidance issued, modified or withdrawn after September 28, 2020, must be approved by an agency head who must ensure that it follows all relevant statutes.  Guidance documents also must now include a disclaimer stating that the document does not have the force and effect of law, or explain why the Guidance is binding.

Guidance may of course be helpful to employers and fiduciaries in interpreting laws and regulations.  But, arguably, by not including certain Guidance in the database, employers and fiduciaries will have more flexibility in their legal interpretations, albeit at the loss of some degree of certainty.  The PRO Rule thus should cause employers and fiduciaries, and their counsel, to hone their statutory and regulatory interpretation skills.  There are a number of well-accepted canons of constructions that should now be given more attention.  See e.g. https://www.law.georgetown.edu/wp-content/uploads/2018/12/A-Guide-to-Reading-Interpreting-and-Applying-Statutes-1.pdf.

One final thought worth passing on is that ERISA fiduciaries still may have the right to rely in good faith on the reasonable legal opinions of competent counsel.  Courts have the final say on what a statute and regulation means in the context of particular facts, and they may view fiduciary action based on the advice of counsel with some degree of deference.  See generally Restatement (Third) of Trusts § 93, comment c (2012). This means that employers and fiduciaries should not hesitate to seek out counsel on what a statute or notice and comment regulation means, especially in a space now suddenly lacking Guidance.

Our take-away:  The new PRO Rule will put a premium on the interpretative skills of employers and fiduciaries, and their counsel.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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