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The 2010 Amendments to the APA: Legislature Overrides Veto of Law to Require Legislative Ratification of “Million Dollar Rules”

Administrative Law

During the 2010 regular session, the Florida Legislature enacted HB 1565,1 which makes a number of changes to the Florida Administrative Procedure Act (APA). One of the most significant changes provides that rules with a “million dollar” impact may not take effect until ratified by the legislature. The bill passed with little opposition, but it subsequently sparked considerable controversy. On May 28, 2010, Governor Crist vetoed the bill, claiming that the measure “encroaches upon the principle of separation of powers”2 and that if the bill became law, “nearly every rule would have to await an act of the Legislature to become effective. This could increase costs to businesses, create more red tape, and potentially harm Florida’s economy.”3

Having been vetoed, HB 1565 joins the ranks of at least three other bills amending the APA that were vetoed in prior years.4 In each case, a substantially similar measure was enacted the following year and became law.5 In this case, the legislature did not wait until the next year, but instead voted to override the veto during a special legislative session held on November 16, 2010.6

Here is a brief summary of some of the key provisions in HB 1565:7

Revises Rules that Require SERC — Since 2008, agencies have been required to prepare a statement of estimated regulatory costs (SERC) for each proposed rule that will have “an” impact — whether positive or negative — on small business.8 HB 1565 revises this requirement in two respects. First, it limits the requirement to those cases in which the proposed rule will have an “adverse” impact on small businesses.9 Second, it requires an SERC where the proposed rule is likely to directly or indirectly increase regulatory costs in excess of $200,000 in the aggregate in the state within one year after the implementation of the rule.10

& #x2022; Expands Contents of SERC to Include Economic Analysis — An SERC is required to include 1) a good faith estimate of the number of individuals and entities likely required to comply with the rule and a description of these individuals; 2) a good faith estimate of the cost to the agency and to other state and local governmental entities in implementing and enforcing the rule, any anticipated effect on state and local revenues; 3) a good faith estimate of transactional costs likely to be incurred by individuals and entities in order to comply with the rule; and 4) an analysis of the rule’s impact on small businesses and small counties and cities.

HB 1565 amends §120.541 to require the SERC also to include an economic analysis showing whether the proposed rule directly or indirectly 1) is likely to have an adverse impact on economic growth, private-sector job creation or employment, or private-sector investment in excess of $1 million in the aggregate within five years after the implementation of the rule; 2) is likely to have an adverse impact on business competiveness, including the ability of persons doing business in the state to compete with persons doing business in other states or domestic markets, productivity, or innovation in excess of $1 million in the aggregate within five years after the implementation of the rule; or 3) is likely to increase regulatory costs, including any transactional costs, in excess of $1 million in the aggregate within five years after the implementation of the rule.11

Prohibits Certain Rules from Taking Effect Until Ratified by the Legislature — If the adverse impacts or regulatory costs of the rule exceed any of these three criteria, then the rule must be submitted to the president of the Senate and speaker of the House of Representatives no later than 30 days prior to the next regular session, and the rule may not take effect until it is ratified by the legislature.12

& #x2022; Exception for Emergency Rules — The requirement to prepare an economic analysis — and presumably the requirement for legislative ratification — does not apply to the adoption of emergency rules adopted in accordance with §120.54(4).13 This referenced subsection states that, if an agency finds that an immediate danger to the public health, safety, or welfare warrants emergency action, the agency may adopt any rule necessitated by the immediate danger.

The bill also provides that an emergency rule may remain in effect longer than the usual 90 days, and may be renewable, when the agency has initiated rulemaking to adopt rules addressing the subject of the emergency rule and the proposed rules are awaiting ratification by the legislature.14

& #x2022; Exception for Adoption of Federal Standards — The requirements to prepare an economic analysis and for legislative ratification also do not apply to the adoption of federal standards pursuant to §120.54(6).15 This referenced subsection establishes an expedited process for adopting rules substantively identical to regulations adopted pursuant to federal law in the pursuance of state implementation, operation, or enforcement of federal programs.

& #x2022; Revises Effect of Failure to Prepare SERC — HB 1565 provides that the failure of the agency to prepare an SERC when required or to respond to a written lower cost regulatory alternative is a material failure to follow the applicable rulemaking procedures and requirements set forth in the APA,16 and the rule, therefore, may be determined to be an invalid exercise of delegated legislative authority on this ground. Significantly, the bill provides that this is a material failure to follow the applicable rulemaking procedure and requirements “notwithstanding s.120.56(1)(c).” The referenced paragraph, (1)(c), states that the agency’s failure to follow the applicable rulemaking procedures or requirements is presumed material, but the agency may rebut this presumption by showing that the substantial interests of the petitioner and the fairness of the proceedings have not been impaired. It appears that the “notwithstanding” language in HB 1565 is designed to eliminate the agency’s ability to rebut this presumption and, therefore, essentially means that the rule is per se invalid.

& #x2022; Revises Limits on Challenges to Rules Based on SERC — HB 1565 provides that an agency’s failure to prepare an SERC or to respond to a written lower cost regulatory alternative may not be raised in a rule challenge proceeding unless raised within one year after the rule’s effective date, and then only by a person whose substantial interests are affected by the rule’s regulatory costs.17

& #x2022; Revises Limits on Challenges to Rules Based on §120.52(8)(f) — Similarly, HB 1565 limits rule challenges on the ground that the rule imposes regulatory costs on the regulated person, county, or city that can be reduced by the adoption of less costly alternatives that substantially accomplish the statutory objectives. Rules may not be declared invalid on this ground unless 1) the issue is raised in an administrative proceeding within one year after the effective date of the rule; 2) the challenge is to the agency’s rejection of a lower cost regulatory alternative; and 3) the substantial interests of the person challenging the rule are materially affected by the rejection.18

& #x2022; Requires Agency to Revise SERC if Any Change to the Proposed Rule Increases Regulatory Costs — The bill requires the agency to revise an SERC if any change to the proposed rule increases the regulatory costs of the rule.19

& #x2022; Requires Agency to Provide Revised SERC — At least 45 days before filing the rule for adoption, an agency that is required to revise an SERC must provide the statement to the person who submitted the lower cost regulatory alternative and to the Joint Administrative Procedures Committee.20 The agency also must publish notice on the agency’s website that the revised SERC is available to the public.

& #x2022; Extends Time for Challenging Rules After Preparation of SERC — The bill extends from 20 to 44 days the time after the SERC has been prepared and made available for filing challenges to the proposed rule.21 However, the bill does not include a corresponding change to the time the agency must wait before filing the rule for adoption,22 thus, creating a “glitch,” such that the rule could be filed for adoption and become effective before the time for filing a challenge to the proposed rule has expired. Legislation already has been filed to repeal this change and eliminate this inconsistency.23

& #x2022; Deletes References to Contracts in Connection with Challenges to Statements Defined as Rules — The APA provides that if the administrative law judge enters a final order that all or part of an agency statement violates the rulemaking requirement in §120.54(1)(a), the agency must immediately discontinue all reliance upon this statement, or any substantially similar statement, as a basis for agency action. In 2008, §120.56(4)(d) was revised to create an exception, providing that “this paragraph shall not be construed to impair the obligation of contracts existing at the time the final order is entered,” apparently seeking to change the result in a specific case.24 In that case, the administrative law judge concluded that the agency “cannot escape the rulemaking requirements of s. 120.54 merely by labeling the generally applicable agency statements contract provisions rather than rules.”25 The bill amends §120.56(4)(d) by deleting this exception.26 As a result, contract provisions that are generally applicable agency statements remain subject to the rulemaking requirements.

& #x2022; Licensing — HB 1565 makes three changes to §120.60, relating to the processing of applications for licenses .

& #x2022; Authorizes Agencies to Establish by Rule the Time for Submitting Additional Information — First, HB 1565 authorizes an agency to establish by rule the time period by which the applicant must respond to any request for additional information.27 The bill further requires that the agency must grant the applicant’s request for an extension of this prescribed time for submitting the additional information for good cause shown.

& #x2022; Authorizes Applicant to Request that Agency Process the Application — Second, HB 1565 provides that if the applicant believes the agency’s request for additional information is not authorized by law or rule, the applicant may demand that the agency process the application.28

& #x2022; Clarifies that Notice of Agency Action Must Be Provided Only to Those Who Made a Written Request — Third, HB 1565 clarifies that the persons to whom the agency must provide notice are those who have made a written request for notice of agency action.29

& #x2022; Effective Date — When it voted to override the veto of HB 1565, the legislature also passed a joint resolution setting the effective date as the following day, November 17, 2010.30 This raised the question of whether the new law, including the requirement that certain rules may become effective only if ratified by the legislature, applies to pending rulemakings. The Joint Administrative Procedures Committee promptly issued a memorandum advising that “[p]roposed agency rules that have not been filed for adoption, and proposed rules that have been filed for adoption but are not yet effective, as well as proposed rules noticed on or after the effective date of [HB 1565] appear to be subject to the new legislation.”31 The memorandum requested agencies to advise the committee whether their rules require legislative ratification. It appears that at least one agency has determined that the new law applies to pending rulemakings and will delay the effective date of these rules.32

Legislative ratification is not new to Florida,33 but the implementation of HB 1565 raises a number of other interesting questions, including: at what stage of the rulemaking process may these rules be submitted for ratification, whether such rules continue to be subject to legal challenges provided by the APA, and what procedures will the legislature use to consider whether to ratify these rules?34 The resolution of these and other questions may well require further legislative action.35 Stay tuned.

1 HB 1565 was filed by Rep. Chris Dorworth (R-Heathrow). The companion Senate bill, SB 1844, was filed by Sen. Mike Bennett (R-Bradenton). Several provisions in the bill that was ultimately enacted are contained in SB 2140, a bill filed by Sen. Arthenia Joyner (D-Tampa), chair of the Joint Administrative Procedures Committee.

2 But see SWFWMD v. Save the Manatee Club, Inc., 773 So. 2d 594, 598 (Fla.1st D.C.A. 2000) (“Rulemaking is a legislative function and, as such, it is within the exclusive authority of the Legislature under the separating of powers provision in the Florida Constitution.”).

3 See letter dated May 27, 2010, veto of HB 1565, an act relating to rulemaking.

4 See SB 536 (1995) (vetoed on July 12, 1995); SB 1010 (2005) (vetoed on June 22, 2005); and HB 7183 (2007) (vetoed on June 27, 2007).

5 See Chs. 96-159, 2006-82 and 2008-104, Laws of Florida.

6 See Fla. Const. art. III, §8(c) (if each house shall, by a two-thirds vote, re-enact the bill, it shall become law, the veto notwithstanding).

7 HB 1565 is now codified at Ch. 2010-279, Laws of Florida.

8 Fla. Stat. §
120.541 describes the required contents of an SERC. For a discussion of the 2008 changes, see Fred R. Dudley, The New Role of a Statement of Estimated Regulatory Costs in the Rulemaking Process, 31
Administrative Law Section Newsletter No. 2 (Jan. 2010).

9 Ch. 2010-279, §2, amending §120.541(1)(b).

10 Id.

11 Ch. 2010-279, §2, amending §120.541(2)(a).

12 Ch. 2010-279, §2, amending §120.541(3).

13 Ch. 2010-279, §2, amending §120.541(4).

14 Ch. 2010-279, §1, amending §120.54(4)(c).

15 Ch. 2010-279, §2, creating §120.541(4).

16 Ch. 2010-279, §2, creating §120.541(1)(e).

17 Ch. 2010-279, §2, amending §120.541(1)(f).

18 Ch. 2010-279, §2, amending §120.541(1)(g).

19 Ch. 2010-279, §2, amending §120.541(1)(c).

20 Ch. 2010-279, §2, amending §120.541(1)(d).

21 Ch. 2010-279, §3, amending §120.56(2)(a).

22 See Fla. Stat. §120.54(3)(e)2.

23 See HB 993 (2011) and SB 1382 (2011).

24 For a brief discussion of this exception, see Lawrence E. Sellers, Jr., The 2008 Amendments to the APA: The Open Government Act, 82
Fla. B. J. 43 (Dec. 2008).

25 Disability Support Services, Inc. v. DHRS & AHCA, DOAH Case No. 96-5104RU , aff’d per curiam, DCF v. Disability Support Services, Inc., 722 So. 2d 195 (Fla. 1st D.C.A. 1998).

26 Ch. 2010-279, §2, amending §120.56(4)(d).

27 Ch. 2010-279, §4, amending §120.60(1). A number of rules establishing such time periods are already on the books, including Rules 40A-1.1020; 40A-1.203; 40B-1.6051; 58A-5.015(1)(b); 59C-1.010 (3)(a); 62-4.055(1); 62-17.570(2); 62-45.060(3)(a); 62B-49.005; 69K-1.005; 69V-40.031; 69V-40.100; and 69V-180.030.

28 Ch. 2010-279, §2, amending §120.60(1).

29 Ch. 2010-279, §2, amending §120.60(3). This change was prompted in part by the case of Earthmark Southwest Florida Mitigation, LLC v. Resource Conservation Holding, Inc., and Department of Environmental Protection, DOAH Case No. 08-5950 (final order entered Feb. 12, 2009).

30 HJR 9-A (2010) (HB 1565 shall take effect November 17, 2010, the veto of the governor notwithstanding).

31 See memorandum dated November 17, 2010, from Scott Boyd, Executive Director & General Counsel, to Agency Heads and General Counsel. The memorandum cites Florida Public Service Commission v. Florida Waterworks Association, 731 So. 2d 836 (Fla. 1st D.C.A. 1999), and Life Care Centers of America, Inc. v. Sawgrass Care Center, Inc., 683 So. 2d 609 (Fla. 1st D.C.A. 1996).

32 See email dated November 24, 2010, from Board of Medicine to Interested Parties re Change in Effective Date of Pain Management Clinic Rules. See also Kate Howard, New Florida Law Is Delaying Regulation of Pill Mills, (Dec. 1, 2010); Lee Logan, As Drug Deaths Mount, New Law Stalls Tighter State Regulation,
St. Petersburg Times
(Nov. 24, 2010).

33 For example,
Fla. Stat. §373.421, requires legislative ratification of the methodology used to determine the landward extent of wetlands, and by
Fla. Stat. §373.4211, the legislature ratified the administrative rule establishing that methodology with certain changes. For a discussion of other statutory provisions requiring legislative ratification, see Dan R. Stengle & James Parker Rhea, Putting the Genie Back in the Bottle: The Legislative Struggle to Contain Rulemaking by Executive Agencies, 21
Fla. S.U.L. Rev. 415, 427-430 (1993).

34 Legislation filed to ratify Board of Medicine Rule 64B8-9.0131, relating to Standards of Practice for Physicians Practicing in Pain Management Clinics, addresses one of these questions with respect to that particular rule. It provides that “[t]his act does not alter rulemaking authority delegated by prior law, does not constitute legislative preemption of or exception to any provision of law governing adoption or enforcement of the rule cited, and is intended to preserve the status of any rule as a rule under
Fla. Stat. Ch. 120. This act does not cure any rulemaking defect or preempt any challenge based on a lack of authority or a violation of the legal requirements governing the adoption of the rule cited.” SB 1990 (2011).

35 Legislation also has been filed to require the notice of proposed rule to include a statement as to whether the proposed rule will require legislative ratification pursuant to §120.541(3). See HB 993 (2011) and SB 1382 (2011).

Larry Sellers is a partner in the Tallahassee office of Holland & Knight LLP. He received his J.D., with honors, from the University of Florida College of Law. He is a board certified state and federal government and administrative practice lawyer.

This column is submitted on behalf of the Administrative Law Section, Cathy Miller Sellers, chair, and Paul Amundsen, editor.

Administrative Law