1. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman1 Chapter 43 Administrative Law

2. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman2 Administrative Agencies Created by federal, state, and local agencies Regulate businesses and individuals Governed by administrative law Established by the legislative, executive, and judicial branches

3. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman3 Federal Administrative Agencies Administrative agencies that are part of the executive, legislative, or judicial branches of government. The majority of federal administrative agencies are part of the executive branch of government. Administrative agencies created by Congress are independent of the executive branch. –They have broad regulatory powers over key areas of the national economy.

4. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman4 State Administrative Agencies Administrative agencies that states create to enforce and interpret state law. –Have a significant effect on business. –Corporations department, fish and wildlife, licensing boards Local governments and municipalities create administrative agencies to administer local law. –Zoning commissions, liquor boards

5. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman5 General Government Regulation Businesses and industries are subject to general government regulation that applies to many businesses and industries collectively. –NLRB oversees labor union and management activity, –OSHA regulates safety and health standards for workers –FDA establishes standards for drugs, food, and alcohol

6. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman6 Specific Government Regulation Many industries are subject to specific regulation that regulates companies in that industry. –Banking (Federal Reserve) –Television (FCC) –Railroads (FRA) –Commercial airlines (FAA)

7. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman7 Administrative Law Administrative Law is a combination of substantive and procedural law. Each federal administrative agency is empowered to administer a particular statute or group of statutes. –These statutes are the substantive law that is enforced by the agency.

8. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman8 Administrative Procedure Act Establishes certain administrative procedures that federal administrative agencies must follow in conducting their affairs. –notice and hearing requirements –rules for conducting agency adjudicative actions –procedures for rule making Most states have enacted administrative procedural acts that govern state administrative agencies.

9. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman9 Administrative Law Judge ALJs preside over administrative proceedings. –Decide questions of law and fact concerning the case. –No jury. –The ALJ is an employee of the administrative agency. –ALJ issues decisions in form of an order. Appealed first to agency for review, then to appropriate court.

10. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman10 Delegation of Powers When an administrative agency is created, it is delegated certain powers. –Legislative powers –Executive powers –Judicial powers If an administrative agency acts outside the scope of its delegated powers, it is an unconstitutional act.

11. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman11 Delegated Legislative Powers Substantive rule making Interpretive rule making Issuing policy statements Granting licenses

12. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman12 Rule Making Federal agencies may issue substantive rules –Has the force of law. –Must be adhered to by covered persons and businesses. –Violators may be held civilly or criminally liable. –All substantive rules are subject to judicial review.

13. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman13 Substantive Rule Making Must follow APA procedures: –Notice of proposed rules must be published in Federal Register. –Interested parties must be given an opportunity to participate. –Informal rule making: All public input must be reviewed. Notice-and-comment rule making –Formal rule making: Agency conducts trial-like hearing. –Agency then can announce its final rule making.

14. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman14 Interpretive Rules Rules issued by administrative agencies that interpret existing statutory language. These rules do not establish new laws. Neither public notice nor public participation is required.

15. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman15 Statements of Policy A statement issued by administrative agencies. –announces a proposed course of action that an agency intends to follow in the future. These statements do not have the force of law. Public notice and participation are not required.

16. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman16 Licensing Power Statutes often require the issuance of a government license before a person can enter certain types of industries or professions. Most administrative agencies have: –power to determine whether to grant licenses to applicants. –Power to suspend or revoke licenses. Subject to judicial review: –Courts usually defer to agency’s expertise.

17. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman17 Judicial Power Many agencies have the judicial authority to adjudicate cases through an administrative proceeding. Initiated when an agency serves a complaint on a party for violation of a statute, administrative rule, or order. Agency must comply with the Due Process Clause. –Must give proper and timely notice. –Must allow an opportunity to present evidence.

18. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman18 Executive Power Executive powers may be granted to agencies. –Investigation and prosecution of possible violations of statutes, administrative rules, and administrative orders. May obtain information –Voluntarily –Administrative subpoena Can seek judicial enforcement if party fails to comply.

19. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman19 Administrative Searches Physical inspections are subject to Fourth Amendment protection –No unreasonable search or seizures –Reasonable searches: Party voluntarily agrees. Pursuant to valid search warrant. Business or industry which is covered by warrantless searches provisions.

20. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman20 Administrative Searches, continued Warrantless searches automatically valid: –Liquor sales –Firearms sales Hazardous industries –Statutes provide for non-arbitrary warrantless search: Coal mines Certain chemicals and gases Explosives factories and stores Evidence from unreasonable search and seizure inadmissible.

21. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman21 Judicial Review of Administrative Agency Actions Many federal statutes expressly provide for judicial review. Where no enabling statute, the APA authorizes judicial review of federal agency actions. The party appealing the decision is the petitioner. Decisions of federal administrative agencies are appealed to the appropriate federal court. Decisions of state administrative agencies may be appealed to the proper state court.

22. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman22 Judicial Review The case must be ripe for review. The petitioner must have exhausted all administrative remedies. Final order rule –The decision of the administrative agency must be final before judicial review can be sought.

23. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman23 Appeal of a Federal Administrative Agency Rule, Order, or Decision Administrative Law Judge (ALJ) Federal Administrative Agency U.S. District Court U.S. Court of Appeals U.S. Supreme Court Whether the appeal from the Federal Administrative Agency is to the U.S. District Court or the U.S. Court of Appeals is determined by the federal law in question.

24. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman24 Standards of Judicial Review of Administrative Agency Decisions Question s of Fact Questions of Law Questions of Law

25. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman25 Questions of Law If the administrative agency has decided a question of law: –Reviewing court is free to substitute its own judgment for that of the administrative agency. –interpretation of statutory language

26. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman26 Questions of Fact If the administrative agency has decided a question of fact: –Not easily overturned. –Reviewing court usually defers to the agency’s fact-finding. APA specified standards for review of fact-finding: –The arbitrary, capricious abuse of process test. –The substantial evidence test. –The unwarranted by the facts test.

27. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman27 Disclosure of Agency Administrative Actions Public concern over possible secret agency actions induced Congress to pass several statutes that: –Promote public disclosure. –Protect parties from overly abusive agency actions.

28. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman28 Freedom of Information Act Requires that documents of federal administrative agencies be open to the public. Requires agencies to publish their proceedings, rules, regulations, and other information in the Federal Register. Specifies time periods for agency response to information requests, sets limits on copying charges, and provides for disciplinary action against employees that refuse to honor requests

29. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman29 Freedom of Information Act (continued) Documents exempt from disclosure: –Those classified as in the interest of national security. –Those that are statutorily prohibited. –Records whose disclosures would interfere with law enforcement proceedings. –Medical, personnel, and similar information. –Papers containing trade secrets, confidential, or privileged information. All decisions not to disclose requested documents are subject to judicial review.

30. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman30 The Government in the Sunshine Act Requires that most meetings of federal administrative agencies be open to the public. Exceptions include meetings: –Where a person is accused of a crime. –Concerning an agency’s issuance of a subpoena. –Where public attendance would frustrate the implementation of an agency action. –Concerning daily operations. All decisions not to close a meeting to the public are subject to judicial review.

31. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman31 The Equal Access to Justice Act Protects private parties from harassment by federal administrative agencies. – Must be subject to an unjustified federal administrative agency action –Party has the right to sue. –May recover attorneys’ fees and costs. –Courts have held that the actions must be extremely outrageous to get an award.

32. © 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman32 Privacy Act Individual’s privacy –Requires that federal administrative agencies maintain only information that is relevant and necessary. –Must be needed to accomplish a legitimate agency purpose. Gives individuals access to these records and a right to correct the records.