We heard a lot during last week’s impeachment trial about free speech and the First Amendment. Participants quoted Justice Oliver Wendall Holmes, who famously wrote that the First Amendment does not protect “falsely shouting fire in a theatre and causing a panic.”
On a different topic, Justice Holmes also said this: The young person knows the rules, but the older person knows the exceptions.
For businesses and individuals licensed by the government, it is important to know both the rules and the exceptions.
Most people know that legislative bodies at the state and federal levels enact laws. But many people do not know that state agencies also promulgate thousands of rules, or administrative regulations, that have the force and effect of law. These rules impact everything from the quality of the water we drink to the licensing of our physicians to the protection of our elderly in nursing homes.
Some of these rules are technical, while others are substantive.
Examples of Minnesota Rules.
The following are examples of requirements imposed on licensed professionals and businesses through administrative rules:
A life insurance company may not provide a projection of future dividends unless it discloses the dividends are not guaranteed and the projection is based on the insurer’s current dividend experience, among other things.
A referring physician must generally disclose her financial or economic interest in an entity to which the physician is making a referral by posting signage, incorporating a notice in existing office documents, or providing a freestanding disclosure.
An insurance agent must give a customer or prospective customer an itemized, signed receipt if he or she takes possession of a customer’s insurance policy.
Nursing homes must immediately complete a detailed incident report of an accident or injury to a resident and the action taking after learning of the accident or injury.
A professional corporation of physicians must promptly notify the Minnesota Board of Medical Practice if it hires a new physician or a partner dies.
A residential building contractor engages in “financially irresponsible” conduct if he owes the State more than $500 in back taxes or interest.
All of these requirements are contained in administrative rules adopted by state agencies. And licensees can be disciplined for not following them.
What is an “Administrative Rule”?
An administrative “rule” is “every agency statement of general applicability and future effect… adopted to implement or make specific the law enforced or administered by that agency or to govern its organization or procedure.” Minn. Stat. § 14.02, subd. 4.
A rule focuses on the regulation of future conduct. This is different from an agency’s adjudicatory functions, which focus on the past conduct engaged in by a licensee. See Minn. Stat. § 14.381, subd. 1 (“An agency determination is not considered an unadopted rule when the agency enforces a law or rule by applying the law or rule to specific facts on a case-by-case basis.”)
It is important for licensees and their attorneys to review both the applicable statutes and the applicable agency rules when confronted with a compliance or enforcement question. The administrative rules are published by the Office of Revisor as Statutes and cited as Minnesota Rules.
Some rules are procedural and describe the procedures to be followed by the agency and licensees, such as those that govern licensing disciplinary proceedings. Other rules are substantive and provide more specificity surrounding the laws enforced by the agency.
Duly-enacted rules have the “force and effect of law.” Minn. Stat. § 14.38, subd. 1.
The law firm of Swanson Hatch, P.A. represents businesses and licensed professionals in legal compliance and enforcement matters. Former Minnesota Attorneys General Lori Swanson and Mike Hatch have decades of legal experience in the application of state laws to businesses and regulated professionals. Prior to her twelve years as Minnesota Attorney General, Lori Swanson previously served as Solicitor General and Deputy Attorney General of the State of Minnesota and chaired the Federal Reserve Board’s Consumer Advisory Council in Washington, D.C. Before he became Attorney General, Mike Hatch previously served as Commissioner of the Minnesota Department of Commerce for eight years. Lori Swanson can be reached at lswanson@swansonhatch.com, or at 612-315-3037. Mike Hatch can be reached at mhatch@swansonhatch.com, or at 612-315-3037. The firm’s website is www.swansonhatch.com.
Unadopted Rules.
Minnesota law contains detailed requirements for how state agencies must adopt administrative rules. There are different procedural requirements applicable to different types of rules. That said, as a general proposition, the state agency must prepare a Statement of Need and Reasonableness (“SONAR”) setting forth the justification for the rule and engage in a lengthy rulemaking process that provides for public comments and review by an administrative law judge.
Much like legislative history can be helpful in trying to determine the intent of the legislature in enacting a statute, the SONAR can be helpful to litigants if there is a dispute about the interpretation of an administrative rule.
In some cases, state agencies may issue guidelines, bulletins, or policy directives that meet the definition of a “rule,” even though they have not been properly adopted as an official rule. A litigant may be able to challenge the enforcement of an unadopted rule, especially if it is not a longstanding agency position.
A person may petition the Office of Administrative Hearings for an order that an agency is attempting to enforce a “policy, guideline, bulletin, criterion, manual standard, or similar pronouncement as though it were a duly adopted rule.” Minn. Stat. § 14.381, subd. 1. An administrative law judge (“ALJ”) has the power to direct a state agency to cease enforcement of an unadopted rule. Id. at 2. If the ALJ rules in favor of the state agency, however, the judge may require the challenger to pay the agency’s costs of defending against the petition unless the ALJ concludes that: (1) the petition was brought in good faith; and (2) a cost assessment would constitute “undue hardship” for the challenger. Because of this fee-shifting provision, it may be safer to challenge a rule in court.
Grounds to Challenge Rules.
There are a number of bases upon which a person may challenge an administrative rule that, on its face, has been duly-adopted by the agency.
First, an agency may only adopt a rule if it has been delegated statutory authority to do so by the Minnesota Legislature. Minn. Stat. § 14.05, subd. 1. A rule for which an agency lacks statutory authority is invalid. See, e.g., Stasny by Stasny v. Minnesota Dep’t of Commerce, 474 N.W.2d 195 (Minn. Ct. App. 1991).
Second, a rule is invalid if it conflicts with a statute. See, e.g., Hirsch v. Bartley Lindsay Co., 537 N.W.2d 480 (Minn. 1995).
Third, administrative rules can generally be challenged for the same types of constitutional infirmities upon which statutes can be challenged, such as:
Vagueness.
Overbreadth.
Procedural and substantive due process.
Equal protection.
The “dormant commerce clause” (i.e., undue burden on interstate commerce.)
Conclusion.
It is important for licensees and their attorneys to be familiar with the applicable agency rules that regulate their conduct—and with how to contest those rules should it be necessary. And, just as Justice Oliver Wendell Holmes once said, wise licensees should also be familiar with the exceptions to the rules.
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www.swansonhatch.com
431 S Seventh Street, Suite 2545
Minneapolis, MN 55415 612-315-3037
The materials in this article are for informational purposes and do not constitute legal advice, nor does your unsolicited transmission of information to us create a lawyer-client relationship. Sending us an email will not make you a client of our firm. Until we have agreed to represent you, nothing you send us will be confidential or privileged. Readers should not act on information contained in this article without seeking professional counsel. The best way for you to inquire about possible representation is to contact an attorney of the firm. Actual results depend on the specific factual and legal circumstances of each client’s case. Past results do not guarantee future results in any matter.
We heard a lot during last week’s impeachment trial about free speech and the First Amendment. Participants quoted Justice Oliver Wendall Holmes, who famously wrote that the First Amendment does not protect “falsely shouting fire in a theatre and causing a panic.”
On a different topic, Justice Holmes also said this: The young person knows the rules, but the older person knows the exceptions.
For businesses and individuals licensed by the government, it is important to know both the rules and the exceptions.
Most people know that legislative bodies at the state and federal levels enact laws. But many people do not know that state agencies also promulgate thousands of rules, or administrative regulations, that have the force and effect of law. These rules impact everything from the quality of the water we drink to the licensing of our physicians to the protection of our elderly in nursing homes.
Some of these rules are technical, while others are substantive.
Examples of Minnesota Rules.
The following are examples of requirements imposed on licensed professionals and businesses through administrative rules:
All of these requirements are contained in administrative rules adopted by state agencies. And licensees can be disciplined for not following them.
What is an “Administrative Rule”?
An administrative “rule” is “every agency statement of general applicability and future effect… adopted to implement or make specific the law enforced or administered by that agency or to govern its organization or procedure.” Minn. Stat. § 14.02, subd. 4.
A rule focuses on the regulation of future conduct. This is different from an agency’s adjudicatory functions, which focus on the past conduct engaged in by a licensee. See Minn. Stat. § 14.381, subd. 1 (“An agency determination is not considered an unadopted rule when the agency enforces a law or rule by applying the law or rule to specific facts on a case-by-case basis.”)
It is important for licensees and their attorneys to review both the applicable statutes and the applicable agency rules when confronted with a compliance or enforcement question. The administrative rules are published by the Office of Revisor as Statutes and cited as Minnesota Rules.
Some rules are procedural and describe the procedures to be followed by the agency and licensees, such as those that govern licensing disciplinary proceedings. Other rules are substantive and provide more specificity surrounding the laws enforced by the agency.
Duly-enacted rules have the “force and effect of law.” Minn. Stat. § 14.38, subd. 1.
Unadopted Rules.
Minnesota law contains detailed requirements for how state agencies must adopt administrative rules. There are different procedural requirements applicable to different types of rules. That said, as a general proposition, the state agency must prepare a Statement of Need and Reasonableness (“SONAR”) setting forth the justification for the rule and engage in a lengthy rulemaking process that provides for public comments and review by an administrative law judge.
Much like legislative history can be helpful in trying to determine the intent of the legislature in enacting a statute, the SONAR can be helpful to litigants if there is a dispute about the interpretation of an administrative rule.
In some cases, state agencies may issue guidelines, bulletins, or policy directives that meet the definition of a “rule,” even though they have not been properly adopted as an official rule. A litigant may be able to challenge the enforcement of an unadopted rule, especially if it is not a longstanding agency position.
A person may petition the Office of Administrative Hearings for an order that an agency is attempting to enforce a “policy, guideline, bulletin, criterion, manual standard, or similar pronouncement as though it were a duly adopted rule.” Minn. Stat. § 14.381, subd. 1. An administrative law judge (“ALJ”) has the power to direct a state agency to cease enforcement of an unadopted rule. Id. at 2. If the ALJ rules in favor of the state agency, however, the judge may require the challenger to pay the agency’s costs of defending against the petition unless the ALJ concludes that: (1) the petition was brought in good faith; and (2) a cost assessment would constitute “undue hardship” for the challenger. Because of this fee-shifting provision, it may be safer to challenge a rule in court.
Grounds to Challenge Rules.
There are a number of bases upon which a person may challenge an administrative rule that, on its face, has been duly-adopted by the agency.
First, an agency may only adopt a rule if it has been delegated statutory authority to do so by the Minnesota Legislature. Minn. Stat. § 14.05, subd. 1. A rule for which an agency lacks statutory authority is invalid. See, e.g., Stasny by Stasny v. Minnesota Dep’t of Commerce, 474 N.W.2d 195 (Minn. Ct. App. 1991).
Second, a rule is invalid if it conflicts with a statute. See, e.g., Hirsch v. Bartley Lindsay Co., 537 N.W.2d 480 (Minn. 1995).
Third, administrative rules can generally be challenged for the same types of constitutional infirmities upon which statutes can be challenged, such as:
Conclusion.
It is important for licensees and their attorneys to be familiar with the applicable agency rules that regulate their conduct—and with how to contest those rules should it be necessary. And, just as Justice Oliver Wendell Holmes once said, wise licensees should also be familiar with the exceptions to the rules.
www.swansonhatch.com
431 S Seventh Street, Suite 2545
Minneapolis, MN 55415
612-315-3037
The materials in this article are for informational purposes and do not constitute legal advice, nor does your unsolicited transmission of information to us create a lawyer-client relationship. Sending us an email will not make you a client of our firm. Until we have agreed to represent you, nothing you send us will be confidential or privileged. Readers should not act on information contained in this article without seeking professional counsel. The best way for you to inquire about possible representation is to contact an attorney of the firm. Actual results depend on the specific factual and legal circumstances of each client’s case. Past results do not guarantee future results in any matter.
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Swanson | Hatch, P.A.
431 S. 7th Street, Suite #2545
Minneapolis, MN 55415
612-315-3037
www.swansonhatch.com