In Federalist 47, James Madison wrote that “the accumulation of all powers, legislative, executive, and judiciary, in the same hands, whether of one, a few, or many, and whether hereditary, self-appointed, or elective, may justly be pronounced the very definition of tyranny.” Our constitutional structure is thus built on a foundation of the separation of powers. Indeed, as any Schoolhouse Rock aficionado could tell you, the legislative branch is supposed to legislate, the executive branch is supposed to enforce that legislation, and the judicial branch should interpret that legislation. But what happens when Congress places all of those powers in one agency, and then removes all of that agency’s accountability to elected officials? Worse, what happens when the power of such an agency is in the hands of one unelected individual? This is what Congress did when it created the Consumer Financial Protection Bureau in 2010. First, Congress created a single director as the head of the organization, but insulated that director from presidential removal except “for cause.” This unique structure removes the president’s ability to exert control over the CFPB even though the agency is charged with enforcing laws. Furthermore, since a director serves a five-year term, a president could conceivably never appoint a new director. Second, Congress eliminated its own power over the CFPB by granting the bureau independent access to Federal Reserve funds. Because the CFPB doesn’t need congressional approval to access these funds, there is no “power of the purse” for Congress to use to control an agency empowered to regulate the financial services industry. Third, Congress then gave the CFPB almost unlimited power through vague statutory language. The Dodd-Frank Act grants the agency power to punish “unfair”, “deceptive,” and “abusive” practices, but also grants the CFPB’s director full discretion to define those terms. What’s even worse, no director has yet to define them terms, preferring to act on a case-by-case basis. With this vast arbitrary power, the CFPB has investigated, prosecuted, and punished people, a glaring violation of due process. This is why Cato has filed an amicus brief urging the Supreme Court to rule on the constitutionality of the CFPB, as we have before (we also previously filed twice in the lower courts arguing that it’s not). The high court has an obligation to defend our separation of powers. If the Court allows the CFPB to continue as currently constituted, it will allow major violations of constitutionally protected liberty by a powerful and unaccountable federal agency. The case is Seila Law LLC v. CFPB. The Court will decide whether to take it up when it returns in September from summer recess.

As no less a public figure than Sen. Bernie Sanders (I‑Vt.) has ironically been discovering lately, it’s not easy for an employer to comply with wage and hour law these days. For another illustration as to why that is, consider last month’s unanimous Supreme Court ruling reversing the Ninth Circuit in Parker Drilling v. Newton. 

Although it was closely followed by business groups, Parker Drilling drew relatively little attention in the wider press. The practical question it raised might at first seem irrelevant to most ordinary workplace settings, namely: are oil workers on platforms off the California coast owed overtime pay for time they spend sleeping and otherwise off duty while on site? 

Up till 2015, the answer to that question seemed clear: federal law sets labor standards for offshore platform workers, and it says sleep and recreation periods don’t have to be paid. (Such arrangements have long been routine at the platforms, given that for many workers commuting to housing on land is not very practical.) In 2015, however, the California Supreme Court interpreted its state law in a different and more liberal way, classifying more on-site sleep and recreation arrangements as generating legally compensable time. Class action lawyers sprang into action, arguing that this new state rule should be applied to platform workers off the Pacific coast. While a district court dismissed the claim, the Ninth Circuit vacated and remanded, holding that the federal labor rules incorporated the new California rules by implication. 

Pause for a moment to note a curious thing about this controversy: at least for the sorts of high-skill jobs found on offshore oil platforms, predictable labor market adjustments could mean that a legal rule on whether to count sleep time might not make much difference in practice. As the Washington Legal Foundation noted in its merits brief before the high court, “Until California announced its rules four years ago in Mendiola v. CPS Security Solutions, Inc., employers and employees negotiated OCS [Outer Continental Shelf] wage agreements with the understanding that sleep and rest time spent on OCS structures was not compensable under applicable federal law.” Flip that presumption, and with base wage lowered appropriately (still higher than minimum wage) and overtime added back, the negotiation could wind up reaching much the same overall pay package.

What proved distinctively destructive, here as in many situations, was legal uncertainty. As often happens when law changes by judicial say-so, the new California rule was said to apply retroactively: the platforms should have been paying for downtime all along. So the platform employers were handed an enormous past bill for compensation that, had they known ahead of time, they might have negotiated their way around. 

Now that won’t happen: after its own dive into the waters of statutory language and federal pre-emption theory, the Justices unanimously agreed that federal law does not incorporate California’s for this purpose, putting yet another distinctive Ninth Circuit frolic to an end. But the drilling episode typifies many other situations in which wage-hour law, especially as it comes under pressure to change and liberalize, generates uncertainty. Should exemptions be read narrowly so as to bring more white-collar and academic workers under overtime law? Is time spent donning and doffing work apparel compensable? What about the situations of tipped restaurant workers, service advisers at car dealerships, church volunteers, gig economy drivers, and workers who check e‑mail after work hours? 

Even if you’re a class action lawyer, it’s hard to see all these uncertainties as optimal. 

Before the distraction of Robert Mueller’s congressional testimony and its inconsequence, the nation had been roiling over President Trump’s tweet that four progressive, minority congresswomen should “go back” to the countries “they originally came from.” The president’s critics condemned the tweet as racist and xenophobic. He and his supporters responded that it was a justified demand that Reps. Alexandria Ocasio-Cortez (D, NY), Ilhan Omar (D, MN), Ayanna Pressley (D, MA), and Rashida Tlaib (D, MI) stop criticizing the nation and its government’s policies.

This post focuses on a different problem with the tweet, one that has gotten overlooked: it was a direct attack on representative government and the U.S. Constitution. And the attack has been repeated in Trump and his supporters’ subsequent comments.

In their 2018 election campaigns, Ocasio-Cortez, Omar, Pressley, and Tlaib were explicit about what messages and ideas they would take to Washington. Agree with them or not, the legislators are now in Congress doing what their constituents elected them to do. Because the four are following their voters’ will, Trump and his supporters say the congresswomen should leave the Capitol and/​or the country.

Trump and his supporters may consider this a patriotic defense of the United States. But the demand to “Send them back!”—even if just campaign rhetoric—strikes at the nation’s founding principles. It is as much a violation of America’s ideals as celebrating the country’s independence with a display of military might rather than a tribute to individual liberty and democratic representative government.

I have a letter to the editor in today’s Washington Post: 

The July 8 front-page article “Court’s ruling on ACA could cost GOP” claimed that the Supreme Court upheld the Affordable Care Act “twice,” presumably referring to National Federation of Independent Business v. Sebelius in 2012 and King v. Burwell in 2015.

King v. Burwell did not uphold the ACA. On the contrary, King overturned part of the ACA.

The King plaintiffs challenged the Internal Revenue Service’s unexplained decision to spend funds that the ACA plainly does not authorize it to spend and to impose the ACA’s mandate penalty on millions of Americans whom the plain language of the statute exempts. Chief Justice John G. Roberts Jr. affirmed that “the most natural reading” of the operative statutory language favors the plaintiffs. In other words, the plaintiffs sued to uphold the ACA as written.

The court nevertheless upheld the Obama administration’s rewriting of the statute. In so doing, it overturned part of the ACA.

Note the present tense. The ACA still says the IRS doesn’t have that authority. 

No matter. The ACA is dead. Long live ObamaCare.

Last year, the Departments of Treasury, Labor, and Health and Human Services worked within federal law to expand consumer protections and restore Americans’ freedom to choose the health insurance that meets their needs. On Friday, a federal court rebuffed an effort to block those protections and force Americans into ObamaCare. First, a little background.

In 1996, Congress exempted “short-term limited duration insurance” from federal health insurance regulations. Congress never defined what “short-term” or “limited duration” meant. So in 1997, the Clinton administration gave meaning to those terms by decreeing that health insurance plans qualify for the exemption so long as they have a contract term, and a total duration, that last less than 12 months. The Bush administration finalized this definition in 2004. 

When Congress enacted the ironically named Affordable Care Act (ACA) in 2010, it tied that law’s copious regulation of the individual health insurance market to the same definition of health insurance Congress created in 1996. That means — you guessed it — “short-term, limited duration insurance” is also exempt from the ACA’s costly regulations.

When the ACA began to make the cost of health insurance soar in 2014, the Obama admininstration noticed that consumers were taking refuge in the short-term market, where premiums could be 50–70 percent lower than ACA premiums. So in 2016, the Obama administration arbitrarily shortened the maximum allowable contract term of such plans to 3 months.

This had the effect of stripping protections from consumers in the short-term market. Under the 12-month rule, consumers who bought a short-term plan in January then got a cancer diagnosis in February could have continuous coverage until they enrolled in an ObamaCare plan the following January. But under the 3‑month rule, those consumers would lose their coverage in April and face 9 months of medical bills without any health insurance coverage at all, because ObamaCare deliberately outlaws the sale of health insurance to such consumers until January of the following year. (Rationing, anyone?) Real people got hurt by the Obama administration’s stripping consumer protections from short-term plans. Importantly, leaving people who didn’t buy ObamaCare plans with less protection was the purpose of the Obama rule, which sought to force people into ObamaCare plans by making short-term plans unappealing.

In 2018, the Departments of Treasury, Labor, and Health and Human Services revisited and revised the definitions of “short-term” and “limited duration” to give these plans the maximum flexibility allowed by law. 

• First, the departments reverted to the pre-ACA definition of “short-term” — i.e., less than 12 months, rather than 3 months — which Congresses and presidents of both political parties had accepted for 20 years, and which the Congress that enacted the ACA saw fit to leave undisturbed.
• Second, they said that while the initial term of such plans could not exceed 12 months, insurers and enrollees could renew these plans up to two times, such that the total duration of such plans would match the 36-month maximum duration of COBRA coverage. In other words, for the first time, the departments gave meaning to the phrase “limited duration,” rather than treat it as surplusage, as the Clinton, Bush, and Obama administrations had.
• Third, the departments clarified that not only can consumers purchase as many consecutive 36-month short-term plans as they wish.
• Fourth, the departments clarified that under federal law, issuers are free to combine short-term plans with a guarantee that the issuer will continue to sell the enrollee as many consecutive plans as the enrollee wishes, without new underwriting. Under such arrangements, short-term plan enrollees who develop cancer could keep their coverage while still paying healthy-person premiums.

One effect of this rule is that it will expand consumer protections in the short-term market. Another is that it can reduce ACA premiums by keeping sick people out of ACA risk pools.

In Association of Community Affiliated Plans v. Treasury, interest groups that participate in the ACA sued to block the rule. But federal district court judge Richard J. Leon would have none of it. In a tightly reasoned opinion released on Friday, he explained the departments were well within their authority to revert to the prior definition of “short-term” and to give meaning to the separate term “limited duration.” Judge Leon stressed that, contrary to the plaintiffs’ claims, the Congress that enacted the ACA seemed to have no problem whatsoever with the 12-month maximum term. He further noted that the plaintiffs’ insistence on a 3‑month maximum term would actually reduce the very protections in the 1996 law that Congress was trying to promote.

The ruling should boost the market for renewable term health insurance by giving such plans greater regulatory certainty. Even so, the plaintiffs say they will appeal the ruling. It’s hard to see how they could win, but crazier things have happened when ObamaCare comes before the courts.

Congress should moot that appeal by adopting the departments’ final rule by statute. Doing so would give consumers a permanent, free-market alternative that would compete with ObamaCare on a level playing field — something advocates of a “public option” say they want — and could even reduce ObamaCare premiums. 

Justice Stevens, who died yesterday at age 99, was the longest-lived justice in American history and the third-longest serving. A proud son of the Midwest, he lived an amazing American life that included witnessing Babe Ruth’s “called shot” and a valorous WWII stint in the Navy. I never had the chance to meet him but, as the personal accounts and eulogies now attest, he was a consummate gentleman and all class, a bow-tied throwback to an era to which we should all attitudinally aspire. 

Stevens, nominated by President Ford in 1975 as the first new justice after Roe v. Wade, had a confirmation process that lasted all of 19 days and concluded with a 98–0 vote. (A different world, indeed.) From 1994 until his retirement in 2010, he was the senior associate justice, meaning the one who assigned opinions whenever the chief justice was on the other side. A moderate conservative when he was on the Seventh Circuit—perhaps the last of the Rockefeller Republicans—Stevens gradually moved left and ended up as the co-leader, with Justice Ruth Bader Ginsburg, of the Supreme Court’s liberal bloc. 

In his nearly 35 years on the Court, Justice Stevens left a lasting legacy, with majority opinions in Chevron v. Natural Resources Defense Council (granting judicial deference to administrative agencies), Apprendi v. New Jersey (making sentencing guidelines non-binding), Hamdan v. Rumsfeld (striking down military commissions), Kelo v. City of New London (allowing the taking of private property to give to another private owner), and Massachusetts v. EPA (allowing states to sue the EPA over greenhouse gases), as well as famous dissents in Texas v. Johnson (would’ve allowed laws against flag burning), Bush v. Gore (would’ve allowed vote-counting to continue in the 2000 presidential election), D.C. v. Heller (would’ve allowed a complete ban on personal firearms), and Citizens United v. FEC (would’ve allowed certain campaign finance restrictions). 

Many legal analyses of Stevens’s work in the last 24 hours have centered on the above cases, but I want to mention his disappointing view of expansive federal power. Especially when interpreting the scope of congressional authority to regulate interstate commerce, Stevens consistently sided with the government. 

He dissented in United States v. Lopez (Gun-Free School Zones Act) and United States v. Morrison (Violence Against Women Act), cases from 1995 and 2000, respectively, that for the first time in decades found that Congress had exceeded its constitutional power under the commerce clause. Five years later, he authored Gonzales v. Raich, which allows the government to enforce the federal criminal ban on marijuana even against patients who grow and consume the plant for their own personal use consistent with state law. 

These sorts of rulings, when combined with his opinions in Kelo, Johnson, Heller, and Citizens United, show that he really didn’t believe in either structural or rights-based protections for individual freedom, at least with the exception of presidential power and criminal procedure. His jurisprudence was difficult to characterize as a matter of conventional judicial methods and modes, but the results were what we’d now doubtlessly call progressive. In other words, he was a lawyer’s lawyer and a man’s man, a war hero and patriot, but no great friend of liberty.

For many decades, critics have noted that agencies were using Dear Colleague and guidance letters, memos and so forth — also known variously as subregulatory guidance, stealth regulation and regulatory dark matter — to grab new powers and ban new things in the guise of interpreting existing law, all while bypassing notice-and-comment and other constraints on actual rulemaking.

That’s a problem we at Cato have been concerned about for at least twenty years — the quote itself is from my 2017 post in this space. In financial regulation, for example, as Charles Calomiris argued in a Cato working paper around the same time, agencies’ overreliance on guidance is a systematic failing that “avoids transparency, accountability and predictability.” We’ve published much more on the topic, in both a lighter and a more serious vein.

Since my update post last year, there have been a number of new developments. Soon after then-Attorney General Jeff Sessions’s announcement of the new policy, followed by the revocation of dozens of existing guidance documents, then-Associate Attorney General Rachel Brand issued a January 2018 directive telling Department of Justice attorneys not to rely on allegations of noncompliance with agency guidance, in and of themselves, as reason to initiate civil enforcement actions. And this past winter, DOJ updated its Justice Manual to limit the use of guidance as a basis for direct liability in both civil and criminal enforcement. “Guidance is not law. It’s not binding. And it shouldn’t be given the force or effect of law,” said Deputy Assistant Attorney General Charles Cox in a January speech.

It’s important not to overstate what is changing here: the revised Justice Manual is careful to specify that even if they do not create liability directly, guidance documents can still prove relevant to enforcement in many other ways. They can be used to prove states of mind; as evidence of professional or industry standards, practices, and customs, or that scientific or technical assertions are generally accepted in a particular field; in cases where a regulated party falsely represented itself as having followed guidance; and in various other circumstances.

On April 11, the White House Office of Management and Budget tightened another means of control when it issued guidance (irony alert) about the duty of agencies, including traditionally independent agencies, to notify OMB’s Office of Information and Regulatory Affairs well in advance of publishing new rules to ensure compliance with the Congressional Review Act. The guidance makes clear that “rule” can sometimes include “guidance documents, general statements of policy, and interpretive rules” that do not go through a conventional rulemaking process.

Meanwhile, on a separate track, the unglamorous but often influential federal agency known as the Administrative Conference of the United States commissioned Yale law professor Nicholas Parrillo to write a lengthy study on the guidance issue. (Spinoffs: summary by Parrillo and Lee Liberman Otis, Yale Journal on Regulation and related symposium, Federalist Society panel.) Parrillo agrees that the problems with guidance are real, but argues that most of them arise from structural difficulties within administrative and legal bureaucracy, rather than from a purposeful intent to circumvent process protections. He also finds that they come up unevenly: regulated parties are most likely to feel that they have no real choice but to obey guidance 1) when they need to obtain preapproval before doing business, 2) when repeat interactions with regulators are inevitable and full compliance all the time is unlikely no matter how hard they try; 3) when the consequences of agency enforcement, or even the opening of an enforcement action, are severe; and 4) when the regulated party employs a large dedicated compliance staff.

These might serve as interesting guideposts in looking for ways to revamp regulatory schemes in such a way that agencies’ whims will no longer be received as law.