Executive Order Invites Deregulation to Help Economy in COVID-19 Pandemic

On May 19, the President signed the Executive Order on Regulatory Relief to Support Economic Recovery (EO).  The EO comes in response to the ongoing COVID-19 pandemic, which is widely expected to cause a severe economic downturn.  The Congressional Budget Office on Tuesday forecasted an 11% economic contraction for the second quarter of 2020.  To fight this economic crisis, the EO indicates that the federal government plans to stimulate the economy through administrative deregulation. 

In the EO, the President states that “agencies must continue to remove barriers to the greatest engine of economic prosperity the world has ever known.”  As regulatory lawyers, we see opportunity for deregulatory pushes at agencies from the Environmental Protection Agency to Treasury, and from the Federal Communications Commission to the Federal Trade Commission.  The EO itself does not deregulate and—instead—requires federal agencies to “consider” taking such action, thus granting them considerable discretion.

The EO takes aim at regulation to promote economic growth, using four key directives:

First, the EO broadly calls on federal agencies to deregulate where possible to stimulate economic growth during the COVID-19 pandemic.  The EO specifically directs the heads of all federal agencies to “identify regulatory standards that may inhibit economic recovery and” consider taking appropriate action.  As examples, it directs agencies to consider rescinding, modifying, waiving, or exempting parties from regulatory standards in order to promote job creation and economic growth.

Second, the EO instructs agencies to consider making permanent some of the temporary deregulatory measures already taken in response to the pandemic.  In particular, the heads of federal agencies are required to “review any regulatory standards they have temporarily rescinded, suspended, modified, or waived . . . and determine which, if any, would promote economic recovery if made permanent[.]”  Examples of temporary regulatory relief pursued by federal agencies include measures to cut red tape at the Department of Health and Human Service to promote telehealth, lifting of restrictions on truckers’ working hours, and waivers of certain rules for telecommunications relay services to allow more flexibility.  Covered agency heads are required to report the results of this review to the Director of the Office of Management and Budget (“OMB”) and other executive officials.

Third, the EO directs agencies to help regulated entities in their compliance efforts—addressing concerns from industry stakeholders.  As the United States Chamber of Commerce has explained:

A reopening plan that is medically based and relies on social distancing and other best practices for public health may raise significant regulatory and legal liability risks.  These are in addition to numerous lawsuits already filed as a result of COVID-19 and litigation risk that will become exacerbated during a reopening.

Moreover, these legal uncertainties could leave innovations — that could help the economy — in regulatory limbo.  Reflecting such concerns, the EO directs the heads of federal agencies, excluding the Department of Justice, to “accelerate procedures by which a regulated person or entity may receive a pre-enforcement ruling . . . with respect to whether proposed conduct in response to the COVID-19 outbreak . . . is consistent with statutes and regulations administered by the agency[.]”  Wiley has put together an Employer’s Guide to Reopening and is available to assist with compliance issues related to reopening.

Fourth, the EO contemplates a more forgiving enforcement regime.  It directs federal agencies to consider promulgating “policies of enforcement discretion that . . . decline enforcement against persons and entities that have attempted in reasonable good faith to comply with applicable statutory and regulatory standards[.]”  It further instructs agencies to consider principles of fairness in administrative enforcement in adjudication, such as avoiding “unfair surprise” and ensuring that evidentiary rules are “public, clear, and effective.”  The EO also cites prior Executive Order 13892, Promoting the Rule of Law Through Transparency and Fairness in Civil Administrative Enforcement and Adjudication, which seeks to promote accountability, fairness, and public participation in agency enforcement and pre-enforcement rulings.

Taken together, these provisions indicate that the government is open to temporarily—and potentially permanently—rescinding federal regulations.  The EO doubles down on prior deregulatory moves, such as Executive Order 13771, Reducing Regulation and Controlling Regulatory Costs, which required executive departments and agencies that announce a new regulation to propose at least two regulations which be repealed.  While the EO does not contain a formal enforcement mechanism, it empowers OMB to set deadlines for compliance and monitor agencies’ progress. 

The message is clear that the Administration is receptive to requests to remove regulatory burdens.  If industries or companies identify regulations from which permanent relief will help spur innovation, job growth, or investment, now is the time to seek action.