New York Law Review

Tag: Rulemaking

  • Council of the City of New York v. Department of Homeless Services, 22 N.Y.3d 153 (2013): Rulemaking Requirements for City Agencies

    Council of the City of New York v. Department of Homeless Services, 22 N.Y.3d 153 (2013)

    A New York City agency must comply with the notice and hearing provisions of the New York City Administrative Procedure Act (CAPA) when implementing new rules, even if those rules are based on state regulations.

    Summary

    The New York City Council sued the Department of Homeless Services (DHS), arguing that DHS failed to comply with CAPA when it implemented a new Eligibility Procedure for Temporary Housing Assistance (THA). The new procedure required applicants to meet a need standard and cooperate with investigations. The Court of Appeals held that the Eligibility Procedure was a “rule” under CAPA and did not fall under any exemptions, thus requiring DHS to comply with CAPA’s notice and hearing provisions. This decision reinforces the importance of transparency and public input in city agency rulemaking, even when implementing state mandates.

    Facts

    In 2011, DHS announced a new Eligibility Procedure for THA applicants. The procedure mandated a detailed, multi-step process for determining eligibility, including uniform standards for cooperation and demonstrating need. The policy applied to all single adult THA applicants. DHS did not comply with CAPA’s notice and hearing requirements before implementing the new procedure. The City Council then brought a declaratory judgment action asserting the DHS violated CAPA.

    Procedural History

    The Supreme Court, New York County, initially found that DHS had violated CAPA. The Appellate Division, First Department, affirmed this decision. DHS appealed to the New York Court of Appeals.

    Issue(s)

    1. Whether DHS’s Eligibility Procedure for THA constitutes a “rule” under CAPA, triggering its procedural requirements.
    2. Whether the Eligibility Procedure falls under any exemption to CAPA’s mandates, specifically the exemption for explanatory statements or communications implementing state regulations.

    Holding

    1. Yes, because the Eligibility Procedure is a statement of general applicability that implements policy and prescribes procedural requirements, thus fitting the definition of a “rule” under CAPA.
    2. No, because while CAPA includes an exception to the prior review requirement for rules implementing state mandates, it does not exempt such rules from CAPA’s notice and hearing requirements.

    Court’s Reasoning

    The Court of Appeals reasoned that the Eligibility Procedure met the definition of a “rule” under CAPA because it was a statement of general applicability that implemented policy and prescribed procedural requirements. The court emphasized that the procedure was intended for broad application and included mandatory procedures and uniform standards. The court distinguished the case from situations involving agency discretion or ad hoc practices, stating that the Eligibility Procedure “sets standards that substantially alter or, in fact, can determine the result of future agency adjudications.”

    The court rejected DHS’s argument that the procedure was merely explanatory of existing state regulations and therefore exempt from CAPA. While CAPA contains an exception to the requirement of prior review by the City Law Department and Mayor for rules implementing state mandates, it does not exempt such rules from the notice and hearing requirements. The Court stated, “This means that even if DHS’s Eligibility Procedure is largely duplicative of the pertinent state statutes and regulations (i.e., even if it would otherwise fall within SAPA’s interpretive statements exemption), it is exempt under CAPA from only one aspect of the procedural mandate—the requirement of prior review by the City Law Department and Mayor; CAPA’s notice and hearing requirements remain applicable.”

    The court emphasized the importance of local awareness and stakeholder input, even when a city agency is implementing state directives. The court explained that the notice and hearing process provides an opportunity for stakeholders to be heard concerning whether the City agency’s proposed manner of implementation is the best approach to take in light of local concerns.

  • Alca Industries, Inc. v. Delaney, 92 N.Y.2d 775 (1999): Bid Withdrawal Criteria Are Not Always Rules Subject to SAPA

    Alca Industries, Inc. v. Delaney, 92 N.Y.2d 775 (1999)

    Bid withdrawal criteria included in a specific contract bid advertisement by the Office of General Services (OGS) do not constitute a “rule” of general applicability under the State Administrative Procedure Act (SAPA) and therefore do not require formal promulgation under SAPA.

    Summary

    Alca Industries challenged the Office of General Services’ (OGS) decision to retain its bid security after Alca sought to withdraw its bid due to a mistake. Alca argued that the bid withdrawal criteria used by OGS were “rules” under the State Administrative Procedure Act (SAPA) and were unenforceable because they hadn’t been formally promulgated. The Court of Appeals reversed the lower courts’ rulings, holding that the bid withdrawal criteria, as applied to a specific contract, did not constitute a “rule” under SAPA because they lacked general applicability. The court emphasized the distinction between ad hoc decision-making and establishing a general course of conduct for the future, finding that OGS acted within its discretionary capacity, not in a quasi-legislative, rule-making capacity.

    Facts

    Alca Industries submitted a bid, along with a bid bond for $11,800, for an oil separator project advertised by the Office of General Services (OGS). After the bids were opened, Alca realized it had failed to include an allowance for “washwater treatment equipment,” a required component in the project manual. Alca immediately requested to withdraw its bid and have its bid security returned. OGS denied the request, citing bid withdrawal criteria that required the mistake to have occurred “in the absence of negligence in the preparation of the bid,” which OGS found was not met.

    Procedural History

    Alca petitioned to overturn OGS’s determination in Supreme Court, arguing the bid withdrawal criteria were unenforceable rules under the State Administrative Procedure Act (SAPA). The Supreme Court agreed with Alca. The Appellate Division affirmed the Supreme Court’s decision. The Court of Appeals granted leave to appeal and reversed the Appellate Division’s order, remitting the matter to the Supreme Court for consideration of remaining contentions.

    Issue(s)

    1. Whether the bid withdrawal criteria used by OGS in a specific contract bid advertisement constitute a “rule” of general applicability subject to the promulgation requirements of the State Administrative Procedure Act (SAPA).

    Holding

    1. No, because the bid withdrawal criteria applied only to the specific contract at issue and did not establish a general standard of conduct applicable to all OGS contract bidding.

    Court’s Reasoning

    The Court of Appeals distinguished between ad hoc decision-making and rulemaking, defining rulemaking as establishing “any kind of legislative or quasi-legislative norm or prescription which establishes a pattern or course of conduct for the future.” Citing People v. Cull, 10 NY2d 123, 126. The court noted that SAPA defines a rule as an agency statement “of general applicability.” The court reasoned that OGS was acting in its discretionary capacity when it included the withdrawal criteria in its bid advertisement for the oil separator project, not in its quasi-legislative rule-making capacity. The court emphasized that the bid withdrawal criteria only covered the bidding for this particular contract, and there was no evidence that these criteria were required for all contract bidding. The court distinguished this case from Matter of J.D. Posillico, Inc. v Department of Transp., 160 AD2d 1113, where the Department of Transportation applied fixed standards for all contract bidding. Here, Alca’s rights and remedies were determined by bidding conditions it assented to when it submitted its bid. The court also emphasized that including bid withdrawal standards falls within OGS’s statutory authority to “best promote the public interest” by awarding contracts to the “lowest responsible and reliable bidder.” Finally, the court found that Alca had notice of the conditions contained within the bid invitation, addressing concerns about lack of public rules. The court noted, “Here, Alca could conform its bid to OGS expectations and standards, and it knew precisely what circumstances would result in forfeiture of its bid deposit.”

  • New York City Transit Authority v. New York State Department of Labor, 88 N.Y.2d 225 (1996): Agency Penalty Guidelines and Rulemaking Requirements

    New York City Transit Authority v. New York State Department of Labor, 88 N.Y.2d 225 (1996)

    An administrative agency’s penalty guidelines that allow for inspector discretion and case-by-case analysis do not constitute a fixed, general principle requiring formal rulemaking under the New York Constitution and State Administrative Procedure Act.

    Summary

    The New York Court of Appeals addressed whether the Department of Labor’s penalty guidelines for violations of the Public Employee Safety and Health Act (PESH Act) were unenforceable because they were not formally filed and published as a rule or regulation. The Court held that the penalty guidelines did not constitute a rule or regulation requiring formal filing and publication, as they vested inspectors with significant discretion and allowed for flexibility in imposing penalties based on the individual offense and offender. The Court reversed the Appellate Division’s decision, finding that the guidelines did not establish a rigid, numerical policy invariably applied across-the-board, but encompassed both fixed and variable factors unique to a facility to be considered on a case-by-case analysis.

    Facts

    The Department of Labor conducted health and safety inspections at five facilities of the New York City Transit Authority’s Surface Transit Division in 1988. Inspectors found violations of the PESH Act regulations, including the failure to have a readily available list of hazardous chemicals and the lack of a written Respiratory Protection Program at one facility. The Department issued Notices of Violation and calculated penalties for each facility based on its Field Operations Manual’s penalty-assessment guidelines. The Transit Authority challenged the citations.

    Procedural History

    The Industrial Board of Appeals upheld the penalties for all five facilities but reduced the amounts assessed. The Transit Authority then commenced an Article 78 proceeding challenging the Board’s determinations and arguing that the penalty guidelines were unenforceable because they weren’t filed and published as required by the New York Constitution and the State Administrative Procedure Act. The Appellate Division granted the petition and annulled the Board’s orders. The Court of Appeals granted the Department of Labor leave to appeal.

    Issue(s)

    1. Whether the Department of Labor’s penalty guidelines constitute a rule or regulation that must be filed with the Secretary of State and published in the State Register under Article IV, Section 8 of the New York Constitution and Section 102(2)(b)(i) of the State Administrative Procedure Act.

    2. Whether the Board’s determination upholding the finding that petitioner violated 29 CFR 1910.1200 (e) (1) was supported by substantial evidence.

    Holding

    1. No, because the penalty guidelines vest inspectors with significant discretion and allow for flexibility in the imposition of penalties, tailoring the sanction to the individual offense and offender.

    2. Yes, because the Department and Board reasonably construed 29 CFR 1910.1200 (e) (1) as requiring that chemical inventories be made available and readily accessible to employees, and the Board’s conclusion that petitioner’s computer-stored inventory did not satisfy the regulatory standard is supported by substantial evidence.

    Court’s Reasoning

    The Court reasoned that the penalty guidelines did not establish a fixed, general principle applied without regard to other facts and circumstances. Although the guidelines capped the maximum amount of penalties, inspectors were directed to determine the gravity of the violation based on the probability and severity of injury, and whether the violation was willful or repeated. Inspectors then use their professional judgment to adjust the penalty scale based on mitigating and contributing factors. The values are averaged to obtain a “gravity based quotient,” and penalties can be reduced based on the employer’s size, good faith, and history.

    The Court distinguished this case from Matter of New York State Coalition of Pub. Empls. v New York State Dept. of Labor, noting that the PESH Act authorizes penalties for violations but does not mandate regulations regarding those penalties. The Court quoted Matter of Roman Catholic Diocese v New York State Dept. of Health, stating the Department could opt for case-by-case imposition of penalties, including “’establishing a guideline for a case-by-case analysis of the facts.’”

    Regarding the violation of 29 CFR 1910.1200 (e) (1), the Court deferred to the Department and Board’s interpretation requiring readily accessible chemical inventories for employees. The Court found substantial evidence supported the Board’s conclusion that the Transit Authority’s computer-stored inventory didn’t meet this standard, as employees lacked access to the required information.

    The Court emphasized the importance of accessible information for employee safety, stating that the regulations were meant “to inform them of the hazards inherent in the day-to-day handling of these materials.”

    The Court also noted the Transit Authority’s failure to keep a written Respiratory Protection Program at one facility, supporting the citation for that violation.

  • Schwartfigure v. Hartnett, 83 N.Y.2d 296 (1994): Agency Rulemaking Requirements for Benefit Recoupment

    Schwartfigure v. Hartnett, 83 N.Y.2d 296 (1994)

    An administrative agency’s rigid policy of recouping overpaid benefits through a fixed percentage reduction, applied without considering individual circumstances, constitutes a “rule” subject to the rulemaking procedures of the State Administrative Procedure Act (SAPA).

    Summary

    Schwartfigure was overpaid unemployment benefits through no fault of her own. When she later became eligible for new benefits, the agency recouped the overpayment by reducing her new benefits by 50% according to a long-standing policy. She challenged this recoupment method, arguing it violated state law and constituted an unpromulgated rule under SAPA. The court held that while the agency had the right to recoup overpayments, the rigid 50% reduction policy was a rule that required formal promulgation under SAPA, as it was a fixed, general principle applied without considering individual circumstances.

    Facts

    In 1988, Schwartfigure received unemployment benefits. In December 1989, the Unemployment Insurance Appeal Board determined she was overpaid $2,112, but not due to any misrepresentation on her part. She did not appeal this determination. In January 1991, she again qualified for benefits. Starting February 1991, the agency paid her only 50% of the eligible benefits, offsetting the remaining 50% to recoup the prior overpayment. Her offer to repay in smaller installments was rejected.

    Procedural History

    Schwartfigure filed a hybrid declaratory judgment and Article 78 proceeding, arguing the recoupment violated Labor Law § 597(4) and the recoupment policy was an unpromulgated rule under SAPA. The Supreme Court dismissed the petition. The Appellate Division affirmed, holding a 1983 amendment restored the agency’s common-law right of setoff. The New York Court of Appeals granted leave to appeal.

    Issue(s)

    1. Whether the agency’s method of recouping overpaid unemployment benefits through a 50% reduction of subsequent benefits contravenes Labor Law § 597(4)?

    2. Whether the agency’s 50% set-off policy for non-willful overpayments constitutes a “rule” within the meaning of the State Administrative Procedure Act, requiring formal promulgation?

    Holding

    1. No, because the 1983 amendment to Labor Law § 597(4) restored the agency’s common-law right of setoff to recoup funds erroneously paid.

    2. Yes, because the agency’s rigid, numerical 50% set-off policy, invariably applied without regard to individual circumstances, falls within the definition of a “rule” under SAPA.

    Court’s Reasoning

    The court acknowledged the agency’s restored common-law right of setoff to recoup overpaid benefits. However, it distinguished between the right to recoup and the manner in which that right is exercised. The court emphasized that any procedure chosen by the agency to implement its right of setoff is subject to the rulemaking requirements of SAPA unless a statutory exception applies.

    The court, citing Matter of Roman Catholic Diocese v New York State Dept. of Health, 66 NY2d 948, 951, defined a rule as “a fixed, general principle to be applied by an administrative agency without regard to other facts and circumstances relevant to the regulatory scheme of the statute it administers”. The agency’s 50% set-off policy was deemed a rigid, numerical policy invariably applied across-the-board without regard to individualized circumstances or mitigating factors.

    The court rejected the argument that the policy concerned only internal management. The court reasoned that the recoupment directly and significantly affected the segment of the public over which the agency exercises direct authority. Because the 50% setoff was accomplished pursuant to an administrative rule not properly promulgated under SAPA, Schwartfigure was entitled to a determination of benefits considering her individual circumstances at the time the benefits were payable.

  • Roman Catholic Diocese of Albany v. New York State Department of Health, 66 N.Y.2d 948 (1985): Agency Guidelines and Rulemaking

    Roman Catholic Diocese of Albany v. New York State Department of Health, 66 N.Y.2d 948 (1985)

    Only a fixed, general principle applied by an administrative agency without regard to other facts and circumstances relevant to the regulatory scheme constitutes a rule or regulation requiring filing with the Department of State.

    Summary

    This case addresses whether a guideline used by the Department of Health (DOH) in assessing applications constituted an unfiled rule or regulation. The Court of Appeals held that the DOH’s 50% guideline for reviewing applications did not constitute a rule requiring filing with the Department of State, as it was not a fixed principle applied without considering other relevant facts and circumstances. The court reversed the Appellate Division’s order and dismissed the petition challenging the guideline.

    Facts

    The Department of Health (DOH) used a 50% guideline when evaluating applications. Petitioners challenged this guideline, arguing it was an unfiled rule or regulation that should have been filed with the Department of State as required by the New York Constitution, article IV, § 8.

    Procedural History

    The Appellate Division initially ruled in favor of the petitioners. However, the Court of Appeals reversed the Appellate Division’s order and dismissed the petition.

    Issue(s)

    Whether the 50% guideline employed by the Department of Health in passing on applications constitutes a rule or regulation required by NY Constitution, article IV, § 8 to be filed in the office of the Department of State.

    Holding

    No, because the 50% guideline employed by the Department of Health was not a fixed, general principle applied without regard to other facts and circumstances relevant to the regulatory scheme of the statute it administers.

    Court’s Reasoning

    The Court of Appeals agreed with the dissenting Justice at the Appellate Division, who argued that only a fixed, general principle applied by an administrative agency without regard to other facts and circumstances relevant to the regulatory scheme of the statute it administers constitutes a rule or regulation requiring filing with the Department of State. The court emphasized that the 50% guideline was not applied as such a rule. This means the DOH considered other factors beyond the 50% threshold when making decisions on applications. The court, therefore, did not need to address the constitutional arguments presented. The key distinction is between a rigid, universally applied rule versus a flexible guideline used in conjunction with other factors. The court implicitly acknowledged the need for agencies to have some flexibility in applying their expertise without being unduly burdened by formal rulemaking requirements for every internal guideline. As the court stated, “only a fixed, general principle to be applied by an administrative agency without regard to other facts and circumstances relevant to the regulatory scheme of the statute it administers constitutes a rule or regulation required by NY Constitution, article IV, § 8 to be filed in the office of the Department of State.” This decision provides clarity on the distinction between a binding rule and a flexible guideline within administrative law.