Statutory and regulatory laws on California underground regulations

The California Office of Administrative Law (OAL) is charged with ensuring that executive branch agency and department regulations are “clear, necessary, legally valid, and available to the public.” OAL is responsible for reviewing proposed regulations by California’s more than 200 state agencies and departments that have rulemaking authority.

The formal rulemaking process is established by the California Administrative Procedure Act (APA), which is found in the state’s Government Code. Among its many provisions, the APA sets forth the criteria by which OAL reviews all of those regulations to ensure compliance with the APA’s procedural requirements. OAL reviews regular and emergency rulemaking projects, as well as any challenged “underground” regulations.

On the OAL website (www.oal.ca.gov), readers can track the list of rulemaking actions submitted to OAL for review. This list is updated daily per OAL. Their website also contains a listing of underground regulation petitions that are under review by OAL. Here is the link: https://oal.ca.gov/underground_regulations/underground-regulations-under-review/

What are the regulations governing the review of underground relations by OAL?

Concerning the review of alleged underground regulations, the role of OAL is specified in the California Code of Regulations (CCR), Title 1, Division 1, Chapter 2, which is titled “Underground Regulations.”

In Section 250(a), it provides the following definition: “’underground regulation’ means any guideline, criterion, bulletin, manual, instruction, order, standard of general application, or other rule, including a rule governing a state agency procedure, that is a regulation as defined in Section 11342.600 of the Government Code, but has not been adopted as a regulation and filed with the Secretary of State pursuant to the AP A and is not subject to an express statutory exemption from adoption pursuant to the APA.”

In CCR Section 260, the submission of underground regulation petitions is discussed. Section 270 deals with OAL review of these petitions. And, Section 280 describes the suspension of underground regulation actions. In terms of “underground regulations,” OAL is charged with reviewing any such challenged regulatory agency actions by way of a petition filed with OAL.

According to OAL, “if a state agency issues, utilizes, enforces, or attempts to enforce a rule without following the APA when it is required to, the rule is called an ‘underground regulation.’ State agencies are prohibited from enforcing underground regulations.” If an individual or entity believes a state agency or department has issued an alleged underground regulation, that issuance can be challenged by filing a written petition with OAL.

As a part of the written petition submitted to OAL, the petitioner must provide the written petition and all attachments to the challenged agency prior to or concurrently with submitting it to OAL. Also, the petition must include the following items:

• Petitioner’s contact information
• Name of challenged agency
• A complete description of the challenged rule and a photocopy of the challenged rule
• A description of the actions of the challenged agency showing that it has issued, used, enforced, or attempted to enforce the challenged rule
• The legal basis for concluding that the guideline, criterion, bulletin, provision in a manual, instruction, order, standard of general application, or other rule or procedure is a regulation and that no express statutory exemption to the requirements of the APA is applicable
• Information demonstrating that the petition raises an issue of considerable public importance
• The petitioner’s written confirmation that the petitioner submitted a copy of the petition and all attachments to the challenged agency
• The petitioner’s written confirmation must include the contact information of the individual at the challenged agency to whom the copy was submitted

CCR § 270 concerns the review of petitions regarding underground regulations. When OAL receives a written petition, it must, within 60 calendar days, determine if the petition is complete. If the petition is incomplete, OAL will notify the petitioner in writing what is missing from the petition. OAL will begin the review period when the petition is complete.

OAL will either accept or decline to consider the petition. OAL will inform the challenged agency that the petition is under review and offer to provide a copy of the petition. Within 60 days, OAL is required to determine whether or not to consider the petition on its merits, in its entirety or in part.

While OAL has exclusive discretion to consider the petition, factors considered in deciding whether or not to accept a petition must include:

• The degree to which the petition raises an issue of considerable public importance.
• Whether the issue raised by the petition was or is currently being considered by a court or other body that can address the petitioner’s concerns.
• Whether the challenged rule is superseded.
• Whether the challenged rule expired by its own terms.
• Additional relevant information, if any, obtained pursuant to subsection (b) that is pertinent to a potential resolution of the issues raised by the petition.
• Availability of OAL personnel to complete the review of the petition pursuant to the time limits established by this chapter.

If OAL declines to consider the petition, then OAL is required to immediately advise the petitioner and the challenged agency of its decision and specifically indicate that the decision in no way reflects on the merits of the underlying issue presented by the petition. On the other hand, if OAL decides to consider the petition on its merits, then OAL must either issue a summary disposition or issue a determination.

Circumstances in which facts demonstrate that the challenged rule is not an underground regulation include the following:

• The challenged rule is contained in a California statute.
• The challenged rule is contained in a regulation that has been adopted pursuant to the rulemaking provisions of the APA.
• The challenged rule is statutorily exempt from the rulemaking provisions of the APA.

If OAL issues a summary disposition, the written document must state the basis for concluding that the challenged rule is not an underground regulation. Also, a summary disposition is to be filed with the Secretary of State and sent to the petitioner and challenged agency within 60 calendar days following receipt of the complete petition. OAL also publishes the summary disposition in the California Regulatory Notice Register.

If OAL instead issues a determination, then OAL must notify the petitioner and the challenged agency of its decision and publish the petition in the next California Regulatory Notice Register, giving notice to the public that comments on issues raised by the petition may be submitted to OAL.

Any public comments must be submitted to OAL within 30 calendar days from the date of publication. The challenged agency may submit a response to the petition to OAL. However, no response may be considered by OAL unless the challenged agency provided a copy of the response to the petitioner concurrently with submission of the response to OAL.

Any response by the challenged agency is required to be submitted to OAL within 45 calendar days of the publication of the petition in the California Regulatory Notice Register. Thereafter, the petitioner may submit to OAL a reply to the challenged agency’s response within 15 calendar days after the challenged agency response was provided to the petitioner. Finally, within 120 calendar days, OAL must issue a determination as to whether or not the challenged agency has issued, used, enforced, or attempted to enforce an underground regulation.

CCR § 280 concerns the suspension of actions regarding underground regulations and provides that any action of OAL is to be suspended if, prior to filing its determination with the Secretary of State, OAL receives a written certification from the challenged agency that it will not issue, use, enforce, or attempt to enforce the challenged rule

In such a case, OAL will file the petition and the certification with the Secretary of State, as well as publish a summary of the petition and the certification in the California Regulatory Notice Register.

If OAL accepts the petition for review, then OAL may issue a determination. According to OAL, this program is informally known as the “Chapter Two Unit,” or “CTU,” because OAL’s regulations regarding underground regulations are found in California Code of Regulations, Title 1, Chapter 2. The OAL website provides information on underground regulations and how to submit a written petition to OAL alleging an underground regulation.

OAL’s review of an alleged underground regulation is limited to a 3-step analysis to determine whether the alleged underground regulation must be adopted as a regulation pursuant to the APA. First, is the policy or procedure either a rule or standard of general application, or a modification or supplement to such a rule? Second, has the policy or procedure been adopted by the agency to either implement, interpret, or make specific the law enforced or administered by the agency, or govern the agency’s procedure?

If the answer to these two questions is “yes,” then the challenged rule is a regulation. However, before a determination is complete, OAL must review the final step of the analysis. Has the policy or procedure been expressly exempted by statute from the requirement that it be adopted as a “regulation” pursuant to the APA?

If the answer to this final question is yes, then the underground regulation did not have to go through the APA process. However, if the answer to this last question is no, then the rule is an underground regulation and cannot be enforced by the agency or department. Instead, it must go through the formal rulemaking process pursuant to the APA.

Finally, readers should be aware of Government Code Section 11340.5(e) which provides that, if an interested person has already begun litigation challenging an underground regulation, a determination issued by OAL may not be considered by the court in that pending litigation. Those challenging an alleged underground regulation should determine whether they want to pursue OAL review of the agency action, or whether to go directly to court to challenge it.

How have California’s courts viewed underground regulations by the state’s rulemaking entities?

In terms of a definition, the courts have ruled that any regulation not properly adopted under the APA is labeled an “underground regulation.” An OAL determination that a particular administrative guideline is an underground regulation is not binding on the courts, but it is entitled to deference. Davenport v. Superior Court (2012) 202 Cal.App. 4^th 665, review denied; People v. Medina (2009) 171 Cal.App. 4^th 805, review denied

Additionally, the courts have noted that an underground regulation is a regulation that a court may determine to be invalid because it was not adopted in substantial compliance with the procedures of the APA. Excelsior College v. Board of Registered Nursing (2006) 136 Cal.App. 4^th 1218; Patterson Flying Service v. Department of Pesticide Regulation (2008) 161 Cal.App. 4^th 411, rehearing denied; Fisher v. State Personnel Board (2018) 235 Cal.Rptr. 3^rd 382

There are some exceptions to the “underground regulation” rule. For example, agency advice or opinion letters are not characterized as underground regulations violative of the APA and therefore may properly be considered when a court is considering the applicability of a wage order. United Parcel Service Wage and Hour Cases (2010) 190 Cal.App. 4^th 1001