“Is Congress an endangering species?”

For businesses hoping to have an influence on the course of regulation, much of the action has moved from Congress to the executive branch. The last few years have seen an expansive exercise of federal power through the issuance of new regulations, the reinterpretation of existing ones, and the enforcement of both, as well as more novel regulatory approaches. The trend shows through in virtually every regulatory area, and it looks likely to continue through 2015 and beyond.

On the one hand, the Obama administration is proud of its assertive approach, pointing to progress even in the face of what it calls a “do-nothing” Congress. By contrast, congressional Republicans — and some constitutional scholars — have accused the administration of regulatory overreaching.

But one thing seems certain about this new wave of administrative activism: it spells new headaches for business.

More regulation means more compliance costs and challenges. More aggressive enforcement means harsher penalties and more intrusive sanctions for failure to comply. And more key decisions being made by the executive branch — rather than by Congress or the courts — means businesses have to be even more focused and strategic to make their views known and influence the outcomes.

Federal agencies have been testing the limits of their statutory authority. Like the president, agency leaders also see themselves as taking up the mantel that Congress dropped.

For example, no major environmental statute has undergone a major reauthorization since the 1990s. In the meantime, new environmental challenges — greenhouse gases, new findings about substance toxicity, and the like — have emerged. In some cases, there is broad agreement — among stakeholders, if not in Congress — that revisions are needed because the laws as currently written cannot be interpreted to address these newer concerns.

As the number and scope of administrative rules multiply, so do the penalties for non-compliance. If just measured in fines alone, these penalties are rising fast: more than $13 billion in 2014, up from about $7 billion in 2013, according to economist Brandon Garrett at the University of Virginia. (In 2008, the figure was closer to $2 billion.) And, in the realm of consumer protection, for example, the Federal Trade Commission has been increasingly willing to go to court to seek monetary damages or consumer redress rather than settling for an injunction- blocking future non-compliant behavior.

Moreover, enforcement actions are increasingly resulting in much more than a fine and an order to stop the violations. Prosecutors are demanding deep and very specific changes in management and embedding monitors in the company to ensure that they occur. Settlements are requiring corporate policy changes, staff training, remedial community training programs, and more.

Additionally, companies facing even the threat of enforcement actions have allowed regulators to influence their policies in new ways. For example, after a safety crisis, General Motors signed an accord with the National Highway Traffic Safety Administration in which it agreed to implement training policies that expressly disavow statements diluting the safety message in internal communications. The move is part of a growing trend of agencies trying to change corporate culture.

In another case, the Consumer Product Safety Commission is calling on retailers to pull products from their shelves when the agency cannot convince manufacturers to recall them. Retailers are increasingly willing to go along; now that the commission’s civil penalty cap has increased from $1.8 million to $15 million.

Regulators are also becoming more aggressive in their efforts to root out alleged misdeeds, largely through efforts to recruit insiders. For example, in 2013 the government enhanced whistleblower protections for employees of government contractors and extended the protections to subcontractors. When coupled with significant awards afforded to whistleblowers, the protections amount to deputizing the workers of America to blow the whistle on their employers and act as a partner in enforcement.

The recent regulatory expansionism will continue through 2015 — and likely beyond — thanks to a striking confluence of events.

  • Firstly, the third year of a president’s term tends to be the most aggressive in terms of policymaking. Midterm elections are over, political appointees are firmly in place, and the administration is acting with its legacy in mind. By contrast, in 2016, the administration may face pressure to pull back on rulemaking for the sake of pre-election politics or transitional smoothing.
  • Secondly, the 2013 decision by Democrats to strip Republicans’ ability to filibuster the president’s nominees has resulted, for the first time in a decade, in a federal appeals bench — including the all-important D.C. Circuit — in which judges appointed by Democrats considerably outnumber Republicans. These judges are generally thought to be more receptive to the regulators in legal challenges to the administration’s authority.
  • Thirdly, a U.S. Supreme Court ruling in 2013, City of Arlington v. FCC, appears to give agencies wide discretion in deciding the scope of its statutory authority. Arlington continues a tendency running back 30 years for courts to defer to agencies when there is ambiguity about whether the agency is allowed to act under its authority established by Congress. As a result, unless Congress clearly mandates otherwise, agencies can expand their authority as far as they see fit. And since their statutory authority tends to be quite broadly stated, agencies have a lot of leeway.

Companies struggling with compliance do have a range of options, however.  As they devise their compliance strategy, companies may want to seek guidance from agencies on how their rules might apply to them; seek waivers, exceptions and mitigating guidelines; and develop sound policy reasons to have the agency construe its rules in a manner that achieves the regulatory goal but is less onerous for a company.

Congress still has a role to play in affecting an industry’s regulatory burden. For one, a legislator can write letters or hold hearings in an attempt to influence agencies on important issues. Congress can constrain agency actions by appropriations riders or budgetary restrictions. And legislative wins are still possible for companies that can find issues that can be agreed by both sides of the aisle as job creators.

It is more important than ever to build and sustain relationships with relevant agencies. That means interacting with them regularly and educating them about issues important to your industry. The goal is to build your reputation and their comfort level well before any sensitive issues come up, such as potential enforcement actions or proposed regulations you want to fight.

As in the case of agency leaders, it’s important for companies to establish ongoing relationships with relevant members of Congress, rather than reaching out only when they need something from them.