Today, North Carolina Gov. Pat McCrory signed into law the Regulatory Reform Act of 2013, enacting the most comprehensive review ever of the state’s regulations. Over the next 10 years, all North Carolina regulations will be subject to review and potential amendment or repeal. As a result, regulated industries and businesses will have the opportunity to seek long-sought rule changes, but doing so with the risk that other less favorable changes may occur.
The Regulatory Reform Act requires that all North Carolina regulations not required by federal law be reviewed over the next decade. The schedule for review will be set by the Rules Review Commission, a little-known executive agency created in 1986 with the limited role of determining that proposed new rules are authorized by law and are clear and necessary. Under the Regulatory Reform Act, rules will be reviewed under a three-step process involving state agencies, the Rules Review Commission and the Joint Legislative Administrative Procedure Oversight Committee.
Step One – Agency Review
The first step in the process is a review of rules by the agency responsible for enforcing those rules. Each agency will classify its rules into one of three categories:
Necessary with substantive public interest: Any rule in which the agency has received public comments within the last two years or which affects the interests of the regulated public and the agency knows or suspects that persons may object to the rule.
Necessary without substantive public interest: Any rule for which there has been no public comment within the last two years.
Unnecessary rules: Any rule the agency determines to be obsolete, redundant or otherwise not needed.
The agency will post its initial classifications on its website and invite public comment for at least 60 days. After reviewing the public comments, the agency will submit a report to the Rules Review Commission with the agency’s initial classification, a copy of all public comments received and the agency’s response to the public comments.
If an agency does not review a regulation by the deadline established by the Rules Review Commission, that rule expires.
Step Two – Rules Review Commission Review and Final Determination Report
The Rules Review Commission will then review the agency reports and prepare a final determination report, which will include:
- The agency’s initial classification
- All public comments in response to the initial classification
- The agency’s response to public comments
- A summary of the Rules Review Commission’s determinations regarding public comments
As part of its review, the Rules Review Commission will determine whether a public comment has “merit.” The Regulatory Review Act states that a public comment has “merit” when it addresses the specific substance of the rule and relates to whether or not there is authority for the rule, whether the rule is clear and unambiguous, or whether the rule is reasonably necessary to implement or interpret an enactment of the North Carolina legislature, Congress or a federal agency.
Similar to the agency review process, the Rules Review Commission will classify rules into three categories:
- Rules classified as necessary, where there have been no public comments or no public comments with merit — those rules will remain in effect.
- Rules classified as unnecessary, where there have been no public comments or no public comments with merit — those rules will expire.
- Rules classified by either the agency or the Rules Review Commission as necessary, where there have been public comments that have merit — those rules will have to be readopted through the formal rulemaking process.
Step Three – Legislative Review and Approval
The Rules Review Commission’s final determination report does not take effect until each agency whose rules are affected by the report has consulted with the Joint Legislative Administrative Procedure Oversight Committee. If the committee disagrees with any determination in the report, the committee may recommend that the legislature require the agency to conduct a review of that specific rule in accordance with Step One during the following year.
Every State Regulation Is In Play
Under the Regulatory Reform Act, the potential for rule changes and regulatory chaos is high. Once a set of rules is posted for review by an agency, any industry or trade group, environmental organization, consumer organization or other public interest group can solely, by the submission of sufficient public comments that have “merit,” require the rules to go through the rulemaking process all over again. This process can take more than a year because the specific commission responsible for those rules (such as the Utilities Commission or Environmental Management Commission) will have to vote to readopt the rule, hold a public hearing, accept written public comments and then formally adopt the rule. During this process, the commission on its own initiative or in response to public comments can make changes to the rule.
The Regulatory Reform Act of 2013 will have a significant impact in all highly regulated areas, including healthcare, environmental, labor and businesses subject to licensing requirements. The new law provides businesses and industries seeking to change or repeal what they believe to be unnecessary or misguided regulations to do so without having to go through the time-consuming and expensive process of filing a rulemaking petition or seeking to have the legislature change a rule by statute. However, the rules review process will clearly be a two-edged sword, with the potential for improved or even worse regulations, all in a process that no one will be able to control.
If you have questions about or would like to discuss further how your company may want to take action under the Regulatory Reform Act of 2013, please contact one of the authors on this page.