Administrative agencies perform the functions of rulemaking, adjudication, and investigation.
Rulemaking is the process by which an administrative agency creates rules that have the force of law. Agencies have rulemaking authority only to the extent delegated by the legislature. Generally, the legislature enacts laws based on government policy and permits an administrative agency to adopt rules to implement the law enacted. Agency rules have the force of law when they concur with government policy.
Administrative adjudication is the exercise of judicial powers by an administrative agency. A legislative body also delegates judicial powers to the agency.
According to the federal Administrative Procedure Act (APA), through adjudication, an administrative agency hears a case that comes before it and decides on the issue in dispute. The final order formulated by the agency will have a binding effect on the parties. However, in the rulemaking process, there is no resolution of disputes. An administrative agency makes rules for future use. In most cases an agency decides cases based on preexisting rules.
Rulemaking affects the entire public rather than a particular group of people. Adjudication affects only the disputing parties. However, this rule can vary because in some circumstances, agency rules can have general or particular applicability. An agency’s decision in a case can be extended to other cases based on similar matter.
Administrative agencies have discretionary powers to adopt new rules through adjudication or rulemaking, or both.[i] However, agencies exercise discretionary power only in accordance with the legislature’s intention.[ii]
Adjudicative rulemaking is the process of making new rules appropriate for deciding a dispute before an agency. While conducting the adjudicative function, administrative agencies can adopt new rules related to the issue in question because the rule generally applicable does not cover the issue.[iii] Therefore, an administrative agency can use adjudication to create new principles even if the principles involve a change from previous policies. However, administrative agencies are supposed to adopt new rules through the rulemaking procedure instead of creating rules while deciding cases.[iv]
An administrative agency’s discretionary powers to act by rulemaking or adjudication can be restrained by statutory provisions. Judicial review also acts as a restraint to exercise agency’s discretionary choice.
Administrative agencies also have the power to conduct investigations. Investigations by administrative agencies are proceedings to obtain information to govern future action. In such proceedings no action is taken against anyone.
Generally, an administrative agency obtains information through investigations rather than the rulemaking process.[v] Therefore, an investigation can be an initiation of rulemaking. However to enact or amend a rule, all statutory requirements for making a rule should be observed.
[i] Ford Motor Co. v. FTC, 673 F.2d 1008 (9th Cir. 1981)
[ii] R & R Mktg., L.L.C. v. Brown-Forman Corp., 158 N.J. 170 (N.J. 1999)
[iii] Rodriguez v. Service Lloyds Ins. Co., 997 S.W.2d 248 (Tex. 1999)
[iv] Matter of Sheriff’s Officer (PC2209J), 226 N.J. Super. 17 (App.Div. 1988)
[v] ASG Industries, Inc. v. United States, 82 Cust. Ct. 101 (Cust. Ct. 1979)