Oregon Advisory Opinions June 23, 1976: OAG 76-60 (June 23, 1976)

OAG 76-60.

ORS 183.310(1) provides:

"'Agency' means any state board, commission, department, or division thereof, or officer authorized by law to make rules or to issue orders, except those in the legislative and judicial branches." (emphasis supplied).

The word "state" in the above statute is a limitation on the words "board, commission, department, or division." The word "state" also limits the word "officer." An officer must be a state officer. Cities, counties, school districts or other special districts are not agencies or state agencies for purposes of Oregon Laws 1975, ch 136 and ORS ch 183. Since the enactment of the Administrative Procedure Act in 1957, there has been no suggestion that the Act applies to other than state agencies.

In School Dist. 7 v. Weissenfluh , 236 Or 165, 170, 387 P2d 567 (1963) n 4, the court noted that a rural school board is not an agency as defined in ORS 183.310(1).

ORS 171.705(3) prior to the amendment in 1975 defined a state agency as one ". . . whose costs are paid wholly or in part from funds held in the State Treasury . . . ." A similar definition is in ORS 291.002(7) which relates to public financial administration. Special districts, such as port or mass transit districts, although authorized by statute, are not under the budgetary and allotment procedure of ORS ch 291. Their monies are not held in the State Treasury.

It is our opinion that an "agency" for purposes of the Administrative Procedure Act means an agency which is responsible to the executive branch of government. It may also mean an agency which is responsible for implementation of executive branch functions. Criteria which may be used to assist in determining whether an "agency" is such for purposes of the Administrative Procedure Act are:

(a) The agency must have been specifically created by the legislature as opposed to general legislative authority to create a political subdivision.

(b) The agency costs must be paid wholly or in part from funds held in the State Treasury.

(c) The agency is subject to budgetary and allotment controls as provided in ORS ch 291.

(d) The agency is not in the legislative or judicial branches of government.

The above criteria will be applicable to most "agencies" for purposes of the Administrative Procedure Act, but not all. For example, the several Commodity Commissions within the Department of Agriculture are agencies but their costs are not paid wholly or in part from funds held by the State Treasury and they are exempt from various provisions of ORS ch 291. There are also

the obvious situations in which the legislature enacted statutes placing an "agency" under the Administrative Procedure Act.

It is difficult to set forth criteria for use in determining what is and what is not a rule. The authorities cannot agree. Davis, Administrative Law Treatise , §5.01 at 285 states:

"Even before the Administrative Procedure Act added new obstacles to the task, probably no effort to provide a precise definition of the term 'rule' was wholly successful. Yet its core of meaning is generally understood and may be simply described. A rule (or a 'regulation'--a term used interchangeably with 'rule') is the product of rule making, and rule making is the part of the administrative process that resembles a legislature's enactment of a statute. Adjudication is the part of the administrative process that resembles a court's decision of a case. Admittedly this analogy to statutes and to decisions of courts is imperfect and is of little use in trying to classify borderline or mixed activities. But precise definition in the abstract is not necessarily desirable, for the same function may well be regarded as rule making for one purpose or in one context and as something else for some other purpose or in another context. . . ." (footnote omitted).

Davis believes that one of the most helpful definitions of rule making is that of Professor Fuchs, who concluded:

". . . 'the issuance of regulations or the making of determinations which are addressed to indicated but unnamed and unspecified persons or situations.' . . ." (footnote omitted). Davis, §5.01, at 286.

Davis further believes that the various definitions are unsatisfactory and may be avoided by ". . . saying simply that adjudication resembles what courts do in deciding cases, and that rule making resembles what legislatures do in enacting statutes. . . ." Davis, §5.01, at 287.

1 Cooper, State Administrative Law , § 2 (1st Ed 1965) at 107, the author states:

"To achieve a successful and workable definition of the term 'rule,' the statute should incorporate certain basic inclusions and certain equally important exclusions."

The Oregon statutory definition of rule complies with the suggestion of Cooper and Davis. ORS 183.310(7) provides:

"'Rule' means any agency directive, regulation or statement of general applicability that implements, interprets or prescribes law or policy, or describes the procedure or practice requirements of any agency. The term includes the amendment or repeal of a prior rule, but does not include:

"(a) Internal management directives, regulations or statements between agencies, or their officers or their employes, or within an agency, between its officers or between employes, unless hearing is required by statute, or action by agencies directed to other agencies or other units of government.

"(b) Declaratory rulings issued pursuant to ORS 183.410 or 305.105.

"(c) Intra-agency memoranda.

"(d) Executive orders of the Governor.

"(e) Rules of conduct for persons committed to the physical and legal custody of the Corrections Division of the Department of Human Resources, the violation of which will not result in:

"(A) Placement in segregation or isolation status in excess of seven days.

"(B) Institutional transfer or other transfer to secure confinement status for disciplinary reasons.

"(C) Noncertification to the Governor of a deduction from the term of his sentence under ORS 421.120.

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"(D) Disciplinary procedures adopted pursuant to ORS 421.180."

The basic definition above of "Rule" includes any policy decision made by an agency. This definition includes not only policy determinations made pursuant to an agency's statutorily granted discretionary powers, but also those decisions which arise out of the interpretation or implementation of an express statutory directive.

The definition then sets forth some significant exclusions. Some of these exclusions, such as executive orders of the Governor, certain rulings by the Corrections Division and declaratory rulings, are specifically defined and no further interpretation is necessary.

The exclusions for "internal management directives" and "intra-agency memoranda" are more difficult. The only case in which the internal management directive exception was considered is Wehrmann v. Public Welfare Div ., 24 Or App 141, 544 P2d 606 (1976) where the Court of Appeals held that a directive to staff explaining an existing rule was an internal management directive. The case law authority from other states is conflicting. Aguiar v. Hawaii Housing Authority , 522 P2d 1255 (1974).

In the absence of any definitive precedent, we take the view that the criteria for determining whether a policy determination is a rule or is an internal management directive or memorandum should be determined not by the subject matter but by reference to the persons to whom the directive

is addressed. If the directive or memorandum is addressed to persons other than employes or agents of an agency, then it is our opinion that it is a rule. This would include not only the general public, but also any directive or memorandum addressed to segments of the public or clients of an agency such as welfare recipients, licensees, or students. On the other hand, if the directive is addressed only to officers or employes of an agency or to other state agencies, then it is deemed internal management and not a rule.

The distinction we have drawn does not ignore that a directive to agency employes or to another agency may have substantial policy implications. In practice, it is impossible to draw a rational distinction between such directives which are of a policy nature and those which are not. Our definition of the internal management exemption will not undermine the effectiveness of the Administrative Procedure Act, but merely confines the number of events in the policy making process to which that act applies. The management directive or memorandum addressed exclusively to officers, employes or other state agencies is necessarily internal. Until that directive or memorandum has been acted upon, it cannot affect the public or any segment thereof. If the directive of an agency contains policy decisions that affect other members of the public, then the agency still has to go through the rule making process before officers and employes or other agencies could implement

the directive. If the directive contains policy decisions relating to agency personnel, the legislature intended that such matters should not be subject to the Administrative Procedure Act. The procedural rights of employes are protected through other statutes.

Although the statutory definition does not expressly exclude "orders", as defined in ORS 183.310(4), it is clear that if the matter is an "order" then it is not also subject to the rule making process. Sun Ray Dairy Drive Inn v. OLCC , 75 Adv Sh 176, 530 P2d 887 (1975). To conclude otherwise would require unnecessary procedural duplication. Orders ordinarily arise out of the contested case procedure and are appealable directly to the Court of Appeals. If a contested case is not available, then the person subject to the order is entitled to a de novo trial in the circuit court.

An order can embody policy decisions by an agency and the distinciton between an order and a rule is important. Whereas a rule is a policy decision, an order is an "agency action expressed verbally or in writing directed to a named person or named persons . . . ." ORS 183.310(4). Thus, for example, student conduct regulations are rules, but a disciplinary action against a particular student is an order. In making the order, it may be necessary for the administrative agency to make policy decisions or interpret the student conduct rules. However, this would not make the order a rule. The courts have recognized that entering orders is not a mechanical process, and that many policy decisions have to be

made on a pragmatic case by case basis.

This is best illustrated by Sun Ray Dairy v. OLCC , 16 Or App 63, 517 P2d 289 (1973) and Sun Ray Drive In v. OLCC , 75 Adv Sh 146, ___ Or App ___, 530 P2d 887 (1975). In Sun Ray Dairy the OLCC had denied a liquor license on the ground "that there were sufficient licensed premises in locality and that the license was not demanded by public interest or convenience." 16 Or App 65. The Court of Appeals reversed on the ground that the Commission had failed to adopt rules setting forth the criteria for granting and denying licenses. Subsequently, the Commission adopted new rules with general criteria including:

"'10-730 Special Rules. * * * [P]ackage store licenses shall not be issued:

"'* * * * *

"'(2) To an outlet which primarily sells petroleum products if there are other outlets with packaged liquor privileges within a reasonable distance.

"'* * * * *.'" OAR ch 845, § 10-730.

In Sun Ray Drive In , petitioner's request was denied by OLCC under the new rule. Petitioner appealed contending that the rule was too general in that it did not precisely define "primarily" and "reasonable distance". The Court affirmed the denial recognizing that agencies must have certain "latitude" in implementing policy decisions.

In summary, we would suggest the following criteria for determining what is a rule.

1. If the matter constitutes an order as defined

in ORS 183.310(4), then it is not a rule.

2. Executive orders of the Governor, orders by the Corrections Division pursuant to ORS 183.310(7) (e) and declaratory rulings do not constitute rules.

3. Directives, regulations, statements or interpretations addressed exclusively to officers or employes of an agency or to another state agency does not constitute a rule.

4. Any other directive, regulation, statement or interpretation of a policy making nature constitutes a rule. If the matter is not of a policy nature, but merely relates to the performance of a perfunctory and non-discretionary statutory duty, then it is not a rule.

Examples to illustrate how these criteria would apply are as follow. Examples 1, 6, 7, 8 and 9 should also answer your specific opinion requests.

Example 1. You ask in your opinion request whether the form of voter registration card that is prescribed by the Secretary of State is a rule. Oregon Laws 1975, § 7, Chapter 678, provides in part:

"(1) A person may register to vote by delivering or mailing a completed registration card to the county clerk for the county in which he resides. The registration card shall supply all the information required by ORS 247.121. The Secretary of State shall prescribe the form of the registration card and shall prepare and distribute the registration cards not later than 30 days after the date this 1975 Act becomes effective."

It is our opinion that the Secretary of State's action is not a rule. The form of the card is not important, but

the content is. The Secretary of State has no discretion as to the content. The card must reflect the information required by ORS 247.121. His prescription of the form is purely a perfunctory duty and could hardly be characterized as policy making.

Example 2. The Oregon Liquor Commision adopts a resolution pursuant to its discretionary powers that in the future it will not grant liquor licenses for any premises located within 100 feet of a church. The resolution is clearly a policy decision and thus a rule. Before the Commission can undertake such a policy, it would have to comply with the rule making procedure.

Example 3. In lieu of adopting a resolution as in Example 2, the OLCC sends a directive to its employes that no license application shall be granted if the premises is less than 100 feet from a church. Is the directive a rule? Since the directive is addressed exclusively to employes of the agency, it does not constitute a rule, but is merely an internal management directive. However, the employes of the Commission cannot carry out the directive until such time as the Commission adopts an appropriate rule or regulation pursuant to Chapter 183. If the Commission has not adopted a rule, but improperly denied license on the basis of the directive, the employe's action would be invalid and subject to judicial challenge.

Example 4. Agency X issues a directive to all employes that they must have their hair cut to a prescribed length. Such

a directive does not constitute a rule as it is addressed exclusively to employes of the agency and thus is of an internal management nature. Employes, however, may have a right to appeal the rule to the Employe's Relations Board or through the collective bargaining process.

Example 5. Agency Y asks for an attorney general's opinion interpreting a statute affecting the agency. The attorney general's opinion is clearly an interpretation of a statute having policy implications affecting the public, but nevertheless the opinion is not a rule, but rather is an internal management directive from one agency to another, i.e., the attorney general to Agency Y. However, in order for Agency Y to implement the attorney general's opinion it must adopt a rule.

Example 6. Under the principles established above, rules of student conduct and control of housing conditions would be rules of the Department of Higher Education. See also, Amazon Coop. Tenants v. Bd. High. Ed ., 15 Or App 418, 516 P2d 89 (1973).

Example 7. The public Welfare Divison established a rule which read:

"Income includes any receipt payment gain or benefit in cash, goods or services obtained from any source by gift, contribution entitlement or compensation." OAR 461-4.030.

Subsequently the Division sent to its employes a bulletin which stated that "tax rebates will be considered as income available to meet need." The instructions to the employes was

a perfunctory explanation of a matter which was obviously covered by the existing rule. As such it did not declare or establish policy and consequently was an internal managment directive, not a rule, Wehrmann v. Public Welfare Civ ., 24 Or App 141, ___ P2d ___ (1976).

Example 8. The public Welfare Division adopts a form requesting factual information which is to be filled out by persons providing medical assistance to recipients. The form includes instructions concerning the method of filling out the form and directions as to the offices to which the various types of forms will be submitted. Upon receipt of the completed forms at the proper office, the persons submitting the forms will be compensated at a reasonable rate to be determined by the Commission. Although the physical character of the form and the instructions attached would not be rules if the information to be included in the form is not specifically legislatively stated, the determination concerning what information is required would clearly be rule making. If the Division was directed to determine the "reasonable" rate of compensation that determination would be rule making.

Example 9. The Oregon Arts Commission establishes "guidelines" determining conditions to be complied with prior to payment of grants. This would be a directive, regulation or statement of a policy making nature and consequently a rule.

You also ask when is a rule adopted under Oregon Law 1975, ch 136, § 3(1). In the Attorney General's Model

Rules of Procedure on the Administrative Procedure Act (1975), it is recommended that an agency submit a draft of a proposed permanent rule to legislative counsel at the same time the notice of intent to adopt the rule is submitted to the Secretary of State for publication. A temporary rule must also be submitted to legislative counsel prior to adoption by an agency. It was our opinion at that time and remains unchanged that a rule is adopted when the agency enters a "formal" order of adoption. A formal order of adoption may be a statement that the rule is adopted and setting forth the date together with the signature of the authorized person to sign for the agency. The rule is effective when filed with the Secretary of State, but must be adopted by the agency before filing with the Secretary of State. In ORS ch 183, the legislature uses the words "adoption" and "effective date", and it is only reasonable that the words have different meanings.

A rule may have an effective date in the future if the rule so provides, but this does not relate to adoption. It is possible that an agency could adopt a rule and wait an indefinite period of time before filing with the Secretary of State. In most situations, the agencies will file the rule immediately after adoption.