Notice & Comment: Regulation by Adjudication Gives Agencies Maximum Flexibility in Wielding Their Powers
An e-cigarette manufacturer follows an arduous set of standards to get its market applications approved by the Food and Drug Administration (FDA). The company completes the process as outlined, but the FDA still denies its applications. Why? The FDA changed the rules on a dime after the fact, without public input, without following the rulemaking process, and without fair notice. The agency’s ad hoc determination in an adjudication reset the standards for approving marketing applications, and it didn’t matter that companies had already followed the rules of the previous system.
This is a real example of regulation by adjudication, the topic of a new research brief published by Pacific Legal Foundation. It’s a practice that mixes otherwise separate and distinct mechanisms—rulemaking and adjudication—to allow agencies to create new rules when they resolve individual cases and disputes. Like courts, agencies often adjudicate cases and set binding policy as a result of their decisions. This may seem like an efficient way for an agency to operate, but it’s problematic for several reasons.
Rulemaking and adjudication each have very different purposes. Rulemaking is general and prospective; it applies to everyone and to future conduct. Adjudication, however, is particular and retrospective; it applies to the parties in a case and to past conduct.
Regulation by adjudication, then, like in the example above with the FDA, allows an agency to have everything at once. With an ad hoc adjudicative decision, the agency gets to bind both the parties to the particular case at hand as well as outside parties. And more than that, the rulings apply to future conduct as well as retroactively to conduct that has already happened.
This practice flies in the face of traditional rule-of-law principles.
It’s important to state the obvious: Agencies are not courts. Whereas the Supreme Court can bind lower courts and other parties in future, similar cases with its rulings, federal agencies don’t have that same ability because they don’t have judicial power under the Constitution. Regulation by adjudication, as a commingling of legislative and judicial power under the guise of executive power, represents a major separation-of-powers problem.
Agencies are executive bodies that create rules to enforce federal law. Those rules, importantly, shouldn’t be retroactive. The Constitution explicitly prohibits ex post facto laws—laws that make certain activities illegal after the fact. It comes down to fairness and predictability. How is anyone supposed to obey laws and rules if we don’t have fair notice of what the law is, we can’t predict what it will be, and we don’t know if it’ll apply to the activities we’re engaging in right now? This method of regulation gives agencies extraordinary discretion in wielding their vast powers after the fact.
One agency, the National Labor Relations Board (NLRB), conducts its work mainly through regulation by adjudication. The agency’s website explicitly states, “The Board sets policy for the Agency primarily through adjudication.” And the numbers don’t lie. The NLRB published 27 rules in the Federal Register through notice and comment from 2015 through 2024. During that time, the board issued upwards of 2,000 decisions in cases concerning unfair labor practices. The vast majority of the NLRB’s regulatory activity is adjudicative.
Many of these decisions become binding agency policy in the same way that notice-and-comment rules in the Federal Register are binding agency policy. For example, in 2015, the NLRB in an adjudication changed its rule for determining whether two or more entities are joint employers of one workforce. Before the ad hoc ruling, the NLRB had one rule for determining joint employers; after the ruling, and without any public input, the agency had a new rule for making that determination. The board created this new joint-employer rule and redefined the National Labor Relations Act’s definition of “employer” through an adjudication, as opposed to going through the traditional rulemaking process. That decision applies across the U.S. economy to all relevant businesses and labor agreements.
In 2017, the board overruled its 2015 decision in another case and reinstated the prior policy. Finally, in 2023, the NLRB promulgated a rule through notice and comment establishing a standard for determining joint-employer status. This is truly the exception that proves the rule—only after several back-and-forth changes in agency policy did the NLRB finally go through the rulemaking process and consider public input for what was always a generally applicable rule.
It’s a testament to how far we’ve strayed from the Constitution that federal agencies behave like quasi-courts in their normal day-to-day work. But it should be no less a major rule-of-law and separation-of-powers concern when agencies use disputes between two parties over past conduct to effectively create new regulations governing parties beyond the immediate case and conduct that has yet to occur.
This article originally appeared in Notice & Comment on January 28, 2026.
