REG · Business Law · 6 practice questions
Administrative guidance vs rules, OSHA warrants, WARN, CERCLA, FTC
If an agency imposes new binding duties with penalties, it must use notice and comment; process and statutory limits control enforcement. Below: sort scenarios on guidance vs rules, subpoenas, OSHA warrants and contests, WARN coverage, CERCLA PRPs, and FTC deception and Section 13(b).
Try one first
Hint
Evaluate what the agency's statement actually does in practice (creates binding obligations and penalties), not how it is labeled.
Answer D. An agency statement that creates binding legal obligations and attaches penalties functions as a legislative (substantive) rule rather than mere guidance. Legislative rules that have binding effect generally must be promulgated through notice-and-comment under 5 U.S.C. §553; the fact pattern shows no notice-and-comment and does not claim a 'good cause' exception. Because the agency imposed and enforced a new CEO-signed quarterly-filing requirement without required rulemaking, the penalty is unlikely to be upheld.
Why not A: This is tempting because agencies often have broad regulatory authority, but broad statutory authorization does not let an agency sidestep APA notice-and-comment when it issues a new binding substantive rule. Labeling a binding requirement 'guidance' does not avoid the §553 rule.
Why not B: This is tempting because arbitrary-and-capricious review is an important limitation on agency action, but it conflates procedural and substantive review. Here the threshold question is whether the agency enacted a binding rule without following §553 procedures; for binding legislative rules, failure to follow required notice-and-comment is a separate defect that can independently invalidate enforcement regardless of whether the rule would survive arbitrary-and-capricious review.
Why not C: This distractor appeals to fairness and reliance concerns, actual notice can make enforcement seem equitable, but actual notice does not cure the procedural requirement for legislative rules. If a guidance document imposes binding obligations, enforcement by penalties without required notice-and-comment is likely invalid even where the regulated party had notice.
Sort it
The conclusion matches the governing rule or statutory outcome.
The conclusion conflicts with the rule or omits a required procedure or limit.
| Item | Goes to |
|---|---|
| An agency can enforce a CEO‑signed quarterly cybersecurity certification via “guidance” without notice and comment because the statute broadly authorizes regulation. | Incorrect under the rulesBinding new duties with penalties are legislative rules that generally require notice and comment; labels do not control. |
| A document that mandates a new template, extra required metrics, and an executive certification for reports, and threatens penalties for noncompliance, is a legislative rule rather than interpretive guidance. | Correct under the rulesIt creates binding new obligations backed by penalties, which is substantive rulemaking. |
| During a preliminary inquiry, a court would likely enforce a subpoena for specified Product Z labeling and testing records but narrow or deny a 15‑year “all documents” demand. | Correct under the rulesPre‑complaint subpoenas are allowed if reasonably relevant; overbroad catchalls can be narrowed. |
| An agency subpoena is unenforceable until formal charges are filed. | Incorrect under the rulesAgencies may subpoena during preliminary investigations; charges are not required first. |
| OSHA may conduct a routine, nonemergency inspection of a nonpublic production floor without consent or a warrant if selection is from a neutral program. | Incorrect under the rulesNeutral programs do not eliminate the Fourth Amendment requirement; OSHA needs consent or an administrative warrant. |
| To preserve review of an OSHA citation, an employer must file a written notice of contest within 15 working days; an informal conference alone does not preserve rights. | Correct under the rulesOSHA procedure requires a timely written notice of contest or the citation becomes a final order. |
| WARN notice is required where 105 employees each work 40 hours (4,200 aggregate weekly hours) and a unit shutdown will cause employment loss to 50 or more non‑part‑time employees at one site. | Correct under the rulesCoverage is met by the 4,000‑hours alternative test, and a plant closing triggers at 50 or more affected non‑part‑time employees. |
| A private purchase agreement that makes the seller responsible for preclosing cleanup prevents the EPA from seeking CERCLA response costs from the current owner who did not cause the release. | Incorrect under the rulesCurrent owners are PRPs regardless of fault; private contracts do not bar EPA recovery. |
| On these facts, CERCLA PRPs include Delta (arranger), SafeDump (owner/operator at time of disposal), and GreenCo (current owner), but not QuickHaul (transporter that did not select the site). | Correct under the rulesPRPs include arrangers, owners/operators at disposal, and current owners; a transporter is a PRP only if it selected the site. |
| The FTC may bring an administrative deceptive‑advertising case directly against a commercial bank. | Incorrect under the rulesBanks are carved out of the FTC’s direct jurisdiction under the FTC Act. |
| Under Section 13(b) the FTC can obtain an injunction in federal court but cannot obtain equitable monetary relief absent a separate basis. | Correct under the rulesAMG Capital limits Section 13(b) to injunctive relief; restitution or disgorgement needs other authority. |
| Objective health claims such as “clinically proven to eliminate joint pain in 7 days” must be substantiated by competent and reliable scientific evidence; testimonials or general disclaimers are not enough. | Correct under the rulesObjective efficacy claims require proper scientific substantiation under the FTC’s deception standard. |
| When a statute provides an internal agency appeal and judicial review only of a final board order, a party must exhaust that appeal; an ALJ initial decision is not final agency action. | Correct under the rulesAbsent an exception, exhaustion is required before federal‑court review. |
| To prove deception, the FTC must show advertiser intent and actual consumer reliance with monetary loss. | Incorrect under the rulesThe standard is whether the ad’s net impression is likely to mislead reasonable consumers about a material fact; intent and individual reliance are not required. |
Key points
- Binding “guidance” that creates new duties is a legislative rule and needs notice and comment absent an exception.
- Courts enforce the reasonably relevant parts of an administrative subpoena and narrow or reject overbroad demands.
- Neutral OSHA inspection programs do not remove the warrant-or-consent requirement for nonpublic areas.
- An OSHA informal conference does not preserve review; a written notice of contest within 15 working days does.
- WARN coverage can be met by the alternative 4,000 aggregate weekly hours test; plant closings trigger at 50 or more non‑part‑time employees at a single site.
- CERCLA liability is strict; current owners can be PRPs and private contracts do not bar the EPA.
How the exam traps you
- Treating labeled “guidance” as enforceable even when it imposes new binding duties without rulemaking. Ask if the document binds with penalties. If yes, it is a legislative rule that generally needs notice and comment.
- Letting an OSHA citation become final by missing the 15‑working‑day deadline. Calendar 15 working days from receipt and file a written notice of contest on time.
- Assuming a private contract eliminates CERCLA liability to the government. Contracts allocate costs between parties; they do not bar EPA recovery from PRPs.
- Believing an agency must file charges before issuing an investigative subpoena. Pre‑complaint subpoenas are allowed if within authority and reasonably relevant; courts can narrow overbreadth.
Question 2
Hint
Focus on the remedies Section 13(b) itself authorizes in federal court; do not assume the FTC already has a final administrative order or separate statutory penalty authority.
Answer C. Section 13(b) authorizes the FTC to seek injunctive relief in federal district court to stop ongoing or imminent unfair or deceptive acts. The Supreme Court in AMG Capital Management, LLC v. FTC held that Section 13(b) does not itself authorize equitable monetary remedies such as consumer restitution or disgorgement. Monetary relief therefore generally requires separate statutory authority or a prior final FTC order; given the facts here, injunctive relief is the primary remedy available under 13(b).
Why not A: This is tempting because the FTC historically sought monetary relief in district court; however, the Supreme Court's decision in AMG limits Section 13(b) to injunctive relief and disallows equitable monetary remedies under 13(b) itself.
Why not B: Civil penalties require a statutory predicate (for example, a penalty provision tied to violation of a final FTC order or a specific rule) and are not an immediate remedy conferred by filing under Section 13(b) alone.
Why not D: This is appealing because many FTC matters proceed administratively, but Section 13(b) permits the FTC to bring a federal court action for injunctive relief without first completing administrative adjudication or obtaining a prior final order.
Question 3
Hint
Remember which parties CERCLA treats as potentially responsible and whether private contracts alter the EPA's statutory enforcement rights.
Answer B. CERCLA identifies current owners/operators as potentially responsible parties and the EPA can recover cleanup costs from them even if they did not cause the release or were not negligent. A private contract allocating preclosing cleanup costs changes only the parties' private rights; it does not bar the EPA from enforcing the statute. Cedar may, however, have a contractual or equitable claim against Pine for reimbursement.
Why not A: Tempting because of the intuitive 'polluter pays' idea that the original causer is solely responsible. This is incorrect under CERCLA: current owners can be liable for cleanup of preexisting contamination, and the stem expressly rules out any statutory defense for Cedar.
Why not C: Tempting because buyers often think knowledge or negligence should be required. Under CERCLA, however, liability for owners/operators can be strict and is not conditioned on proof of traditional tort negligence or prior knowledge; the absence of statutory defenses in the stem means that theory fails here.
Why not D: Tempting because a contract and a solvent seller seem to allocate responsibility. But a private agreement between Pine and Cedar does not limit the EPA's statutory right to pursue any potentially responsible party. Cedar may seek reimbursement from Pine, but that does not immunize Cedar from EPA claims.
Question 4
Hint
Decide whether the ad makes puffery or an objective, measurable health claim, then recall that objective health claims require competent and reliable scientific evidence, not just disclaimers or testimonials.
Answer C. A specific, quantified health‑effect statement (25% LDL reduction in 30 days) is an objective efficacy claim that must be substantiated under federal consumer‑protection advertising rules by competent and reliable scientific evidence. Testimonials and a small, uncontrolled internal survey do not meet that evidentiary standard. WellnessCo should remove or materially revise the claim unless it obtains proper scientific substantiation first.
Why not A: This distractor tempts by treating testimonials and an internal survey as supporting data. In reality, small uncontrolled surveys and testimonials lack controls, proper sampling, and reliability; they do not constitute the competent and reliable scientific evidence required for broad, quantified health claims.
Why not B: This is tempting because disclaimers are common and appear to limit consumer expectations. However, a general disclaimer does not substitute for competent and reliable scientific evidence required to substantiate an objective, quantified health claim; the underlying claim can still be misleading without proper support.
Why not D: This is tempting because supplements are regulated differently than drugs, but it fails: federal consumer‑protection advertising rules require substantiation for objective efficacy claims regardless of product classification. Being a supplement does not permit unsubstantiated quantified health claims.
Question 5
Hint
Distinguish criminal-search standards from administrative inspection-warrant rules, and ask whether this manufacturer falls within the narrow 'closely regulated' exception.
Answer C. For routine, nonemergency OSHA inspections of nonpublic commercial areas, the Fourth Amendment generally requires consent or an administrative inspection warrant (see Marshall v. Barlow's). Administrative probable cause, not criminal probable cause, is the standard to support such an inspection warrant. The manager should therefore refuse immediate entry absent consent or an administrative inspection warrant while preserving records and avoiding obstruction.
Why not A: This option tempts because neutral inspection programs support oversight, but it is wrong: neutrality alone does not eliminate the Fourth Amendment requirement, OSHA still needs consent or an administrative warrant to enter nonpublic areas absent an emergency.
Why not B: This distractor appeals to the familiar criminal probable-cause standard, but it fails because administrative inspection warrants require only administrative probable cause; OSHA need not show criminal probable cause for routine administrative inspections.
Why not D: This choice is tempting since the closely regulated-industry exception allows some warrantless searches, but it is incorrect: the exception is narrow and typically does not encompass ordinary manufacturers, so it does not justify warrantless entry here.
Question 6
Hint
Use the two‑step approach: first determine whether the employer is covered (two alternative coverage tests exist), then apply the event trigger (plant closing vs. mass layoff). Employees may be counted differently in each step.
Answer A. Under WARN coverage is determined first and may be met either by having 100 or more employees after excluding those employed fewer than 6 months or who work under 20 hours/week, or alternatively by having 100 or more employees in total whose aggregate weekly hours (excluding overtime) are at least 4,000. Harbor's workforce totals 105 employees working 40 hours/week, for 105 × 40 = 4,200 aggregate weekly hours, so it meets the 4,000‑hour alternative coverage test. Separately, a plant closing is triggered when 50 or more employees who are not treated as part‑time under WARN (here, the 52 long‑service employees) will experience employment loss at a single site. Because both coverage and the plant‑closing trigger are met, WARN notice is required.
Why not B: This lures candidates who recall only the 100 full‑time threshold; it is incorrect because WARN also provides an alternative coverage test that counts all employees' aggregate weekly hours (including recent hires), and Harbor meets the 4,000‑hour test.
Why not C: This confuses rules: the 33% (one‑third) test relates to the mass‑layoff trigger for certain layoffs, not the plant‑closing trigger. A plant closing is triggered by 50 or more non‑part‑time employees losing employment at a single site, which Harbor has.
Why not D: This overstates the exclusion. Employees employed fewer than 6 months are excluded from the 50‑employee plant‑closing count but can be included when calculating aggregate weekly hours for the alternative 4,000‑hour coverage test; excluding them from the plant‑closing count does not prevent Harbor from meeting the coverage test.
Common questions
Does labeling an agency document as “guidance” avoid notice and comment?
No. If the document creates new binding obligations backed by penalties, it is a legislative rule and generally requires notice and comment despite the label.
Can an agency issue an investigative subpoena before filing charges?
Yes. Courts enforce subpoenas that are within the agency’s authority, sufficiently definite, and reasonably relevant. Overbroad demands may be narrowed.
When can OSHA enter nonpublic areas without a warrant, and how do employers preserve review of a citation?
For routine, nonemergency inspections of nonpublic areas, OSHA generally needs consent or an administrative inspection warrant. To preserve review of a citation, file a written notice of contest within 15 working days of receipt.
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