[atlas:bill]

AN ACT Relating to regulatory reform for small businesses; amending RCW 34.05.360 and 34.05.570; adding a new section to chapter 34.05 RCW; and creating a new section.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. The legislature finds that many small businesses in the state are frustrated by the complexity of the regulatory system. The Washington Administrative Code containing agency rules now fills twelve volumes, and appears to be growing each year. While the vast majority of small businesses make a good faith attempt to comply with applicable laws and rules, many find it extremely difficult to keep up with agencies' issuance of new rules and requirements. Therefore, state agencies are directed to make a good faith attempt to notify businesses affected by rule changes that may subject noncomplying businesses to penalties. Further, the legislature finds that requiring the governor's signatures on new agency rules will promote accountability and reduce future regulatory burdens on small businesses. Finally, the legislature finds that small businesses lack the resources that state agencies routinely use in defending administrative rules that may have been adopted unlawfully, without regard to proper administrative procedures, or which exceed an agency's statutory authority. The legislature therefore finds that it is necessary to place the burden of demonstrating that new administrative rules are adopted in a lawful manner upon the adopting agency.

NEW SECTION. Sec. 2. A new section is added to chapter 34.05 RCW to read as follows:

Within two hundred days of the effective date of a rule that imposes additional requirements on businesses the violation of which subjects the business to a penalty, assessment, or administrative sanction, an agency shall make a good faith effort to notify businesses affected by the rule of the requirements of the rule and how to obtain technical assistance to comply. For purposes of this section, "good faith" means: (1) The agency at least notifies businesses in the standard industrial classifications or their successor identified in the rule-making file as businesses affected by the rule that are registered with the department of revenue; or (2) for rules imposing additional requirements only on persons or firms licensed, registered, or operating under a permit, the agency notifies those persons or firms holding the license, registration, or permit. The notification must announce the rule change, briefly summarize the rule change, and include a contact for more information. Notification may be by individual notice, agency bulletins or newsletters, or any other means that will reasonably inform affected businesses. Failure to notify a specific business under this section does not invalidate a rule or waive the requirement to comply with the rule.

Sec. 3. RCW 34.05.360 and 1988 c 288 s 311 are each amended to read as follows:

The order of adoption by which each rule is adopted by an agency shall contain all of the following:

(1) The signature of the governor;

(2) The date the agency adopted the rule;

((~~(2)~~)) (3) A concise statement of the purpose of the rule;

((~~(3)~~)) (4) A reference to all rules repealed, amended, or suspended by the rule;

((~~(4)~~)) (5) A reference to the specific statutory or other authority authorizing adoption of the rule;

((~~(5)~~)) (6) Any findings required by any provision of law as a precondition to adoption or effectiveness of the rule; and

((~~(6)~~)) (7) The effective date of the rule if other than that specified in RCW 34.05.380(2).

Sec. 4. RCW 34.05.570 and 1995 c 403 s 802 are each amended to read as follows:

(1) Generally. Except to the extent that this chapter or another statute provides otherwise:

(a) Except as provided in subsection (2) of this section and except that an agency bears the burden of demonstrating that the agency action was authorized by law, the burden of demonstrating the invalidity of agency action is on the party asserting invalidity;

(b) The validity of agency action shall be determined in accordance with the standards of review provided in this section, as applied to the agency action at the time it was taken;

(c) The court shall make a separate and distinct ruling on each material issue on which the court's decision is based; and

(d) The court shall grant relief only if it determines that a person seeking judicial relief has been substantially prejudiced by the action complained of.

(2) Review of rules. (a) A rule may be reviewed by petition for declaratory judgment filed pursuant to this subsection or in the context of any other review proceeding under this section. In an action challenging the validity of a rule, the agency shall be made a party to the proceeding.

(b) The validity of any rule may be determined upon petition for a declaratory judgment addressed to the superior court of Thurston county, when it appears that the rule, or its threatened application, interferes with or impairs or immediately threatens to interfere with or impair the legal rights or privileges of the petitioner. When the validity of a rule is challenged, after the petitioner has identified the defects in the rule, the burden of going forward with the evidence is on the agency. The declaratory judgment order may be entered whether or not the petitioner has first requested the agency to pass upon the validity of the rule in question.

(c) In a proceeding involving review of a rule, the court shall declare the rule invalid only if it finds that: The rule violates constitutional provisions; the rule exceeds the statutory authority of the agency; the rule was adopted without compliance with statutory rule-making procedures; or the rule is arbitrary and capricious.

(3) Review of agency orders in adjudicative proceedings. The court shall grant relief from an agency order in an adjudicative proceeding only if it determines that:

(a) The order, or the statute or rule on which the order is based, is in violation of constitutional provisions on its face or as applied;

(b) The order is outside the statutory authority or jurisdiction of the agency conferred by any provision of law;

(c) The agency has engaged in unlawful procedure or decision-making process, or has failed to follow a prescribed procedure;

(d) The agency has erroneously interpreted or applied the law;

(e) The order is not supported by evidence that is substantial when viewed in light of the whole record before the court, which includes the agency record for judicial review, supplemented by any additional evidence received by the court under this chapter;

(f) The agency has not decided all issues requiring resolution by the agency;

(g) A motion for disqualification under RCW 34.05.425 or 34.12.050 was made and was improperly denied or, if no motion was made, facts are shown to support the grant of such a motion that were not known and were not reasonably discoverable by the challenging party at the appropriate time for making such a motion;

(h) The order is inconsistent with a rule of the agency unless the agency explains the inconsistency by stating facts and reasons to demonstrate a rational basis for inconsistency; ((or))

(i) The order is arbitrary or capricious; or

(j) The order is based on a de facto rule.

(4) Review of other agency action.

(a) All agency action not reviewable under subsection (2) or (3) of this section shall be reviewed under this subsection.

(b) A person whose rights are violated by an agency's failure to perform a duty that is required by law to be performed may file a petition for review pursuant to RCW 34.05.514, seeking an order pursuant to this subsection requiring performance. Within twenty days after service of the petition for review, the agency shall file and serve an answer to the petition, made in the same manner as an answer to a complaint in a civil action. The court may hear evidence, pursuant to RCW 34.05.562, on material issues of fact raised by the petition and answer.

(c) Relief for persons aggrieved by the performance of an agency action, including the exercise of discretion, or an action under (b) of this subsection can be granted only if the court determines that the action is:

(i) Unconstitutional;

(ii) Outside the statutory authority of the agency or the authority conferred by a provision of law;

(iii) Arbitrary or capricious; ((or))

(iv) Taken by persons who were not properly constituted as agency officials lawfully entitled to take such action; or

(v) Based on a de facto rule.