On May 9, President Trump signed Executive Order (EO) 14294, “Fighting Overcriminalization in Federal Regulations.” The EO is a continuation of President Trump’s larger effort to address the “overregulation” problem that has vexed U.S. businesses for decades. This alert briefly discusses the history of this issue, highlights the key provisions of the new EO, and offers some thoughts on likely implications for the business community going forward.
History of EOs about Regulations
EO 14294 isn’t the first presidential effort at confronting the overregulation of business. Indeed, going back to the 1980s, the subject has been almost standard presidential EO fare. In 1981, President Reagan issued EO 12291, which required agencies to conduct regulatory impact analyses. In 1993, President Clinton issued EO 12866, which required a cost-benefit analysis for any new “economically significant” regulation. In 2007, President Bush issued an amendment to Clinton’s EO 12866, requiring a written rationale to be issued with any new regulation. In 2011, President Obama issued EO 13563, “Improving Regulation and Regulatory Review.” Finally, during his first term, President Trump issued EO 13771, which mandated a “one-in, two-out” approach to any new regulations. Beyond this bipartisan history of presidential concern about the way regulations are promulgated, interpreted and enforced, the latest EO is specifically focused on the way regulations have increasingly become the subject of criminal enforcement actions. This slightly new emphasis marks a potentially very significant approach to this decades old problem.
EO 14294
The new EO opens with a familiar political talking point that has actually enjoyed broad bipartisan support, at least in concept: “The United States is drastically overregulated.” It goes on to observe that what is worse is that many federal regulations carry criminal penalties for violations and observes that many of these regulatory crimes are “strict liability” offenses that don’t require the government to even prove that the offender intended to violate the law. Indeed the EO suggests that the status quo “privileges large corporations, which can afford to hire expensive legal teams to navigate complex regulatory schemes and fence out new market entrants, over average Americans.” Against this backdrop, the EO makes several policy pronouncements and directs certain specific actions by federal officials. Here are some of the highlights:
1. Criminal Enforcement Is “Disfavored”
First and foremost, the EO plainly declares that, going forward, criminal enforcement of regulatory offenses will be disfavored and will be most appropriate for persons “who know or can be presumed to know what is prohibited or required by the regulation and willingly choose not to comply.” It further declares that “strict liability offenses” are especially disfavored and where enforcement is appropriate, civil rather than criminal enforcement should be considered. Relatedly, the EO provides that when promulgating regulations, agencies should “explicitly describe the conduct subject to criminal enforcement, the authorizing statutes, and the mens rea standard applicable to those offenses.”
2. Agencies to Report on Criminal Regulatory Offenses
The EO directs all federal agencies to submit a report on criminal regulatory offenses within their jurisdiction to the director of the Office of Management and Budget (OMB) by May 9, 2026. Each such report must include a list of all criminal regulatory offenses enforceable by the agency or the Department of Justice (DOJ) and the range of potential criminal penalties for all such identified regulations, and the reports must be updated on an annual basis. In addition, future rulemakings that propose criminal penalties for violations must cite to their authorizing statute and include the mens rea requirement for each element of the offense.
The EO also asks agencies to develop a “uniform default mens rea” for their regulations based on the information submitted in its report, which should assess if its mens rea standards for criminal regulatory enforcement are appropriate. The report should also include a plan to change the applicable mens rea standards to a generally applicable standard and must provide a justification for each criminal regulatory offense for which the agency plans to deviate from the general standard.
3. Transparency and Agency Referrals
The EO further directs that all future notices of proposed rulemaking (NPRMs) and final rules that could include criminal regulatory offenses should include a statement identifying the rule or proposed rule as a criminal regulatory offense. Moreover, each agency is directed to consult with the attorney general and publish guidance describing its plan to address criminally liable regulatory offenses. When considering whether to make a referral to the Department of Justice for prosecution, the agency should consider the following factors:
- the harm or risk of harm caused by the alleged offense;
- the potential gain to the putative defendant that could result from the offense;
- whether the putative defendant held specialized knowledge, expertise or a license; and
- evidence of the putative defendant’s general awareness of the unlawfulness of his conduct as well as his knowledge of the regulation at issue.
4. Exceptions to the New Policy
The EO explicitly does not apply to the enforcement of laws or regulations related to immigration, national security or defense. This would appear to be in line with the administration’s overall prioritization of these areas for aggressive enforcement action.
Implications for the Business Community
This EO will likely grant to businesses, and especially those that frequently must navigate federal regulations, potentially reduced criminal liability for unintentional violations. This new guidance also means that federal contractors and other companies that must generally adhere to federal regulations can revisit risk assessments to identify whether and how noncompliance would create the highest risk of criminal enforcement. Perhaps most importantly, going forward, agencies will likely be more careful in making criminal referrals, and DOJ will likely be more selective in bringing charges.
However, it is important to note that this EO, while a clear expression of the current administration’s views and goals, is not law and will be subject to potentially varying interpretations throughout the enforcement bureaucracy. In addition, like any EO, this will obviously be subject to change by the next administration, or even during the current administration. Individual prosecutors also retain their discretion in deciding whether to pursue criminal charges for alleged regulatory violations.
The bottom line is that while the intent of this new EO should provide some hope for a more commonsense approach to criminal enforcement of federal regulations, businesses should continue to carefully review all applicable regulations and carefully assess their risk exposure for potential enforcement actions.
Brownstein’s Government Investigations & White Collar Defense team will continue to closely monitor the implementation of this EO and other Trump administration initiatives that may affect the federal government’s enforcement of regulations against of U.S. businesses. For any questions about this topic, contact the authors.
This document is intended to provide you with general information regarding Executive Order 14294. The contents of this document are not intended to provide specific legal advice. If you have any questions about the contents of this document or if you need legal advice as to an issue, please contact the attorneys listed or your regular Brownstein Hyatt Farber Schreck, LLP attorney. This communication may be considered advertising in some jurisdictions. The information in this article is accurate as of the publication date. Because the law in this area is changing rapidly, and insights are not automatically updated, continued accuracy cannot be guaranteed.