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Employment Law Update: Chevron Overboard! In a Case Having Nothing to Do With the Workplace, the Supreme Court Overturns Federal Agency Chevron Deference. What Does This Mean for Employers?

On June 28, 2024, the U.S. Supreme Court issued its decisions in Loper Bright Enters. v. Raimondo, No. 22-451, and Relentless, Inc. v. Department of Commerce, No. 22-1219 (June 28, 2024), two cases involving fishing vessel operators challenging federal regulations regarding fishery management in federal waters. Although these cases are not workplace-related, the decision is expected to significantly impact employers and the workplace given the expanse of federal regulations governing the workplace, and the regularity with which those regulations are challenged in litigation. The list of potentially impacted agencies includes the Equal Employment Opportunity Commission (EEOC), the Department of Labor (DOL), the Occupational Safety and Health Administration (OSHA), and the National Labor Relations Board (NLRB). These agencies, which are seen by many as having too much power, have potentially had the wind taken out of their proverbial sails. 

The Chevron Doctrine

Since the Supreme Court decision in Chevron v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), courts have looked at the underlying statute to determine whether the provision at issue in the litigation was clear (unambiguous). If the statute was clear, the analysis ended there. If the provision was ambiguous, or the statute was silent on the matter, courts proceeded to consider whether the agency’s interpretation of the statute as reflected in its corresponding regulations was “reasonable.” If reasonable, the court had to uphold the interpretation, even if the court might conclude there is another, better interpretation.  

The last forty years have confirmed that the Chevron doctrine presents a rather low hurdle for an agency to clear when defending a challenged action. This deference has allowed agencies to drastically change the parameters of employment laws with minimal judicial interference.

Through rulemaking, agencies have refined the meaning of the statutes they enforce and, in some cases, have broadly expanded the scope of those statutes. Just this year, the DOL has issued regulations increasing the minimum salary requirements to meet the salary basis test for the executive, administrative, and professional exemptions, although there is no such provision for such a requirement in the Fair Labor Standards Act (FLSA). The EEOC expanded the Pregnant Workers Fairness Act (PWFA) to require accommodations for medical conditions related to abortion. And, the Federal Trade Commission (FTC) issued a proposed Rule banning non-compete agreements in a large set of circumstances, essentially eliminating the ability to have such restrictions in most employment agreements.

The Loper Bright Decision

In Loper Bright, the Supreme Court held that courts are not to defer to an agency’s interpretation of a statute merely because the statute is ambiguous. Instead, courts must exercise their independent judgment in interpreting a statute and reviewing the agency's interpretation of the statute. Relying on the Administrative Procedure Act (APA), which was enacted to curtail zealous agency action, the Court concluded that agencies are not entitled to deference when interpreting statutes. Without being able to rely on Chevron, federal agencies will have to draft regulations more carefully, staying closer to the statutory language and intent, and avoiding drafting regulations to implement policy goals not in line with the underlying legislation.

If a statute expressly authorizes an agency to act, however, courts must respect that delegation of authority. The fundamental question for a reviewing court is: “Does the statute authorize the challenged agency action?” Although the Chevron framework is overruled, the Supreme Court confirmed that prior decisions relying on the Chevron framework are not overturned.

What Does This Mean For Employers?

Currently, nothing has changed as Loper Bright did not involve an employment-related regulation or agency edict. Existing regulations and guidance from the EEOC, DOL, OSHA, NLRB, and other agencies will remain in effect, as is, unless and until they are challenged in litigation and a court finds them outside the scope of the agency’s authority. The Loper Bright decision, however, makes it easier to challenge the authority of an agency to issue subject regulations and should restrict the ability of agencies to transform labor and employment laws to the extent seen in the last several decades.

Loper Bright very well may affect pending legal challenges to federal agency rules, including:
 

• The EEOC’s regulations implementing the PWFA;
   
• The DOL rules increasing the minimum salary threshold for application of the FLSA’s white-collar exemptions, effective July 1, 2024.
   
• OSHA’s “walkaround” rule that permits union organizers to accompany OSHA inspectors on workplace inspections; and
   
• The Federal Trade Commission’s rule banning non-compete agreements.

Although courts now have more discretion to reject an agency’s interpretation, that does not mean rejection will be the new default. While less judicial deference to federal agencies may hold immediate appeal for employers, it also may bring unpredictability as court decisions from multiple jurisdictions may conflict with each other on the same set of agency actions.

Whiteford’s Labor and Employment Law Team will continue to monitor and report on these important developments.

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The information contained here is not intended to provide legal advice or opinion and should not be acted upon without consulting an attorney. Counsel should not be selected based on advertising materials, and we recommend that you conduct further investigation when seeking legal representation.