On June 28, 2024, the U.S. Supreme Court overturned the Chevron doctrine. In overturning forty years of precedent, the Court has shifted power away from federal agencies to judges. The impact of this decision will be felt by all employers big and small that are subject to labor and employment regulations.
Background on Chevron
The Chevron doctrine, stemming from the 1984 Supreme Court case Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., required courts to defer to agencies’ interpretations of ambiguous statutory language.
When Congress passes a statute, it can assign enforcement responsibility to an agency, which then clarifies how the statute applies in practice. Agencies clarify statutory application by:
- Publishing informal guidance;
- Issuing quasi-judicial opinions; and/or
- Issuing formal regulations.
The rationale behind Chevron deference was that agencies possess specialized expertise that courts lack, thereby enabling more informed judicial decisions by relying on agency interpretations.
Supreme Court’s Decision
In Loper Bright v. Raimondo and Relentless v. Department of Commerce, the Supreme Court overturned Chevron. The Court’s decision emphasizes a more stringent review of agency interpretations of statutes, indicating that deference to agency interpretations should not be automatic and must undergo thorough judicial scrutiny. Loper Bright’s mandate for courts to “exercise their independent judgment in deciding whether an agency has acted within its statutory authority” marks a significant change in how agency regulations and guidance will be assessed in the future.
Implications for Employers
We anticipate three major changes based on the Court’s Loper Bright decision:
- Regulatory Uncertainty and Compliance Challenges: The overturning of Chevron introduces uncertainty in labor and employment regulations. It will become more difficult to predict outcomes in cases and will complicate compliance efforts as courts now grapple with the boundaries of permissible agency interpretations of statutory ambiguities.
- Changes in Rulemaking and Enforcement: Labor and employment agencies like the Department of Labor (DOL) and the National Labor Relations Board (NLRB) will likely face more challenges in implementing and enforcing regulations. Without Chevron deference, these agencies’ rules and guidelines will face heightened judicial scrutiny, potentially slowing down the rulemaking process and increasing litigation. Thus, we may see fewer new regulations, and more modest regulations, issued.
- Impact on Existing Regulations: Existing regulations and guidance that were previously upheld because of Chevron deference may be subject to new legal challenges under Loper Bright. Recently adopted or proposed rules related to overtime, safety inspections, and independent contracting may also be impacted.
The lawyers at Poyner Spruill will continue to monitor the impact the Loper Bright decision has on labor and employment law and provide updates where applicable.
