Chevron Overruled — What Does this Mean for Employers?

In what may be one of the most significant United States Supreme Court decisions handed down in decades, the Court, in Loper Bright Enterprises v. Raimondo, overturned the Chevron doctrine, and removed the forty-year old legal foundation that many federal labor and employment agencies relied upon when promulgating their workplace regulations. This advisory provides a pragmatic explanation of the Chevron doctrine, the Supreme Court’s holding in Loper Bright, and what employers should be on the look-out for next in the months and years that follow this sea-change in federal law.

What was the Chevron Doctrine?

When Congress uses its legislative powers to pass a statute, it often directs federal agencies to enforce the statute. But sometimes, those statutes are ambiguous or even entirely silent on specific issues the agencies are to monitor. So, federal agencies often promulgate their own regulations to “fill” those gaps in the statute. But what happens if a regulated party challenges the validity of those regulations? That is where the Chevron doctrine played a huge role for the better part of half of a century.

Under the now defunct Chevron doctrine, courts used a two-step test to determine whether the agency’s regulation was valid. Step one required the court to examine the statute the regulation interpreted to determine whether the statutory provision at issue was clear or ambiguous. If the statute was clear, the analysis ended at step one. But, if the statute was ambiguous or silent on the issue, courts moved on to step two. Under this step, courts analyzed whether the agency’s interpretation of the statute was “reasonable.” If the agency’s interpretation was reasonable, the court simply deferred to the agency’s interpretation of the statute and upheld the regulation’s validity.

Because this second step required a relatively low burden on the agency, federal agencies routinely prevailed on legal challenges made to their regulations in federal court. Indeed, studies of Chevron suggest that about three-fourths (75%) of the legal challenges to agency interpretations have been overruled in federal circuit courts of appeals in the past four decades. Powerful regulations created by the Department of Labor (DOL), National Labor Relations Board (NLRB), Equal Employment Opportunity Commission (EEOC), and the Occupational Health and Safety Administration (OSHA) were regularly upheld under the Chevron doctrine. Consequently, this doctrine gave federal agencies considerable power in shaping federal law in the workplace.

Loper Bright Overrules the Chevron Doctrine–What’s Next?

All of the above analysis changed under the Supreme Court’s recent decision in Loper Bright when SCOTUS expressly overruled this two-step framework. The Court was analyzing two circuit court decisions that applied Chevron to uphold a little-known National Marine Fisheries Service regulation. The regulation required that under certain circumstances fishing boat owners had to pay for an onboard observer to monitor compliance with federal fisheries regulations. In the lead case, Loper Bright, the D.C. Circuit ruled that the underlying statute, the Magnuson-Stevens Act, was silent on the question of whether boat owners could be compelled to pay for a monitor, and under the second step gave the regulation Chevron deference, and approved of the regulatory language.

The U.S. Supreme Court, in a 6-3 decision penned by Chief Justice Roberts, discarded Chevron in its own analysis of the maritime regulation, reasoning that “an ambiguity is simply not a delegation of law-interpreting power.” The Supreme Court went on to hold that it should be the courts, and not federal agencies, which should have the final say in resolving statutory and regulatory silence and ambiguities. As a consequence, courts are no longer required to defer to the federal agency’s interpretation of an ambiguous or silent federal statute, which represents a colossal blow to the power and influence of federal agencies, which have been accused by many political observers of becoming surrogates for Congressional action, and weaponized by presidential administrations as a means of pushing political agendas that have been stymied by legislative gridlock.

The Supreme Court’s decision did not examine a challenge to an employment regulation, so existing regulations from the DOL, EEOC, OSHA, and NLRB are still in full force and effect. In fact, the Supreme Court expressly emphasized that prior decisions relying on Chevron were not overturned. But, federal employment regulations are now much easier to challenge, so agencies may soon begin to formulate narrower rules rather than adopting broad regulations that stretch the underlying statute past its perceived borders. Additionally, this decision will undoubtedly impact ongoing litigation involving scads of workplace regulations including the DOL’s new rule on wage requirements for exempt workers under the Fair Labor Standards Act (FLSA), the NLRB’s joint-employer rule under the National Labor Relations Act, the DOL’s new rule on who is an independent contractor or employee under the FLSA, and even the EEOC’s recent regulations on the Pregnant Workers Fairness Act.

Ultimately, though, employers have entered a new and uncertain era for complying with federal labor and employment laws. The full impact of Loper Bright is unknown until we see how federal agencies and lowers courts react to the majority opinion. Crowe & Dunlevy will closely monitor these changes over the coming months and our Labor and Employment Practice Group will be ready to assist employers navigate this post-Chevron world.

If you have any questions regarding the impact Chevron being overruled might have on your company, please contact Logan C. Hibbs or a member of the firm’s Labor & Employment Practice Group.


Associated People:

Logan C. Hibbs

Practice Area:

Labor & Employment