In a landmark decision, the Supreme Court overruled its 40-year-old decision in Chevron, USA Inc. v. Natural Resources Defense Council. Chevron directed federal courts to defer to agencies’ interpretation of unclear laws.
In Loper Bright Enterprises et al. v. Raimondo, Secretary of Commerce, et al, the Supreme Court held that the courts should no longer give deference to federal agencies in interpreting laws; rather they are required to exercise independent judgment in determining the meaning of statutory provisions.
This FAQ explains (1) the meaning of Chevron deference; (2) the Supreme Court’s decision and (3) the impact the decision will have on federal agencies and employers.
How did Chevron deference work?
Chevron deference is the leeway federal judges gave agencies to interpret the laws they administered when a dispute arose. The Supreme Court in Chevron established a two-step test to uphold an agency’s interpretation:
- The Court decided whether Congress had directly addressed the issue. If Congress’ intent was clear, that ended the analysis.
- If Congress’ intent was unclear, and the statute was ambiguous as to the issue, the Courts would then defer to the agency’s interpretation of the statute – provided the interpretation is reasonable.
The idea behind such deference was that federal agencies have special competence and are better suited than federal judges to interpret a law when Congress left it open for interpretation. As explained below, the Supreme Court overturned Chevron such that the Courts will no longer give deference to the federal agencies.
What did the Supreme Court Change?
Federal agencies such as the Department of Labor (DOL), the Equal Employment Opportunity Commission (“EEOC”) and the National Labor Relations Board (“NLRB”) publish regulations and guidance interpreting the laws they administer.
The courts previously gave these agencies deference – meaning they gave weight to the agencies’ interpretation of the laws they administer. This gave the agencies a degree of power and leverage over employers who they believed were violating the law.
Those days appear to be over. The Supreme Court refuted the notion that federal agencies have special competence to interpret unclear law stating that the Chevron doctrine was misguided:
“Perhaps most fundamentally, Chevron’s presumption is misguided because agencies have no special competence in resolving statutory ambiguities. Courts do. The Framers anticipated that courts would often confront statutory ambiguities and expected that courts would resolve them by exercising independent legal judgment. Chevron gravely erred in concluding that the inquiry is fundamentally different just because an administrative interpretation is in play. The very point of the traditional tools of statutory construction is to resolve statutory ambiguities. That is no less true when the ambiguity is about the scope of an agency’s own power—perhaps the occasion on which abdication in favor of the agency is least appropriate.”
Now courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority, and courts may not defer to an agency interpretation of the law simply because a statute is ambiguous.
Does the Supreme Court’s decision overturn prior cases that relied on Chevron?
No. The court made clear in its holding that it was not calling into question prior cases that relied on the Chevron framework. “The holdings of those cases that specific agency actions are lawful — including the Clean Air Act holding of Chevron itself — are still subject to statutory stare decisis despite our change in interpretive methodology,” Justice Roberts said.
What is the impact the Supreme Court’s decision may have on federal agencies and employers?
Federal agencies no longer have the benefit of court deference. This is a game changer. Employers are now on a more equal playing field in cases where the meaning of a statute or law is in question. The shift in the balance of power between agencies and employers may lead to increased litigation. For example, employers may be more willing to challenge agency enforcement actions knowing that the agencies will not have the benefit of court deference. This new reality may also impact settlement strategies and mediation and conciliation negotiations.
In addition, federal agencies will feel pressured to “stay in their lane” and be less motivated to try to expand the application of laws by proposing creative and expansive interpretation of laws.
Finally, although the decision does not impact past decisions, it may impact recently passed rules that are currently being challenged. For example, the DOL’s new overtime rule is under scrutiny and the FTC rule banning noncompetes is also being challenged. It will be interesting to see if the parties opposing these rules rely on Loper to support their position.
Conclusion
Federal agencies issue and prosecute rules that impact all aspects of business. For the past 40 years federal courts applied the Chevron doctrine and gave deference to federal agencies’ interpretation of unclear laws. This empowered the federal agencies and gave them a leg up on employers as to enforcement and litigation. The Supreme Court’s decision overturns Chevron and creates a more equal playing field. Courts are now directed to exercise their independent judgment in deciding whether an agency has acted within its statutory authority. The potential impact of the decision is huge for agencies and employers on many fronts.
Stay tuned for more developments.
As always, please let me know if I can help.
Work hard at work worth doing. This is what drives Daniel Park in every aspect of his life. At Berman Fink Van Horn, Daniel demonstrates this in everything he does.
Kenneth Winkler, a shareholder at Berman Fink Van Horn, helps employers navigate the employment laws and regulations that govern the workplace.
