Supreme Court Issues Important Decision Impacting Federal Agencies

On June 28^th, 2024, the United States Supreme Court overturned Chevron U.S.A. v. Natural Resources Defense Council, a foundational case in federal agency law. In the consolidated cases of Loper Bright Enters. V. Raimondo, No. 22-451, and Relentless, Inc. v. Department of Commerce, No. 22-1219 (June 28, 2024), the Supreme Court redefined the process by which courts will review certain federal agency actions.

Under Chevron, courts had previously granted a high degree of deference to federal agencies when agencies interpreted and applied statutory law. If a federal statute was silent or ambiguous on a matter, courts allowed agencies to regulate the matter so long as the agencies’ actions were “reasonable.” Under the new standard in Loper, federal agencies will no longer be accorded the great deference afforded to them by Chevron. Agencies must now either regulate in accordance with the plain language of the statute that enables them or regulate in line with the congressional intent behind such statutes. Going forward, courts will no longer defer to an agency’s own interpretation of the statute. Courts will employ the traditional tools of statutory interpretation to ensure an agency is acting within the scope of power granted to it by Congress.

As it pertains to employment law, the immediate effects of the Loper decision are still percolating. The potential future consequences stem from the sheer quantity and extent of federal agency regulation which occurs in employment law. Regulations issued by agencies such as the Equal Employment Opportunity Commission, the Department of Labor, the Occupational Safety and Health Administration, and the National Labor Relations Board may be impacted. Nevertheless, the Court noted in its decision that all prior decisions that relied on Chevron are not overturned. It is only future challenges to agency regulations that have the potential to upset the status quo. Going forward, courts will decide whether an agency has acted within its statutory authority and “may not defer to an agency interpretation of the law simply because a statute is ambiguous.”

While some commentators applaud the Supreme Court’s efforts to reign in the power of administrative agencies, other commentators are concerned with the possibility of different jurisdictions ruling differently on the same agency actions. When the interpretation of a statute is left to a federal agency, a consistent rule is created for employers across state lines. When individual courts review challenges to an agency rule, there is a possibility that one jurisdiction will invalidate the agency’s interpretation while a different jurisdiction upholds the same interpretation. This predicament may create uncertainty or conflict for interstate employers.

Going forward, it will be important for employers to stay current with challenges to federal agency rules. Courts will likely see an immediate influx of lawsuits based on the Loper decision in the coming months. Notable challenges already underway are attacks on a recently adopted FTC rule, which was set to ban most types of noncompete agreements beginning September, 2024, and various attacks on the Department of Labor’s guidance defining the term “independent contractor” under the Fair Labor Standards Act.

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