The Potential Impact of the Supreme Court Overruling Chevron

As early as middle school, we become familiar with the functions of the three branches of government. The legislative branch makes laws, the judicial branch interprets them, and the executive branch enforces them. Perhaps this simplified description is best for teaching young students, but the reality is far more complicated.

The federal bureaucracy is sometimes referred to as the “Fourth Branch.” The bureaucracy consists of fifteen Cabinet departments (appointed by the President and approved by the Senate) and more than 2,000 agencies. Every year, hundreds of these agencies publish regulations (rules) that interpret federal law.

In 1984, the Supreme Court heard the landmark case Chevron v. Natural Resources Defense Council. The Chevron Doctrine states that courts should defer to the interpretation of federal agencies when they enact “ambiguous” statutes using “reasonable” rule(s). The decision expanded the role of the federal bureaucracy, and many argue, displaced the role of the judiciary in interpreting law.

Late last month, a divided Court (6-3) overturned Chevron. The decision, Loper Bright Enterprises v. Raimondo, asked judges to “exercise their independent judgment in deciding whether an agency has acted within its statutory authority.” What does this mean for employers?

Employers primarily deal with three federal agencies: the National Labor Relations Board (NLRB), the Equal Employment Opportunity Commission (EEOC), and the U.S. Department of Labor (DOL).

All of these agencies create rules interpreting federal law. Late last year, the NLRB issued regulations for determining joint-employer status (which have since been struck down by a federal district court in Texas). The EEOC recently released regulations for the Pregnant Work Fairness Act. In March, the DOL implemented a rule for determining if a worker is an independent contractor under the Fair Labor Standards Act.

Since Chevron, the rules created by federal agencies generally had the force of law. After Loper Bright, however, courts will determine whether an agency has exceeded their “statutory authority.” If the court determine an agency has exceeded its authority, the agency rules become merely persuasive authority.

The NLRB’s, EEOC’s, and DOL’s rulemaking authority has been diminished. Recently issued regulations have been pulled into question by Loper Bright. But this does not mean that federal agencies will be rendered meaningless.

Certain agency rulemaking requirements stem explicitly from Congressional statutory authority. Agencies acting upon express statutory mandates will likely not be found to be acting outside their “statutory authority,” rendering their actions unaffected by Loper Bright.

The Court also stated in Loper Bright that prior cases which determined specific agency actions are lawful remain good law.

Although the NLRB processes rulemaking power, it primarily interprets the National Labor Relations Act (NLRA) by deciding individual cases. The NLRB relies on courts to enforce orders. Pre-Chevron, the Supreme Court afforded the decisions of the NLRB great deference.

It’s unclear if the Court will default to pre-Chevron deference, or if all NLRB decisions will be subject to the same enhanced scrutiny as other agency rules.

After Loper Bright, federal agencies and courts are on the cusp of a potential power shift. It is critical for employers to monitor litigation going forward. Court orders may require changes in policies and practices.

Written by Christina Charikofsky. Christina is a summer associate at Kollman & Saucier and a rising third-year student at the University of Baltimore School of Law.

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