The Supreme Court recently reversed a long-standing doctrine established by the 1984 decision, Chevron v. Natural Resources Defense Council. The Court returned the duty of interpreting ambiguous statutory provisions involving federal agency rulings to the district courts, where it resided prior to the Court’s Chevron decision.
The Origin of Chevron Deference
The Court in Chevron decided the issue of who determines what the law means in instances where statutory language is ambiguous or silent. Under the Chevron doctrine, courts are required to defer to “permissible” agency interpretations of the statutes those agencies administer, even when a reviewing court interpreted the statute differently.
The Chevron decision held that the courts should have given deference to the Environmental Protection Agency’s interpretation of the validity of certain provisions of the Clean Air Act. The Court set a now-familiar precedent that required courts to employ a two-step test when dealing with questions of statutory interpretation. The first step was to determine whether Congress had directly addressed the issue in the past. If the statute was clear as to Congress’s intent, the inquiry was over. If, however, the statute was silent or ambiguous on the issue, courts were then required to defer to the agency if it offered “a permissible construction” of the statute in question. As long as the agency’s interpretation was “permissible,” courts were bound to that interpretation, even if they would have arrived at a different definition had the statute been examined under the traditional judicial process.
The Court further determined that the rationale of Chevron deference was that, when Congress left an ambiguity in a statute that was administered by an agency with specialized expertise in the area, the ambiguity would be best resolved and interpreted by the agency with that expertise. That was especially true in cases where Congress explicitly left a gap for the agency to fill. In the forty years since the Chevron decision, Chevron deference has become a basic principle of administrative law. In addition to taking advantage of the expertise of the agency, some of the benefits associated with the Chevron doctrine include:
- Consistency in regulatory enforcement and interpretation across many jurisdictions
- Efficiency in implementing policies without interference from the courts
- Flexibility in adapting interpretations to changing circumstances without being subject to strict judicial scrutiny
- Autonomy in agency decision-making
Despite these potential advantages, critics of Chevron argue that it allows agencies to exceed their authority without being subject to sufficient checks from the judiciary. Other critiques of Chevron have included:
- Granting the power to interpret laws created by elected representatives to unelected agency officials
- Enabling political influence to become a factor leading to inconsistent regulatory outcomes
- Creating uncertainty in legal applications due to different interpretations by federal agencies
- Risking that overly broad interpretations will give agencies more power than Chevron originally intended
Agencies have recently issued differing interpretations of their own rules, leading to a rise in unpredictable and inconsistent opinions with changes in White House administration. Notably, the National Labor Relations Board (NLRB) and the Department of Labor (DOL) have exhibited this variability. In late 2023, the NLRB broadened the joint employer test replacing the 2020 test implemented under the Trump administration. Recently, the Eastern District of Texas, vacated the NRLB’s new test and reinstated the 2020 rule. Also in 2023, in McLaren Macomb Hospital, the NLRB ruled that a mere proffer of a severance agreement containing a non-disparagement clause and confidentiality provision was a violation of Section 7 of the National Labor Relations Act, reversing its 2020 decision in Baylor Univ. Med. Ctr. & Internat’l Technology, which had found that actions taken post-employment were not work rules subject to Section 7. In another major decision from June of this year, J.O. Mory, Inc., an NLRB administrative law judge ruled that overly broad non-compete agreements are unlawful.
Similarly, the DOL’s standard for determining when a worker is an independent contractor has vacillated between the Obama, Trump and Biden administrations with a Final Rule issuing this year in which it changed its 2021 position.
The recent Supreme Court opinion described Chevron as ‘unworkable,’ reflecting concerns about the difficulty of complying with changing agency rules.
Chevron Deference is Overruled by the Supreme Court.
The viability of Chevron emerged with two lawsuits: Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce. Both directly challenged the National Marine Fisheries Service (NMFS)’s authority in its implementation of the Magnuson-Stevens Fishery Conservation and Management Act which was enacted by Congress to address overfishing in the international waters off the U.S. Coast. Specifically, the NMFS initiated a rule requiring that vessels in the Atlantic herring industry pay a daily rate for observers that the NMFS assigned to vessels for the purpose of data collection regarding catches and overfishing. Previously such observers had been paid by the government. These two cases brought four decades of Chevron into question in front of the Supreme Court.
In reaching its decision to overrule Chevron, the Court relied heavily on the Administrative Procedures Act (APA) which expressly directs that courts are to decide legal questions by applying their own judgment. Under the APA, administrative agencies are not entitled to deference. Notably, the Chevron Court did not address the applicability of the APA in that circumstance, nor has it done so in any subsequent decision in which it employed the Chevron deference.
The APA was enacted in 1946 as a “check” on administrators, to prevent them from exceeding their authority and codified the traditional judicial practice that courts were to adjudicate legal questions by applying their own independent judgment. The APA provided specific procedures for situations involving agency action and, most importantly, allowed the courts to decide any legal questions through application of their own judgment. For four decades, the APA’s standards and procedures for cases involving agency statutory interpretation governed. The Court heavily relied on this administrative law history, including the purpose and procedure of the APA, in explaining why Chevron must be overruled. This requirement that the courts exercise their independent judgment was the linchpin of the Court’s position on overturning Chevron.
NMFS argued that Chevron deference should continue, and that Congress actually intended for agencies to resolve statutory ambiguities because agencies have “subject matter expertise” regarding the statutes that they administer. NMFS, as well as the dissent, expressed concerns that the judiciary was not equipped with the scientific background to fill the gaps in ambiguous or silent statutory provisions. Additionally, NMFS argued that deferring to agencies enforces a uniform application of federal law. And finally, it argued that interpreting ambiguities involves policymaking that is “best left to political actors.”
The Court rejected each of these arguments. The Court stressed that interpretive statutory issues fall within the purview of the judicial system, rather than an agency, as the federal courts interpret ambiguous statutory provisions as a standard practice outside the administrative context, and held that the federal courts are adequately equipped to do so. With respect to the concern that overturning Chevron would result in inconsistent application of federal law, the Court found such argument without merit, and stated that, if the agency is unhappy with the court’s decision, it is free to ask Congress to revise the statute accordingly. The Court in Loper emphasized the role of the judicial system in interpreting the law. Justice Roberts stated that “it remains the responsibility of the Court to decide whether the law says what the agency says,” regardless of the technical or scientific nature of the issues.
Future Implications of the Loper Decision
- Higher Judicial Scrutiny: District courts will play a more active role in statutory interpretation. Decisions that were once up to agencies will now be in front of judges.
- Jurisdictional Influence: Uncertainty for employers regarding the interpretation and application of regulatory statutes, including labor and employment laws, may arise due to opinions from different jurisdictions.
- Streamlined Approach: This decision is not retroactive, meaning that all prior rulings made under Chevron still stand.
- Compliance Strategies: Employers may need to adjust compliance policies to account for future changes in statutory interpretation.
- Legal Guidance: Taking the ability for interpretation away from agencies may lead to more complex future litigation, which in turn may cause increased reliance on legal counsel for advice.
The Loper Decision Was Not Unanimous
The implications of the Loper decision on federal law uniformity will be soon tested as current challenges to agency rules and decisions such as the DOL overtime exemption wind through the appellate courts. Additional challenges to the Equal Employment Opportunity Commission (EEOC)’s enforcement rule under the Pregnant Workers Fairness Act and the FTC’s rule invalidating non-compete agreement are also pending.
The Loper decision will cause a significant change in the way federal agencies will regulate. It remains to be seen whether there will be a greater or lesser degree of unanimity in the ways these laws are administered once a significant amount of the regulatory authority which, for the past forty years, has been the concern of federal agencies now becomes subject to scrutiny by federal courts.
For assistance in complying with the various federal agency decisions governing labor and employment matters please call our attorneys in the Labor & Employment Practice Group.