Federal regulations lose force after Supreme Court strikes down “Chevron”

Published: June 28, 2024 | by Michael Cardman, Emily Scace and Robert S. Teachout

Hundreds if not thousands of federal regulations interpreting key employment laws are suddenly in doubt in the wake of a new Supreme Court ruling that came out today.

Its 6-3 decision overturned a 1984 ruling that courts must defer to an administrative agency’s interpretation of a law if the text of the law is ambiguous and the agency’s interpretation is a reasonable one.

For 40 years, this decision — known as Chevron — has helped federal agencies like the US Department of Labor (DOL) defend their interpretations of laws like the Family and Medical Leave Act (FMLA), the Fair Labor Standards Act (FLSA) and the Occupational Safety and Health (OSH) Act. Going forward, it will be the courts, not the federal agencies, that have the most power to fill in gaps in the law.

“The inevitable result will be more challenges to the interpretation of the rules and defendants asserting positions that seek to anchor defenses to the original legislative intent of the laws giving rise to the agency rules,” attorney Gerald L. Maatman, Jr., a partner in the Duane Morris Chicago office and chair of its Workplace Class Action group, told Brightmine, formerly XpertHR.

“This ruling overturns decades of established precedent, fundamentally changing how courts evaluate the boundaries of regulatory authority and executive actions,” Emily M. Dickens, chief of staff, head of government affairs, and corporate secretary for the Society for Human Resource Management (SHRM) said in a statement. “This decision sets a new precedent to guide lower courts to not give deference to a federal agency’s interpretation of laws when challenged.”

Chevron background

The Chevron doctrine was a rule of interpretation based on the 1984 case Chevron v. Natural Resources Defense Council, holding that courts should defer to an administrative agency’s reasonable interpretation of ambiguous statutory language rather than substituting their own judgment. When an administrative agency’s regulation or other legal interpretation is challenged in court, under Chevron the court’s task was to determine:

1. Whether the language in the relevant statute is ambiguous; and
2. If so, whether the agency’s interpretation is a reasonable one.

If the answer to both questions was yes, a court applying Chevron deference had to let the agency’s interpretation stand. This high level of deference gave administrative agencies — such as the DOL, the Equal Employment Opportunity Commission (EEOC) and the Occupational Safety and Health Administration (OSHA) — a great deal of latitude to issue regulations and fill gaps in the statutes they are charged with implementing. Many statutes are broadly written and short on details, and it has fallen to agencies to determine how those laws apply in practice through rulemaking and other forms of interpretation.

Later cases narrowed the doctrine so that it applies only to interpretations reached through formal proceedings with the force of law (e.g., rulemaking), not to informal interpretations such as those contained in guidance, opinion letters and other materials that are not legally binding. Those materials may instead be entitled to Skidmore deference, a weaker form of deference that depends on the persuasive value of the agency’s reasoning.

The Loper decision

With today’s decision in Loper Bright Enterprises v. Raimondo, the Supreme Court overruled Chevron.

Instead, it held that courts must exercise their own independent judgment to decide whether an agency has lawfully interpreted a statute. Courts may not defer to an agency’s interpretation of the law simply because a statute is ambiguous.

The Chevron ruling’s presumption that statutory ambiguities are implicit delegations to agencies “is misguided because agencies have no special competence in resolving statutory ambiguities,” Chief Justice John Roberts wrote for the majority. “Courts do.”

Justice Elena Kagan disagreed that the courts are best-positioned to resolve ambiguities. In a dissent, she wrote: “Some interpretive issues arising in the regulatory context involve scientific or technical subject matter. Agencies have expertise in those areas; courts do not. Some demand a detailed understanding of complex and interdependent regulatory programs. Agencies know those programs inside-out; again, courts do not.”

What’s next

Today’s decision overturning Chevron deference will not immediately invalidate any regulations. In fact, the Court explicitly held that its decision does not retroactively overturn all regulations that were upheld via Chevron.

However, it is likely to have a large ripple effect on federal regulation in years to come. Without Chevron deference, administrative agencies such as the DOL will likely need to meet a higher bar when engaging in rulemaking and defending their rules in court — including recent rules addressing overtime, independent contractors, pregnancy accommodations and more, many of which already face legal challenges. They will need to demonstrate that their interpretation of a statute they are charged with carrying out is not just reasonable, but correct.

Not all agencies and statutes will be equally impacted, however. Some federal statutes, such as Title VII of the Civil Rights Act of 1964, do not grant an administrative agency the power to issue substantive regulations carrying the force of law. Thus, the EEOC, which enforces Title VII, has never been entitled to Chevron deference in its interpretation of that statute, although it has received Chevron deference in other contexts. And, as noted above, because Chevron did not apply to informal guidance, opinion letters and other interpretations that lack the force of law, these materials are not directly impacted.

Meanwhile, Republicans in Congress already have plans to undo “the negative impacts of Chevron deference,” such as requiring Congress to approve any regulations that have an economic impact of $100 million or more per year.