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July 16, 2024
On Friday, June 28, 2024, the United States Supreme Court overturned 40-year-old precedent – Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) – that required courts to defer to “permissible” agency interpretations of statutes that those agencies administer, even when the reviewing court reads the statute differently (commonly called “Chevron deference”).
In the 6-3 ruling in Loper Bright Enterprises v. Raimondo, No. 22-451 (June 28, 2024), the Supreme Court held that the Administrative Procedures Act (APA) requires courts to exercise their independent judgment to decide whether an agency has acted within its statutory authority.[1] Justice Roberts, who wrote for the majority of the Supreme Court, noted that the judgment of the Executive Branch may help inform an inquiry, and courts must respect occasions when a statute expressly delegates – within constitutional limits – authority to an agency, but “courts need not and under the APA may not defer to an agency interpretation of the law simply because a statute is ambiguous.” The majority viewed Chevron as insisting on more than the respect historically given to Executive Branch interpretations. Instead, it viewed Chevron as demanding that courts afford binding deference to agency interpretations, including those that have been inconsistent over time, even when judicial precedent holds that an ambiguous statute means something else and even though agencies have no special competence in resolving statutory ambiguities.
Justices Kagan, Sotomayor, and Jackson would have continued “Chevron deference.” Justice Kagan, who wrote the dissenting opinion, said that such deference is a cornerstone of administrative law and allocates responsibility for statutory construction between courts and agencies.
The majority of the Supreme Court contends that its decision to overturn Chevron does not call into question prior cases that relied on the Chevron framework because the holdings of those cases still are subject to statutory stare decisis [a principle that directs courts to adhere to previous judgments while resolving a case with comparable facts] despite the Court’s change in interpretive methodology. The dissenters believe the opposite is true. Given Chevron‘s pervasiveness, the decision to overturn it is likely to produce large-scale disruption, they said.
Employers: You may be wondering why you should care about Chevron. Here’s why. Look at 2024, alone. Several agency rules have become, or are slated to become, effective this year: the Equal Employment Opportunity Commission’s rule implementing the Pregnant Worker’s Fairness Act; the Department of Labor’s new overtime regulations under the Fair Labor Standards Act; the Federal Trade Commission’s rule to ban non-competition agreements. All of these rules have been subject to legal challenges. The Supreme Court’s decision in Loper may give those legal challenges – either initially or on appeal – more strength.
This article is designed to provide one perspective regarding recent legal developments, and is not intended to serve as legal advice. Always consult an attorney with specific legal issues.
[1] The cases underlying the Supreme Court’s decision (Loper Bright Enterprises v. Raimondo, No. 22-451 and Relentless Inc. v. Department of Commerce, No. 22-1219) involved challenges by fishing groups to a National Marine Fisheries Service rule that required fishers to pay part of the cost of having federal compliance monitors aboard their ships.
