Chevron’s Passing Likely to Reshape Labor and Employment Law as SCOTUS Questions Presumption of Agency Subject Matter Expertise

On June 28, 2024 the Supreme Court overruled the 40-year-old landmark ruling known as Chevron, a doctrine of administrative law that has until now required courts to defer to federal agencies’ interpretations of ambiguous statutory language. By doing so, the Court has created opportunities for court challenges to agency regulations including those issued by federal labor law and equal employment law agencies. Loper Bright Enterprises v. Raimondo; Relentless Inc. v. Department of Commerce.

At issue in these cases was a rule promulgated in 2020 by the National Marine Fisheries Service (NMFS) that approved an amendment to the fishery management plan covering Atlantic herring fisheries. The Magnuson-Stevens Fishery Conservation and Management Act (MSA) makes no provision for requiring the fishing industry to pay for on-board observers while fishing in Atlantic herring fisheries, but the NMFS rule required the fishermen to pay for observers if federal funding became unavailable. The costs of an observer were estimated to reduce annual revenue to the vessel owner by up to 20%. The district courts and the District of Columbia and the First Circuit Courts of Appeals deferred to the NMFS rule – one court holding that the agency’s interpretation was reasonable, and the other holding that the agency rule did not exceed the bounds of the permissible.

In a 6-3 decision, the Court held that the Administrative Procedure Act (APA) does not permit courts to defer to a federal agency’s interpretation of an ambiguous statute but instead requires courts to use “their independent judgment in deciding whether an agency has acted within its statutory authority.” Writing for the majority, Chief Justice John Roberts said courts may consider an agency’s judgment in determining whether the agency exceeded its authority in interpreting a statute, but the APA does not allow courts to defer to the agency’s interpretation “simply because a statute is ambiguous.”

The Court’s 1984 Chevron decision held that a court must defer to an agency when evaluating an ambiguous statute, which often resulted in the court’s greenlighting an expansive construction of a statute by finding that the agency engaged in a “permissible” interpretation given its supposed expertise. Specifically, Chevron deference imposed a two-part test on courts faced with a challenge to an agency’s rule-making: first, whether Congress directly addressed the question at issue, and second, if the court determined Congress’ intent was unclear because the statute was silent or ambiguous, whether the agency’s interpretation was nonetheless a “permissible construction of the statute.” Even if the court would have interpreted the statute differently, Chevron required the court to defer to the agency’s permissible interpretation of ambiguous statutory language, except in limited situations.

In sending Chevron to its final resting place, the Court explained, “Perhaps most fundamentally, Chevron’s presumption is misguided because agencies have no special competence in resolving statutory ambiguities. Courts do.” The Court criticized Chevron as “allowing an agency to change position as much as it likes…. Chevron thus allows agencies to change course even when Congress has given them no power to do so.” The majority decision cautions that the decision does not upend previous cases decided under Chevron and emphasized that these prior holdings “are still subject to statutory stare decisis despite our change in interpretive methodology.” However, going forward, courts must evaluate ambiguous agency regulations by using traditional statutory construction tools.

After Loper and Relentless, judicial deference to an agency’s expertise is no more, unless Congress specifically provides for deference in the statute. This decision has broad implications for rule-making by agencies such as the Equal Employment Opportunity Commission, the National Labor Relations Board, the Occupational Safety and Health Administration, the Wage-Hour Division of the Department of Labor, and even the Federal Trade Commission which recently asserted jurisdiction over non-compete agreements in the workplace. Requiring courts to use traditional statutory interpretation tools instead of deference will limit how far federal agencies can go to advance political agendas through rules and regulations that exceed a statute’s limits. Federal labor law shifts dramatically and unreliably, some years favoring union rights, some years favoring a more centrist position, on issues such as dues checkoff, supervisor status, successor employer liability, and procedures that apply to union organizing and employer recognition of a union. As one striking example, Loper may make vulnerable the controversial NLRB decision in Cemex Construction Materials, which is currently on appeal to the Ninth Circuit. In the 2023 Cemex case, the NLRB introduced new rules that materially change an employer’s duties when faced with a union demand for recognition and substantively affect employees’ rights to vote on unionization by secret ballot.

Employers now have another tool in their toolbox to challenge NLRB rules and regulations by arguing that the agency’s action is neither enabled by statutory language nor entitled to Chevron deference. If you have questions as to the impact of the Loper and Relentless decisions on issues in your workplace, please contact Firm Partner and Labor Law specialist Patrick W. McGovern, Esq. via email here, or by phone at 973.535.7129, or contact any attorney in the firm’s Labor Law Practice Group.