US Supreme Court revokes ‘obedience’ to federal agencies, opens up more challenges to regulations

On Friday, June 28, the United States Supreme Court overturned the verdict Chevron, USA Inc. v. Natural Resources Defense Council. Chevron often required courts to defer to federal agencies when those agencies interpreted the statutes they administered. Because of today’s decision, courts will no longer defer. Instead, they will give statutes their “best” interpretation. That means agencies — including labor and employment agencies — will have less leeway to write broad rules. Instead, they will have to write rules that stick more closely to the statutory language. They may also have to defend some existing rules from closer scrutiny in court. And that closer scrutiny could unsettle some recently adopted or proposed rules, such as rules on overtime, safety inspections, and independent contractors.

What is Chevron respect?

Chevron deference is the principle that determines what the law means. Historically, this decision has been made by the courts. Decisions dating back to the early 19th century have explained that the courts’ job is to “say what the law is.” But in ChevronThe court said judges should sometimes defer to executive agencies. Agencies are often appointed by Congress to administer statutes. And those statutes are not always clear. So agencies often clarify and expand on statutory text through formal interpretations in the form of regulations. Chevron held that courts should accept such interpretations when (a) the statute is ambiguous and (b) the agency’s interpretation is reasonable.

What did the Court rule?

The court has now rejected that approach. By setting aside ChevronThe court explained that judges cannot defer to agencies on matters of legal interpretation. Judges can consider agency expertise, practice, and consistency. They can also defer to agency policy decisions when the agency has been given express authority to make policy. However, they cannot give agency interpretations of the law binding legal effect. Instead, they must exercise their independent judgment and give statutes their “best” interpretation.

How does this decision affect labor and employment law?

This approach will affect how agencies make policy—including labor and employment agencies. Most federal labor and employment agencies rely on some form of deference. For example, the Department of Labor (DOL) often uses deference principles to write overtime regulations under the Fair Labor Standards Act (FLSA). The Occupational Health and Safety Administration (OSHA) relies on deference when it writes regulations under the Occupational Health and Safety Act. And the National Labor Relations Board (NLRB) relies on deference when it writes regulations and decides cases under the National Labor Relations Act.

Those agencies will now face a new landscape in federal court. If the agencies are challenged by individuals or companies about the meaning of the statute, they can no longer expect to start their case with an advantage. Instead, they will be on equal footing with those bringing the charges. The question will no longer be whether the agency’s position is reasonable. Instead, the question will be which side interprets the statute as “best.”

What should employers pay attention to now?

This new landscape could affect ongoing litigation. The DOL is already defending a new rule setting new minimum wages for the FLSA’s “white-collar” exceptions. It’s also defending the Davis-Bacon minimum wage provision and the FLSA’s independent contractor provision. Similarly, the NLRB is defending a provision defining “joint employers.” And OSHA is defending a provision that allows union representatives to accompany OSHA inspectors—even in nonunion workplaces. In all of these cases, the agencies are defending their rules with some form of deference. But now they may have to change their litigation strategy.

In the future, agencies may be discouraged from writing broad rules—that is, rules that stretch the plain language of the statute. The rules will now be easier to challenge, especially if they depart significantly from the text of the statute. So agencies may have to write narrower rules and find other ways to advance their policy positions. For example, they may file more lawsuits to establish their interpretations in court. And they may seek friendlier venues for filing those lawsuits to improve their chances. In short, they may regulate more modestly and litigate more strategically.

This decision was not the only one that involved labor and employment law. The Court’s 2024 docket included a number of decisions that ostensibly involved administrative law but that could have implications for labor and employment law. Littler’s Workplace Policy Institute (WPI) will provide a more detailed analysis of these decisions in the coming days.