What can employers expect after Chevron concessions end

It didn’t take long for federal courts to apply the Supreme Court’s landmark June 28 decision Loper Bright Enterprises v. Raimondo court invalidates Chevron’s compliance rule standard.

In fact, on the same day, the Supreme Court issued its ruling Loper LightJudge Sean Jordan cited this decision in his analysis of the Department of Labor’s overtime regulations under the Fair Labor Standards Act. Jordan found that DOL exceeded its statutory authority by introducing a wage level test in the final overtime rule that “effectively replaces” the exemption from overtime payments for employees with certain duties under the FLSA.

Jordan temporarily blocked the rule as it applies to state employees in Texas, but despite the limited applicability of his decision nationwide, the rule still faces a number of legal challenges. As such, it likely represents the first agency rule that a federal appeals court will have a chance to review after Chevron, said Alex MacDonald, a Littler Mendelson shareholder.

Chevron’s Turnaround Has Long-Term Consequences

Before Loper Lightfederal courts — pursuant to the 1974 Supreme Court ruling in the case Chevron vs. National Resources Defense Council —generally referred to agencies’ interpretations of ambiguous statutes. “That’s not the approach anymore,” MacDonald said. “Ambiguity is no longer sufficient to command respect.”

Instead of this The Supreme Court ruled at the end of last month that courts must “exercise their independent judgment in deciding whether a body acted within its statutory powers” ​​under the Administrative Procedure Act.

The decision could cause a number of DOL rules to fall, according to Paul DeCamp, a senior fellow at Epstein Becker Green and former administrator of the DOL’s Wage and Hour Division, although employers may not see the effects for some time. That’s partly because the court did not overturn any decisions that were made under its Chevron to hold.

The court further explained that Loper Light did not revoke its 1944 decision. Skidmore v Swift & Co.in which he ruled that courts could defer to certain “interpretations and opinions” of a federal agency. That has since been couched as a form of deference to the agency by federal courts, MacDonald said, but what the court expressed in Skidmore has not achieved the same level of respect that is shown to federal agencies in Chevron.

And now that the government has lost its “heavy thumb on the scale” of the Chevron injunction, courts will not give special status to interpretations by agencies like the DOL, DeCamp said.

“The long-term impact is that eliminating Chevron’s compliance will likely force agencies, including the DOL, to be more thoughtful and reasonable in the rules they issue,” DeCamp said. “In the long run, it will lead to better regulation that more closely follows the laws that Congress passes.”

Others disagree with this view and are concerned. Loper Light could make courts more involved in policymaking. Jim Townsend, director of the Levin Center for Oversight and Democracy at Wayne State University, said the court’s decision represents a misunderstanding of the regulatory process.

“Congress often plays a significant role in monitoring and providing input into these regulations,” Townsend said. The idea that agencies deliberately ignore congressional intent when creating regulations “is simply not true,” he added. “That’s not how it works.”

DOL rules may not play well in federal courts

Another long-term effect that employers should be aware of is that the variability in the nature of regulatory action between election cycles may be mitigated by Loper Light kind of rules, DeCamp said.

“Of course, when there’s a change in administrations, there’s often a dramatic shift in policy preferences, which is a normal part of the ebb and flow of the electoral process. I don’t think that’s going to change,” he added. “But eliminating Chevron and the pressure that puts on executive branch agencies to be more thoughtful will help mitigate that seesaw effect that we have.”

Few Department of Labor regulations reflect this effect as much as the Department of Labor’s regulations on independent contractors, and the Department of Labor recently finalized updated independent contractor rule that went into effect in March. MacDonald said he sees the rule as an example of the DOL interpreting a statutory term that could be considered ambiguous — the definition of “employee” in the FLSA — in a way that arguably exceeds its authority and therefore could be challenged in a post-Chevron world.

DeCamp said courts will still have to consider agency expertise when deciding whether regulations are valid, especially when they involve highly technical or scientific terms. But he also said many DOL regulations issued in recent years won’t necessarily fall into that category.

“In light of the court’s decision, I am hard-pressed to find any regulation issued by the Department of Labor over the decades that is based on technical expertise rather than political preference, particularly in the case of the Wage and Hour Division,” DeCamp said.

DeCamp added that this doesn’t necessarily mean that all or even most DOL regulations are invalid, or that courts won’t see them as such. But ultimately, “the framework for analyzing these regulations will be much less compliant with the department than it has been,” he said.

Employers can prepare and participate

Still, MacDonald said, that doesn’t mean HR should expect controversial regulations to be scrapped overnight, with existing compliance obligations still to be met. Instead of updating the regulations, future agencies could also opt to issue subregulatory guidance, such as opinion letters, he added.

“We are not knocking apples over now,” MacDonald said. “All the cases decided under Chevron are still good. You can still trust the federal code of regulations. It’s just that in the future, regulations will be subject to more scrutiny and you may see fewer of them.”

DeCamp similarly noted that existing federal regulations remain in effect even if employers have the opportunity to challenge particularly sensitive regulations and submit public comments on proposed regulations; “Employers should not look to Loper Light as a license to break the law,” he said.

In the meantime, employers could also benefit from communicating with congressional lawmakers, specifically committee chairs and senior members, to provide input on bills during the rulemaking process, Townsend said. He added that while ensuring a more stable regulatory environment is not the sole responsibility of regulated parties, collaboration can help.

“The more dialogue there is with these communities … the more you can establish a record of what the statutory terms mean and the relationship between the statute and the regulation in question,” Townsend said. “Otherwise, we have a void.”