Landmark U.S. Supreme Court Decision Offers Opportunities for Hospitality Employers: Your 4-Step Plan of Action After Chevron

The Supreme Court’s recent landmark ruling, which gives employers a powerful tool to combat regulatory abuse, will have broad implications for nearly every area of employment law—and every industry. We look at how specific areas of employment law will be affected now that federal agency rules and positions are more vulnerable after SCOTUS abandoned decades-old law Chevron doctrine. In this issue, we’ll focus on how the new standard will impact employers in the hospitality industry. We’ll also outline four steps you can take now to get ahead of the competition.

What happened?

On June 28, the U.S. Supreme Court shook the legal world by striking down the famous Chevron doctrine, holding that courts cannot defer to an agency’s interpretation of an ambiguous federal statute. In Loper LightThe court said that judges now “must exercise their independent judgment” when deciding cases involving agency rules, regulations, guidelines, or other actions. Simply put, the ruling gives courts—not administrative agencies—the authority to determine what the law actually is. You can read all about it here , including all the different ways the employment law landscape could soon change.

How will this impact employers in the hospitality industry?

Whether you run a hotel, restaurant, entertainment venue or other hospitality business, there are a number of workplace regulations that have a huge impact on your day-to-day work. Here are some key areas where you may see huge changes right now, Chevron has been repealed:

Rules regarding tip pooling and tip credit allocation: Employers must follow strict rules if they accept the so-called “tip credit” and pay tipped employees less than the standard minimum wage — and recent Department of Labor (DOL) regulations have created more challenges for hospitality businesses that use the tip credit method in payroll payments. Employer associations representing the hospitality community have filed legal challenges in the past to fight the onerous tip-pooling rules, and the end Chevron may prove to be the key to combating this type of abuse in the future.
More rules on wages and working hours: Because the federal Fair Labor Standards Act (FLSA) is either silent or ambiguous on many of the details necessary to practically resolve wage and hour issues, courts often apply the law Chevron deference to DOL regulations and other interpretations. While this provided stability over the years, it gave the DOL excessive authority to establish workplace regulations.
Now we expect that employers’ defenders will strengthen their arguments by pointing to new Loper Light decision in challenges to DOL regulations, such as the new salary threshold for employees exempt from tax under the FLSA’s white-collar exemption. Hospitality employers are likely to feel a big impact from a new federal overtime rule that raised the tax-exempt salary threshold to about $44,000 on July 1 and mandates another increase to nearly $59,000 in early 2025. The court has already cited Loper Light when it issued a very limited ruling blocking the federal government from enforcing the new rule against the state of Texas as an employer. We expect the courts to hear more challenges to the Overtime Rule in the coming months – and a successful challenge would go a long way toward alleviating your concerns about the impact of this significant change on your operations.
Labor relations: Unions cover a wide range of professions and industries outside of traditional manufacturing settings – most recently, there has been a focus on hospitality-related professions such as baristas and other service positions. Now that courts are less bound to defer to agency interpretations of their own rules, the NLRB is poised to lose its recently unchecked authority as its positions become subject to increased and significant judicial scrutiny. We expect a flood of cases attacking the NLRB’s recent interpretations of federal labor law, which have significantly tilted the scales in favor of unions.
Workplace safety: One common criticism of OSHA is that the agency has long used the authority granted to it by Chevrondoctrine as a means to promote its own expanded interpretation of the law by issuing citations to employers. Some courts have permitted this practice, which is essentially a bypass of the legislative process and impermissibly expands OSHA’s authority. However, the agency’s decisions in these situations will now be challenged as employers appeal OSHA citations. In addition, hospitality employers will want to keep an eye on OSHA’s proposed heat-related illness and injury regulations, which will affect many workplaces, including outdoor restaurant workers and hotel workers who work wholly or partially outdoors.

Does this new reality have any drawbacks?

While the end Chevron is seen as beneficial for employers, however we can see some negative consequences resulting from this change, including:

Regulatory uncertainty – Transition from Chevrondoctrine could lead to a period of regulatory fluidity as courts reassess existing agency interpretations. And not every agency action will be vulnerable to the same type of attack, because the laws that created the agencies and gave them the authority to issue regulations are all slightly different. That uncertainty can complicate compliance and strategic planning efforts for hospitality employers.
Potential delays in rulemaking -Now that Chevron has been repealed, agencies may exercise greater caution and discernment when drafting new regulations, facing greater judicial scrutiny.
Inconsistent jurisdictions – Without a uniform standard of deference, different courts in different states could interpret the statutes in different ways, creating a patchwork of compliance requirements across the country. Of course, this could be particularly difficult for hospitality employers doing business in multiple states.

4 steps you can take right now

Please note that the federal agencies listed above have not changed their current approach, so you should ensure that your policies and programs comply with applicable laws and regulations unless and until a legal challenge to the agency’s rules is successful.

While we wait for the post-Chevron reality takes shape, you may want to review your company’s practices and policies to plan for how different cases might play out. We also encourage you to take these four steps to remain flexible during this period of uncertainty:

Be informed and proactive – Ensure your legal team or outside counsel is regularly updated on important court decisions and regulatory changes. Staying ahead of the curve will allow you to anticipate and prepare for potential impacts.
Improve legal and compliance resources – Consider expanding your internal legal team or increasing collaboration with outside legal counsel. Actively support compliance by assigning a team member to review assets, identify areas where changes are proposed, and ensure real-time tracking of regulatory changes.
Leadership training– Ensure your leadership team understands the impact of the recent Supreme Court ruling, what existing laws and regulations may impact your industry, and how to track changes to ensure compliance with the latest updates.
Advocate for clarity and honesty – Actively participate in industry and trade associations that will take the lead in providing resources and advocacy support to help navigate the changing regulatory landscape. Hand in hand with these organizations, you can work with policymakers and advocate for a clear, fair, and predictable regulatory framework. Effective advocacy can help shape regulations that support growth and stability across industries.

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The Supreme Court’s landmark decision represents a significant shift in the regulatory landscape, presenting both challenges and opportunities for hospitality employers. You can effectively navigate this period of change by staying informed and actively engaging in advocacy.