Consequences of the US Supreme Court’s ‘Chevron Respect’ Ruling for Workforce

The Supreme Court recently overturned decades of administrative law with its decision in Loper Bright Enterprises v. Raimondo which ended the practice of courts deferring to regulatory agencies in their interpretation of statutes. This seemingly technical change in how agencies operate could have significant implications for employers and the workforce—from retirement and health care planning to hiring practices.

In its decision, the Supreme Court struck down the “Chevron deference” doctrine, which held that when considering challenges to regulations, a court must first determine whether Congress directly addressed the issue. If Congress failed to do so, or if the law was ambiguous, the court was required to defer to the relevant federal agency’s interpretation of the law. The end of Chevron deference means that the court must now decide whether the agency acted within its statutory authority when it issued the regulations, and even if it did, it cannot defer to the agency’s interpretation of the law simply because the statute is ambiguous. Instead, the court must reach its own conclusion about the meaning of the statute.

Five conclusions for the executive authorities from the Supreme Court ruling:

1. Courts will exercise greater control over agency regulation.

Under Loper Light decision, the court’s role is to independently interpret statutes and ensure that the regulatory agency acted within its delegated authority. While the immediate effect of this decision is limited, in the long run federal agencies can expect greater judicial review when issuing, defending, and enforcing regulations.

2. Not every regulation will be challenged.

Many practitioners assume that a flood of new lawsuits will overwhelm an already overburdened court system, blocking interpretation and enforcement for years. However, any new challenges to the rules can still be costly, time-consuming, and risk failure. This may cause many organizations to prefer the predictability of the current rules.

3. Compatibility issues are likely.

No action may be necessary for now, but employers will need to monitor the relevant regulations more comprehensively. For example, a regulation may be upheld by one court while another court may strike it down or be subject to a different interpretation, potentially causing confusion. “If there’s a specific area where you’re looking for clarity because no regulations have been issued yet,” said Eric Keener, a senior partner in Aon’s U.S. retirement practice, “you may have to get used to being in an uncomfortable position.”

4. Multinational corporations should take the rest of the world into account.

International companies must monitor their operations beyond U.S. borders. For example, the European Union’s Corporate Sustainability Reporting Directive will require many employers to disclose information on a range of sustainability issues. Employers may still need to prepare for reporting obligations, even as U.S. federal sustainability laws—such as the SEC’s Climate Disclosure Rule—may be invalidated by Chevron’s lack of respect.

5. Previous decisions still apply.

In striking down Chevron, the court did not invalidate the cases that relied on the Chevron framework. But the Supreme Court has made it easier to challenge regulations with its recent decision in Corner Post Inc. v. Board of Governors of the Federal Reserve System. Whether those challenges are more likely to succeed because of Loper Bright remains to be seen.

Specific regulations to look out for

While this decision does not strike down any laws beyond the details of the case, it is worth noting several employment laws that are either already being challenged or are expected to be in the future.

• A Federal Trade Commission (FTC) rule prohibiting the use of non-compete clauses. In April 2024, the FTC announced a rule largely banning non-compete clauses. The rule would invalidate existing non-compete clauses with a few limited exceptions. It is set to take effect in September 2024. The rule is already being challenged in several lawsuits. In one of those lawsuits, a federal district court judge in Texas invalidated the rule, although the judge said the ruling applied only to the parties in the case and declined to issue a broader injunction. A separate federal court is set to consider the rule before it goes into effect. Appeals to a federal appeals court and the Supreme Court are likely, and many commentators assume that Chevron’s demise makes the rule’s long-term survival questionable.
• Department of Labor (DOL) guidance on retirement plans. Over the years, the DOL has issued guidance that many stakeholders believe demonstrates the need to move beyond deference to Chevron. Employers have observed that a wide range of regulatory requirements change over time based on administrative guidance rather than changes in statutory language. Examples of statutory interpretations that appear to change over time without intervening statutory changes include the environmental, social, and corporate governance investment rules and the fiduciary investment advisory rules. Challenges to these rules have already begun, and there will likely be further challenges to the DOL guidance in these and other areas in a post-Chevron world, as well as potential delays in future guidance.
• Regulation of employer group health plans. The decision does not mandate any immediate changes to how employer group health plans are regulated. However, given that federal agencies have issued a complex set of regulations that could now be subject to increased scrutiny or further legal challenges, future challenges may be more likely. Many of the regulations are already pending and more cases are expected. Some of the regulations to watch for include:
  • Section 1557 Anti-Discrimination Laws
  • Rules on unexpected settlements
  • The scope of preventive services, particularly as covered by the Braidwood v. Becerra case

Congress will likely devote more attention to drafting legislation, as the Loper Bright decision suggests. However, it seems unlikely that any congressional attempts at specificity will produce laws without ambiguity or address every potential issue that might require clarification. In such cases, the courts will be the final arbiters of what the law is.