U.S. Supreme Court Issues Decision Reducing Federal Agencies’ Administrative Power and Likely Impacting Workplace Regulations

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On June 28, 2024, the U.S. Supreme Court issued its decision in Loper Bright Enterprises v. Raimondo, overturning the Court’s 1984 decision in Chevron v. Natural Resources Defense Council, which required courts to defer to a federal agency’s reasonable interpretation of an ambiguous law.  Under the “Chevron doctrine,” if Congress had not directly addressed an issue giving rise to a dispute, and a court was asked to review a federal agency’s interpretation of a statute, courts were required to uphold the agency’s interpretation of the statute as long as that interpretation was reasonable. 

But in Loper Bright, Chief Justice John Roberts, writing for the Court’s majority, explained that deference provided under the Chevron doctrine is inconsistent with the Administrative Procedure Act (“APA”), which directs courts to “decide legal questions by applying their own judgment” and therefore “makes clear that agency interpretations of statutes — like agency interpretations of the Constitution — are not entitled to deference.”  Justice Roberts concluded that “[u]nder the APA, it thus remains the responsibility of the court to decide whether the law means what the agency says.”

In dissent, Justice Elena Kagan predicted that the Court’s ruling “will cause a massive shock to the legal system.”  How does this prediction apply to employers?  Although the facts of Loper Bright were not workplace-related, the new decision could have major implications for rules and regulations issued by entities governing workplace regulations, including the U.S. Department of Labor (“DOL”), the Equal Employment Opportunity Commission, and the National Labor Relations Board (“NLRB”).  As Justice Kagan noted, Congress simply cannot write perfectly complete and unambiguous statutes.  As a result, there will inevitably be gaps and questions that some other actor—either a court or the responsible agency—must fill.  Federal agencies have relied upon the Chevron doctrine, including very recently, to take action in the labor and employment arena to fill those gaps and expand rules impacting employers.  A few examples of such action follow:

• The DOL issued rules increasing the minimum salary threshold for the Fair Labor Standards Act’s (“FLSA”) white-collar overtime exemption and revising the analysis as to the proper classification of independent contractors.
• The NLRB revised its “joint employer” rule, establishing a much broader framework for determining when two entities may be considered joint employers.
• The Federal Trade Commission proposed a rule that would ban most non-competition agreements.

These and other rules will be challenged under the Loper Bright decision.  After Loper Bright, if a court decides an agency issued a rule that is overbroad or unenforceable, the court has much greater power to strike the rule.  Employers can expect to see new cases attacking administrative rulings and courts relying on their expanded power, likely coming to different conclusions in different jurisdictions. 

Most relevant currently, a Texas federal district court has already relied upon Loper Bright in blocking the DOL’s 2024 rule raising the minimum salary threshold at which executive, administrative, and professional employees, as well as “highly compensated” employees, are exempt from overtime pay under the FLSA, holding that the new rule exceeds the DOL’s authority under the FLSA.[1]  Notably, that decision only granted a preliminary injunction as to the state of Texas as an employer, but undoubtedly other courts will also rely on Loper Bright in taking similar positions.

Employers: understand how and to what extent your workplace practices and policies rely on administrative rules or guidance, and realize there may be lawsuits filed attacking administrative agencies’ workplace rules.  However, the fact courts now have more discretion does not necessarily mean that they will reject administrative agencies’ current rules and interpretations.  Stay tuned and in the meantime, and continue to follow agency regulations and guidance as they are currently in place.

[1] State of Texas v. United States Dept. of Labor, Civ. No. 4:24-CV-499-SDJ, at *12–13 (E.D. Tex. June 28, 2024).