The End of Chevron: Implications for Employers

On June 28, 2024, in a landmark decision, the United States Supreme Court invalidated the long-standing standard known as the Chevron doctrine in the case of Loper Bright Enterprises v. Raimondo, marking a significant shift in administrative law that will ripple through various sectors, including the parameters of the employment relationship. This ruling alters the landscape of regulatory interpretation, presenting challenges for employers who seek clarity in the anticipated enforcement of the regulations governing their industries.

Understanding the Chevron Doctrine and Its Demise

Established in 1984, the Supreme Court decision articulated in the Chevron USA v. National Resources Defense Council, commonly referred to as the “Chevron doctrine, mandated that courts defer to federal agencies’ reasonable interpretations of ambiguous statutes that they administer. This deference aimed to promote consistency and expertise in regulatory implementation, granting agencies substantial authority in interpreting and enforcing laws. However, critics argued that this deference undermined judicial review and empowered agencies beyond their intended scope.

The United States Supreme Court’s decision in West Virginia v. EPA in 2022 played a significant role in beginning the erosion of the Chevron doctrine, paving the way for its eventual overturning in 2024. In West Virginia v. EPA, the Court formally articulated and applied the “major questions doctrine”. This doctrine requires that courts exercise care in concluding that Congress intended to delegate such authority to agencies without clear and explicit authorization. In this case, the Court used the major questions doctrine to restrict the Environmental Protection Agency’s authority to regulate greenhouse gas emissions from power plants. This decision signaled a willingness to scrutinize and potentially limit agency interpretations of statutes, even in cases where Chevron deference may have been previously applied. The major questions doctrine created a path for courts to bypass Chevron in cases that involved what the courts determined to be “major questions”. The decision in this case set a precedent for more aggressive judicial review of agency actions, encouraging challenges to agency interpretations previously upheld under Chevron.

The Supreme Court’s decision to discard the Chevron doctrine signifies a departure from decades of legal precedent. As a practical matter, the ruling signals a shift in the interpretation of regulatory matters as courts will no longer mechanically defer to agency interpretations of what they deem to be ambiguous statutes. Rather, judges are now permitted to conduct a more rigorous analysis, potentially leading to varied outcomes in regulatory and legal disputes. The demise of Chevron deference means that federal agencies can no longer expand their jurisdiction and authority based on the wording of an ambiguous statute. Entities seeking to challenge an overbroad assertion of authority by a federal agency will have their arguments assessed by a federal judge without being subject to the whims of an agency exploiting poorly or incompletely drafted statutory language.

Implications for Employment Law

Employment law in the United States is governed by a broad range of regulations governing workplace practices, from wage and hour laws to regulations prohibiting unfair and discriminatory employment practices. The principles of the Chevron doctrine have been pivotal in shaping how agencies like the Department of Labor (DOL) and the Equal Employment Opportunity Commission (EEOC) enforce and interpret employment-related laws. The demise of the Chevron doctrine introduces several key implications for employers:

• Increased Judicial Scrutiny

With courts no longer bound by Chevron deference, judges will take a more active role in interpreting employment statutes. This could lead to more significant variability in how laws are applied across different jurisdictions and cases. Employers may face heightened uncertainty in understanding their compliance obligations and potential liabilities.  Employers defending against agency action must continue to navigate an uncertain litigation process in order to obtain what they believe to be a lawful interpretation of a statute.

• Challenges in Compliance

Employers often rely on agency guidance and interpretations in their efforts to navigate complex employment regulations. Without Chevron deference, the clarity and consistency provided by agency interpretations may diminish. This could complicate compliance efforts, requiring employers to seek legal counsel more frequently to ensure adherence to evolving legal standards. Legal departments and Human Resource professionals will play crucial roles in navigating this new landscape. Employers may need to invest more resources in legal expertise and compliance monitoring to stay informed about potential challenges and changes in interpretation.

• Potential for Regulatory Instability

The absence of Chevron deference introduces uncertainty into the regulatory landscape. The agency rules that employers have always relied on may now be subject to more intensified legal challenges. This could lead to many challenges as courts reassess previously settled interpretations. Employers should be prepared for potential changes in wage and hour laws, workplace safety standards, employee classification, and anti-discrimination policies. In a perfect world, Congress will need to get serious about drafting clear and unambiguous statutes in which they intentionally and expressly delegate authority to federal agencies. Such action would have the practical effect of limiting the application of federal law as these agencies would be bound by the parameters provided in the relevant statutes.

• Potential for Circuit Splits and Supreme Court Involvement

Without the unifying effect of Chevron deference, there is an increased likelihood of circuit splits on interpretations of federal employment laws. This will likely lead to inconsistent regulations across different jurisdictions, creating obstacles for employers operating across multiple states.

Strategic Considerations for Employers

In response to these anticipated shifts in focus, employers should consider several strategic actions:

• Monitor Legal Developments: Continuously monitoring legal developments and judicial decisions following the overruling of Chevron is paramount. This includes tracking court rulings, agency guidance, and legislative proposals that could affect regulatory interpretations and enforcement within the context of the employment relationship.

• Assess Compliance Programs: Review and enhance compliance programs to address potential regulatory uncertainties and mitigate legal risks. Employers may need to adjust their operations procedures to align with potential challenges in regulatory interpretations and enforcement priorities. This may involve revising internal policies and practices to ensure compliance with emerging legal standards to mitigate legal risks.

• Investment in Legal Expertise: Given the anticipated rise in litigation challenging agency interpretations and regulations, investing in robust legal expertise is crucial. Employers and business stakeholders should consider retaining experienced legal counsel specializing in regulatory compliance and administrative law to navigate the complexities of post-Chevron legal landscapes effectively.

• Advocacy and Engagement: Participate in industry associations, such as the Society for Human Resource Management, and advocacy efforts to influence regulatory reforms that align with your specific business objectives while ensuring regulatory compliance. Collaborating with associations and lobbying groups to influence legislative responses to the overruling of Chevron could help shape future regulatory frameworks more favorable to your business interests.

• Scenario Planning, Risk Management, and Education: Employers should conduct scenario planning exercises to anticipate various regulatory outcomes post-Chevron. Ensuring that key stakeholders within the organization, including executives, human resources managers, and frontline employees, are educated and informed about the potential impacts of the overruling of Chevron is significant. Training programs and workshops focused on compliance updates and regulatory changes can help foster a culture of compliance and minimize legal liabilities.

If you have questions about this topic or any other employment-related issue, please contact Connie Carrigan at (919) 250-2119 or email her at ccarrigan@smithdebnamlaw.com. 

Co-written with Kaylyn Chatman – 2024 Smith Debnam Summer Associate

A 2024 Smith Debnam Summer Associate, Kaylyn Chatman comes to Smith Debnam after recently completing her second year of law school at North Carolina Central University. She earned a Bachelor of Arts in Criminal Justice from Livingstone College and a Master of Arts in Human Service Consulting from Liberty University. Before enrolling in law school, Kaylyn worked as a police officer for ten years.