What is the Supreme Court Chevron Decision?

I have written several articles on postings related to politics. A list of links have been provided at bottom of this article for your convenience. This article will, however address different aspects on these political events.

The court ruled in Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce on Friday. (Thomas Hawk via Flickr)

This article was updated on June 28 at 3:46 p.m.

In a major ruling, the Supreme Court on Friday cut back sharply on the power of federal agencies to interpret the laws they administer and ruled that courts should rely on their own interpretion of ambiguous laws. The decision will likely have far-reaching effects across the country, from environmental regulation to healthcare costs.

By a vote of 6-3, the justices overruled their landmark 1984 decision in Chevron v. Natural Resources Defense Council, which gave rise to the doctrine known as the Chevron doctrine. Under that doctrine, if Congress has not directly addressed the question at the center of a dispute, a court was required to uphold the agency’s interpretation of the statute as long as it was reasonable. But in a 35-page ruling by Chief Justice John Roberts, the justices rejected that doctrine, calling it “fundamentally misguided.”

Justice Elena Kagan dissented, in an opinion joined by Justices Sonia Sotomayor and Ketanji Brown Jackson. Kagan predicted that Friday’s ruling “will cause a massive shock to the legal system.”

When the Supreme Court first issued its decision in the Chevron case more than 40 years ago, the decision was not necessarily regarded as a particularly consequential one. But in the years since then, it became one of the most important rulings on federal administrative law, cited by federal courts more than 18,000 times.

Although the Chevron decision – which upheld the Reagan-era Environmental Protection Agency’s interpretation of the Clean Air Act that eased regulation of emissions – was generally hailed by conservatives at the time, the ruling eventually became a target for those seeking to curtail the administrative state, who argued that courts, rather than federal agencies, should say what the law means. The justices had rebuffed earlier requests (including by one of the same lawyers who argued one of the cases here) to consider overruling Chevron before they agreed last year to take up a pair of challenges to a rule issued by the National Marine Fisheries Service. The agency had required the herring industry to pay for the costs, estimated at $710 per day, associated with carrying observers on board their vessels to collect data about their catches and monitor for overfishing.

The agency stopped the monitoring in 2023 because of a lack of funding. While the program was in effect, the agency reimbursed fishermen for the costs of the observers.

After two federal courts of appeals rebuffed challenges to the rules, two sets of commercial fishing companies came to the Supreme Court, asking the justices to weigh in.

The justices took up their appeals, agreeing to address only the Chevron question in Relentless v. Department of Commerce and Loper Bright Enterprises v. Raimondo. (Justice Ketanji Brown Jackson dissented in the Relentless case but was recused from the Loper-Bright case, presumably because she had heard oral argument in the case while she was still a judge on the U.S. Court of Appeals for the District of Columbia Circuit.)

Chevron deference, Roberts explained in his opinion for the court on Friday, is inconsistent with the Administrative Procedure Act, a federal law that sets out the procedures that federal agencies must follow as well as instructions for courts to review actions by those agencies. The APA, Roberts noted, 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. Under the APA,” Roberts concluded, “it thus remains the responsibility of the court to decide whether the law means what the agency says.”

Roberts rejected any suggestion that agencies, rather than courts, are better suited to determine what ambiguities in a federal law might mean. Even when those ambiguities involve technical or scientific questions that fall within an agency’s area of expertise, Roberts emphasized, “Congress expects courts to handle technical statutory questions” – and courts also have the benefit of briefing from the parties and “friends of the court.”

Moreover, Roberts observed, even if courts should not defer to an agency’s interpretation of an ambiguous statute that it administers, it can consider that interpretation when it falls within the agency’s purview, a doctrine known as Skidmore deference.

Stare decisis – the principle that courts should generally adhere to their past cases – does not provide a reason to uphold the Chevron doctrine, Roberts continued. Roberts characterized the doctrine as “unworkable,” one of the criteria for overruling prior precedent, because it is so difficult to determine whether a statute is indeed ambiguous.

And because of the Supreme Court’s “constant tinkering with” the doctrine, along with its failure to rely on the doctrine in eight years, there is no reason for anyone to rely on Chevron. To the contrary, Roberts suggested, the Chevron doctrine “allows agencies to change course even when Congress has given them no power to do so.”

Roberts indicated that the court’s decision on Friday would not require earlier cases that relied on Chevron to be overturned. “Mere reliance on Chevron cannot constitute a ‘special justification’ for overruling” a decision upholding agency action, “because to say a precedent relied on Chevron is, at best, just an argument that the precedent was wrongly decided” – which is not enough, standing along, to overrule the case.

The Supreme Court is expected to rule on Monday on when the statute of limitations to challenge agency action begins to run. The federal government has argued in that case, Corner Post v. Federal Reserve, that if the challenger prevails, it would open the door for a wide range of “belated challenges to agency regulation.”

Justice Clarence Thomas penned a brief concurring opinion in which he emphasized that the Chevron doctrine was inconsistent not only with the Administrative Procedure Act but also with the Constitution’s division of power among the three branches of government. The Chevron doctrine, he argued, requires judges to give up their constitutional power to exercise their independent judgment, and it allows the executive branch to “exercise powers not given to it.”

Justice Neil Gorsuch filed a longer (33-page) concurring opinion in which he emphasized that “[t]oday, the Court places a tombstone on Chevron no one can miss. In doing so, the Court returns judges to interpretative rules that have guided federal courts since the Nation’s founding.” He sought to downplay the impact of Friday’s ruling, contending that “all today’s decision means is that, going forward, federal courts will do exactly as this Court has since 2016, exactly as it did before the mid-1980s, and exactly as it had done since the founding: resolve cases and controversies without any systemic bias in the government’s favor.”

Kagan, who read a summary of her dissent from the bench, was sharply critical of the decision to overrule the Chevron doctrine. Congress often enacts regulatory laws that contain ambiguities and gaps, she observed, which agencies must then interpret. The question, as she framed it, is “[w]ho decides which of the possible readings” of those laws should prevail?

For 40 years, she stressed, the answer to that question has generally been “the agency’s,” with good reason: Agencies are more likely to have the technical and scientific expertise to make such decisions. She emphasized the deep roots that Chevron has had in the U.S. legal system for decades. “It has been applied in thousands of judicial decisions. It has become part of the warp and woof of modern government, supporting regulatory efforts of all kinds — to name a few, keeping air and water clean, food and drugs safe, and financial markets honest.”

By overruling the Chevron doctrine, Kagan concluded, the court has created a “jolt to the legal system.”

Kagan also pushed back against the majority’s suggestion that overruling the Chevron doctrine would introduce clarity into judicial review of agency interpretations. Noting the majority’s assurances that agency interpretations may be entitled to “respect” going forward, she observed that “[i]f the majority thinks that the same judges who argue today about where ‘ambiguity’ resides are not going to argue tomorrow about what ‘respect’ requires, I fear it will be gravely disappointed.”

Similarly, she questioned the majority’s assertion that Friday’s decision would not call into question decisions that relied on the Chevron doctrine to uphold agency action. “Courts motivated to overrule an old Chevron-based decision can always come up with something to label a ‘special justification,’” she posited. “All a court need do is look to today’s opinion to see how it is done.”

But more broadly, Kagan rebuked her colleagues in the majority for what she characterized as a judicial power grab. She lamented that, by overruling Chevron, the court had, in “one fell swoop,” given “itself exclusive power over every open issue — no matter how expertise-driven or policy-laden — involving the meaning of regulatory law.”

Roman Martinez, who argued the case on behalf of one of the fishing companies, applauded the decision. “By ending Chevron deference,” he said in a statement, “the Court has taken a major step to preserve the separation of powers and shut down unlawful agency overreach. Going forward, judges will be charged with interpreting the law faithfully, impartially, and independently, without deference to the government. This is a win for individual liberty and the Constitution,”

But Kym Meyer, the litigation director for the Southern Environmental Law Center, decried the ruling in a statement. “[T]he Supreme Court today says individual judges around the country should decide the best reading of a statute. That is a recipe for chaos, as hundreds of federal judges — who lack the expertise of agency personnel — are certain to reach inconsistent results on the meaning of federal laws as applied to complex, technical issues.”

Friday’s ruling came in one of three cases during the 2023-24 term seeking to curtail the power of federal agencies – a conservative effort sometimes dubbed the “war on the administrative state.” In October, the court heard arguments in a challenge to the constitutionality of the mechanism used to fund the consumer watchdog Consumer Financial Protection Bureau. Last month the court upheld the CFPB’s funding by a 7-2 vote. And on Thursday, the justices pared back the power of the Securities and Exchange Commission and other administrative agencies, holding that the SEC cannot continue to use in-house proceedings to impose fines in securities fraud cases.

The Supreme Court Ends Chevron Deference—What Now?

The U.S. Supreme Court’s ruling today in Loper Bright Enterprises v. Raimondo dealt a severe blow to the ability of federal agencies to do their jobs by ending the 40-year-old precedent of “Chevron deference.” Instead of deferring to the expertise of agencies on how to interpret ambiguous language in laws pertaining to their work, federal judges now have the power to decide what a law means for themselves. As a result, despite not being accountable to the people, judges will now be able to expand their role into the realm of policymaking.

“In one fell swoop, the majority today gives itself exclusive power over every open issue—no matter how expertise-driven or policy-laden—involving the meaning of regulatory law,” wrote Justice Elena Kagan in her dissent from the ruling. “As if it did not have enough on its plate, the majority turns itself into the country’s administrative czar.”

The decision has profound consequences, not only for the country’s rule of law but also for how agencies—such as those protecting the public against everything from pollution and contaminated food to workplace hazards and rising drug prices—are able to function. Here’s what you need to know.

The balance of power

We’re taught in school about how the U.S. government’s separation of powers is supposed to work: Congress writes the laws, the executive branch carries them out, and the judiciary—including the Supreme Court—resolves arguments about what these laws mean and evaluates whether they’re being enforced properly. In reality, these powers overlap at times between the branches of government, and overall, the system relies on a certain degree of trust.

For instance, as society, technology, and the economy have grown more complex, so, too, has the task of governance. Because Congress is not equipped to micromanage the day-to-day administration of the legislation that it passes, it must rely on federal agencies—under the supervision of the president—to carry out laws and policies according to their best good-faith interpretations. Likewise, federal judges have a role in determining the meaning of Congress’s laws in order to settle disputes. But the act of policymaking has always belonged to the two elected branches.

Today, however, the Supreme Court seized for both itself and lower-court judges a policymaking role that the Constitution did not intend for them to have. The court stripped many federal agencies tasked with protecting public health, public safety, and the environment—including the U.S. Environmental Protection Agency (EPA) and the U.S. Food & Drug Administration, to name just two—of their power to interpret the laws they carry out. Instead, federal judges now get to call the shots.

What is “Chevron deference,” and how does it work?

Chevron deference is the latitude federal judges give agencies over how to interpret the statutes they administer when a dispute arises. Some 40 years ago, the Supreme Court articulated a relatively simple two-part test. First, the judges examine the wording and the context of the statute in question to see if Congress’s intent is clear. If it is, then the matter is settled: The agency is obliged to follow the letter of the law.

“What it comes down to is this: If Congress has left an agency with a policy choice, the agency should get to make it, not the courts.”

David Doniger, Senior Federal Strategist for NRDC’s Climate & Energy Program

But if the statutory language is ambiguous—that is, if it has two or more reasonable interpretations—the reviewing court must defer to the agency’s choice in how to carry out the law. The idea behind such deference is that expert agencies, accountable to an elected president, are better suited than federal judges to make the policy choices that Congress left open.

Established in 1984 by the Supreme Court’s ruling in Chevron U.S.A. v. Natural Resources Defense Council, this jurisprudential doctrine has underpinned U.S. administrative law ever since and has governed some of our most important protections involving pollution, food safety, and more. David Doniger argued the Chevron case on behalf of NRDC, which at the time was trying to get the EPA to adequately enforce pollution controls at industrial facilities under the Clean Air Act. The agency under then president Ronald Reagan was more inclined toward pursuing industry-friendly deregulation than decreasing pollution. Citing statutory ambiguity, Reagan’s EPA proffered its interpretation of the Clean Air Act’s directive—an interpretation that was, unsurprisingly, much more to the liking of polluters and industrial facility owners (like Chevron). The court ultimately ruled in favor of the agency, and the precedent of Chevron deference was born.

Today, Doniger, who currently serves as senior federal strategist for NRDC’s Climate & Energy program, distills the court’s reasoning in the 1984 case. “What it comes down to is this: If Congress has left an agency with a policy choice, the agency should get to make it, not the courts,” he says.

The case that overruled Chevron deference

Loper Bright Enterprises v. Raimondo pitted the owners of a New England fishing company against a federal agency, the National Marine Fisheries Service (NMFS). The Magnuson-Stevens Act sets catch limits to help prevent overfishing and requires fishing boats to have a government-appointed inspector onboard to monitor compliance.

Fishing companies incur the cost of these monitors—in plaintiff Loper Bright’s case, about $700 a day—but the company argued that NMFS had no authority to force it to do so. A district court disagreed, reasoning that Congress left that question open for the agency to decide. Applying Chevron, the court deferred to NMFS’s choice that the boat owner should pay. A federal appeals court affirmed this decision.

The plaintiffs then appealed to the Supreme Court, which in May 2023 announced that it would take up the case.

A recipe for chaos

At the time of the 1984 Chevron v. NRDC ruling, Doniger notes, it was widely perceived in legal and political circles that judges in the lower federal courts were inappropriately crafting policy by deciding for themselves what certain laws meant, effectively substituting their own ideas for the discernment of agency experts. “So the Supreme Court was basically saying to the lower courts: Stop inserting your own policy preferences under the guise of interpreting the law,” Doniger says.

That order, in and of itself, is apolitical, because the Chevron sword cuts both ways. In administrations that are seeking to relax protections (such as Reagan’s EPA in the Chevron case itself), agency heads won’t like having their decisions overruled by judges with a different way of seeing things. For presidential administrations that prioritize climate action, curbing pollution, and promoting environmental justice, Chevron deference has helped allow environmental progress. John Walke, a senior advocate in NRDC’s Environmental Health program, has argued many cases in federal court where Chevron deference has come into play, and he thinks combatants on both sides of the political divide should bemoan its erasure. Walke says, “Regulatory agencies can be harmed, but deregulatory agencies can be harmed as well.”

Chevron deference’s detractors argue that the doctrine gives agencies a rubber stamp to impose onerous restrictions and rules. But as noted by the Brennan Center for Justice, a nonpartisan law and policy institute, federal agencies face legal challenges to their rules all the time—and only prevail in about 70 percent of these challenges, even with the Chevron doctrine on their side. In other words, their powers are far from unchecked.

Both Doniger and Walke think that ending Chevron deference could potentially usher in a new era marked by legal and administrative chaos. For instance, in Chevron v. NRDC, the Supreme Court admonished the lower courts to not usurp agency prerogatives by making public policy through their rulings. Now the Supreme Court has reopened the door for federal judges to decide how executive-branch agencies should go about their daily business whenever Congress has used ambiguous language, which, it should be noted, isn’t always unintentional. Sometimes Congress is purposefully inexplicit in order to give the subject-area experts space to decide how best to implement a regulation. For example, an agency made up of occupational safety specialists should already be well equipped to decide how to handle the technical, nuts-and-bolts aspects of imposing workplace protections—rules about equipment usage, say, or the need for periodic employee rest breaks—without the meddling of judges. And given the complexity of weather patterns, EPA scientists are better equipped than judges at determining how much a state should curb its air pollution in order to protect people living in other states downwind.

An even more obvious problem with giving judges this unrestrained interpretive authority? The federal court system is huge—and the roughly 850 judges who sit on the lower courts are a philosophically and ideologically diverse bunch, to say the least. And as the judicial appointments process has become increasingly partisan, the range of these judges’ views has gotten even wider. Ending Chevron deference is tantamount to throwing a dart at a lower-court dartboard…and hoping for the best. “[There are] more than 10 different circuits, each with multiple judges,” Walke says. “Each with the ability to decide which reasonable interpretation is their preferred reasonable interpretation.”

That’s probably not the result that those who called for an end to Chevron deference had in mind. But it’s what we’re all dealing with now. And when a judge’s ruling gets it wrong, Congress will have to try to make it right by passing a new law—cue, the sands of time.

Supreme Court Decision Limiting the Authority of Federal Agencies Could Have Far-Reaching Impacts for Health Policy

The US Supreme Court has again overturned longstanding precedent, this time getting rid of a 40-year- old standard for decision making that required federal courts to defer to reasonable agency decisions where federal law is silent or unclear. This “Chevron deference” standard is now gone, ushering in a new era where courts will not have to accept agency expertise in their review of challenged regulations. While the details of the rules that define administrative law often garner little attention, this decision, like the decision that overturned Roe v. Wade, will have profound effects for health care. This issue brief examines the decision and assesses what is ahead.

What the Court Said

As explained in the KFF brief Upcoming SCOTUS Case Could Weaken the Impact of Regulation on Key Patient and Consumer Protection, the Supreme Court took up two cases to review the question of whether Chevron deference should be overruled or changed. The two cases, Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce, decided jointly, relate to federal regulations affecting the fishing industry, but the decision will shape how courts review legal challenges to all regulations that interpret issues where a federal law is ambiguous or silent, including health care.

In a 6-3 decision, with Justice Roberts writing for the majority, the Court concluded that Chevron deference should never have been used to begin with, overturning the Chevron decision. The Court made the following major points:

Courts must use independent judgment to determine the meaning of federal statutes. It cannot defer to agency regulation just because the issue is not clear in a statute. According to the majority opinion the Chevron decision runs counter to the Administrative Procedure Act (APA) which incorporated prior practice that “courts decide legal questions by applying their own judgement.” The APA is a 1946 law that sets parameters for how agencies function.
On the question of deferring to agency expertise to resolve an issue, the Court said that “…agencies have no special competence in resolving statutory ambiguities. Courts do.” While courts can “respect” agency regulation and expertise and look to it to inform them on technical issues, “Congress expects courts to handle technical statutory questions.”
While federal courts must generally follow prior Supreme Court decisions (a legal concept called stare decisis), the majority opinion said that the 1984 Chevron decision is flawed and “unworkable,” because there can be different interpretations of what makes a statute ambiguous. As a result, the Court concludes that there is not “any reason to wait helplessly for Congress to correct our mistake.”
The opinion notes that it does not implicate prior cases that relied on Chevron to uphold agency actions because those decisions are still subject to “statutory stare decisis” and can still be upheld even though the deference standard has changed.

Of note is a 33-page dissent by Justice Kagan (joined by Justices Sotomayor and Jackson) stating that, contrary to the majority, the APA includes no reference to how courts should review agency regulations—with or without deference to agency decisions—when courts use their authority to interpret the law. In addition, she rebukes the majority for disrupting use of a method of review (Chevron deference) that is the “cornerstone of administrative law” and “subverting every known principle of stare decisis,” with no particularly significant reason “above and beyond thinking it wrong.” She questions the majority’s conclusion that the decision will not implicate prior cases that have upheld agency regulations based on Chevron deference, questioning why courts would respect those prior decisions when this Court is not respecting precedent in this case. She predicts that some existing federal regulations never challenged under Chevron before will now be challenged. One quote from Justice Kagan’s dissent best sums up her opinion:

“In one fell swoop, the majority today gives itself exclusive power over every open issue—no matter how expertise-driven or policy-laden—involving the meaning of regulatory law. As if it did not have enough on its plate, the majority turns itself into the country’s administrative czar.”

Implications for Health Policy

Criticism of the authority of administrative agencies has been an ongoing theme of commentary from some organizations concerned with overregulation of industry. Some have encouraged changes to “dismantle the administrative state,” with a particular focus on the US Department of Health and Human Services—the agency with most of the administrative authority over Medicare, Medicaid, the Affordable Care Act and other health statutes, and that houses key public health organizations such as the Centers for Disease Control and Prevention and the National Institutes of Health.

The decision will likely impede the ability of executive agencies to implement laws passed by Congress. As explained in the previous KFF brief, while agency final rules will still have the force of law, there will be more of an incentive to challenge these rules in a court that now will not have to give any weight to agency decisions and expertise where statutes are not clear. More regulations will be overturned, placing a real barrier on implementing key health care protections such as prescription drug affordability in Medicare, eligibility rules for Medicaid beneficiaries, infectious disease control and public safety standards, as well as consumer protections for those in self-insured private employer-sponsored plans.

A natural result will mean less agency regulation. No law passed by Congress can include every possible nuance needed to implement the law. Limitation on the ability of regulators to fill in those gaps could result in impacts to health care consumer and patient protections. Technical requirements for how plans and providers bill and code for patient service, for example, are important in executing new health care standards, from free preventive care to surprise billing protections. Without regulations to fill in technical gaps, it will be more difficult to operationalize requirements to carry out the intent of Congress.

The executive branch will not necessarily be the only place where there are implications. Congress will be challenged to be more specific in its legislation, making it more difficult to reach consensus on a range of matters. This may be a particular concern where the issue being addressed in legislation is itself a black box—such as prescription drug pricing and the role of pharmacy benefit managers—where Congress itself and the public may lack access to reliable information about a highly technical subject.

Those seeking to access the judicial branch could see barriers as lower federal courts become more crowded or backlogged with administrative actions. Also, the decision-making itself will require more technical and scientific knowledge from judges, perhaps expanding the time it takes to resolve disputes.

What Happens Now

The decision does not immediately change any specific health care policy, but over time all health care stakeholders will see the impact of the reduced significance of notice-and-comment rulemaking in areas where federal law is silent or unclear. Some argue that the rulemaking process is already “captured” by industry in some areas, such that industry players can influence regulation to their advantage. This will affect these stakeholders as they may no longer have an easy avenue to get their concerns heard and addressed. The decision could also impede reforms meant to help health care consumers navigate an increasingly complex and unaffordable health system, particularly in cases where agencies stretch their regulatory authority beyond the specifics in a statute.

The decision does not affect agency ability to enforce health care statutes using existing tools including audit, data collection, and administrative agency proceedings where those are available. It could mean a shift in agency resources from drafting and defending regulations to enforcement actions based on the text of a statute or a renewed focus on helping consumers recognize and act on activity that violates federal law. This could mean more informal guidance from agencies on best practices to inform consumers and monitor stakeholder activity instead of courting industry and setting new standards. Whether these actions take place, however, will be largely dependent on the priorities of the President.

Congress will still have the ability to specifically delegate to administrative agencies in legislation the task of developing regulations in certain areas. Chevron deference does not implicate this scenario. However, regulations resulting from this delegation can still be reviewed by courts without deference to the agency or could be subject to constitutional challenges claiming that Congress does not have the authority to delegate (nondelegation doctrine). The “major questions doctrine” is another legal framework courts have increasingly applied in recent years to invalidate agency regulation.

Short of unlikely Congressional action to restore Chevron deference, the Supreme Court in a single decision has shifted many policy decisions from agency technical experts to federal judges, with implications for health policy that will reverberate for years to come.

Supreme Court Overrules Chevron, Sharply Limiting Judicial Deference To Agencies’ Statutory Interpretation

Loper Bright Enterprises v. Raimondo, No. 22-451
Relentless, Inc. v. Department of Commerce, No. 22-1219 – Decided June 28, 2024

Today, the Supreme Court overruled Chevron v. Natural Resources Defense Council, a landmark decision that had required courts to defer to agencies’ reasonable interpretations of ambiguous statutory terms.

“Chevron is overruled. Courts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority, as the APA requires.”

Chief Justice Roberts, writing for the Court

Background:

The Supreme Court’s decision in Chevron v. Natural Resources Defense Council, 467 U.S. 837 (1984), instructed courts to apply a two-step framework when reviewing administrative agencies’ interpretations of statutes that they administer. At step one, courts determined whether the statute had an unambiguous meaning using the traditional tools of statutory construction. If not, then courts proceeded to step two, at which they deferred to the agency’s interpretation as long as it was reasonable. This meant that an agency’s reading of the law could control even if it was not the view that a court would otherwise adopt using its independent judgment (and even if the agency’s view had changed over time).

Loper Bright Enterprises and Relentless, Inc. are small businesses engaged in herring fishing off the Atlantic coast. They brought two lawsuits challenging a rule promulgated by the Department of Commerce that required them to pay for government-approved fishing monitors, which can reduce fishers’ returns by up to 20%. The challengers argued that this rule was unauthorized by the governing statute, which did not expressly say who should pay for these monitors. The district courts in both cases granted summary judgment to the Department, and the D.C. Circuit and First Circuit affirmed. Applying Chevron, these courts both held that the agency had reasonably interpreted the statute.

Issue:

Whether the Court should overrule or clarify the Chevron doctrine.

Court’s Holding:

Chevron is overruled. Judicial deference to administrative agencies’ statutory interpretation is contrary to the Administrative Procedure Act (“APA”) and traditional principles of judicial review. Judges must independently interpret statutes without deference to an agency’s reading of the law.

What It Means:

Overruling Chevron will make it more difficult for government agencies to win cases turning on statutory-interpretation questions. Today’s decision continues a trend of Supreme Court decisions reining in administrative agency action, including recent cases curbing the Securities and Exchange Commission’s power to bring enforcement actions in administrative tribunals rather than federal courts (SEC v. Jarkesy) and granting a stay of the Environmental Protection Agency’s “Good Neighbor” emissions-regulation plan for failing to comply with the APA’s requirement of reasoned decisionmaking (Ohio v. EPA). Altogether, this case law signals the Justices’ skepticism of expansive claims of regulatory power by federal agencies, and today’s action is a major resetting of the balance of power between courts and agencies, as well as between agencies and challengers of agency action.
Notably, the Court rested its decision on the plain language of the APA, which provides that a court reviewing agency action “shall decide all relevant questions of law” and “interpret constitutional and statutory provisions.” 5 U.S.C. § 706. Justice Thomas wrote a separate concurrence to explain his view that Chevron also violates the Constitution’s separation of powers by abdicating judges’ duty to exercise independent judgment and impermissibly conferring that judicial power on the Executive Branch.
The effects of Chevron’s demise will likely be most dramatic in the lower federal courts, some of which have continued to apply Chevron in recent years even as the Supreme Court has rarely invoked the doctrine over the past decade. Today’s decision instructs these circuit and district judges to change their practices and abandon deference. Instead, they “must exercise their independent judgment in deciding whether an agency has acted within its statutory authority.”
Going forward, agencies’ interpretation of statutes will still be entitled to a lesser degree of “respect” under Skidmore v. Swift & Co., insofar as the agencies’ views are persuasive. This may depend on factors such as whether the agency adopted the interpretation close in time to the statute’s enactment and how consistently the agency has adhered to that interpretation since.
Today’s decision does not necessarily unsettle prior cases relying on Chevron to interpret statutes. The Court stated that a prior case’s reliance on Chevron to conclude that an agency’s action was lawful is not, standing alone, justification to overrule it.
Even after today’s decision, agencies will likely continue to issue regulations largely as before the overruling of Chevron, particularly in certain areas, though the scope of such regulations may change. For example, taxpayers will continue to seek rules regarding how to report routine business transactions and will want to participate in the rulemaking process through the notice and comment procedure. While today’s decision will have a significant impact on the litigation landscape regarding such tax and other regulations, many of those regulations faced strong judicial headwinds when challenged even under Chevron.

Go Fish! U.S. Supreme Court Overturns ‘Chevron Deference’ to Federal Agencies: What It Means for Employers

The U.S. Supreme Court has overturned the decades-old Chevron doctrine of judicial deference to a federal agency’s interpretation of an ambiguous statute. Loper Bright Enters. v. Raimondo, No. 22-451, and Relentless, Inc. v. Department of Commerce, No. 22-1219 (June 28, 2024). The Court’s decision came in response to a pair of cases brought by two fishing vessel operators challenging federal regulations on fishery management in federal waters.

Although the underlying cases were not workplace-related, the decision may significantly affect employers because of the many regulations issued by federal agencies such as the Equal Employment Opportunity Commission (EEOC), Department of Labor (DOL), Occupational Safety and Health Administration (OSHA), and National Labor Relations Board (NLRB) that affect the workplace every day.

Chevron Doctrine

Previously, courts were required to defer to agency regulations if the language of the statute at issue was ambiguous and the agency’s interpretation was “reasonable.” Loper Bright requires lower federal courts to uphold an agency’s statutory interpretation only if the court is persuaded that it is the best interpretation of the law.

Under the Chevron doctrine, courts used a two-step framework when reviewing an agency regulation interpreting a statute. At step one of the Chevron analysis, the court looked at the underlying statute to determine whether the provision at issue was clear. If the statute was clear, the analysis ended at step one. However, if the provision was ambiguous, or the statute was silent on the matter, a court went to step two and considered whether the agency’s interpretation of the statute as reflected in the regulation was a “reasonable” one. If determined to be reasonable, the court had to uphold the interpretation, even if the court might conclude there is another, better interpretation. This was a fairly low burden for an agency defending a challenged action.

Chevron’s Impact on Workplace Law

Chevron deference has been a foundational precedent for more than 40 years. In that time, courts have issued thousands of decisions deferring to a broad swath of regulations issued by federal agencies. This deference has allowed agencies to shape the contours of employment laws with minimal judicial review.

Through rulemaking, agencies have refined the meaning of the statutes they enforce and, in some cases, have broadly expanded the scope of those statutes. For example, the DOL imposed a minimum salary requirement for application of the executive, administrative, and professional exemptions, although there is no such provision in the Fair Labor Standards Act (FLSA). More recently, the EEOC stretched the Pregnant Workers Fairness Act (PWFA) to require accommodations for medical conditions related to abortion.

Since Chevron, federal agencies have routinely relied on the decision in response to challenges to these statutory interpretations. Chevron deference has allowed the agencies to survive legal challenges to similar expansive interpretations of the laws they enforce — emboldening agencies to extend their regulatory reach.

The Court’s Decision

In Loper Bright, the Court’s majority held that courts may not defer to an agency’s interpretation of a statute merely because the statute is ambiguous. A court must exercise independent judgment in interpreting a statute and reviewing the agency interpretation of the statute. The Administrative Procedure Act (APA), which Congress enacted to curb overzealous agencies, the Court said, prescribes how courts are to review such agency actions. The APA makes clear that agencies are not entitled to deference when interpreting statutes, the majority explained.

However, an agency’s interpretation, as reflected in a regulation or other agency action, may have some sway, the Court said. A court may look to the agency charged with enforcing a statute for guidance in interpreting its meaning. An agency’s interpretation may be “especially useful” if it was issued concurrently with the statute itself and has “remained consistent over time,” the Court observed. Further, if a statute expressly authorizes an agency to act, courts must respect that delegation of authority, but “consistent with constitutional limits,” the court must ensure the agency has acted within those limits. At bottom, though, the essential question for a reviewing court is: “Does the statute authorize the challenged agency action?”

Although it made clear that the Chevron framework is abandoned, the Court emphasized that prior decisions that relied on the Chevron framework are not overturned.

What Does This Mean for Employers?

Nothing changes today. The Supreme Court’s decision did not address a challenge to a specific employment regulation. Regulations and guidance from the EEOC, DOL, OSHA, NLRB, and other agencies will continue to exist and be in effect. Employers should continue to follow agency regulations and guidance unless and until a court rejects these interpretations.

But the Loper Bright decision will make it easier to challenge regulations and thus may limit the ability of agencies to reshape labor and employment law to the degree with which they have over the last 40 years. The decision is likely to affect pending legal challenges to an array of federal agency rules, including:

EEOC regulations implementing the PWFA (which are currently enjoined (in part) in Louisiana and Mississippi pending ongoing litigation);
DOL rules increasing the minimum salary threshold for application of the FLSA’s “white collar” exemptions; defining “independent contractor” vs. statutory employee under the FLSA; limiting the amount of time tipped employees can spend doing work that is not “tip producing”; adopting sweeping revisions to Davis-Bacon and Related Act prevailing wage regulations (recently enjoined pending a final court decision); and implementing an executive order boosting the minimum wage for federal contractors;
OSHA’s new “walkaround” rule allowing union organizers to accompany OSHA inspectors on workplace inspections;
The NLRB’s joint-employer rule; and
The Federal Trade Commission’s rule barring non-compete agreements.

Of course, just because a court has more discretion to accept or reject an agency’s interpretation does not mean the interpretation will be rejected. However, with greater judicial discretion, a rule may be upheld in one court and invalidated in another. This could lead to a spate of inconsistent rulings throughout the country, creating jurisdictional conflicts and compliance headaches for large employers in multiple states.

While less judicial deference to federal agencies may hold some immediate appeal for employers, it also may bring less predictability. An uncertain regulatory backdrop and a potentially chaotic landscape of court decisions across jurisdictions can make it harder for employers to manage their workplace, as a practical matter, and to comply with the law.

Employers must stay on top of developing cases and know how to reconcile conflicting court decisions around the country, in addition to using the other compliance tools at their disposal — including agency guidance.

Finally, while employers should not expect an immediate change to the interpretation of employment statutes, employers facing lawsuits based upon agency interpretations of the law may have additional legal arguments in defense of litigation.

Resources

gibsondunn.com, “Supreme Court Overrules Chevron, Sharply Limiting Judicial Deference To Agencies’ Statutory Interpretation.” By Gibson Dunn; scotusblog.com, “Supreme Court strikes down Chevron, curtailing power of federal agencies.” By Amy Howe; nrdc.org, “The Supreme Court Ends Chevron Deference—What Now?” By Jeff Turrentine; kff.org, “Supreme Court Decision Limiting the Authority of Federal Agencies Could Have Far-Reaching Impacts for Health Policy.” By Kaye Pestaina, Michelle Long, and Justin Lo; jacksonlewis.com, “Go Fish! U.S. Supreme Court Overturns ‘Chevron Deference’ to Federal Agencies: What It Means for Employers.” By Stephanie L. Adler-Paindiris & Patricia Anderson Pryor;

Common Sense and Ramblings In America

What is the Supreme Court Chevron Decision?

The balance of power

What is “Chevron deference,” and how does it work?

The case that overruled Chevron deference

A recipe for chaos

What the Court Said

Implications for Health Policy

What Happens Now

Chevron Doctrine

Chevron’s Impact on Workplace Law

The Court’s Decision

What Does This Mean for Employers?

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The balance of power

What is “Chevron deference,” and how does it work?

The case that overruled Chevron deference

A recipe for chaos

What the Court Said

Implications for Health Policy

What Happens Now

Chevron Doctrine

Chevron’s Impact on Workplace Law

The Court’s Decision

What Does This Mean for Employers?

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