Seyfarth Synopsis: Today, the administrative state's foundation shook as the Supreme Court overruled Chevron, holding that federal administrative agencies are not entitled to deference in interpreting statutes and that courts, not agencies, must be the ultimate arbiters of statutory meaning. While the end of Chevron deference marks a sea change in administrative law, the conservative majority of the Supreme Court cited the value of stare decisis and also held that prior decisions on the lawfulness of agency action are not subject to immediate reversal. Additionally, much agency guidance, such as the EEOC's Title VII guidance and the NLRB's regulatory efforts, have not been subject to Chevron deference in the first place. Other agency guidance, such as certain DOL regulations relating to ERISA's reporting and disclosure requirements, stems from explicit statutory authority, and challenges to those regulations remain unlikely to succeed, even without Chevron's protective shield. While the end of Chevron deference represents a significant change in the way federal courts will handle challenges to agency guidance, the administrative state is still alive and kicking.
The Supreme Court has brought an end to 40 years of deference to administrative agencies, overturning Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 468 U.S. 837 (1984). In Loper Bright Enterprises v. Raimondo, No. 22-451, 603 U.S. __ (2024), the Supreme Court held that courts, not agencies, are best situated to interpret ambiguous statutory provisions, even in areas of agency expertise.
Chief Justice Roberts, writing for a 6-3 conservative majority, and continuing the current Court's hostility to the power of federal agencies, held that "[c]ourts must exercise their independent judgment in deciding whether an agency has acted within its statutory authority," rather than allowing the agency to fill gaps in statutes.
Notably, however, while the Court's decision is a sea change in how courts review administrative agencies' exercise of their power, for the time being, all agency rules that were enforceable before Loper Bright remain enforceable. Indeed, the Court went out of its way to note that all decisions relying on Chevron to uphold an agency's action (1) remain good law for now and (2) are not subject to overruling just because they relied on Chevron. The bottom line is that, practically, nothing changes yet for people or entities subject to administrative authority.
That's not to say that there isn't significant potential for disruption moving forward. We expect regulated entities to bring new (and potentially far reaching) challenges to longstanding rules that are premised only on statutory ambiguity. Under Loper Bright, courts have significantly more leeway to interpret statutes contrary to an agency's interpretations and courts can use this to cabin agency authority.
The Administrative State Lives
However, Loper Bright does not spell the end of the administrative state. Most notably, the decision appears to endorse the continuing validity of Skidmore v. Swift, in which courts grant a modicum of deference to an agency's statutory interpretation "to the extent that it has the 'power to persuade'" in light of the agency's thoroughness, its consistency over time, and the soundness of its reasoning. The continuing availability of Skidmore likely provides some security to longstanding agency rules and interpretations, particularly in noncontroversial areas of significant agency expertise.
Additionally, Loper Bright does little to call into question Congress's ability to expressly delegate authority to agencies to promulgate regulations and relevant definitions (such as the delegations that are present in the Age Discrimination in Employment Act (ADEA), the Americans With Disabilities Act (the ADA), and the Genetic Information Nondiscrimination Act (GINA), as well as the recently passed Pregnant Workers Fairness Act and the PUMP Act). Given this, when Congress has directly authorized an agency to exercise discretion about the meaning of a statute, Loper Bright suggests that there is less space for courts to disagree with that interpretation and rules promulgated under such a delegation may be less vulnerable to attack.
For example, the Employee Retirement Income Security Act of 1974 (ERISA) contains extensive reporting and disclosure requirements. However, Congress also expressly authorized the Secretary of Labor to authorize an alternative compliance method for a plan or group of plans in certain cases where "he determines ...that the use of such alternative method is consistent with the purposes of" the statute. 29 U.S.C. § 1030(a). Because the statutory language expressly commits the question to the Secretary of Labor's determination, challenges to related regulations may face an uphill battle even post-Chevron.
Notwithstanding breathless declarations in the media of the end of the administrative state, the federal government's day-to-day enforcement activities, such as those conducted by the NLRB or the EEOC, will continue unchanged after today's Loper Bright decision. Moreover, labor and employment counsel focused on the EEOC's or NLRB's regulations should be aware that the end of Chevron deference does not affect the way that federal courts are likely to view much of the EEOC's or NLRB's regulatory guidance, as courts have rarely granted Chevron deference to those agencies to begin with.
Prior to today, the EEOC's Title VII guidance had only been receiving Skidmore deference, and not Chevron deference. In 1976, in General Electric Co. v. Gilbert, 429 U.S. 125 (1976), the Supreme Court held that the EEOC's Title VII guidance was only entitled to Skidmore deference. The Supreme Court followed this holding in 1991, in EEOC v. Arabian Am. Oil Co., 499 U.S. 244 (1991), when it held that an EEOC policy statement and the EEOC compliance manual were also not entitled to Chevron deference.
(Unlike Title VII, which only delegates to the EEOC "procedural" rulemaking authority, the Age Discrimination in Employment Act (ADEA), the Americans With Disabilities Act (the ADA), and the Genetic Information Nondiscrimination Act (GINA), as well as the recently passed Pregnant Workers Fairness Act and the PUMP Act all directly grant the EEOC rulemaking authority. The EEOC's regulatory efforts on these fronts is likely to continue, undeterred.)
Similarly, in the case of the NLRB, courts rarely relied upon Chevron in granting deference to its decisions. But the Court's reasoning in overruling Chevron leaves little room for continued deference to NLRB decisions, except in limited circumstances like that noted in the majority opinion's discussion of NLRB v. Hearst Publications, Inc., 322 U.S. 111 (1944), in which deference was granted because the issue was primarily one of fact and not law. When reviewing NLRB decisions going forward, courts will likely follow Loper Bright's instruction to respect the Board's legal determinations, but not provide outright deference to them.
Looking Forward
Today's decision in Loper Bright is not the end of the administrative state, but under the current Supreme Court majority, agency power is likely to continue eroding. On June 27, 2024, in SEC v. Jarkesy, the Supreme Court held that the administrative law judges of the Securities and Exchange Commission could not impose certain civil penalties, undermining the ability of agencies to impose civil penalties outside of federal court. After Jarkesy, it is likely we will see ongoing challenges to the lawfulness of SEC administrative law judge appointments and whether the agency structure of the SEC (as investigator, prosecutor, and judge) violates the Due Process Clause of the 5th Amendment. These and other issues threaten to reduce the power of administrative agencies even further.
Client Impacts
We will continue monitoring ongoing developments and will be writing additional client updates on this issue.
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