Landmark Shift: Supreme Court Rejects Chevron
Deference
Business leaders, take note: a recent Supreme Court
decision has significantly altered regulatory compliance. In June
2024, the Court overturned the long-standing precedent of
Chevron U.S.A., Inc. v. Natural Resources Defense Council
(1984), also known as Chevron doctrine or Chevron
deference. The Chevron doctrine had previously required
courts to defer to federal agencies' reasonable interpretations
of ambiguous statutes. Let's unpack what this means for
business.
Chevron Explained: Deference to the Agency Experts
For forty years, courts deferred to agencies with deep expertise
to interpret unclear or vague regulations. However, critics argued
it gave agencies too much power, potentially allowing them to
rewrite the rules without clear Congressional intent. With
Chevron's overturning, courts will now independently
interpret the law and decide if the agency acted within its
authority.
Two Cases and the Undoing of Chevron
Two cases decided the fate of Chevron deference. In
addition to Relentless, Inc. vs. Department of Commerce,
in Loper Bright Enterprises v. Raimondo,
the Court ruled 6-2 to significantly curtail agency deference,
stating that the judiciary, not executive agencies, should have the
final say in interpreting federal laws. This decision has
far-reaching implications for the power of federal agencies and the
relationship between the executive and judicial branches of
government in interpreting and applying federal law.
The Court's Reasoning
The Court argued that the Constitution assigns the judiciary the role of interpreting laws. The Court noted that while agencies' expertise can be respected, the final interpretation of the law must be the court's responsibility. The decision highlights the importance of judicial independence and the need for courts to exercise their own judgment rather than deferring to agencies.
The Impact for Business
Overturning Chevron emphasizes the role of the judiciary
in maintaining checks and balances on executive power. For
businesses, the Supreme Court's ruling on Chevron
deference offers a range of possible outcomes. On one hand, it has
the potential to empower businesses to challenge unfavorable agency
decisions and encourage clearer regulations. On the other hand, it
could lead to increased litigation costs, inconsistent court
rulings, and potential regulatory hesitancy, creating new
challenges for businesses. The overall impact will largely depend
on how courts apply this new standard and how agencies respond in
drafting and enforcing regulations.
What Business Leaders Can Do
This ruling carries significant weight for any business that deals with federal regulatory agencies on a regular basis. Here are some actions to consider now:
- Compliance environment: Stay informed about how the ruling might impact your industry's specific regulations. Consider revisiting your compliance practices to ensure alignment with potential changes in enforcement based on judicial interpretation.
- Engagement with regulators: Proactively engage with relevant agencies to understand how they plan to adjust their enforcement approach in light of the decision.
- Advocacy: If a business relies on a specific, industry-friendly agency interpretation, consider advocating for legislative clarification to ensure continued application.
Businesses need to be aware of this shift and adapt their strategies accordingly. By staying educated and proactive, leaders can adapt to the new regulatory and compliance situation with increased confidence.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.