SCOTUS to hear case that could upend power of federal regulatory agencies
As we have seen recently, the U.S. Supreme Court is again considering overturning decades-long precedent. Nearly 40 years after the Court decided Chevron v. Natural Resources Defense Council, it has agreed to reconsider.
In Chevron, the Court held that courts should defer to a federal administrative agency’s interpretation of an ambiguous statute as long as the agency interpretation is “reasonable.” This became known as “Chevron deference,” meaning that the courts generally defer to the agency interpretation.
That ruling will be revisited in Loper Bright Enterprises v. Raimondo, which the Supreme Court recently agreed to review. The case involves a group of commercial fishing companies who are challenging a rule issued by the National Oceanic and Atmospheric Administration Fisheries, a federal agency.
If the Court overrules Chevron, the ruling could have a profound impact on how the government operates – and it could be good news for employers, whose actions are often controlled by interpretations issued by federal administrative agencies, such as the Equal Employment Opportunity Commission, the National Labor Relations Board, the Occupational Safety and Health Administration, and the Wage and Hour Division of the U.S. Department of Labor, among others.
Background
Loper Bright Enterprises is a family‐owned herring fishing company located in Cape May, NJ, and operating in New England waters. The specific rule at issue in Loper Bright is whether the NOAA Fisheries has the authority to require commercial fishing companies to pay for the costs of placing the agency’s observers on fishing vessels. These observers stay on board to oversee the vessel’s operations and to ensure compliance with a host of federal regulations.
Loper Bright and other fishing companies sued to challenge this rule. Their argument is that the Magnuson-Stevens Act, which says that the NOAA Fisheries may require vessels to carry these observers, says nothing about payment of the observers.
A divided panel of the U.S. Court of Appeals for the District of Columbia Circuit held that the MSA’s silence on the issue of payment of the observers made the statute ambiguous. Therefore, applying Chevron, the D.C. Circuit deferred to the NOAA Fisheries interpretation of the MSA, and upheld the rule that required fishing companies to pay the observers.
The fishing companies asked the Supreme Court to rule on two questions: 1) whether, under a proper application of Chevron, the MSA implicitly grants the NOAA Fisheries the power to require fishing companies to pay the observers; and 2) whether the Court should overrule Chevron or at least clarify that statutory silence does not constitute an “ambiguity” that requires court deference to the agency.
The Court agreed to review the second question only. Justice Ketanji Brown Jackson has recused herself. She was on the panel of the D.C. Circuit that heard oral argument in the case; however, she did not join in the decision because by the time that the decision was issued, President Biden had already nominated her to the Supreme Court.
Chevron deference
In Chevron, the Supreme Court was asked to decide whether the Clean Air Act permitted the Environmental Protection Agency to define the term “stationary source” to mean whole industrial plants only. Justice John Paul Stevens, writing for a unanimous Court, said that courts should ordinarily defer to policymaking decisions made by federal agencies, such as the Environmental Protection Agency or the Department of Labor, for two reasons:
- Agencies typically have far greater expertise in the areas they regulate than do judges, and therefore the agencies are more likely than the courts to make prudent policy decisions.
- Although federal judges are largely immune from democratic accountability, because they are “not part of either political branch of the Government,” federal agencies are typically run by officials who serve at the pleasure of an elected president, meaning they tend to have more political accountability for policy decisions.
Essentially, Chevron means that the final decision on matters of policy will be made by policy experts, such as these agencies, and not by judges – provided that the agency interpretation of the applicable statute is “reasonable.”
Since it was issued in 1984, Chevron has been cited in more than 18,000 cases and 3,500 administrative decisions and guidance. Under Chevron, courts have typically told parties who object to a federal regulation to take it up with the agency that promulgated the regulation.
However, in recent years, the Court has indicated that Chevron may be overruled. Last year, the Court advanced what it called the “major questions” doctrine in a case known as West Virginia v. EPA. There, the Court invalidated an EPA regulation that attempted to require power plants to move away from the use of coal. The Court ruled that Congress must be explicit when giving a federal agency the power to address issues of “economic and political significance” through administrative rulemaking. The major questions doctrine effectively permits five justices to veto any action by a federal agency that touches upon a matter that those five justices deem to be a matter of “vast ‘economic and political significance.’”
Legal implications
The Loper Bright case is likely to be argued this fall, with an opinion expected sometime in 2024. Meanwhile, several of the Court’s conservative justices have not been shy about expressing their disdain for Chevron.
One example arose in connection with an employment law case. In Helix Energy Solutions Group, Inc. v. Hewitt, a case about the “salary basis” requirement for some exemptions under the Fair Labor Standards Act, Justice Brett Kavanaugh all but invited litigants to address whether the DOL overstepped its authority by establishing the requirement, which is arguably inconsistent with the text of the FLSA.
Outside the employment context, Justice Clarence Thomas argued in a concurring opinion in Michigan v. EPA in 2015 that Chevron deference deprives “Courts [of] the ultimate interpretative authority ‘to say what the law is,’ and hands it over to” the executive branch. Justice Neil Gorsuch argued in a dissent this past fall in Buffington v. McDonough that the Court “should acknowledge forthrightly that Chevron did not undo, and could not have undone, the judicial duty to provide an independent judgment of the law’s meaning in the cases that come before the Nation’s courts.”
Depending on how the Court rules in Loper Bright, the impact could be positive for employers. For example, the Federal Trade Commission has issued proposed regulations that would not only prohibit employers from entering into non-compete agreements with their employees but would also nullify existing non-competes. It is questionable whether the proposed rule would survive even under a Chevron standard, but it would be much likelier to fail under a more rigorous standard.
Although many legal scholars and commentators are concerned about the fate of Chevron, it is also important to note that the Court could stop short of overturning Chevron. The Court could instead make it clear that agencies have only the authority that Congress has expressly delegated to them.
