Regulatory Outlook Employers Can Expect After the End of the Chevron Doctrine

Federal courts did not wait long before beginning to apply the Supreme Court's landmark ruling of June 28—Loper Bright Enterprises v. Raimondo, a decision thatoverturned the Court's prior "Chevron deference" doctrine。

In fact, on the very day the Supreme Court issued itsLoper Brightruling, Judge Sean Jordan cited it in his analysis of the Department of Labor's overtime regulations under the Fair Labor Standards Act. Jordan held that the salary level test set by the Department in its final overtime rule "effectively supplanted" the FLSA's overtime exemption for employees performing certain duties,exceeding its statutory authority。

Jordan temporarily blocked the rule's application to state employees in Texas, and although his ruling has limited nationwide applicability, the rule still faces multiple legal challenges. Therefore, Alex MacDonald, a shareholder at Littler Mendelson, said this could be the first opportunity for a federal appellate court to analyze an agency regulation under the "post-Chevron" framework.

Overturning Chevron has long-term implications

BeforeLoper Bright, federal courts, relying on the Supreme Court's 1974 ruling inChevron v. National Resources Defense Council, generally deferred to agency interpretations of ambiguous statutes. MacDonald said: "That approach is no longer applicable. Ambiguity is no longer sufficient to trigger deference."

Instead,the Supreme Court ruled late last monththat courts must, under the Administrative Procedure Act, "exercise independent judgment" in determining whether an agency has acted within its statutory authority.

Paul DeCamp, a member of Epstein Becker Green and former administrator of the Department of Labor's Wage and Hour Division, said the ruling could invalidate several DOL regulations, but employers may not see immediate effects. Part of the reason is that the Supreme Court did not overturn any existing judgments based on itsChevronrulings.

Additionally, the Court clarified thatLoper Brightdid not overturn its 1944 ruling inSkidmore v. Swift & Co., which allows courts to consult certain agency "interpretations and opinions" as guidance. MacDonald said this was later articulated by federal courts as a form of deference to agencies, but the level of deference articulated inSkidmoredid not reach the level of deference afforded to federal agencies inChevron.

DeCamp said that with Chevron deference abolished, the government's "heavy weight on the scale" has been removed, and courts will no longer give special status to interpretations by agencies like the Department of Labor.

DeCamp said: "The long-term impact is that the elimination of Chevron deference may force agencies, including the Department of Labor, to be more thoughtful and more careful when crafting rules. In the long run, this will lead to better regulations that more closely align with the laws Congress enacted."

Others disagree and worry thatLoper Brightcould lead courts to become more involved in policymaking. Jim Townsend, director of Wayne State University's Levin Center for Oversight and Democracy, said the Court's ruling misunderstands the regulatory process.

"Congress often plays an important role in oversight and providing input," Townsend said. The idea that agencies deliberately ignore congressional intent when crafting rules "is not true," he added. "That's not the case."

DOL regulations may face unfavorable prospects in federal courts

DeCamp said another long-term effect employers should watch is that theLoper Brightruling may, to some extent, mitigate the volatile back-and-forth nature of regulatory actions between election cycles.

"Of course, when administrations change, policy preferences often shift dramatically—that's part of the normal ebb and flow of the electoral process. I don't think that will change," he added. "But the elimination of Chevron deference, and the pressure it places on the executive branch to be more thoughtful, will help alleviate this 'seesaw' effect we've seen."

Few DOL regulations illustrate this effect as well as its independent contractor rule. The Department recently finalized itsupdated independent contractor rule, which took effect in March. MacDonald said he views this rule as an example of the Department interpreting a potentially ambiguous statutory term—the definition of "employee" under the FLSA—in a way that may exceed its authority, and thus could be challenged in the "post-Chevron" era.

DeCamp said courts still need to consider agency expertise when determining whether regulations are valid, especially when those regulations involve highly technical or scientific terms. But he also said many regulations the Department of Labor has issued in recent years do not necessarily fall into that category.

"Given the Court's ruling, I find it difficult to identify any regulation the Department of Labor has issued over the past few decades that is based on technical expertise rather than policy preference, especially those from the Wage and Hour Division," DeCamp said.

DeCamp added that this does not necessarily mean all or most DOL regulations are invalid, and courts will not view them that way. But ultimately, "the framework for analyzing these regulations will be less deferential to the Department than before," he said.

Employers can prepare—and participate

Even so, MacDonald said this does not mean HR departments should expect controversial regulations to be overturned overnight, and existing compliance obligations must still be fulfilled. He added that future agencies may also decide to issue sub-regulatory guidance, such as opinion letters, rather than pursuing regulatory updates.

"We're not going to overturn the entire system now," MacDonald said. "All cases decided under theChevrondoctrine remain valid. You can still rely on the Code of Federal Regulations. It's just that going forward, regulations will face stricter scrutiny, and you may see fewer regulations issued."

DeCamp similarly noted that existing federal regulations remain valid, even if employers have opportunities to challenge particularly vulnerable regulations and submit public comments on proposed rules; "employers should not viewLoper Brightas a license to violate the law," he said.

Meanwhile, Townsend said employers could also benefit from communicating with congressional lawmakers, more specifically with committee chairs and ranking members, to provide input during the rulemaking process. He added that while ensuring a more stable regulatory environment is not solely the responsibility of regulated parties, cooperation would help.

"The more dialogue that occurs with these groups... the more you build a record about the meaning of statutory terms and the connection between regulations and the underlying laws," Townsend said. "Otherwise, we'll face a vacuum."