No More Chevron Deference: What Does This Mean for Employers?

From 1984 until June 2024, a reviewing court had to defer to a federal agency’s reasonable interpretation of ambiguous statutes, even if the court would have interpreted the statute differently. In June 2024, the U.S. Supreme Court overturned what the court referred to as the “ancien régime” of Chevron deference in Loper Bright Enterprises v. Raimondo. For those of us who are not French history buffs, “ancien régime” was the political system overturned by the French Revolution; here, it signals the upending of longstanding administrative practice.

In the much-anticipated decision, the 6-3 Supreme Court majority abolished the Chevron doctrine and instead held that, under the Administrative Procedure Act, courts must “exercise independent judgment in determining the meaning of statutory provisions,” even ambiguous ones. Given the vast amount of rulemaking that happens at the agency level — in the form of regulations and administrative guidance across a broad network of government agencies — the overturning of Chevron deference is poised to have wide-ranging impacts across various industries and sectors. For example, the Food and Drug Administration (FDA) no longer has carte-blanche to interpret the Federal Food, Drug, and Cosmetic Act, nor does the Federal Trade Commission (FTC) interpretation of the FTC Act necessarily carry the day.

Without Chevron, Employers Should Watch for Challenges to Employment Rules and Regulations

Various employment-related federal agencies will be affected by the overturning of Chevron, given the numerous statutes and agency interpretations that currently govern the employment law landscape. Courts are now empowered to favor more employer-friendly interpretations of ambiguous statutes. For example, one employer has already asked the Supreme Court to overturn the National Labor Relations Board’s (NLRB) ruling that the U.S. president can remove the NLRB general counsel at will and that the board’s general counsel has unreviewable prosecutorial discretion to fashion complaints on behalf of the parties. Additionally, challenges to the Equal Employment Opportunity Commission’s (EEOC) regulations regarding the abortion-related provisions of the Pregnant Workers Fairness Act have been filed. Moreover, the Occupational Safety and Health Administration’s (OSHA) April 2024 Union Walkaround Rule (which gave unions and other third parties access private employer worksites) has been challenged in the wake of Loper-Bright. Still, there is no guarantee that courts will not uphold more employee-friendly interpretations of these statutes. Employers should stay alert to the latest legal developments and regularly review their employment policies and practices accordingly.

The Loper-Bright aftershocks are already being felt by employers. In Restaurant Law Center et al. v. U.S. Department of Labor, the U.S. Court of Appeals for the Fifth Circuit (covering Louisiana, Mississippi, and Texas) recently overturned a Department of Labor (DOL) regulation that set limits on the amount of time that tipped employees may spend on tasks that do not directly generate tips (known as the 80/20/30 Rule). Unfettered by the Chevron doctrine, the court found that the DOL’s rule was inconsistent with its interpretation of the Fair Labor Standards Act (FLSA).

Specifically, the court found that the final rule “replace[d] the Congressionally chosen touchstone of the tip-credit analysis — the occupation — with one of DOL’s making — the timesheet.” Thus, the DOL’s interpretation was deemed inconsistent with the text of the FLSA and ultimately invalid. As such, employers are no longer beholden to the previous federal agency-imposed strict time limits for tipped employees. Still, employers should be aware of state-specific laws that require a taking a tip credit against the minimum wage for employees who “customarily and regularly” earn tips and the prohibition on use of the tip credit in certain states.

Although federal rules and regulations may now be more susceptible to challenge post-Chevron, employers must still ensure that their policies comply with parallel state laws and regulations. C’est la vie of a U.S. employer!