Grant Collins
On June 28, the U.S. Supreme Court issued a decision that will have far-reaching consequences for federal agencies. Specifically, in Loper Bright Enterprises v. Raimondo, the Supreme Court ended four decades of deference to federal agencies’ leeway to interpret ambiguous laws — called Chevron deference under the Court’s 1984 decision — and ushered in a new era of administrative law.
Challenges to federal rulemaking are nothing new. Under existing law, agency rules have been voided because the agency was not tasked with administering the law or because the agency failed to use deliberative procedures. More recently, courts have sustained challenges to agency rulemaking under the “major question” doctrine, which provides that agencies can only regulate issues of “vast economic and political significance” if Congress clearly and explicitly delegated that power. The Loper decision does not impact these doctrines but instead provides an additional tool for curtailing agency decisions and rulemaking.
Under Loper, decisions and rulemaking by federal agencies, including the Department of Labor (DOL), the National Labor Relations Board (NLRB), and the Occupational Safety and Health Administration (OSHA) are more likely to be successfully challenged. While these challenges may result in less vacillations following changes in the executive branch, the immediate effect will be a substantial increase in litigation challenging agency decisions and rulemaking.
The Old Standard: Judicial Deference
In 1984, the Supreme Court issued a decision in Chevron U.S.A., Inc. v. Natural Resources Defense Council, which called for courts to accept reasonable agency interpretations of ambiguous laws.
Under Chevron, on review of agency action, where the relevant statute was silent or ambiguous regarding a specific issue, courts were directed to defer to agencies and were not to “impose [their] own construction on the statute.” Thus, where an agency offered “a permissible construction of the statute,” courts were to defer to the agency even if the court would have reached a different conclusion.
The Chevron deference standard was largely premised on the belief that federal agencies are subject matter experts and, as part of the executive branch, political actors better situated to develop and implement policy.
The New Standard — No Deference to Legal Questions
In Loper, the Supreme Court majority held that Chevron could not be reconciled with the Administrative Procedures Act (APA), which “specifies that courts, not agencies, will decide ‘all relevant questions of law’ arising on review of agency action.” The court concluded that “Chevron was a judicial invention that required judges to disregard their statutory duties.”
The majority therefore overruled Chevron and held “courts need not and under the APA may not defer to an agency interpretation of the law simply because a statute is ambiguous.” As the court explained:
[D]elegating ultimate interpretive authority to agencies is simply not necessary to ensure that the resolution of statutory ambiguities is well informed by subject matter expertise. The better presumption is therefore that Congress expects courts to do their ordinary job of interpreting statutes, with due respect for the views of the executive branch. And to the extent that Congress and the executive branch may disagree with how the courts have performed that job in a particular case, they are of course always free to act by revising the statute.
Following Loper, courts will no longer defer to agencies in answering legal questions. As the court explained, while an agency’s interpretation may be “informative,” “courts need not and under the APA may not defer to an agency interpretation of the law simply because a statute is ambiguous.”
Importantly, the court acknowledged that judicial review of agency “policymaking and factfinding” must be deferential. Thus, courts will continue to defer to factual findings developed by an agency during an administrative hearing, provided that certain due process elements are met.
What’s Next?
While Loper is sweeping, it does not invalidate every action by federal agencies. The Chevron deference standard only applied when an agency interpreted an ambiguous or silent statute. It did not apply to an agency interpreting its own regulations or where Congress expressly delegated an issue to an agency.
Nevertheless, after Loper, any agency decision interpreting an ambiguous federal statute is ripe for review. The court tried to alleviate concerns regarding an influx of cases by noting that pre-Chevron decisions “are still subject to statutory stare decisis despite [its] change in interpretive methodology.” While it is not clear what “statutory stare decisis” means, it is clear that existing rules and prior statutory interpretations will be carefully scrutinized under Loper.
After Loper, a “permissible” reading of a statute is no longer good enough for a federal agency. As the court explained, “[i]n the business of statutory interpretation, if it is not the best, it is not permissible.” Thus, agencies will need to demonstrate that their construction of a statute is the correct reading or their interpretation will be open to challenge.
National Labor Relations Board
It remains to be seen how the Loper decision will impact the NLRB. The Supreme Court deferred to the NLRB before the Chevron decision and it may continue to do so because Congress gave the NLRB primary responsibility for interpreting the National Labor Relations Act and effectuating national labor policy.
More likely, however, reviewing courts will no longer defer to the NLRB’s interpretation of the NLRA. This means that controversial NLRB decisions may be ripe for challenge, including its expansive reading of “protected concerted activities,” demands for recognition under the NLRB’s decision in Cemex, and its expanded use of legal remedies under the NLRB’s decision in Thryv, Inc.
Department of Labor
The DOL has recently released several new rules that impact SMACNA contractors, including: amending the Davis-Bacon Act regulations and increasing the minimum salary requirements to be exempt under the Fair Labor Standards Act. Even before Loper, these rules were subject to legal challenges. Specifically, a federal district court in Texas recently blocked portions of the DOL’s Davis-Bacon rule, including the “incorporation by operation of law” provision and the provisions expanding application of the rule to “truck drivers” and “material suppliers.”
The Loper decision means that more agency decisions and rulemaking will be subject to legal challenge. Not all litigation will be successful, but agencies will be required to anchor their statutory interpretations to the text of the federal authorizing statute.
OSHA
OSHA has also been engaged in considerable rulemaking under the Biden administration, including a new heat-stress rule that was released on July 2. The proposed rule will then go through a 120-day public comment period before the rule could be finalized. This will likely continue into 2025.
In the absence of a heat-stress rule, OSHA has depended on the Occupational Safety and Health Act’s general duty clause to cite employers the agency believes endangered workers because of too-hot conditions. The general duty clause requires employers to provide a workplace that is free of known deadly hazards that can be reasonably abated.
It remains to be seen whether OSHA regulations, including any final rule regarding heat stress, will be successfully challenged under the Loper decision.
Bottom Line
While the full impact of Loper is yet to be seen, the decision will likely result in a proliferation of litigation challenging agency interpretations of federal statutes, particularly if the federal agency is trying to do something new and aggressive, such as interpreting the law in a new way.
Agencies and stakeholders who are disappointed by a judicial construction that differs from an agency’s interpretation will be forced to seek relief from Congress — that is, by amending the statute — rather than seeking a change in the executive branch.
Loper is unlikely to impact the day-to-day decisions of federal agencies, which typically take the form of making factual findings and holding hearings to develop the factual record. Nevertheless, the court’s decision in Loper creates a new administrative regime wherein federal regulators are now more carefully scrutinized by the judicial branch.
We will continue to monitor these issues as they develop.
Grant Collins is a specialist in labor and employment law at Felhaber Larson. Reach him at gcollins@felhaber.com.
