On January 17, 2024, the Supreme Court of the United States heard oral argument in two cases challenging the continued validity of the Chevron doctrine. The two cases – Loper Bright Enterprises, Inc. v. Raimondo and Relentless, Inc. v. Department of Commerce – challenge a rule issued by the National Marine Fisheries Service that requires commercial fishing vessels to pay the salaries of federal monitors aboard those ships. Over the past forty years, Chevron has cast a wide net and overturning it is sure to have much broader implications than just the fishing industry. Employers should be prepared for the courts to play a much larger role in interpreting various federal regulations.

What is the Chevron Doctrine?

The Chevron doctrine came from the 1984 case Chevron USA Inc. v. Natural Resources Defense Council which held that where a “statute is silent or ambiguous with respect to the specific issue” before an agency, courts “may not substitute [their] own construction of a statutory provision for a reasonable interpretation made by” the agency – a principle known as “Chevron deference.”

Chevron deference requires courts to analyze an agency’s construction of a statute using a two-step test. Under the first step, courts determine whether the statutory language is “clear” or “ambiguous.” If it is clear, that language controls, and an agency may not deviate from it. If the language is ambiguous, under the second step, courts must defer to an agency’s interpretation of the statutory scheme if that interpretation is “reasonable.”

Though Chevron deference was relatively benign when the case was first decided, Chevron deference has long since given federal agencies significant discretion, arguably carte blanche, to pass rules and determine what the law is. In recent years, critics have argued that Chevron deference violates Article III of the Constitution, which says the federal courts should handle interpretation of law.

A Potential New Standard of Deference

Practically speaking, tossing out Chevron would not necessarily mean that courts would completely disregard federal agencies’ interpretations of statutes. Justice Clarence Thomas suggested that he would lean towards applying Skidmore deference. Named from the Supreme Court’s 1944 decision in Skidmore v. Swift & Co., Skidmore deference uses a sliding scale approach rather than Chevron’s more rigid two-step process. Under Skidmore deference, courts would have more room to consider various factors, such as how carefully an agency considered its regulatory decision, whether an agency has maintained the same position over time, and whether an agency’s reasoning is persuasive.

Impact on Employers

The Supreme Court’s final ruling could impact the outcomes of employers’ future cases against federal agencies that enforce employment laws such as the U.S. Department of Labor and the U.S. Equal Employment Opportunity Commission. The Department of Labor regulatory landscape tends to be more political, given how policies often change between administrations.

For example, as previously covered by HR Legalist here, the Department of Labor’s ever-changing definition of an independent contractor largely depends on the political party in power. Overturning Chevron could bring a level of stability and predictability to this issue, and many other wage and hour issues, by giving the courts the final word. At oral argument Justice Brett Kavanaugh noted, “Chevron itself ushers in shocks to the system every four or eight years when a new administration comes in … That is not stability.”

If Chevron is overturned, the courts will be far more involved in statutory interpretation. Moreover, there are 12 federal circuit courts in different regions of the country that could reach different conclusions if they are not required to defer to a federal agency’s interpretation. Accordingly, statutory enforcement could be meaningfully different across the country, which brings challenges to multistate employers.

The Supreme Court is likely to issue a ruling before the end of June when its current term ends. HR Legalist will continue to monitor this case and stands ready to counsel employers when the Court’s decision comes down.

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