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Key Takeaways
ARTICLE | Major Changes Coming To Business & Labor Regulations With The End of Chevron Deference
In closing out the 2023 - 2024 session, the Supreme Court released a pair of decisions that will fundamentally reshape the current regulatory landscape and shift a substantial amount of power away from federal agencies and to federal judges.
While reactions have been mixed, regardless of one’s views on regulation in general, it is important to recognize that the next few years will almost certainly see major changes to the rules that guide everything from environmental protection to labor rights and workplace safety.
Whether a particular agency rule or regulation is 150 years old or whether it was enacted yesterday, as of July 1, 2024 those rules are now potentially ripe for a legal challenge, and there were many lawsuits working there way through the legal pipeline in anticipation of this opportunity already in addition to the many more that are sure to follow suit in light of these recent rulings.
Further, some of those legal challenges will almost certainly be decided differently by the various federal judges and appellate panels who will be tasked with adjudicating the multiple iterations of these cases, so there may be considerable uncertainty about the enforcement of a given regulation in a given jurisdiction at a given time.
While it remains to be seen which rules and agencies will be most affected, labor and employment law are particularly dependent on agency rulemaking to keep century-old statutes current, which means that any regulatory upheaval in store in the short-term will likely be significant, which in turn will require a more proactive and on-the-ball approach from compliance departments in order to navigate the new regulatory landscape as it is created in real time.
As most current and former US civics students are aware, at a foundational level the federal government has three branches: the legislative branch, which writes laws; the executive branch, which enacts and enforces those laws; and the judicial branch, which applies those laws and determines when they have been broken.
While the division of authority may seem relatively simple in principle, it is impossible for legislators to draft laws that take into account every possible scenario in which the law should be applicable or exempted, which is why judges and juries are responsible for applying the (sometimes) abstract law to the concrete facts involved in individual cases with real violators and real victims.
Similarly, it is impossible for legislators to draft laws that provide all the necessary detail, evolve with changing circumstances, and address the unique obstacles associated with enforcement of a given piece of legislation. In order to fill in the gaps between the sometimes amorphous goals and ambiguous language of laws as written, executive and independent agencies made up of specialists in their respective fields distill those laws into what are intended to be clear, concrete rules that make it possible both to enforce the law effectively and to enable effective compliance of the law by minimizing uncertainty, as well.
Of course, just as the disputing parties in a lawsuit or criminal case are likely to interpret the law in their own respective favor, federal regulators and the industries/organizations/individuals that they regulate often arrive at conflicting and/or competing interpretations of rules.
In resolving these disputes over the last 40 years, the Supreme Court has applied what is called Chevron deference whenever there has been a legal challenge as to whether or not an agency reasonably interpreted and implemented a statute as enacted. According to Chevron deference, in order to justify any regulation, federal agency representatives needed only show that there is some ambiguity in a law as written and that the agency’s resolution of that ambiguity was not unreasonable.
A few weeks ago, however, the Supreme Court overturned those 4 decades of precedent and put an end to Chevron deference as the law of the land.
Further, one week later in a separate case, the Supreme Court determined that - for plaintiffs claiming to have been injured by an agency rule under the Administrative Procedure Act - the 6 year statute of limitations begins running when the injury occurs, not when the rule was enacted. As a result of this decision, newly formed organizations and organizations older than 6 years but claiming recent regulation-related injury have the opportunity to challenge those regulations, regardless of how long they have been on the books.
The net effect of these two decisions is that a great deal of the rules in the federal register are going to be challenged in court in numbers that we probably haven’t seen before, and the policy that federal regulatory bodies have relied upon for decades to defend those rules is no longer available to them.
Whether one views these developments as positive or negative, one should probably be prepared for change.
Given that the United States has existed much longer than 40 years, of course, it might be tempting to think that federal government operations will simply revert back to their pre-Chevron deference norms, but that is unlikely for a couple reasons.
For one, having Chevron deference to fall back on for the last 40 years has changed the way the agencies have written rules and implemented regulatory enforcement during that time, which may make the rules written since 1984 more difficult to defend on the merits because they weren’t written with the recognition that they would have to be defended on the merits in court one day.
Further, not only did Chevron deference impact how federal regulators were writing rules, it provided a degree of autonomy that almost certainly influenced what rules were internally deemed as within their purview to write, which in turn increased the number and scope of rules that regulators were enacting as the role of regulation in governance expanded.
To that point, opponents of the Chevron deference doctrine will point to the doubling of the federal register in size since that ruling was handed down 4 decades ago as evidence that the ‘administrative state’ has become overgrown, for which Chevron deference is often blamed at least in part.
Defenders of the federal regulatory framework, however, would counter with the fact that the size of the bureaucratic system that makes up and supports those agencies has consistently decreased relative to the growing US population over the intervening years.
But again, regardless of perspective, federal regulators will almost certainly be mindful of the lack of Chevron deference available going forward in the rulemaking process.
No matter how tightly hewn to the letter of the law regulators may be in the future, however, 40 years of rules have been crafted with a particular defense in mind that will simply no longer provide sufficient validation for the rule in question at a time when legal challenges to new and old rules alike are suddenly on the table.
It’s important to note that these Supreme Court rulings will have no immediate impact on all the decisions that have been rendered since the mid-1980s in which Chevron deference served as a defense.
Those decisions still stand for now, but those decisions are many. In fact, Chevron deference is the most commonly cited precedent in administrative law, and every issue where the government relied upon the Chevron doctrine over the years may now look enticing to potential plaintiffs who have an interest in raising those issues again.
And now when those previously settled issues are raised anew, instead of deferring to regulators in interpreting statutes and enforcing the law accordingly, federal judges will instead be tasked with the responsibility of deciding whether or not a given regulatory body has reasonably or unreasonably interpreted some ambiguity in the legislation.
Whether one believes that the subject-matter experts are better equipped to decide how to interpret and implement laws that may lack sufficient detail, or whether one believes that federal judges are better equipped to make these decisions, it seems clear that the decentralization of decision-making at the least will likely have major effects.
While regulatory bodies are often headed by political appointees, a vast majority of agency support and technical staff have historically stayed in place as executive power has shifted from one party to the other via presidential elections. Though agendas and priorities may have changed alongside those transfers of power, there was nonetheless some continuity in the regulatory approach that allowed agencies to speak and act with singular authority.
When agency decisions were questioned, which was constantly, federal judges all over the country, regardless of their own knowledge bases and/or particular beliefs on the topic, were instructed by the highest court in the land to defer to agency reasoning in resolving statutory ambiguity so long as it was reasonable, and that is for the most part what those judges did.
Going forward, however, federal judges off all ideological stripes holding court in the various districts and circuits that criss-cross this country will no longer defer to the singular interpretation of unclear statutes that a given agency has provided, but instead will supplant the regulators’ singular interpretation with the many, various interpretations that federal judges may return on similar cases with similar facts.
Ultimately, the discrepancies between multiple federal judge’s decisions about whether an agency correctly interpreted their statutory authority will have to be resolved, and that responsibility will rise to the Supreme Court, a majority of whom don’t appear to believe that the deferral to federal regulators was warranted.
There are more than a handful of cases already working their way through the legal system, for which lawyers on both sides have certainly spent the last couple weeks overhauling their arguments.
Further, there are almost definitely plenty of soon-to-be plaintiffs capitalizing on the opportunity and currently seeking legal representation to challenge whatever federal law that they believe to be unjustly enforced to their detriment.
What remains to be seen is how aggressively the federal judiciary will choose to wield their new power.
On one hand, overzealous judges and/or those favoring a particular outcome have always had the opportunity to rule disingenuously, and even when Chevron was precedent, those judges could have theoretically found the authorizing legislation for any rule they wanted to overturn to be unambiguous and/or that the resulting regulation was in fact unreasonable. In that light, maybe not much will change at all.
In such a case, the losing party could always appeal the decision, but the same logic applies to the possibility of an appellate judge ruling in a disingenuous manner.
What is different now, however, beyond the heightened standard that regulators will now have to meet in defense of their rules, is that the Supreme Court has invited judges to involve themselves more proactively in assessing the rule-making process and to apply their own judgment as to whether or not a given rule was reasonably interpreted and enforced.
Simply wielding that additional power does not necessarily mean that judges will rule any differently than similarly-situated judges had in past cases challenging the same rules, but if these recent decisions from the Supreme Court are any indication, the next few years are likely to bring massive changes to how the government and the courts do (and regulate) business.
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