How the Overturn of ‘Chevron’ Could Affect Employers

On June 28, 2024, the Supreme Court issued a landmark decision overturning Chevron USA Inc. v. Natural Resources Defense Council Inc., a forty-year-old case requiring courts to defer to a federal agency’s interpretation of an ambiguous statute.[1] “Chevron deference,” as it was known, empowered agencies to exercise broad rulemaking power.

The Supreme Court’s decision has not changed the application of any federal statute, yet. However, with lawsuits already pending over several high-profile agency rules and regulations, employers could soon experience the impact of the decision. Currently, challenges to the following agency rules are pending across the nation:

• The Equal Employment Opportunity Commission’s implementation of the Pregnant Workers Fairness Act, requiring employers to accommodate all health needs at work arising from pregnancy, childbirth, and related conditions.
• The Department of Labor’s decision to increase the minimum salary threshold for Fair Labor Standards Act (FLSA) exemptions.
• The Occupational Safety and Health Administration’s “walkaround” rule, allowing union organizers to join OSHA inspectors while on site.
• The Federal Trade Commission’s ban on non-competes.

While the Supreme Court’s decision does not require courts to strike down agency rules, it does provide a greater chance that the rules might be narrowed or overturned.

Employers will feel the impact of the Supreme Court’s decision beyond the outcomes of such litigation. Since Chevron, how an agency applied a rule (or if they applied it at all) was dependent upon the political party in office at that time, making it difficult for employers to plan beyond a four-year period.

Now, with the Supreme Court shifting power from agencies to courts, employers will experience greater consistency over time in how rules are interpreted and applied by a court. However, employers will now have to navigate a greater patchwork of interpretations as decisions on individual rules will likely vary from court to court. In short, there will likely be more long-term consistency in a court’s position on an issue, but greater variation on issues across courts.

Further, employers may see agencies be more restrained in their rulemaking as agencies no longer have an automatic leg-up in litigation, and employers will feel more empowered to challenge a rule or decision. As it stands, employers must continue to follow agency guidance and regulations until a court says otherwise.

If you have any further questions about the potential impact of the Chevron overturning, please contact a member of Barton’s Labor & Employment Group.

[1] See Loper Bright Enterprises v. Raimondo, No. 22-451, and Relentless, Inc. v. Department of Commerce, No. 22-1219, 2024 WL 3208360 (June 28, 2024).