SCOTUS Overturns Chevron, Weakening Federal Agency Interpretation Power

By: Christina Ferrari, Corey Lim, Anna Nilles, and Shiloh Theberge

A wide array of regulated industries – health care, life sciences, education, energy and environment, food, finance, and more – will feel the far-reaching impact of the United States Supreme Court’s June 28, 2024 decision in the combined cases of Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Department of Commerce (collectively, “Loper Bright”). The decision ends a four decades-old rule whereby courts deferred to federal agencies’ interpretations of ambiguous statutes. As a result, Loper Bright significantly shifts the distribution of authority among the three branches of federal government and raises many questions about the future of administrative law.

The Chevron Doctrine Solidified Administrative Agency Deference

Since the Supreme Court’s 1984 decision in Chevron. v. Natural Resources Defense Council, under what became known as the “Chevron doctrine,” federal administrative agencies had the ability to interpret any gaps in the statutes that they administer, based on their presumed subject matter expertise. When the meaning of a statute was legally challenged and found to be ambiguous on an issue, under a two-step analysis, courts would defer to and uphold the agency’s statutory interpretation so long as the interpretation was reasonable.

Loper Bright Shifts Statutory Interpretation Power Back to the Courts

In Loper Bright, the Supreme Court limited its review to the specific question of “whether Chevron should be overruled or clarified.” In a long-anticipated 6 – 3 decision, the Court firmly overturned the Chevron doctrine, finding that the courts are required to exercise their independent judgment in deciding legal questions, including whether an agency has acted within its statutory authority. Under the new precedent of Loper Bright, courts must “independently interpret the statute and effectuate the will of Congress subject to constitutional limits” and “may not defer to an agency interpretation of the law simply because a statute is ambiguous.” This does not necessarily strip all power from agencies; rather, their power depends on the clarity and scope of Congress’ directives and deference may still be given to agencies in some instances, such as fact finding and policymaking. The majority also noted that agency interpretations are still deserving of “respect,” and that an agency’s “expertise” and “informed judgment” are still factors for making an agency’s interpretation “persuasive.”

Writing for the dissent, Justice Kagan predicts that Loper Bright may result in “large-scale disruption” because thousands of other cases have relied on the Chevron doctrine. She warns that courts will now have “exclusive power over every open issue – no matter how expertise-driven or policy-laden – involving the meaning of regulatory law” and that regulatory efforts, without the support of Chevron, are endangered.

What does this mean for your business?

For now, existing regulations, rules, and other laws remain in place. Moreover, the Court in Loper Bright did not call into question prior cases that relied on Chevron to uphold agency interpretations, although it did leave open the door a crack for future challenges to those cases.

Over time, the Loper Bright decision will likely spur an increase in litigation as regulated entities strive to challenge unfavorable agency interpretations and agencies’ exercises of authority, and drive changes to agencies’ rulemaking. Regulations and rules promulgated by agencies like the SEC, EEOC, NLRB, DOE, DOL, OSHA, FERC, EPA, and HHS (notably the CMS and the FDA within HHS) interpret statutes that impact millions of people and much of federal funding and budgeting. Due to Loper Bright, these regulations will be subject to increased lobbying efforts and extra inquiry when challenged in court. Loper Bright may also result in inconsistent interpretations at the federal district and circuit court levels because judges may be inclined to impose their individual policy preferences in their interpretation of federal law. As a result, it will be important to follow legal challenges to regulations as they move through the courts. The Loper Bright decision may also spur the legislature to introduce more prescriptive legislation that leaves little ambiguity for the courts to interpret.

Effects on Energy & Environmental Law

The implications of overturning the Chevron doctrine are particularly significant in highly scientific and technical areas, like the energy and environmental sector. Loper Bright shifts regulatory power away from federal agencies with deep knowledge of complex energy and environmental issues to courts that do not have that same level of expertise. Environmental groups are concerned that this power shift will likely result in less predictable and less scientifically informed decisions. There are several recent agency rules that are now vulnerable to additional scrutiny and litigation challenges in the absence of Chevron. These rules include EPA’s rules to curb emissions from power plants, cross-state pollution, and motor vehicles, and FERC’s orders on transmission planning. Eroding agency deference will likely open the door to increased litigation from private businesses with the means to challenge regulations. The implementation of regulations may also be delayed as agencies navigate anticipated increased legal challenges and potentially inconsistent decisions between courts. As a result, regulated entities may require further clarification on new and existing regulatory obligations during such times of uncertainty.

Effects on Health Care and Regulation of Life Sciences Innovation

Loper Bright will likely have a serious impact on health care providers and suppliers, especially those who participate in federal health care programs, like Medicare and Medicaid, established under complex statutes that include a wide-ranging myriad of requirements. Loper Bright also will likely have major consequences for the life sciences industry, including pharmaceutical, medical device, and biologics companies. With rejection of the Chevron doctrine, more legal challenges to agencies’ regulations and rules will be brought by those hoping to benefit from any vulnerability in an agency’s power caused by Loper Bright. This will undoubtedly add greater uncertainty into the regulatory landscape and also may result in inconsistent court decisions based on geographical location and expertise of the court involved, especially if ambiguities in the law at issue in a case require certain technical or scientific knowledge that decision-makers lack. As a result, regulatory agencies may be more hesitant to create requirements not clearly permitted or addressed by statute, and may limit new programs, initiatives, and policies. However, this shift in the law may provide valuable openings and opportunities for regulated entities in the health care and life sciences sectors to directly engage with agencies on the statutes they administer, and to seek necessary modernizations and clarifications to those statutes, and the agencies’ regulations and rules interpreting those statutes, to spur innovation and better patient access to life-changing care.

Effects on Employment Regulations

There are a number of federal agencies that regulate employers, including the EEOC, the DOL, OSHA, the FTC and the NLRB. All of these agencies have relied on the Chevron doctrine to interpret ambiguous employment statutes, particularly given the impact of the modern world on the clarity of the language of employment statutes enacted decades ago. Given that, it is clear the Loper Bright decision will have a significant effect on the regulations and guidance governing the day-to-day workplace. Indeed, during the last 40 plus years, the Chevron doctrine has allowed federal agencies to define and shape employment law without a great deal of review by the courts. This will change. For example, the decision may affect critical regulations and rulemaking related to the minimum salary requirement for application of the so-called white collar exemptions, the “joint employer” rule, prevailing wage regulations, the FTC non-compete rule, and the definition of medical conditions under the Pregnant Workers Fairness Act. Some of these issues are currently being litigated. For now, employers should continue to follow agency regulations and guidance unless and until they are specifically rejected by the courts. Employers also should be vigilant and stay up to date on developing case law in this area, as an uptick in litigation is expected. Unfortunately, with courts having more control over statutory interpretation, it may mean that regulations upheld in one jurisdiction might be rejected in another, creating compliance headaches for multi-state employers. Employers should reach out to their employment counsel with questions about the impact of this major change.

If you have questions or concerns specific to your business or industry, Bernstein Shur attorneys are here to help.  Contact us online or by phone at 207-774-1200.