The Supreme Court of the United States (SCOTUS) recently rejected its historical precedent for agency and administrative rule interpretation. Because of the many workplace regulations issued by federal agencies, such as the Department of Labor (DOL), Equal Employment Opportunity Commission (EEOC), National Labor Relations Board (NLRB), and Occupational Safety and Health Administration (OSHA), this change will result in significant consequences for employers.

From 1984 until now, under the historic Chevron doctrine (Chevron U.S.A. v. Natural Resources Defense Council, Inc.), courts were required to defer to agencies’ “reasonable” interpretations. This was a fairly low burden for a federal agency defending an agency established rule.

Under the new guidance issued on June 28, 2024, in Loper Bright Enters. v. Raimondo, and Relentless, Inc. v. Department of Commerce, courts need only uphold an agency’s interpretation after it exercises independent judgment and agrees with the agency’s interpretation. In other words, courts are no longer required to give deference to the agency’s view or interpretation of what rules mean.

Keep in mind that over the last several decades, federal agencies, through rulemaking, have specified, enhanced and, some argue, broadened the scope of many federal statutes impacting the workplace. Examples include the DOL’s minimum salary thresholds for application of certain exemptions under the Fair Labor Standards Act, the EEOC’s recently effective rules for the Pregnant Workers Fairness Act, and the FTC’s rule largely banning noncompete agreements. Under Chevron, these rules and agencies were granted deference which smoothed the way for more rules but nominal judicial review. Under Loper Bright, courts can independently examine whether the agency’s interpretation is the right one.

Although employers do not need to make any immediate changes, the consequence of Loper Bright on employers should not be minimized. First, it will be easier to challenge regulations and easier for courts to substitute their judgment in pending and future challenges. Even now, there are many pending legal challenges to federal rulemaking with the DOL’s minimum salary threshold and the FTC’s ban on most noncompetes being among the most high-profile.

Second, such challenges are more likely to result in conflicting guidance with multiple challenges resulting in inconsistent rulings. Such jurisdictional conflicts make compliance for multi-state employers even more precarious.

Third, employers should expect greater state and local regulation. If, for example, the FTC noncompete ban is struck down, a reasonable consequence is additional state legislation to narrow or restrict post-employment restrictions. Greater state and local regulation, in connection with employers more likely to have employees spread among more states post-Covid, creates other challenges for employers, namely a patchwork of compliance.

It could be that you are the employer challenging one of these rules or that your company is impacted by reversal of settled law or past practice. Regardless, employers should plan to lean on their employment lawyers and Human Resources partners for notices of change and paths to compliance. Ice Miller is always happy to assist.

This publication is intended for general information purposes only and does not and is not intended to constitute legal advice. The reader should consult with legal counsel to determine how laws or decisions discussed herein apply to the reader’s specific circumstances.