Supreme Court Overturns Chevron Deference, Shifts Authority to Courts to Review Federal Agency Rules and Regulations

Topics: Court Decisions, Legal Information, Non-Compete and Trade Secrets, Wage & Hour Issues

The Supreme Court of the United States’ (SCOTUS) decision last week in Loper Bright Enterprises v. Raimondo marks a significant change in the legal landscape with respect to courts’ authority to review rules and regulations issued by federal agencies. While this decision is unlikely to affect California courts’ deference to California agencies, it gives employers greater opportunity to successfully challenge federal agency rulemaking in court. 

In a 6-3 decision, SCOTUS overruled Chevron v. Natural Resources Defense Council, which for the past 40 years required courts to defer to an agency’s permissible interpretation of a statute if the statute was silent or ambiguous as to the precise issue in question. Chevron deference, the Court reasoned, is irreconcilable with the federal Administrative Procedure Act (APA), which commands that the reviewing court, not the agency, must decide all relevant questions of law. 

SCOTUS’s decision in Loper Bright Enterprises gives courts the authority to exercise independent judgment in interpreting statutes, even where the statute is ambiguous. Consistent with the APA, courts may seek aid from the agency’s interpretation and subject matter expertise, but courts must ensure the agency has engaged in reasoned decision-making within the boundaries of authority delegated to it by statute. 

Employers are likely to see challenges to a number of federal rules and regulations, including EEOC regulations implementing the Pregnant Workers Fairness Act, the FTC’s non-compete ban, the pending appeal of the decision striking down the NLRB’s new joint employment rule, and pending challenges to the new DOL rule increasing salary basis for exempt status under FLSA.

This decision is unlikely to influence how California courts defer to California agencies. California courts continue to use the “variable deference” test, under which courts typically follow an agency’s interpretation of applicable law, with the degree of deference depending on factors specific to each case.