Chevron Overturned: Federal Agencies Lose Power. How Will Employers React?

MZQ LogoPrefer to listen instead of read? No problem! Listen to the blog post at any time by clicking here.


On Friday, June 28th, in Loper Bright Enterprises v. Raimondo, the Supreme Court overturned a 40-year-old precedent deferring to federal agencies where Congressional statutes are otherwise ambiguous. In their decision, the Court ruled that the judiciary, not the executive branch, is responsible for interpreting ambiguous legislation. This will likely lead to a significant change in the process of issuing federal regulations.  

The Chevron Doctrine: Background, criticism, and implications

As background, the 1984 case of Chevron v. National Resources Defense Council held that if a federal agency acted within its authority (as set forth under the Administrative Procedures Act) in interpreting an ambiguous federal statute, a court should defer to the agency’s interpretation of that statute. For the past 40 years, this has been known as the “Chevron Doctrine.” The primary criticism of the Chevron Doctrine was that it gave unelected federal bureaucrats too much power to craft regulations that touch on significant areas of American life, such as the workplace, the environment, and health care. 

The new decision emphasizes the courts’ decision to decide whether an agency has acted within its authority as the Administrative Procedure Act requires. The prior framework required courts to defer to an agency’s interpretation of laws passed by Congress if it was reasonable. Critics responded by accusing the courts of abdicating their responsibility to interpret the law.  

Concerns and potential challenges ahead

One of the immediate concerns with the Loper decision is the possibility of unwinding or even limiting the current framework to craft regulations on issues like health care. Overturning the Chevron decision seemingly makes it more difficult for the federal government to implement laws passed by Congress because many of those regulations will be challenged in the courts—however, that will take place over time. Importantly, employers must continue to comply with all the applicable workplace laws and regulations currently in place. 

What could the ripple effects of this decision be? These federal agencies use highly trained experts to interpret and implement federal laws. Many contend agencies are better suited than courts to resolve ambiguities in a federal statute. Now, with the courts having to make policy decisions, businesses may be subject to a much different interpretation than what they’ve been operating under. Will this lead to widespread disruption for businesses and industry? 

Impact on federal agencies and regulatory clarity

Some believe that, although this decision is impactful, it did not overrule or lessen any workplace statute, protection, or requirement. The federal agencies (DOL, EEOC, HHS, IRS, for example) that currently regulate companies and workplaces will continue to do so. Regulations are still subject to enforcement, but in the future, the courts, in addition to the agencies, will analyze those regulations.   

In the case of the IRS, for example, the elimination of Chevron deference could lead to a surge in challenges to IRS authority. When Congress drafts intricate tax legislation, the IRS has traditionally provided clarity and enforced compliance through its interpretations of legislation. Now, that approach might no longer be reliable. Without the Chevron deference, courts might not defer as easily to the IRS’s expertise, potentially leading to more legal challenges.  

Effects on employer benefits, healthcare, and potential future regulations 

How will that affect employers and their benefits, such as HSAs, HRAs, MERPs, and other instruments to finance healthcare? It could create uncertainty for taxpayers and complicate IRS tax compliance and enforcement. 

So, what’s all the fuss about? In the bigger picture, in time, the workplace may be impacted. Today, this historic decision does nothing more than draw lines in the balance of government between the Executive and Judicial branches. Yet, drawing those lines can be very difficult. For example, is a new product aimed at lowering cholesterol a dietary supplement, which is regulated one way, or a drug, which is regulated differently?  

What about a bill to regulate artificial intelligence? We know there will be gaps because Congress cannot see into the future, so you’d want to call experts who know about AI to make decisions about artificial intelligence, not judges.  

Guidance for employers and businesses

What do employers need to do right now? Employers have been inundated with countless statutory and regulatory changes specific to the healthcare arena. They have been asked to be more vigilant in ERISA, fiduciary responsibilities regarding the employee benefits they provide to their employees, reporting on Mental Health Parity and ACA, and designing more affordable benefit packages at affordable costs, in addition to HIPAA compliance and cybersecurity concerns.  

New issues concerning gag clauses and non-competes have altered how employers create new relationships and choose the proper business partners while maintaining and running their businesses. As simple as it sounds, employers must continue business as usual. There is no immediate workplace change for them to make.  

While not immediately of concern to the average business owner, corporation, or national conglomerate, the elimination of the Chevron doctrine will eventually find its way into the workplace, and employers will have to adapt and adjust. Agency rules now may be more susceptible to court challenges. As a result, employers may find themselves responding to court interpretations of agency rules more than ever before. 

We anticipate an abundance of questions regarding this decision. Please feel free to contact MZQ Consulting.  


© 2024 MZQ Consulting, LLC. All rights reserved.

Content provided to Q4intelligence members by MZQ Consulting, LLC

Photo by melpomen