Labor Enforcers’ Policy Strategies Will Get Post-Chevron Rewrite

Federal agencies that enforce labor and employment laws will have to adjust their regulatory and litigation strategies following the US Supreme Court’s decision to gut a legal doctrine that directed courts to accept how agencies interpret unclear laws, attorneys said.

The high court Friday overturned a 1984 precedent, Chevron v. Natural Resources Defense Council, that required judges to defer to agencies’ reasonable interpretations of ambiguous statutes. Instead, courts should use their own judgment when determining whether an agency has acted within its authority, the court said in the 6-3 ruling.

Attorneys predict that agencies like the Labor Department and the Equal Employment Opportunity Commission will have to expend more resources developing and defending regulations aimed at ensuring workers are properly paid, protected from on-the-job injuries or death, secure in their retirement savings, and shielded from discrimination.

They also may issue more sub-regulatory guidance or launch direct enforcement actions to enact policy changes, lawyers said.

“The decision can’t be underestimated,” said Timothy Taylor, a former deputy solicitor of labor who is now an employment and litigation attorney at Holland & Knight LLP. “It’s a sea change.”

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Defending Regulations

Ahead of the Supreme Court’s ruling, Justice Department attorneys representing the DOL in court had already started to abandon Chevron as a legal shield against challenges to its rulemakings.

The Labor Department and other workplace protection agencies have raised Chevron deference to defend rules outlining the agency’s reading of a law and how employers can comply. The high court noted that its new decision would not apply retroactively to cases that already relied on the doctrine.

Courts have deferred for decades to the DOL Wage and Hour Division’s overtime pay regulations, said Alex MacDonald, a shareholder at Littler Mendelson’s Workplace Policy Institute. The rules set salary thresholds for when workers are entitled to time-and-a-half pay and when employees are exempt from the Fair Labor Standards Act requirement. A new update to the regulations—which were first issued in 1938—was finalized in April.

But following the high court’s decision, that rule may be on weaker ground in court, he said. The statutory text, for example, says nothing about salary, MacDonald said.

A federal court in Texas on June 28 used the new precedent in blocking the Biden administration from enforcing the rule against Texas as a public employer, finding the policy was likely an unlawful exercise of power. Red-state challengers of a Labor Department 401(k) investing rule quickly pointed to the decision in a June 28 letter to the US Court of Appeals for the Fifth Circuit to add to their argument.

Newer rules that haven’t faced thorough legal scrutiny, such as the EEOC’s recently finalized Pregnant Workers Fairness Act regulations, will also likely be litigation targets in a post-Chevron world. That particular rule has been criticized for its inclusion of abortion as a pregnancy-related medical condition that can qualify for reasonable job accommodations.

“Anything new, anything that’s kind of a hot button issue, anything where there will be litigants out there that may not like the agency’s approach, certainly could be ripe for challenges,” said Andrew Maunz, a labor and employment attorney at Jackson Lewis P.C.

Representatives for the DOL and the EEOC declined to comment.

Rulemaking Approach

Without being able to rely on Chevron, federal labor agencies will have to craft regulations more carefully, which could sap up more time and limited legal resources to review the rule for legal vulnerabilities.

As a result, agency rulemakings would likely stick closer to the statute or take “fewer big swings” when it comes to interpreting the law, according to MacDonald.

But others say agencies will continue to regulate as they always have, albeit with a stepped-up game.

“I don’t think that the blocking and tackling of rulemaking is going to change,” said Taylor. “But they’re just going to be more mindful of statutory text and be even more careful and more adherent with what they’re doing to have those rules of adjudication survive.”

Ultimately, the absence of Chevron will make it “much more difficult” for agencies “to effectively” write rules because Congress can’t write laws “with a degree of specificity” that would be required without the doctrine, added Craig Becker, general counsel at the AFL-CIO.

The decision from the high court isn’t just a win for opponents of regulation. Advocates for stronger workplace rules could also use the ruling to their benefit, especially if they argue that a measure didn’t go far enough to protect workers.

“It’s definitely a double edged sword,” Becker said.

Ultimately, less deference to agencies could lead to more confusion and less uniformity in how businesses, workers, and other regulated entities are expected to follow the law.

“It’s going to lead to a very difficult problem for the agencies in cases where you have different law in different circuits without deference, and the Supreme Court doesn’t resolve it because of its limited docket,” Becker said.

Sub-Regulatory Path

Overall, agencies “will likely be hesitant to have as many specific regulations as they have” now, out of fear of being challenged in court, Marilyn Fish, a management-side attorney at Bryan Cave Leighton Paisner LLP said. Instead, she said, they may choose to issue more sub-regulatory guidance, which may not be impacted by Chevron.

That type of guidance includes technical assistance documents, informal opinion letters, policy statements, or manuals. Those documents are subject to a weaker deference standard compared to formal regulations, and thus issuing them may not be as risky as rulemaking, attorneys said.

However, judges post-Chevron could decide to give less deference to that guidance too, they said.

It could set off a ripple effect at the DOL’s Occupational Safety and Health Administration, said James Sullivan, who served as chair of the independent Occupational Safety and Health Review Commission during the Trump administration.

Since 1972, OSHA has written more than 4,260 interpretation letters in response to questions, and published more than 1,230 guidance documents. Many of the letters deal with tightly defined technical concerns, while the guidance documents tend to be more broad and written for workers as well as safety specialists.

Lack of deference also could affect OSHA’s general duty clause cases where the agency claims guidance documents put employers on notice that their safety practices created dangerous situations, said Sullivan, now of counsel with Cozen O’Connor P.C.

Sub-regulatory guidance does have a potential downside—agencies have previously weathered challenges over whether they are impermissible policy changes that should have gone through notice-and-comment rulemaking.

That happened in a case brought by the Mortgage Bankers Association against a 2010 WHD administrator interpretation that overturned a 2006 opinion letter on an overtime exemption. The Supreme Court ultimately found that formal notice-and-comment rulemaking procedures weren’t required for substantive changes to prior interpretations.

The EEOC has also seen litigation against its guidance under Title VII of the 1964 Civil Rights Act—which the agency issues because it lacks the power to craft substantive rules for the law that prohibits bias based on race, sex, religion, color, national origin, sexual orientation, and gender identity.

For example, a court partially blocked EEOC’s guidance on the use of criminal history in employment decisions, finding it was an attempt at substantive rulemaking that fell outside of the agency’s authority.

More Enforcement?

With the death of Chevron deference, DOL agencies may fall back more on the courts as part of its regulatory regime, MacDonald said.

“You may see the Solicitor of Labor filing more lawsuits strategically to try to establish certain legal positions in court,” he said. “If you take a position in litigation and the court accepts your position, then that is the law.”

Maunz said he anticipates the EEOC will amp up its litigation efforts, given that the agency doesn’t have the power to issue substantive Title VII rules and “lawsuits have been its main way to kind of put policy measures in place.”

However, agencies may struggle to boost litigation efforts without additional funding and resources.

Others say the elimination of Chevron deference could spell disaster for agencies like the DOL. It could force them to avoid the courtroom at all costs, said Michael Kreps, a Groom Law Group Chartered principal and former Democratic Senate staffer.

“The agency’s opinion about an interpretation is less impactful,” Kreps said. “If you disagree with them, the deck might not be stacked against you in court.”