Employers’ and business organizations’ legal challenges to recent federal agency determinations in the areas of employment, labor, and wage and hour laws have all been bolstered by the Supreme Court’s recent decision in Loper Bright Enterprises v. Raimondo (June 28, 2024), which overturned the deference the courts historically have applied to federal agency rulemaking.  Days later, in a second decision with implications for employers, the Supreme Court held in Corner Post, Inc. v. Board of Governors (July 1, 2024), that the limitations period to file a lawsuit challenging a federal agency determination first begins when the plaintiff is injured by final agency action, thereby creating opportunities for employers to challenge not only recent agency rules, but also regulations issued even one or more decades ago.

New Standard for Reviewing Agency Decisions

Forty years ago, in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), the Supreme Court adopted a two-step framework to interpret statutes administered by federal agencies.  First, the courts would assess whether Congress had directly spoken to the precise question at issue.  Second, if the courts determined that a statute was ambiguous or silent with regard to the specific issue at hand, the courts would be required to defer to the agency’s interpretation so long as the agency had adopted a permissible construction of the statute.

In Loper Bright, a majority of the Supreme Court held that the Chevron framework was contrary to the fundamental premise that it is the responsibility of the courts to exercise independent judgment in deciding questions of law.  The Court further reasoned that the level of deference that courts have accorded to agency determinations in the years subsequent to Chevron is contrary to the federal Administrative Procedure Act’s (APA’s) requirement that all relevant questions of law are to be determined by the reviewing court.  The Supreme Court therefore overturned Chevron and held that courts are to exercise their independent judgment in deciding whether an agency has acted within its statutory authority.

The Supreme Court explained that agencies still maintain responsibility for issuing regulations.  In considering those regulations, the Supreme Court held that judicial review:

• • should respect the agency’s determination when Congress specifically granted an agency the authority to make an administrative determination, and the agency’s determination is sensible;
  • should consider an agency’s interpretation of technical statutory questions, particularly when they rest on factual premises within the agency’s expertise; and
  • may be guided by agency interpretations and opinions based upon specialized experience, depending on the agency’s thoroughness, the validity of its reasoning, its consistency with earlier and later regulatory pronouncements, and other relevant factors.

When, however, the agency has no comparative expertise in resolving a regulatory ambiguity, the Court held that interpretation of the statute is best left to the courts.

Opportunities to Challenge Agency Decisions May Arise Indefinitely

Corner Post involved a complaint filed by a truck stop with a convenience store that first opened for business in 2018.  The store had filed suit in 2021 to challenge a rule issued by the Federal Reserve Board 11 years earlier, in 2011, related to fees charged to merchants for customers using debit cards.  The Federal Reserve Board had asserted that the six-year limitations period to challenge an agency’s rulemaking under the APA began when the agency had finalized its rule back in 2011, which meant that the limitations period ran in 2016 (before the store even existed), and the claim was barred.  The Supreme Court rejected the Board’s argument and instead held the limitations period begins only when a specific individual or organization suffers an injury from final agency action.

What This Means for Employers

There currently are multiple lawsuits pending that challenge a range of agency rules impacting employers.  These include:

• • the Federal Trade Commission’s new rules banning non-compete agreements that are scheduled to take effect in September;
  • the Department of Labor’s new regulations that recently increased the salary threshold for exempt status;
  • the EEOC’s new regulations implementing the Pregnant Workers’ Fairness Act, which include providing accommodations for workers to obtain and recover from abortions; and
  • recent pronouncements from the National Labor Relations Board that have expansively construed noncompete and nonsolicitation agreements, confidentiality provisions, and similar employer policies and agreements as unduly impinging on employees’ rights to discuss the terms and conditions of their employment.

These challenges to federal agency regulations will now be reviewed under a much less deferential standard.  A federal district court in Texas has already issued preliminary injunctions precluding the enforcement of the FTC’s noncompete rule and the DOL’s increased salary threshold.  A federal district court in Louisiana did the same with respect to the abortion-related provisions in the PWFA.  Those injunctions do not extend beyond the parties involved and others in specific states (Texas for the first two and Louisiana and Mississippi for the third).  In all three cases the district courts found it unlikely the regulations would withstand scrutiny under the former Chevron standard, and it is even less likely now that the regulations will survive judicial review, with nationwide implications.

Beyond the pending challenges to recent federal regulations, the Corner Post decision offers employers the opportunity to challenge federal regulations that may have been adopted many years, even a decade or longer prior to the lawsuit having been filed.  When coupled with the new Loper Bright standard of judicial review, this expansive interpretation of the limitations period means that even long-established federal agency regulations are now subject to challenge.

No Regulations Have Been Overtuned Yet

Significantly though, the Supreme Court decisions solely relate to the time period and standard for courts to review federal administrative agency rulings.  The Court’s decisions place the continued viability of specific employment regulations at risk, but they do not automatically overturn any particular employment regulation.  Both the recently adopted and the longstanding regulations issued by the FTC, the EEOC, the DOL and the NLRB all remain in effect at present and, outside the limited jurisdictions in which a preliminary injunction has been issued, employers need to comply with legal changes like the heightened salary threshold for claiming an employee is exempt from paying overtime and providing accommodations to workers for reasons related to pregnancy termination.

Further, the Supreme Court’s decisions have no bearing on regulations issued to administer state and local laws.  Those regulations remain subject to whatever standard of judicial review applies in the specific state.

By Tracey I. Levy