U.S. Supreme Court Overrules Chevron Doctrine - Potential Impact to Employers

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While the decision overturns a 40-year long-standing precedent and represents a significant reduction in the authority granted to federal agencies in interpreting and implementing legislation, the impact of the change remains to be seen.

On June 28, 2024, the United States Supreme Court issued a decision in Loper Bright Enterprises et al. v. Raimondo (Loper Bright) which overturned the long-standing precedent of Chevron USA Inc. v. NRDC. The Chevron case established the so-called Chevron Doctrine which stated that judicial deference should be afforded to federal agency determinations in interpreting statutes where legislation may be ambiguous or subject to interpretation.

With the 6-3 opinion, the Court shifted authority for interpreting legislation from federal agencies to the judiciary. The Supreme Court decided that courts are best positioned to interpret whether government agencies have statutory authority when the agency's actions extend beyond the language of the legislative provisions, even in agency-specific areas.

While the decision overturns a 40-year long-standing precedent and represents a significant reduction in the authority granted to federal agencies in interpreting and implementing legislation, the impact of the change remains to be seen. For instance, the Court specified that prior Federal Court decisions which were based on the Chevron Doctrine are not subject to immediate reversal based on the Loper Bright decision and remain precedential law.

In addition, not all agency guidance relies on the Chevron Doctrine and therefore is not impacted by the Loper Bright decision. Current U.S. government regulations remain in effect unless and until challenged and overturned in the Federal Courts. While the potential impact is not expected to be fully realized for some time, two recent decisions in the Federal Courts cited the Loper Bright decision, including the June 28, 2024, decision by the U.S. District Court (USDC) for the Eastern District of Texas, blocking the U.S. Department of Labor (DOL) overtime rule from taking effect for Texas state government employees, and the July 3, 2024, decision by the USDC for the Northern District of Texas, finding that the Federal Trade Commission (FTC) lacks authority to issue binding regulations governing "unfair methods of competition" related to the proposed ban of non-compete agreements.

Additionally, on July 9, 2024, the 5th U.S. Circuit Court of Appeals, New Orleans, is scheduled to hear arguments in the case of State of Utah et al. v. Julie A. Su et al., asking to overturn a lower court's decision that the DOL acted properly in allowing retirement plan managers to consider environmental, social and governance factors in preparing their investment options in 401(k) plans. Thus, it is reasonable to anticipate more activity regarding administrative law, including challenges to agency discretion.

ADP routinely monitors court proceedings and agency determinations impacting our operations and those of our clients and we will continue to do so following the Loper Bright ruling, including with respect to any cases currently on Federal Court dockets which may have relied on the Chevron Doctrine.

Administrative law areas of potential focus based on the Loper Bright ruling include regulations issued by agencies such as the DOL, National Labor Relations Board, Equal Employment Opportunity Commission, and the FTC, among others on topics such as wage and hour, fiduciary rules, discrimination and harassment, labor relations, and non-compete agreements.

ADP will continue to monitor developments related to this decision.

ADP Compliance Resources

ADP maintains a staff of dedicated professionals who carefully monitor federal and state legislative and regulatory measures affecting employment-related human resource, payroll, tax and benefits administration, and help ensure that ADP systems are updated as relevant laws evolve. For the latest on how federal and state tax law changes may impact your business, visit the ADP Eye on Washington Web page located at www.adp.com/regulatorynews.

ADP is committed to assisting businesses with increased compliance requirements resulting from rapidly evolving legislation. Our goal is to help minimize your administrative burden across the entire spectrum of employment-related payroll, tax, HR and benefits, so that you can focus on running your business. This information is provided as a courtesy to assist in your understanding of the impact of certain regulatory requirements and should not be construed as tax or legal advice. Such information is by nature subject to revision and may not be the most current information available. ADP encourages readers to consult with appropriate legal and/or tax advisors. Please be advised that calls to and from ADP may be monitored or recorded.

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Updated on July 8, 2024