On June 28, 2024, the United States Supreme Court issued a landmark decision in Loper Bright Enterprises v. Raimondo and Relentless Inc. v. Department of Commerce (Loper), overruling its prior decision in Chevron, U.S.A. Inc. v. Natural Resources Defense Council Inc. (Chevron). The Chevron case, from 1984, gave rise to the Chevron doctrine of deference, a legal principle compelling federal courts to defer to a federal agency’s reasonable interpretation of ambiguous statutory provisions the agencies administer.
Under the Chevron doctrine, if a federal law is unclear or ambiguous, federal courts must affirm a federal agency’s reasonable interpretation of the law, which typically take the form of formal agency regulations and/or guidance. The Chevron decision became a seminal ruling on federal administrative law, cited by federal courts more than 18,000 times over the decades.[1]
With the Loper decision, courts will change the way they view certain federal agency regulations and guidance. They will now be required to exercise their independent judgment when determining whether a federal agency has overstepped its statutory authority in issuing regulations to an ambiguous law, rather than previously deferring to an agency’s reasonable interpretation of the law.
This decision is likely to result in significant consequences to employee benefit-related regulations as it could usher in litigation challenging federal agency regulations involving employee benefit and workplace laws. As a result, regulations and guidance will potentially be overturned by courts in different jurisdictions, and federal agencies' ability to implement laws passed by Congress could be hampered.
While the consequences of the Loper decision cannot be overstated, the Supreme Court’s ruling did include two potential carve-outs where administrative agency rules could still be afforded some measure of weight:
Regulations and guidance promulgated by the following federal agencies administering workplace laws could be impacted by the Loper decision:
Since this ruling was just handed down by the Supreme Court on Friday, June 28, 2024, is it too early to speculate about the floodgates that might open for court challenges to regulations and guidance, including those involving employee benefit and employment laws, amongst other areas of federal administrative law.
However, below is a non-exhaustive list of recent federal agency regulations that could potentially face more immediate challenges in the wake of the Loper decision overruling Chevron:
Health & Welfare Plans:
UPDATE: Three different federal district courts in Mississippi, Florida, and Texas, recently blocked portions of this Section 1557 nondiscrimination rule, all citing Loper.
Retirement Plans:
Employment Law:
UPDATE: Click here for an article with more details regarding a recent federal court decision temporarily blocking the FTC noncompete ban only for the named plaintiffs in the case.
UPDATE: Click here for an article with more details regarding a recent federal court decision temporarily blocking the FLSA overtime rule only for state employees in Texas.
The Loper decision does not apply retroactively; it notes that previous rulings that relied on the Chevron doctrine to hold agency actions as lawful are not affected because those decisions are still subject to “statutory stare decisis[2]” and can still be upheld even though the deference standard has now changed.
That being said, another significant Supreme Court decision just issued on July 1, 2024 (Corner Post, Inc. v. Board of Governors of the Federal Reserve System) essentially removes the statute of limitations for bringing court challenges to federal agency regulations. While federal agency regulations previously upheld under the Chevron standard are presumably safe from future challenges, other regulations could potentially be at risk, even long after they take effect, as a result of this recent Corner Post decision.
Employers sponsoring employee benefit plans should be aware of the Loper decision and its overall significance to the legal system, while noting that federal agency rules still have the weight of the law behind them. Nonetheless, this ruling will likely make court challenges to agency rules more enticing to interested parties now that courts are not bound by the Chevron doctrine to defer to agency rules when a law is not clear (except in the limited circumstances described above).
It is important to note that the Loper decision does not immediately impact any existing employee benefit plan regulation or guidance, and all existing regulations and guidance remain in effect. However, employers may start to feel unsettled when considering how the multitude of regulations and guidance related to employee benefit plans[3], which are consistently relied upon by them, can now be more easily challenged in court.
Additionally, multistate employers are advised to pay extra attention to litigation trends as agency regulations may be vacated in certain jurisdictions but affirmed in others.
Risk Strategies is closely monitoring employee benefit-related developments in the wake of this recent decision and will provide relevant updates when available.
Contact Risk Strategies with any questions at benefits@risk-strategies.com.
[1] www.scotusblog.com/2024/06/supreme-court-strikes-down-chevron-curtailing-power-of-federal-agencies
[2] Stare decisis is a Latin term meaning “let the decision stand” and a legal principle providing that courts and judges should honor “precedent,” or the decisions, rulings, and opinions from prior cases.
[3] Under the Employee Retirement Security Act of 1974 (ERISA), the Public Health Services Act (PHSA), and the Internal Revenue Code.