On Friday, June 28, the U.S. Supreme Court overruled Chevron, USA Inc. v. Natural Resources Defense Council. Chevron often required courts to defer to federal agencies when those agencies were interpreting statutes they administer. Because of today’s decision, courts will no longer defer. Instead, they will give statutes their “best” interpretation. That means agencies—including labor and employment agencies—will have less leeway to write broad rules. They will instead have to write rules that hew more closely to statutory language. They may also have to defend some existing rules against closer scrutiny in court. And that closer scrutiny could upset some recently adopted or proposed rules, such as rules on overtime, safety inspections, and independent contracting.

What is Chevron deference?

Chevron deference is a rule about who gets to decide what a statute means. Historically, that decision was made by courts. Decisions going back to the early nineteenth century explained that it was courts’ job to “say what the law is.” But in Chevron, the Court held that judges should sometimes defer to executive agencies. Agencies are often assigned by Congress to administer statutes. And those statutes are not always clear. So agencies often specify and expand on the statutory text through formal interpretations in the form of regulations. Chevron held that courts should accept those interpretations when (a) the statute is ambiguous, and (b) the agency’s interpretation is reasonable.

What did the Court decide today?

The Court has now rejected that approach. In overruling Chevron, the Court explained that judges cannot defer to agencies on questions of interpreting law. Judges can consider agency expertise, practice, and consistency. They can also respect agency policy decisions when an agency has been given explicit authority to make policy. But they cannot give agency interpretations of law binding legal effect. Instead, they must exercise their independent judgment and give statutes their “best” interpretation.

How does this decision affect labor and employment law?

This approach will affect how agencies make policy—including labor and employment agencies. Most federal labor and employment agencies rely on some form of deference. For example, the Department of Labor (DOL) often uses deference principles to write overtime rules under the Fair Labor Standards Act (FLSA). The Occupational Health and Safety Administration (OSHA) relies on deference when it makes rules under the Occupational Health and Safety Act. And the National Labor Relations Board (NLRB) relies on deference when it writes rules and decides cases under the National Labor Relations Act.

These agencies will now face a new landscape in federal court. If the agencies are challenged by private people or companies about the meaning of a statute, they can no longer expect to start the case with a leg up. Instead, they will be on equal footing with the challengers. The question will no longer be whether the agency’s position is reasonable. Instead, the question will be which side’s interpretation of the statute is the “best” one.

What should employers watch for now?

This new landscape could affect ongoing litigation. The DOL is already defending a new rule setting new minimum salaries for the FLSA’s “white collar” exemptions. It is also defending a prevailing-wage rule under the Davis-Bacon Act and an FLSA rule defining independent contractors. Similarly, the NLRB is defending a rule defining “joint employers.” And OSHA is defending a rule that allows union representatives to accompany OSHA inspectors—even in non-union workplaces. In all these cases, the agencies are defending their rules with some form of deference. But now, they may have to change their litigation strategy.

Going forward, agencies may be discouraged from writing broad rules—that is, rules that stretch the statute’s plain language.  Rules will now be easier to challenge, especially when they stray far from the statutory text. So agencies might have to write narrower rules and look for other ways to advance their policy positions. For example, they might file more lawsuits to establish their interpretations in court. And they may look for friendlier venues to file those lawsuits to improve their chances. In short, they may regulate more modestly and litigate more strategically.

This decision was far from the only one affecting labor and employment law. The Court’s 2024 docket was stocked with decisions that facially involved administrative law, but which could spill over into labor and employment law. Littler’s Workplace Policy Institute (WPI) will have more detailed analysis on these decisions in the coming days.