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On Friday last week, The Supreme Court made a major ruling – or rather, overruling – on a precedent dating back to 1984 that will curb the power of federal agencies, including labor regulators.
In a 6-3 ruling, the court said that judges should no longer defer to agencies in interpreting ambiguous parts of statutes.
That’s a fair amount of jargon to swallow down. So, what does Chevron actually mean, how is it used, and what does the overruling mean for HR?
What is the Chevron doctrine?
In essence, the original Chevron precedent had allowed agencies including the US Department of Labor (DOL), the Equal Employment Opportunity Commission (EEOC), the Occupational Health and Safety Administration (OSHA), and the National Labor Relations Board (NLRB) to fill in the gaps where laws were unclear with their own rules.
When such agencies wielded Chevron during court, it would be up to someone challenging the agency to prove that the statute was “unambiguous” – i.e. the existing law was clear and did not need interpretation from an agency – or that the agency’s interpretation was “unreasonable.”
In turn, this means it’s more difficult – or at least, will require more resources – for agencies like the DOL and the EEOC to defend workers when they deem companies to have violated regulations relating to pay and pensions, health and safety, pensions, or discrimination.
“When it comes to employee safety and wellbeing, OSHA will now likely have a much harder time issuing regulations to protect employees’ safety in the workplace,” Adam Wright, VP of Legal at SixFifty, tells HR Grapevine. “Federal courts – not the subject matter experts of OSHA – will have the final say when it comes to interpreting and implementing the Occupational Safety and Health Act.”
By one estimation, the precedent has been invoked in over 15,000 judicial decisions. A post by Littler Mendelson P.C., a US-based law firm, says that agencies like the DOL and EEOC have nearly doubled their output since 1984, showing the potential impact the original ruling has on the power of such agencies in the courtroom, and by extension their influence over the regulations companies must adhere to.
What does the Chevron overruling mean for HR?
Two chunky caveats before we get into what the overruling of Chevron could mean for HR teams. Firstly, we know that the decision does not apply retroactively to cases in which the precedent was used, so HR professionals at companies with an EEOC or OSHA case lurking in their filing cabinets can breathe a sigh of relief.
Secondly, while the implications shouldn’t be underestimated - Timothy Taylor, a former deputy solicitor of labor and an attorney at Holland & Knight LLP, described it to Bloomberg Law as “a sea change” – we don’t know exactly what the full impact will be yet.
It will take weeks, months, and years for us to get a clear picture of how different courts now approach the various regulations and rules previously deferred to; and similarly how federal agencies alter their rules and regulations in response to the overruling.
“The Supreme Court’s case overruling Chevron doesn’t have an immediate impact on employment law, and there are no immediate actions HR teams need to take,” explains Wright.
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But changes are inevitably underway, and HR teams should begin preparing for what they may mean in their workplaces. Regulations created by federal agencies that previously were deferred to by judges, now face challenges from litigants.
Past cases on overtime pay, for example, have previously relied on the DOL’s Wage and Hour Division’s pay regulations – but following the overruling, the ability of the DOL to enforce these regulations is weakened, possibly leaving employees who believe they have not been compensated for overtime with a smaller chance of winning cases against their employer.
Indeed, Bloomberg Law reports a DOL overtime rule that was set to go into effect in the state of Texas has been temporarily halted by a federal judge, arguing it was an unlawful use of power by the agency. The state had previously argued the overtime rule would drive up payroll costs.
“We can already see the effects of the case,” asserts Wright. “The overruling of Chevron makes it more likely that lawsuits challenging rules like the DOL’s non-compete ban and the EEOC’s regulations implementing the Pregnant Workers Fairness Act will be successful. HR teams should pay attention to these cases.”
Whether one agrees with the overruling or not, the change will bring certainly more inconsistency from case to case. This, in turn, will make it more difficult for employers to understand how best to fulfill legal requirements.
With many areas looking decidedly grey, sticking to the regulations and rules published by the federal agencies remains a starting point. But litigants are already challenging the agencies’ rules, judges are already weighing in, and agencies themselves may well be re-writing their rules.
“More legal challenges mean more uncertainty about whether businesses should prepare to comply with new rules, and this is something HR teams should be prepared for in the wake of the case overruling Chevron,” Wright adds.
To prepare, HR teams should monitor major cases and seek consistent legal advice on any significant cases or legal developments that may impact their company.
