Supreme Court Deals New Blow to Agency Power, Kills 40-Year-Old Rule

A new U.S. Supreme Court washes away a 40-year-old rule that gave federal agencies broad power to fill in the blanks when federal laws are ambiguous.

As a result, courts now have a greater say when it comes to deciding what ambiguous statutory language means and how the law is to be applied. The ruling essentially transfers a significant degree of power away from agencies and to court tribunals.

The decision follows closely on the heels on another recent Supreme Court ruling that curtailed the power of the National Labor Relations Board to gain early injunctions for employees in cases involving labor disputes.

The Supreme Court’s ruling in the new case placed its earlier decision in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) under the microscope. In Chevron, the Court set a rule that said if statutory language is ambiguous, courts are to defer to agency interpretations of the law as long as those interpretations are reasonable.

Because it is not uncommon to find ambiguity in federal statutes, in practice the rule gave federal agencies significant power to say what the law is.

Rule Was Applied Over and Over

What became known as Chevron deference has been granted in thousands of cases since the rule was established, including cases involving employment law issues.

The new Supreme Court ruling explicitly overrules the landmark Chevron decision, saying that courts must exercise their own independent judgment when deciding whether a federal agency has properly interpreted a statute – and that courts should not defer to an agency’s interpretation just because the statute at issue is ambiguous.

The issue of Chevron’s continuing viability reached the Supreme Court in the form of a challenge to a National Marine Fisheries Service (NMFS) rule that required certain fishermen to bear costs associated with onboard observers who were tasked with collecting data in connection with conservation and management efforts. The observers could cost up to about $700 a day and significantly reduce the vessel owner’s returns.

Fishermen Challenge Agency Rule

Atlantic herring fishing businesses challenged the rule, saying the NMFS lacked the authority to require them to make the payments. The relevant statute, called the Magnuson-Stevens Fishery Conservation and Management Act (MSA), does not include specific terms that address whether Atlantic herring fishermen may be forced to pay costs associated with observers.

A federal appeals court applied Chevron and ruled for the government. More specifically, it decided that the agency’s decision to require payment was a reasonable construction of the MSA.

A separate group raised an unsuccessful similar challenge in a different suit, and the Supreme Court agreed to accept both cases for further review.

By a 6-3 vote, the Court struck down the Chevron rule, ushering in a new era of increased court power to give definitive meaning to unclear statutory language.

Who Holds the Power — and How Much?

As early as 1803, the decision noted, the Supreme Court has made it clear that it is “the province and duty of the judicial department to say what the law is.” Translation: Courts should get the last word.

At the same time, it said, it has also been long established that courts should give “due respect” to executive branch interpretations of federal statutes. Despite this principle, however, courts still must independently interpret the statute at issue, the majority decision said.

It is the job of courts to decide all relevant questions of law, the Court said.

“[A]gencies have no special competence in resolving statutory ambiguities,” the majority ruling asserts. “Courts do.”

The rulings below were vacated, and the cases were remanded.

What New Supreme Court Ruling Means for HR

This ruling will make it easier for claimants to challenge federal agency interpretations of federal statutes.

In the employment context, it will affect regulatory oversight and enforcement efforts of the Equal Employment Opportunity Commission, the Department of Labor, the Occupational Health and Safety Administration, and the National Labor Relations Board.

HR administrators may now rely less heavily on agency guidance that is intended to clarify ambiguous statutory language. Unfortunately, this means there will be less certainty and predictability for those seeking agency guidance from those sources on cloudy HR-related issues. The proverbial grain of salt now is at play with respect to a large swath of federal agency guidance.

Loper Bright Enterprises v. Raimondo, No. 22-451 (U.S. 6/28/24).