Workforce Implications of U.S. Supreme Court Ruling on ‘Chevron Deference’

Workforce Implications of U.S. Supreme Court Ruling on ‘Chevron Deference’
July 10, 2024 7 mins

Workforce Implications of U.S. Supreme Court Ruling on ‘Chevron Deference’

Workforce Implications of U.S. Supreme Court Ruling on ‘Chevron Deference’

The U.S. Supreme Court has changed the way laws are interpreted in the development of regulations. This change has the potential for far-reaching consequences for both regulatory agencies and employers.

Key Takeaways
  1. Courts are no longer required to defer to regulatory agencies when interpreting the law, as they had been for four decades.
  2. The change could impact a variety of workforce-related regulations — from the recent ban on noncompete clauses to health insurance.
  3. While the immediate effects are limited, the long-term impacts could be far-reaching. Employers will need to monitor upcoming cases to stay informed.

The Supreme Court recently overruled decades of administrative law with its decision in Loper Bright Enterprises v. Raimondo that ended the practice of judicial deference to regulatory agencies in interpreting statutes. This seemingly technical change in how agencies work could have a significant impact on employers and the workforce — ranging from retirement planning and healthcare to hiring practices.

In its decision, the Supreme Court overturned the doctrine of “Chevron deference,” which held that when considering challenges to regulations, a court must first determine if Congress had directly addressed the issue at hand. If Congress had not, or if the law was ambiguous, a court was required to defer to the relevant federal agency’s interpretation of the law. The end of Chevron deference means that a court must now decide whether an agency has acted within its statutory authority in issuing the regulations and, even if it has, may not defer to an agency’s interpretation of the law simply because a statute is ambiguous. Instead, a court must reach its own conclusion of the statute’s meaning.

Five Executive Learnings from the Supreme Court Decision:

1. Courts will exercise greater scrutiny of agency regulations.

Under the Loper Bright decision, the role of the court is to independently interpret statutes and ensure that the regulatory agency has acted within its delegated authority. While the immediate effect of this decision is limited, in the long term, federal agencies can expect greater judicial scrutiny when issuing, defending and enforcing regulations.

2. Not every regulation will be challenged.

Many practitioners assume that a flood of new litigation will swamp an already overwhelmed court system, tying up regulatory interpretation and enforcement for years. However, any new challenges to regulations could still be costly, time consuming and carry the risk of failure. This may result in many organizations preferring the predictability of current regulation.

3. Compliance issues are likely.

No action may be necessary for the time being, but employers will need to monitor relevant regulations more comprehensively. For example, a regulation may be upheld by one court while being struck down or subject to a different interpretation by another court, inviting potential confusion. “If there’s a particular area, you’re looking for clarity on because there are no regulations issued yet,” said Eric Keener, senior partner in Aon’s U.S. Retirement practice, “you may need to get comfortable being uncomfortable.”

4. Multinationals should consider the rest of the world.

Multinational companies need to monitor what they are doing outside of the U.S. For example, the European Union’s Corporate Sustainability Reporting Directive will require many employers to provide disclosures on a range of sustainability topics. Employers may still need to prepare for reporting obligations even though U.S. federal regulations addressing sustainability — such as the SEC’s climate disclosure rule — may be nullified given the absence of Chevron deference.

5. Prior decisions still stand.

By overruling Chevron, the court did not overturn cases that relied on the Chevron framework. However, the Supreme Court made bringing challenges to regulations easier with its recent decision in Corner Post Inc. v. Board of Governors of the Federal Reserve System. Whether those challenges are more likely to succeed because of Loper Bright remains to be seen.

Specific Regulations to Watch

While no regulation is overturned by this decision outside the specifics of the case, there are a few workforce-related regulations worth keeping an eye on, either because they are already being challenged or are expected to be.

  • The Federal Trade Commission (FTC) rule banning noncompete clauses. In April 2024, the FTC announced a rule largely banning the practice of using noncompete clauses. The rule would nullify existing noncompete clauses with a few limited exceptions. It is scheduled to go into effect in September 2024. The rule is already being challenged in several lawsuits. In one of these lawsuits, a federal district court judge in Texas struck down the rule, though the judge said the ruling only applied to the parties in the case and declined to issue a broader injunction. A separate federal court is set to weigh in before the rule takes effect. Appeals to the federal appeals court and the Supreme Court are likely, with many commentators presuming that the end of Chevron makes the rule’s long-term survival doubtful.

  • Department of Labor (DOL) guidance for retirement plans. Over the years, the DOL has issued guidance that many stakeholders say showed the need to move beyond Chevron deference. Employers have seen a wide range of regulatory requirements change over time based on administrative guidance rather than changes in statutory language. Examples of statutory interpretations that have appeared to change over time without intervening statutory changes include regulations addressing environmental, social, and governance investment and the fiduciary investment advice rules. Challenges to these rules have already begun, and it is likely that there will be further challenges to DOL guidance in these and other areas in a post-Chevron world, as well as potential delays in future guidance.

  • Regulation of employer group health plans. The decision does not mandate any immediate changes to the way employer group health plans are regulated. However, given that federal agencies have issued a complex body of regulations that may now be subject to increased scrutiny or further legal challenges, future challenges may be more likely. Many regulations are already in litigation and more cases are expected. Some regulations to keep an eye on include:
    • Section 1557 nondiscrimination regulations
    • Surprise billing regulations
    • Preventative services coverage, specifically as being litigated in Braidwood v. Becerra

Congress will likely give more attention to the drafting of legislation, as the Loper Bright decision suggests. But it seems unlikely that any congressional attempts at specificity will produce laws with no ambiguities or address every potential question that may need to be clarified. In those cases, courts will be the final arbiters of what the law is.

Quote icon

Navigating this new landscape is going to be a tough job, but an important one — not just for compliance but for your overall employee value proposition. Employers are going to need information, but more importantly, they’ll need guidance.

J.D. Piro
Senior Vice President, Legal Consulting Group, Health Solutions

Employers Will Need Guidance

While no immediate action is necessary for employers, there is little doubt the Supreme Court has opened up a wide new avenue for challenges to regulations that significantly impact employers. Regardless, federal agencies are not going to stop issuing regulations, and employers are still going to need guidance. This could result in Congress providing more detailed technical guidance when writing legislation, more litigation over agency interpretations or a mix of both. It is unlikely that the road ahead will be straightforward.

How Aon Can Help

With the administrative state currently in flux, employers should keep in mind that compliance is only one part of the story. The ability for companies to attract, retain and sustain talent is about more than just meeting the minimum requirements of the law. Having a trusted advisor monitoring regulatory developments while the employer works to take care of its employees can help an organization make better decisions.

While organizations are entering a period of regulatory uncertainty, Aon’s consultants can assist employers in:

  • Evaluating existing and future regulatory guidance
  • Mitigating risks associated with compliance and non-compliance
  • Helping employers avoid possible false starts where it may appear that the regulatory guidance may be subject to challenge
Key Contacts

Irene Gallagher
Vice President, Health Solutions, North America
[email protected]

Eric Keener
Senior Partner, Wealth Solutions, North America
[email protected]

Thomas Meagher
Senior Partner, Wealth Solutions, North America
[email protected]

J.D. Piro
Senior Vice President, Health Solutions, North America
[email protected]

Laura Wanlass
Partner, Talent Solutions, North America
[email protected]

General Disclaimer

The information contained herein and the statements expressed are of a general nature and are not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information and use sources we consider reliable, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. This information is not a replacement for legal, tax accounting or other professional advice and no one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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