BY Mark Adams
When it comes to federal governmental rulemaking, the Administrative Procedure Act provides a framework for how rulemaking takes place (including requirements to publish notices of proposed and final rulemaking in the federal register as well as opportunities for the public to comment on proposed rules as well) and instructs courts how to review agency actions. Yet, despite this procedural framework, two questions remain that are bones of contention themselves.
First, does an agency have the authority delegated to them in the first place to promulgate a particular rule? The answer to that question varies greatly and lies within underlying federal law that either expressly (or not) empowers an agency to enact regulations on that subject. This question has often been the focus and point of argument in recent high-profile challenges to recent rules (such as the Department of Labor’s salary threshold rule, and the Federal Trade Commission’s Non-Compete Rule – both of which are challenges to authority vested in those agencies and are still working their ways through the courts).
Second, is a resulting rule that is promulgated by that agency something that must be honored by the courts? The answer to that question has now changed in the wake of recent Supreme Court decisions in Relentless v. Department of Commerce and Loper Bright Enterprises v. Raimondo.
The cases collectively involved the commercial fishing industry and challenges by fisherman against a rule written by the National Marine Fisheries Service that required fisherman to pay for the costs associated with carrying observers on fishing vessels to help monitor and guard against overfishing. In defending and justifying its rule, the federal government relied on the long-established case precedent of Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc. (or “Chevron” for short) which had required courts to defer to the rulemaking authority of a federal agency unless the rule was contrary to clear congressional intent. Put another way, if a federal law was silent or ambiguous on a particular question or issue, courts were to provide deference to the agency and their corresponding rule.
In overruling the prior Chevron case precedent ruling in favor of the petitioning fishermen, the Supreme Court held that “the Administrative Procedure Act requires courts to exercise their independent judgment in deciding whether an agency has acted within its statutory authority, and courts may not defer to an agency interpretation of the law simply because a statute is ambiguous.”
So, what does this mean in general and for employers in particular?
Well, it does not mean that agencies do not possess the authority to promulgate regulations at all anymore. The Administrative Procedure Act still exists and will continue to provide federal agencies with a framework to develop regulations.
It also does not automatically invalidate existing regulations that were enacted prior to these Supreme Court decisions. So, for employers hoping that some of these burdensome employment-related regulations would be null and void – no – that is not happening. Invalidating a regulation will still require a legal challenge to make that a reality. That being stated, the door to challenging federal rules and regulations is open wider for parties to consider such challenges. “Chevron deference” as it has been commonly called in the past had cast quite a shadow and deterred many from challenging an agency’s power and its rulemaking. With that shadow gone, one should expect even more challenges to rules in the future. DOL’s salary rule and FTC’s non-compete rule are already in the crosshairs but it is not a stretch to think that other rules from the likes of OSHA and the NLRB could be targeted down the road as well.
That being stated, it does not mean that such challenges will be successful when all is said and done. In fact, a court may still defer to such a rule or regulation if they want to. It also raises the possibility that courts could arrive at different conclusions on a rule’s validity as well (leaving open differences to be reconciled through the appellate process and ultimately to the US Supreme Court possibly).
Conceivably, it could also result in fewer regulations in the future. After all, with fiscal budgets always being scrutinized, an agency may think twice about investing time and resources in rulemaking if they reasonably believe their efforts may go for naught due to a subsequent challenge and/or invalidation given that Chevron deference has been removed.
While regulations often create headaches for employers and more specifically their Human Resource professionals, they do serve as a roadmap (like them or not) on how to comply with a particular law. Thus, for regulations that are either struck down or not promulgated at all, it could leave employers to weigh their potential risks more carefully on matters that are not as clearly addressed under an existing law.
So, what is the regulatory forecast today? In the dog days of summer, the forecast is cloudy for sure.