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Major Developments from the Supreme Court

July 5, 2024

Two recent decisions by the Supreme Court will have implications for HR. First was the Loper Bright Enterprises v. Raimondo, No. 22-451 (2024) decision. This decision concerned a 40-year doctrine called the Chevron deference, a nod to the power of agency actions. The second decision was SEC v. Jarskey, No. 22-859 (2024). This case discussed the powers of the internal administrative courts specifically in rulings which involve monetary relief.

The Loper Bright case concerned a rule promulgated by the National Marine Fisheries Service, an agency in the Department of Commerce, in short that required fisherman pay for observers required by a fishery management plan. The Loper Bright trial court ruled that the agency’s rule for payment of observers was a reasonable interpretation. There was nothing in the law specific to this requirement, but the trial court confirmed the power of the agency by holding to the Chevron Deference rule, which arose in the 1984 Chevron v. Natural Resources Defense Council  case concerning the powers of the Environmental Protection Agency:

“If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress,” Justice John Paul Stevens wrote for a 6-0 court in the 1984 opinion. But “if the statute is silent or ambiguous with respect to the specific issue,” he said that courts should defer to reasonable interpretations by the agency charged with implementing the law.

Further, the Supreme Court at that time gave two primary justifications for this approach. First, since judges lack the expertise of the specialized agencies that Congress created to carry out federal policies, it should trust their judgement because of their expertise. Second, when there is no clear direction from Congress, decisions left to agencies have to be checked through presidential appointments and Senate confirmations. In other words, it was justified because the court understood that there was a check and balance built into the regulatory oversight process.

However, the current Supreme Court disagreed and overruled this interpretation. The Supreme Court stated:

“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.”

This decision does not mean the end of administrative agencies. Congress can specifically delegate authority to the agencies for regulatory interpretations, such as the delegations that are present in the Age Discrimination in Employment Act (ADEA), the Americans With Disabilities Act (the ADA), and the Genetic Information Nondiscrimination Act (GINA), as well as the recently passed Pregnant Workers Fairness Act and the PUMP Act. The courts will also use an older standard for review that does allow some deference to the agencies.

However, this decision is consistent with the 2022 West Virginia v. EPA case which held  that any time an agency does something big and new, the regulation is presumptively invalid, unless Congress has specifically authorized regulating in this sphere. An agency “can’t simply retrofit an old statute to create new tools or new mechanisms” to address a problem that is generally within the agency’s jurisdiction.

How does this decision impact HR?  First, this reversal could lead to an injunction of the Wage and Hour’s new overtime regulations. For example, the appeal of Mayfield v. LABR, No. 23-50724 (Fifth Circuit Court of Appeals) by the Dairy Queen franchise owner arguing that the FLSA does not specifically identify a salary level test for overtime considerations may lead to injunctive relief. The trial court decision stating Wage and Hour’s salary level test was reasonable was based on the court’s reference to the Chevron deference. Now there is likely to be fact-finding and more extensive court review of the circumstances surrounding the existence and reasonableness of the salary level test. And if the administration changes in the meantime, like last time (Obama to Trump administrations), the overtime regulations will likely be rescinded.

Second, it means that any controversial regulations, from for example DOL, NLRB, OSHA, etc., that smells of political agenda as opposed to technical expertise will be subject to review directly by the courts. As such, a review of comments will have an independent review by the courts, as opposed to the agency itself, which in this current administration has been standard operating practice to downplaying legitimate concerns if the requirements were implemented.

As a result, HR’s pace of compliance activity should slow down, giving professionals time to breathe.

The second case that came down last Thursday, the Jarskey case, takes away the power of the internal agencies’ courts to impose civil penalties or remedies. It did not void total reviews of these administrative courts, simply the imposition of civil penalties.  Specifically, the Jarskey case concerned a hedge fund founder who was accused of fraud. The past practice of the SEC was to ask its in-house administrative law judges to impose monetary penalties. The Supreme Court ruled that it violates the defendant’s right under the Seventh Amendment to a jury trial.

How does this impact HR? When an agency such as the Office of Federal Contract Compliance Programs, Wage and Hour, NLRB, OSHA, and others try to impose any kind of monetary penalty on an employer, they will have to go to federal court. Therefore, it will slow down the process and allow employers to present in a more neutral setting than the agencies’ own administrative courts, theoretically making it a more level playing field for employers to prove they did no wrong.

In summary, the Supreme Court is continuing its civics line of cases, clearly defining the roles between the three branches of government.


By Anthony Kaylin, courtesy of SBAM-approved partner, ASESources:  Seyfarth Shaw 6/28/24, The Wall Street Journal 6/28/24, New York Times 6/28/24, National Law Journal 6/28/24

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