The Supreme Court heard oral arguments this week in a case that could significantly curb the power of federal agencies to issue major regulations.
Why it matters: Sweeping rules, such as the independent contractor rule issued last week, or the SEC’s forthcoming human capital metrics rule, could become a thing of the past as a result of this case.
The bottom line: The oral arguments accentuated what many have already speculated – that the Court’s conservative majority is likely to significantly limit Chevron deference, and consequently, agency regulatory authority.
Background: The case concerns Chevron deference, a judicial doctrine under which courts must defer to agencies’ reasonable interpretations of ambiguous statutes. Under Chevron, federal agencies have significant power to fill in legal gaps with broad rules and regulations – such as defining independent contractor status under federal wage law.
Conservative justices skeptical: As expected, the more conservative wing of the Supreme Court harshly questioned the validity of Chevron deference during oral arguments. Justice Kavanaugh said the doctrine allows agencies to implement “massive change” each new presidential administration, while Justice Gorsuch noted that it results in “whatever the agency says wins” (in court). The oral arguments – unsurprisingly – telegraphed the most likely result of the case: the conservative majority ruling to limit or even completely overturn Chevron deference.
What’s at stake: Should Chevron deference be significantly curtailed or overturned entirely, the future of the regulatory state may be in serious jeopardy. Agency regulations have taken on an increasingly outsized role (particularly in the HR space) in recent years given the continued abdication of legislative responsibility by Congress. That role would be significantly diminished in the wake of an anti-Chevron ruling, with two potential consequences: Congress being pushed to resume meaningful legislative activity, and a potential end to the constant seesaw of regulation every four to eight years. Whether that void will indeed be filled – and with what – remains to be seen.
Outlook: The case will be decided later this year. Employers should keep an eye on the outcome, as it could significantly impact the breadth of regulations that they have to deal with.
