HR Legalist

Update: Overtime Rule now Partially in Effect, but Supreme Court Overturns Longstanding Agency Deference in Overturning Chevron

As noted in our June 24, 2024 blog and client alert, the Department of Labor’s new Overtime Rule is subject to several legal challenges, including in Texas. On Friday, a federal judge in the Eastern District of Texas temporarily halted the implementation of the Rule as it pertained to the State of Texas as an employer. While all other employers nationwide are now subject to the new rule as of today, the Texas court could still strike down the rule after additional hearings.  Further litigation in that case, as well as other cases challenging administrative rules, will now be subject to a sea change in the law regarding administrative agency deference, per the Supreme Court’s ruling this past Friday.

In its June 28, 2024, decision in Loper Bright v. Raimondo[1], the Supreme Court issued a decision upending 40 years of precedent which required courts to defer to agencies’ reasonable interpretations of ambiguous statutes, established in Chevron v. Natural Resources Defense Council[2]. In overturning Chevron, the Supreme Court held that courts must use their own judgment when determining whether an agency has acted within its statutory authority and may not defer to an agency’s interpretation when a law is ambiguous.

By overturning so-called “Chevron Deference,” federal agencies like the Environmental Protection Agency, Department of Labor, the Federal Trade Commission, and Equal Employment Opportunity Commission will likely have to exert greater effort in justifying the rationale behind their interpretations and courts could curb rulemaking efforts where Congress’s grant of authority is less clear.

The decision will also likely result in an uptick in litigation as parties seek to challenge existing agency rules that have been upheld under Chevron Deference, as well as new agency rules.

Potential Short-Term Impacts

The Supreme Court’s decision could have a large impact not only on environmental regulations but also on labor and employment law, including the DOL overtime rule as well as the FTC Rule banning non-compete agreements nationwide, which is scheduled to go into effect in September.

The impact of Loper Bright on the National Labor Relations Board (NLRB) is more complicated, since the NLRB makes decisions on a case-by-case basis, similar to a court of appeals.  As the Supreme Court pointed out, courts have been deferring to the NLRB’s application of specific facts to the labor law since decades before Chevron.[3]  However the NLRB also acts through rulemaking, and Chevron’s demise makes it easier for impacted parties to challenge those rules.  For example,  last winter’s final rule ushering in a more union-friendly standard for joint employment was blocked by a Texas court and is now on appeal before the Fifth Circuit. 

HR Legalist will continue to monitor developments and impacts of the Supreme Court’s Loper Bright decision and will provide updates on the HR Legalist Blog.

[1] 603 U.S. ___, (2024).

[2] 467 U.S. 837, (1984).

[3] See NLRB v. Hearst Publications, Inc., 322 U. S. 111 (1944).

The information contained in this publication should not be construed as legal advice, is not a substitute for legal counsel, and should not be relied on as such. For legal advice or answers to specific questions, please contact one of our attorneys.