Subject: SCOTUS Overrules “Chevron” – What Does It Mean For Employers?: LRI INK

July 2, 2024

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Celebrating The 4th of July

by Michael VanDervort


Dear Readers,


This week, we're sending our newsletter a bit early, as our Broken Arrow offices will be closed on Thursday. Our team is looking forward to spending time with family and friends.


Wishing all a safe and happy Independence Day!

SCOTUS Overrules “Chevron” – What Does It Mean For Employers?

by Michael VanDervort


The U.S. Supreme Court shook things up by overruling the 40-year-old Chevron v. Natural Resources Defense Council decision. This move has legal circles buzzing, and many folks are left scratching their heads, wondering what the big deal is with Chevron anyway. Let’s break it down.


What the Heck is Chevron?

The original Chevron case revolved around a dry question: Did the Clean Air Act allow the Environmental Protection Agency (EPA) to define “stationary source” since the Act itself didn’t spell it out? The Supreme Court devised a two-part test for such situations:

  1. Check the Statute: If Congress explicitly addressed the issue, that’s the end of it.

  2. Agency Interpretation: If the statute is vague or silent, the agency steps in and interprets it. If the agency’s take was reasonable, the courts had to roll with it, even if they had a different view.

This became known as Chevron deference.


Say Goodbye to Chevron Deference

Fast forward to last Friday. The Supreme Court decided in Loper Bright Enterprises v. Raimondo that Chevron deference is no more. The Court ruled that courts must use their own judgment to decide if an agency has overstepped its bounds. The majority opinion emphasized that courts should check potential agency overreach, stating, “Courts decide legal questions by applying their own judgment.”


Why Overruling Chevron Matters

While past cases decided using Chevron deference aren’t going anywhere, this ruling changes the game for how courts will handle ambiguous statutes from now on. Here’s why it matters:

  1. Judicial Independence: Judges will no longer be rubber-stamping agency interpretations of ambiguous laws. Instead, they’ll be flexing their own interpretive muscles.

  2. More Legal Showdowns: Expect a surge in challenges to agency actions, as courts will now scrutinize agency interpretations more closely.

Impact on Employers

Here’s how this Supreme Court decision might shake things up for employers:


Wage and Hour Regulations

Look out for challenges to Department of Labor regulations on overtime and independent contractor classifications. Employers might see some favorable rulings as courts no longer defer to the Department of Labor’s interpretations.


Non-Competition Agreements

The Federal Trade Commission’s (FTC) proposed rule banning non-competes could face tough scrutiny.


Discrimination and Harassment

The Equal Employment Opportunity Commission (EEOC) handles federal anti-discrimination laws. Expect a spike in challenges to EEOC regulations, particularly those addressing age and disability discrimination.


Labor Law and NLRB Decisions

The NLRB has been making many employee-friendly decisions lately. With Chevron deference out the window, employers might successfully challenge some of these rulings, potentially leading to more balanced outcomes.


The Bottom Line

The end of Chevron deference marks a significant shift in how administrative law is interpreted, with courts now taking a more hands-on approach. For employers, this could open doors to more effectively challenging agency regulations and decisions.

Joint Employer Check-In: Where The NLRB’s Overhaul Efforts Currently Stand

by Kimberly Ricci

Over six months have passed since the NLRB unveiled a final rule aimed at dramatically increasing the number of businesses that qualify as joint employers. The new rule would require only that two employers must share the mere ability to control “essential terms” within the workplace. In contrast, currently, these employers need “substantial direct and immediate control” to fit the definition. Will the new rule come to fruition? Let’s talk it out.

 

The key dangers of the new rule: (1) Increasing companies’ liability to workers who they do not employ during labor disputes and allegations of labor law violations; (3) Requiring an employer to bargain with a union that doesn’t even represent its workers; (3) Easing the path to unionization.

 

The impact would be felt throughout countless industries  – including food service, healthcare, hospitality, retail, and construction – and perhaps render franchise models extinct by increasing liability for umbrella companies. In short, this could create such significant risk for employers that an untold number of job losses would be expected.

This wouldn’t be the first time that the joint employer definition has flip-flopped, but that detail doesn’t lessen the consequences to companies if the new rule is upheld and the fight against the rule is ongoing.

Currently, here is where the process stands on the legal front:

  • The new final rule was initially set to take effect last December. That got pushed to Spring 2024 pending litigation that still isn’t resolved;

  • The U.S. Chamber of Commerce swiftly sued to overturn the new rule, alleging that it “act[s] arbitrarily and capriciously in violation of the Administrative Procedure Act”;

  • In March, a Texas federal judge agreed with the Chamber and blocked the rule, and the NLRB appealed the ruling to the 5th U.S. Circuit Court of Appeals;

  • Additionally, Congress passed a joint resolution to overturn the final rule. Then Biden vetoed the measure, and the U.S. House failed to override the veto;

  • And now we are waiting on the 5th Circuit’s decision.

Something to keep in mind: Last week, the Supreme Court overturned the Chevron doctrine, which could affect every federal agency, even the NLRB (and here’s what that means). We are also monitoring the high court’s SEC v. Jarkesy ruling, which previews how challenges against the NLRB’s constitutionality might go in the future. Either or both of these developments could potentially weaken the NLRB’s powers.

 

Are any union shenanigans ongoing? Oh yes. Some unions argue that there should be no joint employment rule, period. Namely, the SEIU and AFL-CIO want the current version of the rule to be rescinded but also to abandon the new final rule. In effect, they want arising issues to be solved through litigation “on a case-by-case basis.” That surely would not go well[GK1]  for employers, considering the court system is overburdened enough.


What can employers do while waiting? It’s worth evaluating how this new rule would impact specific businesses in cases of potential joint employment. Sadly, it’s not hard to imagine that an infinite number of business relationships will cease to exist as companies determine what joint-employment risks they are comfortable taking in the future.

Stories You May Have Missed:


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NLRB issues first order requiring bargaining despite union election loss

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Workers at Illinois Cresco Labs facility vote to dump union. Workers got better raises and company benefits after decertifying the union

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Starbucks: A Development in the U.S. Labor Movement

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New union takes aim at Greenville's service industry

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About Labor Relations INK

Labor Relations INK is published weekly and is edited by Labor Relations Institute, Inc. Feel free to pass this newsletter on to anyone you think might enjoy it. New subscribers can sign up by visiting here.


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Contributing editors for this issue: Greg Kittinger, Michael VanDervort, and Kimberly Ricci.


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About Labor Relations Institute

LRI exists to help our clients thrive and become extraordinary workplaces. We improve the lives of working people by strengthening relationships with their leaders and each other. For over 41 years, LRI has led the labor and employee relations industry, driven by our core values and our proven process, the LRI Way.

 

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