Employee benefit and employment law regulations after Loper Bright

In Loper Bright Enterprises v. Raimondo, No. 22-451, 603 U.S. ____ (2024), a 6-3 opinion written by Chief Justice Roberts, the Supreme Court overruled Chevron U.S.A. Inc. v. Natural Re¬sources Defense Council, Inc., 467 U.S. 837 (1984), and formally reasserted the primacy of the courts to determine the meaning of ambiguous federal statutes. The Court ruled that Chevron was inconsistent with the Administrative Procedure Act (APA), which provides that “the reviewing court shall decide all relevant questions of law [and] interpret constitutional and statutory provisions,” and, in the majority’s view, codified the “traditional” rule that courts decide questions of law de novo. As Chief Justice Roberts summarized the decision:

ESsentials:

Loper Bright has no bearing on the deference most commonly at issue in employee benefits litigation: deference due to decisions of the responsible plan fiduciary, e.g., to determine benefit claims or interpret the plan document.

Instead, it is substantially concerned with agency litigation where the agency asserted that its interpretation of a legal matter is conclusive, arguably displacing the usual constitutional role of the courts to say what the law is. That is, the agency was administering the law, writing the guidance, and enforcing the law – its constitutional roles – and then, in litigation, claimed under Chevron authority to do so without independent judicial review. 

• In practice, the Chevron doctrine of deference to the administering agency’s interpretation through regulations of ambiguous federal statutes had a controversial, complicated and somewhat checkered history of application.
• For the regulated community, however, it too often seemed that observance of APA procedural requirements and a credible preamble was all a court would require to uphold a rulemaking. 

For the private litigant that disagreed with the agency interpretation, any such deference created a playing field tilted in favor of the agency. In short, the question of agency deference implicates a complex balancing of agency efficiency and expertise against separation of powers and due process considerations, while also taking into account legislative delegation.

Loper Bright resets that balance in a manner that provides the private party a meaningful opportunity to be heard, which the APA, for all its notice and comment procedures, often does not. For better or worse, the direction of a regulation quite often is functionally set before it is proposed, in which case the opportunity for public comments to affect the rulemaking is on the margins at best.

• At least in some contexts, the prospect of litigation over controversial regulations can actually make an agency less responsive to public comments in the APA rulemaking process.
• In a recent example, the US Department of Labor (DOL) included in its 2016 Fiduciary Rule 2.0 certain sensible accommodations of concerns expressed in public comments, which were then cited against the Department in the Fifth Circuit opinion vacating that rule. In its 2024 Rule 4.0, DOL was less accommodating.

Because employment and employee benefits are so heavily regulated, certainty about the law is of great importance to the regulated community.

• It is often the case that certainty about a regulator’s position matters more than the accuracy of the regulator’s position. To the extent Loper Bright leads to fewer regulations and more sub-regulatory guidance, it is possible that need for certainty can still be met. 
• The regulated community also has a substantial interest in regulators fixing the inevitable, unintended ambiguities and gaps if not outright drafting errors in any legislation enacted by Congress in a manner that makes the overall statutory scheme cohere, particularly in a legislative environment where technical correction bills are not always forthcoming. The majority opinion completely misapprehends this practical necessity, which common-law courts focused on the single issue in litigation are not particularly equipped to accomplish.
• For those reasons among others, including the significant commitment, resources, uncertainties and elapsed time inherent in challenging a regulation in court, it seems more likely to us that benefits and employment regulations will continue to be contested on a selective basis rather than a routine basis – i.e., only when a particular ox has been gored in a consequential manner. Even so, Loper Bright introduces new uncertainties for the regulated community.

It also seems logical that Loper Bright should stifle the unconstructive incidence of ping pong regulation from presidential administration to succeeding presidential administration – DOL’s perambulating views under ERISA on ESG come to mind – but that may be too much to hope.

Finally, it seems likely that Loper Bright will revitalize through the courts the role of the APA “as a check upon administrators whose zeal might otherwise have carried them to excesses not contemplated in legislation creating their offices.” US v. Morton Salt, 338 US 632, 644 (1950). To the extent DOL conceived in its Fiduciary Rule 4.0 that it was appointed by Congress in ERISA to be a universal financial services regulator, or in its FLSA overtime rule that it has carte blanche to establish a salary minimum for the “executive, administrative and professional” exemption, for example, or the Federal Trade Commission conceived in its non-compete rule that Congress had authorized it to displace state law on that issue, the early returns from the courts hearing challenges to those regulations are pointing in the direction of a greater check on agency power.

At the same time, the regulation-writing function of federal agencies is sometimes staffed by respected professionals who are of comparable caliber to federal judges, deeply mindful of the limits on the authority of the Executive branch, steeped in and devoting all their professional time to the conscientious interpretation of the statutes for which their agency is responsible, and who may have a better chance than a generalist judge of ascertaining the “single best reading” of the (often complex and interrelated if not inscrutable) statutory provision as fixed at enactment, which is the outcome Loper Bright seeks.

On the evidence, then, the courts will face a permanent and continuing challenge in properly balancing, in a constitutionally divided government:

• accuracy versus certainty in the interpretation of benefits and employment statutes;
• the practical utility of conscientious regulators undertaking to make legislation coherent in a manner consistent with Congressional purposes, versus the impulse of overzealous regulators seeking to dictate national policy by rewriting statutes through regulations, to reflect their own agendas or the views of current political actors; and
• the expertise of agencies versus the validation of due process and the rule of law provided by an impartial hearing for a private party aggrieved by an agency interpretation, resolved by a judge at a remove from the dispute.

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If you have any questions about this Legal Briefing, please feel free to contact any of the attorneys listed or the Eversheds Sutherland attorney with whom you regularly work.