On June 28, 2024, the Supreme Court published a landmark ruling that overturned decades of judicial deference to government agencies under the so-called Chevron doctrine. This decision fundamentally alters the landscape of administrative law. Although the specific impact remains unclear, the reversal of Chevron is sure to affect the world of employee benefits and executive compensation.

Chevron Deference & the Loper Decision

Articulated by the Supreme Court in 1984, Chevron deference required courts to defer to an administrative agency’s interpretation of ambiguous statutes under certain circumstances. In practice, this doctrine granted executive agencies substantial power to interpret law and promulgate regulatory authority.

In Loper Bright Enterprises v. Raimondo (as consolidated with Relentless, Inc., et al. v. Department of Commerce, et al.), the Supreme Court overturned the Chevron doctrine. Chief Justice Roberts, writing for the majority, held that the judiciary should not cede interpretative authority to executive agencies without a clear congressional mandate. The Court’s decision emphasizes judicial independence in statutory interpretation and purports to rein in perceived overreach by administrative agencies. Loper sets aside four decades of judicial philosophy by reference to the centuries-old role of the judiciary as articulated in Marbury v. Madison and the Federalist Papers. The ruling is clear that prior cases decided under Chevron are unaffected by the reversal in Loper.

Impact on Employee Benefits Law

The end of Chevron deference is poised to reshape employee benefits law in many ways, not limited to the following.

• Increased Judicial Oversight: Absent Chevron deference, courts will play a more active role in interpreting statutes, including those related to employee benefits. This shift could lead to more rigorous scrutiny of agency interpretations.
• Uncertainty in Regulations: ERISA and other employee benefits statutes often involve complex and ambiguous provisions. Without Chevron deference, the Department of Labor and other agency interpretations of these ambiguities may face heightened challenges in court, creating a period of uncertainty as new judicial precedents are established. In fact, several regulations (e.g., the ESG rules, the fiduciary rule, and the non-compete ban) are currently under review in the courts and might be among the first to be subject to adjudication in a post-Chevron world.
• Agency Limitations: Agencies like the Department of Labor and the Internal Revenue Service may find their regulatory authority curtailed. Their ability to issue binding guidance on ambiguous statutory provisions may be limited, impacting how quickly and effectively they can respond to emerging issues.
• Unclear Protections: Although agency rules often impose burdens on employers and their employee benefit plans, they also provide some degree of protection for compliant employers and plans. After Chevron, it is unclear to what extent regulations may be relied upon as a sign of compliance with law.

These are but a few of the potential ramifications of Loper, with much else to be expected. In all, the elimination of Chevron deference represents a major shift in the law and will demand heightened attention to statutory language and judicial interpretations.