The power of the government to regulate the conduct of the business community is largely exercised by powerful federal and state administrative agencies. These agencies include the Environmental Protection Agency and the Pennsylvania Department of Health, to name a few. However, these agencies are not constitutional in dimension, and most are not run by elected officials. Rather, these agencies are purely creatures of statute, housed in the executive branch of government, endowed to exercise only those powers explicitly granted to them by statute.
The Era of Chevron Deference
Since 1984, the federal courts were required to defer to agency interpretations of the federal statutes they enforced, using a principle that came to be known as the Chevron deference. The United States Supreme Court established this rule in Chevron U.S.A. Inc. v. Natural Resources Defense Council, Inc. In a nutshell, under the Chevron deference principle, federal courts were required to surrender a certain amount of their constitutional authority to independently interpret a statute administered by an administrative agency and then defer to any “permissible” agency interpretation of that statute if it did not directly speak to the issue at hand. So, for example, in the Chevron case, the Supreme Court deferred to the EPA’s interpretation of what Congress meant by the term “stationary source” under the Clean Air Act rather than making its own judicial interpretation using statutory/legislative intent.
The Loper Decision: A Turning Point
But no more. Recently, in Loper Bright Enterprises et al. v. Raimondo, Secretary of Commerce, et al., the U.S. Supreme Court overruled Chevron, holding that the federal Administrative Procedure Act requires federal courts to exercise their independent judgment in deciding whether an agency has acted within its statutory authority and courts may not defer to an agency interpretation of a statute simply because it is ambiguous.
The Loper decision does not mean an end of the so-called “administrative state,” as some commentators have predicted. To be sure, administrative agencies still have the power to regulate industry by issuing duly promulgated regulations, so long as those regulations do not contradict or go beyond what is statutorily permitted. Moreover, some version of Chevron deference lives on in various state courts. Beyond that, the long-term effects of Loper are not entirely known. Unfortunately, there is no handy list of regulations/policies where administrative agencies have overstepped their boundaries!
Action Steps for Businesses
Businesses operating in regulated industries should take a fresh look at what federal and state regulations/policies are giving them the most headaches. Once those regulations/policies are identified, businesses should consult with their attorneys about whether there is a basis to challenge those regulations/policies (either individually or through a trade organization) using the Loper decision.
