On June 28, the Supreme Court handed down Loper Bright Enterprises v. Raimondo, which overturned the prior Supreme Court precedent, articulated in Chevron v. Natural Resource Defense Council, Inc. and known as “the Chevron doctrine.” Under the Chevron doctrine, agency interpretations of Acts of Congress were owed deference wherever the law was unclear. Chevron gave substantial authority to agencies to implement and interpret laws.
Under the new Loper Bright standard, courts may exercise their independent judgment in deciding whether an agency has acted within its statutory authority, as the Administrative Procedure Act (APA) requires. This means that courts no longer must defer to agency interpretations of law and are now empowered to interpret the intent of Congress. Once a court establishes Congressional intent, it must decide whether an agency action falls within Congressional intent. If it does not, the agency’s decision is unlawful.
On July 1, the Supreme Court handed down Corner Post, Inc. v. Board of Governors of the Federal Reserve System, a decision that changes how statutes of limitations apply to administrative rules. Under Corner Post, “An Administrative procedure claim does not accrue for purposes of §2401(a)’s 6-year statute of limitations until the plaintiff is injured by final agency action.” This means that under Corner Post, administrative rules created at any time may be challenged by a party so long as that party has been subject to the rule for less than six years—the statute of limitations for APA claims.
As soon as the Supreme Court overturned Chevron, lower courts began to issue rulings that rely on Loper Bright.
For example, in Texas v. Dept. of Labor (4:24-CV-499-SDJ), a Texas Federal District judge enjoined the Department of Labor (DOL) from enforcing a Final Rule to increase the minimum salary level requirements for executive, administrative, and professional (colloquially “white collar”) exemptions from the Fair Labor Standards Act (FLSA)’s minimum wage and overtime requirements in the state of Texas. Under the Final Rule, certain employees who earn more than $844 a week or $43,888 a year on or after July 1, 2024, or $1,128 a week or $58,656 a year after January, 1st 2025, fall within the white-collar exemptions.
The State of Texas sought a preliminary injunction to block this rule. The judge studied the authorizing legislation and found Congress had placed a priority on the duties performed by the employee rather than their salary. Citing Loper Bright, he stated:
An examination of the ordinary meaning of the [white collar] Exemption’s undefined terms shows that the Exemption turns on an employee’s functions and duties, requiring only that they fit one of the three listed, i.e., “executive,” “administrative,” or “professional capacity.” The exemption does not turn on compensation.
Thus, when the DOL created the white-collar compensation threshold, it went beyond its authority. The judge ruled, “[a] Department-invented test, untethered to the text of the FLSA, that systematically deprives employees of the EAP Exemption when they otherwise meet the FLSA’s duties test, is necessarily unlawful.” This ruling applies only in Texas; however, the major change due to Loper Bright is clear: agencies are no longer granted broad authority or discretion on how to implement Acts of Congress. Their actions must be directly supported by statute or legislative history.
On July 2, a Kansas Federal District Court issued an injunction against the Department of Education to prohibit the enforcement of a gender policy. In Kansas v United States Dept. of Education, several states and organizations challenged a recent Department of Education Final Rule “clarifying that sex discrimination ‘includes discrimination on the basis of sex stereotypes, sex characteristics, pregnancy or related conditions, sexual orientation, and gender identity.’” The plaintiffs challenged the rule under the theory that Title IX’s protections against discrimination based on sex only apply to “biological sex.” In granting the plaintiffs’ request for an injunction, the judge cited Loper Bright, stating:
The Supreme Court recently held that the court “need not and under the APA may not defer to an agency interpretation of the law simply because a statute is ambiguous.” [Loper Bright, *22]. The court must exercise its “independent judgment in deciding whether an agency has acted within its statutory authority, as the APA requires.” Id. … At issue here is Title IX’s command that an individual not be discriminated against “on the basis of sex.” Therefore, the court must determine the ordinary meaning of this command. Bostock, 590 U.S. at 654. After review, the court finds that the unambiguous plain language of the statutory provisions and the legislative history makes clear that the term “sex” means the traditional concept of biological sex in which there are only two sexes, male and female. See Nat’l Ass’n of Home Builders v. Defs. of Wildlife, 551 U.S. 644, 666 (2007) (discussing that the “words of a statute must be read in their context and with a view to their place in the overall statutory scheme”).
Thus, the court enjoined the Department of Education from enforcing its Final Rule. This ruling demonstrates the new way courts will strictly rely on statutory language and legislative history to determine the legality of agency made rules.
Finally, also relying on Loper Bright, on July 3, the United States District Court for the Northern District of Texas (the District Court) found in Ryan, LLC, et al. v. Federal Trade Commission, Case No. 3:24-cv-00986-E, that the Federal Trade Commission (FTC)’s proposed ban on post-employment non-compete agreements exceeded the commission’s statutory authority. In its decision, the court emphasized that “[t]he question to be answered is ‘not what the [Commission] thinks it should do but what Congress has said it can do.’”
Given the higher risk to legal challenges of agency rulemaking efforts under Loper Bright, we may see a greater reliance by agencies on their supervisory and enforcement powers, rather than their rulemaking authority. Instead of seeking to develop and adopt new regulations or rules, agencies may turn to enhanced regulation by enforcement. This could lead to augmented regulatory uncertainty as companies and individuals strive to determine what is allowed—not by adopted regulations or rules but as the result of agency enforcement actions.
