The Chevron Doctrine is Overturned and Businesses Are on Notice: Courts May Change the Interpretation of Ambiguous Federal Laws (Yes, Laws that Affect Your Business)!

It’s been a few months now since the Supreme Court has overturned what is commonly referred to as the “Chevron Doctrine.” If you are a business owner, the recent overturning of the Chevron Doctrine may have interesting consequences for your business.

To understand how the Chevron Doctrine involves your business, you must first understand how the Chevron Doctrine was applied. In 1985, the Chevron Doctrine was established in the case Chevron USA, Inc. v. Natural Resources Defense Council. The Chevron Doctrine was a legal principle that held that if a statute is ambiguous (meaning it is unclear what Congress intended), the courts must give deference to the federal agency’s interpretation of that ambiguous statute. Of course, the ambiguous statute must be a statute that particular federal agency administers, and the federal agencies’ interpretations were accepted as long as they were “reasonable.” When there was ambiguity, the federal agencies would publish an informal guidance, resolve any issues by issuing an opinion, and/or issue a formal regulation. Thus, under the Chevron Doctrine, the federal agencies had significant authority to interpret and implement ambiguous statutes. Thus, federal agencies were able to interpret ambiguous statutes in ways they believed the statues should be interpreted.

Under Chevron, the federal agencies held significant authority and businesses choosing to challenge the federal agencies’ interpretation of a statute were basically encountering an uphill battle at every step. To do so, the business would have to basically argue the statute is NOT ambiguous (and thus not open to interpretation by the federal agency), or the business would have to argue that the federal agency’s interpretation is NOT reasonable. Both arguments were difficult to win because most of the federal labor and employment statutes were written many years ago and were ambiguous. In fact, many lawmakers argue that bills are intentionally made ambiguous so that lawmakers can garner more votes to get the bill passed. The result is an ambiguous new law. In addition, because these laws are ambiguous, the federal agency only had to show that its interpretation was reasonable. Any plausible interpretation will be deemed reasonable. Clearly, under the Chevron Doctrine, it was very difficult for businesses to challenge a federal agency’s interpretation of a statute.

In mid-2024, the Supreme Court rejected this legal principle of deferring to federal agencies’ interpretations and determined that the courts should instead be responsible for such interpretations. In making such interpretations, the courts will rely on “traditional tools of statutory construction” to determine on their own the best interpretation of what is deemed an ambiguous statute. In other words, the courts will look at the actual words of the statute (the order of the words, the specific words used, punctuation, etc.), the legislative history of the statute (including any changes made to the bill or discussions regarding the bill before it became law), including the actual purpose of the statute.

What does this mean for your business? Well, business owners are forced to comply with various federal labor and employment laws that (in the past) were controlled by guidance from federal agencies such as the Department of Labor, Occupational Safety and Health Administration, Equal Employment Opportunity Commission, or the National Labor Relations Board. Clearly, businesses have relied on these federal agencies for guidance on various issues in the past such as regulations on overtime, worker (mis)classification, joint employment, pregnancy accommodations, prevailing wages, noncompete agreements, etc. The statutes dealing with all of these issues will now be met with higher judicial scrutiny. The courts now have the power to change the interpretation of any statute they deem ambiguous. Businesses may even choose to challenge the federal agency’s interpretation of a statute with the hopes of finding a court to rule in the businesses’ favor. And most interesting of all, the federal agencies will now have to defend their interpretations.