With its judgement in Loper Bright Enterprises v. Raimondo, the US Supreme Court overruled decades of administrative law, putting a stop to the tradition of judicial deference to regulatory bodies when interpreting statutes.
This shift in how agencies function could have a substantial influence on employers and the workforce, affecting everything from retirement planning and healthcare to hiring procedures, according to J.D. Piro, senior vice president, Legal Consulting Group, Health Solutions at Aon.
The Supreme Court’s judgement rejected the theory of “Chevron deference,” which required courts to follow government agencies’ interpretations of confusing statutes. Courts must now evaluate whether an agency operated within its statutory power by independently interpreting the Act’s meaning, even if the statute is confusing.
This shift is expected to lead to greater judicial scrutiny of agency regulations. Piro emphasizes that this will have long-term implications for how federal agencies issue, defend, and enforce regulations.
The Loper Bright ruling compels courts to interpret statutes independently and ensure that regulatory organisations act within their delegated powers. Although this may not result in an immediate rise in litigation, Piro believes that future challenges to regulations will be costly, time-consuming, and risky. As a result, many organisations may prefer the certainty of current legislation.
Employers will need to examine rules closely, as different courts may interpret the same regulation differently, potentially leading to uncertainty. Eric Keener, senior partner in Aon’s US retirement group, suggests that businesses become accustomed to this volatility.
“If there’s a particular area,you’re looking for clarity on because there are no regulations issued yet, you may need to get comfortable being uncomfortable,” Keener told CNN.
Multinational companies should also consider regulations outside the US. For example, the European Union’s Corporate Sustainability Reporting Directive requires disclosures on various sustainability topics.
Even if US federal regulations addressing sustainability are nullified, multinational employers may still need to prepare for these reporting obligations. Piro highlights the importance of a global perspective in regulatory compliance.
The regulations to watch out for
While the Supreme Court’s decision does not immediately overturn any regulations outside the specifics of the case, several workforce-related regulations could be affected, either because they are already being challenged or are expected to be.
- FTC Rule on Noncompete Clauses: In April 2024, the Federal Trade Commission (FTC) announced a rule largely banning the use of noncompete clauses. Scheduled to take effect in September 2024, the rule is already facing several legal challenges. A federal district court judge in Texas struck down the rule, but the ruling applied only to the parties in the case. Further rulings are expected, and appeals to higher courts are likely. The end of Chevron deference makes the rule’s long-term survival uncertain. Piro notes that this could significantly impact how businesses protect their proprietary information and competitive position.
- DOL Guidance for Retirement Plans: The Department of Labor (DOL) has issued various guidances that stakeholders believe highlighted the need to move beyond Chevron deference. These include regulations on environmental, social, and governance (ESG) investments and fiduciary investment advice. Challenges to these rules have begun, and more are expected as future guidance may face delays and further legal scrutiny. Piro points out that these developments will require employers to stay vigilant and adapt their retirement planning strategies accordingly.
- Regulation of Employer Group Health Plans: While the decision does not mandate immediate changes to the regulation of employer group health plans, increased scrutiny or legal challenges to federal regulations are anticipated. Many regulations are already in litigation, with more expected. Key regulations to watch include Section 1557 nondiscrimination regulations, surprise billing regulations, and preventive services coverage. Piro emphasizes that these potential changes could have widespread implications for employer-sponsored health plans.
Piro said that the decision suggests Congress will need to draft legislation more carefully, but it remains unlikely that any congressional attempt at specificity will eliminate ambiguities. Courts will continue to be the final arbiters of ambiguous laws.
“Navigating this new landscape is going to be a tough job, but an important one — not just for compliance but for your overall employee value proposition. Employers are going to need information, but more importantly, they’ll need guidance,” Piro said.
Piro noted that the ability to attract, retain, and sustain talent involves more than just compliance with the law. A trusted advisor monitoring regulatory developments while employers focus on their employees can help organizations make better decisions.