Supreme Court Ruling Upends Regulatory Framework

In a decision late last month, the Supreme Court changed the regulatory framework that
has guided courts for the last 40 years. In Loper Bright Enterprises et. al. v. Raimondo,
the Court overturned Chevron Deference, the legal principle that courts have used to
evaluate the lawfulness of regulations since 1984. This ruling promises to bring a high
level of unpredictability to the federal regulatory environment.

Loper Bright Enterprises v. Raimondo

Put succinctly, if a statute is silent or ambiguous with respect to a specific issue, Chevron
Deference required a court reviewing a regulation addressing that issue to defer to the
issuing agency’s interpretation of the statute, so long as that interpretation was based on
a permissible understanding of the statutory language. Chevron rested on a presumption
that when Congress left an ambiguity in a statute it was understood that the ambiguity
would be resolved by the enforcing agency, and wanted the agency to possess whatever
degree of discretion the ambiguity allowed. In its recent decision overturning Chevron
Deference, the Court essentially held that the doctrine improperly delegated a judicial
function – resolving statutory ambiguity – to an administrative agency.

How the Demise of Chevron Deference will Impact Existing Regulations

When overruling Chevron, the justices specifically stated their decision should not call
into question prior decisions that relied on Chevron Deference – the fact that a court relied
on Chevron Deference when reaching its decision is not, standing alone, enough to justify
overruling a statutory precedent. That being said, we can expect the loss of Chevron
Deference to make it easier to challenge a host of regulations moving forward – not just
in labor and employment, but in every area of law.

In the labor and employment universe, we can expect the loss of Chevron Deference to
impact a number of recently enacted regulations, including but not limited to the following:

• Federal Trade Commission Final Rule Banning Non-Compete Agreements

In April of this year, the FTC issued a Final Rule banning the use of non-compete
agreements in employment, independent contractor, and other relationships. The
rule is currently scheduled to take effect in early September. Last week, a Texas
court issued a preliminary injunction against the enforcement of the rule, but that
injunction applies only to the parties in the case (which includes the U.S. Chamber
of Commerce). Additional challenges to the rule are pending.

There is some question about whether the FTC has the authority to promulgate
such a rule, as non-compete agreements have historically been regulated by state
law. Given that the FTC’s issuance of this Final Rule expands its regulatory
authority into a new area, we expect that Loper Bright Enterprises et. al. v.
Raimondo may have a particularly noticeable impact on challenges to this rule.

• Department of Labor Adjustments to White Collar Salary Thresholds

In late April, the DOL issued a Final Rule increasing the salary threshold necessary
to qualify for one of the White Collar Overtime Exemptions under the Fair Labor
Standards Act as follows:

• Effective July 1, 2024: To $844/week, or $43,888 annually;
• Effective January 1, 2025: To $1,128/week, or $58,656 annually; and
• Effective July 1, 2027, and every 3 years thereafter: To reflect then-current
  earnings data, using the 35th percentile of full-time non-hourly workers in
  the lowest wage Census Region or such other methodology then in effect.

In late June, a Texas court also enjoined implementation of the DOL rule, but that
ruling only applies to the State of Texas as an employer. Although other
challenges to the rule have been filed, the July 1st increase has already taken
effect.

• Occupational Safety and Health Administration Rulings

On April 1, 2024, OSHA published a Final Rule that expanded who can be
authorized to act as a representative of employees during an OSHA physical
workplace inspection. The new rule will potentially allow significantly expanded
union access to nonunionized employers.

Although multiple challenges to this rule have been filed, to date our office is not
aware of any court entering an injunction against the rule.

In addition, just last week, OSHA released a Proposed Rule on Heat Injury and
Illness Prevention in Outdoor and Indoor Work Settings. The Proposed Rule is still
subject to comment, and it will be some time before a final rule is proposed.

• Equal Employment Opportunity Commission Pregnant Workers Fairness Act
  Regulations

On April 15, 2024, the EEOC published a Final Rule to implement the Pregnant
Workers Fairness Act (PWFA), which requires employers with 15 or more
employees to provide reasonable accommodations to an employee’s known
limitations related to pregnancy, childbirth, or related medical conditions, unless
the accommodation would cause the employer an undue hardship. In the Final
Rule, the EEOC provided some specific examples of possible accommodations
employers may provide, including but not limited to:

• Additional, longer, or more flexible breaks to drink water, eat, rest, or use
  the restroom;
  • Additional, longer, or more flexible breaks to drink water, eat, rest, or use
    the restroom;
  • Changing food or drink policies to allow for a water bottle or food;
  • Changing equipment, devices, or workstations, such as providing a stool to
    sit on, or a way to do work while standing;
  • Changing a uniform or dress code or providing safety equipment that fits;
  • Changing a work schedule, such as having shorter hours, part-time work,
    or a later start time;
  • Telework;
  • Temporary reassignment;
  • Temporary suspension of one or more essential functions of a job;
  • Leave for health care appointments;
  • Light duty or help with lifting or other manual labor; and
  • Unpaid Leave to recover from childbirth or other medical conditions related
    to pregnancy or childbirth.

The Final Rule carves out four specific accommodations that the EEOC deems as
“reasonable” and will not impose an undue hardship in virtually all cases:

1. Allowing an employee to carry or keep water and drink, as needed, in or
   nearby the employee’s work area;
2. Allowing an employee to take additional restroom breaks, as needed;
3. Allowing an employee whose work requires standing to sit, and vice versa,
   as needed; and
4. Allowing an employee to take breaks, as needed, to eat and drink.

The rule also establishes additional requirements, such as limitations on an
employer’s ability to request documentation.

On June 17, a Louisiana court issued an injunction postponing the effective date
of a requirement in the Final Rule that covered entities provide accommodations
for purely elective abortions of employees that are not necessary to treat a medical

condition related to pregnancy in the states of Louisiana and Mississippi (the
injunction also applies to four Catholic organizations that challenged the ruling).
The new regulations otherwise took effect on June 28, 2024.

Conclusion

The Loper Bright Enterprises v. Raimondo ruling will likely impact all of the above referenced regulations, and currently existing regulations are expected to face new
challenges in the future. This creates a new level of uncertainty when dealing with new
regulatory guidance. If you have any questions about how the new Supreme Court ruling
may affect your industry, or existing regulatory issues, please contact our office.

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This Client Alert provides a general overview of new legal developments. It is not intended to
provide legal advice. If you have questions or would like more information about how these
developments may affect your business, please contact us at (570) 341-8800.