Mid-Atlantic Health Law TOPICS

On June 28, 2024, the United States Supreme Court overturned the Chevron deference doctrine, which was established by the Supreme Court in its 1984 decision in Chevron v. Natural Resources Defense Council, Inc. In Chevron, the Court had ruled that federal courts were required to give deference to federal agency interpretations of ambiguous federal statutes.  

In its June decision in Loper Bright Enterprises v. Raimondo, the Court ruled that Chevron deference violates the federal Administrative Procedure Act (APA) and usurps the longstanding role of federal courts in construing statutes.  

The Court’s decision will require federal agencies to demonstrate—without the advantage of having a preferred viewpoint—that in issuing a regulation they have determined the best meaning of any statute that is ambiguous or silent on the regulation’s subject.
 

What is the Chevron Deference Doctrine?

In Chevron, the Court devised a two-step analysis for determining if a federal regulation interpreting a federal statute and Congressional intent should be upheld.  

First, a court had to decide if the federal statute was ambiguous or silent on the subject of the federal regulation. If the statute and Congressional intent were clear, the court would have to reject any contrary administrative interpretation. 

Second, the court would have to find that the agency’s statutory interpretation was reasonable.

According to Chevron, courts should defer to federal administrative agencies to fill gaps when statutes are ambiguous or silent on an issue. Such deference is warranted because federal agencies have greater expertise than courts in their specific subject areas. Provided that the agency interpretation is reasonable, the court should defer to it.

What Did the Supreme Court Rely On?

In overturning the Chevron deference doctrine, the Supreme Court found that such deference violated the APA. Under the APA, which sets forth the formal process for agencies to issue rules, the duty to construe statutes is given to federal courts, not federal agencies.  The Supreme Court relied on Section 706 of the APA, which provides that federal courts are to “decide all relevant questions of law” and “interpret… statutory provisions.”   

In addition, the Court ruled that preservation of Chevron deference is not required by stare decisis, the judicial doctrine of adhering to prior court decisions. Finally, the Court found that the deference doctrine is unworkable. Accordingly, the Court concluded it is time “to leave Chevron behind.”
 

What Does Overruling Chevron Mean?

In its decision, the Supreme Court attempted to limit the magnitude of the shift it ordered in overruling Chevron deference.  

First, the Court ruled that reliance on its decision alone is insufficient to overturn a prior federal court decision that used the Chevron deference two-step framework.  

Second, the Court indicated that federal agency expertise will still be used as guidance in reviewing federal regulations. But absent Chevron deference, whether the agency’s rationale for a rule is followed by a court depends on its persuasiveness, not a pre-existing presumption of correctness.

What is clear is that post-Chevron, an agency will have to make its case in a federal court that its rule is consistent with federal law and Congressional intent. In short, the federal agency will stand in the same position as any other litigant.

Although it is too early to tell how the overruling of Chevron will play out, it is expected to affect court challenges to federal regulations across the board. In particular, observers are watching for developments in the following areas.
 

Health Care  

It did not take long for a health care regulation to come under fire at least in part based on the Supreme Court overturning Chevron deference. On the same day that the Loper Bright decision was announced, Hackensack Meridian Health filed a complaint asking a court to throw out regulations issued by the Centers for Medicare & Medicaid Services on how to calculate enhanced rates for hospitals that care for low-income patients. 

Challenges also are likely to federal agency rules implementing the Affordable Care Act, the Consolidated Appropriations Act and the No Surprises Act. Challenges also may be mounted against the Transparency in Coverage rule, and rules relating to Medicare drug pricing negotiations and the Medicaid drug rebate program.

Employment  

On August 20, 2024, a U.S. District Court judge in Dallas set aside the Federal Trade Commission’s nationwide ban on non-compete provisions in employment agreements.  The ban was set to take effect on September 4.  The FTC is expected to appeal.  

Post-Chevron it is clear that a federal court will not be allowed simply to defer to the FTC in deciding whether the agency has jurisdiction to ban non-competes as part of its longstanding role in policing unfair competition.   

Also likely to face a court challenge is the Department of Labor (DOL) rule issued in January on whether a worker is an employee or an independent contractor under the Fair Labor Standards Act (FLSA). In 2024, DOL modified the analysis adopted during the former Administration in an effort to expand the number of workers who are deemed employees. The FLSA’s overtime and minimum wage provisions cover employees, but not 
independent contractors. 

DOL regulations on other FLSA exemptions, pay equity, disparate impact compliance and federal contract compliance also likely will come under further scrutiny now that Chevron has been “left behind.” 

Retirement  

The SECURE and SECURE 2.0 Acts passed in 2019 and 2022 impose new requirements on (and authorize new features for) employer-sponsored pension plans regulated by the Employee Retirement Income Security Act  (ERISA) and federal tax law.  The federal agencies tasked with implementing laws relating to pension plans likely will issue regulations that will be tested post-Chevron in federal courts.  

In addition, the DOL’s Fiduciary Rule, which modifies the law relating to prohibited transactions, also may come under further scrutiny.
 

Theodore P. Stein
410-576-4229 • tstein@gfrlaw.com