Hi, Ho the Witch is (not necessarily) Dead—Will the Death of Chevron Deference Change Wage and Hour Law?

Last week the Supreme Court killed Chevron deference.See Loper Bright Enters. v. Raimondo, No. 22-451, and Relentless, Inc. v. Department of Commerce, No. 22-1219 (June 28, 2024). Depending on your perspective, you either jumped for joy or you jumped off a bridge. To my mind, neither reaction makes a lot of sense.

First, let’s briefly remember what Chevron deference is/was. See Chevron U.S.A., Inc. v. Natural Resources Defense Council, 468 U.S. 837 (1984). Back in 1984, the Supreme Court was called upon to consider whether the Environmental Protection Agency properly interpreted the term “stationary source” in the Clean Air Act to encompass multiple pollution sources in the same industrial grouping. The Court established a two-part test to answer the question.First, if a Court determined that Congress has spoken on a particular subject, then the issue is whether the agency’s choice is consistent with that clear statement. If yes, the rule gets the thumbs-up; if not, the rule is rejected. However, if Congress has not directly spoken on the question, then the Court held that an agency regulation will be upheld if its rule is based on a permissible interpretation of the statute even if the Court might have reached a contrary conclusion if it had been the first arbiter of the statute’s meaning.

Regardless of whether I’m a fan of particular regulations or not, I’ve always been troubled by those aspects of the Administrative Procedure Act that treat government actions as presumptively OK. Chevron deference fell in that same category. Why should a Court cite Congressional silence or ambiguity to cede its role and walk away when a rule before it was clearly dumb, horrifically unjust, or even just incorrect? So, to my mind, the rejection of Chevron deference isn’t automatically a good or bad thing from a public policy perspective. It’s just the restoration of the judicial role to interpret the law.

Bear in mind that judicial review will remain constrained if Congress has delegated the task of closing gaps or defining terms to the executive branch. See Loper Bright, slip op. at 17 n.5 (offering the example of the Fair Labor Standards Act, which authorizes the Secretary of Labor to “define[] and delimit[]” aspects of the domestic service exemption). In such cases, judicial deference to agency interpretations remains intact with its role being to ensure “the agency has engaged in ‘reasoned decisionmaking’ within the boundaries of the Congressional delegation.” Id. at 18.

That’s why I’m just not buying into the frenzy that’s permeating the media coverage and the blogosphere in the days since the issuance of the Loper Bright decision. I’m especially puzzled by a number of employer-oriented blogs that are drooling at the prospect of rolling back the Biden Administration’s take on the independent contractor rule and increases to the dollar thresholds for the salary basis test applicable to exemptions under the Fair Labor Standards Act (“FLSA”).

The FLSA provides that its minimum wage and overtime provisions will not apply to employees “employed in a bona fide executive, administrative, or professional capacity . . . (as such terms are defined and delimited from time to time by the Secretary of Labor).” 29 U.S.C. § 213(a)(1). Going back to 1940, these exemptions have been defined in some fashion or another by regulations that set forth some combination of duties and compensation requirements to inform the analysis of whether particular employees are exempt.

Notably, DOL’s regulations require (generally) that employees be paid on a salary (as opposed to hourly) basis. In addition, the regulations set a minimum salary threshold that must be paid an employee if they are to be exempt. For many years, the salary minimum was $455 per week. The Obama Administration raised this amount to $913 per week; the Trump Administration lowered it to $680 per week; and now the Biden Administration has raised it to $1,128 per week.

The Obama increase was challenged in a Texas federal court that held the administration lacked the authority increase the salary threshold because, according to the Court, the government only had the authority to impose a duties test under the FLSA. In our view, the validity of this decision is quite shaky. Congress delegated plenary authority to DOL to “define and delimit” what it means to be “employed in a bona fide executive, administrative, or professional capacity.” For decades, Courts have applied the salary basis test and Congress has left the test completely intact. Loper Bright will not change this and Justice Roberts said as much. So, we’re not expecting any changes on this front.

Second, let’s consider the independent contractor rule. The FLSA requires the payment of minimum wages and overtime to employees. See 29 U.S.C. §§ 206-07. So, who’s an employee? Subject to certain exceptions, the FLSA states than an employee is “any individual employed by an employer.” 29 U.S.C. § 203(e). The term employ “includes to suffer or permit to work.” 29 U.S.C. § 203(g). Despite the circularity of these definitions, the FLSA historically has not covered individuals who work as “independent contractors.”

Unlike the EAP exemptions, Congress did not state that DOL can “define and delimit” who is an employee and the FLSA makes no mention of independent contractors. Rather, the independent contractor definition has evolved over the years via judicial interpretation and DOL regulations, which DOL asserts are consistent with judicial interpretation. The Obama, Trump and Biden administrations promulgated their own spins on the independent contractor test, which I blogged about this past January (click here). Under Loper Bright, any of these versions could be subject to judicial scrutiny. However, from a practical standpoint, who cares? As I note in my blog, the independent contractor analysis is a dressed-up smell test the outcome of which will vary from case-to-case based on the facts—even in the gig worker cases.

So, are any regulatory witches dead? Perhaps, but don’t count on it.