Business Impact: Supreme Court Ruling to End 'Chevron' Doctrine, Shifts Federal Regulations From Agencies to Courts

On June 28, 2024, the U.S. Supreme Court ended the Regan-era doctrine known as the Chevron deference doctrine. Chevron allowed federal agencies to have reasonable interpretations of ambiguous federal laws, giving agencies, and by extension, the President, the powers to legislate outside of Congress. In other words, federal agencies charged with rulemaking of enacted legislation were given the last word on implementing and creating rules resulting from passed legislation.

The overturning of the 40-year doctrine drastically limits the power of the current and future presidents requiring Congress to be more explicit in its directions to agencies as well as agencies to be conservative with their reach.

In recent years, the Biden administration has used Chevron to enact new climate regulations through the Environmental Protection Agency, ban non-competes through the Federal Trade Commission, and expand overtime pay eligibility through the Department of Labor. Despite today's Supreme Court ruling, those Biden-administration actions hold. However, future actions are now under the microscope.

An example of future impacts would be with IRS guidance that taxpayers have long relied on. Many statutes from Congress are only sentences long, charging the IRS to promulgate and implement rules related to a certain tax, which results in hundreds of pages from the IRS's regulatory division. Now, any promulgation from the IRS or Treasury is more open to challenges.

These changes present some challenges for this administration, most notably for student loan debt relief, sweeping climate change regulations, AI guidance, and Medicare's ability to negotiate drug prices. A District Court Judge on June 28, following the Supreme Courts decision, halted the Department of Labor's expanded overtime rule for public employees in Texas. This expansion was effective on July 1, with this district court signaling a nationwide ripple effect.

Why it matters: The overturning of Chevron will lead to businesses being able to plan farther out into the future and across presidential terms. This type of business-friendly policy consistency continues to be a priority for the Detroit Regional Chamber. With a potentially new President every four years, agencies were able to flip-flop their interpretations of their own regulations regularly and left businesses waiting until post-election to determine their business decisions. Now, moving forward, the decisions of what agencies do will require more certainty and must stand up to increased legal scrutiny. The instability and overreach of agencies hampered efficiency, investment, and advancements.

This decision indeed opens the door for more legal challenges and will delay the enactment of federal regulations. However, the Biden administration has used the rule-making process at an unprecedented rate to advance their policy goals without the involvement of Congress or public input. This step back allows for more thoughtful rules that work better with employers.

The Chamber will continue to update members through the new regulatory environment.