A Fundamental Change Affecting All Federal Regulations
In 2024, the U.S. Supreme Court issued a landmark decision in Loper Bright v. Raimondo that significantly altered how courts review federal agency regulations, making it easier for businesses and industry groups to challenge both new and existing rules. This decision eliminated the “Chevron doctrine,” established in 1984 through the case Chevron v. Natural Resources Defense Council. Under this doctrine, courts deferred to federal agencies’ interpretations of ambiguous statutory language if the agency’s position was deemed reasonable, even if the court disagreed or believed a different interpretation was better.
The Chevron doctrine recognized the specialized expertise of federal agencies in addressing complex regulatory matters, something judges often lack. As a result, the doctrine made it very difficult to challenge agency rules, which could often have multiple “reasonable” interpretations of statutory language. Now, with the Chevron doctrine overturned, courts are free to apply their own interpretations of the law without deferring to agencies. This means that even if an agency’s interpretation is reasonable, it can be struck down if a court finds it is not the “correct” or “best” interpretation. This shift could lead to many current and future regulations being overturned, significantly impacting businesses and how they operate.
This change is likely to result in federal agencies pursuing more conservative regulatory initiatives. Developing regulations is a time- and resource-intensive process, often involving years of research, public comment, and implementation planning. Without greater certainty that their rules will survive judicial review, agencies may be less willing to invest the effort required to craft ambitious regulations. Similarly, businesses may hesitate to dedicate resources toward preparing for compliance with new rules that could ultimately be invalidated.
Additionally, a related Supreme Court decision in Corner Post v. Board of Governors of the Federal Reserve now allows industry participants to challenge regulations long after their adoption. Previously, challenges needed to be brought at the time a regulation was introduced. Following this ruling, businesses can now challenge regulations when they experience harm, even years later. This change opens the door for new and existing industry participants to contest long-standing rules, creating further uncertainty for regulatory compliance.
The impacts of these rulings are already being felt. For example, the Fifth Circuit Court of Appeals recently struck down the SEC’s new regulations for private fund advisers, including those managing hedge funds, venture capital, and private equity funds. These rules, years in the making, were overturned without the protection of Chevron deference. Similarly, key regulations such as the Department of Labor’s fiduciary rules for employee benefit plan service providers and the Federal Trade Commission’s ban on non-compete agreements have been delayed or blocked, as courts question whether they will hold up under scrutiny.
In addition to the cases already being contested, several key federal regulations are now under scrutiny, raising questions about whether they will face the same fate as the SEC’s recent rules. Among these, regulations issued by the Department of Labor (DOL) could be called into question. The interpretation of what constitutes an “employee” has already had profound implications for industries like construction, skilled trades, and the rapidly expanding gig economy, encompassing app-based ridesharing and delivery services. With Chevron deference no longer shielding this interpretation, its future now seems uncertain. This is just one example of a vast regulatory environment now facing potential challenges.
The elimination of the Chevron doctrine marks a fundamental shift in the federal regulatory landscape. Moving forward, businesses can expect both opportunities and challenges as courts take a more active role in defining agency authority. Our goal is to help you navigate these changes with confidence, providing resources and guidance to ensure you're well-informed and prepared for the evolving regulatory environment.
*Disclaimer*: Harvard Business Services, Inc. is neither a law firm nor an accounting firm and, even in cases where the author is an attorney, or a tax professional, nothing in this article constitutes legal or tax advice. This article provides general commentary on, and analysis of, the subject addressed. We strongly advise that you consult an attorney or tax professional to receive legal or tax guidance tailored to your specific circumstances. Any action taken or not taken based on this article is at your own risk. If an article cites or provides a link to third-party sources or websites, Harvard Business Services, Inc. is not responsible for and makes no representations regarding such source’s content or accuracy. Opinions expressed in this article do not necessarily reflect those of Harvard Business Services, Inc.