In our first article, we explored the changing role of agencies in light of the Supreme Court’s decision in Loper Bright Enterprises v. Raimondo. To recap, the Court overturned Chevron deference which required courts to defer to federal agency interpretations of ambiguous statutes. Given the high degree of ambiguity in most statutes, Chevron positioned federal agencies as key players in shaping our regulatory landscape. Now under Loper-Bright, courts are required to independently judge whether an agency has acted within its statutory authority, significantly expanding the role of courts and opening the door for more challenges.
To be clear, the Loper-Bright decision doesn’t mean agency deference is dead. Statutes may be written differently over time to reduce ambiguity, but this won’t happen overnight, and agencies will continue to issue meaningful guidance for businesses. Employers, in particular, rely heavily on agency rules and interpretations because employment laws change so frequently and often overlap. Existing and future interpretations will continue to provide a reasonable basis to design their compliance operations.
What’s changed however, is the increased likelihood of challenges and likely disruption to existing operations. So, the question really becomes: How should employers think about their current operations in light of this ruling?
Evaluating Current Agency Interpretations and Guidance
With the weight of agency interpretations broadly diminished, employers should expect some significant legal challenges to longstanding rules. For compliance teams, that can be unnerving to say the least. But again, this won’t happen overnight, and as frustrating as disruption to processes can be, Chevron deference resulted in some equally frustrating outcomes. That frustration was key in the Loper-Bright case itself where commercial fishermen were required to bear the cost of federal monitors on their boats, a significant financial burden imposed based on agency interpretation.
Which brings us to the core of this article: How should employers approach specific agency interpretations that they’ve built their compliance operations around? To establish an approach, we’ll look at a few areas most employers are very familiar with.
Worker Classification under the FLSA
The Department of Labor’s (DOL) interpretation regarding worker classification under the Fair Labor Standards Act (FLSA) has gone through various iterations. The DOL has issued proposed rules and final rules over the years to provide guidance on distinguishing between employees and independent contractors. This agency interpretation significantly impacts wage and hour laws, including overtime pay and other benefits.
- What is vulnerable to change? The FLSA language is often ambiguous, particularly regarding what constitutes an independent contractor versus an employee. For instance, the DOL’s Final Rule, effective March 2024, outlines a six-factor test for classification but doesn’t clearly assign a specific weight to any one factor, creating ample room for varied interpretations. Even though this rule was interpretive, it carried significant influence under Chevron. With Chevron overturned, courts will now have more room to independently assess these classifications, potentially leading to more challenges from businesses seeking flexibility and from workers advocating for proper classification and benefits.
- How can employers prepare? Employers need to understand what they are preparing for in this new landscape. The key is recognizing the potential for differing interpretations across various jurisdictions and being ready to adapt to these changes. This could lead to a lack of uniformity in how the FLSA is applied, creating confusion and operational complexity–especially for employers operating in multiple states.
Background Checks and FCRA Compliance
When it comes to background checks and Fair Credit Reporting Act (FCRA) compliance, employers rely on interpretations from several different agencies. The FTC, EEOC, and CFPB all issue interpretation and guidance on issues ranging from proper disclosures to non-discriminatory evaluation of criminal records in making employment decisions.
- What is vulnerable to change? The FCRA’s provisions are often broad and ambiguous, particularly around the requirements for disclosure and authorization. The Act requires that employers inform candidates about background checks in a “clear and conspicuous” manner, using a document solely for this purpose. The ambiguity of terms like “clear and conspicuous” and “standalone document” have created confusion and frustration for years, especially as digital solutions have become the predominant method of interacting with employees. This ambiguity has resulted in an entire industry where plaintiffs challenge employer procedures, with courts predominantly deferring to agency interpretations under Chevron deference.
- How can employers prepare? Employers need to understand what they are preparing for in this new landscape. The key is recognizing the potential for differing interpretations across various jurisdictions and being ready to adapt to these changes.
- Invest in tools for rapid adaptation: There is an increased possibility of federal circuits issuing differing rulings on what constitutes “clear and conspicuous” and a “standalone document.” Employers may need to quickly update their compliance procedures based on geography. Tools that enable rapid deployment of new content and different operational procedures will be key.
- Strategic investment in control: If a court rules that certain disclosure practices are non-compliant, employers may find themselves asking a background check provider to make changes on their behalf. And keep in mind, Consumer Reporting Agencies (CRAs) have their own compliance to worry about, potentially creating conflict regarding whose compliance is more important. Investing in more control and the ability to make changes for yourself can enable employers to decrease that reliance and ensure candidate experience isn’t jeopardized.
These are certainly not the only rules and regulations vulnerable to change. But these are representative of the real potential for disruption and how employers can approach this new reality that Loper-Bright presents.
A New Approach for Employers: Focus on Control In an environment where regulatory turbulence is expected to increase, a lack of control poses a significant threat to employers. While existing regulations will remain in place until challenged successfully, employers should prepare for more legal challenges, as courts will now independently review agency interpretations.
The Loper-Bright decision undoubtedly has the potential to disrupt many existing procedures and frustrate compliance teams all over. But it also provides employers with a compelling reason to make strategic investments—specifically in enhancing compliance control and unlocking internal expertise. By reducing reliance on third-party vendors and bolstering internal capabilities, businesses can better navigate the complexities of evolving regulations and assert their own reasonable interpretations at a time when courts are clearly open to revisiting frustrating outcomes.
Up next: We’ll dive into the practical applications Onboarded provides to help employers keep up to date, enhance control, and ultimately thrive in this post-Chevron world.
.png)
