Loper and Labor Law: Implications of a Possible Decrease in Deference on New Rulemaking

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Emily Manning:  Hello everyone.  And welcome to this Federalist Society virtual event.  My name is Emily Manning and I'm an Associate Director of Practice Groups with The Federalist Society. Today, we're excited to host a discussion titled "Loper and Labor Law: Implications of a Possible Decrease in Deference on New Rulemaking."

 

      We're joined today by Alexander Thomas MacDonald, shareholder at Littler, and Tammy Dee McCutchen, former Administrator for the Wage and Hour Division at the U.S. Department of Labor.  If you'd like to learn more about today's speakers, their full bios can be viewed on our website, FedSoc.org.  After our speakers give their opening remarks, we will turn to you, the audience, for questions.  If you have a question, please enter it into the Q&A function at the bottom of your Zoom window, and we will do our best to answer as many as we can.

 

      Finally, I'll note that, as always, all expressions of opinion today are those of our guest speakers, not The Federalist Society. With that, thank you for joining us today.  And, Tammy, the floor is yours.

 

Tammy Dee McCutchen:  Thank you.  And I am very opinionated. So, watch out.  We're going to do some of this in a question-and-answer conversation style, rather than speeches. And I'm going to start by asking Alex, back to basics, what is Chevron? And why does it matter?

 

Alexander Thomas MacDonald:  That's a really good question. And we talked a little bit about this before we started. And I think, for an audience of Federalist Society listeners, of all audiences in the world, are probably most likely, statistically, to be familiar with Chevron. But we're going to do a little bit of lead-in so that people understand the context and why we're talking about Chevron potentially going away and what it could mean for labor law.

 

      What is Chevron? Chevron was a 1984 case decided by the Supreme Court. It's essentially a bedrock of administrative law. If you took administrative law in law school, or even if you didn't, you probably read Chevron. It is one of the most influential Supreme Court decisions of the last century, one of the most influential Supreme Court decisions of all time. 

 

And I'm not just saying that to have a hot take or to hyperventilate. It's been cited more than 15,000 times at the last count I saw. It's extremely important. And why is it extremely important? Because it goes to a bedrock of fundamental principle that gets brought up and applied in most litigation involving federal agencies in the United States. And that litigation is becoming more and more common because federal agencies are becoming more and more active.

 

I saw one statistic not too long ago that since Chevron was decided, the number of pages, on average, published in the federal register, has doubled, which just tells you agencies have become much more active since Chevron was decided, which has led to a lot more disputes, statistically, about agency action, which has made Chevron even more relevant. So, I talked about why it's relevant. What is it? Chevron is essentially a decision that instructs lower courts on how they're supposed to handle disputes over an agency's interpretation of a statute that the agency has been charged with applying. 

 

In our labor and employment space, the things you think about is, okay, the Department of Labor's Wage and Hour Division is in charge of enforcing the Fair Labor Standards Act. The National Labor Relations Board is in charge of administering the National Labor Relations Act. The Equal Employment Opportunity Commission is in charge of implementing Title VII and various other anti-discrimination laws in the United States. And these agencies have built up a certain level of, some people would say prestige — I'll just say experience here — with implementing these laws.

 

And so, the question is how much weight should a federal court give to the agency's view of what a statute means in a particular case, in particular, when the agency has published a formal rule or some sort of other guidance explaining to the public how it views this statute, what its terms mean, how it will apply it, and, essentially building out the statute's meaning.

 

And what Chevron said in that case was that courts should accept the agency's interpretation when two conditions are true. And this has become known as "the Chevron two-step," though different people will tell you there's actually more steps embedded in here. But I'm not going to get into that. Step one is, is the statute ambiguous? Ambiguous meaning, could it be interpreted two different ways, in a certain context?

 

If the statute is ambiguous, then all the court is supposed to ask is is the agency's interpretation reasonable? If it's reasonable, then the court accepts that interpretation, even if — and this is the important part — even if the court, applying its own judgment or its own view of the law, would have interpreted the statute differently in the first instance. And so that means, in effect, that agencies are walking into court with a leg up in interpretive disputes.

 

Now, we'll get into the justification for that and maybe some of the effects of that. But that's the effect of Chevron, which is that courts are putting a thumb on the scale, or Chevron is putting a thumb on the scale in favor of the agency's interpretation in a dispute with a private party over what a statute means. That's step one.

 

Tammy Dee McCutchen:  Alex, you mentioned that the regulatory agencies, the executive agencies, are getting more and more active in regulations. Do you think that's why the Supreme Court is looking at Chevron now?

 

Alexander Thomas MacDonald:  Wow. So, I don't have a direct plug-in into the minds of any of the justices. I'm sorry. But there are certain developments, both in the legal community and the intellectual community, and government that could have led the court to consider Chevron now. So, actually, what is happening? Let's sort of explain that here.

 

      There are two cases in front of the Supreme Court right now: one called Loper Bright Enterprises, the other involving a company called Relentless. Both involve sort of a recondite statute about federal fisheries law. The underlying dispute is specifically about whether the government, the Department of Commerce, can make boats that operate, and these fisheries pay for, their own on-board monitors. There's some dispute about the statutory language.

 

It doesn't actually authorize this, but there's a way to read it. There's language in the statute that says the Department of Commerce can create reasonably necessary conditions. And there's some dispute over what that means.  But anyway, this is the ambiguity that's in front of the Supreme Court right now.  So, procedurally, that's what's happening.  The agency won at both the First Circuit and the D.C. Circuit. Both courts relied explicitly on Chevron to reach that result. And now we're up at the Supreme Court.

 

So, procedurally, that's why they're considering it now. Why did they take the case? There's been a couple of trends that may have led the court to decide that this was the right moment. One is the one we were just talking about, which is this increased agency activity. Just as a statistical matter, it is unquestionable that agencies are regulating more than they were in the 1980s. Just do the math. It's a matter of counting. They are issuing more regulations.

 

Now, we could go into some disputes about how substantive those are, how far the agency is reaching from the original meaning of the statute, how aggressive some of these regulations are. That's a more difficult question. But we do know, as a matter of just counting pages, that they are regulating more often.  We also know --

 

Tammy Dee McCutchen:  How about --

 

Alexander Thomas MacDonald:  I'm sorry.

 

Tammy Dee McCutchen:  How about agency flip-flops like we're seeing in the Labor and Employment space, for example, for independent contractor and joint employment? Could that be impacted?

 

Alexander Thomas MacDonald:  No. That's a good point. So, specifically, in our world, which is the labor and employment world, that's another trend that may be driving this, which is, we've seen -- and, again, this is something that's hard to quantify in numbers, but anybody who's following this space knows that we've had wild swings in policy going back and forth between the most recent administrations on several issues. A good example is joint employment.

 

You can see what's happening over at the NLRB. The NLRB issued new joint employment standards during the Obama administration. Those were challenged in court. Then the Trump administration reversed that decision. That reversal was reversed in the court. The board then issued a new regulation, which has now been pulled down by the Biden board which is now litigating that decision to pull it down in court. They've issued their own interpretation, which is also subject to dispute.  So, you're looking at six swings, in the course of six years, over one interpretation of one term in one statute.

 

That starts to look less like an agency applying its experience and judgment to a statutory term and instead looks like pure politics. We're not, at this point, deciding what the term "employer" or "employee" means in a statute, nor are we looking at an agency that is saying, "Well, in our decades of experience in applying this statute, we see these kinds of disputes bubble up. And we think the best policy is to implement it in this way." 

 

What you're seeing is who's in office and whose ox is going to get gored just based on — it's hard to describe it as anything else but a partisan, at least from an external viewpoint — a partisan dynamic, which may be driving some of the interest at the Court to say, "Yeah, this is a problem. This doesn't look like law. This looks like politics." And, in fact, this specific example was brought up during oral arguments over the Loper Bright and Relentless cases.

 

There was an amicus brief filed by CDW tracking some of these swings, specifically at the National Labor Relations Board. And Justice Kavanaugh asked about this. There's obviously some concern in some corners of the court that these swings were not reflective of agency experience or agency expertise, or even legitimate policy disputes. They were really just about personnel. Now, all of a sudden, we have a democratic administration or a republican administration. Now we can get a majority on the board. Now we're going to change the "law" because we can. It's just a matter of counting heads.

 

      So that's one perception that's pretty widely spread out there. There's been a lot written about this. I'm not breaking any new ground here. So that could be something that's driving the Court. But there's also been other institutional critiques of Chevron since then. Not only the effect it's having on agencies, but potentially the effect it's having on Congress. It's almost become a joke now, or a cliché, to say that Congress is stultified, that Congress doesn't do anything. We're not getting any new laws. They have no incentive to write laws.

 

      Whether or not that is related to Chevron, it certainly has opened a space for agencies to be the ones leading on policy in this country. If you're not passing any new laws, you're not amending any laws, you're not doing anything at Congress, whether that's to enact new policies or disapprove of policies that agencies are enacting, then that leaves a space for the executive branch to fill the void through notice and comment regulations or less formal guidance. And so that institutional incentive is certainly — I say certainly — could be playing some role in the Court's thinking.

 

      And one more institutional concern that you might think about when you're looking at this — and this is also in the academic literature, endemic in the academic literature — is this idea that Chevron and the increased activity that it has fostered among agencies is actually having a pernicious effect on our presidential elections. Look, I don't want to overplay this point because I'm not sure that I completely agree with it. Because presidential elections have been rancorous from the very start. It's not as if Thomas Jefferson and John Adams were best of friends after that election.

 

      But there are some people out there who are writing and saying that because agencies have become the lead policymakers in this country that it has enhanced the power of the president and, therefore, raised the stakes of presidential elections, has made them more partisan. Because, if you win this one election, all of a sudden you get to unilaterally write policy for the entire country.  That is going to make anybody strain, perhaps even more than they would have, to win the election. It just becomes apocalyptic, in the views of some folks.

 

Hon Tammy Dee McCutchen:  So, it makes Congress more lazy.  It makes the president more powerful. And what is it doing to the courts, itself? Isn't it also just giving courts an excuse to not actually judge?

 

Alexander Thomas MacDonald:  Yeah. I'm so glad you asked that question. Because that actually is the lead critique of Chevron. It's the one that's been around since the very beginning. And it's really the most obvious one. So, thank you for pulling me back to it. The whole idea of deference, to some, is antithetical to what courts are supposed to be doing.  So, Article III of the Constitution vests all judicial power in the courts.

 

That means, historically speaking, that courts are supposed to be exercising their independent judgment to resolve disputes and adjudicate the cases that involve the rights of private parties independently. That's why we have an independent judiciary. They are not supposed to be just accepting the views of one party in a case. And in any case that involves the government, if you're deferring to the government's view of a statute, that is, in some sense, what you are doing. You are letting one party dictate the outcome of a dispute between two parties. 

 

There's Philip Hamburger out there who's written about this. But many, many others have written about how this is just inconsistent with what we expect an independent judiciary, as Article III sets up, to be doing. It's also, on less momentous terms, although it's still pretty important -- we were talking about the Constitution. There's a statute that covers this issue. It's called the Administrative Procedure Act. Section 706, the Administrative Procedure Act says that courts are supposed to be resolving questions of law de novo.

 

And that means they're not supposed to defer. They're supposed to, "as new," on their own. That's what "de novo" means. And that's not what Chevron says. It's hard to square Chevron with that language. And one of the most damning critiques of Chevron is that Chevron, even though Section 706 was squarely on point and should have been discussed, it's never even cited in the decision. It's as if it didn't even exist. That has been another critique that's been around since 1984 when Chevron was decided. 

 

Hon. Tammy Dee McCutchen:  Very good. So, with that general background, let's try to focus in on labor and employment law. And I'm going to start out. I think Chevron has impacted labor and employment law. I'd like you to talk a little bit about that. But first, let's talk about rulemaking in general. And let me take that one because, as you know, I've been a regulator during my time in the Bush administration. I did regulations regarding the white-collar exceptions under Part 541.

 

And I find that an interesting one, because we did what we wanted to do, as an executive agency. And I will tell you, in that rulemaking, we had something like 13 votes in the House and Senate to try to stop us from doing what we were doing in the rule. But they were never votes on the same bill or the same language.  So, we just ignored them.  I also find it interesting because these are the regulations that govern when an executive, administrative or professional or outside sales employee is exempt. 

 

And here was Congressional laziness even before Chevron, Alex, because there are no definitions of those terms. Instead, they left it to the regulations of the secretary.  So, from a regulator, from somebody deriding the regulations, I think I can say the impact is, because of Chevron, you don't so much worry about being true to the text of the statute, as long as you can find an ambiguity in the statute.  What do you think?

 

Alexander Thomas MacDonald:  Tammy, since we're on this subject, before we move on, I've been dying to ask you, and I'm going to ask you live. There's been, in the air, some skepticism of the Department of Labor's interpretations of certain terms for which they receive Chevron deference in the Fair Labor Standards Act. And I'm thinking specifically of Justice Kavanaugh's dissent in the Helix case. He suggested that there was no basis in the statutory text for a salary basis in the definition of certain exemptions under the Fair Labor Standards Act. I would just love to hear your take on that. Just talk about that a little bit.

 

Hon. Tammy Dee McCutchen:  Well, absolutely. Well, first of all, I did file comments on the proposed regulations, of course, on behalf of the America First Policy Institute with James Sherk. And we actually took Kavanaugh's one sentence in Helix Energy and our first argument was there's no salary in the statute. And there isn't. I can read you the whole text here, because it's very short. "Any employee employed in a bona fide executive, administrative, or professional capacity," right? There's no "salary" in there.

 

      So, I think Kavanaugh has opened the door.  And if Chevon goes away, the door is open wider to litigation and argument that any salary test for exemption is contrary to the language of that section, especially when there are other exemptions, such as the 7(i) commissioned sales employee exemption, that include pay requirements. So, if Congress wanted a pay requirement in an exemption, it knew how to throw it in there.

 

      So, I think that's one area of employment law that you could see a shift. No, I will tell you, I know I'm an outlier. And I've heard over the years that many employers want the salary test because it's a nice bright-line rule. But, of course, what we're seeing, if the bright line is 35,000 salary annually, that's one thing.  But the Department of Labor wants that to be 55,000 and employee advocacy groups have suggested, like, 80,000. So, bright lines are good if you can draw them where you went to. And that's going back, Alex, where you get another example of change in administrations to get a completely different change of view about how important the salary level should be in making that exemption determination.

 

Alexander Thomas MacDonald:  Yeah. That's right. It's just such a great example of how this concept plays out in the real world. You had started to ask about rulemaking in general, specifically in the labor and employment space. And I think that's a real good way to start with the effects, because this is how Chevron applies on the first instance, or at least is most obvious, is when an agency is going through the formal notice and comment process under the APA.

 

      Most major federal agencies engage in notice and comment rulemaking with Chevron or quasi-Chevron authority. I'll talk about what I mean by quasi-Chevron authority at some point. Some of them are more active than others, but we have seen this play out very recently. I say very recently; over the last ten years. There's been quite a bit of rulemaking activity on behalf of federal agencies as we've seen administrations swing back and forth. And then, subsequent litigation, in which Chevron played some or a controlling role.

 

      I'll give you some examples of instances I'm talking about. Most people listening to this or watching this presentation will probably remember the controversy over OSHA's mask or vaccine rule and may remember the controversy over the EEOC's EEO-1 reporting requirements. We already talked about the NLRB's joint employment rules. And then there have been a variety of Department of Labor rules that have been issued, pulled back, reissued and challenged. These include overtime rules.

 

Not just rules about the salary basis, but there have been challenges to the Department's interpretation of certain rules around tipping, what work, and what workers qualify for a tip exemption. There's been litigation over the department's interpretation of certain "persuader rules." Those are rules that apply to somebody who's engaged in persuading employees whether or not to join a union. And then, right now, there's an independent contractor rule that's being challenged. 

 

And for complete transparency, I should flag for the audience that I work in Littler's Workplace Policy Institute. It's a group in Washington D.C. that focuses on these issues, focuses on regulation and new laws and new policy. And our group actually is involved and has been involved in many of these cases. We're involved in several right now. So, I just want to flag that for folks. And what I'm trying to give you is my personal views of these things. But you take what I say with that caveat. I am deeply involved with a group that is representing management in some of these issues.  So, I do come to it with that perspective.

 

Hon. Tammy Dee McCutchen:  Come on, the Department of Labor is scared of Littler, because Littler has been involved in so many cases where they have beat the regulations down. When I was there before I retired, I was involved in the litigation against the Obama era overtime regulations.  So, there's a lot of litigation. So, I think the impact is not only on will it change.  I mean, it's two things, right?  Will it change the approach of the agency when they're regulating?

 

And then the second half of this is what will be the impact on litigation challenging that? And I think one affects the other. If agencies like the NLRB, EOC, DOL, if any agency is a little bit more careful and measured in how they regulate and stop trying to stretch what the law says or finding, like, for example, in Part 541, they say it's ambiguous. Well, I don't see the word, "salary" in that statute. So how can it be ambiguous when it's not there? So, will agencies stop trying to find ambiguity to get past that first step of Chevron in every single word? It depends on what the definition of "is" is.

 

Alexander Thomas MacDonald:  Yeah. Let's put a pin in that about the statutory silence issue when we get to predictions. Because one part of the question that's in front of the court right now is not just should Chevron be overruled, but should Chevron be reinterpreted to find that there is no ambiguity just based on statutory silence. So, a statute is not ambiguous solely because it doesn't explicitly address something.

 

      You can't just say, "Well, it doesn't have that word in it, therefore, it's ambiguous whether that word should have been included," which, you say that to a normal person, they'd look at you like you're growing three heads. But that's how the laws develop. But you divided this into two concepts, which is extremely useful to think about it this way. So, let's walk through them one by one. The first one, and I'd love your opinion on this too, is how this is going to — you were in this seat, you were doing this — how is this going to affect agency decisions about rulemaking?

 

      My own view is that if Chevron goes away -- and I say it's my own view. This is just based both on observing agency behavior over time and watching what Chevron has done to agency activity. If Chevron were to go away, you would expect agencies to do two things. One would be to regulate less. If the benefit of having a formal regulation on the books is that it will receive Chevron deference when you try to apply it, and Chevron deference goes away, well, there's less incentive to regulate.

 

And so, you may see certain cases in which agencies do the cost-benefit analysis and decide "Well, we're not going to get much from having a regulation in the CFR. Perhaps there are other ways to accomplish our policy goals. Why are we going to go through this exercise only to go into litigation and have a toss-up in front of a court?" The other thing I would expect is that when agencies do decide that, for whatever reason, it is still good policy to have a formal regulation on the books, that that regulation will track, much more carefully, the statute itself, and will be far less ambitious about what it's trying to do, as far as moving policy needle. 

 

Agencies will be nibbling around the edges, as opposed to taking big swings with their regulations. I'm saying, "big swings." I'm not trying to be pejorative.  I think, even if you talked to some of the people in agencies today, they would tell you they're taking big swings. The one that's front of my mind right now — I've been talking to some people about it, even today — is the Department of Labor's new rules for the H-2A Program. And if folks haven't had a chance to take a look at these proposed regulations, please do. Because they illustrate exactly what we're talking about when we say the agencies are leading the policy apparatus of the federal government.

 

This regulation takes four or five words from an immigration statute which just says that the department is responsible for making sure that workers who come in through this temporary visa program are not undermining the working conditions of domestic workers. They've taken that just sort of sparse phrase and spun it out into an entirely new labor relations scheme, which, in some ways, mirrors the National Labor Relations Act — which doesn't apply to the workers under these programs — and expands it in some ways.

 

So, there's a concept called "secondary boycotting," which is illegal under the National Labor Relations Act. It just means you can't go picket in front of somebody else's facility because you have a dispute with me, to pressure me. That's what a secondary boycott is. This not only doesn't have the limits of the NLRA. This Department of Labor Regulation doesn't have those limits. It actually gives workers an affirmative right to engage in secondary boycotting. 

 

That's just a fundamentally new policy. You can't find that anywhere in any statute. The agency made this policy. That's lawmaking. That's writing a law. And they're relying on very "ambiguous" language — sparse language, silent language, which they're saying is ambiguous — to spin out this entire program. You're not going to see that if Chevron goes away, because you'd just have no chance of defending it.

 

Hon. Tammy Dee McCutchen:  I hope you're right that when Chevron goes away there'll be more restraint in the agencies, but I think it will take many, many losses in the courts for agency regulations before that will happen. And this gets back to the litigation. We continue to look for -- I'm sorry to say it, Alex, Littler files most of its challenges of DOL regulations where? In Texas, right?

 

Alexander Thomas MacDonald:  Well, you know, we've had some good luck in Texas.

 

Hon. Tammy Dee McCutchen:  So, there's going to be forum-shopping going on, depending on where you are. So, I hope you're right. But I'm sort of like, I'll believe it when I see it. 

 

Alexander Thomas MacDonald:  But doesn't that illustrate to you the pernicious part of Chevron and what this has done to the lawmaking process in this country? It shouldn't be about which forum you're in. We shouldn't have policy being made through this kind of piecemeal regulating and litigating. I ought to be made by Congress. And that's not my opinion. I'm not making a value judgment. That's what the Constitution says. I mean, if you don't like that process, take it up with James Madison. I didn't write the document.

 

Hon. Tammy Dee McCutchen:  And that's what, also, is sort of the other issue that's sort of related to this, is the major questions doctrine now. And so, I think Chevron being overruled and the major questions doctrine in place will work together to make sure that these wide swings by agencies do get knocked down by courts, even courts that you wouldn't normally think would knock that down.

 

Alexander Thomas MacDonald:  I'd love your opinion on this, because you mentioned the major questions doctrine. There's been a lot of commentary about whether Chevron is not about to be overruled, whether it's already dead. The Court, itself, doesn't cite Chevron anymore. It's been forever since the court really took it seriously and applied it. The last major case that I can think of where the Court really applied Chevron to the full hilt of its intellectual implications was Brand X. 

 

Brand X was a case where the Court effectively said that even once a court has interpreted a statute to mean one thing, the agency can come back and issue a new interpretation that is different from the one the court had. And if the agency does that, the court has to defer. And that flows directly from the logic of Chevron. But it shocks some people when they hear that, like, "Wait a second. You're telling me that an agency can overrule a court once it's issued a decision in the U.S. Reports that you can open and read? And that can be overturned by an unelected agency?" Well, yes. That's what Brand X says. 

 

But the author of Brand X, Justice Thomas, has since said that he thinks Brand X is wrong.  And that's part of a broader trend, which is, you just don't -- Chevron is not getting a lot of play at the Court.  Instead, what you're seeing is the development, or at least the more full articulation of doctrines like the major questions doctrine. So, with those doctrines having developed and with Chevron sort of dying on the vine at the most important court in the land, how important is Chevron? What do you think, Tammy? Is Chevron even --

 

Hon. Tammy Dee McCutchen:  Yeah, you're right. Of course, I follow all the FLSA cases that come before the Supreme Court. And things like the pharmaceutical sales rep exemption, the Section 30 definition of clothing. No mention of Chevron, right? And, also, in the more recent cases, which is, let's tie this more closely to employment law. They also, as you know, abandoned this interpretation thing where you have to interpret exemptions very narrowly, but the rest of the statute very broadly. 

 

And that was kicked out the window too. So that now the Supreme Court has said, for the FLSA, "you are interpreting every word the same and not differently." So, I think you're right. I think it hasn't been that important in the Supreme Court for a long time. On the other hand, very few cases get to the Supreme Court. Most of the litigation is in the district courts and the appellate courts. And those courts do use Chevron, as we talked about. They use Chevron so that they can just say, "Okay. The agency is right." And I think it's a bit of laziness. It's a bit of "I'm not going to actually do the statutory interpretation myself. I'm just going to let the agency win." So it's still important in the lower courts. And that's where most of the litigation is going on.

 

Alexander Thomas MacDonald:  Yeah. That's a really great point. And, particularly in our world, labor and employment cases don't often reach the U.S. Supreme Court. They're almost always decided in the lower courts. And the lower courts are still applying Chevron. There's no question about that. Before we move on too quickly, we should tick through some of the other labor employment issues that are out there right now that could be most immediately affected, because we're talking about rulemaking.

 

      There are several rules just hanging out there right now that are in existence, or have been proposed, that could be affected by this change. And so, what are those? I already mentioned the independent contractor rule. Just to give a little bit of history, the Department of Labor didn't have a formal regulation on the definition of independent contractor until 2021. It was in the last thing that the Trump administration did, toward the end. They published this rule. It took effect in January 2021.

 

The Biden administration came in and did two things in relatively quick succession. They issued one rule saying that they were pausing the implementation of that independent contractor rule. And then they quickly followed with another rule saying that they were rescinding that rule. Both of those were challenged in court. A district court in Texas, in March 2022, said that both actions were invalid, and put the 2021 rule back into effect. And it's actually the rule that's in effect as we're talking today. 

 

In the meantime, rather than take another run at this and try to pull that rule down again, the Department of Labor decided to go through another rulemaking, this time proposing a different test through regulation. That regulation was proposed in October, was finalized a few weeks ago, and is scheduled to take effect the coming March. That's still at issue in the litigation. The case is sitting with the Fifth Circuit right now. There's some procedural motions flying back and forth. 

 

But Chevron is going to play, whatever happens to Chevron — I say, "is going to;" you shouldn't make categorical predictions — is likely to play a pretty significant role in how that case develops, going forward, at least as far as what level of deference the agency is going to receive.

 

Hon. Tammy Dee McCutchen:   I tell you, Alex, one wrinkle on this is even if Chevron goes away, will it have an impact? Because, the truth is, for independent contracting, under the FLSA, the definitions of "employer," "employee," and "to employ" are so vague and so circular, unless the Supreme Court decides to define those terms, and they haven't breached that question since the 1040s and that's where you get the whole economic realities test. But just let me remind you, an "employee," under the FLSA, includes any person acting directly or indirectly in the interest of an employer. An employee is --

 

Alexander Thomas MacDonald:  Well, that settles the question. That seems perfectly clear to me, Tammy.

 

Hon. Tammy Dee McCutchen:  Perfectly clear. An "employee" means an individual employed by an employer. And "to employ" means to suffer or permit to work. So, there's nothing there in the statute. And that's why the problem of who's an independent -- and we've written about this, Alex, together, I know. And anybody, just Google us both and you'll see the works that we've done. But basically --

 

Alexander Thomas MacDonald:  We've got a bunch of them floating out there now.

 

Hon. Tammy Dee McCutchen:  We do. But the reason why independent contractor versus employee is so difficult is because it's like nothing in the statute. So even if Chevron goes away, how does a court not listen to the DOL when they're trying to define those terms?

 

Alexander Thomas MacDonald:  Well, let me throw another wrinkle at you. In the rule itself, the Department does not explicitly rely on Chevron. Well, what do they rely on? They rely on an older case called Skidmore, which was also an FLSA case. And Skidmore deference, at least from the tenor of the arguments in the Loper and Relentless cases, seems to be the main competitor or fallback position for Chevron deference. And let me explain this a little bit more so people don't get completely in the weeds. Skidmore was a case about whether certain sleeping time, when the employees were sleeping on the employer's property, was compensable time under the FLSA. That was the substantive labor law question, or labor and employment law question.

 

The Supreme Court, in the course of deciding this, as a matter of law, looked at the Department's interpretation, the Wage and Hour administrator's interpretation. And Justice Jackson, the original Justice Jackson — beautiful writer, by the way, I just want to say — he looked at the Department's interpretation, said, "Well, you know, the administrator has a lot of experience applying the statute. He's seen these things come up over and over. He's had the same, consistent position on this issue for quite a long time. That opinion is rational and well-reasoned, and so we ought to give it significant weight."

 

That's what Skidmore means. It has the Department or agency or board, or whatever entity is in front of you, apply the statute in a way that is both consistent, both based on actual expertise and experience, and has been consistent over time, is persuasive, effective. Should we defer to that? It's a much lighter and less rigid form of deference. But it is, nevertheless, deference. And we can talk a little bit more about Skidmore when we get to predictions, if you'd like.

 

But that's another wrinkle in the independent contractor case is that the Department itself is not relying on Chevron. It is already relying on this lower level of deference. So that could scramble how this effect ends up playing out with that particular rule. But there are other rules out there. There's the NLRB's joint employer rule. There are rules that the Department of Labor has just issued under the Davis-Bacon Act, in which they are claiming effectively near-unilateral authority to define terms under that statute, in particular, the term "prevailing wages."

 

I'll take one side note on this. The Davis-Bacon Act, for those of you who don't know what it is, it's a prevailing wage law that applies to federally-funded and federally-assisted — meaning that some federal money is going in there — construction projects. So, if you are in the construction contracting world, Davis-Bacon is extremely important to you. And if you're not, you've probably never heard of the statute.

 

Hon. Tammy Dee McCutchen:  And if you're --

 

Alexander Thomas MacDonald:  The Department hasn't -- go ahead, Tammy. I'm sorry.

 

Hon. Tammy Dee McCutchen:  All taxpayers should care because the Department's proposed regulation basically means the prevailing wage will be a union rate, which is significantly higher than a market rate, which means we're paying more for every federal building that goes up.

 

Alexander Thomas MacDonald:  That's exactly right. And this interpretation, this definition of prevailing wages, was changed in the 1980s for exactly that reason. It had come under heavy criticism, not from Republicans, not from rock-ribbed conservatives, but from the government itself. The GSA issued a pretty scathing report about how this was driving up federal construction costs. 

 

And the inspector general of the Department of Labor itself issued a similarly scathing report. And that persuaded a lot of people, "Look, we need to take another look at this." They changed the definition in the '80s. That definition's been in place until just late last year the Department changed it to go back to this union-friendly definition.

 

Hon. Tammy Dee McCutchen:  And Littler is representing ABC and challenging that reg. So, you're probably waiting to see what you're going to argue, based on the Supreme Court's decision on Loper.

 

Alexander Thomas MacDonald:  Yeah.  I should actually flag that for our audience. I am on the pleadings in that case.  So, you're not getting a completely disinterested view of that particular regulation.

 

Hon. Tammy Dee McCutchen:  How about the ESG Investment Rule? That seems to be pretty far afield from the definition of what's a fiduciary duty.

 

Alexander Thomas MacDonald:  Absolutely. Absolutely. That's another one that's hanging out there. And there's also a regulation out about project labor agreements which could be affected by this particular change in the law. So, we could spend the next 15 minutes ticking through federal regulations.  Because, the thing is, it's not just the regulations that have been recently proposed that could be subject to challenge if Chevron were to go away. It's, potentially, any regulation which the Department of Labor or Equal Employment Opportunity Commission or OSHA or any other federal agency is relying on Chevron for deference. Those could be open to challenge if the doctrine itself goes away, which could lead to a period of substantial pushback against some of these regulations. It's hard to predict exactly how that would turn out. But I do think that would be the result.

 

Hon. Tammy Dee McCutchen:  Let's talk about the procedural posture. It's not like there's a statute of limitation against challenging a regulation. If the DOL, if LRB, if EOC is trying to enforce a regulation against your company and you believe that, if there's Chevron deference going away, those regulations would be invalidated, you can bring them. So, you could challenge a regulation that's been on the book for 30 years, right?

 

Alexander Thomas MacDonald:  That's right. That's right. So, for procedural challenges and errors they made in the rulemaking process, the APA has a 6-year statute of limitations. But to your point, if, let's say, the Department of Labor has had a regulation on the books since, I don't know, the 40s, which some of these are old enough to be, and I believe that that's an incorrect interpretation of the law, and they sue me, I can certainly raise that as a defense. And if Chevron is no longer the law of the land, then it's possible that the agency will get no deference from a court and the court will take a fresh look at it.  And that -- that regulation could be a jump ball. Or at least the correct interpretation of the statute could be a jump ball.

 

Hon. Tammy Dee McCutchen:  So that sounds very disruptive. And I do want to get to predictions. But as we're at the quarter to the hour, what I'd like to do is take a few questions first and then pop in at the end with some predictions. So, Emily, do you have some questions for us?

 

Emily Manning:  I sure do. Thank you both for this great discussion. And we'll now turn to audience questions. So, if you have a question, please enter it into the Q&A function at the bottom of your screen. So, the first member of our audience is asking, "In a world with Chevron or without it, are all agencies equivalent? Or are some more equal than others? If the latter, how and why does that happen?"

 

Alexander Thomas MacDonald:  Bonus points for the George Orwell reference in a webinar about the administrative state. The answer is that there are significant differences. And there are significant differences, not because some agencies are just better at this than others, but because they have different statutory authority. There are agencies, like the Wage and Hour Division, who have delegations in their statutes to define certain terms or to implement certain regulations. The National Labor Relations Board has similar delegated authority to implement the National Labor Relations Act through regulation. They're allowed to do it. And in those cases --

 

Hon. Tammy Dee McCutchen:  I would mention, also — excuse me — OSHA and EPA for making factual determinations based on scientific evidence regarding the environment and safety. And so, I cannot see any court walking away from deferring to those agencies, because it is based on their experience, their factual determinations, as opposed to statutory analysis.

 

Alexander Thomas MacDonald:  Well, that's a good distinction to draw, Tammy. Because there's a conceptual difference between deferring to an agency based on the agency's investigation and determinations of underlying facts in the real world — scientific concepts, statistical concepts, economic concepts, just impressions about what is life like on earth— as opposed to deference to an agency about what certain words mean in the U.S. Code. The former is more like what agency "deference" was originally intended to mean, and what, I'll just say, makes more rational sense.

 

A court isn't out there conducting these experiments, isn't running tests, doesn't have a laboratory where it can second-guess OSHA or EPA or some of these more scientific agencies on the determinations they're making. And more to the point, those kinds of determinations are much more easily characterized as executive activity. What the agency is doing is it's taking statutes that Congress has enacted through the appropriate processes, and it is implementing them in real life.

 

It's saying, "All right, well, they told us to set a safe standard of particulars in X water source. We test it. We've run the test. This is what we've come up with." It makes sense for the court to say, "All right. You've been tasked with figuring this out. You've determined, based on a scientific judgment, that this is the safe level. We will defer to you." Whereas it doesn't make sense for them to defer to the agency about the definition of certain terms. Or at least it makes less sense, when you --

 

Hon. Tammy Dee McCutchen:  Just like appellate review of the fact-finding versus the law, which should be de novo. And within the employment law context, the only agency that really does that sort of scientific fact-finding is OSHA, right? Wage and Hour, NLBR, EEOC, that's all interpreting statutes. So, I think OSHA might actually continue to get significant amounts of deference on their fact-finding, even without Chevron.

 

Alexander Thomas MacDonald:  Yeah, I can't let this webinar end without mentioning this fact, because it makes me chuckle every time I think about it. The National Labor Relations Board, which is supposed to be our expert on labor relations in the real world, is forbidden from employing a labor economist to inform its decisions. It actually can't do it. It can't make those kind of real-world scientific or social scientific judgements. All it can do is set up a kangaroo court of five lawyers to make mini judicial decisions. 

 

Hon. Tammy Dee McCutchen:  Emily, do we have another?

 

Emily Manning:  So, the next member of our audience is asking, "If Chevron is overruled or even substantially mitigated, how will that affect local state agencies, such as workers compensation?"

 

Alexander Thomas MacDonald:  That's a great question. So state and local agencies are all implementing state law, right? Many of them — and this is a critique that's been leveled at state supreme courts in general — have parroted federal deference standards. So, there are the equivalent of Chevron in a lot of different states. But that's not true everywhere. And you've seen a trend in recent years — Ohio, I think, is one state that has explicitly moved away from Chevron — that many states are saying, "Actually," for all the reasons we've been talking about for the last 15 minutes, "this kind of deference doesn't make sense. We are going to take a de novo look at questions of law."

 

      And, in fact, this is one of the more powerful arguments that's been made against Chevron.  So, Tammy, you mentioned, well, this could cause chaos. Won't we have this period of disruption after Chevron is overturned? Well, the evidence suggests no, because we have states that have moved away from Chevron and have said, "No, we're going to lean in. We're going to be looking at our agencies' interpretations de novo."

 

And there hasn't been widespread chaos in those states. We haven't seen anarchy explode. We haven't seen this huge wave of litigation. In fact, what you've seen is courts doing their job and the normal functioning of government without this sort of multilayered, multistep deference doctrine. But, in answer to the listener's question, it is a question of state law rather than -- it won't directly affect it. 

 

Hon. Tammy Dee McCutchen:  But I tell you, I was just Googling. And I could not easily find a list of states that have backed off of Chevron. So that might be, Alex, a good Federalist Society blog for you to write, is to inform our audience of a list of states that have already abandoned Chevron, and states that use Skidmore.

 

Alexander Thomas MacDonald:  I would read that article.

 

Hon. Tammy Dee McCutchen:  Yeah, yeah.  You should write it.

 

Alexander Thomas MacDonald:  I'll take it under advisement.

 

Hon. Tammy Dee McCutchen:  All right, Emily. Let's go back to the questions.

 

Emily Manning:  All right. An audience member is asking if Chevron requires deference to agency adjudication or only to rulemaking.

 

Alexander Thomas MacDonald:  Another great question. It's both. It is both.  And I promised, I mentioned earlier the quasi-Chevron doctrines. So, Chevron, by its terms, could apply to an agency decision that was made with statutory authorization through an adjudication. You might imagine something like the NLRB would be the primary example. But it's technically not, because the NLRB got deference before everybody else. There was a case called Hearst Publishing, in which the Court said it was going to defer to the board's interpretations made through adjudication, not through rulemaking. That's how the board makes most of its policy, is through adjudication. 

 

It has the authority to do both. It usually does it through adjudication. And that gets the same kind of deference from the courts. Even though the board's deference is based on a different case, the underlying logic is the same. The underlying concepts are the same. And so, whatever happens in Loper Bright and in Relentless, the underlying logic is going to carry through to cases like Hearst and the deference doctrines that apply to agencies like the board that make their interpretations through adjudication. It's the same concepts. It's a different procedure. It just depends on whether the agency is authorized to make policy through these adjudications or not. 

 

Hon. Tammy Dee McCutchen:  I think there will be a split between, just like you're reviewing a district court's decision between fact-finding and interpretations of the law. So, if Chevron goes by the wayside, I think courts will start doing their own bit of statutory interpretation, regardless of whether it's a regulation or adjudication decision.

 

Alexander Thomas MacDonald:  That's right.

 

Emily Manning:  So, I want to give you time to discuss your predictions. So, I'll leave you with this last question. "What is your best guess on the timing of the Supreme Court decisions on both the Loper and the Relentless cases? And what do you predict will happen?"

 

Alexander Thomas MacDonald:  I don't think that actually requires a great deal of foresight. It's going to be the last week of June. This is when they release all the big decisions. So, we're all going to be refreshing the page, waiting for the decision to come out. Do you feel differently, Tammy?

 

Hon. Tammy Dee McCutchen:  No, I don't. I think it will be one of the last decisions because it is so important. And how written opinions will there be? Many. So, all right. That's a good segue. Let's move to predictions. We have about six minutes left, Alex. Go to it.

 

Alexander Thomas MacDonald:  I'm going to make one bold prediction and one sort of out of the side of my mouth prediction. The bold prediction is Chevron will not survive in the form that we have always known it. The Court did not take this case to do nothing. It is, at minimum, going to pare Chevron back. The question is how far are we going to pare it back? Are we going to get something like we got with the Lemon test, where you have Justice Gorsuch coming out and saying, "You know, it's been dead the whole time. We haven't been citing it. But just in case you missed that, we're formally overruling it."

 

      That would satisfy a lot of the commentariat. I don't actually think we're going to get that, if I'm being completely honest. I think what we're more likely to get is some opinion from the Court that says we've all been misunderstanding Chevron this whole time. Chevron never meant that you're just supposed to just rubber-stamp the agency's decision. Rather, what you're supposed to be doing is making an initial judgment using the traditional tools of statutory interpretation about what the statute means.

 

And then, if you reach a point where you just throw up your hands and say, "Look, the scales are equal. I can't really tell, using my traditional terms, what this means. What do you think, agency?" And then, in that case, you can take the agency's position into account and maybe tip the scales. That sounds a lot like Skidmore to me. That doesn't sound like Chevron.

 

But, actually, if you're pressing me and saying, "What do you think is most likely?" I think that's what the Court is going to do. It's going to say that Chevron has just been overinterpreted. It's not supposed to be this grand reallocation of interpretive authority. It's just a guide for judges to do what they're supposed to be doing, which is reading the law. That's effectively overruling Chevron. But I don't think they're going to say that.

 

Tammy Dee McCutchen:  Then why not just say Chevron is overruled and Skidmore is the deference for all agency actions? Wouldn't that be clearer?

 

Alexander Thomas MacDonald:  Well, I think it would be clearer. But the reason I think they're going to go something more along those lines is you heard several of the justices expressing some concern about what overruling Chevron would mean for many, many, many precedents in the lower courts that were applying Chevron. Does that mean those are all up for grabs? 

 

They are concerned about this chaos argument that some of the petitioners have been making, or the amici have been making. And so, rather than just saying that Chevron is overruled and all of these cases relying on it are now questionable, they're just going to say, "No, no, no, no. Chevron just doesn't mean what you think it means." And the result in all of those cases could still be correct. Because all it means, this is just applying a tool of statutory interpretation. We don't have to overrule 15,000 cases that have cited the case.

 

Tammy Dee McCutchen:  I'm sure, Alex, that you and the other lawyers at Littler would not be deterred in challenging those past decisions and regulations that went through Chevron deference anyway.

 

Alexander Thomas MacDonald:  Well, to be fair, Tammy, we're not deferred from challenging them now.

 

Tammy Dee McCutchen:  Exactly. So, what's the count? How many of the justices do you think would go for an all-out reversal of Chevron?

 

Alexander Thomas MacDonald:  Oh, gosh, an all-out reversal? So, Chevron is here in the court of history, and for all time overruled? I don't know. I think I could count to three.

 

Tammy Dee McCutchen:  Just three?

 

Alexander Thomas MacDonald:  You could probably get Justice Thomas. You could probably get Justice Gorsuch. You might get Justice Alito, though he's just been less vocal on these issues. Beyond that, I don't see anybody that wants to do that.

 

Tammy Dee McCutchen:  I'm thinking Justice Kavanaugh, because he has been rather disdainful of some of the agencies' interpretations of statutes. And to me, that puts him in a category that he might be willing to say, "All judges need to do their jobs all the time in doing statutory interpretation."

 

Alexander Thomas MacDonald:  That's fair. That's a fair supposition. I can't say that I have a window into his mind. But he did seem like somebody who was receptive to these chaos arguments. Though, the Chief and Justice Barrett were more obviously concerned about that aspect, at least at oral argument.

 

Tammy Dee McCutchen:  Well, as we close, I will tell you folks, I think Alex is exactly right. I don't think we will get a pure "It's gone. Chevron is reversed. But you guys, for many years, you have been misreading what Chevron means, and we're going to redefine it for you." I agree with you, Alex. I think that's what's going to happen. 

 

Alexander Thomas MacDonald:  Yeah. I hate to disappoint, folks. But I think we've filibustered for the full hour, Tammy. And there's still so much more to talk about.

 

Tammy Dee McCutchen:  Well, I hope our audience has found it helpful. So, I think we're ready to sign off, Emily.

 

Emily Manning:  All right. On behalf of The Federalist Society, thank you both for joining us for this great discussion today. And thank you, also, to our audience for joining us. We greatly appreciate your participation. Check out our website FedSoc.org or follow us on all major social media platforms @fedsoc to stay up to date with announcements and upcoming webinars. Thank you once more for tuning in. And we are adjourned.