The U.S. Supreme Court recently made four important rulings that limit the power of federal agencies. Although these rulings didn’t directly target labor and employment agencies, their effects will be significant. This blog post explores how these decisions will reshape labor and employment law and what employers need to watch for in the coming months.
For additional information regarding labor and employment law, and to find out how this could impact your business, please contact our Managing Partner, Richard Liu, at richard.liu@consultils.com.
Supreme Court Rulings
1. Loper Bright Enterprises v. Raimondo
The Supreme Court decided that judges must independently interpret laws rather than defer to agency interpretations. This means courts will no longer automatically align with agency viewpoints, requiring a fresh judicial analysis of statutes. This decision is expected to challenge agencies like the Department of Labor (DOL) and the Occupational Safety and Health Administration (OSHA) to present more robust justifications for their regulations.
2. Securities and Exchange Commission v. Jarkesy
In this case, the Court limited the scope of penalties that can be imposed through administrative adjudication. The ruling questioned the constitutionality of in-house administrative law judges (ALJs) imposing penalties without jury trials. This decision could impact how labor and employment agencies, which often use ALJs, handle enforcement and penalties.
3. Ohio v. Environmental Protection Agency
The Court ruled that agencies must thoroughly address significant issues raised during the rulemaking process. Ignoring major public comments can render a rule invalid. This ruling underscores the importance of comprehensive and transparent rulemaking processes for all federal agencies, including those in labor and employment.
4. Corner Post, Inc. v. Board of Governors of the Federal Reserve System
This decision extended the timeframe for challenging agency rules, allowing lawsuits to be filed based on when an injury occurs rather than when the rule was established. This could lead to an increase in legal challenges against longstanding labor and employment regulations.
Impact on Labor and Employment Law
1. Challenges in Rulemaking
Labor and employment agencies, such as the U.S. Department of Labor (DOL), the National Labor Relations Board (NLRB), and the Equal Employment Opportunity Commission (EEOC), will face stricter judicial review. Previously, courts often deferred to these agencies' interpretations of statutes. Under the new rulings, agencies must now defend their rules as the “best” interpretations, not just “reasonable” ones. This shift places agencies on an equal footing with challengers, making it more difficult to introduce and defend new regulations.
For example, the DOL has recently issued major rules on overtime, worker classification, joint employment, pregnancy accommodations, prevailing wages, and non-compete agreements. All these rules are currently under legal challenge. The Supreme Court’s decisions mean these challenges will be evaluated with a stricter standard, potentially leading to more rules being overturned or blocked.
2. Enforcement Limitations
The Jarkesy ruling significantly impacts the enforcement mechanisms of labor and employment agencies. Agencies can no longer rely on administrative law judges to impose civil penalties through in-house processes. This decision forces agencies to seek enforcement through the federal court system, a more cumbersome and resource-intensive process.
For instance, the DOL’s H-2B visa program, which relies on administrative processes to enforce compliance, may now face significant operational challenges. The inability to impose penalties through ALJs could weaken the program's enforcement capabilities.
3. Structural Challenges
The Jarkesy decision also opened the door to challenges regarding the constitutional validity of ALJs. The Fifth Circuit’s broader decision suggested that ALJs’ independence from presidential control might violate the U.S. Constitution. This rationale could apply to ALJs across various labor and employment agencies, potentially undermining their adjudicative structures. Ongoing challenges to the status of these judges are likely to gain momentum, causing further instability in agency enforcement actions.
4. Need for Better Rulemaking Justifications
The ruling in Ohio v. EPA requires agencies to provide thorough explanations for their rulemaking decisions. Labor and employment agencies must now ensure that they address all significant issues raised during the public comment period. Failure to do so could result in rules being invalidated as "arbitrary and capricious." This ruling emphasizes the need for transparency and comprehensive justifications in the rulemaking process, adding another layer of complexity to the development of new labor and employment regulations.
What Employers Should Watch For
The next few months will be critical in shaping the future of labor and employment policy. Employers should be proactive in understanding how these Supreme Court decisions might impact their operations. Key areas to watch include:
Pending Legal Challenges: Monitor the outcomes of current lawsuits against major labor and employment rules. These cases will test the new judicial standards and set precedents for future regulations.
Policy Shifts: Expect labor and employment agencies to explore alternative methods of influencing policy, such as issuing more informal guidance or pushing for state-level regulatory changes.
Compliance Strategies: Work closely with legal counsel to adapt to new compliance requirements and prepare for potential changes in enforcement practices.
Conclusion
The Supreme Court’s recent decisions mark a significant shift in the balance of power between federal agencies and the judiciary. Labor and employment agencies will face heightened scrutiny and new challenges in both rulemaking and enforcement. Employers must stay informed and proactive in navigating this evolving legal landscape. Our firm will continue to monitor these developments and provide timely updates to help you stay compliant and prepared for the future.
For additional information regarding labor and employment law, and to find out how this could impact your business, please contact our Managing Partner, Richard Liu, at richard.liu@consultils.com.
Richard Liu, Esq. is the Managing Counsel of ILS. He serves clients as a management-side defense lawyer specializing in employment and business litigation. Richard is also an expert on litigation prevention and compliance. He regularly advises Fortune 500 companies and startups on employment, labor, and commercial matters.
Email: richard.liu@consultils.com | Phone: 626-344-8949
*Disclaimer: This article does not constitute legal opinion and does not create any attorney-client relationship.
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