By: Kelly J. Koelker and Michael E. Steinberg
The rules governing the employment relationship are always changing. Laws creating new employer obligations, technology solutions making work more efficient and more complicated, and rules governing the resolution of disputes between employers and their workers are around every corner. Wage and Hour Around the Corner is a new blog series for employers, in-house lawyers, and HR, payroll, and compensation, that helps employers stay on the cutting edge of wage and hour changes happening now and those on the horizon.
Seyfarth Synopsis: Following the US Supreme Court’s decision in Loper Bright announcing the end of Chevron deference, lower federal courts have begun to apply the decision to uphold some federal wage-hour rules while striking down others; state courts, meanwhile, have taken divergent approaches to agency deference in the wake of Loper Bright.
In June 2024, the Supreme Court overruled the Chevron doctrine of agency deference, under which federal courts deferred to agencies’ interpretations of ambiguous laws they administered so long as the agencies’ constructions were based on a “permissible” reading of the statute. Under the Chevron regime, courts were to defer to agencies’ statutory interpretations even if they would have reached different conclusions as to what the statute meant. In Loper Bright, the Supreme Court instructed that it is the task of the federal courts, not administrative agencies, to decide questions of law, including the proper construction of a statute.
Loper Bright produced immediate fallout in the world of federal wage and hour law. As we have covered previously, the Department of Labor’s “80/20” rule governing performance of non-tip-producing work by tipped workers, promulgated in late 2021, was the subject of pending litigation when Loper Bright was decided. A federal district court in Texas, applying Chevron deference, had upheld the validity of the rule. The Fifth Circuit, discarding the veneer of agency deference post-Loper Bright, reversed and vacated the 80/20 rule.
Nonetheless, Chevron—and Loper Bright’s overruling of Chevron—only comes into play where Congress has not explicitly delegated discretion to regulate to the relevant agency. As the Supreme Court stated in Loper Bright, “When the best reading of a statute is that it delegates discretionary authority to an agency, the role of the reviewing court” is to “fix[] the boundaries of the delegated authority” and ensure that the agency has engaged in rational decision-making within those limits.
In a number of instances, the FLSA makes such express delegations of regulatory authority to the Secretary of Labor. For example, under Section 213 of the FLSA, the Secretary has the express authority to “define[] and delimit[]” the statute’s minimum wage and overtime exemptions for bona fide executive, administrative, and professional employees (“EAP Exemption”). Earlier this month, the Sixth Circuit reaffirmed the DOL’s “broad authority” to “define and delimit” the scope of the EAP Exemption, and rejected an employer’s attempt to invalidate the DOL’s longstanding requirement that employees be paid a DOL-established minimum salary to qualify for the exemption. The Sixth Circuit’s decision came on the heels of a Fifth Circuit opinion reaching the same conclusion.
In short, employers should not assume that Loper Bright will usher in a sea change—its practical effects on the validity of most of the DOL’s rulemaking and administrative guidance under the FLSA may prove to be more modest. That said, after Loper Bright, it remains to be seen which areas of FLSA rulemaking courts will find to be questions of statutory interpretation rather than review of delegated discretionary authority. For example, in the litigation over the DOL’s 80/20 Rule, the Fifth Circuit found the inquiry turned on the proper interpretation of the statutory terms “engaged in” and “occupation,” terms the court found not to be ambiguous.
Meanwhile, employers facing state law wage-hour claims implicating state regulations also should consider whether and how Loper Bright might affect courts’ disposition of those claims. That is because when courts decide state wage-hour claims that are analogous to claims under federal wage-hour law, they often look to federal precedent for guidance or even expressly adopt the federal standard. This means, in theory, that if a federal court strikes down a federal wage-hour regulation based on Loper Bright, then a court looking to federal law in deciding parallel state law claims likewise could be inclined to reach the same result.
But this outcome—parallel determinations when both federal and state law claims center on application of analogous federal and state regulations—is not a foregone conclusion. Loper Bright involved interpretation of the federal Administrative Procedure Act (APA), which applies only to promulgation of federal regulations and thus does not directly affect courts’ analysis of state law claims involving state-issued regulations. Many states have a “mini-APA” comparable to the federal APA pursuant to which state regulations may be promulgated. If a state “mini-APA” tracks the federal APA, then courts examining state wage-hour regulations may be inclined to determine that Chevron deference likewise should not be granted to state rules after Loper Bright. But attention must be paid to the specific standard of review—independent of federal law—that states apply to guide courts reviewing state regulations.
Some states, including Georgia, Hawaii, Illinois, Massachusetts, and Texas, grant “substantial deference” to state agency interpretations of ambiguous state laws, sometimes expressly endorsing the Chevron approach. In these states, Chevron-like deference likely would still apply to state-issued regulations. Other states, including California, apply a somewhat lower, and sometimes variable, level of judicial deference when reviewing state regulations. Akin to Loper Bright, a growing number of state courts do not grant deference to state agencies in reviewing regulations interpreting state laws.
It remains to be seen whether courts or legislatures in the “substantial deference” states will amend their standard of review to align with Loper Bright, or will continue to call for Chevron-like analysis. At least one state supreme court (Hawaii) has expressly criticized the U.S. Supreme Court’s decision in Loper Bright and made clear that it will continue to defer to agency expertise in interpreting ambiguous state laws. One the other hand, a concurring opinion in another state appellate court decision (Georgia) has questioned whether it should abandon Chevron-like deference and follow the Loper Bright approach.
Given the complexity of these issues and the relative recency of Loper Bright¸ it is not surprising that they have not yet been widely addressed in federal or state appellate decisions. When confronted with analogous wage-hour claims asserted under both federal and state law, employers should:
- Analyze whether the claims turn on application of federal and state regulations.
- Analyze whether Congress or a state legislature has delegated rule-making authority under the applicable statute(s) and relevant authority.
- Consider whether defense of the claims would be advanced by challenging the applicable federal regulation under the standard announced in Loper Bright and the applicable state deference standard.
- Bearing in mind that state law wage-hour claims often carry with them longer statutes of limitations and enhanced damages relative to federal law, be prepared to rebut plaintiffs’ arguments that the outcome under state law should not be affected by analysis of the applicable federal regulation under Loper Bright.
If you have any questions, please do not hesitate to reach out to the authors of this post, or the Seyfarth attorney with whom you work. In addition to being here to assist with those considerations, we will continue to monitor these important developments and keep our readers informed.
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