Chevron Overturned, Federal Agency Deference Over: Impact of Loper Bright on Regulations Affecting Employers and Educators

By Jenny Lee, Hailey Golds and Michael Warner - Franczek P.C.

August 20, 2024

On June 28, 2024, in Loper Bright Enterprises v. Raimondo, the U.S. Supreme Court overturned Chevron v. Natural Resources Defense Council, upending 40 years of judicial precedent holding that federal courts should defer to federal agencies when it comes to the interpretation of federal law. Given that the Supreme Court’s holding in Loper Bright implicates the validity of the actions and implementing regulations of agencies such as the Department of Labor, Equal Employment Opportunity Commission, and Department of Education, the Loper Bright decision will have a potentially major impact on employers and educational institutions.

Under the Chevron regime, courts deferred to reasonable agency interpretations of the statutes administered by those agencies, even if a reviewing court read the statute differently. In Loper Bright, however, the Supreme Court held that the Administrative Procedure Act (APA) requires courts to exercise their independent judgment in deciding whether an agency has acted within its statutory authority, and that courts may not defer to an agency interpretation of a statute simply because a statute is ambiguous. In overruling Chevron, the Supreme Court dramatically reduces the authority of experts at administrative agencies to interpret the agencies’ underlying statutes and gives this authority to the courts.

Loper Bright thus makes it easier for plaintiffs to challenge and potentially overturn agency rules and regulations. For example, the impact of Loper Bright has already been seen with respect to the Department of Education’s 2024 regulations implementing Title IX, which went into effect on August 1, 2024. The 1972 Title IX statute provides that “[n]o person in the United States shall, on the basis of sex, be excluded from participation in, be denied the benefits of, or be subjected to discrimination under any education program or activity receiving Federal financial assistance.” The 2024 regulations issued by the DOE interpret discrimination “on the basis of sex” to include discrimination “on the basis of sex stereotypes, sex characteristics, pregnancy or related conditions, sexual orientation, and gender identity.”

Since the Supreme Court’s decision was issued in June, several federal courts have cited Loper Bright in their decisions regarding whether or not to temporarily enjoin the Department of Education (DOE) from enforcing the 2024 regulations in numerous states and schools affiliated with plaintiff organizations. On July 2, 2024, relying on Loper Bright’s holding that a court “need not and under the APA may not defer to an agency interpretation of the law simply because a statute is ambiguous,” a Kansas federal district court found that the 2024 regulations’ interpretation of “sex” and “discrimination” as including sexual orientation or gender identity, among other characteristics, are contrary to the statutory and historical context of Title IX. In Kansas v. U.S. Dep’t. of Educ., the court reasoned that based on the meaning of “sex” at the time the statute was enacted in 1972, the term “sex” means “the traditional concept of biological sex in which there are only two sexes, male and female.” The district court held that the plaintiffs are likely to succeed in their claim that the DOE exceeded its statutory authority by expanding the definition of sex discrimination in the 2024 regulations to include discrimination based on sexual orientation and gender identity. (More information about the Kansas court ruling and its impact on schools can be found in our alert here.)

On July 24, 2024, in Arkansas v. U.S. Dep’t. of Educ., a federal district court in Missouri similarly relied on Loper Bright in finding that the DOE likely exceeded its statutory authority and/or acted contrary to law in redefining “on the basis of sex” under Title IX, declaring that “[t]he Court must ultimately decide the meaning of sex under Title IX.” On July 31, 2024, a federal court in Oklahoma, issuing a preliminary injunction against the DOE in Oklahoma v. Cardona, cited Loper Bright for the proposition that Congress enacted the APA “as a check upon administrators whose zeal might otherwise have carried them to excesses not contemplated in legislation creating their offices.”

Arriving at a different conclusion, a federal court in Alabama cited Loper Bright in a July 30, 2024, order denying plaintiffs’ request for a preliminary injunction of the 2024 regulations. Quoting Loper Bright, the court stated: “To determine whether an agency action is ‘not in accordance with law,’…a court must exercise its independent judgment” by using “traditional tools of statutory interpretation.” The court found that the plaintiffs did not establish a substantial likelihood of success in their argument that the Title IX Final Rule violated the APA because the plaintiffs did not provide any statutory analysis of Title IX to support their argument. (Notably, this decision was overturned by the 11th Circuit Court of Appeals two days later.)

Thus, while Congress had expressly granted the DOE the authority to effectuate the Title IX statute in a manner that is “consistent with achievement of the objectives” of the statute, these district courts’ rulings send a clear signal that whether a federal agency’s implementing rules are deemed to be “consistent” with a statute will now, post-Chevron, be a matter for the courts. This is bound to create further uncertainty and confusion, as demonstrated by these conflicting decisions above.

Other agency regulations implementing federal laws related to education, such as those interpreting VAWA, FERPA, IDEA and Section 504, are also at greater risk of legal challenges in the wake of Loper Bright. In the employment realm, wage and hour regulations implemented by the Department of Labor will likely be subject to challenge, as will recently issued EEOC regulations interpreting the Pregnancy Worker Fairness Act. Two federal courts cited Loper Bright in their decisions regarding the Federal Trade Commission’s final rule banning new non-compete agreements, set to take effect on September 4, 2024, with one federal court (in Ryan LLC v. Federal Trade Commission) issuing an injunction against the rule, while another federal court (in ATS Tree Services v. Federal Trade Commission) declining to enjoin the rule, thus setting up a potential circuit split and threatening the rule’s implementation.

Please reach out to a Franczek attorney if you have any questions regarding the Loper Bright decision and its implications on any federal regulation or statute that impacts employers or educators. We will continue to keep you posted on new updates in the post-Chevron federal regulatory landscape.

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