The intricacies of federal administrative law can feel far removed from business’s day-to-day operations, but the Supreme Court’s decision last week in Loper Bright Enterprises v. Raimondo could have profound impacts on the federal government’s regulatory authority over U.S. companies. Loper directly overruled the court’s 40-year-old Chevron decision, which required federal courts to defer to the expertise of federal administrative agencies that issue regulations when the underlying legislation is ambiguous. For decades, Chevron has been used by federal agencies to defend rules that do not appear to directly flow from the agencies’ legislative authority.

In its new opinion, the Supreme Court says that courts and not administrative agencies must decide whether a regulation is authorized by Congress. Courts can consider an administrative agency’s interpretation of the law, but ultimately judges have the authority to determine if Congress has delegated authority to such agencies to issue regulations.

This decision will undoubtedly result in a host of lawsuits challenging the ability of multiple federal agencies to regulate U.S. businesses.

For example, given Chevron deference, businesses have assumed that the Occupational Safety and Health Administration has the authority to regulate a wide range of safety practices, even though few of these hazards are specifically mentioned in the OSH Act. Under Loper, employers have a substantially better chance of prevailing on arguments that Congress never gave OSHA the authority to set safety rules for a particular industry or practice. An employer could claim that safety regulations such as OSHA’s forklift driver certification rule are invalid because they do not appear in the 1970 law that created the agency.

On Tuesday, the Supreme Court declined review of a case that challenged the ability of OSHA to regulate most safety practices. The plaintiffs claimed that the 1970 OSH Act was hopelessly vague and unconstitutionally delegated to OSHA authority to regulate various workplace practices. If the appeal had been successful, this could have kneecapped the ability of federal OSHA to inspect and cite employers for the most hazardous workplace activities. The court’s denial means that groups hostile to OSHA safety regulations will need to challenge them on an individual basis, using the lack of Chevron deference to persuade federal courts to invalidate the rules. If federal courts begin making decisions on rules based on those judges' personal policy preferences, we could see a series of circuit court splits over the validity of OSHA and other federal regulations in various parts of the U.S.

Employers with pending OSHA or other appeals of federal regulations should consider whether to use Loper to raise substantive challenges to the rule that is the basis of the enforcement action. While this option adds a potentially effective defense to such claims, the expense involved in taking on federal regulatory authority could be substantial. In addition, federal agencies are likely to be more cautious and circumspect when issuing rules knowing that they are likely to face more intense judicial scrutiny than has been the case in the past.

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