Analysis by Michael Baer
In the U.S., legislation can be very specific or very broad. Provisions can be ambiguous.
Often a law points to a federal agency or agencies to oversee it as it becomes effective, giving them authority to put out legally binding guidance. Frequently, an agency is left to interpret the intent of Congress in extending regulatory guidance because the law’s language lacks sufficient detail to be effectively implemented. Such interpretation needs to have some sound reasoning to justify it being included in a particular rule or regulation that provides governance around a particular statute.
There are a lot of lawyers that agencies in the Executive Branch have hired to do this, and, in part because of their expertise and apparent competency in particular topics, the Supreme Court in 1984 blessed an arrangement in a court case that challenged agency authority back in 1984 [Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837].
The Supreme Court justices in the Chevron ruling told U.S. courts and judges to look at agency regulatory interpretations with “deference” as to proper legal standing. Generally, in the event of a court challenge, judges were to follow an analysis process that deferred to the regulation as if it were based on sound, legal standing, unless clearly unreasonable.
No more.
Forty years later, the Supreme Court relooked at the Chevron doctrine and said allowing the agencies to apply such deference was wrong [Loper Bright Enterprises v. Raimondo, 603 U.S. ___ (2024)].
Supporters laud the latest ruling as appropriately stemming bureaucratic overreach. The ruling limits agencies from having the ability to, in this case, require monitoring costs associated with a law to be borne by businesses being monitored – when the law did not explicitly require those in the industry pay the costs of federal monitors.
Justice Elena Kagan, in dissent, said “Who should give content to a statute when Congress’s instructions have run out? Should it be a court? Or should it be the agency . . .” Before, agencies had the benefit of the doubt, “within the bounds of reasonableness.” Now, she says, it is the courts that will wield power when Congress has left an area to interpret.
Past decisions using Chevron are not to change because of this ruling, but going forward, judges will not be using the deference process for assessing the reasonableness of agency rules. Expect some to be very actively involved in interpreting the appropriateness and legality of the regulatory language to determine if it correctly follows the intent of Congress.
For Payroll, implementation of employment tax, labor, finance, and other laws depends on specific guidance from the overseeing agencies (IRS, the Department of Labor, and others). These agencies now will be navigating that guidance through unknown territory. It could affect instructions on how to timely comply with Payroll-related laws and the way Payroll stakeholders can educate agency rulemaking officials when rules are in their formative stage.
Michael Baer is president of Baer Unlimited, an independent research, analysis, and communications provider that helps Payroll modernize operations, stay compliant, and improve the use and security of their data. For more on these issues discussed above, contact him directly at mike.baer@baerunlimited.com, or book Michael as a mentor through the GPA Mentor page.
Analysis by Michael Baer
In the U.S., legislation can be very specific or very broad. Provisions can be ambiguous.
Often a law points to a federal agency or agencies to oversee it as it becomes effective, giving them authority to put out legally binding guidance. Frequently, an agency is left to interpret the intent of Congress in extending regulatory guidance because the law’s language lacks sufficient detail to be effectively implemented. Such interpretation needs to have some sound reasoning to justify it being included in a particular rule or regulation that provides governance around a particular statute.
There are a lot of lawyers that agencies in the Executive Branch have hired to do this, and, in part because of their expertise and apparent competency in particular topics, the Supreme Court in 1984 blessed an arrangement in a court case that challenged agency authority back in 1984 [Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837].
The Supreme Court justices in the Chevron ruling told U.S. courts and judges to look at agency regulatory interpretations with “deference” as to proper legal standing. Generally, in the event of a court challenge, judges were to follow an analysis process that deferred to the regulation as if it were based on sound, legal standing, unless clearly unreasonable.
No more.
Forty years later, the Supreme Court relooked at the Chevron doctrine and said allowing the agencies to apply such deference was wrong [Loper Bright Enterprises v. Raimondo, 603 U.S. ___ (2024)].
Supporters laud the latest ruling as appropriately stemming bureaucratic overreach. The ruling limits agencies from having the ability to, in this case, require monitoring costs associated with a law to be borne by businesses being monitored – when the law did not explicitly require those in the industry pay the costs of federal monitors.
Justice Elena Kagan, in dissent, said “Who should give content to a statute when Congress’s instructions have run out? Should it be a court? Or should it be the agency . . .” Before, agencies had the benefit of the doubt, “within the bounds of reasonableness.” Now, she says, it is the courts that will wield power when Congress has left an area to interpret.
Past decisions using Chevron are not to change because of this ruling, but going forward, judges will not be using the deference process for assessing the reasonableness of agency rules. Expect some to be very actively involved in interpreting the appropriateness and legality of the regulatory language to determine if it correctly follows the intent of Congress.
For Payroll, implementation of employment tax, labor, finance, and other laws depends on specific guidance from the overseeing agencies (IRS, the Department of Labor, and others). These agencies now will be navigating that guidance through unknown territory. It could affect instructions on how to timely comply with Payroll-related laws and the way Payroll stakeholders can educate agency rulemaking officials when rules are in their formative stage.
Michael Baer is president of Baer Unlimited, an independent research, analysis, and communications provider that helps Payroll modernize operations, stay compliant, and improve the use and security of their data. For more on these issues discussed above, contact him directly at mike.baer@baerunlimited.com, or book Michael as a mentor through the GPA Mentor page.