The "Chevron deference" ruling – what are its implications for insurers and employers?

The US Supreme Court recently overruled decades of administrative law with its decision in Loper Bright Enterprises v. Raimondo, ending the practice of judicial deference to regulatory agencies in interpreting statutes.

This change in how agencies operate could significantly impact employers and the workforce, affecting areas ranging from retirement planning and healthcare to hiring practices, according to J.D. Piro, senior vice president, Legal Consulting Group, Health Solutions at Aon.

In its decision, the Supreme Court overturned the doctrine of “Chevron deference,” which required courts to defer to federal agencies' interpretations of ambiguous statutes. Now, courts must determine whether an agency has acted within its statutory authority and independently interpret the statute's meaning, even if the statute is ambiguous.

This shift is expected to lead to greater judicial scrutiny of agency regulations. Piro emphasizes that this will have long-term implications for how federal agencies issue, defend, and enforce regulations.

The Loper Bright decision requires courts to interpret statutes independently and ensure regulatory agencies act within their delegated authority. Although this may not lead to an immediate surge in litigation, Piro suggests that new challenges to regulations could be costly, time-consuming, and carry the risk of failure. As a result, many organizations might prefer the predictability of existing regulations.

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Employers will need to monitor regulations comprehensively, as different courts may interpret the same regulation differently, leading to potential confusion. Eric Keener, senior partner in Aon’s US retirement practice, advises that employers may need to become comfortable with this uncertainty.

“If there’s a particular area, you’re looking for clarity on because there are no regulations issued yet, you may need to get comfortable being uncomfortable,” Keener said.

Multinational companies should also consider regulations outside the US. For example, the European Union’s Corporate Sustainability Reporting Directive requires disclosures on various sustainability topics.

Even if US federal regulations addressing sustainability are nullified, multinational employers may still need to prepare for these reporting obligations. Piro highlights the importance of a global perspective in regulatory compliance.

The regulations to watch out for

While the Supreme Court’s decision does not immediately overturn any regulations outside the specifics of the case, several workforce-related regulations could be affected, either because they are already being challenged or are expected to be.

• FTC Rule on Noncompete Clauses: In April 2024, the Federal Trade Commission (FTC) announced a rule largely banning the use of noncompete clauses. Scheduled to take effect in September 2024, the rule is already facing several legal challenges. A federal district court judge in Texas struck down the rule, but the ruling applied only to the parties in the case. Further rulings are expected, and appeals to higher courts are likely. The end of Chevron deference makes the rule’s long-term survival uncertain. Piro notes that this could significantly impact how businesses protect their proprietary information and competitive position.
• DOL Guidance for Retirement Plans: The Department of Labor (DOL) has issued various guidances that stakeholders believe highlighted the need to move beyond Chevron deference. These include regulations on environmental, social, and governance (ESG) investments and fiduciary investment advice. Challenges to these rules have begun, and more are expected as future guidance may face delays and further legal scrutiny. Piro points out that these developments will require employers to stay vigilant and adapt their retirement planning strategies accordingly.
• Regulation of Employer Group Health Plans: While the decision does not mandate immediate changes to the regulation of employer group health plans, increased scrutiny or legal challenges to federal regulations are anticipated. Many regulations are already in litigation, with more expected. Key regulations to watch include Section 1557 nondiscrimination regulations, surprise billing regulations, and preventive services coverage. Piro emphasizes that these potential changes could have widespread implications for employer-sponsored health plans.

Piro said that the decision suggests Congress will need to draft legislation more carefully, but it remains unlikely that any congressional attempt at specificity will eliminate ambiguities. Courts will continue to be the final arbiters of ambiguous laws.

“Navigating this new landscape is going to be a tough job, but an important one — not just for compliance but for your overall employee value proposition. Employers are going to need information, but more importantly, they’ll need guidance,” Piro said.

Piro noted that the ability to attract, retain, and sustain talent involves more than just compliance with the law. A trusted advisor monitoring regulatory developments while employers focus on their employees can help organizations make better decisions.

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