Corporate Counsel Connect FEBRUARY 2025
Are Businesses Really Better Off Post- Chevron ? 5 Issues for Corporate Counsel to Track + Your Action Plan
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We’re already seeing the impact of the Supreme Court’s landmark ruling last year overturning the decades-old Chevron doctrine. But while the Loper Bright decision offers a powerful new tool for corporate counsel looking to fight back against regulatory agencies, there may be hidden dangers lurking beneath this apparent victory. The ruling will no doubt have a broad impact on business operations – and especially workplace law – but the end of the decades-old Chevron doctrine could come at a cost. Here are five reasons this victory might fall short of the hype for businesses, the impact on corporate counsel, and the actions you should consider taking now.
John M. Polson Chairman & Managing Partner Irvine / Los Angeles
Christine E. Howard Partner Tampa / Atlanta
Danielle H. Moore Partner San Diego
Danielle H. Moore Partner San Diego
5 Reasons Why the Victory May Be Costly
While the business community celebrated this decision after decades of frustration over bureaucratic red tape, they may one day look back at the Loper Bright decision as a costly victory. Here are five reasons why – plus the impact on corporate counsel and what you can do to minimize risks.
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Agencies Might Be Too Tied Up in Court to Perform Crucial Services In addition to developing and enforcing regulations, federal agencies also carry out valuable services that businesses and the general public might rely upon (such as performing reviews, granting approvals, issuing permits, etc.). Impact: We are already seeing a stream of lawsuits and legal filings from business groups and others challenging all kinds of regulations, which means that many agency leaders are now tied up in litigation and distracted from their everyday work. Since each agency only has so many resources, businesses might suffer from long delays in crucial services. Action items: Work with outside counsel and business groups to track key litigation and anticipated delays. Partnering with industry or other trade associations to leverage their unique and specialized resources to stay updated on developments. You may also want to monitor for updates from agencies themselves, keep connected with contacts at relevant agencies, strategize with your business unit leaders on how to handle delays, and assess the impact on any pending or upcoming matters with the applicable agencies.
Fewer Regulations Could Allow for Greater Enforcement Rather than “making new law” through the tiresome (and perhaps fruitless) process of passing new regulations, we’ll soon see federal agencies turn their attention to pushing their priorities through enforcement and litigation. Impact: Agencies might shift their resources to enforce existing regulations and crack down on industries more aggressively. Fewer regulations to focus on means that investigators could place more attention on those that remain. Action items: Lead your team in a compliance audit to help ensure your organization is following all applicable rules and regulations. You may also want to oversee an update to your policies and procedures to handle audits, subpoenas, and agency requests. Additionally, consider developing compliance training for key employees to help prevent violations and prepare for potential investigations.
Quick Background: SCOTUS Strips Power From Federal Agencies For 40 years, the Supreme Court required courts to routinely defer to an agency’s “reasonable” interpretation of ambiguous provisions in federal law, providing federal agencies (and the White House) a powerful instrument to shape the law as they saw fit. This deference allowed agencies to issue rules, regulations, and guidance that carved new paths that were not always anticipated by congress or the general public. But the 2024 Supreme Court term saw SCOTUS toss out Chevron deference and tip the scales of power away from the executive branch. Instead, SCOTUS’s Loper Bright decision empowers federal courts across the country with a burst of newfound freedom and power by ruling that the courts are the ultimate arbiters of what federal law is. Judges now can use their independent judgment to decide if an agency has stepped out of bounds, casting aside any hint of deference. Read more about this game-changing decision and how it could impact your workplace.
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New State of Uncertainty Can Be Bad for Business The uncertainty caused by courts ruling in different ways will only be exacerbated by a companion SCOTUS case that says the six-year statute of limitations to contest regulatory actions doesn’t start ticking until a party is actually injured by the regulation. This gives groups on both sides yet another weapon to fight back against rules they don’t like. Essentially, anyone can start a new business or trade association and claim that a long-established regulation (one which businesses may have grown to rely upon for many years) is fair game for challenge through litigation. Impact: As any business leader knows, it becomes infinitely more difficult to proceed with business plans, invest in new ventures, and create long-term strategies if the entire landscape one builds around is constantly at risk of changing. Action items: Assess the risks of litigation, including whether your attention may be diverted from your core business activities, and whether you want your organization to be on the forefront of a regulatory challenge. Additionally, you may want to engage with policymakers in an effort to influence regulatory policies and protect your business interests. Coordinate with FP’s Government Relations Team and FP Advocacy to ensure your organization’s interests are heard in the halls of Congress and key regulatory agencies – not to mention in statehouses across the country.
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Judges May Create a Patchwork of Obligations Judges who now have greater authority to make their own decisions when it comes to the fate of federal regulations will unwittingly create a patchwork of varying obligations for multistate employers – and confusion for anyone trying to keep up with the inevitable shifting sands. Impact: Not every agency action will be susceptible to the same kind of attack, as the laws that created the agencies and gave them power to issue rules are all a little different – meaning each agency has a different amount of discretion to act on their own. But it will be harder and harder to guess what each individual judge will decide when it comes to each specific regulation at issue. Action items: Partner with outside counsel to determine a course of action, and track circuit splits and other legal outcomes that may vary among courts to devise a multi-state compliance strategy. FP can also assist you in monitoring legal developments, so be sure to subscribe to the FP Insight System to keep abreast of changes and interpretations in administrative law and federal regulations.
Businesses May See Helpful Regulations Thrown Aside
Many business advocates know they can attack what they perceive as troublesome rules by running to a business-friendly jurisdiction (somewhere in Texas, for example) and filing a challenge to the rule. Oftentimes these suits seek to challenge a regulation’s enforcement nationwide. On the other hand, worker advocacy groups and unions may do the same and run to worker-friendly jurisdictions (such as D.C., New York, Hawaii, or Washington state) to challenge agency regulations they don’t like. Impact: Now that Chevron is gone, forum shopping has already become even more fruitful. This could result in courts in worker-friendly jurisdictions more easily striking down business-friendly rules. Action items: Be ready to pivot and adjust your compliance strategies as court rulings start to reshape the regulatory landscape. You may also want to be proactive by commissioning or joining amicus briefs in legal challenges that are important to your industry to help influence judicial interpretations.
Conclusion This development will be worth tracking for the foreseeable future, so make sure you subscribe to Fisher Phillips’ Insight System to get the most up-to- date information. If you have questions, contact your Fisher Phillips attorney or the authors of this Insight.
FP’s Inside Counsel Spin
Decision in a Nutshell You can read a full accounting of the E.M.D. Sales, Inc. v. Carrera case in our January 15 Insight: SCOTUS Delivers Win to Employers in Overtime Exemption Cases by Rejecting Higher Standard of Proof: Key Takeaways. The case involved several employees of a grocery distribution company who claimed they were misclassified as outside sales employees and therefore owed overtime pay. There was a split among the federal appeals courts as to what standard of proof the employer must meet when presenting evidence to defeat the claim: • A “preponderance of the evidence” standard, a lower threshold roughly equivalent to a 51% chance of being correct; or • A more-stringent “clear and convincing” standard, thought to be about an 80-90% chance of being correct, but less than “beyond a reasonable doubt.” The 4th U.S. Circuit Court of Appeals applied the higher clear and convincing standard, making it the sole federal appeals court to do so. In contrast, six other federal appeals courts (the 5th, 6th, 7th, 9th, 10th, and 11th) applied the preponderance of evidence standard. SCOTUS resolved this disagreement and set a consistent standard nationwide with its January 15 decision.
The Supreme Court handed businesses a wage and hour win in January, but inside counsel need to ensure they are taking appropriate action to take advantage of the standard set by the Court. The Justices ruled that employers do not have to meet the unusually high “clear and convincing” evidence standard to prove they correctly classified employees as exempt from minimum wage and overtime pay under the Fair Labor Standards Act (FLSA). Rather, employers need only show their position is more likely than not correct under the “preponderance of the evidence” standard. This decision sets a consistent national standard and could reduce litigation risks – but only if you ensure you are following best practices.
Christine E. Howard Partner Tampa / Atlanta
Litigation and Defense Strategy – Coordination with Outside Counsel Make sure your outside counsel are aware of the E.M.D. Sales decision and its implications.
Guidance for Your Internal Operations Inside counsel should lead three internal initiatives to shore up your defenses:
Reassess Exemption Classifications
Strengthen Wage and Hour Compliance Programs
• Conduct a classification audit: The Supreme Court’s ruling will impact all 34 of the FLSA’s exemptions. With a lower evidentiary burden, you are in a stronger position to defend exempt classifications. However, proactive compliance remains critical to avoid litigation. • Focus on ‘gray area’ positions: You should re-evaluate positions on the borderline of exempt and non- exempt status. Consider potential risk exposure if an employee’s duties don’t align with the FLSA’s exemption criteria. • Engage HR and Compensation Teams: Ensure job descriptions accurately reflect duties, particularly for outside sales employees and white-collar exemptions.
Immediate Changes to Litigation Strategy
• Regular training for managers and HR: Ensure that your supervisors are trained on proper classification criteria, timekeeping requirements, and overtime rules to prevent misclassification claims. • Enhance documentation protocols: Employers still bear the burden of proof in misclassification disputes. You should reinforce best practices for maintaining records that demonstrate compliance. • Monitor state/local law variations: Some states impose stricter exemption standards — ensure state law compliance isn’t overlooked.
• Lower burden means stronger defenses: Employers no longer need to meet the higher “clear and convincing” standard, reducing the risk of adverse rulings. Inside counsel should ensure outside counsel is leveraging this ruling in pending and future misclassification cases – especially in Maryland, North Carolina, South Carolina, Virginia, and West Virginia, which are part of the 4th Circuit. • Motion practice opportunities: In active cases, consider motions for reconsideration or summary judgment where prior adverse rulings hinged on the higher burden of proof.
Refining Litigation Tactics in Wage and Hour Cases
• Reassess settlement thresholds: With a lower burden of proof, you may have stronger leverage in settlement negotiations. Reevaluate your litigation risk assessments and case valuation summaries with your outside counsel. • Develop trial strategies emphasizing the new standard: Trial teams should be prepared to educate judges and juries on the preponderance standard to reinforce employer-favorable arguments.
Engage in Proactive Risk Management
Consider Broader Wage and Hour Litigation Trends
• Risk modeling for potential claims: Analyze historical misclassification claims and assess areas where reclassification may be prudent. • Internal hotline for classification concerns: Establish or reinforce a process for employees to raise concerns before they escalate into litigation. • Evaluate arbitration agreements: If feasible, consider whether arbitration agreements could help manage potential wage and hour disputes more efficiently.
• Watch for DOL enforcement shifts: While SCOTUS has ruled on the standard of proof, states may seek to tighten exemption rules through guidance or rulemaking. Stay ahead of any local shifts. • Monitor collective action strategies: Plaintiffs’ firms may adjust tactics in response to this ruling, possibly shifting focus to alternative legal arguments or pursuing state law claims. Maintain active oversight of these case trends.
Action Plan for Inside Counsel
• Coordinate an immediate audit of high- risk job classifications. • Communicate with your HR and finance teams to update policies and training materials. • Engage with outside counsel to refine litigation defense strategies. • Monitor pending misclassification litigation for potential case strategy shifts.
Conclusion Make sure you are subscribed to Fisher Phillips’ Insight System to get the most up-to-date information specifically developed for inside counsel. For further information, contact your Fisher Phillips attorney or the authors of this Insight.
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