EPA Supreme Court Decision May Limit Rulemaking Power from DOL, EEOC and NLRB

Department of Labor (DOL), Equal Employment Opportunity Commission (EEOC) and National Labor Relations Board (NLRB) regulations may receive less deference following a pair of U.S. Supreme Court decisions last term, including one involving an Environmental Protection Agency (EPA) rule.  

The first of the decisions blocked the DOL Occupational Safety and Health Administration's vaccine-or-testing rule for large employers.

In a decision less familiar to some employers, the Supreme Court again took a dim view of agencies wading into new regulatory territory in a 6-3 June 30 decision, West Virginia v. Environmental Protection Agency.

The decision has a convoluted history: 27 states asked the Supreme Court to review the EPA Clean Power Plan to carry out the Clean Air Act, and the court granted a stay in 2016, preventing the rule from taking effect. The Trump administration then repealed the plan. A number of states challenged the repeal, and an appeals court vacated the repeal, even though others, including West Virginia, had intervened to defend the repeal. Then the Biden administration asked the appeals court to stay the decision to vacate the repeal while the administration considered whether to issue a new rule.

The Supreme Court first rejected the government's contention that no one could seek the court's review because no one was adversely affected by the plan, which never took effect. Vacating the repeal of the Clean Power Plan purportedly brought it back into legal effect, the court said. Thus, to the extent the plan harmed the intervening states, they had "standing" to sue, and the court determined that the plan injured these states.

The Supreme Court concluded that "the EPA could not implement and enforce its Clean Air Act regulations requiring power producers to shift energy generation from one energy sector—coal—to another—natural gas or solar," said Curtis Moore, an attorney with Fisher Phillips in Charlotte, N.C.

The EPA decision could have significant employment law ramifications, potentially limiting the rulemaking authority of the DOL, EEOC and NLRB.

'Major Questions Doctrine'

The high court, in reaching its holding in the EPA decision, applied the "major questions doctrine," which Moore said is related to the constitutional separation of powers and the nondelegation doctrine in agency law.

"In sum, the doctrine states that an agency must point to clear congressional authorization before engaging in action that courts conclude has broad-reaching economic and political significance," he said. Otherwise, agency regulations will not be upheld.

The majority opinion in the EPA decision "did not clearly outline the contours of the major questions doctrine, nor clearly state when it should be applied," said Jacqueline Prats, an attorney with Trenam Law in Tampa, Fla. Nonetheless, Justice Neil Gorsuch's concurrence "sheds some light on the doctrine."

Gorsuch noted that the doctrine applies when:

• An agency claims the power to resolve a matter of great political significance.
• A significant portion of the American economy will be regulated, in which case there must be clear congressional authorization for the regulation.
• An agency seeks to regulate in an area that is the domain of state law.

This list isn't exclusive, Gorsuch wrote.

"With the explosive growth of the administrative state since 1970, the major questions doctrine soon took on special importance," he said.

Gregory Ossi, an attorney with Faegre Drinker in Washington, D.C., observed that the major questions doctrine limits an agency's regulatory power. A major question, he said, also is involved when the rule:

• Is a transformative expansion in regulatory authority.
• Was based on a rarely used provision.
• Regulates an area where Congress conspicuously and repeatedly declined to enact legislation.
• Requires technical and policy expertise not traditionally needed in an agency's regulatory development.
• Does not have clear congressional authorization.

Writing in a dissent in the EPA decision, Justice Elena Kagan stated that a key reason Congress makes broad delegations "is so an agency can respond, appropriately and commensurately, to new and big problems." She added, "Congress knows what it doesn't and can't know when it drafts a statute and Congress therefore gives an expert agency the power to address issues—even significant ones—as and when they arise." She added that an "anti-administrative-state stance shows up in the majority opinion, and it suffuses the concurrence."

Rulemakings That Might Be Affected

The Supreme Court is likely to use the major questions doctrine to narrow the scope of agency regulation, including for employment law enforcement agencies, according to Jason Murtagh, an attorney with Buchanan Ingersoll & Rooney in Philadelphia and San Diego.

He noted that the DOL's Wage and Hour Division has indicated that it will propose a rule to increase the compensation threshold level for some exemptions to the Fair Labor Standards Act's overtime requirements. The Wage and Hour Division also has announced plans to revisit independent contractor regulations.

Given that these proposed rules could have a significant economic impact, it is likely that they will be challenged, he said.

The EEOC likely will require private employers with more than 100 employees and all federal contractors and first-tier subcontractors with 50 or more employees to include compensation data and hours worked information—so-called Component 2 data—in their EEO-1 reports, he predicted. Such a requirement, if reinstituted, might be challenged based on the major questions doctrine, Murtagh said. This requirement originally was applied during the Obama administration, but under the Trump administration, the EEOC concluded the requirement was too burdensome.

The NLRB may return to the Obama administration's relaxed standard for joint employers, whereby even indirect control over another employee could qualify an entity as a joint employer.

"Challengers will cite the major questions doctrine and argue that this regulation will have a significant economic impact on employers across the country," Murtagh stated.

What constitutes a matter of great economic and political significance has not been fully developed, he added. "Some agencies may become more reticent to engage in extremely broad regulatory actions in the short term, and instead engage in piecemeal regulation while also couching regulations in language that downplays their impact," he said.

The DOL, EEOC and NLRB might shy away from rulemakings in which they would be doing something radically different from statutes' central model of regulation, said Arthur Sapper, an attorney with Ogletree Deakins in Washington, D.C. Nonetheless, he added that "major questions cases are not common."

However, Prats said, "Because federal labor-and-employment rulemakings often affect enormous swaths of the American workforce, many of them may be vulnerable to a major questions doctrine challenge."

If federal employment enforcement agencies act with more restraint as a result of the EPA decision, "I would anticipate that this will fuel additional blue-state efforts to accomplish at a state level regulatory goals that are not achieved at the federal level," said Joe Schmitt, an attorney with Nilan Johnson Lewis in Minneapolis.