Reining In the Administrative State: What the Supreme Court Has Been Up To, and Why it Matters for Employers
In recent years, the Supreme Court has been steadily curtailing the power and influence of Federal agencies like the EPA, SEC, and DOL. Labor and employment cases have frequently been the Court's chosen vehicle. This webinar examined how the Supreme Court used matters as diverse as auto repair advisors, the Clean Air Act, and fishermen to restore constitutional guardrails to keep the "headless fourth branch" of government in check. Stine and Betsy Dorminey conducted a practical discussion on these pivotal cases.
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Webinar Key Insights
The stakes for employers in this new legal landscape are remarkably high. Failing to understand how the Supreme Court is dismantling the administrative state could leave your business vulnerable to outdated compliance strategies or, conversely, cause you to miss significant opportunities to challenge overreaching agency actions that were previously considered settled law. As the fourth branch of government is reined in, the shift from agency deference to constitutional literalism means that the rules governing your workforce—from H-2A guest worker programs to OSHA safety standards—are now more susceptible to judicial scrutiny than they have been in forty years.
- The Supreme Court has officially ended Chevron deference, meaning judges will no longer automatically defer to an agency's interpretation of an ambiguous law; instead, they must provide their own independent, fair reading of the statute.
- Under the Jarkesy ruling, if a government agency like the SEC or Department of Labor seeks to impose significant civil penalties or money damages, you now have a Seventh Amendment right to a jury trial before an Article III judge rather than a purely administrative proceeding.
- The Major Questions Doctrine prevents agencies from making massive policy shifts—such as OSHA vaccine mandates or EPA cap-and-trade systems—without explicit and clear authorization from Congress.
- The statute of limitations for challenging federal regulations has been expanded; the Corner Post decision allows businesses to challenge a rule within five years of being injured by it, even if the regulation was originally issued decades ago.
- Labor exemptions are no longer strictly and narrowly construed to favor the employee; they are now entitled to a neutral, fair reading that treats the employer’s position with equal weight under the law.
- The President’s power to fire members of administrative boards is being expanded, potentially making these independent agencies more accountable to the executive branch and less able to operate as a headless fourth branch of government.
We are witnessing a tectonic shift in governance where the judicial branch is reclaiming its role as the final arbiter of what the law means. By dismantling decades of agency overreach and restoring the separation of powers, the courts are forcing the administrative state back into its constitutional lane, providing employers with powerful new tools to defend their interests.
FAQ
What is meant by the "administrative state" or the "fourth branch" of government?
The administrative state refers to the collection of federal agencies, such as the Department of Labor and the National Labor Relations Board, that have grown over decades to exercise significant power alongside the traditional legislative, executive, and judicial branches. (Timestamp: 00:58)
What was the Chevron decision and why was it significant?
The 1984 Chevron decision established a rule of deference, which meant that when a statute had a "lacuna" or ambiguity, the judicial branch should defer to the administrative agency's interpretation of that law. This effectively put a "thumb on the scale" in favor of the agency during legal challenges.
(Timestamp: 01:51)
How did the Supreme Court change the way labor law exemptions are read in Encino Motorcars?
In Encino Motorcars, the Court shifted away from the "remedial" approach of strictly and narrowly construing exemptions to favor employees. Instead, it ruled that exemptions are entitled to a "fair reading" just like any other statutory provision. (Timestamp: 07:32)
What is the Major Questions Doctrine?
The Major Questions Doctrine is a litmus test used by the Supreme Court to determine if an administrative agency has exceeded its authority. It holds that for issues of vast importance or "massive questions," an agency cannot rely on general statutory language; instead, Congress must clearly and specifically delegate that authority. (Timestamp: 12:35)
Did the Supreme Court allow OSHA to mandate COVID-19 vaccines for employees?
No; the Supreme Court found that OSHA exceeded its statutory authority. The court determined that compelling employees to take a vaccine was not within the scope of what the Occupational Safety and Health Act was designed to cover. (Timestamp: 14:25)
What did the Loper Bright decision do to Chevron deference?
The 2024 Loper Bright decision specifically overruled Chevron. The Court ruled that judges should no longer defer to an administrative agency's interpretation of the law, but must instead use their own judgment and interpretation principles. (Timestamp: 20:29)
How did the Corner Post case change the statute of limitations for challenging federal regulations?
The Court ruled that the window to challenge a regulation under the Administrative Procedure Act (APA) is a statute of limitations, not a statute of repose. This means a party can challenge a rule within five years of being "aggrieved" or injured by it, even if the rule was originally issued much earlier. (Timestamp: 24:33)
Does an employer have a right to a jury trial in cases involving administrative fines?
Yes; in the Jarkesy decision, the Court held that if an agency is seeking money damages or civil penalties, the Seventh Amendment provides a right to a jury trial. Such cases must be heard by an Article III judge rather than through a purely administrative proceeding. (Timestamp: 27:23)
Can the President fire members of independent agencies at will?
While the 1935 Humphrey’s Executor case allowed Congress to restrict the President's power to remove certain officials, recent legal challenges suggest the Court may be narrowing this rule. Current litigation involving agencies like the NLRB and the Consumer Protection Board explores whether these removal protections unconstitutionally interfere with the President's duty to faithfully execute the law.
(Timestamp: 39:22)
Webinar Transcript
Introduction to the Administrative State
Elizabeth K. Dorminey (00:00): Let's get started. My name is Betsy Dorminey and I'm here with my esteemed colleague, Larry Stine. Today our topic is reining in the administrative state and how the Supreme Court is turning down the power of administrative agencies. This is a topic that we find quite compelling and very interesting. It is a bit technical, but it goes back to eighth-grade civics regarding the separation of powers between the legislative, executive, and judicial branches.
Elizabeth K. Dorminey (00:58): In modern governance, those three branches have been added to over the decades by the emergence of the administrative branch—the "headless fourth branch" of the government. These are all the administrative agencies we deal with: the National Labor Relations Board, the US Department of Labor, and the Federal Elections Committee. This is particularly pertinent to employers because many of these cases are having profound effects on the way government operates in the 21st century, often coming out of the world of labor and employment law.
The Rise and Fall of Chevron Deference
Elizabeth K. Dorminey (01:51): The action really started in the 1980s with the Chevron decision (Chevron v. Natural Resources Defense Council). This was an opinion by Justice Scalia, who later expressed a degree of regret for it. The Chevron decision basically said that when an administrative agency developed a policy position on a statute that had an ambiguity or lacuna, the judicial branch should defer to the administrative experts and put their "thumb on the scale" in favor of the agency's interpretation.
J. Larry Stine (02:59): That deferral power still sticks in my craw. I had an OSHA case where I argued a written document applied, but the 11th Circuit deferred not to the written document, but to the government's litigation position in their brief. Courts often deferred because they felt technical stuff like OSHA was too complicated for them, but they were ignoring the principles we were asking them to look at.
Elizabeth K. Dorminey (04:20): We saw this in cases involving foreign guest worker programs. There was a written regulation regarding the reimbursement of travel expenses after workers finished half their contract. However, the Department of Labor issued an administrative opinion saying they had to be paid in the first workweek. They essentially rebuilt a regulation with an opinion letter, which is an example of the administrative state "running wild" by making decisions that run counter to duly enacted regulations.
Narrowing the Scope: Encino Motorcars and Appointment Powers
J. Larry Stine (06:33): We began to see the first cracks in a wage and hour case called Encino Motorcars. During the New Deal period, the Supreme Court ruled that exemptions were to be strictly and narrowly construed to favor the employee. In Encino, the Court changed the rule and said that exemptions are entitled to a fair reading like every other provision. This was a tectonic shift and the first sign of the Court chipping away at the administrative state.
Elizabeth K. Dorminey (09:36): Another issue involves Administrative Law Judges (ALJs) and review boards that are often staffed and funded by the very agencies whose decisions they review. Sometimes it seems there is a bit of "home cooking" going on.
J. Larry Stine (10:21): In Carr v. Saul, the Court looked at how ALJs were appointed. The Constitution gives appointment powers to certain groups, and it does not allow lower officials to appoint other lower officials. The Court ruled that you must have officers appointed by the appropriate level of power, and you cannot delegate that authority.
The Major Questions Doctrine
Elizabeth K. Dorminey (11:47): This leads to the "Major Questions Doctrine," a litmus test for whether an administrative agency has the power to initiate a massive change or if they must go to Congress for such an important issue.
J. Larry Stine (12:35): Congress has found it easy to get around difficult decisions by giving them to the administrative state. But the courts are pulling back. This was a precursor in the OSHA cases regarding COVID-19. The argument was that the agency exceeded its statutory authority because taking vaccines was not within the ambit of what the Occupational Safety and Health Act was designed to cover.
J. Larry Stine (15:10): The Court really defined this in West Virginia v. EPA. The EPA decided they were going to regulate carbon dioxide through a "cap and trade" system. Because they couldn't pass it through legislation, they tried to do it by regulation. The Supreme Court ruled that such a massive question, which could put coal plants out of business, requires clear delegation from Congress rather than general language. The executive branch needs to stay in its lane.
The 2024 Trio: Loper Bright, Corner Post, and Jarkesy
Elizabeth K. Dorminey (19:54): In 2024, things really started to pop with the Loper Bright case. This involved the National Marine Fisheries Service requiring fishing boats to not only carry a monitor but also pay that monitor's salary.
J. Larry Stine (21:21): Loper Bright specifically overruled Chevron. The Court ruled that you do not defer to the administrative agency on how to interpret the law. Judges deal with difficult questions all the time; they should read the statutes and make up their own minds rather than punting to an agency. It essentially requires a "fair reading" of the statute using statutory interpretation rules.
J. Larry Stine (24:18): Then there was the statute of limitations case, Corner Post. Agencies were taking the position that if a regulation was issued, you had to challenge it within five years. But the Supreme Court ruled that you must be injured by the regulation to bring an action. If a company wasn't even in existence during the first five years, they can still challenge it once they are adversely affected. This ensures rules remain subject to challenge.
Elizabeth K. Dorminey (27:12): Perhaps the most impactful was SEC v. Jarkesy. This involved the SEC imposing heavy fines in an administrative proceeding. The Court ruled that if you are going after someone for money damages, they have a right to a trial by an Article III judge and a jury. You cannot just levy those fines in a purely administrative proceeding.
Looking Ahead: Removal Powers and 2026
J. Larry Stine (38:23): We are also seeing a series of attacks on Humphrey's Executor regarding the President’s power to remove executive branch officials. While the President was found to have the power to remove the General Counsel of the NLRB, President Trump later fired members of the NLRB, the MSPB, and the Federal Reserve. Those cases went to the emergency docket, and the Supreme Court has stayed orders that would have reinstated those members.
J. Larry Stine (44:11): In 2026, we expect another major decision. From the oral arguments, it looks like the Court will not repeal removal protections entirely but will severely restrict the power of Congress to limit the President's removal power. This will re-examine the "headless fourth state" and put more control back in the hands of the executive branch.
Elizabeth K. Dorminey (46:15): We appreciate your time today. This is an absolutely fascinating issue that impacts almost every aspect of our lives. If you have any questions or want to chat further, feel free to email us at js@wimlaw.com or ekd@wimlaw.com.
