Kelli Ludlum, Research Fellow
Brigit Rollins, Staff Attorney
The United States Supreme Court last year decided Loper Bright Enters. v. Raimondo, a case that redefined judicial review in administrative law. On June 28, 2024, the Court overturned the forty-year-old Chevron doctrine that gave judicial deference to agency decisions when agencies used their authority to interpret ambiguous statutes. More detailed information on the Loper Bright ruling is available in this post.
The Loper Bright decision did not clearly articulate a new test to replace Chevron in statutory interpretation cases, nor did the Court’s majority opinion discuss the standard used to review agencies’ regulatory interpretation. The National Agricultural Law Center is providing a series of articles with background and perspective on these issues that remain at the forefront of the future of administrative law. The first article in the series, available here, discussed Skidmore deference type of judicial review that was created prior to Chevron and remains intact. This second article explores Auer deference, used by courts to review agency decisions that interpret the agency’s own regulations.
Background
In Auer v. Robbins, the Supreme Court was asked to identify a “salary-based” employee for purposes of the Fair Labor Standards Act (FLSA). The FLSA exempts “bona fide executive, administrative, or professional” public employees from overtime pay requirements. The Department of Labor (DOL), which administers the FLSA, issued regulations with specific requirements for overtime-exempt status. One requirement was that the employee earn a specific minimum dollar amount on a “salary basis.”
To further define the salary-basis test, the DOL stated that the salary must not be “subject to reduction because of variations in the quality or quantity of the work performed.” The DOL subsequently issued guidance on this disciplinary-deduction rule, clarifying that an employee’s pay is “subject to” disciplinary deductions when the employee is covered by a policy that permits such deductions “as a practical matter.”
The Auer plaintiffs included almost two hundred individuals currently or formerly employed as sergeants with the Saint Louis Police Department. The sergeants sued the Saint Louis Board of Police Commissioners for overtime compensation, claiming they did not meet the salary-basis test for exempt status. Although the sergeants’ salaries exceeded the minimum dollar threshold, they argued that their pay structure failed the test because their salaries were subject to deductions for disciplinary reasons. Under the terms listed in the city’s police department manual, salaries could theoretically be reduced for a variety of infractions related to the quality or quantity of work performed, but this was not the department’s general practice. The Department had not otherwise communicated that pay deductions were a disciplinary consequence for employees at the sergeant level.
The trial court determined that all the sergeants were paid on a salary basis, and most met the remaining requirements to be exempt from overtime pay. The Eighth Circuit agreed that the sergeants were salaried employees and ruled that all were overtime-exempt.
In a unanimous opinion written by Justice Scalia in 1997, the Supreme Court affirmed the Eighth Circuit decision. To reach this holding, the Court articulated what came to be known as the Auer doctrine: an agency’s interpretation of its own regulations is controlling unless that interpretation is “plainly erroneous or inconsistent with the regulation.”
The Court ruled that the DOL’s overtime-exempt regulation using the salary-basis test was a reasonable agency interpretation of the FLSA’s statutory exemption. Because the salary-basis test came from DOL regulations, it was within the agency’s authority to include the element of no disciplinary deductions. The disciplinary-deduction rule, requiring that disciplinary infractions actually and practically result in salary reductions, was consistent with the DOL regulations establishing the salary-basis test. Therefore, the Court upheld DOL’s interpretation of the disciplinary-deduction rule and found that the language in St. Louis Police Department manual did not impact the salary-based (overtime-exempt) status of the police sergeants.
Auer’s Recent Limitations and Exceptions
For more than twenty years, courts used Auer to give agencies a high degree of judicial deference when an agency interpreted its own regulations. Under the Auer analysis, an agency’s interpretation was upheld unless it was plainly erroneous or inconsistent with the regulation. But over time, judges began to question whether Auer produced unintended consequences.
Justice Scalia, who had authored the Auer opinion, was among those skeptics. In Scalia’s view, Auer’s practical effect was to give the force of law to nonlegislative rules interpreting agency regulations, contrary to statutory notice and comment requirements. Scalia also believed Auer violated the fundamental separation of powers because it permitted an agency to promulgate a law and then interpret it, encouraging the agency to enact vague rules which maximized its own flexibility and power in future adjudications.
The Court addressed these issues in Kisor v. Wilkie in 2019. In a 5-4 decision, the Court declined to overturn Auer but substantially limited the degree of deference given to agencies when interpreting regulations. The Court set forth a five-part test to determine whether the agency’s interpretation truly merited judicial deference.
First, courts were to evaluate whether the regulation the agency interpreted was truly ambiguous. If so, the second step was to determine whether the agency’s resolution of the ambiguity was reasonable. After these two initial steps, courts were tasked with an independent inquiry into whether the character of the agency’s interpretation entitled it to controlling weight. Three factors were to be considered, including:
- Was the agency’s interpretation sufficiently authoritative or an official position?
- Was the agency’s interpretation based on its own expertise?
- Did the agency interpretation reflect fair and considered judgment?
In evaluating the final factor of “fair and considered judgement,” the timing of the agency’s first announcement of its interpretation could be dispositive. The Court reasoned that the agency’s interpretation must not unfairly surprise regulated entities or disrupt expectations. This factor eliminated deference to agency interpretations that initially emerged in litigation positions and enforcement proceedings.
Going Forward
The original Auer deference given to agencies interpreting their own regulations has been significantly limited by subsequent decisions. In a concurring opinion in Kisor, Justice Gorsuch wrote that Auer had been “zombified” – so many exceptions had been created that there was essentially no doctrine left. However, in the five years since Kisor was decided, Auer has continued to be cited by federal circuit courts in almost 150 cases, resulting in the application of varying levels of judicial deference. Some circuits use Auer to afford agencies greater deference than others.
To read the decision in Auer v. Robbins, click here.
For more information on administrative law from the National Agricultural Law Center, click here.