SCOTUS Ruling Gives Employers Ways to Challenge Federal Agency Actions

The Supreme Court of the United States (SCOTUS or Supreme Court) recently made rulings in two cases that ultimately gave employers more tools to challenge federal agency actions during administrative proceedings. Since challenging federal agency actions can be a daunting undertaking for some employers, the Supreme Court’s recent decisions remove some barriers to opening up specific constitutional claims. These decisions represent a victory for employers that may be facing an administrative proceeding before a federal agency. In February 2023, the Supreme Court decided against the employer regarding overtime exemptions for highly compensated employees.

Current Limitations When Employers Challenge Federal Agency Actions

Several federal agencies, including the U.S. Department of Labor (DOL), the National Labor Relations Board (NLRB), the Occupational Safety and Health Administration (OSHA), and the Equal Employment Opportunity Commission (EEOC), enforce various employment laws. These and other federal agencies have the authority to bring claims against employers citing violations of those specific laws. Employers often find it difficult to challenge federal agency actions. Usually, employers must compromise when challenging such regulatory actions. Oftentimes, employers may lack the resources, funding, or time to adhere to the procedures required to challenge these actions.

Supreme Court Decisions Involving Constitutional Challenges

The Supreme Court ruled in two similar cases that dealt with how employers must challenge federal agency actions. In both cases, employers needed to bring challenges to agency final orders to the court of appeals.

• In Axon Enterprise v. Federal Trade Commission, the Federal Trade Commission (FTC) investigated the employer’s competitor acquisition to determine whether it violated federal antitrust laws. The employer subsequently protested the determination. The S. Court of Appeals for the Ninth Circuit initially found in favor of the FTC.
• Similarly, in Securities and Exchange Commission v. Cochran, the Securities and Exchange Commission (SEC) accused an accountant of misconduct. The accountant then had to ensure a lengthy proceeding and appeals process in order to challenge the accusation. The S. Court of Appeals for the Fifth Circuit allowed the accountant to challenge federal agency actions by the SEC while bypassing the agency’s administrative process.

In hearing the two cases, the Supreme Court focused on whether the challenges could be properly heard by a federal district court without first going through the two agencies’ normal proceedings. Ultimately, the Supreme Court ruled in favor of the employers in both cases. Allowing the employers to bypass prohibitive administrative processes allows them to more easily challenge federal agency actions in the end.

Employer Takeaways

Considering the Supreme Court’s recent ruling in these cases, employers should take note of a few key points. Employers wanting to open constitutional claims against federal actions may be able to bypass any lengthy administrative review by an agency. However, to avoid the need to challenge federal agency actions in the first place, employers will still find it prudent to ensure compliance with the various employment laws these agencies enforce.