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Michigan Supreme Court Expands Employer Exposure to Public Policy Retaliation Claims

In Michigan, various state employment laws prohibit employers from retaliating against employees. But can an employee pursue a public policy retaliation claim against the employer in addition to a statutory retaliation claim?

On July 22, 2024, the Michigan Supreme Court ruled that anti-retaliation provisions in two important workplace safety laws—the federal Occupational Safety and Health Act (“OSHA”) and Michigan’s Occupational Safety and Health Act (“MIOSHA”)—do not preclude a plaintiff from also asserting a violation of public policy in court. Stegall v. Resource Technology Corp (Case No. 165450, decided July 22, 2024).

Cleveland Stegall, an IT specialist working at FCA through the staffing agency Resource Technology, complained internally about asbestos insulation issues at the assembly plant and threatened to file complaints with the government. He was subsequently terminated. Stegall sued both entities for wrongful discharge under OSHA and MIOSHA’s anti-retaliation provisions, as well as termination in violation of public policy.

At-will employees generally may be terminated for any reason (or no reason at all). But one exception to this rule is that certain terminations violate public policy and therefore create an actionable legal claim. This includes firings for “failure or refusal to violate a law” or exercising a right conferred by the Michigan Legislature.

Both the trial court and the Court of Appeals dismissed Stegall’s public policy claim because they concluded that the OSHA and MIOSHA laws already forbid retaliation. The Michigan Supreme Court reversed. It reasoned that the remedies under OSHA and MIOSHA are insufficient, pointing to the truncated 30-day period to file a complaint with the relevant government agency, the discretion granted to the respective investigating agency, and the employee’s lack of control over what occurs after a complaint has been filed. See 29 U.S.C. §660(c)(2) and MCL 408.1065(2).

What does this case mean for employers? The Michigan Supreme Court’s decision provides another avenue for employees to pursue retaliation claims, particularly where the employee raises workplace safety concerns. It is unclear, however, whether courts will extend this ruling and allow employees to pursue public policy wrongful discharge claims if the employee is also seeking relief under another anti-retaliation statute.

Full Steam Ahead: NLRB Top Lawyer Signals Continued Focus On Injunction Actions

Last month, the U.S. Supreme Court issued a decision in Starbucks v. McKinney clarifying the standards courts must use when evaluating requests by the National Labor Relations Board (NLRB) for injunctive relief under Section 10(j) of the National Labor Relations Act (NLRA). Many view this as, at least in some jurisdictions, heightening the standard the agency must meet in these cases.

NLRB General Counsel Jennifer Abruzzo issued a memo on July 16 noting this ruling will not affect how her office views Section 10(j) cases. According to the press release, “General Counsel Jennifer Abruzzo reaffirmed her commitment to seeking Section 10(j) injunctions after the Supreme Court’s recent decision in Starbucks Corp. v. McKinney, which set a uniform four-part test applicable to all Section 10(j) injunction petitions.”

The statement then goes on to note, “General Counsel Abruzzo explained that, while the Supreme Court’s decision in Starbucks Corp. provides a uniform standard to be applied in all Section 10(j) injunctions nationwide, adoption of this standard will not have a significant impact on the Agency’s Section 10(j) program as the Agency has ample experience litigating injunctions under that standard and has a high rate of success in obtaining injunctions under the four-part test — a success rate equivalent to or higher than the success rate in circuit courts that applied the two-part test.”

Employers should take note, as the NLRB does indeed have a high success rate when seeking these injunctions against employers. For example, in fiscal year 2020, the agency prevailed in every 10(j) case it brought. These actions can be costly from a time and resources perspective for companies, as they are then forced to defend against alleged labor violations before both the NLRB and in federal court simultaneously.

Accordingly, while the recent Supreme Court ruling did offer a uniform standard and clarity around the legal framework for 10(j) cases, it appears this won’t cause a dip in the amount of such matters the NLRB brings.

Supreme Court Holds That the Eighth Amendment Does Not Prevent Enforcement of Local Camping Bans, Authorizing a Significant Shift in Local Policies on Homelessness

Until recently, local policies on homelessness have been guided by two controversial rulings from the Ninth Circuit Court of Appeals: Martin v. Boise (9th Cir. 2019) 920 F.3d 584 and Johnson v. City of Grants Pass (9th Cir. 2022) 50 F.4th 787.[1] However, the Supreme Court’s decision in City of Grants Pass v. Johnson(2024) 603 U.S. ____, is likely to transform local jurisdictions’ policy approaches to managing homelessness. In a 6-3 decision, the Supreme Court upheld the city’s ban on camping and parking overnight on public property.

By way of background, in Martin, the Ninth Circuit held that the Eighth Amendment’s restriction against cruel and unusual punishment barred cities from imposing criminal penalties for violations of public-camping ordinances whenever the number of homeless individuals exceeds the number of “practically available” shelter beds in a jurisdiction. In Johnson, the Ninth Circuit expanded on Martin and held that a city cannot enforce its camping ban or impose fines or civil penalties unless the city has enough shelter beds for its entire population. Since then, affected cities and states have widely criticized these two Ninth Circuit rulings, which effectively blocked the enforcement of local ordinances prohibiting or regulating camping and sleeping outdoors.

In the Supreme Court’s decision in Johnson, the Court rejected the Ninth Circuit’s rulings and held that ordinances prohibiting camping, overnight parking, or sleeping outdoors do not violate the Eighth Amendment’s protections against cruel and unusual punishment because these ordinances regulate “conduct” and “actions”, rather than “mere status.”

The Court focused on the practical implications of Martin and Johnson, finding that the Ninth Circuit created an unworkable and confusing test to evaluate public camping ordinances, based on subjective and vague determinations of who is “involuntarily” homeless. The Court also criticized judicial injunctions prohibiting the enforcement of public camping ordinances, finding that these determinations are “public policy responses” best handled by local governments and the legislature (not courts).

In doing so, the Court agreed with local jurisdictions that complained that the Ninth Circuit inappropriately limited available policymaking tools and “undermined” local efforts to address homelessness. The Court emphasized that local governments have “broad power” over the substance and enforcement of their laws and must be afforded “wide latitude” and “flexibility” to address homelessness.

Although the Court’s ruling authorizes the enforcement of public camping ordinances, it does not grant unfettered power to local jurisdictions. The Court acknowledges that public camping ordinances could still implicate other constitutional concerns, including potential violations under the Due Process Clause. The Court further notes that local governments are not required to adopt public camping ordinances, and may choose to narrow such laws by imposing relevant time, place, and manner restrictions.

Even with these limitations, the Court’s decision is likely to significantly alter the future of local policies on homelessness, especially throughout California. Local governments are now authorized to take more aggressive actions to enforce existing ordinances (or enact new ones) prohibiting or otherwise regulating overnight camping and parking on public property. Ordinances that include relevant time, place and manner restrictions (e.g., regulating when, where, and how people sleep in public) are likely to be particularly insulated from constitutional challenges.

We will continue to monitor updates to local policies on the homeless in response to this decision and provide updates as they become available.

FOOTNOTES

[1] See prior article here.

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by: Alexander L. Merritt, Kathryn C. Kafka of Sheppard, Mullin, Richter & Hampton LLP

For more news on the Supreme Court’s decision in City of Grants Pass v. Johnson, visit the NLR Real Estate section.

Petition for Certiorari Filed in Supreme Court in False Claims Act Case Seeking Review of Whether “Willful” Under the Anti-Kickback Statute Requires Knowledge that the Conduct is Unlawful

The Supreme Court now has the opportunity to define “willfulness” under the federal criminal Anti-Kickback Statute (AKS). In a declined qui tam case filed against McKesson Corporation, a pharmaceutical wholesaler, the relator, Adam Hart, a former McKesson employee, filed a petition for certiorari seeking Supreme Court review of a Second Circuit decision that upheld the dismissal of relator’s complaint asserting claims under the civil False Claims Act (FCA) premised on alleged violations of the AKS. U.S. ex rel. Hart v. McKesson Corp., 96 F.4th 145 (2d Cir. 2024). A violation of the AKS requires as the scienter element that the defendant “knowingly and willfully” offered or paid remuneration to induce the recipient of the renumeration to purchase goods or items for which payment may be made under a federal health care program. 42 U.S.C. § 1320a-7b(b)(2). The Second Circuit held that a defendant does not act “willfully” within the meaning of the AKS unless that defendant “act[s] knowing that his conduct is unlawful.” United States ex rel. Hart, 96 F.4th at 154.

The AKS is enforced both as a criminal statute and, as in this case, is frequently used by the government or relators as a predicate violation to support an alleged violation of the civil FCA. Since 2010, Congress has specified that a claim that includes items or services “resulting from” an AKS violation is a false or fraudulent claim under the FCA. 42 U.S.C. § 1320a-7b(g). Though the evidentiary standard in criminal and civil cases differs, the government or relator in civil cases must adequately plead the “knowingly and willfully” scienter element of the AKS.

Hart alleged in his Second Amended Complaint that McKesson offered physician oncology practices two valuable business tools, the Margin Analyzer and the Regimen Profiler, to induce those practices to purchase oncology pharmaceuticals from McKesson. Hart alleged that these business tools were prohibited remuneration, and that McKesson acted “knowingly and willfully” in offering these two tools to its customers in violation of the AKS. Hart’s basis for alleging “willfulness” included: (1) alleged document destruction during the litigation; (2) Hart informed his supervisor during compliance training about the potential AKS violation, yet McKesson continued to provide these tools, worth about $150,000, to medical practices free of charge in exchange for commitments to purchase drugs from McKesson; and (3) Hart’s discussions with other employees that McKesson was inappropriately exploiting the business tools.

After the government declined to intervene, the District Court dismissed the FCA claims in a Second Amended Complaint (after dismissing the prior complaint as well) by ruling that Hart failed to plausibly allege sufficient facts to suggest McKesson acted “willfully”. The Second Circuit upheld the dismissal and agreed that a defendant acts “willfully” under the AKS only if the defendant knows “that its conduct is, in some way, unlawful.”

The Second Circuit rejected the relator’s proposed approach, a looser standard that would meet the “willfully” standard of the scienter element if (a) the company provided something of value in connection with the sale of pharmaceuticals reimbursed by the government, and (b) knew, even through general compliance training, that it is illegal to provide things of value to induce sales. Hart filed a petition for a writ of certiorari, presenting the question: “[t]o act ‘willfully’ within the meaning of the [AKS], must a defendant know that its conduct violates the law?”

There is no dispute, under the law, that a defendant does not need “specific intent” to violate the AKS. 42 U.S.C. § 1320a-7b(h). However, the petition raises questions about how certain sister Circuits interpret “willfully” when addressing violations of the AKS:

The Second Circuit held in this case that a defendant does not act “willfully” within the meaning of the AKS unless that defendant “act[s] knowing that his conduct is unlawful, even if the defendant is not aware that his conduct is unlawful under the AKS specifically.” United States ex rel. Hart v. McKesson Corp., 96 F.4th 145,154 (2d Cir. 2024).
The Eleventh Circuit, in accord with the Second, has also held that a defendant must know that its conduct is unlawful in order to violate the AKS. United States v. Sosa, 777 F.3d 1279, 1293 (11th Cir. 2015) (“[T]o find that a person acted willfully in violation of § 1320a-7b, the person must have acted voluntarily and purposely, with the specific intent to do something the law forbids, that is with a bad purpose, either to disobey or disregard the law.”) (internal quotations omitted)).
The relator argues in the petition that the Fifth and Eighth Circuits are split with the Second Circuit. Relator relies on a Fifth Circuit case holding that “willfully” requires that a “defendant willfully committed an act that violated the . . . Statute” without a requirement that a defendant know its conduct is unlawful. United States v. St. Junius, 739 F.3d 193, 210 & n.19 (5th Cir. 2013). However, a more recent Fifth Circuit case, which was cited by the Second Circuit, defines “willfully” to mean “the act was committed voluntarily or purposely, with the specific intent to do something the law forbids; that is to say, with bad purpose either to disobey or disregard the law.” United States v. Nora, 988 F.3d 823, 830 (5th Cir. 2021) (citation omitted).
The relator cites an Eighth Circuit case holding a defendant’s conduct is willful if a defendant “knew that his conduct was wrongful,” but asserts the Eighth Circuit has not “require[d] proof that [the defendant] . . . knew it violated ‘a known legal duty.’” United States v. Jain, 93 F.3d 436, 441 (8th Cir. 1996). However, a more recent Eighth Circuit relied on Jain to uphold a jury instruction stating, “[a] defendant acts willfully if he knew his conduct was wrongful or unlawful.” United States v. Yielding, 657 F.3d 688, 708 (8th Cir. 2011).
The Second Circuit did recognize a circuit split, but described its view as in “align[ment] with the approach to the AKS taken by several of our sister courts [including the Third, Fifth, Sixth, Seventh, Eighth, and Eleventh Circuits], which have held or implied that to be liable under the AKS, defendants must know that their particular conduct was wrongful.” United States ex rel. Hart, 96 F.4th at 154-55.

It is important to remember that the AKS is a felony statute subject to criminal fines and up to 10 years of imprisonment. It also criminalizes conduct that, in other industries, is not illegal. Further, due to the breadth of the statute and its complexity, Congress and the U.S. Department of Health and Human Services’ Office of Inspector General (OIG) have developed a complicated set of guidance to help attorneys and compliance professionals understand and provide counsel with respect to AKS compliance, including statutory exceptions, regulatory safe harbors, advisory opinions, and an enormous body of sub-regulatory guidance. The Second Circuit understood this and noted that its “interpretation of the AKS’s willfulness requirement thus protects those (and only those) who innocently and inadvertently engage in prohibited conduct.” Id. at 155-56.

If the Supreme Court takes an interest in this case, it likely will invite the view of the Solicitor General. Any Supreme Court interest in granting this petition will likely attract a wide range of amici participation at the certiorari stage by health care industry groups and associations, pharmaceutical company associations, other business groups, as well as associations of whistleblower counsel and other supporters of the private action qui tam provisions of the FCA. Though the range of holdings by the Courts of Appeal are often nuanced, Supreme Court consideration of the issue would be viewed as very significant, and a decision that creates a rigorous standard for “willfulness,” or alternatively, a lenient one, could considerably impact the Department of Justice (DOJ) and relators’ ability to successfully plead, and prove, an AKS violation as a predicate to an alleged FCA violation.

Nine Questions, Nine Answers: The Supreme Court’s Decision Overruling ‘Chevron Deference’

On the second-to-last day of its term, the US Supreme Court issued its decisions in Loper Bright Enterprises v. Raimondo and Relentless, Inc. v. Dep’t of Commerce. These decisions overruled Chevron USA. v. National Resource Defense Council, the 40-year-old precedent that established the “Chevron” doctrine, which gave federal agencies a certain amount of deference to interpret statutes they administer.

The Chevron doctrine provides that when a statute is ambiguous — that is, when it is unclear whether US Congress has spoken directly to the precise issue at hand — courts must defer to the interpretation of the relevant agency as long as the agency interpretation of the statute is reasonable.

Since 1984, the Chevron doctrine has played a foundational role in administrative law and placed federal agencies as the primary interpreters of the statutes they administered. In recent years, many scholars and policy advocates have questioned whether the Supreme Court should, or would, overrule Chevron and reassert the judiciary’s primary role in interpreting statutes.

The Loper Bright decision is available here. Understanding that for many, this decision has resulted in a deep dive into arcane issues of constitutional law and regulatory policy, below we ask and answer nine questions about the decision, its background, context, and likely impact.

What happened?

CASE BACKGROUND

Both Loper Bright and Relentless involve the Magnuson-Stevens Act, a law that empowers the US Secretary of Commerce and the National Marine Fisheries Service (NMFS) to require certain fishing vessel operators to provide space onboard their vessels for federal observers tasked with ensuring compliance with various federal regulations.

To implement the Magnuson-Stevens Act, NMFS issued a rule requiring the fishing companies, rather than the government, to pay the costs and salary of the observers (roughly $710 per day). The petitioners in Loper Bright, four family-operated herring fishing companies, argued that the Act did not authorize the agency to impose these fees and challenged the rule before the US District Court for the District of Columbia. Relentless involved a challenge to the same regulations by two New England fishing vessels brought in Rhode Island federal court.

The appellate courts reviewing Loper Bright and Relentless, the US Courts of Appeals for the DC Circuit and the First Circuit, respectively, both applied the “Chevron doctrine” and ultimately upheld the NMFS regulation.

The DC Circuit found ambiguity in the statute that justified deferring to the agency’s reasonable interpretation. The First Circuit, in turn, cited back to the DC Circuit’s opinion in Loper Bright and similarly found the NMFS regulation did not exceed “the bounds of the permissible.” The Supreme Court granted certiorari in both cases and, considering them together, addressed whether it should uphold, limit, or overturn Chevron.

THE LOPER BRIGHT DECISION

In a 6-3 decision, the Supreme Court overruled Chevron and held that courts must “exercise their independent judgment” when interpreting federal statutes and may not defer to agency interpretations simply because they determine that a statute is ambiguous.

Tracing the history of “deference” from the Federalist Papers through the New Deal, the Court explained that the judicial branch has always had the exclusive responsibility for interpreting the law. While courts should and did give “respect” to executive branch interpretations, the final decision has historically been for the courts alone.

The judicial branch’s role, explained the Court, was solidified in 1946 with the passage of the Administrative Procedure Act (APA), which provides that the courts will decide “all relevant questions of law” arising during a review of agency actions. The courts may “seek aid” from the agency interpretations, but courts still must “independently interpret the statute and effectuate the will of congress.”

The Court concluded that Chevron deference is inconsistent with this history and the text of the APA, and further noted that federal agencies (as opposed to federal judges) have no special expertise when it comes to interpreting statutes.

Why now?

Chevron has been in the Court’s crosshairs for the better part of a decade. Justice Neil Gorsuch pointed out in a lengthy concurrence in Loper Bright that the Supreme Court has not applied the Chevron doctrine since 2016. In a separate dissenting opinion last year — discussed here — Justice Gorsuch outlined how the Chevron doctrine has been subjected to so many competing interpretations and carve-outs that it has been rendered practically unworkable and incoherent.

Further, as the majority recognized, if courts defer to agencies under Chevron, that approach is inconsistent with other interpretive doctrines, most notably the “major questions doctrine,” which the Court used to strike down the US Environmental Protection Agency’s (EPA) regulation of greenhouse gases in West Virginia v. EPAin 2022 because the Clean Air Act had not “expressly” granted EPA authority to require decarbonization of the US energy sector. (For more on this case, see here.)

Why is everyone talking about “Chevron deference”?

Loper Bright, when read in conjunction with other decisions like West Virginia v. EPA from two terms ago or SEC v. Jarkesy, decided this term and discussed here, has been interpreted by some as the culmination of a long-term trend in which justices appointed by Republican presidents are reconfiguring US administrative law. Some view Chevron deference as a crucial safeguard to protect administrative agencies and permit them to regulate in highly technical areas based upon sometimes broad mandates from Congress without fear that a judge lacking technical knowledge or expertise would overstep. For those individuals, the end of Chevron deference represents a threat to the administrative state as we know it and raises fear that judges rather than agencies will decide the propriety of complex technical issues.

For others, Chevron deference represents a usurpation of the judiciary’s role in interpreting the law and leads to administrative agencies over-regulating and over-stepping the authority vested in them by Congress. Some groups may view Chevron deference as part and parcel of some unaccountable deep state. For these individuals, the end of Chevron deference represents a long-awaited victory against overactive agencies exerting authority beyond that granted by Congress.

For many, Chevron deference is simply an interpretive mandate that attempted to balance the judiciary’s role in statutory interpretation with some level of deference to the agency’s particular knowledge and expertise.

Any tendency to catastrophize may be exacerbated by this being a presidential election year. While the Loper Bright decision is important, the practical impact of it is debatable and not yet clear. While it is possible that Loper Bright will announce a sea change in administrative practice, it is also possible that Loper Bright’s calls for “administrative respect” but not “deference” will be modest in the near term. Further, the Court went out of its way to note that prior cases that applied Chevron to uphold an agency’s actions were still good law based on the doctrine of stare decisis and that “mere reliance on Chevron cannot constitute” a reason for “overruling such a holding[.]”

What does the decision mean for agency interpretations of their own regulations?

It does not affect them. Kisor v. Wilkie, a 2019 Supreme Court decision, remains the key precedent governing judicial review of an agency’s interpretation of its own regulations. Significantly, Loper Bright cites Kisor favorably. Under Kisor,agency regulatory interpretations are entitled to deference if they are reasonable when viewed with traditional tools of statutory construction and courts should defer to agency interpretations that:

Are official positions of the agency made in some formal context.
Are consistent with prior formal interpretations of the agency.
Rest on actual agency expertise and not a litigation position.
Were issued with fair notice to regulated entities.

Citing the APA, the Court in Kisor stated that where a rule is ambiguous, “when a court defers to a regulatory reading, it acts consistently with [APA] Section 706.” For more on Kisor, see here.

Does the decision bar courts from considering an agency’s expert input?

It does not. The majority notes that

[d]elegating ultimate interpretive authority to agencies is simply not necessary to ensure that the resolution of statutory ambiguities is well informed by subject matter expertise. The better presumption is … that Congress expects courts to do their ordinary job of interpreting statutes, with due respect for the views of the Executive Branch. And to the extent that Congress and the Executive Branch may disagree with how the courts have performed that job in a particular case, they are of course always free to act by revising the statute.

Loper Bright acknowledges that Congress can delegate policymaking authorities and that reviewing courts should consider any such delegation in reviewing related challenges.

It also notes that “Congress expects courts to handle technical statutory questions. Many statutory cases call upon courts to interpret the mass of technical detail that is the ordinary diet of the law and courts did so without issue in agency cases before Chevron.” (Internal citation omitted.) The majority suggests that courts “do not decide such questions blindly” and that “parties” — including agencies — “and amici in such cases are steeped in the subject matter, and reviewing courts have the benefit of their perspective.”

In such circumstances, while “an agency’s interpretation of a statute ‘cannot bind a court,’ it may be especially informative ‘to the extent it rests on factual premises within’ [the agency’s] expertise.’” Accordingly, citing Skidmore v. Swift & Co., Executive Branch interpretations may still have particular “power to persuade, if lacking power to control.”

Will the decision allow regulatory challenges to be decided more quickly by courts?

Probably not. As we discussed above, nothing in Loper Bright portends that agencies now lack the ability to use technical input to justify how they have interpreted statutes they are tasked with executing. Further, the Loper Bright formulation of “respect” to agencies — with courts being empowered to make ultimate decisions about statutory interpretation — may procedurally look very much like pre-Loper Bright “deference” in terms of what sorts of briefs are filed, how technical evidence is submitted, or how courts process challenges.

Many disputes will also involve an additional layer of briefing related to the impact of the decision itself as challenges proceed through courts, particularly when there are questions about whether Congress delegated specific questions to agencies.

Will this decision result in more litigation?

Yes. Post-Loper Bright, we can expect increase in challenges to regulations across the government, with parties evaluating what pre-Loper Bright regulations they can encourage the Court to revisit, especially in light of the Court’s decision in Corner Post v. Board of Governors, which effectively relaxes APA-related statutes of limitations in some cases. This litigation will occur even though the Loper Bright majority attempted to stem the tide by stating that agency rules which were enforceable before the decision remain good law for now. As we have discussed before, many regulatory challenges are filed in forums perceived to be hostile to regulation. Those cases will then percolate through appellate courts to flesh out what administrative litigation looks like after this decision, particularly on the issue of how courts can appropriately parse out statutory interpretation, which is in the province of the courts from decisions delegated by Congress to agencies.

The regulated community should use the Loper Bright decision as an opportunity to review key regulations that govern their operations and assess whether regulations are newly vulnerable. Our teams are ready to provide assistance in conducting this review.

Does the decision affect state law?

The Loper Bright decision binds only federal courts.

Traditionally, state courts have not uniformly adopted Chevron. Around half the states, including Illinois, New Jersey, New York, and Pennsylvania, allow for Chevron-style deference to state agencies. Others, including California and Virginia, allow some degree of deference depending on the particulars of agency decisions.

Given that Chevron deference has been controversial for some time, state legislatures in Arizona, Georgia, Idaho, Indiana, Nebraska, Ohio, and Tennessee have in recent years passed laws closely cabining deference afforded to state agencies. Florida voters amended the state constitution in 2018 to prohibit courts from deferring to state agencies. States including Arkansas, Colorado, Delaware, Michigan, Mississippi, and Utah have court decisions to the same effect. (See here for a more detailed discussion.)

What should we watch for next?

In the coming days, many ArentFox Schiff teams will analyze how the Loper Bright decision will affect specific practice areas. Additionally, watch for our end-of-term wrap-up on administrative and environmental law.

What Does the End of Chevron Deference Mean for Federal Health Care Programs?

On June 28, 2024, the Supreme Court rejected the doctrine of Chevron deference in the closely watched case of Loper Bright Enterprises v. Raimondo.[1] In a 6-3 decision, the Court held that Chevron’s rule that courts must defer to federal agencies’ interpretation of ambiguous statutes gave the executive branch interpretive authority that properly belonged with the courts. Moreover, the Court concluded that Chevron deference was inconsistent with the Administrative Procedure Act (APA), holding that the APA requires courts to exercise independent judgment when deciding legal issues in the review of agency action.

Loper will have significant and immediate implications for the U.S. Department of Health and Human Services (HHS), the federal agency charged with the administration of the federal health care programs, including Medicare and Medicaid. As detailed below, the Court’s decision sets a more exacting standard for courts to apply when reviewing HHS’s regulations and legal positions.

What Was Chevron Deference?

The doctrine of Chevron deference was established in 1984 by the Supreme Court in Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc.[2] In that case, the Court held when a “statute is silent or ambiguous with respect to the specific issue” raised regarding a statute that the agency administers, “the question for the court is whether the agency’s answer is based on a permissible construction of the statute.”[3]

Although scholars have debated Chevron’s rationale at length, it generally was read to require deference based upon agencies’ presumed subject matter expertise and an assumption that Congress delegated authority to agencies—rather than courts—to fill in gaps in statutory schemes. Notably, the Supreme Court had not itself invoked Chevron deference since 2016, although lower courts have continued to rely on it regularly.[4]

What Did Loper Decide?

Loper involved two New England fishing companies appealing the D.C. Circuit’s ruling that applied Chevron deference to uphold the National Marine Fisheries Service’s interpretation of the Federal Magnuson-Stevens Act (the “Act”) as requiring fishermen to pay for the use of compliance monitors on certain fishing boats, even though the federal law is silent on who must pay. Petitioners used the case as a vehicle to present a broader challenge to Chevron,arguing that the doctrine has led to excessive deference to federal agencies, resulting in overregulation, the abdication of judicial responsibility to interpret statutes, and the unwarranted imposition of regulatory enforcement costs.

The Loper majority firmly rejected Chevron and held that the APA requires courts to exercise their independent judgment in deciding legal questions that arise in reviewing agency action. As the majority held, “courts need not and under the APA may not defer to an agency interpretation of the law simply because a statute is ambiguous.”[5]

Importantly, however, Loper noted that deference may still be afforded agencies in certain instances. First, the Court observed that the APA expressly mandates a deferential standard of review for agency policy-making and fact-finding.[6] Second, Loper explained that some statutes are best read to “delegate[] discretionary authority to an agency,” in which case a court’s role is to merely ensure the agency “engaged in ‘reasoned decisionmaking’” within that authority.[7] Lastly, Loper reaffirmed that an agency’s “expertise” remains “one of the factors” that may make an agency’s interpretation persuasive.[8]

How Will Loper Impact Federal Health Care Programs?

Loper’s directive that courts should construe statutes independently and not defer to agencies’ positions has enormous implications for providers and suppliers that participate in federal health care programs. Much of today’s health care landscape is governed by HHS’ regulations, impacting many Americans and much of the federal budget. For example, Medicare currently covers more than 67 million beneficiaries, and Medicare spending comprised 12% of the federal budget in 2022 and 21% of national health care spending in 2021.[9]

Federal health care programs like Medicare and Medicaid are established by statutes that set forth myriad requirements regarding the coverage of items and services, and how, when, and by whom those items and services may be furnished.[10] HHS’s various components—most notably the Centers for Medicare and Medicaid Services (CMS)—have issued numerous, detailed regulations to implement these statutes. HHS’s components also include FDA, CDC, HRSA, AHRQ, OCR, NIH, and many others that intersect with health care providers and suppliers regularly.

Going forward under Loper, future challenges to agency regulations will take place upon a much different playing field. This has several important implications:

More Legal Challenges: We expect to see more legal challenges brought against HHS’s regulations as they are issued. Loper expressly stated that it “does not call into question prior cases that relied on the Chevron framework,” so prior decisions affirming regulations should be stable.[11] But going forward, Loper means that courts have no “thumb on the scale” in favor of HHS’s legal positions, and so litigants may view Loper as increasing their odds of success. At the same time, this may create more uncertainty for providers and suppliers who must determine how to comply with new regulations under challenge.
Less Ability for HHS to Create New Programs or Impose New Requirements: Especially where HHS imposes new substantive requirements that are not clearly authorized by statute, HHS’s regulations may be vulnerable. For example, the challengers to CMS’s minimum-staffing requirements for nursing homes are sure to cite Loper.[12] Likewise, when HHS creates new programs or initiatives by regulation based on broad statutory language (e.g., HHS’s recent creation of rural emergency hospital regulations[13]), the regulations may be more vulnerable to challenges. As another example, legal challenges to FDA’s new rule on Laboratory Developed Tests are pending and will likely invoke Loper.[14]
More Incentive to Challenge Reimbursement Rules: Legal challenges are frequently brought to CMS’s rules governing reimbursement, which often have complicated statutory formulas subject to differing interpretations. Whereas in the past, courts often deferred to CMS’s interpretations,[15] Loper now creates more potential for providers and suppliers to seek more favorable legal interpretations to enhance reimbursement.
Slower and More Cautious Rulemaking: As HHS promulgates new regulations, it will now have to consider the enhanced litigation risk that Loper creates. This may lead to agencies slowing and proceeding more cautiously in rulemaking as agencies seek to craft defensible regulations.
Inconsistent Decisions by Courts: Because Loper directs courts to exercise independent judgment rather than defer to HHS’s interpretations, we expect that courts in different areas of the country may reach differing conclusions regarding HHS regulations. This may make certain geographic locations more advantageous for provider and supplier operations or expansions.

Conclusion

Going forward, courts will be more amenable than ever to siding with challenges to HHS regulations. This creates both challenges and opportunities for providers and suppliers who should carefully assess the legal basis for all new regulations.

The authors acknowledge the contributions of Callie Ericksen, a student at the University of California Davis Law School and 2024 summer associate at Foley & Lardner LLP.

[1] Loper Bright Enterprises v. Raimondo, No. 22-451 (June 28, 2024), together with Relentless, Inc. v. Department of Commerce, No. 22-1219, available here.

[2] 467 U.S. 837 (1984).

[3] Id. at 843 (emphasis added).

[4] See Am. Hosp. Ass’n (“AHA”) v. Becerra, 142 S. Ct. 1896, 1904 (2022) (determining that HHS’s preclusion of judicial review “lacks any textual basis,” remaining silent with respect to Chevron); Becerra v. Empire Health Found., 142 S. Ct. 2354, 2362 (2022) (illustrating that HHS’s reading aligns with the statute’s “text, context, and structure” in calculating the Medicare fraction for purposes of Medicare Part A benefits, without any mention of Chevron); Vanda Pharms., Inc. v. Ctrs. for Medicare & Medicaid Servs.,98 F.4th 483 (2024) (holding that CMS’s definitions of “line-extension” and “new formulation” did not conflict with the Medicaid statute).

[5] Loper Bright Enterprises v. Raimondo, No. 22-451, slip op. 35 (June 28, 2024).

[6] Id. at slip. op. 14 (citing 5 U.S.C. §§ 706(2)(A), (E)).

[7] Id. at slip op. 18.

[8] Id. at slip op. 25 (citing Skidmore v. Swift & Co., 323 U.S. 134 (1944).

[9] See KFF, Medicare 101 (published May 28, 2024), available here.

[10] See 42 U.S.C. §§ 1395–1395lll.

[11] Loper Bright Enterprises v. Raimondo, No. 22-451, slip op. 34 (June 28, 2024).

[12] See Am. Health Care Ass’n v. Becerra, No. 24-cv-114 (N.D. Tex) (challenging the rule issued at 89 Fed. Reg. 40876 (May 10, 2024).

[13] Conditions of Participation, 42 C.F.R. §§ 485.500-485.546 (Subpart E), and Payments, §§ 419.90-419.95 (Subpart J), 87 Fed. Reg. 71748, 72292-93 (Nov. 23, 2022),

[14] 21 C.F.R. § 809, 89 Fed. Reg. 37286 (May 6, 2024).

[15] See, e.g., Baptist Mem’l Hosp. – Golden Triangle, Inc. v. Azar, 956 F.3d 689 (5th Cir. 2020) (deferring to CMS’s rule addressing “costs incurred” for calculating Medicaid Disproportionate Share Hospital payments).

Supreme Court Issues Landmark Decision Upending Deference to Federal Agencies

On June 28, 2024, the Supreme Court of the United States upended the 40-year-old doctrine whereby federal courts gave deference to administrative agencies’ reasonable interpretations of federal statutes. The ruling stands to have significant implications for federal agencies’ rulemaking and enforcement of federal labor and employment laws.

Quick Hits

The Supreme Court held that courts must exercise their independent judgment in deciding whether an agency acted within its statutory authority and may not defer to an agency’s interpretation when a law is ambiguous.
The decision overruled the four-decades-old doctrine known as Chevron deference, in which courts had deferred to agencies’ reasonable interpretations of ambiguous statutes.
The ruling will have a major impact on federal agencies’ rulemaking authority.

The Supreme Court decision in Loper Bright Enterprises v. Raimondo held that courts must exercise independent judgment in deciding whether an agency acted within its statutory authority and may not simply defer to the agency’s interpretation of ambiguities in the law.

The decision overrules the longstanding doctrine known as Chevron deference, under which courts would defer to a federal agency’s reasonable interpretation of an ambiguous law that the agency administers. The deference had provided the rules of such administrative agencies with the force of law, but that authority will, at a minimum, be weakened, along with the corresponding power of the agencies.

In the opinion of the Court, Chief Justice John Roberts wrote that Chevron deference “defies the command of the” Administrative Procedure Act (APA) that courts “not the agency whose action it reviews … ‘decide all relevant questions of law’ and interpret … statutory provisions.” Chevron deference “requires a court to ignore, not follow, ‘the reading the court would have reached’ had it exercised its independent judgment as required by the APA,” (Emphasis in original).

The Court, in its majority, rejected the presumption that ambiguities in federal statutes are implicit delegations of authority to agencies, stating the “presumption is misguided because agencies have no special competence in resolving statutory ambiguities.”

The ruling will have significant implications for the multiple federal agencies that regulate employers, including the U.S. Department of Labor (DOL), the U.S. Equal Employment Opportunity Community Commission (EEOC), the Federal Trade Commission (FTC), the National Labor Relations Board (NLRB), Occupational Safety and Health Administration (OSHA), and the Office of Federal Contract Compliance Programs (OFCCP), among others.

Chevron Deference

Under the two-step Chevron deference framework, the court would first determine whether a statute in question was clear and unambiguous regarding an issue. If the statute was clear, then the court would give effect to it. If, however, the court found the statute was ambiguous or silent on the issue, then the court would proceed to step two. At that step, the court would determine whether the agency’s interpretation was a permissible or reasonable construction of the statute. If so, the court would uphold the agency’s interpretation.

The deference had allowed federal agencies leeway to act, allowing them interpret ambiguities and fill gaps in the laws they enforce. However, the doctrine has been criticized in recent years as unconstitutionally allowing the Executive Branch’s policy positions to be advanced by federal agencies outside the democratic process and for taking power away from federal courts to interpret laws.

Background

The issue over Chevron deference came before the Supreme Court in two cases challenging a National Marine Fisheries Service (NMFS) rule that required fishing vessels to pay the salaries of federal observers that vessels are required to “carry” under the Magnus-Stevenson Act (MSA). The MSA is silent as to whether the fishing industry is responsible for paying the costs for the observers. Given concerns about funding, the NMFS rule required the vessels carrying the observers to pay the costs despite objections from the fishing industry over its negative economic impact on the livelihoods of commercial fishermen.

In Loper Bright Enterprises, four family-owned and –operated fishing companies, argued that the NMFS cannot force vessels to pay for the observers because the MSA did not clearly give the agency power to do so. However, the D.C. Circuit Court of Appeals ruled in favor of the agency, finding that the law’s silence on the issue created an ambiguity that required deference to the agency.

Supreme Court Justice Ketanji Brown Jackson recused herself from the Loper Bright case as she had sat on the D.C. Circuit panel that had ruled in the case. The Court then added Relentless, Inc. v. Department of Commerce, in which the owner of fishing vessels raised a similar challenge to the NMFS rule. The challengers argued that since the MSA provides for observers to be paid in at least three other contexts, the NMFS did not have the authority to require fishing vessels to pay for them. But the First Circuit Court of Appeals affirmed a district court finding that “the rule is a permissible exercise of the agency’s authority and is otherwise lawful.”

At the Supreme Court, the challengers in Loper Bright Enterprises argued that the Court should “either abandon Chevron for good or at least substantially cabin its scope” because it has “proved unworkable” and has “seriously distorted how the political branches operate.” They argued that stare decisis does not bar the court from abandoning the framework since the Court would not have to change the outcome of the case in which the deference was established but merely alter the interpretative methodologies used. Similarly, the challengers in Relentless argued that the deference is unconstitutional because it “compromise[es] judges’ independence when interpreting the law,” which is a power vested in the federal courts under Article III of the U.S. Constitution.

Decision

In deciding Loper Bright, the Supreme Court stated that courts simply “do not throw up their hands because ‘Congress’s instructions have’ supposedly ‘run out.’” “Courts instead understand that such statutes, no matter how impenetrable, do—in fact, must—have a single, best meaning. … So instead of declaring a particular party’s reading ‘permissible’ in such a case, courts use every tool at their disposal to determine the best reading of the statute and resolve the ambiguity,” the Court stated.

The Supreme Court further stated that agencies do not have any special ability to interpret ambiguities, “even when an ambiguity happens to implicate a technical matter” as “Congress expects courts to handle technical statutory questions.” However, the Court stated that courts do not decide cases “blindly” and instead, rely on arguments from the parties and amici, noting that an agency’s interpretation “may be especially informative.”

“The better presumption is therefore that Congress expects courts to do their ordinary job of interpreting statutes, with due respect for the views of the Executive Branch,” the court stated. “And to the extent that Congress and the Executive Branch may disagree with how the courts have performed that job in a particular case, they are of course always free to act by revising the statute.”

However, the Court noted that the decision does “not call into question prior cases that relied on the Chevron framework,” as cases upholding specific agency actions “are still subject to statutory stare decisis despite our change in interpretative methodologies.

Justice Elena Kagan and Justice Sonia Sotomayor dissented and were joined by Justice Jackson to the extent it applied to the Relentless case. In the dissenting opinion authored by Justice Kagan, the justices argued that Chevron deference “has formed the backdrop against which Congress, courts, and agencies—as well as regulated parties and the public—all have operated for decades” and “has been applied in thousands of judicial decisions.”

They argued that Chevron deference is “right” and the “obvious choice” to resolve ambiguities because “[a]gencies have expertise” that “courts do not.” Further, agencies report to the president, “who in turn answers to the public for his policy calls; courts have no such accountability and no proper basis for making policy.” Moreover, “Congress has conferred on that expert, experienced, and politically accountable agency the authority to administer—to make rules about and otherwise implement—the statute giving rise to the ambiguity or gap,” Justice Kagan wrote.

Next Steps

The Supreme Court’s latest decision is likely to shift power dynamics by weakening agency authority to interpret ambiguous statutes and increasing judicial scrutiny. At a minimum, agencies may need to provide stronger justifications on the merits for their interpretations, and overall, they may be less likely to issue rulemaking in areas where statutory authority is not clear.

The decision is also likely to increase litigation and legal uncertainty, as it potentially opens the floodgates to a wave of legal challenges to overturn all sorts of existing agency rules that have been upheld citing Chevron deference and legal challenges to new agency rules moving forward. For example, this decision likely will have significant impact on the litigation challenging the Federal Trade Commission’s (FTC) rule purporting to ban noncompetes nationally.

SCOTUS Freezes States’ Efforts to Resolve Water Conflict

What Happened?

On June 21, 2024, the Supreme Court narrowly held that three states could not enter a consent decree to settle their interstate water dispute without the support of the intervening federal government. The ruling halts the agreement between Texas, New Mexico, and Colorado to settle Texas’s claims and reconfigure water allocation under the Rio Grande Compact going forward. The decision frustrates multi-year efforts by the states to fairly apportion shrinking water supplies and continues uncertainty for water users dependent on flows from the Rio Grande. More generally, the decision highlights the federal government’s power in cases arising under interstate compacts where federal interests are “inextricably intertwined” with the outcome.

Background

In 2013, Texas sued New Mexico and Colorado, claiming that New Mexico’s increased groundwater pumping was diminishing flows from the Rio Grande, unfairly shorting water allocated to the Lonestar state. This claim arose under the Rio Grande Compact, a 1938 allocation agreement between the three states that depend on the Rio Grande’s waters. The Supreme Court allowed the federal government, although not a party to the Compact, to intervene in the dispute in 2014, based on the federal interests in delivering water to Mexico under a 1906 treaty, in operating a Bureau of Reclamation reservoir and irrigation project closely connected to Compact compliance, and in fulfilling potential federal obligations to Indian tribes. The Supreme Court held that the federal government’s interests were “inextricably intertwined” with the case.

Since that decision, the states sought a compromise, recognizing that the 1938 Compact failed to predict severe droughts and dwindling water supplies, new circumstances that require adaptation. Despite this negotiated solution, the federal government refused to sign the agreement. The federal government claimed that the settlement undermines the Compact’s plain language, which cannot be modified without congressional approval, and that the negotiated agreement would impose new obligations on the federal reservoir and irrigation project. Based on its intervenor status, the federal government asked the Supreme Court to reject the deal in the absence of its consent.

Writing for the 5-4 majority, Justice Jackson explained that the Court’s 2018 decision to allow federal claims in the case to proceed “leads inexorably” to the federal government’s approval being necessary before a valid resolution. Justice Gorsuch, writing for the dissent, cautioned that this deference to the intervenor risks federalizing interstate water disputes and limiting the necessary discretion for states to independently manage their waters. Despite previously authoring a unanimous 2018 decision that green-lighted the federal claims, his dissent pointed back to “a century’s worth” of precedent, holding that the Reclamation Act requires the federal government to comply with state control of water resources and not to assert incompatible federal interests. The majority reasoned, by contrast, that the federal government’s interest was particular to the Compact, where compliance depends on federal action.

Analysis

The Court’s acknowledgment of the federal interest in the three states aligning Rio Grande Compact compliance with contemporary water realities is expressly tailored to the unique federal role in this situation. The problem the Court focused on was the proposed resolution’s failure to include the federal government, given its intervenor status and its integral role in managing a reservoir and irrigation project essential to the Compact. This does not authorize federal interference in all interstate water compacts, as the dissent fears, but others may be “inextricably intertwined” with federal interests. Still, the pointed dissent may signal that a significant court minority stands ready to guard state control of water resources when the federal government overreaches. The decision’s immediate impact will perpetuate uncertainty for water users in all three states as the parties are forced back to trial or the negotiating table.

Junk Science or Relevant Evidence: Supreme Court Says Experts May Now Aid in Determining Criminal Intent

In criminal cases, oftentimes the most significant element in dispute is whether the defendant harbored the intent to “knowingly” or “willfully” violate the criminal law at issue. If the defendant denies that he knew what he was doing was illegal, the government must prove beyond a reasonable doubt that the defendant had the required mens rea — or mental state — to violate the law. The government does this by presenting circumstantial evidence that it argues supports a reasonable inference that the defendant had the required mental state to violate the law. And defense lawyers test that evidence largely on cross examination and by presenting counterevidence.

The more complicated the law — think tax, securities, or federal election conduit contribution laws — the riskier it is that a person can be held criminally liable for what seemed like innocent or at least not illegal conduct. In these cases, experts may be called to testify about how a certain industry or regulatory regime is structured or how it operates, and the parties can argue to the jury whether the facts of the case circumstantially prove the reasonable inference that the defendant knowingly or willfully violated a criminal law related to that industry or regulatory regime. But Federal Rule of Evidence 704(b) prohibits an expert from stating an opinion about whether a criminal defendant “did or did not have the mental state or condition that constitutes an element of the crime charged or of a defense. Those matters are for the trier of fact alone.” FRE 704(b) was adopted in response to President Ronald Reagan’s shooter, John Hinkley, being found not guilty by reason of insanity after competing experts offered opinions on the ultimate issue of Hinkley’s sanity. So FRE 704(b) now requires that a jury alone must decide whether the defendant intended to commit a crime. And the answer to this question is often the difference between freedom or years in prison.

In Diaz v. United States, ___ S. Ct. ___, 2024 WL 3056012 (June 20, 2024), the U.S. Supreme Court ruled that FRE 704(b) does not preclude expert testimony about the likelihood that the defendant intended to commit a crime based on the defendant’s membership in a particular group. Diaz was charged with “knowingly” transporting drugs across the U.S.-Mexican border. She argued the “blind mule” defense: she did not know there were drugs in the car, therefore she did not knowingly transport them. The government called as an expert a Homeland Security Investigations Special Agent to testify that “in most circumstances, the driver knows they are hired to take drugs from point A to point B.” The Agent said that drug-trafficking organizations would expose themselves to too much risk by using unknowing couriers. The Agent admitted on cross examination that he was not involved in Diaz’s case, and that drug-trafficking organizations sometimes use unknowing couriers. The jury found Diaz guilty and she was sentenced to 84 months in prison.

Diaz argued that the Agent’s expert testimony violated FRE 704(b)’s proscription of expert’s providing opinions about whether a defendant did or did not have the required state of mind to violate the law. The Court affirmed the Ninth Circuit’s opinion that the Agent’s expert testimony did not violate FRE 704(b) because the expert “did not express an opinion about whether Diaz herself knowingly transported [drugs].” Instead, he testified that “most” drug couriers know they are hired to drive drugs from point A to point B. “That opinion does not necessarily describe Diaz’s mental state. After all, Diaz may or may not be like most drug couriers.” The Court acknowledged that it would have violated Rule 704(b) if the Agent had testified that “all” drug couriers know they are transporting drugs, since Diaz would be included in that drug courier group thus making it an opinion about Diaz’s mental state.

The Court said that FRE 704(b) only proscribes expert opinions “in a criminal case that are about a particular person (‘the defendant’) and a particular ultimate issue (whether the defendant has ‘a mental state or condition’ that is ‘an element of the crime charged or of a defense.’).” Because the Agent “did not give an opinion ‘about whether’ Diaz herself ‘did or did not have a mental state or condition that constitutes an element of the crime charged or of a defense,’ his testimony did not violate Rule 704(b).”

In her concurrence, Justice Ketanji Brown Jackson inferred that “what’s good for the goose is good for the gander” when she wrote that criminal defendants were now free to offer expert testimony “‘on the likelihood’ that the defendant had a particular mental state, ‘based on the defendant’s membership in a particular group.’” For example, “Diaz could have offered expert testimony on the prevalence and characteristics of unknowing drug couriers.” Justice Jackson said that the Diaz opinion will now allow psychiatrists to testify as experts “to tell the jury that when people with schizophrenia as severe as a defendant’s commit acts of violence, it is generally because they do not appreciate the wrongfulness of their conduct.” This would not create a “spectacle of dueling experts on the defendant’s mental state,” Justice Jackson wrote, but instead “could help jurors better understand a defendant’s condition and thereby call into question a mens rea that might otherwise be too easily assumed…given the biases, stereotypes, and uneven knowledge that many people have about mental health conditions.”

Justice Neil Gorsuch wrote a terse dissent that was joined by Justices Sonia Sotomayor and Elena Kagan. The dissent said the Agent’s probabilistic assessment that “most” couriers know they are transporting drugs violated FRE 704(b) because it was a statement “about whether the defendant” had a “mental state . . . that constitutes an element of the crime charged.” The word “about” is defined as “concerning, regarding, with regard to, with reference to; in the matter of.” And according to the dissent, expert testimony about what most drug couriers know was testimony about the likelihood of what Diaz knew. Justice Gorsuch warned of “warring experts” on the issue of a defendant’s intent, which he says will make the criminal justice system less reliable as lawyers may try and find probabilistic expert opinions on intent rather than doing the hard work of gathering circumstantial evidence and arguing about what that evidence reasonably infers about a defendant’s intent.

Implications of Executive Action for Family Unity and Retention of DACA Talent for Employers and Individuals

Highlights

On June 18, the executive branch announced one of the most significant executive actions affecting U.S. immigration since establishing the Deferred Action for Childhood Arrivals (DACA) program in 2012
The family unity action would allow many undocumented spouses of U.S. citizens to obtain green cards in the U.S. without needing to depart the country
The DACA provisions would make it easier for some DACA recipients to qualify for a work visa

On June 18, 2024, the Biden administration announced one of the most significant executive actions promoting family unity and streamlining the process for Deferred Action for Childhood Arrivals (DACA) recipients seeking to transition to work visas using existing legal authority.

Family Unity and Parole in Place for the Undocumented Spouses of U.S. Citizens

The executive actions initiate a process that will allow certain non-citizen spouses of U.S. citizens to apply for their green cards without leaving the U.S. Currently, a U.S. citizen can sponsor their non-citizen, foreign-born spouse for permanent residency by filing an I-130 immigration petition for the individual, regardless of their immigration status. Immigrant visas are available in this category without backlogs, unlike many other categories. However, undocumented spouses who didn’t enter the U.S. legally typically don’t qualify under current law to complete the permanent residency process in the U.S. In these situations, the spouse typically must depart from the U.S. to complete the process at a U.S. embassy or consulate abroad, thereby triggering a 10-year penalty to lawful readmission under immigration law unless waived due to hardship to a qualifying relative. This process is lengthy, uncertain and expensive, discouraging many of these families from pursuing these steps.

To provide relief, the Biden administration proposes to use the humanitarian parole authority of the executive branch to place qualifying individuals in a legal “parole,” which would then allow them to apply for adjustment of status. Approximately half a million spouses and stepchildren of U.S. citizens in “mixed-status” households could benefit from this change, if implemented.

The availability of this program, also known as Parole in Place, for qualifying non-citizen spouses will be formalized through a rule-making process and publication in the Federal Register. However, the subsequent announcement by the Department of Homeland Security (DHS) on June 18 included the following specifics for individuals to qualify:

Continuously resided in the U.S. for 10 years since June 17, 2014
Physically present in the U.S. on June 17, 2024
Legally married to a U.S. citizen as of June 17, 2024
Entered the U.S. without admission or parole and do not currently hold any lawful immigrant or nonimmigrant status
Have not been convicted of any disqualifying criminal offense
Do not pose a threat to national security or public safety
Merits a favorable exercise of discretion

This program would also include non-citizen children of these spouses (i.e., stepchildren).

All requests will consider the applicant’s previous immigration history, criminal history, the results of background checks, national security, and public safety vetting, and any other relevant information available to or requested by the U.S. Citizenship and Immigration Services.

Employers may stand to benefit from a substantial new group of individuals who will be work authorized and whose statuses could be legalized in the U.S. if this program proceeds.

DACA Recipients and Undocumented College Students

The administration subsequently announced that it is also taking additional steps to facilitate the process for DACA recipients to obtain work visas. DACA was created in 2012 by President Barack Obama as a means for immigrant youth who met certain eligibility requirements to qualify for work authorizations and obtain “deferred action.” While DACA protection has enabled hundreds of thousands of individuals to legally work and live in the U.S., the program has faced considerable uncertainty since 2017, when the Trump administration initially sought to terminate the program but was prevented from doing so in the federal courts.

The program continues to face legal challenges, and additional litigation before the U.S. Supreme Court is very likely. Fundamentally, DACA is not a legal status – the reliance on “deferred action” simply reflects DHS’ decision not to bring immigration removal proceedings against a specific individual. While many DACA recipients and their employers have since sought to transition to a work visa or other legal status that Congress specifically established in the Immigration and Nationality Act (INA), the process for doing so is uncertain, expensive and cumbersome. Since DACA recipients either entered without authorization or were out of status when they received DACA protection, they are typically ineligible for a transition to a lawful status within the U.S.

Instead, they are required under immigration law to “consular process” outside the U.S. and obtain a work visa at a U.S. consulate. The individual’s departure from the U.S. could trigger removal bars (similar to those described above), requiring the individual to obtain a temporary waiver of inadmissibility from the government. These waivers, known as “d3 waivers” based on the section of the INA to which they relate, can take months to obtain and the outcome of such a waiver is not certain. These cumulative issues have chilled the interest of many employers and DACA recipients in pursuing these waivers.

In the coming weeks, the administration is expected to announce additional steps to streamline the availability of d3 waivers. The U.S. Department of State will announce changes to its process for granting such waivers to DACA recipients through updates to the Foreign Affairs Manual, and DHS has indicated that it will adopt the State Department’s policy changes. These steps, if implemented, are very good news for many employers and the DACA recipients that they employ by providing a more efficient, robust and reliable process for transitioning DACA recipients to a more stable and lawful status in the U.S.

Tag: supreme court

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