Applying Loper Bright, Federal Circuit Upholds OPM Overtime Rule

AFP Foundation’s Michael Pepson mentioned Lesko v. United States as a case to watch for understanding how Loper Bright might guide restraint over agency authority without Chevron deference earlier this year. At the time, the Federal Circuit had ordered en banc review to reconsider whether the Court of Federal Claims correctly upheld the Office of Personnel Management’s (“OPM”) overtime regulations. Last week, the full Circuit ruled in favor of OPM after applying the new Loper Bright paradigm for judicial review. 

In Loper Bright, the Supreme Court held that statutes have “a single, best meaning” fixed at the time of enactment. This overturned the Chevron precedent that allowed agencies to regulate according to their preferred “reasonable” interpretations of the law in cases of statutory ambiguity. The regulatory regimes that metastasized under Chevron are coming under scrutiny as courts aim to ensure agencies have authority to regulate based on the best reading of the law. And that was the purpose of the en banc review in Lesko: to evaluate the structure and design of Congress’s laws on overtime payments for federal employees. 

Lesko involved a nurse practitioner at the Indian Health Service. OPM regulations required her overtime payments to be “officially ordered or approved,” that is, “in writing.” Previously, including in Ms. Lesko’s case, courts upheld OPM’s “in writing” requirement as a reasonable interpretation of the Federal Employees Pay Act’s (“FEPA”) phrasing of “officially ordered or approved,” which was deemed ambiguous. With Chevron gone, the Federal Circuit had to reassess its approach to interpreting the regulation.  

The Circuit started with the plain text of FEPA. Looking at the ordinary meaning of the statute and its historical usage, the majority first concluded that OPM’s writing requirement was not expressly authorized because FEPA was silent as to the required form of overtime approval. The phrase “officially ordered or approved” merely described the act of authorization by a proper official: 

[T]he best interpretation of the overtime statute is that Congress mandated an authorization process for directing or ratifying overtime but did not determine the requisite formalities in the statutory text.  To the extent the Government has argued that the plain language of the statute requires that such overtime orders or approvals must be in writing, we do not agree; nor do we give any deference to the agency interpretation[.] 

But while the regulation could not be justified by the statute, the court still ruled in favor of OPM. 

What the Lesko court concluded next hones the question of what Loper Bright means for statutory interpretation. For the majority, the question was not merely whether FEPA literally contained a writing requirement, as reflected in OPM’s implementing regulation. Loper Bright instead counsels that judges should ask whether Congress has, in the absence of any express commands, alternatively granted an agency discretionary authority to fill in procedural details or give meaning to undefined terms. As Loper Bright explained: “[W]hen a particular statute delegates authority to an agency consistent with constitutional limits, courts must respect the delegation, while ensuring that the agency acts within in.”  

The Lesko majority held that FEPA did indeed delegate authority to OPM to enact regulations “necessary for the administration” of Congress’s proscribed payment scheme. Since Congress delegated such authority for overtime authorization, the court reasoned OPM had the ability to require written approval as a condition of overtime payment given various “practical considerations,” such as ensuring “when overtime will be compensated,” avoiding “overtime disputes,” “limit[ing] unexpected liabilities,” and “create[in]g evidence substantiating that the hours worked [by federal employees] were actually hours required by the Government.” 

There is important nuance in how the Lesko court identified this delegation and set its outer boundaries. Rather than treating FEPA’s silence as a statutory prohibition, the court looked to Title 5’s broad authorization for OPM to prescribe regulations “necessary for the administration” of the law as a capacious grant of regulatory power. That decision was based on administrative functionality, demonstrating how housekeeping provisions can often be used to gloss over the lack of specificity in Congress’s drafting. This reliance on catch-all delegations, however, highlights a danger in the application of Loper Bright. While ending Chevron should be an opportunity for limiting administrative overreach, that depends on whether courts demand delegations of power to be express and specific, rather than implied or broad. 

The dissenting judges in Lesko seemed to agree. Judge Stoll, writing on their behalf, argued that, while the majority correctly noted the absence of any express authorization for OPM’s “in writing” requirement, it was wrong to identify a delegation to fill-in procedural niceties or, more precisely, to provide narrower regulatory constructions of statutory terms like “ordered” or “approved.” The best reading of FEPA, for the dissenters, necessarily “include[d] orders or approvals for overtime that are not put into writing” because the law lacked the sort of “clear and direct” delegation contemplated by Loper Bright. The general, catch-all provision identified by the majority, which could authorize any regulation “necessary” for the administration of an entire subchapter in Title 5, could not bear the weight intended by OPM, especially in the face of a countervailing plain reading of the law. Treating “housekeeping” provisions as similarly “clear and direct” as the examples set out in Loper Bright would make them exceptions that swallow the rule. On this point, the dissent had a compelling argument. If courts treat “necessary for the administration” as adequate justification for regulation, agencies will end up enjoying a new form of deference in determining such necessity, thus undermining the constraints imposed by Loper Bright. 

Ultimately, the result in Lesko is quite informative. Ms. Lesko’s claims failed despite Loper Bright and the end of Chevron deference. The court interpreted FEPA without deference for OPM’s position and based on its independent best reading of the statute, upheld the agency’s regulation on delegation grounds. Whether that “best reading” was correct can be contested, of course. But the Lesko decision highlights some of the reality vs. myth in relation to the impact of Loper Bright. Some commentators—including the dissenting justices in Loper Bright—threatened that the end of Chevron deference would rip up the administrative state wholesale. They put little stock in the Court’s insistence that sometimes, the best reading of the law still provides for a delegation of discretionary power to agencies. Interpretation of ambiguity in the law has shifted back to the courts instead of agencies. The rub lies in ensuring that courts properly identify and delimit delegations of discretionary regulatory authority, lest a delegation be so broad as to “render Loper Bright essentially toothless,” as the Tenth Circuit warned in another case earlier this fall. If lower courts react to Loper Bright by allowing vague “housekeeping” provisions to function as broad delegations, those provisions could function as a replacement for Chevron deference, allowing agencies too much leeway in understanding the scope of their own authority. 

Liam Childers is a policy intern at Americans for Prosperity.