Last month, the Supreme Court in Kisor v. Wilkie, 139 S.Ct. 2400 (2019) upheld what is known in administrative law as Auer deference: the age-old principle that a court should defer to an agency when the agency is interpreting its own ambiguous language in a regulation. See Auer v. Robbins, 519 U.S. 452 (1997); see also Bowles v. Seminole Rock & Sand Co., 325 U.S. 410 (1945). Deference to an agency’s regulatory interpretation has long been a challenge to industry and the broader regulated community. In any situation where an agency is on the other side of an issue—whether negotiations or a lawsuit—the agencies always had the upper hand when regulatory language was ambiguous. And this interpretation could often be the deciding factor between a party being in compliance with or in violation of a regulation.

But, with the Kisor decision the Court attempted to respect decades of precedent in this area yet rein in the frequency of Auer deference’s use and assuage naysayers by establishing clear standards for when a court should defer to an agency’s interpretation of its own regulations. The most important aspects of the decision are: (1) the preservation of Auer deference by a Court majority, and (2) important to industry and the regulated community, the Court’s attempt to establish clear—and limiting—standards for when Auer deference should be implemented.[1] Only after a court conducts the extensive analysis established by Justice Kagan, should a court grant an agency deference on its interpretation of an ambiguous regulation, i.e., Auer deference.

While the Kisor decision was not a total win for the regulated community, if applied correctly, this decision could help level the playing field between agencies and the regulated community. For regulatory practitioners, the Kisor decision reaffirms the place that Auer deference holds in administrative law, but attempts to limit the occasions a court will afford an agency Auer deference. Because of the Court’s emphasis on the limited application of Auer deference, practitioners should be heartened when faced in a dispute with an agency over a regulatory interpretation. Now, when engaged in negotiations with a federal agency or in opposition to an agency in any tribunal, the regulated community should use the Kisor decision to support the position that deference to an agency’s regulatory interpretation should only be used occasionally, and only employed after a thorough analysis of the language.

This decision should be considered by the regulated community in conjunction with a January 2018 Memorandum from the U.S. Attorney General titled “Limiting Use of Agency Guidance Documents in Affirmative Civil Enforcement Cases.” The Memorandum prohibits Department of Justice (“DOJ”) attorneys from issuing guidance documents that purport to create binding obligations on parties without undergoing public review and comment. Significantly, the Memorandum further advises DOJ attorneys that they are to be guided by this principle in determining the legal relevance of other agencies’ guidance documents in affirmative civil enforcement.

The main takeaway here is that, due to the combined effect of the Kisor decision and the DOJ Memorandum, agency deference appears to be less strident at present which should lead to more flexibility in negotiations with federal agencies in enforcement matters.