The Ohio Supreme Court Limits Agency Deference

Labor & Employment

On December 29, 2022, the Supreme Court of Ohio held that Ohio state courts were not required to defer to administrative agencies’ interpretations of ambiguous statutes. In a 4-3 opinion, Justice Patrick DeWine denounced agency deference, proclaiming, "[w]e reaffirm today that it is the role of the judiciary, not administrative agencies, to make the ultimate determination about what the law means. Thus, the judicial branch is never required to defer to an agency’s interpretation of the law."

Agency deference occurs when a court yields to an administrative agency’s interpretation of a statute or regulation. The doctrine of agency deference is based upon the landmark U.S. Supreme Court case, Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), in which the U.S. Supreme Court outlined a legal test for when courts should defer to agency interpretations. Pursuant to the Chevron test, a court must defer to an agency’s reasonable interpretation of an ambiguous statute. Although the Chevron test only applies at the federal level, many state courts have adopted Chevron deference as a state-level statutory interpretation guideline.

The recent Ohio Supreme Court case, TWISM Ents., LLC v. State Bd. of Registration for Professional Engineers & Surveyors was monumental in terms of the future of agency deference in Ohio. The Ohio Supreme Court rejected the Chevron test, holding that, in Ohio, judicial deference to the interpretations of administrative agencies is permissive, not mandatory.

The TWISM Enterprises case dealt with the licensing of an engineering firm. TWISM Enterprises, a start-up engineering firm, sought a Certificate of Authorization (COA), which it needed in order to provide professional engineering services to the public. The company designated an independent contractor instead of a full-time W-2 employee as its engineering manager. The Ohio Board of Registration for Professional Engineers and Surveyors (an administrative agency) denied TWISM Enterprises’ application for COA because the engineering manager was an independent contractor, not an employee. The statute that the agency was interpreting, R.C. 4733.16(D), stated that an engineering firm seeking to be authorized, "shall designate one or more full-time partners, managers, members, officers, or directors as being responsible for and in charge of the professional engineering or professional surveying activities and decisions."

The Board denied TWISM Enterprises’ application because it interpreted R.C. 4733.16(D) to mean that a manager must be a full-time W-2 employee, not an independent contractor. The Hamilton County Court of Common Pleas deferred to the Board’s interpretation. Likewise, the First District deferred to the Board’s interpretation, affirming the denial of TWISM Enterprises’ application. However, the Ohio Supreme Court reversed the decision, refusing to defer to the agency’s interpretation. The Ohio Supreme Court concluded that nothing in the statute precluded an independent contractor from being a full-time engineering manager, thus TWISM could designate an independent contractor as its full-time manager for purposes of R.C. 4733.16(D).

In reaching its decision, the Ohio Supreme Court revisited past case precedent and found that Ohio had no clear doctrine on agency deference. Prior to this case, some Ohio courts had favored mandatory conclusive deference, which requires that a court defers to an agency interpretation so long as the interpretation is reasonable. Some Ohio courts had favored a test that is similar to Chevron, which requires mandatory deference if the statute is ambiguous. Other Ohio courts supported permissive deference, meaning that courts may rely on an agency interpretation.

After reviewing Ohio’s past case precedent, the Court adopted the permissive deference test, which permits but does not require a court to consider an agency interpretation when a statute is ambiguous. Notably, the Ohio Supreme Court did not completely reject agency deference. Rather, the Court rejected the Chevron style, ambiguity-triggered mandatory deference, and instead instituted a permissive deference test, allowing courts to have the option of considering an agency interpretation. The Court reasoned that separation of powers was inherently inconsistent with mandatory agency deference. Interestingly, Ohio is not the first state to reject Chevron’s ambiguity-triggered mandatory deference. Over half of the states now have declined to adhere to mandatory deference in recent years.

The case makes clear that an agency interpretation "should never be used to alter the meaning of clear text." Similarly, if a court is tasked with interpreting common words in a statute, it is not necessary for a court to consider an agency’s interpretation. However, in instances where the wording of a statute had a technical meaning and an agency is an expert on the topic, a court may consider an agency interpretation.

The Ohio Supreme Court’s ruling on agency deference may significantly impact future legal developments in Ohio. In the TWISM Enterprises case, the Ohio Supreme Court asserted that mandatory deference restricts judicial independence, especially when an administrative agency is a party because an agency's interpretation is likely to be biased and sympathetic to the agency. Because agencies are often pro-regulation, their interpretations tend to be more constricting of business. With less deference to the assessments of administrative agencies, Ohio courts will no longer be hampered by potentially self-serving agency interpretations.

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