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Court News Ohio

Courts Not Mandated to Defer to State Agency Interpretations

The Supreme Court of Ohio today rejected the view that state courts must defer to an administrative agency’s interpretation of the law.

In a decision written by Justice R. Patrick DeWine, the Supreme Court made clear that the so-called “Chevron deference,” which is a doctrine used in the federal courts, has no place in Ohio law. The judiciary must always apply its own independent judgment when interpreting the law. Chevron deference stems from the U.S. Supreme Court’s 1984 decision in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc.

In a case dealing with the licensing of engineering firms, the Supreme Court of Ohio clarified its position on whether courts should defer to interpretations of law made by executive branch agencies, which has been debated recently in the U.S. Supreme Court and several state supreme courts.

Today’s decision reversed a First District Court of Appeals ruling that denied TWISM Enterprises a certificate of authorization to provide engineering services because the company sought to name an independent contractor as its full-time manager. The First District held it must defer to the Ohio Board of Registration for Professional Engineers and Surveyors, which found the state law on certification required the manager to be a full-time employee of a firm.

“We reaffirm today that it is the role of the judiciary, not administrative agencies, to make the ultimate determination about what the law means,” the Court announced. “Thus, the judicial branch is never required to defer to an agency’s interpretation of the law.” 

Rather, “an agency interpretation is simply one consideration a court may sometimes take into account in rendering the court’s own independent judgment as to what the law is,” the opinion stated.

Justices Sharon L. Kennedy, Patrick F. Fischer, and Michael P. Donnelly joined Justice DeWine’s opinion. Chief Justice Maureen O’Connor and Justices Melody Stewart and Jennifer Brunner concurred in judgment only.

Board’s Interpretation of Certification Law Debated by Lower Courts
TWISM, a small start-up firm, applied to the engineer and surveyor board for a certificate of authorization. Any firm seeking to perform engineering services in Ohio must be authorized by the board.

Under R.C. 4733.16(D), any firm seeking certification “shall designate one or more full-time partners, managers, members, officers, or directors as being responsible for and in responsible charge of the professional engineering or professional surveying activities and decisions.” 

TWISM designated James Cooper as its manager. In the application, Cooper, an independent contractor, stated he is a full-time engineer “in responsible charge for and in charge of the professional engineering” activities of TWISM. He stated that he provides engineering services to TWISM on a per-project basis and that he provides all of TWISM’s engineering services. TWISM designated Cooper as a “manager” “vested with the management” authority “to oversee the day to day operations of the engineering department.”

The board denied TWISM’s application, finding that the law required Cooper to be a full-time employee of the firm to be listed as the manager. It concluded that Cooper did not qualify because he was an independent contractor, not an employee whose employer reports his income on an IRS W-2 tax form. 

TWISM appealed the board’s decision, arguing that nothing in the law stated that the manager had to be a W-2 employee, rather than an independent contractor. The board rejected the company’s arguments, and TWISM appealed to the Hamilton County Common Pleas Court, which reversed the board’s decision.

The board appealed to the First District, which found the court must defer to the agency’s interpretation if the law was ambiguous. Finding the law was ambiguous, the First District deferred to the board’s interpretation and denied the permit.

TWISM appealed to Supreme Court, which agreed to hear the case.

Court Holds That Deference to Agencies Is Permissible, Never Mandatory
The opinion canvassed the Supreme Court’s “admittedly muddled” precedent on deference to administrative agency interpretations of the law. Some cases, the opinion explained, held that “courts owe conclusive deference to ‘an agency’s interpretation of a statute that it has the duty to enforce’ so long as the interpretation is ‘reasonable.’” A second set of cases have held that deference to an agency is mandatory when a statute is “ambiguous” and the agency interpretation is “reasonable.” Finally, the Court explained, a third set of cases have said that courts may defer to agency interpretations of ambiguous statutes.

“Fair to say, there is no ‘Chevron moment’ in this court’s history,” the opinion stated.

The Court then explained that the Ohio Constitution’s system of separation of powers is inconsistent with mandatory deference. The constitution divides the legislative, executive, and judicial powers into three distinct branches of government, each with a designated role in the operation of government.

This separation of powers, “designed to preserve the liberty of all the people,” dictates that it is solely the judicial power to say what the law means, the Court noted. Mandatory deference to an agency’s legal interpretations defies “the foundational principle that ‘no man ought to be a judge in his own cause,’” the opinion stated.

Not only is mandatory deference “difficult to reconcile” with constitutional principles, it also is inconsistent with two statutes, the opinion stated. First, the Ohio Administrative Procedure Act says that courts should review agency decisions for whether they are “in accordance with law.” R.C. 119.12(M) sets a de novo standard of review of agencies’ legal determinations, the Court noted.  And second, R.C. 1.49 states that courts “may,” not must, consider an agency interpretation of an ambiguous law.

The Court announced the controlling deference standard in Ohio.

“First, it is never mandatory for a court to defer to the judgment of an administrative agency,” the opinion stated. Second, “a court may consider an administrative agency’s construction of a legal text in exercising its duty to independently interpret the law.” But it may do so only when the law is ambiguous and only to the extent that the agency interpretation is persuasive, the opinion noted.

“A court may find agency input informative; or the court may find the agency position unconvincing. What a court may not do is outsource the interpretive project to a coordinate branch of government,” the opinion stated.

The Court added that other state high courts across the nation in recent years have reached the same conclusion — the deference is not mandatory.

TWISM’s Application Met Requirements Set by Law, Court Concludes
After clarifying the deference standard, the Court returned to TWISM’s application. It explained that an independent contractor may work as a full-time manager.

“There is nothing in the term ‘manager’ that requires someone to be a W-2 employee instead of an independent contractor,” the Court noted. Furthermore, “in today’s world, it is not at all uncommon for a manager to be an independent contractor rather than a W-2 employee.”

The Court explained that “once the idea that [the court] should defer to the board’s interpretation [was] stripped away,” there was little support for the result reached by the board and the court of appeals. Thus, the Court held that TWISM met the requirements for a certification of authorization to practice engineering. The Court sent the matter back to the engineering board for proceedings consistent with its opinion.

2021-1440. TWISM Ents., L.L.C. v. State Bd. of Registration for Professional Engineers & Surveyors, Slip Opinion No. 2022-Ohio-4677.

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