Preview and Analysis: Long Island Care at Home v. Coke on 4/16

The following entry was written by Jameson Jones, a student in the Stanford Supreme Court Litigation Clinic.

On Monday, April 16, the Court will hear arguments in an administrative law case, Long Island Care at Home v. Coke (No. 06-593), in which the justices will consider the validity of a thirty-year-old Department of Labor regulation struck down by the Second Circuit. The regulation at issue applies a Fair Labor Standards Act (FLSA) exemption for “companionship services” “related to the care of the elderly or infirm” to workers employed by third parties – such as home health care agencies. Although the hearing list for the April sitting has not yet been released, counsel of record for petitioners is H. Bartow Farr III of Farr and Taranto in DC; counsel of record for respondent is Harold Becker of Chicago. The United States will also argue as an amicus curiae in support of petitioners. The briefs of the parties can be found here and the brief for the United States as amicus curiae supporting petitioners can be found here.

Certiorari was granted 1) to determine whether the regulation should have received Chevron deference because it was promulgated pursuant to notice and comment and 2) whether the Second Circuit should have given more weight to the agency’s interpretation pursuant to Skidmore v. Swift & Co. , in which the Supreme Court held that agency opinions regarding the meaning of statutes are not controlling but should be given persuasive weight. From an administrative law standpoint, this case is potentially significant because it could clarify the Court’s demarcation in United States v. Mead Corp. between legislative regulations, which create binding obligations and merit Chevron deference, and interpretive regulations, which merely provide guidance. Below the surface, this case presents two interesting sub-issues: First, how dispositive are notice-and-comment procedures when determining whether Chevron deference is due? And second, what amount of weight should be given to the agency’s own opinion regarding the applicability of Chevron?

The case was brought by Evelyn Coke, a home health worker, against her employer, Long Island Care at Home, Ltd. (as well as Maryann Osborne, the owner and sole shareholder of the company). Claiming that – in violation of the FLSA – she received no overtime or minimum-wage compensation, Coke both sought damages and challenged the DOL regulation that construed the FLSA’s “companionship services” exemption as encompassing companionship-service workers employed by third parties (as opposed to only those directly employed by the person receiving care). The Second Circuit invalidated the DOL regulation; when the agency originally sought certiorari in 2005, the Supreme Court vacated the decision below and remanded the case for consideration of the Department of Labor’s recently promulgated Wage and Hour Advisory Memorandum No. 2005-1 (December 1, 2005). On remand, the Second Circuit considered the DOL Memo but found the arguments unpersuasive regarding both the applicability of Chevron and the legitimacy of the regulation. Long Island Care at Home again sought certiorari, which the Court granted in January.

Because Congress has delegated to the Department of Labor the power to create rules with binding legal force, the threshold question is whether the agency used that authority when creating this regulation. To support its holding that the regulation was not such an exercise, the Second Circuit found highly significant that the regulation was codified under a subpart labeled “Interpretations.” Furthermore, internal inconsistencies in the regulations also helped convince the court that Chevron should not be applied and that no deference was warranted under Skidmore. Most notably, the court felt that the regulation was contrary to both the statute and congressional intent because it applied the exemption to third-party companionship-services employees who did not fall within the overarching category of “domestic service employment,” which the legislative history and regulations define as work in the home of the employer (although the parties dispute whether this must be employment by the household or simply in the household). Although other circuits have upheld this regulation under Chevron, the Second Circuit found that the Supreme Court’s intervening decision in Mead required a different analysis because Mead affords less deference to interpretive rules. Finding inconsistencies in DOL’s position across time and potential deficiencies in the underlying notice-and-comment procedures, the Second Circuit held that this regulation was not an exercise of DOL’s delegated authority and not persuasive.

Petitioners argue that as a longstanding regulation promulgated pursuant to notice and comment, the third-party-employer regulation should be upheld under either Chevron or Skidmore forms of deference. First, they argue that in determining whether DOL invoked its legislative authority, the Second Circuit gave insufficient weight to the use of notice-and-comment proceedings and to DOL’s opinion (as expressed in the 2005 memo) that the regulation has always been legally binding. Even if Chevron does not apply, however, petitioners contend that the Second Circuit should still have given some weight to the longstanding interpretation of the expert agency and upheld the regulation as a well-grounded application of the FLSA. Under petitioners’ analysis, nothing in the act indicates that the availability of the exemption turned upon who employed the worker. In light of Congress’s intent to promote affordable companionship services – an interest that does not turn on whether the worker is employed by a third party –the DOL’s regulation is reasonable and persuasive.

The Solicitor General filed a brief in support of petitioners arguing that the regulation is a legislative rule that was made pursuant to delegated authority, but in any event, the government contends, it deserves Chevron deference under Mead because it was created through formal procedures. Furthermore, the SG argues that this regulation is consistent with other regulations, was reasonable, and that congressional intent would be flouted if the exemption is eliminated because the already high cost of elderly care will rise.

Respondent on the other hand argues that compliance with APA’s notice-and-comment procedures does not automatically trigger Chevron deference under Mead and furthermore that DOL made a conscious choice not to exercise its delegated legislative authority when it passed the third-party-employer regulation. Under this analysis, DOL made clear its choice not to exercise its legislative authority 1) by placing the regulation under the “Interpretations” heading; 2) by stating in the notice of proposed rulemaking that the subsection was a “statement of policy and interpretation”; and 3) by not including the regulation at issue in a list of those adopted pursuant to its authority to delimit the terms of the exemption. Respondent mostly echoes the Second Circuit’s reasons for finding the interpretation unpersuasive pursuant to Skidmore. As a policy matter, respondent argues that the greatest threat to the availability of quality companionship services is not the cost of complying with wage and hour laws, but with the shortfall in employees created by systematic undercompensation.

In addition to the question regarding the dispositive nature of notice-and-comment proceedings on the Chevron inquiry, it will be interesting to see what weight the Court affords DOL’s Advisory Memorandum. The Memorandum, which was written after the Second Circuit’s original opinion, explains that DOL has always regarded the regulation as legally binding. The Second Circuit found the Memorandum unpersuasive in part because it thought courts should only look to agency opinion at the time of promulgation to determine whether its legislative authority was in fact invoked at that time. Thus, DOL’s longstanding opinion that the regulation was legally binding did not persuade the court to uphold the regulation. That the Supreme Court initially remanded the case for consideration in light of the Memorandum suggests that either the Memorandum’s existence or its reasoning may bear on what level of deference is due the regulation. After vacating and remanding one decision of the Second Circuit on this case, my prediction is that the Court accords this regulation deference under Chevron because it was promulgated pursuant to notice and comment.