Overtime Lawsuit: NAHC Vows to Take the Case to the U.S. Supreme Court
August 27, 2015 09:57 AM
A panel of three judges at the U.S. Court of Appeals for the District of Columbia ruled unanimously on August 21, 2015, that the U.S. Department of Labor (DOL) had the discretionary power to revise longstanding federal regulations and exclude third-party employers of workers engaged in “companionship services” and “live-in domestic services” from “availing themselves” of the minimum wage and overtime exemptions under the federal Fair Labor Standards Act (FLSA). In doing, the Court of Appeals reversed the earlier decision of the Federal District Court that invalidated those rules.
The Court of Appeals did not rule on the dispute about whether the DOL could change the definition of “companionship services.” It held that it did not have jurisdiction to rule on that issue because of its ruling on the third-party employer rule. The court concluded that home care companies did not have “standing” to challenge the revised definition since the exemption does not apply to their employees categorically.
The Court of Appeals held that the U.S. Supreme Court decided in Coke v. Long Island Care at Home that the FLSA exemptions were ambiguous and that the DOL had the power to define which employers and employees the exemptions applied to. Under the standards for determining whether a law passed by Congress was properly interpreted by a federal administrative agency, the Court Appeals evaluated the rules under the so-called Chevron step two analysis.
Chevron is a Supreme Court decision that established a two part method of evaluating the validity of federal regulations. Under Chevron, if the plain language of the law permits only one interpretation, that is the end of the analysis. However, if the law is at all ambiguous, the regulation is analyzed to determine if the interpretation is reasonable. The Chevron standard gives deference to the federal agency’s interpretation provided it has some rational basis. The court concluded that DOL presented a reasonable basis for the rule change in that home care work shifted from a casual activity to a vocation in the years following the 1975 original rule. The Court also indicated that DOL reasonably evaluated the impact of the changes in concluding that it would benefit workers and consumers of home care.
The Coke case was actually prosecuted by NAHC at the Supreme Court in 2005 and 2007. That lawsuit successfully stopped a challenge, spearheaded by a home care worker union, to the validity of the then-DOL rule that permitted the application of the “companionship services” exemption to workers employed by home care companies. The Supreme Court unanimously held that the regulation was a valid interpretation of the FLSA. Essentially, the Court of Appeals ruling indicates that DOL has the power to include or exclude third-party employers from the FLSA exemptions. That means that the Court of Appeals thinks that both interpretations are somehow reasonable.
NAHC and the other plaintiffs in the case argued that the plain language of the FLSA applies the exemption to “any employee” without any restriction on the nature of the employer. As an alternative, the plaintiffs argued that the Department of Labor rule change was not “reasonable” and that it was “arbitrary and capricious” for multiple reasons including the harm that it would cause to home care consumers and the home care workers.
Whether the Court of Appeals decision is correct hinges mainly on the question of whether the Supreme Court actually held in the Coke case that the FLSA exemptions in the law were ambiguous. The plaintiff home care associations argued that the Coke case was different than the present lawsuit in that it involved a challenge as to whether the law specifically excluded third party employers from the exemptions—the opposite of the present case. In addition, plaintiffs argued that the Coke decision supports their position in its findings that the legislative history of the law demonstrates that Congress intended the companionship service exemption to make home care affordable for the elderly and infirm.
If there is no further appeal, the Department of Labor rules will go into effect on October 13, 2015. The Court of Appeals “mandate” is effective 45 days from its issuance and an additional 7 days is tacked on to give the parties time to seek a rehearing with the full court. Since the 52nd day falls on a Sunday and Monday is Columbus Day, it would go into effect on October 13.
There are several possible approaches that can continue the challenge to the validity of the regulations.
A request for re-hearing in the Court of Appeals by the full slate of 8 judges not originally on the case is an option. If that route is taken, the effective date of the ruling will depend on when the Court rules on the request. The Court can reject the request without a hearing or it can decide to rehear the case. The make-up of the judges at the DC Court of Appeals is not favorable to employers in this case. A request for rehearing must be filed before the close of the 52 day period following the three judge decision.
The parties can also file a Petition for Writ of Certiorari with the U.S. Supreme Court. Four justices must determine that the case should be heard for the petition to be granted. If it is granted then the full Supreme Court hears the case. A petition to the Supreme Court must be filed within 90 days of the effective date of the Court of Appeals decision. The parties can petition the Supreme Court without seeking a rehearing at the Court of Appeals or do so after the final action of the Court of Appeals on the rehearing request. The Supreme Court accepts only a small number of cases each year. A ruling on a petition to hear the case usually is issued within 60 days. If a petition is granted, the Supreme Court schedules the case for a later point in its October to June term with a decision issued before the Court recesses in June.
Depending upon how the case proceeds, the parties will need to seek a “stay” of the Court of Appeals ruling. The stay request first must go to the Court of Appeals. If it rejects the request, the Supreme Court can grant a stay. A stay would maintain the current status of the challenged rules, i.e. the rules could not go into effect until a final decision from the Supreme Court.
Whether a Court of Appeals rehearing request or petition to the Supreme Court extends the time before the rules take effect is speculative. On one end of the spectrum is the possibility that the Court of Appeals quickly rejects any rehearing request and both the Court of Appeals and Supreme Court refuses to grant a stay. That would add only a few days to the current October 13 effective date. At the other end is that a stay is granted and the Supreme Court reverses the Court of Appeals. In the middle is a nearly endless series of possibilities. The closest thing to a certainty is that the rules will take effect on October 13 if nothing further is done.
NAHC has committed to pursue further appeals, including through the U.S. Supreme Court. Efforts are underway to expedite such action and to garner support from other interested parties. As with the Court of Appeals action, NAHC will be enlisting the support of outside organizations to participate as a “friend of the court.” At the Court of Appeals stage of the case, support came from several groups representing persons with disabilities, state Medicaid programs, and members of Congress.