Court Opinion

ID: 2763518
Source: CourtListenerOpinion
Date Created: 2014-12-22 19:01:02.316404+00
Date Added: 2024-06-11T10:44:35.548693
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UNITED STATES DISTRICT COURT F
FOR THE DISTRICT OF COLUMBIA I L E Q

EﬁgglgiR: (:SSOCIATION OF ; Clerk, US i h A 42374
’ " >  323235523323;
Plaintiffs, )
v. ; Case No. 14-cv-967 (RJL)
DAVID WEIL, et (11., ;
Defendants. “& ;
MEMORANDUM OPINION

(December 2162014) [Dkt. ##9, 13]

For over forty years, Congress has exempted third-party providers of home care
services from having to pay either minimum or overtime wages to their employees who
provide domestic companionship services to seniors and individuals with disabilities, or
to pay overtime wages to live-in domestic service employees. On October 1, 2013,
however, the Department of Labor issued a new regulation that takes these longstanding
exemptions away from third-party employers.

Plaintiffs Home Care Association of America, the International Franchise
Association, and National Association for Home Care & Hospice (together, “p1aintiffs”)
bring this action under the Administrative Procedure Act, 5 U.S.C. §§ 701-06, against
defendants David Weil, in his ofﬁcial capacity as Administrator of the United States
Department OfLabor’s Wage and Hour Division; Thomas E. Perez, in his Ofﬁcial
capacity as the Secretary of the Department of Labor; and the Department of Labor itself

(together, “defendants” or “the Department”). Comp]. 1] 1 [Dkt #1]. Plaintiffs challenge

this new Department of Labor regulation as an arbitrary and capricious exercise of

authority inconsistent with Congress’s language and intent. See generally Compl.

Indeed, plaintiffs contend, inter alia, that if this new rule, which goes into effect on
January 1, 2015, is allowed to stand, it will have a destabilizing impact on the entire

home care industry and will adversely affect access to home care services for millions of

the elderly and inﬁrm. See Compl. 1] 4.

Before me now are plaintiffs’ motion for partial summary judgment on Counts I
and II of their Complaint and defendants’ motion to dismiss, or, in the alternative, for
summary judgment. Pls.’ Mot. for Expedited Partial Summ. J. (“Pls.’ Mot”) [Dkt. #9];
Defs.’ Mot. to Dismiss or in the Alternative Cross-Mot. for Summ. J. (“‘Defs.’ Mot”)
[Dkt #13].1 After consideration of the parties’ pleadings, the arguments of counsel, the
relevant law, and the entire record in this case, plaintiffs’ motion for partial summary
judgment is GRANTED, defendants’ motion is DENIED, and the Department’s revised
Third Party Employer regulation scheduled to go into effect on January 1, 2015, is
VACATED.

BACKGROUND
The Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201-19, ﬁrst passed in

193 8, obligates employers to pay covered employees minimum wage for all hours

worked and overtime wages for hours worked in excess of 40 in a week, id. §§ 206—07.

I Defendants title Docket Entry 13 as “Defendants’ Combined Memorandum in Support of their Motion
to Dismiss or in the Alternative their Cross-Motion for Summary Judgment and in Opposition to
Plaintiffs’ Motion for Summary Judgment,” which is the same title found on Docket Entry 13—1. It is

clear from the context, however, that Docket Entry 13 is the defendants’ motion and 13-1 is their
memorandum in support.

The F LSA and its amendments undoubtedly envisioned that the Department of
Labor would play some role in implementing the statutory scheme. The companionship
services exemption itself directs the Secretary of Labor to “deﬁne[] and delimit[]” the
statutory terms in the exemption, 29 U.S.C. § 213(a)(15), though, notably, no such
express direction is stated in the live—in domestic employee exemption, 29 U.S.C.
§ 213(b)(2l). Further, the 1974 Amendments authorize the Secretary of Labor in a
general sense “to prescribe necessary rules, regulations, and orders with regard to the
amendments made by this Act.” Fair Labor Standards Amendments of 1974, Pub. L. 93-
259, § 29(b), 88 Stat. 55, 76. However, an agency’s general rulemaking authority does
not necessarily mean that every speciﬁc rule the agency promulgates will be a valid
exercise of that authority. C010. River Indian Tribes v. Na! ’1 Indian Gaming Comm ’n,
466 F.3d 134, 139 (DC. Cir. 2006). Congress surely did not delegate to the Department
of Labor here the authority to issue a regulation that transforms deﬁning statutory terms

into drawing policy lines based on who cuts a check rather than what work is being

performed.

As stated above, Congress merely left a number of deﬁnitional gaps in the
exemptions’ statutory language, including regarding what companionship services are
and what domestic service employment is. The Department, appropriately, has ﬁlled

those gaps through regulations, including revised deﬁnitions for “domestic service

11

employment” and “companionship services” in the new rule scheduled to go into effect

January 1, 2015.9

Once those deﬁnitional gaps were ﬁlled, however, the statutory loop was closed.
The language of the exemption provisions is quite clear: “any employee” who is
employed to provide companionship services, or who resides in the household in which
he or she is employed to perform domestic services, is covered by the exemption. 29
U.S.C. § 213(a)(15), (b)(21) (emphasis added). If an employee’s work is encompassed
within the statutory terms as deﬁned by the regulations, the employer is not obligated to
pay overtime and/or minimum wage. This, indeed, is the natural reading of the statute.‘0
There is no explicit—or implicit—delegation of authority to the Department to parse
groups of employees based on the nature of their employer who otherwise fall within
those deﬁnitions.

That Congress intended the exemption to apply to all employees who provide
companionship and live—in domestic services is further evidenced by analyzing the
surrounding exemption text. See Abrams/cl v. United States, 134 S. Ct. 2259, 2267 (2014)

(explaining that a court must “interpret the relevant words not in a vacuum, but with
reference to the statutory context, structure, history, and purpose” (internal quotation

marks omitted)). In particular, Congress did not hesitate in other exemptions listed

9 The Department’s effort to narrow the scope of those exempted services through its new changes to the
regulatory deﬁnitions of statutory terms is not before me at this point.

10 The Department itself recognized this statutory reality in the past. “This language is naturally read to
exempt any employee who provides companionship services to an aged or inﬁrm individual in a private
home. The statute does not draw any distinction between companions who are employed by the owners of
the homes in which they are working and companions who are instead employed by third party
employers." See US. Dep’t of Labor, Wage and Hour Advisory Mem. No. 2005—1 (2005), available at
http://www.d01.gov/whd/FieldBulletins/indexhtm.

12

within Section 213 to make distinctions on the basis of who employs the employee. See,
e.g., 29 U.S.C. § 213(a)(3) (exempting “any employee employed by an establishment
which is an amusement or recreational establishment, organized camp, or religious or
non—proﬁt educational conference center” in certain circumstances); id. § 213(b)(3)
(exempting “any employee of a carrier by air”); id. § 213(b)(10) (exempting salesmen for
motor vehicles and certain other machinery, but only if employed by a certain type of
employer).

Further, in addition to exempting “any employee employed in domestic service
employment to provide companionship services for individuals who (because of age or
inﬁrmity) are unable to care for themselves,” Section 213(a)(15) itself also exempts “any
employee employed on a casual basis in domestic service employment to provide
babysitting services.” Id. § 213(a)(15) (emphasis added). To the extent that Congress
conceptualized companions as “elder sitters” analogous to baby sitters, as argued by the
Department, Defs.’ Mem. at 7, it is clear that Congress recognized that one could “sit”
casually or on a more established basis—and chose to include all those providing
companionship services within the exemption. The Department explicitly has
recognized, and continues to recognize in the new regulations, that “[t]he ‘casual’
limitation does not apply to companion services.” 29 C.F.R. § 55.106; 78 Fed. Reg.
60,557.

To say the least, where Congress wanted to draw a line based on the circumstances
surrounding an employee’s employment rather than the type of services the employee

provides, it did so. And Congress did not include a “casual basis,” employer—based, or

13

any other modiﬁer when exempting “any employee” providing companionship or live-in

domestic services.

This, of course, makes sense. Congress was concerned with what services
employees were providing, not whether money was routed through a third party on its
way to the employee from the individual or family requiring assistance. Of particular
concern here were the costs incurred by those in need of the types of services at issue.
See 119 Cong. Rec. 24,797-98 (1973) (statements of Sen. Dominick and Sen. Johnston);
see also Welding v. Bios Corp, 353 F.3d 1214, 1217 (10th Cir. 2004) (“Congress created
the “companionship services” exemption to enable guardians of the elderly and disabled
to ﬁnancially afford to have their wards cared for in their own private homes as opposed
to institutionalizing them.” (internal quotation marks omitted)).

“Agencies are . . . ‘bound, not only by the ultimate purposes Congress has
selected, but by the means it has deemed appropriate, and prescribed, for the pursuit of
those purposes.” Colo. River Indian Tribes, 466 F.3d at 139 (quoting MCI T elecomms.
Corp. v. AT&T, 512 U.S. 218, 231 n.4 (1994)). Here, Congress has directed the
Department of Labor to deﬁne statutory terms, and then include “any employee” who
provides services according to those deﬁnitions within the scope of the exemptions. The
focus is on the type ofthe services provided, not who pays the check. As such, Congress
has clearly spoken on this issue, and the Department’s new, conﬂicting rule therefore

cannot survive.

14

II. Long Island Care at Home Ltd. v. Coke

The Department argues that plaintiffs’ Chevron Step I argument is foreclosed by
the Supreme Court’s decision in Long Island Care at Home, Ltd. v. Coke. Defs.’ Mem. at
9-21. I could not disagree more. As the plaintiffs contend, this argument turns the actual
holding in that case on its head.

The Supreme Court stated at the outset of its Coke opinion: “The question before
us is whether, in light of the statute’s text and history, . . . the Department’s [current]
regulation is valid and binding. We conclude that it is.” Coke, 551 US. at 162 (internal
citation omitted). The Supreme Court thus only considered the validity and binding
nature of the previous, and still current, rule that interpreted the statutory deﬁnition of
companion employees under Section 213(a)(15).

The Supreme Court did not consider the question with which I am presented by
this new rule: whether the Department is authorized to craft a rule which prevents
employers from “availing themselves” of the Act’s statutory exemptions of their
employees in a manner inconsistent with the plain language of Section 213? To the
extent the Supreme Court analyzed the statutory language of the exemption (rather than
how different regulations interacted with one another), the Court focused on the
Department’s authority to deﬁne statutory terms, which is not the method by which the
Department promulgated the new third-party employer regulation here. Id. at 168
(explaining that it was “reasonable to infer . . . that Congress intended its broad grant of

deﬁnitional authority to the Department to include the authority to answer these kinds of

15

questions” (emphasis added)). And the Supreme Court did not consider the live—in
domestic employee exemption at all.

Finally, in blessing the current companionship services regulation, the Supreme
Court was not faced with a regulation that essentially would eviscerate a
Congressionally-mandated exemption via a method Congress never envisioned. By the
Department’s own numbers, approximately 90% of home health aides and personal care
aides, which include those providing companionship services, are employed by third
parties, rather than by the individual or family needing services. Defs.’ Reply at 10 n.4;
see 78 Fed. Reg. 60,519—20. Congress included the exemptions for a reason, and the
Supreme Court’s decision in Coke not only does not empower the Department to gut
them, it does not grant the Department judicial cover for what can only be characterized
as a wholesale arrogation of Congress’s authority in this area!
111. Congressional Inaction

Although not alone dispositive, I cannot overlook the fact that Congress has
revisited the FLSA many times since the 1974 Amendments, while the 1975 regulations
have been in place. Indeed, Congress has amended its statutory exemptions over the
years in other ways, see, e.g., Act ofDec. 9, 1999, Pub. L. No. 106-151, § 1, 113 Stat.
1731; Small Business Job Protection Act of 1996, Pub. L. No. 104-188, § 2105(a), 110
Stat. 1755, 1929, but has not altered the exemptions at issue here. “It is well established
that when Congress revisits a statute giving rise to a longstanding administrative
interpretation without pertinent change, the “congressional failure to revise or repeal the

agency’s interpretation is persuasive evidence that the interpretation is the one intended

16

by Congress.’” Commodity Futures Trading Comm ’n v. Senor, 478 US. 833, 846 (1986)
(quoting NLRB v. BellAerospace C0,, 416 US. 267, 275 (1974)).

Following the Coke decision, Congress contemplated adjusting the statutory
language of the companionship exemption at least three times, but never did so. See
“Direct Care Job Quality Improvement Act of 201 1,” HR. 2341 and S. 1273, 1 12th
Cong. (2011); “Direct Care Workforce Empowerment Act,” HR. 5902 and S. 3696,
111th Cong. (2010); “Fair Home Health Care Act of 2007,” HR. 3582 and S. 2061,
110th Cong. (2007). Six bills were introduced—three in the House of Representatives,
three in the Senate—over the course of three Congressional sessions, where the sponsors
were in the majority party of each,ll yet there was never sufﬁcient support to get any of
them to the ﬂoor of either house of Congress. This unequivocally represents a lack of
Congressional intent to withdraw this exemption from third-party employers. The fact
that the Department issued its Notice of Proposed Rulemaking after all six of these bills
failed to move is nothing short of yet another thinly—veiled effort to do through regulation
what could not be done through legislation. '2 Such conduct bespeaks an arrogance to not

only disregard Congress’s intent, but seize unprecedented authority to impose overtime

H See note 5, supra.

’2 See, e.g., Am. Ins. Ass ’n v. US. Dep ’t ofHous. & Urban Dev., No. cv 13-00966 (RJL), 2014 WL
5802283 (D.D.C. Nov. 7, 2014) (vacating a HUD rule that expanded the Fair Housing Act to include
disparate impact liability); Avenal Power Ctr, LLC v. US. E.P.A., 787 F. Supp. 2d 1, 4 (D.D.C. 2011)
(holding that regulatory review process did not relieve EPA Administrator of duty to comply with
statutory deadline); Smoking Everywhere, Inc. v. US. Food & Drug Admin, 680 F. Supp. 2d 62, 63

(D.D.C.) aﬂ’d sub nom. Sottera, Inc. v. Food& Drug Admin, 627 F.3d 891 (DC. Cir. 2010) (ﬁnding that
FDA did not have authority under the Food, Drug, and Cosmetic Act to regulate electronic cigarettes as a
drug-device combination).

17

and minimum wage obligations in deﬁance of the plain language of Section 213. It

cannot stand.

CONCLUSION
For all of the foregoing reasons, plaintiffs’ motion for partial summary judgment
[Dkt. #9] is GRANTED and defendants’ motion to dismiss, or, in the alternative, for
summary judgment [Dkt. #13] is DENIED. Accordingly, the United States Department
of Labor’s Third Party Employer regulation, promulgated in 78 Fed. Reg. 60,557 and to

be codified at 29 CPR. § 552.109, is hereby VACATED. An appropriate order shall

accompany this Memorandum Opinion.

RICHARD J. N
United States District Judge

18

Congress amended the F LSA in 1974 in part to extend certain labor protections,
including the provision of minimum and overtime wages, to domestic service
employees.2 Fair Labor Standards Amendments of 1974, Pub. L. No. 93-259, § 7, 88
Stat. 55, 62; see 29 U.S.C. § 201 (ﬁnding that domestic service employment affects
commerce); id. § 206(1) (extending minimum wage protection); id. § 207([) (extending
overtime protections).

At the same time that it expanded FLSA coverage to domestic service employees,
Congress included exemptions tied to ccrtain types of domestic service work. Fair Labor
Standards Amendments of 1974, Pub, L. No. 93-259, § 7(b)(3)-(4), 88 Stat. 55, 62. In
particular, the statute explains that its overtime and minimum wage requirements shall
not apply to “any employee employed in domestic service employment to provide
companionship services for individuals who (because of age or inﬁrmity) are unable to
care for themselves (as such terms are deﬁned and delimited by regulations of the
Secretary)” 29 U.S.C. § 213(a)(15) (“companionship services exemption”). Nor shall
its overtime requirements apply to “any employee who is employed in domestic service
in a household and who resides in such household.” 29 U.S.C. § 213(b)(21) (“live-in
domestic employee exemption”). The exemptions at issue here have remained in place
since the passage of the 1974 Amendments, though F LSA exemptions have been
amended since that time. See, e.g., Act ofDec. 9, 1999, Pub. L. No. 106—151, § 1, 113

Stat. 1731 (deﬁning “ﬁre protection activities” to clarify an overtime exemption); Small

2 Prior to the passage of these amendments, only those domestic service workers employed by a business
large enough to be subject to the FLSA’s enterprise coverage were included within the FLSA’S
protections. 39 Fed. Reg. 35,385; 78 Fed. Reg. 60,481.

3

Business Job Protection Act of 1996, Pub. L. No. 104-188, § 2105(a), 110 Stat. 1755,
1929 (adding an exemption under 29 U.S.C. § 213(a) for certain computer professionals);
Act of Sept. 30, 1994, Pub. L. No. 103-329, § 633(d), 108 Stat. 2382, 2428 (adding an
overtime and minimum wage exemption for certain criminal investigators).

Following the passage of the 1974 Amendments, the Department of Labor
promulgated implementing regulations in 1975. 40 Fed. Reg. 7404. Of interest here, the
regulations focus on the employees and the nature of the employees’ services. 40 Fed.
Reg. 7405. The “term ‘domestic service employment’ refers to services of a household
nature performed by an employee in or about a private home (permanent or temporary) of
the person by whom he or she is employed.”3 40 Fed. Reg. 7405. Examples include
cooks, housekeepers, caretakers, chauffeurs, and “babysitters employed on other than a
casual basis.” Id

“Companionship services” means “those services which provide fellowship, care,
and protection for a person who, because of advanced age or physical or mental infirmity,
cannot care for his or her own needs.” Id. Services “which require and are performed by
trained personnel,” such as by nurses, do not qualify as “companionship services.” Id.
Finally, “live-in” workers are described as “[d]0mestic service employees who reside in
the household where they are employed.” 40 Fed. Reg. 7406.

The regulations further specify that the exemptions cover companions and live-in

domestic service workers who are “employed by an employer or agency other than the

3 Although the phrase “of the person by whom he or she is employed” apparently conflicts with the
current third—party regulation described below, the Supreme Court has held that this more general
regulation does not invalidate the speciﬁc third-party regulation regarding companionship and live-in
workers. Long Island Care at Home, Ltd. v. Coke, 551 US. l58, 169—70 (2007).

4

family or household using their services.” 40 Fed. Reg. 7407. Although the ﬁnal 1975
regulations acknowledge that the Department contemplated the question of whether
employees of third parties should be exempt under the statute, the Secretary “concluded
that these exemptions can be available to such third party employers since they apply to
‘any employee’ engaged ‘in’ the enumerated services.” 40 Fed. Reg. 7405. The ﬁnal
regulation elaborated, “This interpretation is more consistent with the statutory language
and prior practices concerning other similarly worded exemptions.” Id. These
regulations remained substantially unchanged until the rulemaking at issue here.4 See 29
CPR. §§ 552.3, 5526, 552.102, 552.109 (current regulations).

In 2007, the Supreme Court heard a challenge to the validity of the long—standing
inclusion of employees paid by third parties within the companionship services
exemption. In Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158 (2007), a domestic
worker who had been employed by a third party to provide companionship services sued
her former employer, claiming she was entitled to minimum and overtime wages under
the FLSA. With the United States defending the current regulation as amicus curiae, see
Br. for the U.S. as Amicus Curiae Supporting Pet’rs, Coke, 551 U.S. 158 (No. 06-593),
the Court concluded that the third-party rule was valid and binding, Coke, 551 U.S. at
162.

In response to the Supreme Court’s decision in Coke, several bills were introduced

in Congress seeking to abolish this exemption. See “Direct Care Job Quality

 

4 The Department previously considered changing the third-party employer regulation, see 66 Fed. Reg.
5481 (2001); 60 Fed. Reg. 46,797 (1995); 58 Fed. Reg. 69,310 (1993), but ultimately left the regulation in
place until the rulemaking described below.

Improvement Act of 201 1,” HR. 2341 and S. 1273, 112th Cong. (2011); “Direct Care
Workforce Empowerment Act,” HR. 5902 and S. 3696, 111th Cong. (2010); “Fair Home
Health Care Act of2007,” HR. 3582 and S. 2061, 110th Cong. (2007). Notwithstanding
efforts by legislators in the majority party in both the House and Senate in three
consecutive Congresses (1 10th, 111th, and 112m),5 none of their bills ever generated
sufﬁcient support to get out of committee and to the ﬂoor of either house of Congress.
See generally Congressgov, https://www.congress.gov/ (searchable bill histories).
Undaunted by the Supreme Court’s decision in Coke, and the utter lack of
Congressional support to withdraw this exemption, the Department of Labor amazingly
decided to try to do administratively what others had failed to achieve in either the
Judiciary or the Congress. The Department, in December 2011, published a Notice of
Proposed Rulemaking to revise the FLSA domestic service regulations. The Proposed
Rule reworked the definitions of certain terms, including “domestic service employment”
and “companionship services,” and limited the companionship and live-in employee
exemptions to workers employed by the family or household using the services, thereby
excluding third-party employers from the exemptions. 76 Fed. Reg. 81,190-98, 81,244.
After receiving over 26,000 comments, 78 Fed. Reg. 60,460, including comments
from plaintiffs, see J ,A., Tabs D—J [Dkt. ##17-4~17-10], the Department published the

Final Rule on October 1, 2013, 78 Fed. Reg. 60,454 (“new rule” or “new regulation”).

5 In the 1 12th Congress, the majority party remained the same in the Senate, but switched in the House
from Democratic to Republican control. Thus, Rep. Linda Sanchez’s (D-CA-39) 201 1 bill, HR. 2341,

was offered when she was in the minority party.

This new rule is scheduled to go into effect on January 1, 2015.6 Id. Of relevance here,
of course, is the new rule’s effect on the application of the companionship services and
live-in domestic service employee exemptions.7 In a section entitled “Third Party
Employment,” it states that “[t]hird party employers of employees engaged in
companionship services . . . may not avail themselves of the minimum wage and
overtime exemption” provided by the statute, and “[t]hird party employers of employees
engaged in live-in domestic service employment . . . may not avail themselves of the
overtime exemption” provided by the statute. 78 Fed. Reg. 60,5 57.

Plaintiffs are trade associations that represent businesses employing workers
currently subject to the FLSA companionship services and/or live-in domestic service
exemptions. Compl. W 9—1 1. As such, plaintiffs” member organizations include third-
party employers who would not be able to “avail themselves” of the FLSA minimum and
overtime wage exemptions for companions and live-in domestic service workers if the
new rule were to go into effect.

Plaintiffs move for partial summary judgment on Counts I and II of their
Complaint, which involve the new third-party regulation. Pls.’ Mot; Pls.’ Mem. in Supp.
of Mot. for Expedited Partial Summ. J. (“Pls.’ Mem.”) [Dkt. #9—1]. Defendants move to

dismiss those counts, or, in the alternative, cross-move for summar 'ud ment. Defs.’
y J

6 The Department has announced that it will not bring enforcement actions against any employers
regarding violations of the FLSA resulting from the new rule for the first six months it is in effect. 79
Fed. Reg. 60,974—75.

7 Plaintiffs also challenge the new rule’s revised “companionship services” definition in their Complaint,
Compl. W 34-39, but that issue is not before the Court on this Motion for Expedited Partial Summary
Judgment, Pls.’ Mem. at 2 n. l. The change regarding third-party employment was not effected through

any revision to the deﬁnition of“companionship services,” or any other definition, for that matter. 78
Fed. Reg. 60,557.

Mot.; Defs.’ Combined Mem. in Supp. ofMot. to Dismiss or in the Alternative Cross-
Mot. for Summ. J. and in Opp’n to Pls.’ Mot. for Summ. J. (“Defs’ Mem.”) [Dkt. #13-1].
I heard oral argument on the cross-motions on November 19, 2014.
LEGAL STANDARD

Under Rule 56(a), summary judgment is appropriate “if the movant shows that
there is no genuine dispute as to any material fact and the movant is entitled to judgment
as a matter of law.” Fed. R. Civ. P. 56(a); see, e.g., Celotex Corp. v. Catretl, 477 US.
317, 322 (1986). There is no fact-ﬁnding necessary here, as the parties rest this case on
the administrative record. “Summary judgment is an appropriate mechanism for
resolving cases involving administrative rulemaking on the record, particularly where, as
here, the case turns chieﬂy on issues of statutory construction.” Indiv. Reference Servs.
Grp., Inc. v. FTC, 145 F. Supp. 2d 6, 22 (D.D.C. 2001) aﬂ’d sub nom. Trans Union LLC

v. FTC, 295 F.3d 42 (DC. Cir. 2002); see Troy Corp. v. Browner, 120 F.3d 277, 281
(DC. Cir. 1997).
ANALYSIS
I. Chevron Analysis
Plaintiffs ﬁrst argue that the new rule conﬂicts with the plain language and
legislative history ofthe FLSA. Pls.’ Mem. at 1 1-17. The Department disagrees and

counters that the new regulation is entitled to deference because it was promulgated

pursuant to the Department’s rulemaking authority in this area and reﬂects a reasonable
interpretation of the statute. Defs.’ Mem. at 13-28.8

The Court analyzes a challenge to the validity of an agency-promulgated rule
under the analytical framework laid out in Chevron, U.S.A., Inc. v. Natural Resources
Defense Council, Inc, 467 US. 837 (1984). The “inquiry under Chevron is rooted in
statutory analysis and is focused on discerning the boundaries of Congress’ delegation of
authority to the agency.” Arent v. Shalala, 70 F.3d 610, 615 (DC. Cir. 1995). First, in
what is referred to as Chevron Step I, the Court asks “whether Congress has directly
spoken to the precise question at issue." Chevron, 467 US. at 842. If so, the inquiry
goes no further, because the court and the agency “must give effect to the unambiguously
expressed intent of Congress.” Id. at 842-43.

If Congress has not spoken directly on the matter at issue, then the analysis moves
to Chevron Step II—whether Congress has expressly or implicitly delegated authority to
the agency to proceed with the force of law to implement a statutory provision or ﬁll a
statutory gap. If Congress expressly delegates “authority to the agency to elucidate a
speciﬁc provision of the statute by regulation[, . . . the] regulations are given controlling
weight unless they are arbitrary, capricious, or manifestly contrary to the statute.” Id. at

843-44. If Congress implicitly delegates authority to an agency, the Court defers to the

8 Plaintiffs further argue that, should the Court find the new rule not to conﬂict with the statute, the Court
nonetheless should set the rule aside as arbitrary and capricious because the Department of Labor did not
provide an adequate justiﬁcation for changing its long-established policy interpreting the FLSA. Pls.’
Mem. at 17-22. The Department maintains that its use of the notice and comment rulemaking process and
consideration of all of the relevant factors preclude plaintiffs from carrying their burden of proving the
regulation is arbitrary and capricious. Defs.’ Mem. at 29—35. For the reasons described below, I do not
reach this Chevron Step II issue.

agency’s construction of the statute so long as it is a reasonable one. Id. at 844; see
United States v. Mead Corp, 533 US. 218, 229 (2001) (explaining that “it can still be
apparent from the agency’s generally conferred authority and other statutory
circumstances that Congress would expect the agency to be able to speak with the force
of law when it addresses ambiguity in the statute or ﬁlls a space in the enacted law”).
However, a Court may not “presume a delegation ofpower from Congress absent an
express withholding of such power." Ry. Labor Execs. ’Ass ’n v. Nat ’l Mediation 3d,, 29
F.3d 655, 659 (DC. Cir.) amended by 38 F.3d 1224 (DC. Cir. 1994). Unfortunately for
the Department of Labor, I need not get to a Step II analysis in this case.

The essence of the ﬁrst stage of the Court’s inquiry is what questions did Congress
already answer, and what questions did Congress leave up to the Department of Labor to
answer? The Department has not and cannot argue that the statutory text requires a
regulation that effectively excludes those workers employed by third parties from the
exemption. The Supreme Court has rejected such a construction. See Coke, 551 US.
158. Instead, the Department rests its argument on delegated deﬁnitional authority and
general implementation authority to answer what it considers to be open questions left by
Congress. Defs.’ Mem. at 15-16; Dcfs.’ Reply in Supp. ofMot. to Dismiss or in the
Alternative Cross-Mot. for Summ. J. at 1-2 (“Defs’ Reply”) [Dkt. #18]. Plaintiffs, on the
other hand, contend that the exemption enjoyed by third—party employers over the past
forty years is not an open question and the Department of Labor cannot, therefore,
manipulate its deﬁnitional authority in such a way as to effectively rewrite the exemption

out ofthe law. Pls.’ Mem. at 11-13. I agree with the plaintiffs.

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