New York Federal Court Ruling Invalidates Crucial DOL Regulations Interpreting the FFCRA

08.25.2020

On August 3, 2020, a federal district court in New York struck down four regulations issued by the United States Department of Labor (“DOL”) on April 1, 2020, implementing the Families First Coronavirus Response Act (“FFCRA”). Specifically, the court struck down the following four regulations: (1) the DOL’s “work-availability” guidelines; (2) the DOL’s definition of a “health care provider”; (3) the requirement for an employer to consent for intermittent leave; and (4) the DOL’s documentation requirement for employers. New York v. U.S. Dep’t of Labor, Case No. 20-CV-3020 (JPO), 2020 WL 4462260 (S.D.N.Y. Aug. 3, 2020).

The court did not fashion its ruling to strike down the DOL’s regulations on a nationwide basis, nor is it likely that the ruling would apply outside the State of New York. However, the decision provides a roadmap for other federal courts, including district courts in California, to rule on the same issue in future disputes.

Court Ruling

The court’s decision bears on a matter of administrative procedure, which requires that government agencies follow specific protocols while adopting regulatory guidance. Congress passed the FFCRA on March 18, 2020 to provide relief to American workers in connection with the ongoing COVID-19 pandemic crisis. This bill provides several forms of paid leave to employees, in circumstances relating to COVID-19. On April 1, 2020, the DOL issued a “Final Rule,” or finalized set of regulations, interpreting and administering the paid leave provisions contained in the FFCRA. These regulations addressed a host of paid leave-related issues.

The State of New York filed suit under the Administrative Procedure Act (“APA”) to challenge the process followed by the DOL in adopting four of these regulations.

The court analyzed the legality of the four DOL regulations utilizing the Chevron doctrine. In sum, courts use this doctrine to evaluate whether an executive agency follows appropriate procedures within the scope of its authority when issuing regulations (“rulemaking decisions”) interpreting and implementing legislation. Under this doctrine, courts employ a two-step analysis to determine whether if executive agency has the authority to issue “rules” having the force of legislative law: (1) whether the statute at issue is ambiguous or silent on a particular issue, and (2) whether the agency’s interpretation as reflected in a rulemaking decision is reasonable. If the statute at issue is ambiguous or silent on the point in question, the court considers the second step and will defer to an executive agency’s interpretation of the statute so long as that interpretation is reasonable. If the statute is unambiguous, however, that unambiguous meaning applies and any inconsistent regulations cannot stand. The court concluded that the four particular components of the Final Rule exceeded the DOL’s statutory authority to regulate the use of paid leave under the FFCRA, and invalidated these regulations under the Chevron doctrine.

The Work-Availability Requirement

The FFCRA grants two forms of paid leave, Emergency Paid Sick Leave (“EPSL”) and Emergency Family and Medical Leave Act Leave. The bill provides this paid leave to employees who are “unable to work (or telework) due to a need for leave,” based on one of six qualifying conditions enumerated in Section 5102(a) of the FFCRA. The DOL’s Final Rule interpreted the FFCRA to exclude paid leave in the event an employer did not have available work for employees under three of the six qualifying enumerated conditions: (1) an employee who is subject to a quarantine or isolation order related to COVID-19; (2) an employee who is caring for an individual subject to quarantine or isolation order by the government or a health care provider; or (3) an employee who is caring for a child whose school or place of care is closed, or whose childcare provider is unavailable, because of COVID-19.

The court concluded that the statute was ambiguous, but determined under step two of Chevron that the DOL’s “work-availability” regulation was not reasonable for two reasons. First, the court found that the DOL offered no rationale (let alone a compelling reason) for treating three of the six qualifying conditions differently, particularly as the EPSL Act portion of the statute treated all six qualifying conditions evenly. Second, the court found the DOL offered a “patently deficient” and “barebones explanation” for why the work-availability requirement was needed as a general matter. Thus, the court struck down the requirement.

The Definition of “Health Care Provider”

The FFCRA allows employers to elect to exclude employees who are “health care providers” from paid leave benefits. The FFCRA defines “health care providers” to include medical doctors and anyone else determined by the DOL “to be capable of providing health care services.” The DOL’s Final Rule broadly defined “health care providers” as anyone employed at:

any doctor’s office, hospital, health care center, clinic, post-secondary educational institution offering health care instruction, medical school, local health department or agency, nursing facility, retirement facility, nursing home, home health care provider, any facility that performs laboratory or medical testing, pharmacy, or any other similar institution, Employer, or entity.

The court noted that an English professor, librarian, or cafeteria manager at a university with a medical school would all be considered “health care providers” under this formulation, a fact that the DOL conceded. The court found the DOL’s definition overbroad and went beyond the definition provided by the FFCRA. Under the first step of the Chevron doctrine, the court found that the FFCRA unambiguously excluded the DOL’s definition in its Final Rule. Thus, the court struck down the DOL’s definition.

Intermittent Leave

The DOL’s Final Rule limited the circumstances under which employees could intermittently take paid leave under the FFCRA, that is, use leave over separate periods of time rather than one continuous period. The DOL’s regulations permitted the use of intermittent leave only if the employer and employee agreed, and, even then, only for certain qualifying conditions. Particularly, intermittent leave could only be used if an employee needs to care for a child whose school or place of care is closed due to COVID-19.

The court began by noting under the first Chevron step, the FFCRA does not address intermittent leave, creating “precisely the sort of statutory gap … that DOL’s broad regulatory authority empowers it to fill.” The court noted that the FFCRA’s silence contrasts with other federal leave laws (such as the FMLA), which include explicit provisions on intermittent use of leave. The absence of such treatment in the FFCRA suggested that “Congress left this interstitial detail to the agency’s expert decision-making.”

However, the court found that the DOL failed to meet in part the second Chevron step. The court agreed with the general premise that intermittent leave should be limited to situations where there is no risk that the employee might spread COVID-19 to others, which justified the DOL’s limitation on using leave for conditions that correspond with increased public health risk. However, the court found that the DOL utterly failed “to explain why employer consent is required for the remaining qualifying conditions, which concededly do not implicate the same public-health considerations.” Because the Final Rule failed to provide a justification for its blanket requirement of employer consent, the court invalidated that portion of the regulation “[i]nsofar as it requires employer consent for intermittent leave.” But the court found “[i]t survives Chevron review insofar as it bans intermittent leave based on qualifying conditions that implicate an employee’s risk of viral transmission.”

Documentation Requirements

The fourth DOL regulation at issue concerned the requirement that, prior to taking FFCRA leave, employees submit to their employer documentation indicating their reason for leave, the duration of their leave, and when relevant, the authority for the isolation or quarantine order qualifying them for leave. The court found that the Final Rule imposed a more stringent requirement on employees to provide prior documentation, compared to the less onerous notice requirement for using paid leave contained in the FFCRA. Given this disparity and the FFCRA’s unambiguous approach, the court found that the DOL’s prior documentation requirement failed Chevron at step one.

Conclusion

As noted above, this ruling appears to be limited to New York and the safest course for California employers is to continue to follow all of the DOL regulations. However, as the four DOL regulations bear on important components of the FFCRA, it is important for California employers to be mindful of the issue in the event these regulations are similarly struck down by a California federal court or on a nationwide basis. This outcome would substantially impact how paid leave under the FFCRA may be used.

For instance, if the “work-availability” component of the DOL’s Final Rule were struck down, employees may be entitled to use paid leave even if their employer does not have any work for them so long as they seek leave for a qualifying reason. This would expand the eligible pool of employees to include those on furlough or placed on unpaid leaves of absence. Similarly, the elimination of the employer-consent regulatory requirement for employee use of intermittent leave under the FFCRA would decrease employers’ control over this particular use of paid pandemic leave.

Additionally, the New York v. DOL court decision casts doubt on the ongoing utility of the prior guidance provided by the DOL related to the four invalidated provisions above for employers in California. Employers in California have commonly relied upon this administrative guidance from the DOL, in informing their policy and procedure in handling employee requests to use paid leave under the FFCRA. If the DOL regulations underlying their publicly posted guidance are invalidated by a court within California or nationwide, this guidance provides less certain support for employers.

Please contact the authors of this article, or your current AALRR counsel, for more information on this matter or other COVID-19-related questions.