Labor & Employment Law Daily S.D.N.Y. vacates overbroad healthcare exemptions to DOL’s COVID paid leave rule
Wednesday, August 5, 2020

S.D.N.Y. vacates overbroad healthcare exemptions to DOL’s COVID paid leave rule

By Kathleen Kapusta, J.D.

After finding that New York had standing to sue, the court found several features of the final rule implementing provisions of the FFCRA invalid.

Acknowledging that the DOL “labored under considerable pressure in promulgating” the final rule implementing the provisions of the Families First Coronavirus Response Act (FFCRA), a federal court in New York nonetheless found invalid several features of the April 2020 rule. Accordingly, the court granted the State of New York’s motion for summary judgment as to the rule’s work-availability requirement, the definition of “health care provider,” and the temporal aspect of the documentation requirements; it granted in part and denied in the motion as to the intermittent-leave provision. The COVID-19 crisis, said the court, has “required public and private entities alike to act decisively and swiftly in the face of massive uncertainty, and often with grave consequences,” but “as much as this moment calls for flexibility and ingenuity, it also calls for renewed attention to the guardrails of our government. Here, DOL jumped the rail” (State of New York v. U.S. Department of Labor, August 3, 2020, Oetken, J.P.).

The FFCRA obligates employers to offer sick leave and emergency family leave to employees unable to work because of the pandemic. In April, the U.S. Department of Labor promulgated a rule implementing the law’s provisions. Suing under the Administrative Procedure Act, the State of New York contended that several features of the rule exceeded the agency’s authority under the statute. Both parties cross-moved for summary judgment, and the DOL also moved to dismiss for lack of standing.

Standing. New York first argued that the rule’s challenged features, which either limit paid leave or burden its exercise, impose upon it both proprietary and quasi-sovereign injuries. Without paid leave, it asserted, employees must choose between taking unpaid leave and going to work sick. Choosing unpaid leave, it predicted, would diminish the employees’ taxable income and the state’s tax revenue, while choosing to go to work escalates the spread of the virus and raises the state’s healthcare costs. Either way, the state argued, this would result in greater reliance on various state-administered programs, increasing its administrative burden.

Injury to tax revenue. Finding these predictions supported by the evidence, the court noted that all New York had to show is that it would be injured, not the magnitude of its injury. Nor was the causal chain between the challenged action and the predicted harm too attenuated, said the court, finding that because the threatened injury to the state’s tax revenue was sufficient to support standing, it did not need to address New York’s alternative theories of standing, namely, the potential burden on its healthcare system or the injury to its quasi-sovereign interests.

Work-availability requirement. Turing to the merits, the court addressed New York’s first challenge to the rule: the work-availability requirement. The Emergency Paid Sick Leave Act (EPSLA), one provision of the FFCRA, grants paid leave to employees who are “unable to work (or telework) due to a need for leave because” of any of six COVID-19-related criteria. Similarly, another provision of the FFCRA, the Emergency Family and Medical Leave Expansion Act (EFMLEA), also applies to employees “unable to work (or telework) due to a need for leave to care for… [a child] due to a public health emergency.” But the final rule implementing these provisions excludes from these benefits employees whose employers “do[] not have work” for them.

Scope. Before addressing whether the work-availability requirement was consistent with the FFCRA, the court turned to the requirement’s scope, noting that in the context of the EPSLA, the rule applies the work-availability requirement to only three of the six qualifying conditions. While the DOL argued that the statute’s language compels the work-availability requirement, and therefore, the rule must be interpreted to apply it to each of the six enumerated circumstances, the court, disagreeing, found it had to interpret the rule based on its text, structure, history, and purpose. And here, “its terms are clear: The work-availability requirement applies only to three of the Emergency Paid Sick Leave Act’s six qualifying conditions.”

Chevron analysis. In order to determine whether that regime exceeds the DOL’s authority under the statute, the court turned to Chevron’s two-step framework. The FFCRA grants paid leave to employees who, in the case of the EPSLA, are “unable to work (or telework) due to a need for leave because” of any of the six qualifying conditions or, in the case of the EFMLEA, are “unable to work (or telework) due to a need for leave to care for” a child due to COVID-19. The DOL argued that the terms “due to” and “because” compel the conclusion that an employee whose employer “does not have work” for him is simply not entitled to leave, irrespective of any qualifying condition.

But-for relationship. Those terms, the agency asserted, imply a “but-for” causal relationship: If the employer lacks work for the employee, the employee’s qualifying condition would not be a but-for cause of the employee’s inability to work, but rather merely one of multiple sufficient causes. Further, the DOL contended, an absence from work due to a lack of work is not “leave.”

But, said the court, it could not conclude that the “terms ‘because’ or ‘due to’ unambiguously foreclose an interpretation entitling employees whose inability to work has multiple sufficient causes—some qualifying and some not—to paid leave.” Nor was it convinced that the term “leave” requires that the inability to work be caused solely by a qualifying condition. Noting that an employee may need leave for one reason, even if her employer has no present work for her due to some other reason, the court, as an example, explained that a teacher on paid parental leave may still be considered on “leave” even if school is called off for a snow day.

And while New York argued that the FFCRA both uses mandatory language to describe the obligation to provide paid leave and contains several express exceptions to that obligation (suggesting the absence of other implied limitations), the “causation requirement in the Final Rule,” said the court, “is not an additional, implicit exception, nor a negation of the mandatory nature of the leave obligations, but rather a limiter of the universe of individuals who qualify for the leave in the first instance.” At Chevron’s first step, said the court, its only charge is to determine whether the statute’s text is ambiguous. And while Congress’s aim in passing the statute was remedial, that did not require that every provision of the statute be read to unambiguously be given maximal remedial effect.

Second step. Observing that the statute is ambiguous as to whether it requires but-for causation in all circumstances or instead whether some other causal relationship satisfies its eligibility criteria, the court turned to Chevron’s second step, which requires an inquiry into “whether the agency’s answer [to the interpretive question] is based on a permissible construction.” And here, the work-availability requirement failed for two reasons. First, said the court, as to the EPSLA, the rule’s differential treatment of six qualifying conditions was “entirely unreasoned.” That differential treatment, the court explained, “is manifestly contrary to the statute’s language, given that the six qualifying conditions share a single statutory umbrella provision containing the causal language.”

Second, the agency’s explanation for the requirement was “patently deficient,” the court stated, noting that in support of its policy decision, the rule “offers only ipse dexit stating that ‘but-for’ causation is required.” That “terse, circular regurgitation of the requirement does not pass Chevron’s minimal requirement of reasoned decision-making.”

Definition of health care provider. Turning to New York’s contention that the rule’s definition of a “health care provider” exceeded DOL’s authority under the statute, the court noted that because employers may elect to exclude “health care providers” from leave benefits, the breadth of the term “health care provider” has grave consequences for employees. Not only was the definition expansive, the DOL had conceded that an English professor, librarian, or cafeteria manager at a university with a medical school would all be “health care providers” under the rule.

Based on employer identify, not employee duties. Finding that the statute unambiguously forecloses the rule’s definition, the court noted that while the statutory text requires at least a minimally role-specific determination, “the DOL’s definition hinges entirely on the identity of the employer, that it applies to anyone employed at or by certain classes of employers, rather than the skills, role, duties, or capabilities of a class of employees.” Further, observed the court, the definition “includes employees whose roles bear no nexus whatsoever to the provision of healthcare services, except the identity of their employers, and who are not even arguably necessary or relevant to the healthcare system’s vitality.” This definition, said the court, cannot stand.

Intermittent leave. Next, New York argued that the rule’s prohibition on intermittent leave exceeds the DOL’s authority under the statute. The rule permits “employees to take Paid Sick Leave or Expanded Family and Medical Leave intermittently (i.e., in separate periods of time, rather than one continuous period) only if the Employer and Employee agree,” and, even then, only for a subset of the qualifying conditions. New York argued that this requires employees to take any qualifying leave in a single block, and that any leave not taken consecutively in a single block is thereafter forfeited. Disagreeing, the court found that the provision says nothing about forfeiting remaining days of leave when leave is taken intermittently. Because Congress did not address intermittent leave at all in the FFCRA, it’s precisely the sort of statutory gap, under Chevron step one, that DOL’s broad regulatory authority empowers it to fill. And while New York pointed to several provisions in the FFCRA that would be nonsensical if leave could not be accrued incrementally, those provisions, said the court, “cohere with the Final Rule’s intermittent leave restrictions as properly interpreted, because the Final Rule as construed contemplates leave taken in multiple increments, as long as each increment is attributable to a different instance of qualifying conditions.” Thus the DOL’s intermittent-leave rules were entitled to deference if reasonable.

Public health considerations. The intermittent-leave constraints, however, faltered at Chevron’s second step. Noting that under the rule, intermittent leave is allowed for only certain of the qualifying leave conditions, and, even then, only if the employer agrees to permit it, the court pointed out that the conditions for which intermittent leave is entirely barred are those which logically correlate with a higher risk of viral infection. While this restriction advances Congress’s public-health objectives by preventing employees who may be infected or contagious from returning intermittently to a worksite where they could transmit the virus, it failed to explain why employer consent is required for the remaining qualifying conditions, which do not implicate the same public health considerations. Thus, held the court, “Insofar as it requires employer consent for intermittent leave, then, the Rule is entirely unreasoned and fails at Chevron step two. It survives Chevron review insofar as it bans intermittent leave based on qualifying conditions that implicate an employee’s risk of viral transmission.”

Documentation requirements. Finally, turning to New York’s assertion that the rule’s documentation requirements are inconsistent with the statute, the court found that to the extent the requirement imposes a different and more stringent precondition to leave, it is inconsistent with the statute’s unambiguous notice provisions and fails at Chevron step one. And while the DOL argued that the documentation requirements are not onerous, “the requirement is an unyielding condition precedent to the receipt of leave and, in that respect, is more onerous than the unambiguous statutory scheme Congress enacted. The documentation requirements, to the extent they are a precondition to leave, cannot stand.”

Severability. Agreeing with New York that the each offending portion of the rule was severable from the remainder of the rule, the court vacated the following portions of the rule: the work-availability requirement; the definition of “health care provider”; the requirement that an employee secure employer consent for intermittent leave; and the temporal aspect of the documentation requirement, that is, the requirement that the documentation be provided before taking leave. The remainder of the rule, including the outright ban on intermittent leave for certain qualifying reasons and the substance of the documentation requirement, as distinguished from its temporal aspect, remained.

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