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Friday, January 06, 2006

Coke is it: Coke v. Long Island Care

At long last, the Supreme Court is set to decide on January 20, 2006 what it will do about Coke v. Long Island Care, a case on appeal from the Second Circuit.  In short, the Second Circuit struck a 30-year old Department of Labor (DOL) regulation that purports to interpret the Fair Labor Standards Act (FLSA) to exempt home health care attendents from the minimum wage even when such attendents are employed by third parties rather than the elder person for whom care is being provided.  Although a legislative regulation issued by the DOL made clear that employees eligible for the "companionship services" exemption in the FLSA must be employed directly by the home, an interpretive regulation allows third-party employers to claim the exemption as well.  The legislative reg gets Chevron deference; the interpretive reg failed under Skidmore deference. 

Under Coke and the FLSA, third-party employers of home health care providers in the Second Circuit could be on the hook for backpay -- and at the very least would need to start paying home health care attendants minimum wage.  It is no wonder that the Court is inundated with amicus briefs.

At issue are classic administrative law puzzles: 

1.  Should the interpretive regulation be afforded Chevron  deference since the rule was preceded by notice-and-comment rulemaking?  Adrian Vermeule has argued that notice -and-comment procedures furnish regs a safe harbor under Mead; Tom Merrill disagrees with that reading of Mead.  I'm with Merrill. 

2.  Was the interpretive regulation construed by the Second Circuit actually legislative after all?  After Coke came down, the DOL issued an advisory opinion effectively promising that the DOL always thought of the reg as legislative (even though is clearly put the reg in its sub-part B, "Interpretations," rather than its sub-part A, "Regulations").  But who really cares what the DOL says now about its intent then; Mead seems to focus us on the "enacting" agency, not the agency's ex post assessment of its regulatory scheme?

3.  Under Mead, how are courts to distinguish between legislative and interpretive regs?  I think the Second Circuit did an admirable job reading the tea-leaves of Mead.  The DOL was trying to bootstrap a finding of legislative reg through a sub-standard notice-and-comment procedure (that proposed the opposite of what was enacted without a new notice period).

SCOTUSblog assumed the Court would grant cert ages ago -- and it seems even more likely now that the SG recommends that the Court take action.  But in truth there is no circuit split: the only court to have upheld the reg at issue did so under Chevron in a pre-Mead environment.  The Second Circuit was the first to apply Mead, which held that such regs could be scrutinized under the lesser form of deference announced by Skidmore.

Stay tuned.

[UPDATE: I originally wrote that the backpay might be for an "obscene" amount.  I regret that terminology and have removed that reference.]

Posted by Ethan Leib on January 6, 2006 at 06:43 PM in Current Affairs | Permalink


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Tracked on Jan 8, 2006 8:58:14 PM


To answer one of my own questions above, it looks like what keeps DOL from enacting retroactive rules is Sec. 551(4) of the APA, defining rule as "an agency statement of general or particular applicability and future effect . . . "

Posted by: Will Baude | Jan 7, 2006 3:01:29 PM


Let's suppose you're right that Mead endorses a sort of all-things-considered analysis of the agency's rulemaking so that one can determine what level of deference to apply when one then goes back to adjudicate the reasonableness of the agency's rulemaking.

If that's right, and I think it might well be, is there any point in couching all of this in terms of steps and levels of scrutiny, and so on? Why not just say that judges should conduct an all-things-considered review of whether agency's rules comply with their statutes? Among the "all things" to "consider" should be the sort of rule-making it was, Congress's intent on the matter, and so on?

I have Mashaw for admin. And all of this is indeed very helpful.

Posted by: Will Baude | Jan 7, 2006 1:56:06 PM


I really do hope this is helping you study for your upcoming Admin exam. It sounds like you are absorbing the material quite well!

But one little rejoinder: Mead focuses us on the intent of the agency when it promulgated its rule. Mead tells courts that it must look to see if an agency intended a rule to be legislative or interpretive. Given that direction from the Supreme Court, it seems entirely reasonable to consider all circumstantial evidence that might illuminate the agency's choice. I grant you that this sometimes requires analysis that looks merits-based. But, all the same, lower courts must consider the context of the rulemaking and the structure of the regulatory scheme to ascertain the status of a rule for the threshold deference question.

I don't teach admin, I confess, but I think I've got this right. Who di you have, Will? Elliot? Mashaw?

Posted by: Ethan Leib | Jan 7, 2006 1:46:23 PM


I would have thought that the points about the legislative history of the 1974 update and the DOL's contemporaneous understanding of that went to the reasonableness of the DOL's actions, or to whether Congress had spoken clearly on the question at issue (therefore precluding deference even under Chevron) not to whether the rule was the sort of rule that Congress intended to have the force of law. This sort of analysis seems to compress the step-Zero analysis (whether the rule is a Chevron/legislative rule or a Mead/interpretive rule) with the merits of the claim, and if we're going to keep the Chevron/Mead thresh-hold tests around, I'm not sure that's a good idea.

I concede the point about Mead's non-newfoundness, and it might well be that Chevron gives no credit to non-mandatory notice/comment procedures (depending partially on whether you think Chevron/Mead are based on Congressional Intent or on purely institutional/functional considerations), but the points about the reasonableness of the DOL are irrelevant to the question of which deference to apply. Deference comes before merits.


What agency is in charge of implementing the Rehab Act of 1973?

Posted by: Will Baude | Jan 7, 2006 1:28:21 PM

The problem I see with all of this is, doesn't the Rehabilitation Act of 1973 apply to these federal agencies requiring them to make their notice and comment process accessible through reasonable accommodations to the disabled? how can an entire class of disabled people who require the agencies to provide oral-spoken communication methods, scribes/amanuensis, or voice-recognition assistive technology to permit meaningful participation in the comment process subsequently claim a rule is valid? I would think rulemaking that violates the Rehab Act would not be insulated from later challenge. I know firsthand this flaw occurred in the DOJ's and EEOC's rulemaking under the Americans With Disabilities Act.

Posted by: Mary Katherine Day-Petrano | Jan 7, 2006 1:14:35 PM

You might be surprised to learn that many circuits foretold Mead's "newfound" distinction. Coke makes clear that even under Second Circuit law pre-Mead, courts distinguished between legislative and interpretive regs.

Also, there is more to the distinction than mere "caption". As the Second Circuit put it, it is "supported by substance." When the DOL first promulgated the rule, it knew that the reg was at odds with the statute -- which had been extended in 1974 to cover new classes of workers. Irrespective of the what the DOL is now arguing (and I really find the DOL's effort to "clarify" its intentions of 1974 now rather absurd), the legislative history of the 1974 update to the FLSA makes clear that Congress thought these third-party employers were by and large required to pay minimum wage and overtime under the old version of the act. The update in 1974 was intended to give more people coverage, not more people exemptions. So there is good reason to think the DOL very consciously put out this reg as an interpretive reg (especially since it enacted the very opposite of the proposed reg after notice-and-comment).

One could argue, I think, in the final analysis that this case is a somewhat close call. But the Second Circuit opinion is surely within the bounds of a reasonable reading of what Mead allows -- and if the Supreme Court wants to upset that ruling, it will have to carefully guide lower courts in how to apply Mead in the future. And let's pray it isn't Souter again, who botched it the first time around.

Posted by: Ethan Leib | Jan 7, 2006 12:06:26 PM

If there's something problematic about applying Mead and Chevron retroactively, then I would think that pre-Chevron regs would indeed be due less deference-- but that wouldn't, I think, justify applying Mead retroactively, with its relatively newfound distinction between legislative and interpretative rules, especially where (as here) the difference may well be a caption. (It may not be, if the notice-and-comment procedure was indeed defective, with the majority seems hesitant to fully explore.)

Posted by: Will Baude | Jan 7, 2006 11:51:08 AM

But you will admit that pre-Chevron regs (that lived in the age of Skidmore) are not the best candidates for ignoring Mead.

Posted by: Ethan Leib | Jan 7, 2006 1:45:09 AM

No question that my entire line of questioning is hypothetical. The big stakes for the litigants here are in 30 years of back pay, and I see your point that a DOL re-regulation wouldn't be able to get rid of that problem.

Now, I confess there is something a little strange to me about applying Mead (like so many other interpretation decisions) retroactively. If it's right that DOL could relatively easily re-pass the interpretive reg as a legislative reg in order to get deference for it, and if prior to Mead it was understood in every court to consider the reg to get deference for it, it's not entirely clear to me why the regulation should be struck down even in periods that were pre-Mead. Mead rests on a myth that is merely clarifying the existing rules, but that seems implausible on its face.

Posted by: Will Baude | Jan 7, 2006 1:31:36 AM

I like your question about (1), Will. But I suppose I would say that the statute gives the agency the right to define the exemption, not to foreclose otherwise valid claims arising under the FLSA. Under your hypothetical (and it is hypothetical -- the DOL clearly hasn't chosen to redo the regulatory scheme), I can't see how the DOL could pass a legislative regulation that extinguishes previously valid claims. It would have to show the claims themselves to be invalid; and that reduces to the current inquiry. So they still have to fight this.

Posted by: Ethan Leib | Jan 7, 2006 12:50:46 AM

Burnspbesg I think that's all arguably right. (I'm not positive I agree with your, Lieb's, and the Second Circuit's reading of Mead's take on voluntary notice-and-comment procedures, but let us take it as given.)

I think the Brand X inquiry might be a little more complicated, though. The agency's attempt to re-pass the interpretative reg as a legislative reg could be struck down on the ground that the statute spoke precisely to the question at issue (which it doesn't) or on the ground that the court had already said that the statute spoke precisely to the question at issue (which it didn't) or on the ground that notwithstanding the lack of a clear congressional statement here, the DOL's solution was nonetheless unreasonable (which is the arguable but uphill climb all describe.) So there are really 3 inquiries, but 2 of them seem to be obvious losers for Ms. Coke.

Posted by: Will Baude | Jan 7, 2006 12:16:48 AM

Maybe I'm missing something here (I'm a tax guy, not a labor law guy) but this seems pretty straight-forward to me, and it seems like the Second Circuit got it right.

As an initial matter, I agree that Mead does not provide a safe harbor based on notice-and-comment (by coincidence, I just re-read Mead yesterday). What I understand Mead to say is that regulations issued under a specific Congressional grant of rule-making authority get Chevron deference; other guidance issued by the agency in the course of carrying out its duty to interpret and enforce the statute gets "Skidmore deference" (I put that in quotation marks because I wish there was a different term to use, that would reduce the risk of analytical confustion). If the DOL "interpretive regulation" falls into the second category, then it's no different than the Customs classification ruling that was at issue in Mead, or for that matter no different than a Revenue Ruling or Revenue Procedure issued by the IRS. And administrative guidance of that type that is flatly inconsistent with a regulation that is entitled to Chevron deference can't have any effect.

Where Brand X comes into play, I think, is if DOL wants to rewrite the regulation (the "legislative regulation") that is entitled to Chevron deference so that it's consistent with the "interpretive regulation." Then you are squarely faced with the issue that's discussed on pages (I think) 27 through 30 of the slip opinion in Brand X: is this an arbitrary and capricious change in agency interpretation. I suspect that Prof. Lieb is right: that's a fairly difficult showing for a plantiff to make.

Posted by: burnspbesq | Jan 6, 2006 11:56:08 PM

Okay, good. (I've been studying admin law for the past few days so it's good to know at least some of it is sticking.)


Presumably the new DOL reg could just announce that it superseded previous regs to the degree they were inconsistent, right? That would solve problem 3.

Problem 4 is fair enough. Previous courts upheld the reg under Chevron, and if the DOL adopted my modified version of the reg (with the supersession provision) that would presumably eliminate some of the internal contradictions, but the Second Circuit could still go the other way and say that the interpretation was unreasonable.

Problem 1 is the most intriguing. Is it obvious that the DOL can't pass retroactive rules that apply to those claims that have not yet been pressed? (The Ex Post Facto clause isn't a bar after Calder v. Bull, but is something else?) What's the bar on retroactive agency rulemaking?

Posted by: Will Baude | Jan 6, 2006 11:44:31 PM

I'm not sure about Brand X (meaning, I just don't know how it would apply here) -- but everything else you say is right.

A few comments, though:

(1) If the DOL repasses, it can't do so retroactively. So if it embarks on this strategy, it would still need to fight the battle of whether the reg was valid for the 30 years it was in existence as a purportedly interpretive reg.

(2) The DOL would have to repass the reg properly -- with proper notice and comment procedures. The previous one may have been adequate, though the Second Circuit opinion has its doubts.

(3) Even if it did re-pass the reg as it reads now, it would still need to do something about a different legislative regulation, 29 CFR 552.3, which the Second Circuit found to conflict directly with the interpretive reg at issue, 552.109(a). Admittedly, the DOL has some bizarre way to render them consistent. But I'm with the Second Circuit on this point.

(4) Finally, there is still a real question about whether the reg, if it were afforded Chevron deference, would survive challenge. The Second Circuit didn't reach that question because it though it didn't need to under Mead. But there is no guarantee that the reg would survive Chevron owing to the internal contradictions (which the DOL acknowledged existed when it proposed to change the reg) in the regulatory scheme. This is obviously an uphill battle for Coke if she has to show that it succumbs to Chevron scrutiny. But it is doable.

Posted by: Ethan Leib | Jan 6, 2006 10:58:43 PM

So can somebody tell me if I have this right?

The DOL promulgates both legislative and interpretive regulations. Everybody agrees that legislative regulations are due Chevron deference, but there is a decent argument that post-Mead, these DOL interpretive regulations get no such respect.

But is there anything to stop DOL from-- right now-- republishing the interpretive reg in question as a legislative reg? It would have to undergo essentially the same notice-and-comment procedure, but if it were adopted it would now be a legislative reg entitled to Chevron deference, right?

(Walker's opinion seems to rely mostly on the DOL's own description of the rule, and choice of headings, to determine that it was passed according to interpretive authority rather than legislative authority. So if the DOL re-passed the rule wearing its lawmaking hat, that determination would presumably change.)

And the Court's decision in Brand X says-- I think-- that an agency interpretation that would get Chevron deference on a blank slate doesn't get deprived of that deference just because it defies a lower court's ruling to the contrary.

So. Walker's decision seems pretty plausible (and he notes in footnote 6 that one can agree with his decision under both Merrill's and Vermeule's theories) and there may well be reasons that DOL finds it inconvenient or politically costly to repass the regs with a new sticker, but am I correct that if DOL did repass the regs with the heading "legislative" under its legislative authority, they'd get the Chevron deference they used to?

Posted by: Will Baude | Jan 6, 2006 10:35:01 PM

You are way off. If anything, I'm a partisan of the Second Circuit's decision; I'd be very distressed if it was overturned. I think I was just trying to highlight why this obscure case about admin law has gotten the attention of the health care industry. Trying to pay millions of workers backpay could result in a truly enormous fiscal impact. Of course, we don't really know what sort of deal the AFL-CIO (representing Coke, if I'm not mistaken) would strike in what would undoubtedly become a very large class action.

[UPDATE: I'm told the plaintiff is represented by SEIU (the main union repesenting home health care workers), not the AFL-CIO (of which SEIU is no longer a member). My mistake. At the time of the Second Circuit argument, the AFL-CIO was representing Coke.]

Posted by: Ethan Leib | Jan 6, 2006 9:05:05 PM

You write: "third-party employers of home health care providers in the Second Circuit could be on the hook for obscene amounts of backpay"

I'm curious why you characterize the amount of backpay potentially involved as "obscene"? This seems (contrary to your slogan) an instance of partisanship trumping intellectual honesty. If the workers were entitled to minimum wage, then they're entitled to the backpay. What's "obscene" is denying people full and fair compensation for the labor they perform.

Posted by: The Continental Op | Jan 6, 2006 8:52:35 PM

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