In a significant blow to the efforts of the U.S. Department of Labor (DOL) to exclude third-party employers from the companionship and domestic services exemption to the FLSA’s overtime and minimum wage requirements, the U.S. District Court for the District of Columbia today struck down the portions of the regulation applicable to third-party employers.  In Home Care Association of America v. Weil,* the court reviewed the DOL’s revised regulation as applied to third-party employers and held it “not only disregard[ed] Congress’s intent, but seize[d] unprecedented authority to impose overtime and minimum wage obligations in defiance of the plain language” of the FLSA.  Accordingly, the court granted the Home Care Association’s motion for summary judgment and vacated that portion of the regulation. 

The court analyzed the Association’s challenge under the analytical framework set forth in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984).  Emphasizing that “[t]he [DOL] 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 court rejected the DOL’s attempt to “rest[ ] its argument on delegated definitional authority and general implementation authority to answer what it considers to be open questions left by Congress.”  The court concluded that the language of the exemption is “quite clear” and that “[t]here is no explicit – or implicit – delegation of authority to the [DOL] to parse groups of employees based on the nature of their employer who otherwise fall within” the definitions of an employee who provides companionship or live-in domestic services.  The court further opined: “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,” noting that “Congress did not hesitate in other exemptions listed within Section 213 to make distinctions on the basis of who employs the employee.”  

The court wrote that it “could not disagree more” with the DOL’s argument that the plaintiff’s Chevron challenge was foreclosed by the Supreme Court’s decision in Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158 (2007). The court concluded that Coke “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 court stated, “Congress included the exemptions for a reason, and the Supreme Court’s decision in Coke  not only does not empower the [DOL] to gut them, it does not grant the [DOL] judicial cover for what can only be characterized as a wholesale arrogation of Congress’s authority in this area!”  

Finally, the court stated that congressional inaction, although not dispositive, could not be overlooked.  The court pointed to six post-Coke bills seeking to revise the statutory language of the companionship exemption and their collective failure to reach the floor of either house of Congress, and found that “[t]his unequivocally represents a lack of Congressional intent to withdraw the exemption from third-party employers.”  The court characterized the DOL’s issuance of Notice of Proposed Rulemaking after the failure of these bills as “nothing short of yet another thinly-veiled effort to do through regulation what could not be done through legislation.”  

As a result of the court’s order, the new rule’s exclusion of third party employers from the companionship and live-in employee exemption provisions of the FLSA will no longer take effect on January 1, 2015, as previously scheduled.  Other aspects of the rule affecting the paperwork and definitional requirements of both the companionship and live-in exemptions are also being challenged in the ongoing lawsuit, though these additional issues have not yet been addressed by the court.  It remains to be seen whether the new rule will be temporarily stayed in its entirety as a result of the court’s initial ruling.  The DOL has already declared that it will not enforce the new rule until July 1, 2015, but discussions are ongoing as to the impact of the new court ruling on the rule’s January 1 effective date, which could impact any private enforcement actions.