Home Care Association v. David Weil , 799 F.3d 1084 ( 2015 )

United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued May 7, 2015 Decided August 21, 2015
No. 15-5018
HOME CARE ASSOCIATION OF AMERICA, ET AL.,
APPELLEES
v.
DAVID WEIL, SUED IN HIS OFFICIAL CAPACITY,
ADMINISTRATOR, WAGE & HOUR DIVISION, ET AL.,
APPELLANTS
Appeal from the United States District Court
for the District of Columbia
(No. 1:14-cv-00967)
Alisa B. Klein, Attorney, U.S. Department of Justice,
argued the cause for appellants. With her on the briefs were
Vincent H. Cohen, Jr., Acting U.S. Attorney, Beth S.
Brinkmann, Deputy Assistant Attorney General, and Michael
S. Raab, Attorney.
Eric T. Schneidermann, Attorney General, Office of the
Attorney General for the State of New York, Barbara
Underwood, Solicitor General, Seth Kupferberg, Assistant
Attorney General, were on the brief for amici curiae States of
New York, et al. in support of appellants.
2
Kate Andrias was on the brief for amici curiae
Paraprofessional Healthcare Institute and 26 Consumer and
Policy Organizations in support of appellants.
Arthur B. Spitzer was on the brief for amici curiae
Women=s Rights, Civil Rights, and Human Rights
organizations and scholars in support of appellants.
Judith A. Scott, Nicole G. Berner, Renee M. Gerni, Craig
Becker, Lynn Rhinehart, William Lurye, and Claire Prestel
were on the brief for amici curiae American Federation of
Labor and Congress of Industrial Organizations, et al. in
support of appellants.
Jonathan S. Massey was on the brief for amici curiae
Members of Congress in support of appellants.
Daniel B. Kohrman was on the brief for amicus curiae
AARP in support of appellants.
Samuel R. Bagenstos was on the brief for amicus curiae
the American Association of People with Disabilities in
support of appellants.
Maurice Baskin argued the cause for appellees. With
him on the brief was William A. Dombi.
Derek Schmidt, Attorney General, Office of the Attorney
General for the State of Kansas, Jeffrey A. Chanay, Chief
Deputy Attorney General, Toby Crouse, Special Assistant
Attorney General, Mark Brnovich, Attorney General, Office
of the Attorney General for the State of Arizona, Samuel S.
Olens, Attorney General, Office of the Attorney General for
the State of Georgia, Bill Schuette, Attorney General, Office
of the Attorney General for the State of Michigan, Adam Paul
3
Laxalt, Attorney General, Office of the Attorney General for
the State of Nevada, Wayne Stenehjem, Attorney General,
Office of the Attorney General for the State of North Dakota,
Herbert H. Slatery, III, Attorney General, Office of the
Attorney General for the State of Tennessee, Ken Paxton,
Attorney General, Office of the Attorney General for the State
of Texas, and Brad D. Schimel, Attorney General, Office of
the Attorney General for the State of Wisconsin were on the
brief for amici curiae States of Kansas, et al.
Stephanie Woodward was on the brief for amici curiae
ADAPT and the National Council On Independent Living in
support of appellees.
Michael Billok was on the brief for amicus curiae the
Consumer Directed Personal Assistance Association of New
York in support of appellees.
Michaelle L. Baumert and Henry L. Wiedrich were on the
brief for amici curiae Members of Congress in support of
appellees.
Before: GRIFFITH, SRINIVASAN and PILLARD, Circuit
Judges.
Opinion for the Court filed by Circuit Judge SRINIVASAN.
SRINIVASAN, Circuit Judge: The Fair Labor Standards
Act’s protections include the guarantees of a minimum wage
and overtime pay. The statute, though, has long exempted
certain categories of “domestic service” workers (workers
providing services in a household) from one or both of those
protections. The exemptions include one for persons who
provide “companionship services” and another for persons
who live in the home where they work. This case concerns
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the scope of the exemptions for domestic-service workers
providing either companionship services or live-in care for the
elderly, ill, or disabled. In particular, are those exemptions
from the Act’s protections limited to persons hired directly by
home care recipients and their families? Or do they also
encompass employees of third-party agencies who are
assigned to provide care in a home?
Until recently, the Department of Labor interpreted the
statutory exemptions for companionship services and live-in
workers to include employees of third-party providers. The
Department instituted that interpretation at a time when the
provision of professional care primarily took place outside the
home in institutions such as hospitals and nursing homes.
Individuals who provided services within the home, on the
other hand, largely played the role of an “elder sitter,” giving
basic help with daily functions as an on-site attendant.
Since the time the Department initially adopted that
approach, the provision of residential care has undergone a
marked transformation. The growing demand for long-term
home care services and the rising cost of traditional
institutional care have fundamentally changed the nature of
the home care industry. Individuals with significant care
needs increasingly receive services in their homes rather than
in institutional settings. And correspondingly, residential care
increasingly is provided by professionals employed by third-
party agencies rather than by workers hired directly by care
recipients and their families.
In response to those developments, the Department
recently adopted regulations reversing its position on whether
the FLSA’s companionship-services and live-in worker
exemptions should reach employees of third-party agencies
who are assigned to provide care in a home. The new
5
regulations remove those employees from the exemptions and
bring them within the Act’s minimum-wage and overtime
protections. The regulations thus give those employees the
same FLSA protections afforded to their counterparts who
provide largely the same services in an institutional setting.
Appellees, three associations of home care agencies,
challenged the Department’s extension of the FLSA’s
minimum-wage and overtime provisions to employees of
third-party agencies who provide companionship services and
live-in care within a home. The district court invalidated the
Department’s new regulations, concluding that they
contravene the terms of the FLSA exemptions. We disagree.
The Supreme Court’s decision in Long Island Care at Home,
Ltd. v. Coke, 551 U.S. 158 (2007), confirms that the Act vests
the Department with discretion to apply (or not to apply) the
companionship-services and live-in exemptions to employees
of third-party agencies. The Department’s decision to extend
the FLSA’s protections to those employees is grounded in a
reasonable interpretation of the statute and is neither arbitrary
nor capricious. We therefore reverse the district court and
remand for the grant of summary judgment to the Department.
I.
The FLSA, 29 U.S.C. §§ 201 et seq., generally requires
covered employers to pay a minimum wage, and also requires
payment of overtime compensation at an hourly rate equaling
150% of normal pay for weekly work hours beyond forty. 29
U.S.C. §§ 206(a), 207(a)(1). The Fair Labor Standards
Amendments of 1974, Pub. L. No. 93-259, 88 Stat. 55,
extended the Act’s minimum-wage and overtime protections
to employees in “domestic service,” i.e., service in a
household. 29 U.S.C. §§ 206(f), 207(l). The congressional
committee reports accompanying the 1974 Amendments
6
explained that domestic service “includes services performed
by persons employed as cooks, butlers, valets, maids,
housekeepers, governesses, janitors, laundresses, caretakers,
handymen, gardeners, footmen, grooms, and chauffeurs of
automobiles for family use.” S. Rep. No. 93-690, at 20
(1974); H.R. Rep. No. 93-913, at 35-36 (1974).
The 1974 Amendments also exempted defined categories
of domestic-service workers from certain FLSA protections.
This case concerns two of those exemptions. First, 29
U.S.C.§ 213(a)(15), pertaining to companionship services,
provides that the FLSA’s minimum-wage and overtime
requirements shall not apply with respect 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).”
Second, 29 U.S.C. § 213(b)(21), pertaining to live-in
domestic-service workers, provides that the Act’s overtime
protections shall not apply with respect to “any employee who
is employed in domestic service in a household and who
resides in such household.” The 1974 Amendments included
a broad grant of rulemaking authority empowering the
Secretary of Labor to “prescribe necessary rules, regulations,
and orders with regard to the amendments made by this Act.”
1974 Amendments, Pub. L. No. 93-259, § 29(b), 88 Stat. 76.
In 1975, the Department of Labor adopted implementing
regulations. Those regulations addressed the treatment of
companionship-services workers and live-in domestic-service
workers who are employed by third-party agencies. The
regulations provided that the § 213(a)(15) exemption for
companionship services and the § 213(b)(21) exemption for
live-in workers included individuals “who [were] employed
by an employer other than the family or household using their
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services.” 29 C.F.R. § 552.109(a), (c) (2014). The
regulations also defined the term “companionship services” to
mean “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.” 29 C.F.R. § 552.6 (2014). Additionally, “[s]uch
services may include household work related to the care of the
aged or infirm person such as meal preparation, bed making,
washing of clothes, and other similar services.” Id.
Subsequently, in 1993, 1995, and 2001, the Department,
citing dramatic changes in the provision of home care
services, proposed regulatory amendments to remove third-
party-agency employees from the scope of the
companionship-services and live-in worker exemptions. See
Application of the Fair Labor Standards Act to Domestic
Service, 66 Fed. Reg. 5481 (Jan. 19, 2001); Application of the
Fair Labor Standards Act to Domestic Service, 60 Fed. Reg.
46,797 (Sept. 8, 1995); Application of the Fair Labor
Standards Act to Domestic Service, 58 Fed. Reg. 69,310
(Dec. 30, 1993). In 2001, for example, the Department
explained that “workers who today provide in-home care to
individuals needing assistance with activities of daily living
are performing types of duties and working in situations that
were not envisioned when the companionship-services
regulations were promulgated.” 66 Fed. Reg. at 5482. None
of those proposals to alter the regulatory treatment of third-
party-agency employees gained final adoption.
In 2002, the companionship-services portion of the third-
party-employer regulation became the subject of a legal
challenge brought by an employee of a third-party agency
who sought overtime and minimum-wage protections.
Ultimately, the Supreme Court rejected her challenge,
upholding the regulation’s inclusion of third-party-employed
8
workers within the Act’s companionship-services exemption.
Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158 (2007).
The employee argued that the framework of Chevron, U.S.A.,
Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837
(1984), should not apply, and that, if it did, the statutory
exemption unambiguously applied only to workers employed
directly by private households, thus rendering the third-party
regulation invalid. The Court disagreed. It held that the “the
text of the FLSA does not expressly answer the third-party-
employment question”; that Congress had granted authority to
the Department to resolve the issue; and that the Department’s
answer—i.e., its regulation including employees who work
for third-party agencies within the companionship-services
exemption—was reasonable. Coke, 551 U.S. at 168, 171.
In 2013, the Department again considered reversing
course on the third-party-employer issue, this time adopting a
final regulation doing so. “In the 1970s,” the Department
observed, “many individuals with significant care needs were
served in institutional settings rather than in their homes.”
Application of the Fair Labor Standards Act to Domestic
Service, 78 Fed. Reg. 60,454, 60,455 (Oct. 1, 2013). But
“[s]ince that time, there has been a growing demand for long-
term home care.” Id. “As more individuals receive services
at home rather than in nursing homes and other institutions,
workers who provide home care services . . . perform
increasingly skilled duties” analogous to the professional
services performed in institutions. Id. The Department
concluded that, “given the changes to the home care industry
and workforce” since the original 1975 regulations, the new
regulation would “better reflect Congressional intent” behind
the 1974 Amendments. Id. at 60,454. As authority for the
new regulation, the Department cited, in addition to the
statutory exemptions themselves, the general grant of
9
rulemaking authority in § 29(b) of the 1974 Amendments. Id.
at 60,557.
Under the new regulation, third-party employers of
companionship-services and live-in employees may no longer
“avail themselves” of the statutory exemptions. With respect
to companionship services, the revised regulation 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 section
[2]13(a)(15).” 29 C.F.R. § 552.109(a) (2015). With respect
to live-in workers, the revised regulation states that “[t]hird
party employers of employees engaged in live-in domestic
service employment . . . may not avail themselves of the
overtime exemption provided by section [2]13(b)(21).” Id.
§ 552.109(c). The new rules also narrow the Department’s
definition of “companionship services,” which has the effect
of limiting the scope of the Act’s companionship-services
exemption. Among other adjustments, the regulation now
states that “[t]he term companionship services . . . includes
the provision of care”—such as “meal preparation, driving,
light housework, managing finances, assistance with the
physical taking of medications, and arranging medical
care”—only if that care “does not exceed 20 percent of the
total hours worked.” Id. § 552.6(b) (2015).
In 2014, appellees, a group of trade associations
representing third-party agencies that employ home care
workers, filed a lawsuit challenging the regulations under the
Administrative Procedure Act. In December 2014, shortly
before the new regulations were to take effect, the district
court granted partial summary judgment to appellees,
declaring invalid the revised third-party-employer regulation.
Home Care Ass’n of Am. v. Weil, No. 14-cv-967 (RJL), 2014
WL 7272406 (D.D.C. Dec. 22, 2014). The court ended its
10
analysis at Chevron step one, finding that the Department’s
decision to exclude a class of employees from the exemptions
based on the “nature of their employer[s]” contravened the
plain terms of the statute. Id. at *5-6. In light of the district
court’s vacatur of the third-party-employer regulation,
appellees could make use of the companionship-services
exemption, and they therefore gained standing to attack the
Department’s revised definition of companionship services.
In a separate opinion, the district court vacated that definition,
finding that its twenty-percent limitation on hours of “care”
contravened both the text of the statutory exemption and
congressional intent. Home Care Ass’n of Am. v. Weil, No.
14-cv-967 (RJL), 2015 WL 181712, at *4-5 & n.5 (D.D.C.
Jan. 14, 2015). The Department now appeals.
II.
We review the new third-party-employer regulation
pursuant to the two-step Chevron framework. See Util. Air
Regulatory Grp. v. EPA, 134 S. Ct. 2427, 2439 (2014). If
“Congress has directly spoken to the precise question at
issue,” then “the court, as well as the agency, must give effect
to the unambiguously expressed intent of Congress.”
Chevron, 467 U.S. at 842-43. But “if the statute is silent or
ambiguous with respect to the specific issue,” we analyze
“whether the agency’s answer is based on a permissible
construction of the statute.” Id. at 843.
The Department contends that its revised third-party-
employer regulation lies within the scope of its rulemaking
authority under the general agency delegation in § 29(b) of
the 1974 Amendments, as confirmed by the Supreme Court’s
decision in Coke. The Department further argues that the new
regulation is a reasonable exercise of the Department’s
authority at Chevron step two and is neither arbitrary nor
11
capricious. We agree with the Department and uphold the
regulation.
A.
Appellees contend that the new third-party-employer
regulation fails at the first step of Chevron. In their view, the
FLSA does not delegate to the Department the authority to
exclude a class of employers from the Act’s companionship-
services and live-in worker exemptions. That argument is
foreclosed by the Supreme Court’s decision in Coke.
The Court in Coke confronted three distinct statutory
arguments about the applicability of the companionship-
services exemption to employees of third-party providers.
First, respondent Coke, the employee, urged that the 1974
Amendments “clearly express[] congressional intent to
exempt only companions employed directly by private
households,” not companions employed by third-party
agencies. Brief for Respondent at 5, Long Island Care at
Home, Ltd. v. Coke, 551 U.S. 158 (2007) (No. 06-593), 2007
WL 930417, at *5 (capitalization altered). Second, various
amici, including the appellees here, made the opposite
argument—viz., that the “unambiguous language” of the
companionship-services exemption requires applying it to
employees of third-party providers. Brief for National
Association for Home Care & Hospice, Inc. as Amicus Curiae
in Support of Petitioners at 3, Long Island Care at Home, Ltd.
v. Coke, 551 U.S. 158 (2007) (No. 06-593), 2007 WL 527341,
at *3. Finally, the petitioner home care agency, supported by
the United States, put forward an intermediate position. In
their view, the text of the statutory exemption “does not
address third-party employment,” leaving the agency
discretion to resolve the matter at Chevron step two. Brief for
United States as Amicus Curiae Supporting Petitioners at 8,
12
17-18, Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158
(2007) (No. 06-593), 2007 WL 579234, at *8, *17-18; see
Brief for Petitioners at 10-12, Long Island Care at Home, Ltd.
v. Coke, 551 U.S. 158 (2007) (No. 06-593), 2007 WL 549107,
at *10-12.
The Supreme Court rejected the competing arguments
that the statutory text unambiguously compels a result in
either direction. The Court held that “the text of the FLSA
does not expressly answer the third-party-employment
question” and that there is also no “clear answer in the
statute’s legislative history.” Coke, 551 U.S. at 168. Instead,
the question of “whether to include workers paid by third-
parties within the scope of the [exemption’s] definitions” is
among the “details” that the statute leaves to the “agency to
work out.” Id. at 167. In support of that conclusion, the
Court referenced the Secretary of Labor’s general authority
“to prescribe necessary rules, regulations, and orders with
regard to the amendments made by the Act.” 1974
Amendments, Pub. L. No. 93-259, § 29(b), 88 Stat. at 76; see
Coke, 551 U.S. at 165 (citing § 29(b)). Because that grant of
authority “provides the Department with the power to fill . . .
gaps through rules and regulations,” and because the “subject
matter of the regulation in question concerns a matter in
respect to which the agency is expert,” the treatment of third-
party employers under the exemption, the Court concluded,
had been “entrusted [to] the agency.” Coke, 551 U.S. at 165.
The Court’s conclusion precludes appellees’ Chevron
step-one argument. It is true that Coke addressed a challenge
solely to the companionship-services portion of the prior
regulation, while this case also encompasses a challenge to
the live-in worker provision of the revised regulation. But the
Coke Court’s characterization of third-party-employer
treatment as an “interstitial matter . . . entrusted [to] the
13
agency to work out” equally applies to the Department’s
authority under the FLSA’s live-in worker exemption.
Indeed, Congress framed the companionship-services and
live-in worker exemptions with precisely parallel construction
and phrasing. Section 213(a)(15) exempts from the FLSA’s
minimum-wage and maximum-hour requirements “any
employee employed in domestic service employment to
provide companionship services for individuals who . . . are
unable to care for themselves.” 29 U.S.C. § 213(a)(15)
(emphasis added). And § 213(b)(21) symmetrically exempts
from the Act’s maximum-hour requirements “any employee
who is employed in domestic service in a household and who
resides in such household.” 29 U.S.C. § 213(b)(21)
(emphasis added). Both provisions invite further
specification, the details of which “turn upon the kind of
thorough knowledge of the subject matter and ability to
consult at length with affected parties that an agency, such as
the DOL, possesses.” Coke, 551 U.S. at 165, 167-68.
Appellees also stress that the companionship-services
exemption provides for the Secretary to “define[] and
delimit[]” its terms, while the live-in worker exemption
contains no similar supplement. Compare 29 U.S.C.
§ 213(a)(15), with id. § 213(b)(21). The Supreme Court in
Coke, however, did not focus on the “define[] and delimit[]”
language in § 213(a)(15). Rather, in holding that the
Department had authority to “fill [the third-party-
employment] gap[] through rules and regulations,” the Court
relied on § 29(b)’s general grant of authority to establish rules
implementing the 1974 Amendments. Coke, 551 U.S. at 165.
The Court invoked the precise terms of § 29(b)’s general
grant of implementation authority—the authority “to prescribe
necessary rules, regulations, and orders with regard to the
amendments made by this Act”—in the portion of its opinion
holding that the third-party-employment question had been
14
delegated to the Secretary. Id. And although the Court also
cited 29 U.S.C. § 213(a)(15) as a source of agency authority
alongside § 29(b), the “define[] and delimit[]” language,
unlike the language of § 29(b), was neither reproduced nor
highlighted. See Coke, 551 U.S. at 165. Because § 29(b)
“gives an agency broad power to enforce all provisions” of
the 1974 Amendments—including both § 213(a)(15) and
§ 213(b)(21)—the Department’s “authority is clear” with
respect to both FLSA exemptions. Gonzales v. Oregon, 546
U.S. 243, 258 (2006) (emphasis added) (citing Nat’l Cable &
Telecomm. Ass’n v. Brand X Internet Servs., 545 U.S. 967,
980 (2005)).
Appellees get no further in arguing that, even if the
regulation upheld in Coke amounted to a valid exercise of the
Department’s authority to “define” the terms of the
companionship-services exemption, the revised regulation
does not. Appellees posit that, while the Secretary may define
terms within the phrase “employee employed in domestic
service employment to provide companionship services,” the
Department exceeded its authority when, instead of
“defining” that phrase, it issued a rule providing that third-
party employers “may not avail themselves” of the
exemption. 29 C.F.R. § 552.109(a). That argument fails for
the reason already given: The Department’s authority does
not flow solely from the “define[] and delimit[]” language of
§ 213(a)(15), but instead, as the Coke Court emphasized,
comes from the general grant provided by § 29(b) to “work
out” the statutory “gaps” through rules and regulations. Coke,
551 U.S. at 165.
Indeed, in finding it within the Department’s “broad
grant” of authority to decide “whether to include workers paid
by third parties within the scope” of the companionship-
services exemption, the Court explicitly contemplated that the
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full range of potential outcomes lay within the agency’s
discretion. Id. at 167-68. “Should the FLSA cover all
companionship workers paid by third parties?,” the Court
asked. Id. at 167. Or should it instead “cover some such
companionship workers . . . ? Should it cover none?” Id. All
of those possibilities, the Court made clear, were the
Department’s to assess. Id.
Appellees’ remaining step-one arguments are unavailing.
Appellees contend that the Department’s new rules conflict
with the legislative history of the FLSA amendments. But the
Coke Court explicitly found that the “statute’s legislative
history” provides no “clear answer” to the “third-party-
employment question.” Coke, 551 U.S. at 168. And while
appellees seek to attach significance to Congress’s
amendment of other subsections of § 213 in 1996 and 1999
without altering either § 213(a)(15) or § 213(b)(21), the Coke
Court, having been advised about that congressional inaction,
see Brief for the United States as Amicus Curiae at 20 n.5,
Coke, 551 U.S. 158 (No. 06-593), apparently found it
immaterial to the Chevron step one inquiry. Appellees
similarly argue that Congress’s more recent inaction in the
face of proposed legislation to exclude third-party employers
from the statutory exemptions shows congressional intent to
allow employers to continue making use of the exemptions.
But “failed legislative proposals are a particularly dangerous
ground on which to rest an interpretation of a prior statute.”
Cent. Bank of Denver, N.A. v. First Interstate Bank of Denver,
N.A., 511 U.S. 164, 187 (1994) (internal quotation marks
omitted). And here, Congress’s failure to enact legislation
does nothing to upset Coke’s holding that “the text of the
FLSA does not expressly answer the third-party-employment
question.” 551 U.S. at 168.
16
For those reasons, we reject appellees’ challenge to the
regulations at Chevron step one. The Department has the
authority to “work out the details” of the companionship-
services and live-in worker exemptions, and the treatment of
third-party-employed workers is one such detail. Id. at 165-
68.
B.
Because we conclude that Congress delegated authority
to the Department to determine whether employees of third-
party agencies should fall within the scope of the
companionship-services and live-in worker exemptions, we
proceed to Chevron step two. At that step, “‘if the
implementing agency’s construction is reasonable,’ a court
must ‘accept the agency’s construction of the statute.’” Fin.
Planning Ass’n v. SEC, 482 F.3d 481, 498 (D.C. Cir. 2007)
(quoting Brand X, 545 U.S. at 980). The Department’s
interpretation readily satisfies that standard.
Appellees’ Chevron step-two argument largely rehashes
their step-one submission. Their primary contention is that
“the total exclusion of third party employers from availing
themselves of access to the companionship and live-in
exemptions cannot be a permissible construction of the Act.”
Appellees’ Br. 39-40. Coke belies that argument. As the
Court explained, “the text of the FLSA does not expressly
answer the third-party-employment question,” leaving it to the
Department to determine whether the FLSA should apply to
“all,” “some,” or “none” of the home care workers paid by
third parties. Coke, 551 U.S. at 167-68.
The Department’s resolution of that question is entirely
reasonable. The Department explained that bringing
domestic-service workers paid by third-party employers
17
within the FLSA’s protections would be consistent with
congressional intent. The 1974 Amendments “intended to
expand the coverage of the FLSA to include all employees
whose vocation was domestic service,” the Department
observed, 78 Fed. Reg. at 60,454, not to “roll back coverage
for employees of third parties who already had FLSA
protections,” id. at 60,481. Because Congress’s overriding
intent was to bring more workers within the FLSA’s
protections, the Department determined that the
companionship-services and live-in exemptions from
coverage should “be defined narrowly in the regulations to
achieve the law’s purpose.” Id. at 60,482. In the
Department’s view, a narrow construction of the statutory
exemptions draws further support from “the general principle
that coverage under the FLSA is broadly construed so as to
give effect to its remedial purposes, and exemptions are
narrowly interpreted . . . to those who clearly are within the
terms and spirit of the exemption.” Id. (citing A.H. Phillips,
Inc. v. Walling, 324 U.S. 490, 493 (1945)). The Department
thus decided to interpret the exemptions as “narrow” ones that
target individuals who are “not regular breadwinners or
responsible for their families’ support.” Id. at 60,481 (citing
H. Rep. No. 93-913, p. 36).
The Department’s understanding is consistent with
Congress’s evident intention to “include within the coverage
of the Act all employees whose vocation is domestic service.”
S. Rep. No. 93-690, at 20 (emphasis added); see H.R. Rep.
No. 93-913, at 33-34, 36 (similar). Both the 1974 Senate and
House Reports, in explaining the purpose behind the
companionship exemption and another exemption covering
“casual babysitting services,” drew a contrast between
“casual” employees and employees whose “vocation is
domestic service.” S. Rep. No. 93-690, at 20; H.R. Rep. No.
93-913, at 33-34, 36. And one Senator, when commenting on
18
the expansion of the FLSA to cover domestic-service
employees, contrasted the type of assistance provided by a
“neighbor” or an “elder sitter” with “the professional
domestic who does this as a daily living.” 119 Cong. Rec.
24,801 (July 19, 1973) (statement of Sen. Burdick). It is true
that the Department points to no legislative materials
concerning the live-in exemption in particular. But it was
reasonable for the Department to assume that Congress
intended the live-in exemption to operate in much the same
way as the similarly worded companionship exemption—i.e.,
to exclude from the FLSA’s scope casual employees who are
“not regular bread-winners or responsible for their families’
support.” 78 Fed. Reg. at 60,481 (citing S. Rep. No. 93-690,
p. 20; H.R. Rep. No. 93-913, p. 36).
Based on its understanding of congressional intent, the
Department reasoned that the 1974 Congress would have
wanted the FLSA’s protections to extend to the home care
workers of today who are employed by third-party agencies.
“[T]oday, few direct care workers are the ‘elder sitters’
envisioned by Congress when enacting the exemption,” the
Department observed. 78 Fed. Reg. at 60,482. Instead, home
care workers employed by third parties are professional
caregivers, often with training or certification, who work for
agencies that profit from the employees’ services. See id. at
60,455; National Employment Law Project, Comments to
Proposed Revisions to the Companionship Exemption
Regulations, RIN 1235-AA05 14-15 (Mar. 21, 2012),
reprinted in J.A. at 593-94. In light of the “purpose and
objectives of the [1974] amendments as a whole,” 78 Fed.
Reg. at 60,482, the Department decided “to prohibit third
party employers from claiming [the companionship and live-
in] exemptions,” id. at 60,480. The Department thereby
applied the FLSA’s protections to workers for whom such
employment is a “vocation.” S. Rep. No. 93-690, at 20. We
19
find the Department’s resolution to be fully reasonable and
see no basis for setting it aside at Chevron step two.
C.
Appellees contend that, even if the new third-party
regulation passes muster at Chevron step two, it should still
be invalidated as arbitrary and capricious. See 5 U.S.C.
§ 706(2)(A). According to appellees, the Department “failed
to provide an adequate justification for reversing four decades
of policy interpreting the Act.” Appellees’ Br. 40. The
Department needed to satisfy a “higher burden,” appellees
submit, because the new regulation departed from prior rules
and policies. Id.
Contrary to appellees’ suggestion, there is no requirement
that the agency’s change in policy clear any “heightened
standard.” FCC v. Fox Television Stations, Inc., 556 U.S.
502, 514 (2009). Instead, we ask whether actions that are a
departure from prior agency practice, like other agency
actions, rest on a “reasoned explanation.” Id. at 515. A
“reasoned explanation,” in the event of an alteration in
approach, “would ordinarily demand that [the agency] display
awareness that it is changing position,” and “of course the
agency must show that there are good reasons for the new
policy.” Id. But beyond that, the APA imposes no special
burden when an agency elects to change course.
The Department’s explanation for its updated rule meets
those standards. In addition to reasoning that its original
regulation misapplied congressional intent, the Department
justified its shift in policy based on the “dramatic
transformation of the home care industry since [the third-
party-employer] regulation was first promulgated in 1975.”
78 Fed. Reg. at 60,481. When Congress enacted the 1974
20
Amendments, the “vast majority of the private household
workers were employed directly by a member of the
household.” Report to the Ninety-Third Congress by the
Secretary of Labor: Minimum Wage and Maximum Hours
Standards Under the Fair Labor Standards Act 28 (Jan. 19,
1973). By the time the Supreme Court decided Coke in 2007,
the vast majority of home care workers were instead
employed by third-party agencies. See Brief of the Alliance
or Retired Americans, et al. as Amici Curiae in Support of
Respondent at 6, Long Island Care at Home, Ltd. v. Coke, 551
U.S. 158 (2007) (No. 06-593), 2007 WL 951137, at *6.
The duties of typical home care workers also changed. In
the 1970s, many individuals with significant needs received
care in institutional settings rather than in their homes. See 78
Fed. Reg. at 60,455. Since that time, there has been an
increased emphasis on the value of providing care in the home
and a corresponding shift away from institutional care. As the
Department recognized even by 2001, “[d]ue to significant
changes in the home care industry over the last 25 years,
workers who today provide in-home care to individuals
needing assistance with activities of daily living are
performing types of duties and working in situations that were
not envisioned when the companionship-services regulations
were promulgated.” 66 Fed. Reg. at 5482.
In light of the Department’s reasoned explanation for its
change in policy, we conclude that its departure from past
practice was neither arbitrary nor capricious.
D.
Appellees see a “strong[] indicat[ion]” in the
administrative record that removing third-party-employed
workers from the scope of the exemptions “will make home
21
care less affordable and create a perverse incentive for re-
institutionalization of the elderly and disabled.” Appellees’
Br. 44. The Department disagreed with that characterization
in the final rule, concluding that care recipients would be
benefitted, not harmed, by the new regulations. See 78 Fed.
Reg. at 60,459, 60,483. The Department’s conclusion has
ample support in the record.
When issuing the final rule, the Department
acknowledged the existence of certain comments claiming
that the proposed changes would harm home care workers and
recipients. “[R]aising the cost of service provided through
home care agencies,” those comments suggested, “would
incentivize employment through informal channels rather than
through such agencies.” 78 Fed. Reg. at 60,481. Some
commenters also argued that expanding FLSA coverage
would increase institutionalization of the elderly and would
accelerate workforce turnover due to reduced work hours per
shift. The Department rejected those contentions based on the
administrative record.
Fifteen states, the Department explained, already
“provide minimum wage and overtime protections to all or
most third party-employed home care workers” who would
come within the FLSA’s scope under the Department’s rule.
Id. at 60,482. Yet commenters raising concerns about the
rule’s effects “did not point to any reliable data” from those
states indicating that extension of minimum-wage and
overtime protection to home care workers had led either to
increased institutionalization or a decline in continuity of
care. Id. at 60,483. To the contrary, some commenters noted
an absence of evidence from those states suggesting any
decline in access to (or quality of) home care services owing
to the extension of minimum-wage and overtime protections
to home care workers. See Addendum to Reply Br. 14, 21.
22
The industry’s own survey indicated that home care agencies
“operating in overtime and non-overtime states already have
very similar characteristics,” including “a similar percentage
of consumers receiving 24-hour care.” 78 Fed. Reg. at
60,503.
Appellees suggest that, even if the Department’s
conclusions are defensible with regard to the companionship
exemption, we should still invalidate its revised approach
with regard to the live-in exemption because only four of
those fifteen states require payment of overtime to live-in
domestic-service employees. Appellees’ Br. 46. The
Department was aware of those differences when making its
decision, however, as it included a table in the final rule
detailing the nuances of each state’s overtime and minimum-
wage laws. 78 Fed. Reg. at 60,510-12. Whether focused on
fifteen states or a subset of four states, the Department’s core
observation—that commenters could point to no evidence
indicating that extension of protections to home care workers
in the relevant states effected an increase in
institutionalization or workforce turnover—remains true.
The Department instead reasonably credited comments
suggesting that the new rule would improve the quality of
home care services. The “rule will bring more workers under
the FLSA’s protections,” the Department concluded, which
“will create a more stable workforce by equalizing wage
protections with other health care workers and reducing
turnover.” Id. at 60,483. Increased protections will also
“ensur[e] that the home care industry attracts and retains
qualified workers,” improving the quality of home care
services. Id. at 60,548. The Department predicted that the
revised regulations would benefit consumers “because
supporting and stabilizing the direct care workforce will result
in better qualified employees, lower turnover, and a higher
23
quality of care.” Id. at 60,459-60. Those sorts of
“[p]redictive judgements about areas that are within the
agency’s field of discretion and expertise are entitled to
particularly deferential review, as long as they are
reasonable.” BellSouth Telecomm., Inc. v. FCC, 469 F.3d
1052, 1060 (D.C. Cir. 2006) (internal quotation marks
omitted). The Department’s judgments are.
III.
In addition to challenging the third-party-employer
regulation, appellees also challenge 29 C.F.R. § 552.6 (2015),
the regulation defining the scope of “companionship services”
encompassed by the Act’s companionship-services
exemption. Appellees contend that the Department’s revised,
and more limited, definition of companionship services
conflicts with the FLSA and is arbitrary and capricious. We
lack Article III jurisdiction to consider appellees’ challenge.
In light of our disposition with respect to the third-party-
employer regulation, appellees cannot show that the revised
definition of companionship services causes their member
companies injury in fact. See Friends of the Earth, Inc. v.
Laidlaw Envtl. Servs., Inc., 528 U.S. 167, 180-81 (2000).
Appellees conceded before the district court that, until the
court vacated the third-party-employer regulation, their
members “lacked standing to pursue injunctive relief against
[the enforcement of 29 C.F.R. § 552.6], because third-party
employers were not allowed to avail themselves of the
exemption under any definition of companionship services,
and [appellees] were therefore not directly harmed by
[§ 552.6].” Mem. in Supp. of Emergency Mot. for Temporary
Stay of Agency Action and Req. for Expedited Consideration,
No. 14-cv-967, Dkt. No. 23-1, at 1-2 (filed Dec. 24, 2014).
Appellees make no effort in their appellate briefing to revisit
24
that understanding. Because we now reverse the district
court’s vacatur of 29 C.F.R. § 552.109, appellees cannot make
use of the companionship-services exemption, and their
members thus suffer no direct injury as a result of the
Department’s narrowed definition of companionship services.
We therefore lack jurisdiction to consider appellees’
challenge to that definition.
* * * * *
For the foregoing reasons, we reverse the district court’s
judgments and remand for the entry of summary judgment in
favor of the Department.
So ordered.