Amicus Curiae Brief — Long Island Care at Home, Ltd. v. Coke

2a3 TTT es eee

“9+

' sal,

17 i

i) es

AE vr PILE Ur ewe UOLEAK f

No. 06-593 LUSUPREME SOUOT US. |

In the Supreme Court of the Gnited States

LONG ISLAND CARE AT HOME, LTD., ET AL...

PETITIONERS

v.

EVELYN COKE

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE SUPPORTING PETITIONERS

PAUL D. CLEMENT

Solicitor General

Conusel of Record

PITT RE hs EDWIN 8S. KNEEDLER

STEVEN J. MANDEL Deputy Solicitor General

Associate Solicitor ;

DAVID B. SALMONS

JONATHAN L. SNARE

Acting Solicitor of Labor

PAUL L.. FRIEDEN Assistant to the Solicitor

Counsel for Appellate General

Litigation Department of Justice

EDWARD D. SIEGER Washington, D.C. 20530-0001

JOANNA HULL (202) 514-2217

Attorneys >

Department of Labor

Washington, D.C. 20210

QUESTION PRESENTED

Whether the court of appeals erred in holding that a

longstanding Fair Labor Standards Act regulation, 29 C.F.R.

552.109(a), promulgated by the Department of Labor pur-

suant to delegated rulemaking authority and after notice and

comment, was not entitled to deference under Chevron U.S.A.

Inc. v. NRDC, 467 U.S. 837 (1984), and was not enforceable.

(1)

a ae eee 7

ie i 7

iti

=

i an)

7

wl

a d

a

=

TABLE OF CONTENTS

Page

Interest of the United States ................. 0. ee eee eee 1

I Si cece hone Nena ékhee sabe pees bestest ce beet 1

NE 6 dc wi cextdeenbencecunntenendeee te 8

Argument:

I. DOL’s third-party employer regulation is entitled

rn is ce aces weennewas 10

A. Congress clearly granted rulemaking authority

to DOL concerning application of the

companionship services exemption ............. 11

B. DOL exercised its statutory rulemaking

authority in promulgating Section 552.109(a) .... 12

©. Chevron deference is appropriate even if 29

C.F.R. 552.109(a) is not a legislative rule ........ 16

Il. DOL’s third-party employment regulation is a

permissible interpretation of the FLSA’s

companionship services exemption ................ 17

A. DOL’s third-party employer regulation is

supported by the text and history of the

FLSA’s companionship services exemption .... .. 18

B. The third-party employer regulation is

consistent with Congress’s intent in enacting

the exemption for companionship services ....... 21

C. DOL’s third-party employer regulation is

consistent with other DOL regulations .......... 24

D. Invalidating DOL’s third-party employer

regulation would have substantial negative

Ss cccuus ccdakdnneteenensenuneke 27

SED 6c hbnetuuseuhiedeencuden eneeeeesn4éendekene 30

(IIT)

IV

TABLE OF AUTHORITIES

Cases: Page

Auer v. Robbins, 519 U.S. 452 (1997) ...... 9, 11, 14, 25, 29

' Brigham v. Eugene Water & Elec. Bd., 357 F.3d 931

PP ciicccdldhidenhehedanesnhdnessueus 16

Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837 (1984) passim

Christensen v. Harris County, 529 U.S. 576 (2000) ..... 15

Chrysler Corp. v. Brown, 441 U.S. 281 (1979) .......... 14

CBS v. United States, 316 U.S. 407 (1942) .......... 14,15

CFTC v. Schor, 478 U.S. 833 (1986) ............... 20, 29

Fernandez v. Elder Care Option, Inc., No. 03-21998

(S.D. Fla. July 29, 2005), appeal docketed, No. 05-

16806 (11th Cir. filed Dec. 5, 2005) .............. 24, 26

Freeman v. NBC, 80 F.3d 78 (2d Cir. 1996) ........... 16

Holtville Alfalfa Mills, Inc. v. Wyatt, 230 F.2d 398

I a a i ee eeaee 19

Homemakers Home & Health Care Servs., Tne. v.

Carden, 538 F.2d 98 (6th Cir. 1976) ...............-. 20

Jay v. Boyd, 351 U.S. 345 (1956) ...... 0. eee ce eee 29

Johnston v. Volunteers of Am., Inc., 213 F.3d 559

(10th Cir. 2000), cert. denied, 531 U.S. 1072 (2001) ... 15

Madison v. Resources for Human Dev., Inc., 233

Pe ED 5.65 accnceesttecepoveces és’ 15

McCune v. Oregon Senior Servs. Div., 894 F.2d 1107

Je koe i teeee ee iuasesebhene co os 15

National Cable & Telecomms. Assoc’n v. Brand X

Internet Servs., 545 U.S. 967 (2005) ............. 11,12

NationsBank of N.C., N.A. v. Variable Annuity Life

i UU oo scc5cssncnudsovessba 1

7

Olmstead vy. L.C. ex rel. Zimring, 527 U.S. 581 (1999)... 23

Pennzoil Co. v. FERC, 645 F.2d 360 (Sth Cir. 1981),

cert. denied, 454 U.S. 1142(1982) .................. 21

Cases—Continued: Page

Reich v. New York, 3 F.3d 581 (2d Cir. 1993), cert.

co rr ne 16

Skidmore v. Swift & Co., 323 U.S. 134 (1944) ........ 7,18

United States v. Gonzales, 520 U.S. 1(1997) .......... 18

United States v. Mead Corp., 533 U.S. 218 (2001) . passim

United Steelworkers of Am. v. Marshall, 647 F.2d

1189 (D.C. Cir. 1982), cert. denied, 453 U.S. 913

GURU +00cscccvedsdevedecesussatekenmeneeeeee 21

Welding v. Bios Corp., 353 F.3d 1214 (10th Cir.

FN rr bovcsahaseundamee 15, 22

Yellow Transp., Inc. v. Michigan, 537 U.S. 36

GED <vcbanncsecducudensestiesneneeeeeee 11, 21

Tipton v. Associated Milk Producers, Inc., 398 F.

DR. FER CHL. WE. BOOP oc co ccoveccsesoccucions 19

Statutes and regulations:

Act of Nov. 1, 1977, Pub. L. No. 95-151, 91 Stat. 1245 ... 20

Act of Sept. 27, 1979, Pub. L. No. 96-70, 93 Stat. 452 .... 20

Act of Nov. 17, 1989, Pub. L. No. 101-157, 103 Stat.

BD” n.0c0cneecsdseshesscdashes senna 20

Act of Sept. 30, 1994, Pub. L. No. 103-329, 108 Stat.

BD se tenencenscessssnuedvessnsseeeeee 20

Act of Dee. 29, 1995, Pub. L. No. 104-88, 109 Stat. 955 .. 20

Act of Aug. 20, 1996, Pub. L. No. 104-188, 109 Stat.

BED sevsecccnvvedesdeandsdseeeseneeeeeel 20

Act of Nov. 13, 1997, Pub. L. No. 105-78, 105 Stat.

SEE kdncdcepeesuneseeetesoenee see 20

Administrative Procedure Act, 5 U.S.C. 551 et seq. ..... 21

avis (8 PeprerrrretTr er re ee 3

SUB. GER ov ccc ccdsvcscadcncescevetaeeue 21

VI

Statutes and regulations—Continued: Page

Fair Labor Standards Act of 1938, 29 U.S.C. 201

SU SERGRGAUSSdCedeES ce eee dececeeccesooeceeees l

ED oc ccccccsedceccecescees 3

EE 28

29 U.S.C. 208(s) (§ Bis)) .........4.. Rednacesneus 3

PCED coccccclcdcesseeveccese 4

ek bi weeedeesecesess 4

EE 6, 18

ee badeeenceeo ces 2

I a 2

EE 2

EE Ee ee ee 6

ED vccvdneccneeveseesovess 2

ee dn i dadeundendennty 2

Ee 19

UE BO Ge FEED ccccccccccccccoses: ‘os ee

ee eek e cn eeedenweey 6, 20

20 U.S.C. 213 (a1) ...... ee A 11,14

a ee aaeneenes 19

eee encepeedeeens 19

EE ree 19

29 U.S.C. 213(a)(15) (§ 13a (15)) «0... ee eee. passim

ET EE 19

SE 19

air Labor Standards Amendments of 1974,

es en SD oc ccc cecccececscaces 2

LTD wis nes 6dbedeeseesccosecece 2,12

Vil

Statutes and regulations—Continued: Page

Intermodal Surface Transportation Efficiency Act of

1991, Pub. L. No. 102-240, § 4005, 105 Stat. 1914

(49 U.S.C. 110GB(e) (1984)... ccc cece ccccccceces 11

Portal to Portal Act of 1947, ch. 52,61 Stat. 84 ......... 15

Pn) <dvcnecusGuenkweneguesdeeneuenkun 26

er re ee 26

EE SE EET Pr en ee Pree 26

I. i so nn ouesbnnsesenseuntent 26

ED sc ccncnces cedebadensdannennand 26

a aE 27

DED t 1... ecceeusseewueNesseonseeendenel 16

DD 05 oi co cupesesnes souadecsonauuaul 16

GED ccc ccucccccncdeueeennduceusabeneens 26

42 U.S.C. 408%(a) ............ sebebasesesevencsanates 26

I on, cc cl acle eeucencneemaneeds 27

AD oo cc ideveuduwcnsaseueesacecet 27

42 U.S.C. 410(a(2) .......... ea sccccesesevcoscecees 27

LTE oc cc ciucda kus nedscuedassendeeenuceead 26

SOG Be GAN ITD cccccccccvcccccsccecees: 27

26 C.F.R.:

Section 31.31Z1(aX7)-MaN2) .......cccccccccccecss 26

CR EE en nr ae 27

29 C.F Re:

ST aa ae a a a ee 14

Reetietn GER BIO GD 6 ovo vccccccccccccsececs 14

ED ov ccccagbectencceoeeueuuness 16

SEE 6.bin00.00eesncdendecess auekeuaes 16

DRM énosudcdkesnscedsscusdeubeseecadens passim

Vill

Statutes and regulations—Continued: Page

a a ee eas 2,13

ED << civektende paseannenbeenunt 6,13

DEED ‘ccncresecsedecdnnceadensues passim

DE «gc nc dau i daeuuseededsekaneaunee 3

er 3, 27, 28

EE -ccccdbanedasneeesenenwedasents 15

ED occu cdadeneannaie 7, 21, 24, 25, 29

a ee passim

Pt. 780:

DEE - i oind bbieiaddaddébecesasaunawes 19

Pt. 785: |

CCIE ocncosenstsnacdsuseevers 16

Pt. 790: ;

CE 6 suneseuvsvudddedenstesenes 16

ED sy cdceusdeendeaseensecesens 15, 16

Exec. Order No. 13,217, 3 C.F.R. 774 (2001) ........... 23

Miscellaneous:

119 Cong. Ree. (1973):

PRE sv ccdecuccesccessescesuccesesceseesanes 22

EEE odesncksdute dee sndencdnncesedeceunededs 22

RSE od bbendesdudksdecondanuseencasatiadsaas 22

DEE wh nenestveddedeucsscndéwestedesseseneees 22

DOL Op. Ltr. WH-368, 1975 WL 40091 (Nov. 25,

DEY £Guakebcedeneddsedusecantenenseesaencesees 21

SD Ped. Tam, BERBERS CIGSE) .. nc ccccccccccvccccccces 14

39 Fed. Reg. (1974):

CR” EARS ADE EDEN Pe eee mes ree 12, 13, 20

IX

Miscellaneous—Continued: Page

TEE on ctccknucddssenednevusansenende 21

DE dotloudetus sodtaueuksaseduciincesawdes 4, 20

40 Fed. Reg. (1975):

EEE: Shuhshoddedeneicesvddwndesueseecnwtes 12, 20

Py cdintiuetadsetuvtecettwenuscesues ~

Pe shancabakdnedendaseuanaehendtens 4, 12, 18, 21

UE Sdddpabsduednvacdsndscdatesdsieasscesaes 25

SP SEED. ncncocencccsccsecedecasees 4

60 Fed. Reg. (1995):

PE + <idvevbghedhtdsedeutiaweseuadans 4

PE ncdkuiundnecksduaveeswessscecawes are 5

66 Fed. Reg. (2001):

6 ekep dans sd edaeeeeenatensenensed 22, 24

DEES s Dis cee ninedsias Venenenndskesdennneks 5, 29

EE vind beau udedkcekeenesss aneueteenntas i)

RE. On caeherds dneesececedceodetcscdvegdaseses 5

ee EEE Ss ovcavccscséscccosenneses 5, 22

BP Ps Ce SE OD nv ccccnccccsccccesccoseses 14

H.R. Conf. Rep. No. 413, 93d Cong., Ist Sess.

DED dissecucavikesisenMbeeheancsweresscs 18, 28, 29

H.R. Rep. No. 913, 93d Cong., 2d Sess. (1974) ......... 27

S. Rep. No. 300, 93d Cong., Ist Sess. (1973) ........... 26

S. Rep. No. 690, 93d Cong., 2d Sess. (1974) ... 18, 27, 28, 29

Wage and Hour Div., Field Operations Handbook

PED Bekddenesedeuscatesincdennesasncunesseceses 30

In the Supreme Court of the Cnited States

No. 06-593

LONG ISLAND CARE AT HOMRB, LTD., ET AL..,

PETITIONERS

Vv.

EVELYN COKE

ON WRIT OF CERTIORARI

TO THE UNITED STATES COURT OF APPEALS

FOR THE SECOND CIRCUIT

BRIEF FOR THE UNITED STATES

AS AMICUS CURIAE SUPPORTING PETITIONERS

INTEREST OF THE UNITED STATES

The question presented in this case is whether a long-

standing Department of Labor (DOL) regulation, 29 C.F.R.

552.109(a), which was promulgated pursuant to statutory

rulemaking authority after notice and comment, is entitled to

deference under Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837

(1984), and is enforceable. At the Court’s invitation, the

United States filed a brief at the petition stage when this case

first came before the Court. 1268. Ct. 1189 (2006) (granting

writ of certiorari, vacating, and remanding for further consid-

eration in light of DOL’s Wage and Hour Advisory Memoran-

dum No. 2005-1 (Dee. 1, 2005), Pet. App. 50a-64a).

STATEMENT

1. The Fair Labor Standards Act of 1938 (FLSA), 29

U.S.C. 201 et seg., generally requires covered employers to

pay a minimum wage and, for hours of work exceeding 40 in

a work week, overtime compensation at a rate of one and one-

(1)

2

half times an employee's regular rate of pay. 29 U.S.C. 206( a),

207(a)(1). Before 1974, covered employees included those

“engaged in commerce or in the production of goods for com-

merce” (individual coverage), and, since 1961, those “employ-

ed in an enterprise engaged in commerce or in the produc-

tion of goods for commerce” (enterprise coverage). 29 U.S.C.

206(2) and 207(a)(1) (1970). The Fair Labor Standards

Amendments of 1974 (1974 Amendments), Pub. L. No. 93-259,

88 Stat. 55, extended the FLSA’s minimum wage and over-

time requirements to “domestic service” employees, 29 U.S.C.

206(f), 207(/), but specifically exempted such employees pro-

viding “companionship services” to the elderly or infirm.

That exemption applies 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 them-

selves (as such terms are defined and delimited by regula-

tions of the Secretary).

29 17.8.C. 213(a)(15). In additien to this specific grant of au-

thority to “define[] and delimit|]” such terms as “domestic

service employment” and “companionship services,” which

Congress did not otherwise define, Congress also authorized

the Secretary of Labor “to prescribe necessary rules, regula-

tions, and orders” with regard to the 1974 Amendments.

§ 20(b), 88 Stat. 76.

Pursuant to both grants of authority, DOL promulgated

regulations describing the application of the FLSA to domes-

tic service employees. 29 C.F.R. Pt. 552. Adopted in Febru-

ary 1975, those regulations are divided into two subparts,

“General Regulations” and “Interpretations.” Their purpose

is to “provide[] necessary rules for the application of the

[I LSA] to domestic service employment” in accordance with

the 1974 Amendments. 29 C.F.R. 552.2(a).

“{CJompanionship services” are defined, in the “General

Regulations” subpart, as “those services which provide fellow-

3

ship, care, and protection for a person who, because of ad-

vanced age or physical or mental infirmity, cannot care for his

or her own needs.” 29 C.F.R. 552.6. A regulation in the “In-

terpretations” subpart, 29 C.F.R. 552.109(a), exempts domes-

tic service employees providing companionship services from

the FLSA’s minimum wage and overtime pay requirements

when they are employed by a third party:

Employees who are engaged in providing companionship

services, as defined in {29 C.F.R.] § 552.6, and who are

employed by an employer or agency other than the family

or household using their services, are exempt from the

Act’s minimum wage and overtime pay requirements by

virtue of section 13(a)(15) [of the FLSA].

29 C.F.R. 552.109(a).

A separate regulation in the “General Regulations”

subpart states that “domestic service employment,” as used

in Section 13(a)(15) of the Act, “refers to services of a house-

hold nature performed by an employee in or about a private

home (permanent or temporary) of the person by whom he or

she is employed.” 29 C.F.R. 552.3. A regulation in the “Inter-

pretations” subpart explains that the meaning of “domestic

service employment” derives from Social Security regulations

and the “generally accepted” meaning of the term, and in-

cludes persons frequently referred to as “private household

workers.” 29 C.F.R. 552.101(a) (citations omitted).

All the regulations at issue, including Section 552.109(a),

were issued pursuant to notice-and-comment rulemaking

in accordance with the Administrative Procedure Act (APA),

5 U.S.C. 553. Initially, DOL proposed that employees who

provide companionship services, but “are employed by an

employer other than the families or households using such

services,” would not be covered by the companionship exemp-

tion if the third-party employer would qualify as a covered

enterprise under Sections 3(r) and 3(s)(1) of the FLSA, on the

ground that such third-party employment was covered by the

4

FLSA before the 1974 Amendments. See 39 Fed. Reg. 35,385

(1974) (proposed § 552.109). Thus, under the original pro-

posal, domestic service employees providing companionship

services and working for a third-party employer would fall

within the exemption only if their employer did not satisfy the

Act's “enterprise” test for coverage.’

After receiving and considering comments on the pro-

posed rule, however, DOL decided that all third-party em-

ployment, without regard to the employer’s status as a cov-

ered enterprise, should be included within the scope of the

companionship services exemption. See 40 Fed. Reg. 7405

(1975). DOL acknowledged that its decision constituted a_

change from the proposed rule, but explained that under the

text. of Section 13(a)(15) of the Act, the “exemptions can be

available to such third party employers since they apply to

‘any employee’ engaged ‘in’ the enumerated services.” /bid.

“This interpretation,” DOL continued, “is more consistent

with the statutory language and prior practices concerning

other similarly worded exemptions.” /bid. Thus, the final

regulation promulgated to implement the 1974 Amendments

expressly applies the companionship services exemption to

employees who provide companionship services and “are em-

ployed by an employer or agency other than the family or

household using their services.” 29 C.F.R. 552.109(a).

[In 1993, DOL proposed regulatory amendments to limit

the companionship services exemption to employees of a

third-party emplover or agency only when the employee is

jointly employed by the person receiving the services. See 58

Fed. Reg. 69,312. Most commenters opposed the proposed

change. See 60 Fed. Reg. 46,797-46,798 (1995). In 1995, DOL

reopened the comment period for the 1993 proposal to con-

sider whether to revise it to allow the companionship services

' At the time, to qualify as an “enterprise,” an employer, infer alia, had to

have annual gross sales of at least $250,000. See 29 U.S.C. 203(s)(1) (1970).

That limit has since been changed to $500,000. See 29 U.S.C. 203(s)(1I)(AGID.

5

exemption to also apply to employment, either jointly with a

third-party agency or otherwise, by a government agency or

family member acting on behalf of an incapacitated elderly or

infirm person. /d. at 46,798. Commenters expressed concern

with the changes, and DOL did not adopt either the 1993 or

the 1995 proposal. See 66 Fed. Reg. at 5485.

In January 2001, DOL again proposed to amend the regu-

lations to, among other things, eliminate the exemption in

Section 552.109(a) for employers other than the family or

household for whom the services are provided. 66 Fed. Reg.

5485, 5488. In the notice of proposed rulemaking, DOL recog-

nized that “[u]nder the existing regulation, employees-who

are employed by an employer or agency other than the family

or household using the companionship services may still qual-

ify for the exemption.” /d. at 5485. DOL, at that time, ex-

pressed the view that the regulations contain an internal in-

consistency because 29 C.F.R. 552.5, in defining “domestic

service employment,” refers to an employee's employment in

or about the private home “of the person by whom he or she

is employed,” and also opined that the proposed new rule

would not have a significant economic impact. 66 Fed. Reg.

5485-5486. In 2002, however, DOL withdrew the proposed

rule because numerous commenters, including the Small Busi-

ness Administration (SBA) and the Department of Health and

Human Services (HHS), challenged DOL’s conclusion that the

rule would have little economic impact. See 67 Fed. Reg.

16,668. Thus, although DOL has periodically sought public

comment on whether to amend the third-party employer regu-

lation at 29 C.F.R. 552.109(a), the regulation has remained

unchanged since its adoption in 1975.

2. Petitioners employ approximately 40 home health care

aides, who provide companionship services to approximately

30 homebound patients in New York. Pet. App. 34a, 84a.

Respondent is a former employee of petitioners who worked

as a home health care attendant. /d. at 54a. Respondent

brought suit against petitioners under the FLSA, alleging

6

that despite working more than 40 hours a week, she never

received overtime payments, and that her hourly wage was

less than the minimum wage. /bid.

The district court granted petitioners’ motion for judg-

ment on the pleadings, holding that respondent could not

state a claim as a matter of law because home health care

workers are exempt from the minimum wage and overtime

requirements in 29 U.S.C. 206 and 207 under the companion-

ship services exemption in 29 U.S.C. 213(a)(15) and its imple-

menting regulations. Pet. App. 47a-48a. The court applied

the standard set forth in Chevron for reviewing legislative

rules and held that 29 C.F.R. 552.109(a) is not arbitrary, ca-

pricious, or manifestly contrary to the FLSA in including

employees of third-party employers within the scope of the

companionship services exemption. Pet. App. 39a-47a.

3. In 2004, the court of appeals affirmed in part, vacated

in part, and remanded. Pet. App. 7a-32a. The court held that

29 C.F.R. 552.109(a) is not entitled to Chevron deference.

Pet. App. 23a-28a. The court acknowledged that the FLSA’s

companionship services exemption expressly grants authority

to DOL to define and delimit the terms of the statutory provi-

sion; that the regulation is both contemporaneous and long-

standing; and that Congress had amended 29 U.S.C. 213 seven

times since 1974 without expressing disapproval of the

agency's interpretation. /d. at 24a. The court also recognized

that Section 552.109(a) was the product of notice-and-com-

ment rulemaking; that all other courts that have considered

the issue have applied Chevron deference and upheld the reg-

ulation; and that “the rule ‘grants rights, imposes obligations,

or produces other significant effects on private interests’ as

legislative regulations do.” /d. at 24a-25a, 26a (citation omit-

ted). The court concluded, however, that DOL did not intend

to use its legislative rulemaking authority when promulgating

29 C.F.R. 552.109(a) because the regulation is included in

Subpart B of Part 552, entitled “Interpretations,” and because

another regulation (29 C.F.R. 552.2(¢)) states that the “defini-

7

tions required by [29 U.S.C. 213(a)(15)] are contained in

§§ 552.3, 552.4, 552.5 and 552.6.” Pet. App. 26a. Relying on

United States v. Mead Corp., 533 U.S. 218 (2001), the court

reasoned that the regulation is therefore “interpretive,”

rather than “legislative,” and that it is not entitled to Chevron

deference. Pet. App. 26a-27a.

The court then held that the third-party employer regula-

tion is unenforceable under the less deferential standard set

forth in Skidmore v. Swift & Co., 323 U.S. 134 (1944). Pet.

App. 29a. In the court’s view, the regulation is inconsistent

beth with Congress’s likely intent in enacting the 1974

Amendments and with 29 C.F.R. 552.3’s definition of domestic

service employment, and was the product of inadequate rea-

soning. Pet. App. 29a-32a.

4. Petitioners filed a petition for a writ of certiorari, and

the Court invited the Solicitor General to express the views of

the United States. Thereafter, DOL issued an authoritative

Advisory Memorandum making clear its view that the promul-

gation of 29 C.F.R. 552.109(a) was an exercise of DOL’s ex-

pressly conferred legislative rulemaking authority. See Pet.

App. 50a-64a. Specifically, the Advisory Memorandum states

that DOL considers Section 552.109 to be a legally binding

legislative rule. Pet. App. 63a-64a. The Advisory Memoran-

dum also explains that Section 552.109(a) represents the best

reading of the companionship services exemption in 29 U.S.C.

213(a)(15), Pet. App. 50a-52a; is consistent with other regula-

tory provisions, id. at 54a-62a; and best reflects Congress's

concern “that working people could not afford to pay for com-

panionship services if they had to pay FLSA wages,” id. at

52a. Consistent with the recommendation of the United

States, the Court granted the petition for a writ of certiorari,

vacated the court of appeals’ decision, and remanded the case

so that the Second Circuit could consider the Advisory Memo-

randum. 1268. Ct. 1189 (2006).

5. Onremand, the court of appeals again denied Chevron.

deference to 29 C.F.R. 552.109(a). Pet. App. 2a-Ga. The court

é 8

acknowledged that Congress granted legislative rulemaking

authority to DOL. Jd. at 2a. However, the court adhered to

its original conclusion that DOL did not intend the third-party

employer regulation to be a legislative rule. /bid. The court

discounted DOL’s explanation in the Advisory Memorandum

that it had always considered Section 552.109(a) to be a legally

binding legislative rule, reasoning that the regulation could

have been intended merely as internal guidance not meant to

have the force of law outside the agency. /d. at 3a-4a.

The court again invoked Skidmore, and concluded that

nothing in DOL’s Advisory Memorandum convinced it that its

original decision was in error. Pet. App. 4a. The court ac-

‘knowledged, contrary to its earlier decision, see id. at 29a-30a,

that. consideration of congressional intent did not resolve

whether 29 C.F.R. 552.109(a) is a permissible interpretation

of the statute. Pet. App. 4a-5a. However, the court rejected

the reasoning of the Advisory Memorandum and deemed that

regulation inconsistent with the other regulations in 29 C.F.R.

Pt. 552, including Section 552.3. In addition, the court stated

that the Advisory Memorandum did little to allay its concern

regarding the consistency of DOL’s position over time and the

thoroughness of its original consideration and reasoning when

it promulgated Section 552.109(a). Pet. App. 5a-6a.

SUMMARY OF ARGUMENT

{. DOL’s third-party employer regulation at 29 C.F.R.

552.109(a) should be analyzed under Chevron’s deferential

framework because it was promulgated pursuant to an ex-

press statutory grant of rulemaking authority and after notice

and comment. See Mead, 533 U.S. at 226-227, 229-230; Chev-

ron, 467 U.S. at 843-844. DOL’s placement of the regulation

in a subpart of its regulations entitled “Interpretations” does

not change the analysis. Both subparts of the regulation were

subject to notice and comment and both were intended to have

the force of law, as authoritatively explained in DOL’s Advi-

7)

sory Memorandum, Pet. App. 51a, 63a-64a. See Awer v. Rob-

bins, 519 U.S. 452, 457-458 (1997).

II. Under Chevron, such a legislative rule should be sus-

tained unless it is “arbitrary, capricious, or manifestly con-

trary to the statute.” 467 U.S. at 844. The FLSA’s compan-

ionship services exemption does not address third-party em-

ployment. See 29 U.S.C. 213(a)(15). DOL’s regulation at 29

C.F.R. 552.109(a), however, specifically provides that the ex-

emption applies to employees of third parties. That regula-

tion is a reasonable interpretation of the statutory companion-

ship services exemption which, by its terms, applies to “any

employee employed in domestic service employment to pro-

vide companionship services * * * (as such terms are defined

and delimited by regulations of the Secretary).” 29 U.S.C.

213(a)(15). The regulation also furthers Congress’s intent to

ensure that working people would be able to afford companion

services, a rationale that applies equally to all companions,

irrespective of the identity of their employer. Advisory Mem.,

Pet. App. 52a.

As DOL explained in its Advisory Memorandum, Section

552.109(a) was promulgated after notice and comment as an

exercise of legislative rulemaking authority and is the only

regulation that directly addresses the third-party employ-

ment question. Pet. App. 63a. There is no conflict between

DOL’s third-party employer regulation and the other regula-

tions in Part 552, including 29 C.F.R. 552.3, which addresses

the kind of work that qualifies as domestic service and where

it must be performed. /bid. While 29 C.F.R. 552.3 could have

been more artfully drafted to accommodate the third-party

employment situation, Section 552.109(a) addressed that situ-

ation directly, and there is no basis for manufacturing a con-

flict. In all events, DOL’s interpretation of its own regula-

tions is entitled to deference. Auer, 519 U.S. at 461.

DOL carefully considered competing policy interests im-

plicated by the third-party employer regulation both when it

first promulgated the regulation in 1975, and in the over 30

10

ensuing years. In all that time, DOL has repeatedly come to

the same conclusion, that the third-party employer regulation

reasonably serves the interests Congress wanted to promote

in enacting the companionship services exemption. That care-

ful consideration and consistency over a long period of time

provides a further reason to uphold the regulation.

ARGUMENT

I. DOL’S THIRD-PARTY EMPLOYER REGULATION IS

ENTITLED TO CHEVRON DEFERENCE

Under Chevron, an agency's reasonable interpretation of

a silent or ambiguous statute that Congress has charged it

with administering is entitled to deference. “If Congress has

explicitly left a gap for the agency to fill, there is an express

delegation of authority to the agency to elucidate a specific

provision of the statute by regulation.” 467 U.S. at 843-844.

Such “legislative regulations” must be upheld “unless they are

arbitrary, capricious, or manifestly contrary to the statute.”

Id. et 843. If the legislative delegation to the agency on a par-

ticular question is “implicit” rather than “explicit,” the agency’s

interpretation must be upheld if it is “reasonable.” /d. at 844.

Under either standard, a reviewing court cannot reject the

agency’s interpretation “simply because the agency’s chosen

resolution seems unwise.” Mead, 533 U.S. at 229.

‘Thus, deference is required under Chevron at least where:

(1) Congress expressly granted authority to the agency to

make rules carrying the force of law; and (2) the agency pro-

mulgated such rules pursuant to that authority. See Mead,

533 U.S. at 226-227, 233 (denying Chevron deference to a tar-

iff classification ruling because the Customs Service did not

have a “lawmaking pretense in mind” when it issued the rul-

ing). Mead highlights the importance of notice-and-comment

rulemaking as an indication that an agency interpretation has

the “force of law” and should be analyzed under Chevron’s

framework. /d. at 230 (“|T]he overwhelming number of our

11

cases applying Chevron deference have reviewed the fruits of

notice-and-comment rulemaking or formal adjudication.”).

And since Mead, the Court has expressly held that Chevron

applies where an agency with express legislative rulemaking

authority issues rules after notice and comment. See Yellow

Transp., Inc. v. Michigan, 587 U.S. 36, 45 (2002) (applying

Chevron’s framework to regulations implementing the “Single

State Registration System” of the Intermodal Surface Trans-

portation Efficiency Act of 1991, Pub. L. No. 102-240, § 4005,

105 Stat. 2146, 49 U.S.C. 11506(c) (1994)); National Cable &

Telecomms. Ass’n v. Brand X Internet Servs., 545 U.S. 967,

980-981 (2005) (applying Chevron to a Federal Communica-

tions Commission (FCC) ruling classifying broadband cable

Internet service providers under the Communications Act).

A. Congress Clearly Granted Rulemaking Authority To

DOL Concerning Application Of The Companionship

Services Exemption

The third-party employer regulation at 29 C.F.R.

552.109(a) easily satisfies the first of the two criteria that

Mead identified as sufficient for Chevron deference. As the

court of appeals acknowledged on remand, “[t]here is no dis-

pute that Congress delegated to the Department of Labor

* * * the authority to promulgate legislative rules, which

carry the force of law.” Pet. App. 2a-3a. That delegation was

twofold. First, Congress granted the Secretary the authority

to “define|| and delimit|| by regulations” the terms of the

companionship services exemption. 29 U.S.C. 213(a)(15).

Such a provision gives the Secretary broad authority to pro-

mulgate binding legal rules governing the construction of

those terms and the application of the exemption. See Auer,

519 U.S. at 456-458 (FLSA provision granting the Secretary

authority to “define|] and delimit{}” the Act’s exemption for

employees employed in an executive, administrative, or pro-

fessional capacity, 29 U.S.C. 213(a)(1), gives the Secretary

broad authority to issue legally binding rules). Second, Con-

12

gress also gave the Secretary general authority “to prescribe

necessary rules, regulations, and orders” with regard to the

1974 Amendments, including the provisions governing domes-

tic service employment. 1974 Amendments § 29(b), 88 Stat.

76. Such a statutory provision also gives the Secretary au-

thority to promuigate binding legal rules. See National Ca-

ble, 345 U.S. at 980-981 (statutory authorization for FCC to

“prescribe such rules and regulations as may be necessary in

the public interest to carry out the provisions” of the Commu-

nications Act gave FCC broad authority to promulgate bind-

ing legal rules).

B. DOL Exercised Its Statutory Rulemaking Authority In

Promul gating Section 552.109(a)

1. Section 552.109(a) also satisfies the second of the two

criteria that are sufficient to trigger Chevron deference, be-

cause DOL promulgated the rule pursuant to its authority to

issue rules with the force of law. DOL’s use of notice-and-

comment rulemaking to issue Section 552.109(a), see 39 Fed.

Reg. at 35,382 (proposed rule); 40 Fed. Reg. at 7404 (final-

rule), is strong evidence that DOL promulgated that regula-

tion pursuant to its authority to make legally binding rules.

See Mead, 533 U.S. at 229-230 (“It is fair to assume generally -

that Congress contemplates administrative action with the

effect of law when it provides for a relatively formal adminis-

trative procedure tending to foster the fairness and delibera-

tion that should underlie a pronouncement of such force.”).

Moreover, DOL has repeatedly stated that it was using its

legislative rulemaking authority. DOL promulgated Section

552.109(a) at the same time it promulgated the other Part 552

regulations addressing the application of the F LSA to domes-

tie service, and expressly invoked 29 U.S.C. 213(a)(15) and

Section 29(b) of the 1974 Amendments as the authority for a//

those regulations. See 29 C.F.R. Pt. 552; 40 Fed. Reg. at

7405; 39 Fed. Reg. at 35,382. DOL further explained that the

purpose of the regulations—both the “General Regulations”

13

and “Interpretations” subparts—is to “provide|| necessary

rules for the application of the Act to domestic service employ-

ment” in accord with the 1974 Amendments. 29 C.F.R.

552.2(a). DOL thereby invoked its legislative rulemaking

authority for all the Part 552 regulations, including the third-

party employer regulation.

DOL- confirmed that Section 552.109(a) is a legislative rule

when it considered whether to revise that section in 1993,

1995, and 2001, by relying on notice-and-comment procedures,

which would have been unnecessary if the provision was

merely intended to provide internal agency guidance, as the

court of appeals suggested. And in its December 2005 Advi-

sory Memorandum, DOL authoritatively confirmed that it has

always treated the regulation as a binding legislative rule.

Pet. App. 64a. As DOL explained in 1975 and again in 2005,

Section 552.109(a) makes the statutory exemption “available”

to third-party employers, expressing DOL’s intention, at the

time the final rule was promulgated, that the availability of

the companionship services exemption to third-party employ-

ers turned decisively on DOL’s regulation, something that

could be true only of a legislative rule. Pet. App. 63a-64a (cit-

ing 40 Fed. Reg. at 7404-7405).

2. The court of appeals nonetheless concluded that Sec-

tion 552.109(a) “was self-consciously not promulgated in exer-

cise of Congress’s delegated authority,” Pet. App. 26a, be-

cause DOL placed Section 552.109(a) in Part 552’s “Interpre-

tations” subpart and stated in a preamble that the Interpreta-

tions subpart sets forth “a statement of general policy and

interpretation concerning the application of the [FLSA] to

domestic service employees,” while regulations “defining and

delimiting” terms, including “[{t]he definitions required by

section 13(a)(15),” were in the “General” regulations subpart.

Pet. App. 3a (brackets in original) (citing 39 Fed. Reg. at

35,382 and 29 C.F.R. 552.2(¢c)). The placement of 29 C.F.R.

552.109(a) in the “Interpretations” subpart is an insufficient

basis for ignoring DOL ’s use of notice-and-comment proce-

14

dures and its express reliance on its legislative rulemaking

authority.

The court of appeals placed too much weight on Subpart

B’s “Interpretations” heading and the preamble statement

that Subpart B set out a “statement of general policy and in-

terpretation.” Such characterizations are not dispositive. See

CBS v. United States, 316 U.S. 407, 416 (1942) (“The particu-

lar label placed upon {an order promulgating regulations] by

the Commission is not necessarily conclusive, for it is the sub-

stance of what the Commission has purported to do and has

done which is decisive.”). Significantly, this Court, in Auer,

applied Chevron’s framework to a DOL FLSA regulation is-

sued pursuant to notice-and-comment rulemaking, even

though it was set out in an “Interpretations” subpart rather

than a “General Regulations” subpart. See 519 U.S. at 457-

458 (giving Chevron deference to 29 C.F.R. 541.118(a)

(2003)).” Auer confirms that when DOL promulgates a regu-

lation through notice-and-comment procedures pursuant to

rulemaking authority conferred by the FLSA, as DOL did

here, the regulation is entitled to Chevron deference despite

its placement in an “Interpretations” subpart.

A far more relevant consideration in determining whether

a rule is legislative is whether it is “one affecting individual

rights and obligations.” Chrysler Corp. v. Brown, 441 U.S.

281, 302 (1979). Section 552.109(a) unquestionably is intended

to and does affect individual rights and obligations. Indeed,

the court of appeals acknowledged that Section 552.109(a)

“grants rights, imposes obligations, or produces other signifi-

* Section 541.118(a), which was promulgated pursuant to notice-and-com-

ment rulemaking, see 19 Fed. Reg. 1321-1322 (1954), established a salary-basis

test for determining when an employee is employed in an exccutive, adminis-

trative, or professional capacity and thereby exempt from the FLSA’s mini-

mum wage and overtime requirements pursuant to 29 U.S.C. 213(a)(1). In

2004, the Department amended the Part 541 regulations, and the current

regulations are no longer divided into “General” and “Interpretations” sub-

parts. See 69 Fed. Reg. 22,122.

15

cant effects on private interests, as legislative rules do.” Pet.

App. 26a (internal quotation marks and citation omitted); see

also id. at 63a-64a. Thus, the regulation has the force of law,

see CBS, 316 U.S. at 416 (“regulations which affect or deter-

mine rights generally * * * when lawfully promulgated * * *

have the force of law”), and is entitled to Chevron deference

under Mead for that reason, see 533 U.S. at 226-227.

Moreover, labeling a rule as an “interpretation” does not

indicate that it is not a binding legislative rule. Here, the title

merely indicates that Subpart B provides interpretations of

the companionship services exemption that go beyond the

basic definitions provided in Subpart A to further delimit the

contours of the exemption in 29 U.S.C. 213(a)(15) and provide

necessary rules to implement the 1974 Amendments. Chevron

clearly applies to such agency interpretations contained in a

regulation. See Christensen v. Harris County, 529 U.S. 576,

587 (2000). Accordingly, courts of appeals, other than the

court below, have applied Chevron’s framework to regulations

contained in Part 552’s “Interpretations” Subpart. See Madi-

son v. Resources for Human Dev., Inc., 233 F.3d 175, 181 (3d

Cir. 2000) (according Chevron deference to 29 C.F.R.

552.101); McCune v. Oregon Senior Servs. Div., 894 F.2d

1107, 1110 (9th Cir. 1990) (upholding 29 C.F.R. 552.106 under

Chevron). In addition, the Tenth Circuit has twice accorded

Section 552.109(a) Chevron deference, despite its inclusion in

Part 552’s “Interpretations” Subpart. See Johnston v. Volun-

teers of Am., Ine., 213 F.3d 559, 562 (10th Cir. 2000), cert.

denied, 531 U.S. 1072 (2001); Welding v. Bios Corp., 353 F.3d

1214, 1217 n.3 (10th Cir. 2004).*

* Contrary to respondent's argument (Br. in Opp. 13-14), DOL did not

intend to adopt the definition of “interpretation” in 29 C.F.R. 790.17(¢) for

every regulation it placed in a subpart entitled “Interpretations.” Section

790.17(c) adopts that definition only as an interpretation of provisions of the

Portal-to-Portal Act of 1947, ch. 52, 61 Stat. 84, that provide a defense to em-

ployers who prove that they acted “in good faith in conformity with and in

reliance on any written administrative regulation, order, ruling, approval, or

16

(. Chevron Deference Is Appropriate Even If 29 C.F.R.

552.109(a) Is Not A Legislative Rule

Even assuming, arguendo, that Section 552.109(a) is not

a legislative rule that must be upheld unless it is arbitrary,

capricious, or manifestly contrary to the FLSA, it remains a

formal and authoritative construction of the Act that warrants

deference under Chevron and must be sustained as long as it

is reasonable. See 467 U.S. at 844. This Court in Méad did

not hold that Chevron deference is appropriate only to inter-

pretations embodied in legislative rules or formal adjudica-

tions. _To the contrary, the Court specifically held that the

want of formal procedure in Mead itself did not decide the

case, noting that the Court has sometimes found reasons for

Chevron deference even when no such administrative formal-

ity was required and none was affected. See 533 U.S. at 231

interpretation” of certain agencies. 29 U.S.C. 258 and 259%a). In that context,

“interpretation” means “a statement ‘ordinarily of an advisory character, indi-

cating merely the agency’s present belief concerning the meaning of applicable

statutory language,” including “bulletins, releases, and other statements.” 29

C.F.R. 790.17(¢); ef. 29 C.F.R. 790.17(b) (“regulation” and “order” mean au-

thoritative and binding rules). Respondent also cites a number of cases alle

gedly supporting her position that DOL’: ‘interpretations” of statutory exemp-

tions receive only Skidmore deference. Br. in Opp. 15. These cases are readily

distinguishable because they involved statements or positions adopted without

notice and comment. See, e.g., Freemay v. NBC, 80 F.3d 78, 83-84 (2d Cir.

1996) (concluding that 29 C.F.R. 541.302 is an interpretive regulation because

it was not promulgated pursuant to the requirements of the APA); Reich v.

New York, 3 F.3d 581, 587 (2d Cir. 1993) (concluding that 29 C.F... 541.205(a),

which was not subject to notice and comment, is an interpretive rule), cert.

denied, 510 U.S. 1163 (1994); Brigham v. Rugene Water & Klee. Bd., 357 F 3d

931, 940 (9th Cir. 2004) (DOL regulations at 29 C.F.R. 785.14-785.23 interpret-

ing the F LSA’s “waiting time” provision, which were issued without notice and

comment, are “interpretive guidance”). Respondent's argument suffices only

to demonstrate that “interpretation” is an ambiguous term that covers agency

determinations of varving degrees of formality. That, in turn, provides a rea-

son to defer to the agency (under Aver), not a basis to disregard the agency's

interpretation of “interpretation.”

17

(citing as an example NationsBank of N.C., N.A. v. Variable

Annuity Life Ins. Co., 513 U.S. 251, 256-257, 263 (1995)).

This clearly ir an occasion for such deference. Section

552.109(a) was promulgated pursuant to notice-and-comment

rulemaking (and indeed was revised in response to public

comments); it was issued as part of a single comprehensive

package containing all “necessary rules” for implementation

of the new domestic service coverage and the exemption for

companionship services; and it addresses the question at issue

directly and with greater specificity than any other regula-

tion. Section 552.109(a) thus bears ample indicia of a consid-

ered and official position calling for Chevron deference.

il. DOL’S THIRD- PARTY EMPLOYMENT REGULATION IS

A PERMISSIBLE INTERPRETATION OF THE FLSA’S

COMPANIONSHIP SERVICES EXEMPTION

Under the second step of the Chevron analysis, where “the

statute is silent or ambiguous with respect to the specific is-

sue, the question for the court is whether the agency's answer

is based on a permissible construction of the statute.” 467

U.S. at 843. Under this highly deferential standard, “(t]he

court need not conclude that the agency construction was the

only one it permissibly could have adopted * * *, or even the

reading the court would have reached if the question initially

had arisen in a judicial proceeding.” Jd. at 843 n.11. Rather,

courts must defer to any reasonable agency interpretation.

Mead, 533 US. at 229.

The FLSA’s companionship services exemption does not

specifically address third-party employment. See 29 U.S.C.

213(a)(15). Rather, that issue is within the express grant of

rulemaking authority to the Secretary of Labor to “define and

delimit” the terms of the exemption. At a minimum, because

the statute does not preclude application of the companion-

ship exemption to third-party employment, and because 29

C.F.R. 552.109(a) is a permissible interpretation of congres-

sional intent, the Court must defer to DOL’s regulation. Def-

18

erence would be due, moreover, even under the standard of

Skidmore v. Swift & Co., 323 U.S. 134 (1944), beeause DOL’s

longstanding third-party employer regulation is most consis-

tent with the statutory text and Congress's intent in enacting

the FLSA’s exemption for companionship services.

A. DOL’s Third-Party Employer Regulation Is Supported

By The Text And History Of The FLSA’s Companionship

Services Exemption

The statutory exemption applies to “any employee em-

ploved in domestic service employment to provide companion-

ship services.” 29 U.S.C. 213(a)(15) (emphasis added). Con-

gress’s use of the encompassing term “any” is naturally read

to include all employees providing such services, regardless

of who employs them. See, e.g., United States v. Gonzales,

520 U.S. 1, 5 (.997) (“Read naturally, the word ‘any’ has an

expansive meaning, that is, one or some indiscriminately of

whatever kind.”) (internal quotation marks and citation omit-

ted).* See Advisory Mem., Pet. App. 51a, 63a-64a.

As DOL explained when it promulgated 29 C.F.R.

552.109(a) (see 40 Fed. Reg. at 7405) and again in its 2005

Advisory Memorandum (see Pet. App. 5la-52a), its conclusion

' Tt is true that Sections 6(f) and 7(/) of the FLSA, which extend minimum

wage and overtime protections to domestic service employees, indicate that the

term “domestic service” itself should be construed broadly. See 29 U.S.C.

206(f) (minimum wage applies to “/a/ny employee * * * employed in domestic

service” meeting specified income or hour requirements) (emphasis added);

29 U.S.C, 207(/) (“No employer shall employ avy employee in domestic service

in ore or more households for a workweek longer than forty hours” unless such

employee receives overtime compensation.) (emphasis added). The broad

coverage provided by those sections, however, is expressly limited by the

exerptions for casual babysitters and companions for the aged and infirm.

Moreover, the ntended bread coverage is indicated by the word “any,” which

of course is also used in the exemption. Thus, while Congress wanted “to

include within the coverage of the Act all emplovees whose vocation is domestic

service,” it expressly excluded casual babysitters and companions from that

coverage. 5S. Rep. No. 690, 98d Cong., 2d Sess. 20 (1974); see H.R. Conf. Rep.

No. 113, 98d Cong., Ist Sess. 27 (1973).

19

that the companionship services exemption applies to third-

party employers is consistent with interpretations of simi-

larly-worded statutory exemptions that pre-dated the 1974

Amendments. See, e.g., 29 C.F.R. 780.303 (exemption in 29

U.S.C. 213(a)(6)(A) for “any employee employed in agricul-

ture” turns on “the activities of the employee rather than

those of his employer”); Holtville Alfalfa Mills, Inc. v. Wyatt,

230 F.2d 398, 400, 401-402 (9th Cir. 1955) (exemption in 29

U.S.C. 213(a)(6) applies to employee who repaired equipment

on a farm even though his employer owned no farm and oper-

ated none); Tiptonv. Associated Milk Producers, Inc., 398 F.

Supp. 743, 747 (N.D. Tex. 1975) (same); 29 C.F.R. 780.405

(exemption in 29 U.S.C. 213(b)(12) for “any employee employ-

ed in” certain activities “may not apply to some employees of

an employer engaged almost exclusively in activities within

the exemption, and it may apply to some employees of an em-

ployer engaged almost exclusively in other activities”). DOL

therefore had a firm basis for defining the scope of the com-

panionship exemption by reference to the activities of the

employee rather than the activities of the employer.

If Congress had wanted to exclude employees of third-

party employers from the exemption, it easily could have done

so by expressly including a limitation based on employer sta-

tus, as it has done with other FLSA exemptions. See, e.g., 29

U.S.C. 213(a)(3) (exemption for “any employee employed by

an establishment which is an amusement or recreational es-

tablishment, organized camp, or religious or non-profit educa-

tional conference center”); 29 U.S.C. 213(b)(3) (“any employee

of a carrier by air”); 29 U.S.C. 207(i) (“any employee of a re-

tail or service establishment”). Instead, Congress focused on

the activity of “any employee” and expressly assigned to the

Secretary the authority to determine the appropriate defini-

20

tions and limits of the exemption, see 29 U.S.C. 213(a)(15),

which the Secretary did in 29 C.F.R. 552.109(a).”

From the outset of the rulemaking process implementing

the 1974 Amendments and the companionship services exemp-

tion, DOL intended to address the question of third-party

employment in 29 C.F.R. 552.109. See 39 Fed. Reg. at 35,382

(proposed rule); 40 Fed. Reg. at 7404 (final rule). DOL origi-

nally proposed using that regulation to provide that compan-

ionship services employees “employed by an employer other

than the families or households using such services, are not

exempt under section 13(a)(15) of the Act if the third party

employer is a covered enterprise meeting the tests of sections

3(r) and 3(s)(1) of the Act.” 39 Fed. Reg. at 35,385. DOL rea-

soned that such “employment was subject to the Act prior to

the 1974 Amendments and it was not the purpose of those

Amendments to deny the Act’s protection to previously cov-

ered domestic service employees.” /bid.; see Homemakers

Home & Health Care Servs., Inc. v. Carden, 538 F.2d 98, 100

(6th Cir. 1976). But even as originally proposed, Section

552.109(a) would have applied the exemption to some third-

party employers—agencies or companies that were not “en-

terprises” covered by the Act and family members who hired

the companion for the aged or infirm person.

After receiving comments from, among others, public and

private social service groups, public welfare departments of

state and local governments, and business firms providing

> Congress has amended 29 U.S.C. 213 seven times since 1974 and has not

made any changes to the exemption. See Pub. L. No. 95-151, 91 Stat. 1245

(1977); Pub. L. No. 96-70, 93 Stat. 452 (1979): Pub. L. No. 101-157, 108 Stat. 938

(198%); Pub. L. Ne. 103-329, 108 Stat. 2382 (1994); Pub. L. No. 104-88, 109 Stat.

803 (1995); Pub) L. No. 104-188, 710 Stat. 1755 (1996); Pub. L. No. 105-78, 111

Stat. 1467 (1997). This failure to revise or repeal DOL’s longstanding inter-

pretation of the companionship exemption “is persuasive evidence that the

interpretation is the one intended by Congress,” or at least is within the range

of discretion Congress conferred on the ageney. CFTC v. Schor, A78 U.S. 835,

846 (1986) (citation omitted).

21

domestic service workers, DOL revised its rule to exempt all

employees providing companionship services, regardless of

their employer. See 40 Fed. Reg. at 7405 (“On further consid-

eration, I have concluded that the[{] exemption[]| can be avail-

able to * * * third party employers since [it] appllies| to

‘any employee’ engaged ‘in’ the enumerated services.”). The

agency explained that “[t]his interpretation is more consistent

with the statutory language and prior practices concerning

other similarly worded exemptions.” /bid.; see also Advisory

Mem., Pet. App. 52a, 53a.°

B. The Third-Party Employer Regulation Is Consistent

With Congress’s Intent In Enacting The Exemption For

Companionship Services

Section 552.109(a) also is consistent with Congress’s intent

in enacting the exemption for companionship services in the

first place, and it avoids the disruption to the provision of

companionship services to aged and disabled individuals that

would result if the regulation were invalidated.

As DOL stated soon after promulgating 29 C.F.R. 552.109,

see Op. Ltr. WH-368, 1975 WL 40991 (Nov. 25, 1975), allowing

* DOL’s change between its proposed rule in 1974 and the final rule adopted

in 1975, in response to comments, is not a reason Lo deny Chevron deference to

Section 552.10%a). See Yellow Transp., 537 U.S. at 45 (applying Chevron

where agency's position changed from proposed rule to final rule). Such

modifications are at the very “heart of the rulemaking process.” Penazoit Co.

v. FERC, 645 F.2d 360, 371-372 (5th Cir. 1981), cert. denied, 454 U.S. 1142

(1982). Further, respondent’s argument that the third-party employer regu-

lation is procedurally defective under the APA, 5 U.S.C. 551 ef seq.. is not prop-

erly before the Court because it was not timely raised, Pet. App. 382 9.3. and

the court of appeals did not decide the issue, id. at 27a-28a. The argument is

ulso meritless. DOL satisfied the APA's requirement at 5 U.S.C. 54380b)C3) by

setting forth the terms of the proposed Part 552, including the third-party

employer regulation. and then issuing a final rule that was a logical outgrowth

of the proposal. See 39 Fed. Reg. at 35.383-35,385; United Steelworkers of Am.

v. Marshall, 647 F.2d 1189, 1221 (D.C. Cir. 1981). Moreover, following notice

and comment in 1993, 1995, and 2001, DOL retained Section 552.10%a) as

worded. See pp. 4-5, supra.

22

the exemption for all employees providing companionship

-services, regardless of the identity of their employer, is con-

sistent with Congress’s intent to keep such services afford-

able. See 119 Cong. Rec. 24,797 (1973) (statement of Sen.

Dorninick); id. at 24,798 (statement of Sen. Johnston); id. at

24,&01 (statement of Sen. Burdick); Welding, 353 F.3d at 1217

(“Congress created the companionship services exemption to

enable guardians of the elderly and disabled to financially

afford to have their wards cared for in their own private

homes as opposed to institutionalizing them.”) (internal quota-

tion marks and citation omitted). This affordability concern

applies regardless of whether a person needing care employs

a companion directly or uses a third-party agency to obtain

such services.

Indeed, as DOL recognized when it decided not to revoke

the third-party employer regulation in 2002, the cost of com-

panionship services would dramatically increase without the

exemption. See 67 Fed. Reg. at 16,668 (citing comments from,

among others, the SBA and HHS, expressing concern that

extending the FLSA’s minimum wage and overtime coverage

to companions employed by third parties would increase the

cost. of such services). That is a concern not only for persons

who need those services, but also for third-party providers,

whose reimbursement is generally fixed through Medicare

and Medicaid, see, e.g., Nat’l Ass’n for Home Care & Hospice,

Ine. (NAHC) Amicus Cert. Br. 7-8, and for the federal govern-

ment, because Medicare and Medicaid together pay more than

half of the revenues to freestanding agencies. See 66 Fed.

Reg. at 5483 (“40 and 15 percent, respectively”).

Eliminating the third-party employer regulation would

have a substantial impact on home care beyond increased

costs, and could cause disruption in the care that frail elderly

and disabled individuals currently receive. For example, a

nuraber of home care providers believe that they would need

to limit workers to 40 hours of work each week to control

cosis if the exemption were not available. See, e.g., City of

23

New York Amici Cert. Br. 8; Home Care Council of New York

City Amicus Cert. Br. 8-9. Such a reduction in workers’ hours

would likely disrupt continuity of care, as many individuals

requiring companionship services need care for a significant

portion of the day and night, including, in some cases, round-

the-clock care. Continuing Care Leadership Coalition Amicus

Br. 8. In addition, home care providers have expressed con-

cern that restricting companions to 40 hours of work each

week could make it more difficult for those needing care to

find it “ity of New York Amici Cert. Br. 8, 11. Such difficul-

ties Wuuld lead to increased institutionalization, which is con-

trary to government policy. See Olmstead v. L.C. ex rel.

Zimring, 527 U.S. 581, 599-602 (1999); Exec. Order No.

13,217, 3 C.F.R. 774 (Community-Based Alternatives for Indi-

viduals with Disabilities). Nor is it obvious that the care-

givers would benefit. Some providers predict that caregivers’

total pay would actually be reduced because they would no

longer be able to depend on working overtime hours to sup-

plement their income. See New York State Ass’n of Health

Care Providers Amicus Cert. Br. 6. Moreover, the effects of

limiting the companionship services exemption to individual

employment would visit the greatest hardship on those el-

derly or infirm individuals—for example, those with Alzhei-

mer’s disease—who may be incapable of acting as employers.

See Home Care Ass’n of New York State Amicus Cert. Br. 17;

NAHC Amicus Cert. Br. 6.

Limiting the exemption to individual employment also

would deny the companionship exemption where a family

member hires a companion for an elderly or infirm relative

living in another household. There is no indication in the

FLSA itself, or its legislative history, that Congress intended

that result. Indeed, consistent with the textual reference to

“any employee,” there is no legal or policy justification for

treating employees providing companionship services differ-

ently under the FLSA based on the identity of the employer.

24

The changing nature of the home care industry highlights

the importance of allowing the exemption for all companion-

ship services employees, regardless of their employer. Since

Congress enacted the exemption, “(tlhe number of for-profit

agencies | providing companionship services| * * * increased

** * from 47 in 1975 to 3,129 in 1999.” 66 Fed. Reg. at 5483.

Given the number of agencies now providing these services,

“lijf the companionship services exemption to the FLSA was

narrowed to only those employees hired directly by a family

member or the head of household, then the exemption would

encompass only 2% of employees providing companionship

services in private homes.” Fernandez v. Elder Care Option,

Tnc., No. 03-21998 (S.D. Fla. July 29, 2005), slip op. 45-46 (cit-

ing 66 Fed. Reg. at 5483), appeal docketed, No. 05-16806 (11th

Cir. filed Dec. 5, 2005). Such an outcome would not be consis-

tent with Congress’s intent to ensure the availability and

affordability of those services for working Americans.

C. DOL’s Third-Party Employer Regulation Is Consistent

With Other DOL Regulations

The court of appeals on remand acknowledged that consid-

eration of congressional intent “does not lead to any definitive

conclusion” about the validity of Section 552.109(a). Pet. App.

4a-5a. The court nonetheless invalidated that longstanding

regulation because it concluded that it is inconsistent with

other DOL regulations, particularly 29 C.F.R. 552.3, which

the court believed clearly limit the companionship services

exemption to employees working in the private home of the

person by whom she is employed. Pet. App. 4a-5a, 30a. Sec-

tion 552.3’s general definition of “domestic service employ-

ment,” however, does not support disregarding Section

552.109 a)'s specific treatment of third-party employers.

At the time the regulation was promulgated, DOL demon-

strated its understanding that Section 552.3 did not resolve

the issue of third-party employment by including a separate

section expressly addressing the subject in the context of

25

companionship services, Section 552.109. See 40 Fed. Reg. at

7407. If the definition of domestic service employment in

Section 552.3 had already excluded employees of third parties,

there would have been no point to the promulgation of Section

552.109(a). But DOL did promulgate Section 552.109(a),

which expressly includes employees of third parties within the

exemption. DOL surely did not intend, in the same rule-

making, to both exclude such third-party employees from the

exemption under Section 552.3 and include them under Sec-

tion 552.109(a). To be sure, Section 552.3 could have referred

to the home “of the person by” or for “whom he or she is em-

ployed.” But the absence of such language cannot suffice to

defeat the specific direction provided by Section 552.109(a).

Moreover, although the court of appeals believed that the

version of Section 552.109 proposed by DOL in 1974 sup-

ported its conclusion, see Pet. App. 13a, 30a-31a, it does not.

As originally proposed, Section 552.109 would have applied

the exemption to some third-party employers (i.e., those that

did not satisfy the “enterprise” test for coverage), and family

members living in another household), and therefore even the

original proposal would have been inconsistent with the court

of appeals’ reading of Section 552.3.

As DOL’s Advisory Memorandum explains, Section 552.3

does not limit the companionship services exemption to indi-

vidual employment, because its general definition of domestic

service employment addresses not the status of the employer,

but rather types of covered services and where they must be

provided. Section 552.109(a) is the only regulation that ad-

dresses third-party employment. See Pet. App. 5la-63a. The

agency's interpretation of its own regulations is entitled to

controlling deference. Auer, 519 U.S. at 461-463. Section

552.3 does incorporate language from the Act’s legislative his-

tory in its definition of “domestic service employment” as

“services of a household nature performed by an employee in

or about a private home (permanent or temporary) of the per-

son by whom he or she is employed.” 29 C.F.R. 552.5; see also

26

Advisory Mem., Pet. App. 57a-59a. However, when DOL bor-

rowed this language from the congressional committee re-

ports, it intended to adopt Congress’s emphasis on the nature

of the employee’s activities and the place where those activi-

ties are performed; it did not intend to impose any limitation

on the identity or status of the employer. See id. at 58a-59a.

As DOL pointed out in its Advisory Memorandum, Con-

gress never directly addressed the issue of employer identity

during its consideration of the companionship services exemp-

tion but, rather, focused on the employee’s activities and

where those activities are performed. Pet. App. 52a-53a, 57a-

58a. The legislative history refers to regulations addressing

“{djomestic service in a private home of the emplayer” in the

Social Security context, 26 C.F.R. 31.3121(a)(7)-1(a)(2), and

a “generally accepted meaning” of the term “domestic ser-

vice” that “relates to services of a household nature per-

formed by an employee in or about a private home of the per-

son by whom he or she is employed,” S. Rep. No. 300, 93d

Cong., Ist Sess. 22 (1973), to address the kind of work that

Congress sought to cover as “domestic service.” Those refer-

ences do not establish an intent to limit either FLSA coverage

of domestic service employees, or the companionship services

excmption, based on the identity of the employer. See Advi-

sory Mem., Pet. App. 52a-53a, 57a-58a. Instead, in addressing

the companionship exemption, “[mJost of the statements of

the Congressmen focus on the nature of companionship ser-

vices (e.g., ‘elder-sitting’ or providing companionship to an

elderly person through conversation and shared activities)

and the location of such services (ensuring affordable care for

the elderly within their own homes), rather than the em-

ployer.” Fernandez, slip op. 44-45.’

Under the Social Security system, a tax is imposed on wages and benefits

are based on wages. ‘ee 26 U.S.C. 3101(a) and (b); 42 U.S.C. 402(a), 415.

“Wages” general! means all remuneration for employment. 26 U.S.C.3121(a);

42 U.S.C. 4094). One exception excludes wages below a certain threshold paid

for “domestic service in a private home of the employer.” 26 U.S.C.

27

Moreover, the committee reports’ description of the indi-

viduals who would benefit from the companionship services

exemption, namely, individuals who are “unable to care for

themselves,” H.R. Rep. No. 913, 93d Cong., 2d Sess. 46 (1974);

see also S. Rep. No. 690, 93d Cong., 2d Sess. 20 (1974), sug-

gests that Congress did not intend to exclude those most

acutely in need of help—i.e., individuals who are not capable

of acting as an employer. See, e.g., Home Care Ass’n of NY

State Amicus Cert. Br. 17. Thus, Section 552.3 should not be

read as having so limited the companionship services exemp-

tion.*

D. Invalidating DOL’s Third-Party Employer Regulation

Would Have Substantial Negative Consequences

Respondent’s and the court of appeals’ contrary reading

of Section 552.3 as excluding third-party employment would

create a number of other problems. First, that reading would

create an inconsistency with DOL’s regulation at 29 C.F.R.

552.101, which elaborates on the definition of domestic service

employment set out in Section 552.3. Section 552.101 states

that “the term Tdomestic service employment] includes per-

sons who are frequently referred to as ‘private household

workers.” 29 C.F.R. 552.101(a). Both DOL and Congress

3121(aX(7A) and (B); 42 U.S.C. 409%(a\6)(A) and (B). The Social Security

regulations to which the legislative history of the 1974 Amendments referred

address the kind of work that qualifies for this exception. That work differs in

some respects from another kind of “domestic service” pertormed by college

students in college clubs, fraternities, and sororities that is not considered

“employment” for Social Security purposes pursuant to 26 U.S.C. 3121(b)(2)

and 42 U.S.C. 410(a)(2). See 26 C.F_.R. 31.3121(b)(2)-1; 20 C.P.R. 404.1009(b)

(1974). The existence of both types of “domestic service” in the Social Security

regulations highlights that the “private home of the employer” language in the

F LSA’s legislative history was used to distinguish domestic service performed

mea private home from such service performed in a different setting.

* DOL’s references to domestic services in the home “of the employer,” in

describing the scope of coverage for babysitters, see 29 CFR. 552.105(a), like

the references in 29 C.F.R. 552.3 and 552.101(a), is used to distinguish service

in a private household from service outside the household.

28

understood the phrase “private household workers” to include

employees of third-party employers. Advisory Mem., Pet.

App. 61a-62a (citing references in legislative history to DOL’s

1973 Report to Congress defining “private household work-

ers” as “anyone aged 14 and over working for wages * * *

in or about a private residence who was employed by * * *

a household service business whose services had been re-

quested by a member of the household occupying that resi-

dence”). Because Section 552.101(a) thus includes at least

some domestic workers employed by third parties within the

definition of domestic service employees, it makes no sense to

construe Section 552.3’s language that domestic service be

performed “in or about the private home of the employer” as

excluding them. /d. at 62a.

Second, reading Section 552.3 as excluding third-party

employment would affect not only the scope of the exemption

but would actually exclude many domestic service workers

from FLSA coverage in the first instance, despite Congress’s

intent to cover “all employees whose vocation is domestic ser-

vice,” with the exception only of casual babysitters and com-

panions for the aged and infirm. S. Rep. No. 690, supra, at 20

(emphasis added); see also H.R. Conf. Rep. No. 413, 93d

Cong., Ist Sess. 27 (1973) (same).” Before the 1974 Amend-

ments, two categories of domestic workers generally were not

covered under the Act: those employed by homeowners be-

cause there usually was no basis for individual coverage, and

those employed by third parties that did not meet the test for

enterprise coverage. See 29 U.S.C. 203(s) (1970) (defining

“covered enterprises” as businesses with annual gross sales

of at least $250,000 that emploved at least two employees in

* As DOL explained in its Advisory Memorandum, although Section 552.3

states that it defines domestic service employment “lajs used in section

13(:.15) of the Act,” “the Department in fact intended the provision to supply

a general definition of the term as used throughout the Act.” Pet. App. 60a n.1.

Thes, Section 552.3’s definition applies equally to the general coverage of

domestic service workers and the companionship services exemption.

29

interstate commerce). Congress clearly intended the 1974

Amendments generally to cover both of those categories of

workers, with a few expressly enumerated exceptions, such as

for companions. See S. Rep. No. 690, supra, at 20; H.R. Conf.

Rep. No. 413, supra, at 27 (same). But if Section 552.3 were

construed to exclude third-party employers from the defini-

tion of domestic service employment, then those domestic

workers who are employed by third-party employers that are

not covered enterprises would, to this day, not be covered by

the FLSA. That result is contrary to clear congressional in-

tent. Advisory Mem., Pet. App. 60a.

DOL’s reading of Sections 552.3 and 552.109(a) as comple-

mentary (with only the latter specifically addressing the ques-

tion here), rather than contradictory, gives effect to each pro-

vision and is therefore consistent with the obligation to read

a regulation “so as to give effect, if possible, to all of its provi-

sions.” Jay v. Boyd, 351 U.S. 345, 360 (1956). Moreover,

DOL’s statement in its Advisory Memorandum that “[t]he

regulations address the issue of third-party employment in

only one place—section 552.109(a), which clearly and explic-

itly provides that companions employed by third parties can

qualify for the exemption,” Pet. App. 54a,—is itself entitled to

controlling deference, as is DOL’s full and fair consideration

of its own regulations expressed in this brief. See Auer, 519

U.S. at 461-463 (controlling deference to DOL’s interpretation

of FLSA regulation expressed in amicus brief to the Court).

Thus, this Court should conclude that there is no conflict be-

tween Sections 552.3 and 552.109(a), and that Section

552.109(a) alone—and permissiblv—addresses the question of

third-party employment.”

” DOL’s previous statements in its notices of proposed rulemaking that See-

tions 552.3 and 552.100 a) were inconsistent. see, ¢.g.. 66 Fed. Reg. at 5485, are

entitled to little weight because they were expressed in proposed amendments

tu Section 552.109 that were never promulgated as a final rule. See Schor, 478

U.S. at 845 (“It goes without saying that a proposed regulation does not repr-

esent an agency's considered interpretation of its statute and that an agency

30

CONCLUSION

The judgment of the court of appeals should be reversed.

Respectfully submitted.

PAUL D. CLEMENT

JONATHAN L. SNARE Solicitor General

Acting Solicitor of Labor EDWIN S. KNEEDLER

STEVEN J. MANDEL Deputy Solicitor General

Associate Solicitor DAVID B. SALMONS

Assistant to the Solicitor

PAUL L. FRIEDEN

Counsel for Appellate

Litigation

EX,DWARD D. SIEGER

JOANNA HULL

Attorneys

Department of Labor

General

FEBRUARY 2007

is entitled to consider alternative interpretations before settling on the view it

considers most sound.”). [In any event, the Advisory Memorandum expressly

repudiates and withdraws those and all other previous inconsistent statements,

thus clarifying any ambiguity they may have caused. Pet. App. ti3a; see, ¢.¢..

Wage and Hour Division, Field Operations Handbook § 11d00(e) (1994).