More employees are eligible for up to 12 weeks’ COVID-19-related emergency paid sick leave and emergency paid FMLA leave after a federal district court in New York invalidated significant parts of a US Department of Labor rule on August 3. Employers should consider whether they need to adjust their leave determinations in light of the court’s decision.
The State of New York on April 14 brought a lawsuit under the Administrative Procedures Act (APA) against the US Department of Labor (DOL) challenging portions of DOL’s regulation governing the implementation of the Families First Coronavirus Response Act (FFCRA). The FFCRA requires private employers with less than 500 employees and government employers to provide up to 12 weeks of emergency paid sick leave and emergency Family and Medical Leave Act (FMLA) leave to employees for reasons related to the coronavirus (COVID-19). Read our prior LawFlash on DOL’s mandate.
On August 3, a federal district court ruled largely in favor of New York, first finding that New York had standing to sue, and then invalidating four major provisions of the regulation: (1) DOL’s “work availability” requirement; (2) DOL’s “health care provider” definition; (3) the requirement of employer consent to intermittent leave; and (4) the requirement that employees provide notice of leave prior to taking the leave.
The court’s ruling on DOL’s “work availability” limitation is consequential for the employees and employers covered by the FFCRA because numerous businesses nationwide have either shut down or slowed down operations as a result of state or local shutdown orders and/or a loss of business due to the COVID-19 pandemic. In turn, this has led to a decrease in work immediately available for employees who otherwise remain formally employed—under DOL’s rule these employees were not eligible for FFCRA leave. Further, many employers have already relied on DOL’s rule to grant or deny leave, as well as the DOL FAQs that preceded the rule and have continually been updated to provide additional guidance on numerous questions. Under the court’s ruling, employees must still have a FFCRA-qualifying reason for leave, but they may now be eligible even if the employer has no current work for them.
Employers should consult with counsel if employees come forward to complain that they were improperly denied leave prior to the New York court’s decision. Going forward, employers should also consult with counsel about whether they need to adjust their leave determinations even if employees have no work available due to the shutdown or other lack of work.
For the healthcare exemption, employers may now need to make an individualized determination of whether the employee requesting leave is capable of providing healthcare services. As for intermittent leave and documentation, employers should check their policies and practices to ensure that they do not require prior notice and that intermittent leave does not require employer consent.
To establish its standing to sue, a party must demonstrate (1) a concrete and particularized injury in fact; (2) that the injury is “fairly traceable to the challenged action”; and (3) that it is “likely . . . that the injury will be redressed by a favorable decision.” Without paid leave, New York argued, employees must choose between taking unpaid leave and going to work even when sick—New York predicted that employees who elect the former will diminish their taxable income and therefore the state’s tax revenue, and employees who choose the latter will escalate the spread of the virus and thereby raise the state’s healthcare costs.
The court agreed with New York that the DOL rule’s challenged features impose a proprietary injury on the state’s tax revenue, and that this injury was linked to DOL’s rule. The court further found that New York’s injury would be redressed by a favorable ruling. Because the threatened injury to New York’s tax revenue was sufficient to support standing, the court did not address the state’s alternative theories of standing; namely, the potential burden on its healthcare system or the injury to its quasi-sovereign interests.
Having determined that the state possessed standing based on its proprietary injury to its tax revenue, the court addressed the merits to determine whether DOL exceeded its authority under the FFCRA. To answer that question, the court applied what is known as the Chevron two-step framework.
Under Chevron step one, a court must determine whether the statute is ambiguous. If it is, the court must proceed to step two and determine whether the agency’s interpretation of the ambiguous statute is reasonable.
The court invalidated a fundamental feature of the regulatory scheme, the work-availability requirement. By way of reminder, the Emergency Paid Sick Leave Act (EPSLA) grants paid leave to employees who are “unable to work (or telework) due to a need for leave because” of any of six COVID-19-related criteria. The Emergency Family and Medical Leave Expansion Act (EFMLEA) similarly applies to employees “unable to work (or telework) due to a need for leave to care for . . . [a child] due to a public health emergency.” DOL’s rule, however, excludes from these benefits employees whose employers “do not have work” for them.
The court first concluded that the statute’s text is ambiguous as to whether it requires that the employee’s COVID-19 qualifying condition must be the but-for causation in all circumstances (which DOL argued), or instead whether some other causal relationship satisfies its eligibility criteria (which New York argued). The court therefore proceeded to Chevron’s second step, and found DOL’s interpretation arbitrary or capricious, in part because DOL only applied the work-availability rule to three of the six qualifying conditions without explaining the differential treatment.
But the court then summarily found the more fundamental deficiency to be that “the agency’s barebones explanation for the work-availability requirement is patently deficient.” Therefore, under the court’s reading of the FFCRA, an employee may be entitled to leave even if the employer has no current work for her due to some other reason.
Under the FFCRA, employers may elect to exclude “health care providers” from leave benefits, and DOL interpreted the term broadly, including “anyone employed at any doctor’s office, hospital, health care center, clinic, post-secondary educational institution offering health care instruction, medical school, local health department or agency, nursing facility, retirement facility, nursing home, home health care provider, any facility that performs laboratory or medical testing, pharmacy, or any similar institution, [e]mployer, or entity.” DOL also included other “similar” institutions, and individuals employed by an entity contracting with those institutions. As such, the rule gave employers wide latitude to exclude employees in a broad array of facilities and positions.
DOL had interpreted the term “health care provider,” in accordance with the FFCRA’s purpose, to exempt employees who are essential to maintaining a functioning healthcare system during the pandemic. The court noted that, as DOL urged, a broad definition of “health care provider” operationalizes that goal because employees who do not directly provide healthcare services to patients—for example, lab technicians or hospital administrators—may nonetheless be essential to the functioning of the healthcare system.
The court, however, found that even accepting that rationale, the rule was overbroad by including employees whose roles bear no nexus to the provision of healthcare services, ruling that employers can only exclude employees who are capable of providing healthcare services.
The court’s ruling on when employees can take intermittent leave was mixed, partly in favor of DOL and partly in favor of New York. The DOL rule permits “employees to take Paid Sick Leave or Expanded Family and Medical Leave intermittently (i.e., in separate periods of time, rather than one continuous period) only if the Employer and Employee agree,” and, even then, only for a subset of the qualifying conditions. The court agreed that because the FFCRA is silent on intermittent leave, DOL could fill the gap. And the court agreed that DOL’s interpretation that intermittent leave is allowed for only certain of the qualifying leave conditions because the conditions for which intermittent leave is entirely barred are those that logically correlate with a higher risk of viral infection.
But the court held that DOL failed to explain why employer consent is required for the remaining qualifying conditions, which do not implicate the same public health considerations. Thus, the rule is invalid under Chevron step two insofar as it requires employer consent for intermittent leave.
The DOL rule requires that employees submit to their employer, “prior to taking [FFCRA] leave,” documentation indicating, among other things, their reason for leave, the duration of the requested leave, and, when relevant, the authority for the isolation or quarantine order qualifying them for leave. The court held that this requirement conflicted with the FFCRA’s “reticulated scheme governing prior notice.”
Under the EFMLEA, an employee must provide “such notice as is practicable” where the need for leave is foreseeable. Under EPSLA, “[a]fter the first workday (or portion thereof) an employee receives paid sick time under this Act, an employer may require the employee to follow reasonable notice procedures in order to continue receiving such paid sick time.” Thus, the court invalidated DOL’s requirement that an employee furnish documentation before taking leave, holding that it renders the statutory notice exception for unforeseeable leave and the statutory one-day delay for paid sick leave notice “completely nugatory.”
Employers’ options will be dictated to a large extent by what DOL does next. If DOL decides to defend the current rule, it will need to appeal the decision and could also move to stay the district court’s ruling pending appeal. Administrative agencies also sometimes issue a “non-acquiescence policy,” i.e., DOL could announce that the agency does not agree with the court’s ruling and refuse to follow it, or only follow it in New York.
If instead DOL decides to comply with the court’s decision, DOL could issue an emergency direct final rule addressing the deficiencies in the invalidated provisions. More immediately, DOL could issue a non-enforcement policy for past or even current leave denials taken in reliance on DOL’s rule, meaning it would not enforce the FFCRA against those employers that, for example, exempted health care providers or did not grant leave to workers who did not have work available.
All of these possible actions will take time. Meanwhile, employers should consult with counsel on past denials of leave; for example, counsel can assess whether there may be a good-faith reliance defense under the Portal-to-Portal Act. Going forward, employers will need to assess whether to grant leave even if employees have no work available due to shutdowns or other lack of work, and for the healthcare exemption, employers may want to make a determination of whether the employee requesting leave is capable of providing healthcare services.
As for intermittent leave and documentation, employers should check their policies and practices to ensure compliance with the court’s decision, even if that decision is challenged or not enforced by DOL.
We have developed many customizable resources to support employers’ efforts in safely returning to work. These include tracking of state and local orders on return to work requirements and essential/nonessential work; policy templates and guidelines for key topics such as social distancing procedures, temperature testing, and workplace arrangements for high-risk employees; and webinar training on safety measures for return to work. View the full list of return to work resources and consult our workplace reopening checklist.
For our clients, we have formed a multidisciplinary Coronavirus COVID-19 Task Force to help guide you through the broad scope of legal issues brought on by this public health challenge. Find resources on how to cope with the post-pandemic reality on our NOW. NORMAL. NEXT. page and our COVID-19 page to help keep you on top of developments as they unfold. If you would like to receive a digest of all new updates to the page, please subscribe now to receive our COVID-19 alerts, and download our COVID-19 Legal Issue Compendium.
If you have any questions or would like more information on the issues discussed in this LawFlash, please contact any of the following Morgan Lewis lawyers:
Russell R. Bruch
Leni D. Battaglia
 Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992).
 State of New York v. U.S. Department of Labor, et al., No. 1:20-cv-03020 at 8-9 (S.D.N.Y. Aug. 3, 2020).
 See Chevron U.S.A. Inc. v. Natural Res. Def. Council, 467 U.S. 837 (1984).
 See Catskill Mountains Chapter of Trout Unlimited, Inc. v. Envtl. Prot. Agency, 846 F.3d 492, 507 (2d Cir. 2017).
 See id.
 FFCRA § 5102(a).
 FFCRA § 101(a)(2)(A).
 See 29 C.F.R. §§ 826.20(a)(2), (6), (9), (b)(1).
 See 29 C.F.R. §§ 826.50(a)-(c).
 See 29 C.F.R. § 826.100.
 FFCRA § 3102(b) (adding FMLA § 110(c)).
 Id. § 5110(5)(E).
 29 U.S.C. § 259.