New D.C. Circuit Decision Knocks Fairly Large Hole In Anti-Net Neutrality Case.

Every now and then, the D.C. Circuit throws you an interesting little curve ball. This opinion issued last week would appear to knock a serious hole in the argument made by the cable and telcos against the FCC’s reclassification of broadband as a Title II telecom service.

 

The case, Home Care Association of America v. Weil (HCAA) addresses the legal question that takes up about a quarter of the main brief for petitioners: does the Brand X decision that the Telecom Act was “ambiguous” mean that the FCC gets deference under the Chevron Doctrine when it reexamines the question in 2015 and comes out the other way? Or can Petitioners argue that the statute is not ambiguous and explicitly precludes the interpretation the FCC now gives it? Under HCAA, the D.C. Circuit appears to find that once the Supreme Court decides a statute is ambiguous, that settles the question. If the statute was ambiguous for an interpretation in one direction, it is still ambiguous — and thus subject to Chevron deference — when the agency reverses course. Nor does the agency have a higher burden when it reverses course then it did when it first made the decision.

 

Good lawyers can always distinguish cases, of course — as can a conservative panel of the D.C. Cir. that wants to find a particular result. Furthermore, Petitioners have lots of other arguments to make that are not impacted by the HCAA decision. Nevertheless, it seems clear this case is good news for the FCC (and those of us who support the FCC), and Petitioners will no doubt need to spend a good portion of their reply brief explaining why HCAA doesn’t dictate the result here.

 

I explain in more detail below . . . .

So here’s what happened in the Home Care Association of America Case. Back in 1974, Congress passed an amendment to the Fair Labor Standards Act (FLSA) that explicitly exempted from the act anyone hired for “companionship services for individuals who, because of age and infirmity, are unable to care for themselves (as such terms are defined by the Secretary [of Labor]).” In 1975, the relevant agency in the Department of Labor issued regulations that if a third party agency hired folks to provide such services, the exemption covers third party agencies as well as employees directly hired to attend to home care needs.

 

Flash forward through the years and the nature of home care services changes dramatically, and 3rd party agencies that provide to people employees for this purpose become major businesses. On several occasions, the Department of Labor considered changing the rules, noting that circumstances kept changing beyond what Congress had considered in 1974. But the Department still ended up keeping the exemption as it was in 1975. In 2002, an employee sued, arguing that the changes in circumstance and so forth meant the Department should have eliminated the third party exemption. In 2007, the case reaches the Supreme Court as Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158 (2007). Plaintiff argues that the statute on its face doesn’t extend to third party agencies, only to those directly hired by the home to which they provide the companion services. i.e., the statute is not ambiguous and the agency has no authority to make the rules.

 

A unanimous Supreme Court disagrees. The Court found the statute ambiguous on the matter and applied the usual framework under Chevron which requires deference to the agency.

 

Time marches on and, in 2013, the Department of Labor (DoL) once again considers changing the interpretation of the statutory exemption. This time, however, the Department of Labor does, in fact, changes its mind. Recognizing that it had previously held the opposite for 40 years, the DoL nevertheless decided that the circumstances in 1974 when Congress passed the law, and 1975, when DoL interpreted it, have changed dramatically so that the kind of home care agencies offer these days is comparable to what you used to get in an institutional setting. “Given changes to the home care industry and workforce” since the DoL adopted the initial interpretation in 1975, the DoL decided it would “better reflect the intent of Congress” by getting rid of the exemption for 3rd party agencies. The DoL also relied on its broad general grant of rulemaking to adopt a whole bunch of new rules for the now Title II no-longer-exempt employers of companionship services. The remaining statutory exemption for information services companionship services limit the exemption strictly to edge providers directly hired workers who perform clearly defined services which, while they may sometimes parallel the services offered by Title II non-exempt employees, are not considered the same.

 

Unsurprisingly, the trade association of the broadband providers home care providers sued the FCC Department of Labor, arguing that (a) the statute was not ambiguous and totally prevented the FCC DoL from changing its previous interpretation; (b) the regulations adopted are arbitrary and capricious, violate the statute anyway, and need to meet a “heightened standard” of evidence in the record because of the long reliance of the broadband providers home care providers on the information services classification exempt from Title II classification as exempt from FLSA; and, (c) the new regulations would defeat the Congressional intent to encourage broadband adoption home care employment by raising the cost of broadband home care and chilling investment discouraging agencies from providing such services.

 

The D.C. Circuit holds — citing among other cases, NCTA v. Brand X — that once the Supreme Court has held that a statute is ambiguous and that the agency therefore has authority to adopt one interpretation, the statute remains ambiguous and the agency is free to adopt another interpretation. Period. Done. There is no Heisenberg Anti- Uncertainty Principle for statutory analysis under Chevron that says that a statute can go from Ambiguous to not-Ambiguous on the exact same point of interpretation. So if a provision of the Communications Act of 1934 Fair Labor Standards Act Amendments of 1974 is ambiguous when first interpreted by the agency in 2002 1975, it is ambiguous when the agency reinterprets the language the opposite way in 2015 2014.

 

The D.C. Circuit further goes on to say that just because the agency kept the same interpretation for 40 years and thus engendered lots of reliance while an entire friggin industry built itself in reliance on being exempt from standard employment regulation there is no heightened standard under Fox Broadcasting v. FCC,  for the agency to change its mind. All the agency has to do is say: “Hey, we know we had interpreted this statutory provision one way before. But we now think time has changed and things are different so we need to reexamine whether broadband access professional in-home care providers resembles an information service or a traditional telecom service more traditional babysitting services or a traditional service provided by professionals and institutions. And, looking at how the market has evolved in the last 15 40 years, we think broadband access service home care services look much more like traditional telecom services professional services and should be regulated as such under our general Title II Fair Labor Standards Act authority.”

 

Finally, to the extent that the broadband access providers home care industry argue that the new FCC DoL rules will drive up the cost of broadband home care and discourage adoption and investment people from using home care services, the court says “too bad.” The agency looked at related services like cellular places where states had acted to impose similar regulations on similar services and the agency had concluded, based on the administrative record and these concrete examples, that these doomsday predictions by the broadband providers and their coin operated think tanks the home care industry and their coin operated think tanks were unwarranted. Instead, the agency credited the statements of public interest groups like Public Knowledge healthcare workers and other stakeholders that the proposed regulations would protect consumers and promote investment by edge providers encourage the development of a stable and professional workforce. The D.C. Circuit noted that weighing such conflicting evidence and making predictive judgments as to outcomes “are entitled to particularly deferential review.”

 

So How Does This Relate To The Broadband Providers Challenge To The FCC’s Net Neutrality Rules? I Don’t Think You Made That Clear.

 

Srsly?

 

No, Just Kidding. But Does This Mean The FCC Is Sure To Win?

 

As I noted above, the facts of every individual case matter. We can certainly expect the FCC and Intervenors (like my employer Public Knowledge) to make much of this case and how it seems to resolve the major arguments set forth by the Petitioners. I can’t guarantee that the Home Health Care guys went used loaded terms like “usurpation of authority” and “violation of the court’s previous opinion” and — best of all — “violating the previous bipartisan consensus,” but it wouldn’t surprise me. Nevertheless, the details matter, and a sufficiently conservative, results-oriented panel can no doubt find some way to reach a different result for the FCC.

 

Still, all things being equal, the decision in HCAA provides clear comfort to the FCC and to supporters of reclassification. But we won’t know for sure until the court decides sometime in 2016.

 

Stay tuned . . . .

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