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Judge Creates Regulatory Vacuum, Mass Confusion on Paid Leave

Aug. 5, 2020, 9:30 AM

A federal judge this week muddled the state of pandemic paid leave policy by voiding key aspects of an emergency Labor Department regulation, a decision that’s left employers, workers, and their attorneys scrambling for answers.

The confusion is most extreme in the health-care sector after the Manhattan judge ruled Monday that DOL overstepped its authority by issuing a “vastly overbroad” definition of health-care providers who are exempted from the temporary requirement to provide workers with paid sick and family leave related to Covid-19.

But the court vacated this definition, along with other aspects of the rule, without giving clear instructions on which health-care workers Congress did intend to exclude from paid-leave coverage when it enacted the Families First Coronavirus Response Act in March.

“I would imagine lawyers across the country are scratching their heads trying to figure out what is best to advise the clients right now,” said William Dombi, president of the National Association of Home Care & Hospice. “This is not where workers or employers need to be at this moment.”

The Trump administration has yet to make a public statement about the ruling, although outside observers are expecting the Justice Department to appeal the decision to the U.S. Court of Appeals for the Second Circuit. That silence has created a regulatory vacuum, with multiple open questions for businesses concerned about their new obligations and for workers eager to learn of their rights. Both sides are hoping, but not necessarily expecting, DOL will offer clarity soon.

Chief among the unknowns: Does the decision from Judge J. Paul Oetken of the U.S. District Court for the Southern District of New York take effect nationwide or only in the Empire State; assuming DOJ appeals, would the appellate court temporarily restore the vacated portions of DOL’s rule while considering the appeal; could businesses be held liable retroactive to the law’s April 1 effective date if they denied leave requests by relying on aspects of the rule the judge has now nullified; will DOL issue a new emergency regulation that adopts a narrower interpretation of the health-care exemption; and how, if at all, will the department’s Wage and Hour Division adjust enforcement of the rule?

‘Waiting to Know More’

The law and the DOL regulation require employers with fewer than 500 workers to provide two weeks of paid sick leave to employees unable to work due to the virus. Those companies also must offer up to 10 weeks of partially paid leave under expanded Family and Medical Leave Act coverage to care for a child whose school or day care is closed because of the pandemic. The leave expires Dec. 31.

As more Americans must decide whether to return to work or care for children whose day cares or schools are closed, worker advocates are spreading the word that people who may have been denied coverage in the past now have a second crack.

Sherry Leiwant, co-president of A Better Balance, a group that advocates for paid sick time for workers, praised Oetken’s decision even while finding areas of uncertainty in how it should be applied.

“We are kind of just waiting to know more, but at the moment because we do have a help line, we are telling people they should definitely let their employers know, and if they need the leave, they should be asking to get it,” said Leiwant.

The court’s decision also struck down parts of the DOL rule that allowed employers to deny leave if they didn’t have work available, mandated workers receive employer consent for taking intermittent leave, and required employees to provide certain documentation when applying for leave.

Trickier Burden

Attorneys with Littler Mendelson, the management-side behemoth that serves as outside counsel for NAHC and other health providers, huddled throughout the day Monday attempting to study the decision and its immediate implications before developing a game plan. Until this week, they felt comfortable advising health-care clients that they may elect to exclude all their workers from leave benefits, regardless of whether they provided care to patients. That meant even contracted janitors and cafeteria workers were exempted.

But Oetken turned that assumption upside down by vacating the department’s interpretation and explaining that the FFCRA only gave DOL authority to carve out those who are capable of providing health-care services.

In terms of employers’ obligations to offer the sick leave, “the court’s decision has made the burden on employers trying to comply with this law much trickier,” said Dane Steffenson, a Littler Mendelson attorney who spent 17 years as a DOL trial attorney. Employers must comply with the FFCRA as modified by the order “until there is a stay or new guidance which could be weeks if ever.”

“Employers may have to change their current practices to comply with the FFCRA as amended by the court’s severing of certain provisions only to have to change their practices again if the decision is stayed or DOL issues a new emergency rule,” added Steffenson.

Then there’s the matter of whether workers are owed leave dating back to April or only after Aug. 3.

“That’s the problem, and one of the biggest concerns,” said Joseph Cartafalsa, a shareholder at management firm Ogletree Deakins. “We’re really hoping to get some guidance on this from the government. A lot of employers have taken action to deny leave; do you go back and fix it? It’s kind of hard to fix it retroactively.”

‘Hail Mary’

Some attorneys doubt the Second Circuit would be inclined to grant a stay, assuming DOJ appealed. This would mean businesses could be held in violation of the law this year for denying leave to some health-care employees.

Patricia Smith, who was solicitor of labor under President Barack Obama, called a stay a “hail Mary” if DOJ were to ask for one.

“It’s a very high standard. You’d have to show irreparable harm, and I don’t see it,” Smith said.

Another option, which Dombi said NAHC backs, would be for DOL to quickly issue an emergency regulation that redefines the health-care exemption.

But DOL and DOJ are still declining to comment, forcing all affected by Oetken’s decision to form strategies with limited information.

As complicated as the next steps are for employers, the court ruling has employees and their advocates rejoicing with optimism. They’re hoping that DOL will issue a new definition that expands the law to more health-care employees who’ve been deemed essential throughout the pandemic.

“We would hope that any definition would reflect what was the intent of the legislation,” Leiwant said, “which was to allow employers to exempt health-care workers who are really needed to help fight Covid and make it clear that it shouldn’t be applied to people who really have nothing to do with taking care of people who are sick.”

To contact the reporter on this story: Ben Penn in Washington at bpenn@bloomberglaw.com

To contact the editors responsible for this story: Karl Hardy at khardy@bloomberglaw.com; Martha Mueller Neff at mmuellerneff@bloomberglaw.com

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