Meg Franklin, Associate Member, University of Cincinnati Law Review
Introduction
In a recent case, Or. Rest. & Lodging Ass’n v. Perez, the Ninth Circuit considered whether precedent foreclosed the Department of Labor’s (DOL) ability to promulgate a formal rule.[1] On appeal, the Ninth Circuit found that the DOL was within its authority to promulgate its regulation.[2] The dissent disagreed and insisted that the Ninth Circuit precedent overrides the DOL regulation.[3] Its analysis considered whether the statute was clear and unambiguous and an agency’s scope of power to promulgate rules under an ambiguous statute.[4]
In Perez, the majority and minority were divided over whether the judiciary or an agency should fill in blanks left by Congress.[5] Yet, a third option has arisen in the form of a House of Representatives bill.[6] Under the Regulations from the Executive in Need of Scrutiny Act of 2017 (REINS), all significant blanks found in statutes would be filled in by Congress.[7] In other words, REINS would cancel any major regulations that do not receive explicit approval from Congress.[8]
Oregon Restaurant and Lodging Association v. Thomas Perez
In Perez, the majority and minority opinions disagreed whether § 203(m) of the Fair Labor Standards Act (FLSA) authorized the Department of Labor (DOL) to act or signaled a prohibition from acting.[9]
The FLSA was passed in 1938 after “President Franklin Delano Roosevelt challenged Congress ‘to devise ways and means of insuring to all our able-bodied working men and women a fair day’s pay for a fair day’s work.’”[10] Under the definition of “wage” in § 203(m) of the FLSA, an employer may use the employee’s tips as a credit toward a portion of the minimum wage requirement.[11] This provision also states, “this subsection shall not be construed to prohibit the pooling of tips among employees who customarily and regularly receive tips.”[12] However, § 203(m) is silent on whether tip pooling among non-tipped employees was a violation of FLSA standards.[13]
The court reversed an Oregon district court’s grant of summary judgment[14] and a Nevada district court’s grant of motion to dismiss.[15] Both lower courts found that Ninth Circuit precedent, Cumbie v. Woody Woo, Inc.,[16] precluded the DOL from promulgating a later rule.[17] In Cumbie, the court found that pooling tips between traditionally non-tipped and traditionally tipped employees was permissible because “section 203(m) was silent as to employers who do not take a tip credit.”[18] One year after the Cumbie decision, the DOL promulgated its 2011 regulation.[19] This regulation “extended the tip pool restrictions of section 203(m) to all employers, not just those who take a tip credit.”[20]
The Majority Opinion
On appeal from the Nevada and Oregon district courts, the Ninth Circuit used the Chevron analysis to determine whether the 2011 regulation was properly promulgated.[21] According to the majority opinion:
[t]he first step is to ask, has Congress directly spoken to the precise question at issue. If Congress’s intent is clear, then that is the end of our inquiry. If, however, the statute is silent or ambiguous with respect to the specific issue, we proceed to step two and ask if the agency’s action is based on a permissible construction of the statute. Even if we believe the agency’s construction is not the best construction, it is entitled to controlling weight unless it is arbitrary, capricious, or manifestly contrary to the statute.[22]
Within the first step of Chevron analysis, the Ninth Circuit determined that Chevron deference applies because the FLSA left room for the DOL to enact regulation.[23] In other words, the first step of the Chevron analysis was satisfied “because the FLSA is silent regarding the tip pooling practices of employers who do not take a tip credit.”[24]
Throughout its opinion, the majority relied on a previous case in which the Supreme Court “made clear that an employment practice does not violate the FLSA unless the FLSA prohibits it.”[25] Under that rationale, statutory silence was interpreted as a clear grant of congressional authority.[26] Yet, even if there was doubt, the court found that second step of Chevron was satisfied because the plain meaning of the statute and the legislative intent supported the reasonableness of the regulation.[27]
The Lower Courts and Dissenting Opinion
The dissenting opinion agreed with the district courts that Cumbie should be controlling in striking down the 2011 regulation.[28] In other words, the Ninth Circuit’s interpretation of the statute should prevail over the later rule promulgated by the DOL.[29] In reaching this conclusion, the lower courts and dissent relied on Nat’l Cable & Telecomms. Ass’n v. Brand X Internet Servs.[30] According to the dissent, Brand X held that when a court finds that a statute is unambiguous, there is no room for later agency discretion.[31] Unlike the majority opinion, the dissent found that the statute’s meaning was unambiguous in its silence on employers not taking tip credits.[32] In addition, the dissent noted that Cumbie “concluded that section 203(m) is ‘clear’ or ‘plain’ multiple times—not only in the footnotes to the opinion, but also in the text of the opinion itself.”[33] The dissent clarified that “it is only in the ambiguous ‘interstices’ within the statute where silence warrants administrative interpretation, not the vast void of silence on either side of it.”[34] In other words, Congress does not leave “gaps” or blanks at all; rather, “it simply marks the point where Congress decided to stop authorization to regulate.”[35]
The REINS Act
The dissenting opinion in Perez concluded that the DOL operated outside its scope of authority.[36] Furthermore, it reflected a preference for administrative restraint over administration action.[37] Yet, this preference is not limited to the opinion of the dissenters. In fact, similar sentiment initiated the introduction of the REINS Act.[38] In the introduction of the bill, Rep. Doug Collins said, “[i]t’s time Congress reasserts its constitutional authority to legislate, rather than letting unelected bureaucrats institute rules that impact the economy to the tune of hundreds of millions of dollars.”[39] Aptly named, the REINS Act purports to “rein-in” administrative rules promulgated without explicit congressional authority.[40] The solution proffered by the REINS Act is to take back power from the executive and force the legislative to act.[41] Congress passes “vague, feel-good laws, leaving the hard details of writing the rules and enforcing the laws to administrative agencies.”[42] Then, when the regulations are met with negative feedback, “Congress typically wash their hands of the affair, claiming they never intended for a negative outcome and assailing the agency for going beyond what lawmakers intended.”[43]
The Balance of Power
The traditional understanding of the American government’s separation of powers affords the legislative branch rule-making authority, the executive branch implementation authority, and the judiciary branch interpretation authority.[44] Yet, those lines have been blurred by years of congressional delegation of power to administrative agencies.
In Perez, the responsibility for interpreting Congress’s intention was left to the Ninth Circuit. As Perez illustrates, the courts are sometimes left to weigh conflicting rules and precedent. In doing so, courts are inevitably considering the relative authority of administrative agencies. For example, the majority’s decision in Perez favored broader administrative rulemaking authority than the dissent. This places the courts in the middle of a policy battle over the proper balance of power.
Judicial review is a viable outlet for conflict. Nevertheless, reasserting Congress’s authority through the REINS Act may reduce some of these conflicts. If Congress approves what the agencies fill into the blanks, then the focus of the court’s review becomes the proper delegation of congressional authority instead of ambiguous statutes. The question changes from “who should fill in the blanks” to “did Congress appropriately create those blanks.”
Statutory ambiguity can be interpreted as an opportunity for judicial clarification, an opportunity for administrative action, or a failure by the legislature to legislate. The Ninth Circuit weighed whether statutory ambiguity requires judicial clarification or administrative action. In contrast, the REINS Act presupposes that statutory ambiguity is a failure of the legislature to legislate and that this failure should be solved with congressional pre-approval.[45] Perhaps this REINS Act process would encourage Congress to reduce its use of ambiguous, politically-safe language. When administrative agencies have broad authority, people may feel that federal rulemaking is out of their reach.[46] Increasing congressional accountability may directly increase the electorate’s faith in representative government. Therefore, the REINS Act might be a prudent solution to reinvigorate elected representation in a highly regulated society.
Conclusion
If Congress never left ambiguities in its laws, then the Ninth Circuit in Perez would not have needed to discuss whether ambiguities leave a blank space for the DOL to fill. When there are blanks, the Perez case illustrates two ways in which a court may fill them in. Yet, the REINS Act poses another solution to the ever-present tension among the three (or four) branches of government. The REINS Act requires Congress to monitor administrative overreach. This would connect administrative agencies to the representative government. It would also diminish a court’s need to interpret congressional intent and determine proper administrative scope of authority. Determining who should fill in the blanks is a basic balance-of-powers analysis. The REINS Act purports to re-balance rulemaking authority. And perhaps it should have been Congress filling in the blanks all along.
[1] 816 F.3d 1080 (9th Cir. 2016), rehearing en banc denied by, Or. Rest. & Lodging Ass’n v. Perez, 843 F.3d 355 (9th Cir. 2016).
[2] Or. Rest. & Lodging Ass’n v. Perez, 816 F.3d 1080 (9th Cir. 2016).
[3] Id. at 1091.
[4] Id.
[5] See, id. at 1080.
[6] H. Sterling Burnett, Slowing the regulatory onslaught, The Washington Times (Jan. 24, 2017), http://www.washingtontimes.com/news/2017/jan/24/reinsactwillslowtheregulatoryonslaught/.
[7] Id.
[8] Id.
[9] See, Or. Rest. & Lodging Ass’n v. Perez, 816 F.3d 1080 (9th Cir. 2016).
[10] Or. Rest. & Lodging Ass’n v. Perez, 816 F.3d 1080, 1083 (9th Cir. 2016).
[11] 29 U.S.C.S. § 203(m) (LexisNexis, Lexis Advance through PL 114-321, approved 12/16/16).
[12] Id.
[13] See, id.
[14] Or. Rest. & Lodging v. Solis, 948 F. Supp. 2d 1217 (D. Or. 2013) .
[15] Cesarz v. Wynn Las Vegas, LLC, No. 2:13-cv-00109-RCJ-CWH, 2014 U.S. Dist. LEXIS 3094 (D. Nev. Jan. 10, 2014).
[16] Cumbie v. Woody Woo, Inc., 596 F.3d 577 (9th Cir. 2010).
[17] “[B]oth held that Cumbie left ‘no room’ for the DOL to promulgate its 2011 rule and thus granted Oregon Restaurant & Lodging’s motion for summary judgment, Or. Rest. & Lodging, 948 F. Supp. 2d at 1226, and Wynn’s motion to dismiss, Cesarz, 2014 U.S. Dist. LEXIS 3094, 2014 WL 117579, at *3.” Or. Rest. & Lodging Ass’n v. Perez, 661 F.3d 433, 816 F.3d 1080, 1086 (9th Cir. 2016).
[18] Id. at 1082.
[19] 29 C.F.R. § 531.52 (Lexis Advance through the January 23, 2017 issue of the Federal Register with the exception of Titles 15, 22, 34 and 38 being amended at 82 FR 7149, January 19, 2017 and Title 12 amended at 82 FR 8082, January 23, 2017).
[20] Or. Rest. & Lodging Ass’n v. Perez, 816 F.3d 1080, 1082-83 (9th Cir. 2016).
[21] Chevron U.S.A. Inc. v. NRDC, 467 U.S. 837, 104 S. Ct. 2778, 81 L. Ed. 2d 694 (1984).
[22] Or. Rest. & Lodging Ass’n v. Perez, 816 F.3d 1080, 1086 (9th Cir. 2016) (internal citations omitted).
[23] Id. at 1087.
[24] Id. at1089.
[25] Id. at 1086-87 (citing Christensen v. Harris Cty, 529 U.S. 576, 588, 120 S. Ct. 1655, 146 L. Ed. 2d 621 (2000)).
[26] “Applying the reasoning in Christensen, we conclude that section 203(m)’s clear silence as to employers who do not take a tip credit has left room for the DOL to promulgate the 2011 rule.” Or. Rest. & Lodging Ass’n v. Perez, 661 F.3d 433, 816 F.3d 1080, 1088 (9th Cir. 2016).
[27] Id. at 1089.
[28] Id. at 1093.
[29] Or. Rest. & Lodging Ass’n v. Perez, 661 F.3d 433, 816 F.3d 1080, 1088 (9th Cir. 2016).
[30] 545 U.S. 967, 125 S. Ct. 2688 (2005).
[31] The Supreme Court in Brand X held that “held that ‘a court’s prior judicial construction of a statute trumps an agency construction otherwise entitled to Chevron deference only if the prior court decision holds that its construction follows from the unambiguous terms of the statute and thus leaves no room for agency discretion.’” Or. Rest. & Lodging Ass’n v. Perez, 816 F.3d 1080, 1093 (9th Cir. 2016) (internal citations removed).
[32] Id.
[33] Id.
[34] Id. at 1094 (quoting, Util. Air Regulatory Grp. v. E.P.A., 134 S. Ct. 2427, 2445, 189 L. Ed. 2d 372 (2014)).
[35] Or. Rest. & Lodging Ass’n v. Perez, 843 F.3d 355, 360 (9th Cir. 2016).
[36] “The DOL is not a legislative body unto itself, but instead must carry out Congress’s intent. To the extent Congress’s intent is unclear with regard to a particular statute, the DOL may engage in statutory interpretation and issue rules. But that circumstance is not presented here. Instead, we explicitly and unequivocally found section 203(m) clear and unambiguous. Congress’s intent was clear on this matter. Regardless of how much the DOL dislikes the interpretation, it must follow it. The DOL is not free to manufacture an ambiguity, which circuit precedent mandates is not there.” Or. Rest. & Lodging Ass’n v. Perez, 661 F.3d 433, 816 F.3d 1080, 1094-95 (9th Cir. 2016).
[37] See, Id.
[38] Id.
[39] Id.
[40] Id.
[41] Id.
[42] Id.
[43] H. Sterling Burnett, Slowing the regulatory onslaught, The Washington Times (Jan. 24, 2017), http://www.washingtontimes.com/news/2017/jan/24/reinsactwillslowtheregulatoryonslaught/.
[44] CRS Annotated Constitution, Legal Information Institute: Cornell University Law School, https://www.law.cornell.edu/anncon/html/art1frag1_user.html.
[45] See, id.
[46] See, id.
