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Federal Regulations Advisor Insight and Commentary on U.S. Government Regulatory Affairs

Monday Morning Regulatory Review – 9/21/15: Contraceptive Percolation; FLSA Home Care Delay & Behavioral Science

Posted in Judicial Process, Regulatory Process

dawn over the capitol aocObamacare (Patient Protection and Affordable Care Act or PPACA) percolated back to the forefront of regulatory practice last week with a new conceptual intercircuit conflict. A notice relating to the even longer running issue of labor standards applicable to home health care aids raises questions of how an agency should reset effective and compliance dates after litigation. On the executive review process, a new executive order may not require much, but suggests institutionalization.

Contraceptive Percolation: Whether the Administration’s Obamacare regulations sufficiently accommodated non-profit religious organizations’ First Amendment Freedom of Religion and Religious Freedom Restoration Act (RFRA) rights percolated one-half step further toward United States Supreme Court (SCOTUS) review. The United States Court of Appeals for the Eighth Circuit created a conceptual intercircuit conflict, in Sharpe Holdings v. HHS and Dordt College v. Burwell, when it affirmed district court orders granting preliminary injunctions against enforcement of the contraceptive mandate and accommodation regulations.

As noted many times before, the joint regulations by the Department of Health and Human Services (HHS), Department of Labor (DOL), and the Internal Revenue Service (IRS) establish the “contraceptive mandate” – a requirement that all employers and insurers provide contraceptive coverage at no cost. The regulations provide also an “accommodation” for certain religious organizations that do not qualify for the religious-employer exemption. The accommodation permits eligible religious organization to self-certify by completing and submitting directly to its third-party administrator (TPA) an EBSA Form 700 or notifying HHS of its qualification, insurance plan, and TPA. The pure HHS notification attempted to dovetail with prior SCOTUS procedural order in Wheaton College. Whether the notice to HHS is a sufficient accommodation is the subject of dispute.

Half a dozen courts of appeals previously accepted the accommodation as complying with the First Amendment and/or RFRA. The Eighth Circuit agreed with other circuits that the government demonstrated a sufficiently “compelling interest” in providing contraceptive care to women under the RFRA. The Eighth Circuit differed, however, in finding that the government failed to show, under the RFRA, that the notice process was the least restrictive way of implementing that interest based on the burden imposed. The court thus concluded that the district court did not abuse its discretion in finding that plaintiffs were substantially likely to succeed on the merits that the mandate and accommodation process regulations substantially burdened their exercise of religion in violation of RFRA and that the current accommodation process is not the least restrictive means of furthering the government’s interests. The court thus affirmed the grant of the preliminary injunctions.

► The Administration has grudgingly modified the contraceptive mandate / accommodation regulation over time to respond to court orders. Until now, the Administration appears to have bent far enough. Whether the Solicitor General will seek certiorari from SCOTUS is not at all clear – the coverage of these decisions is quite narrow and preliminary, but a crack in the wall has appeared. Moreover, as in past cases of limited remedy, the decision does not vacate the regulation, but only bars application of the regulation to the specified parties.

FLSA Home Care Delay: DOL issued a policy statement on September 14, stating that it would not enforce its rules extending Fair Labor Standards Act (FLSA) protections to home health care workers employed by third parties until 30 days after the United States Court of Appeals for the District of Columbia Circuit issues its mandate. DOL scheduled the regulations effective date in January 2015, but the United States District Court for the District of Columbia vacated the regulations. On appeal, in Home Care Association v. Weil, the D.C. Circuit reversed and remanded to the district court for entry of summary judgment in DOL’s favor. When DOL issued its policy decision, the plaintiffs had sought a further stay pending their petition for certiorari to SCOTUS, while DOL sought issuance of an immediate mandate – the court denied both motions on Friday. At present, mandate will not issue until seven days after the time for a petition for rehearing or petition for rehearing en banc expires (October 5) or, if a party petitions, seven days after disposition of the petition.

► While some clarity is welcome, the policy statement leaves much unclear and cannot, as yet, clarify. The rule has never become effective and the agency cannot prosecute violations of the rule in any event until the courts’ orders become final. While DOL gave notice of the content of the rules in publication, no legal obligation to comply exists. Given the Court of Appeals orders, it is not all that clear that the issuance of mandate is the relevant finality, or whether finality flows from the district court’s judgment implementing the mandate. DOL (and any agency in this position) should issue a notice after the court judgment becomes final that (1) sets the compliance date of the rule at least 30 days from the date of the notice, and (2) states its prosecution policy from that point forward.

Behavioral Science: President Obama (POTUS) issued a new Executive Order 13707 to encourage federal agencies to utilize behavioral science research and insights in policy decisions – including regulations. Agencies are encouraged to “combine this behavioral science insights policy directive with their ongoing review of existing significant regulations to identify and reduce regulatory burdens, as appropriate and consistent with” other regulatory review executive orders. As always, the executive order contains the non-enforcement boilerplate.

► The executive order impacts the regulatory process. What is less clear, however, is why such an executive order is needed or promulgated. Without more, the executive order seems to suggest that agencies do not consider behavioral science in policy decisions. In reality, the executive order has a more subtle impact in institutionalizing substantive policy decisions by layering additional analysis and analysts on any attempts to change those policies. Every Administration seeks such institutionalization, so a new executive order is not surprising. Of course, the next Administration could as easily amend all of these executive orders into a new one of its own choosing.