Wolke v. Dreadnought Marine, Inc., Civil Action No. 2:96cv843.

• Decision Date: 19 February 1997
• Docket Number: Civil Action No. 2:96cv843.
• Citation: 954 F.Supp. 1133
• Parties: Kevin S. WOLKE, Plaintiff, v. DREADNOUGHT MARINE, INC., Defendant.
• Court: U.S. District Court — Eastern District of Virginia

Page 1133

954 F.Supp. 1133

Kevin S. WOLKE, Plaintiff, v. DREADNOUGHT MARINE, INC., Defendant.

Civil Action No. 2:96cv843.

United States District Court, E.D. Virginia, Norfolk Division.

February 19, 1997.

Jack Ferebee, Virginia Beach, VA, for Plaintiff.

Peter Stevenson Lake, Heilig, McKenry, Fraim & Lollar, Norfolk, VA, for Defendant.

ORDER AND OPINION

DOUMAR, District Judge.

This suit relates to an employment dispute about insurance coverage. Plaintiff, a former employee of Dreadnought Marine, asserts three claims in his complaint. Count One alleges a violation of the Family and Medical Leave Act. Count Two alleges a breach of an implied contract, and Count Three alleges a failure to comply with requirements mandating that employers give employees notification about changes in their insurance coverage. This case is before the Court on Defendant's Motion for Summary Judgment on Count One and Count Three. This opinion memorializes this Court's ruling from the bench.

I. Factual Background

Kevin Wolke was hired as an employee of Dreadnought Marine in September 1994. He was covered by Dreadnought's group health insurance plan. In April 1995, he injured his back in a nonwork-related accident; the injury rendered him unable to work. In July 1995, Dreadnought canceled Wolke's insurance and claimed that the cancellation was retroactive from June 1 1995. Wolke underwent back surgery on July 27, 1996. When his insurance coverage was later denied, Wolke faced judgments on outstanding medical bills. Dreadnought, however, subsequently reinstated Wolke's insurance coverage so that his medical bills would be paid by Dreadnought's insurer.

II. Count I—FMLA

Count One charges a violation of the Family and Medical Leave Act ("FMLA"), 29 U.S.C. §§ 2601 et seq. The Family and Medical Leave Act was recently enacted to grant certain employees the right to take leave from employment to attend to qualifying events, such as personal medical needs or the medical needs of family members. Wolke states that he was entitled to the protections of the Act because he went on medical leave, and that Dreadnought violated the Act by canceling his coverage in violation of 29 U.S.C. § 2614(c)(1).¹ Dreadnought argues that Wolke is not an eligible employee, and that he is therefore not entitled to the FMLA's protections.

Under the statute, an employee must work for twelve months and 1250 hours before the employee is considered "eligible" and entitled to the FMLA's protections. 29 U.S.C. § 2611(2)(A)(I). All parties agree that Wolke was not employed by Dreadnought for twelve months prior to his taking leave. Furthermore, his complaint does not contain any allegation about the number of hours that he worked.² Accordingly, Wolke is an ineligible employee under the statute.

Despite Plaintiff's obvious ineligibility under the statute, Plaintiff argues that he should be deemed an eligible employee under the FMLA by operation of 29 C.F.R. § 825.110(d) (1996). When the FMLA was enacted, the Secretary of Labor was authorized to promulgate regulations as "are necessary to carry out" the FMLA. 29 U.S.C. § 2654. The regulations promulgated pursuant to that authority are found in Volume 29 of the Code of Federal Regulations. That regulation states:

If an employee notifies the employer of need for FMLA leave before the employee meets these eligibility criteria, the employer must either confirm the employee's eligibility based upon a projection that the employee will be eligible on the date leave would commence or must advise the employee when the eligibility requirement is met. If the employer confirms eligibility at the time the notice for leave is received, the employer may not subsequently challenge the employee's eligibility. In the latter case, if the employer does not advise the employee whether the employee is eligible as soon as practicable (i.e., two business days absent extenuating circumstances) after the date employee eligibility is determined, the employee will have satisfied the notice requirements and the notice of leave is considered current and outstanding until the employer does advise. If the employer fails to advise the employee whether the employee is eligible prior to the date the requested leave is to commence, the employee will be deemed eligible. The employer may not, then, deny the leave. Where the employee does not give notice of the need for leave more than two business days prior to commencing leave, the employee will be deemed to be eligible if the employer fails to advise the employee that the employee is not eligible within two business days of receiving the employee's notice. 29 C.F.R. § 825.110(d).³ Focussing on the last sentence of the regulation, Plaintiff claims that because Dreadnought failed to inform him about his FMLA ineligibility, Dreadnought is estopped from asserting Wolke's ineligibility by operation of the regulation. Thus, Wolke argues that Dreadnought's failure to inform Wolke that he was ineligible results in his automatic eligibility.⁴

Dreadnought asserts that Wolke's complaint fails to allege that Wolke told his employer about his need to take medical leave, the event Dreadnought argues would trigger the application of 29 C.F.R. § 825.110. A district court dismissed a similar case because the plaintiff's complaint failed to allege that she had told her employer about her need to take leave. See Jessie v. Carter Health Care Center, Inc., 926 F.Supp. 613, 617 (E.D.Ky.1996). In this case, the complaint does not aver that Wolke informed his employer about the need to take medical leave; it merely alleges that Wolke was "forced to take leave from Dreadnought." Accordingly, 29 C.F.R. § 825.110 might not apply in this case, and Dreadnought might assert Wolke's ineligibility, regardless of 29 C.F.R. § 825.110.

If plaintiff amended his complaint to cure the deficiency by asserting that he did inform his employer about the need to take leave, Wolke would still be an ineligible employee under the FMLA. The regulation upon which Wolke relies to establish ineligibility, 29 C.F.R. § 825.110, is invalid, because it impermissibly contradicts the clear intent of Congress to restrict the class of employees eligible for the FMLA.

The leading case on judicial review of regulations is Chevron U.S.A., Inc. v. Natural Resources Defense, 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). In Chevron, the Supreme Court considered a regulation promulgated by the Environmental Protection Agency and laid out the framework under which courts should assess an agency's regulations. The Court explained:

When a court reviews an agency's construction of the statute which it administers, it is confronted with two questions. First, always, is the question whether Congress has directly spoken to the precise question at issue. If the intent of Congress is clear, that is the end of the matter; for the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress.

Id. at 841-44, 104 S.Ct. at 2781-82. This preliminary question is often referred to as step one of the Chevron test. The Court further explained that if Congress has not spoken and has explicitly or implicitly left a gap for regulations to fill, then the court must proceed to step two—considering whether the agency's interpretation of the statute is "based upon a permissible construction of the statute." Id. at 843, 104 S.Ct. at 2782. Under step two of Chevron, an agency's interpretation ordinarily is accorded deference, unless the regulation is "arbitrary, capricious, or manifestly contrary to the statute." Id. Step two of Chevron tracks the standard of review set out in the Administrative Procedure Act, which allows Courts to strike down regulations that are "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with the law." 5 U.S.C. § 706(2)(A).⁵

The Chevron framework is a topic of much debate, reflected in lively discourses in later Supreme Court cases, lower court cases, and scholarly works. Much discussion has centered on when a regulation or adjudication should be considered "directly contrary" to Congress's intent. In other words, should step one of Chevron be given a limited or broad scope? The Supreme Court's own division on this issue is illustrated in INS v. Cardoza-Fonesca, 480 U.S. 421, 107 S.Ct. 1207, 94 L.Ed.2d 434 (1987), a case in which the Justices disagreed about whether step one or step two of the Chevron analysis applied.

Very rarely would a regulation flatly contradict the plain wording of the statute. For example, if Section 825.110 stated that an employee would be eligible under FMLA after working one day, the regulation would patently contradict the statute. This Court concludes that the Chevron analysis is not limited to such patent contradictions. Such a narrow view of step one of Chevron would render step one almost meaningless. Rather, the first step of Chevron must also cover latent contradictions that become evident only upon application of the regulation. The cases that the Supreme Court itself cited in Chevron bolster this conclusion. See also Brown v. Gardner, 513 U.S. 115, 115 S.Ct. 552, 130 L.Ed.2d 462 (1994) (striking down a Department of Veterans Affairs regulation purporting to limit coverage of veterans' injuries because the statute mentioned only all "injuries" with no limiting language); Legal Assistance for Vietnamese Asylum Seekers v. Dept. of State, 45 F.3d 469, 473 (D.C.Cir. 1995) (holding that Congress's intent in passing a statute providing that people should not be discriminated because of their nationality when applying for immigrant visas was clear, and that a regulation mandating special procedures for Vietnamese was contrary to Congress's "unambiguously" expressed direction which left "no room" for the "regulation").

Thus, under the Chevron framework, this Court must first determine whether Congress has spoken on the precise issue, or whether Congress...