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Mayo Found. for Med. Educ. & Research v. United States - 562 U.S. 44, 131 S. Ct. 704 (2011)


Chevron deference is appropriate when it appears that Congress delegated authority to the agency generally to make rules carrying the force of law, and that the agency interpretation claiming deference was promulgated in the exercise of that authority. The court's inquiry in that regard does not turn on whether Congress's delegation of authority was general or specific.


Petitioners (hereinafter Mayo) offer residency programs to doctors who have graduated from medical school and seek additional instruction in a chosen specialty. Those programs train doctors primarily through hands-on experience. Although residents are required to take part in formal educational activities, these doctors generally spend the bulk of their time--typically 50 to 80 hours a week--caring for patients. Mayo pays its residents annual “stipends” of over $40,000 and also provides them with health insurance, malpractice insurance, and paid vacation time.

The Federal Insurance Contributions Act (FICA) requires employees and employers to pay taxes on all “wages” employees receive, and defines “wages” to include “all remuneration for employment,” 26 USCS § 3121. FICA defines “employment” as “any service . . . performed . . . by an employee for the person employing him,” § 3121(b), but excludes from taxation any “service performed in the employ of . . . a school, college, or university . . . if such service is performed by a student who is enrolled and regularly attending classes at [the school],” § 3121(b)(10). Since 1951, the Treasury Department (TD) has construed the student exception to exempt from taxation students who work for their schools “as an incident to and for the purpose of pursuing a course of study.” 16 Fed. Reg. 12474. In 2004, the Department issued regulations providing that “[t]he services of a full-time employee”--which includes an employee normally scheduled to work 40 hours or more per week--“are not incident to and for the purpose of pursuing a course of study.” The Department explained that this analysis “is not affected by the fact that the services . . . may have an educational, instructional, or training aspect.” The rule offers as an example a medical resident whose normal schedule requires him to perform services 40 or more hours per week, and concludes that the resident is not a student.

Mayo filed suit asserting that this rule was invalid, and the district court agreed. It found the full-time employee rule inconsistent with § 3121's unambiguous text and concluded that the factors governing the Supreme Court of the United States' analysis in National Muffler Dealers Assn., Inc. v. United  also indicated that the rule was invalid.


Was the Treasury Department's full-time employee rule invalid?




The Supreme Court of the United States held that I.R.C. § 3121(b)(10) did not define student or address medical residents. The specific exclusions in § 3121(b)(6)(B)(7)(C)(ii), cast doubt on a claim that Congress specifically intended to insulate medical residents from FICA. The rule was promulgated pursuant to I.R.C. § 7805(a)'s explicit authorization, after notice-and-comment, indicating that Chevron provided the appropriate framework. Focusing on hours worked and hours spent in studies reasonably distinguished between workers who studied and students who worked: employees working enough hours to be considered full-time filled the conventional measure of available time with work. The rule did not distinguish between classroom education and clinical training, but education from service. The TD reasonably concluded the rule avoided the litigation and uncertainty under a case-by-case approach and that taxing residents under FICA would further the purpose of the Social Security Act (SSA). It was not irrational to find the residents--who worked long hours, were highly skilled, and typically shared some or all of the terms of employment of career employees--were the kind of workers Congress intended to contribute to and benefit from the SSA.

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