Reference no: EM133515710

The Federal Insurance Contributions Act (FICA) requires employees and employers to pay taxes on all wages employees receive. FICA 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]."

Since 1951, the Treasury Department has construed this "student exception" to exempt from taxation students who work for their schools "as an incident to pursuing a course of study." Recently, the Department issued a new "full-time employee rule," providing that "the services of a full-time employee"-which includes an employee normally scheduled to work 40 hours or more per week-"are not incident to pursuing a course of study." Basically, an individual who works full-time (40 hours a week) can no longer qualify for the student exemption, even if the work is related to a course of study.

The School of Medicine of Baylor wishes to challenge the new "full-time employee" rule as inconsistent with the unambiguous text of FICA. Specifically, School of Medicine of Baylor is concerned that it will now have to pay taxes on the wages it pays to medical residents, who are full-time employees of the medical school. Residents often spend between 50 and 80 hours a week caring for patients and performing certain procedures. Residents are generally supervised in this work by more senior residents and faculty members, and also take educational workshops and classes.

1. Discuss whether a court would apply Chevron or Skidmore deference to the "full-time employee rule," and explain why.

2. Explain how your chosen level of deference would apply in this case and predict the court's outcome.