By Anthony J. Romano
Sweeping changes to the Department of Labor’s wage and hour regulations, which extended the federal minimum wage and overtime requirements to home health workers, were recently upheld by the United States Court of Appeals for the District of Columbia Circuit. The Fair Labor Standards Act (FLSA) exempts several categories of workers from the overtime pay requirements, including exemptions for executives, administrative, professional and outside sales employees, as well as an exemption known as the “companionship services” exemption. Prior to the new regulations, employers of home healthcare workers —which included third party providers of home healthcare workers as well as the individuals who retain such workers—were not required to pay overtime where the employee was a live-in domestic service worker or a worker who provided “companionship services” to the elderly, sick or disabled.
After more than four decades of recognizing these workers as exempt, the new regulations narrow the scope of the FLSA’s exemption for domestic-service workers who provide either companionship services or live-in care for the elderly, ill or disabled. Pursuant to the new regulations, third-party employers of companionship services and live-in employees can no longer classify these workers as statutorily exempt under the FLSA. In addition, the new regulations include a revised, narrower definition of “companionship-services,” which further limits the scope of the FLSA’s “companionship services” exemption. According to the DOL’s new definition: “Employees providing ‘companionship services’ as defined by the FLSA need not be paid the minimum wage or overtime. Trained personnel such as nurses, whether registered or practical, are not exempt from minimum wage or overtime under the exemption for companions, but registered nurses may be exempt as professionals.” Ambiguities between these roles may be fertile grounds for investigations and litigation.
In 2014, the Home Care Association of America, a group of trade associations representing third-party agencies that employ home case workers, sued the DOL to prevent the new regulations from going into effect. The trial court ruled against the DOL, finding that the new regulations relating to third-party agencies conflicted with Congressional intent, and that the DOL overstepped its authority by attempting to administratively change longstanding interpretations of “companionship services” as applied under the FLSA. The DOL appealed, and on August 21, 2015, a panel of the D.C. Circuit reversed the lower court. The panel in Home Care Association of America v. Weil, No. 15-5018 (D.C. Cir. Aug. 21, 2015), relied on prior U.S. Supreme Court precedent, Long Island Care at Home Ltd. v. Coke, 551 U.S. 158 (2007), which permits the court to defer to agency discretion in its rule making role when neither the statute nor its legislative history expressly addresses the issues at hand: the interpretation of “companionship services” and the treatment of third-party employment under the FLSA. The panel also rejected public policy arguments from the agencies that the new regulation ignores the economic realities faced by the home health industry, and that the consequences of the new regulations will include making home-health care less affordable for individuals, increased institutionalization, and a decline in the quality of care.
The DOL’s final rule was to take effect on January 1, 2015, with DOL enforcement beginning on June 30, 2015. Given the Court’s recent ruling, it is unclear when the regulations will be effective or when the DOL will begin enforcement. The Home Care Association of America has moved to stay the D.C. Circuit’s mandate pending further appeal to the United States Supreme Court. In opposition to the motion to stay, the EEOC has represented that it will not seek to enforce the regulations until 30 days after issuance of the mandate.
In the meantime, third-party employers of home-health care workers should take affirmative steps to review the classification of their employees for compliance with the FLSA and any state law minimum wage, overtime and recordkeeping requirements. In so doing, third-party home-health providers will improve their ability to avoid the very complex and expensive specter of a collective action under the FLSA or state law equivalent.