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The Home Care Final Rule—When Is It Really Final?

By Lilian Doan Davis

As many employers are keenly aware, misclassification claims under the Fair Labor Standards Act (“FLSA”) are becoming more prevalent. Employers may face a number of pitfalls that can expose them to potential liability. First, whether or not an employee is “exempt” from overtime payments under the FLSA can be difficult to determine factually, and classification errors can subject employers to wage and hour claims to collect unpaid overtime. Employers of home care workers face an additional hazard under the FLSA: the uncertainty of the law.

On October 1, 2013, the Department of Labor (“DOL”) issued the Home Care Final Rule (“Final Rule”) to extend minimum wage and overtime protections to almost 2 million home care workers, by revising the regulations defining companionship services so that many direct care workers are subject to the overtime pay provisions of the FLSA. The Final Rule also revised the DOL’s regulations concerning live-in domestic services workers. The Final Rule had an effective date of January 1, 2015.  

In June 2014, associations of home care companies filed a lawsuit in federal court challenging the Final Rule. In December 2014 and January 2015, the U.S. District Court for the District of Columbia issued orders vacating and revising certain portions of the Final Rule, thus affecting the applicability of the Final Rule to many employers. The DOL filed an appeal of the orders to the U.S. Court of Appeals for the District of Columbia Circuit. On August 21, 2015, the Court of Appeals issued a unanimous opinion affirming the validity of the Final Rule and reversing the District Court’s orders.  On October 13, 2015, the Court of Appeals’ opinion upholding the Final Rule became effective when the Court of Appeals issued its mandate. On November 24, 2015, the home care associations filed a petition for certiorari with the U.S. Supreme Court. 

Given the effect of the pendency of the Final Rule on the DOL’s ability to enforce the Final Rule from the original “effective date” of January 1, 2015 to October 13, 2015, the date the Court of Appeals’ opinion became effective, there is a question as to whether employers affected by the Final Rule were required to follow the Final Rule during that interim period. In Beltran v. InterExchange, Inc., 2016 WL 1253622, No. 14-cv-03074-CMA-KMT (D. Col. Mar. 31, 2016), the U.S. District Court of the District of Colorado recently ruled that domestic service workers had viable claims for overtime for any work performed after January 1, 2015 due to the Final Rule. In contrast, in Foster v. Americare Healthcare Svcs, Inc., 2015 WL 8675518, No. 2:13-cv-658 (S.D. Ohio Dec. 11, 2015),  the U.S. District Court for the Southern District of Ohio held that the Final Rule was not effective until October 13, 2015. 

Despite the uncertainty of whether the Final Rule was effective as of January 1, 2015 or October 13, 2015, employers with home health workers should take steps to comply with the Final Rule. The DOL has increased its efforts to address wage and hour violations, including the development of a smartphone app to help employees track hours worked. Accordingly, if an employee is considered “non-exempt” in the wake of the Final Rule, it is critical that employers accurately record their time worked to ensure that they are paid overtime for all hours worked over 40 hours in a workweek.