Many home health care agencies were getting ready for a drastic change in their pay practices as a result of a new Department of Labor (DOL) regulation that was to take effect on January 1, 2015. The new regulation would have kept third-party employers, who constitute more than 90% of the home care industry, from claiming companionship and live-in exemptions from minimum wage and overtime pay rules. They got a big Christmas present!
Just before Christmas, a federal judge in Washington, D.C. struck down the new DOL regulation extending the federal overtime and minimum wage requirements to home care workers employed by third-party businesses. The court’s December 22, 2014, ruling, in Home Care Association of America v. Weil (No. 14-cv-967) vacated a portion of the new rule preventing third-party employers from claiming the companionship services exemption.
Home Care Association of America, the International Franchise Association (IFA) and the National Association for Home Care & Hospice (NAHC) had challenged the third-party regulation portion of the final rule, claiming is was “arbitrary and capricious”, and that, if allowed to stand, the rule would “have a destabilizing impact on the entire home care industry and … adversely affect access to home care services for millions of the elderly and infirm.”
Basis for Federal Court’s Ruling
The federal court, in making its ruling said, “By the department’s own numbers, approximately 90 percent of home health aides and personal care aides, which include those providing companionship services, are employed by third parties, rather than by the individual or family needing services.” The court stated Congress had included third-party providers in the companionship services and live-in domestic employee exemptions for a reason. The court noted that “for over 40 years, Congress has exempted third-party providers of home care services from having to pay either minimum or overtime wages to their employees who provide domestic companionship services to seniors and individuals with disabilities, or to pay overtime wages to live-in domestic service employees.”
The court went on to find the DOL Final Rule was issued despite a 2007 U.S. Supreme Court ruling which upheld the companionship exemption for third-party provided home care workers. Long Island Care at Home v. Coke, 551 U.S. 158 (2007).
The court also took note that six bills had been introduced in Congress to overturn the Coke decision but failed even to get out of committee. “The fact that the department issued its notice of proposed rule making after all six of these bills failed to move is nothing short of yet another thinly veiled effort to do through regulation what could not be done through legislation,” the court stated. “Such conduct bespeaks an arrogance to not only disregard Congress’s intent, but seize unprecedented authority to impose overtime and minimum wage obligations in defiance of the plain language” of the statute, the opinion continued. The court went on to say, “the Department of Labor amazingly decided to try to do administratively what others had failed to achieve in either the Judiciary or the Congress.”
This court found DOL acted improperly in adopting this portion of the new Final Rule. preventing third-party providers from claiming the companionship exemption. “Undaunted by the Supreme Court’s decision in Coke, and the utter lack of congressional support to withdraw this exemption, the Department of Labor amazingly decided to try to do administratively what others had failed to achieve in either the judiciary or Congress,” the court stated.
Home Care Industry Welcomes Decision
An official of a large home care provider organization stated, “Earlier this year, the IFA united with the Home Care Association of America and the National Association for Home Care & Hospice to fight yet another example of regulatory overreach of power by the U.S. Department of Labor. By promulgating regulations to eliminate the overtime exemption for companion care workers, the administration threatened affordable care for seniors and the disabled and put many franchise small businesses and their employees in jeopardy by subjecting them to potentially unsustainable costs. Today’s victory is a small but important step in protecting clients, workers and local franchise business owners in the home care industry. While we are mindful that only part of the DOL’s damaging regulation has been vacated thus far, we are encouraged by the court’s willingness to hold the administration accountable for misguided policies pursued in defiance of congressional intent and legal precedent.”
Continued Uncertainty About Effect of Final Rule
The district court has scheduled a hearing on the companionship definition issue for January 9, 2015, and whether the companionship exemption will be restored to its prior terms may be determined then. Meanwhile, some aspects of the new DOL rule have been allowed to go into effect on January 1, 2015. The court’s ruling does not affect other parts of the new regulation, including its narrowed definition of what constitutes “companionship services” and its record keeping requirements.
What Home-Care Agencies Must Do Now
For the time being, third-party employers can still qualify for the companionship and live-in worker FLSA exemptions. This decision did not vacate the new definition of “companionship services,” in the Rule, however. Employers still have to comply with the new “companionship services” definition. This means to claim the companionship exemption after January 1, 2015, employers should be sure (1) that the time caregivers spend performing “care” services does not exceed 20 percent of their weekly hours per patient and per week and (2) that caregivers do not perform any general household work.
If you have questions about whether you are paying your employees correctly, contact Adair Buckner, Attorney at Law for a complimentary consultation*.
*(The free consultation does not cover actual review of documents or giving legal advice on a specific situation.)