The home care industry received a welcome holiday gift from the United States District Court in Washington, D.C. shortly before Christmas when Judge Richard J. Leon vacated a portion of a new regulation that would have required employers to pay minimum wage and overtime to workers providing companionship services. (The regulation also impacts live-in providers of domestic services, but my focus here is on companionship services.) The new regulation, first proposed in 2011, was set to go into effect on January 1, 2015, and had home care providers scrambling to figure out how they would pay significantly increased labor costs.
The Court’s December 22, 2014 ruling provided some welcome relief, but the final outcome remains uncertain. A new more restrictive definition of companionship services was set to go into effect on January 1, 2015. Under the current rule, a worker providing companionship services can devote up to twenty percent of his/her time to general household work and engage in unlimited care tasks such as meal preparation, bed making, and clothes washing. The new definition would limit all household and incidental care services to twenty percent of the worker’s time with the remaining hours dedicated to engaging the recipient in social, physical, and mental activities, such as conversation, reading, and games.
On December 31, 2014, however, Judge Leon issued a Temporary Restraining Order (TRO), blocking DOL from enforcing the proposed definition of “companionship Services.” In its motion for a temporary stay, the plaintiffs contended that home care recipients, providers, employees, and payers of services (like Medicaid) would suffer irreparable harm if the DOL rule went into effect. The plaintiffs’ motion was supported by detailed affidavits of two disability rights advocacy groups, The Centers for Independent Living and ADAPT. A hearing on plaintiffs’ preliminary injunction motion is scheduled for January 9, 2015. Judge Leon has indicated that he will rule on the motion as early as at the hearing and no later than January 13, 2015. If the requested injunction is granted, the exemption from overtime will continue until the trial court’s final ruling or an appellate court reverses the injunction.
To back up a bit, this case is about the Fair Labor Standards Act (“FLSA”), which requires employers to pay their employees at least minimum wage (and time and a half for any time worked over 40 hours in a single week), unless their employees are exempted from those requirements. Employees who provide companionship services to individuals unable to care for themselves due to age or infirmity always have been exempted from the minimum wage and overtime rules. The DOL wanted more workers to receive minimum wage and overtime, so it sought to narrow the exemption in two ways.
First, the DOL narrowed the definition of “companionship services.” More on that aspect of the regulations, which was not vacated by Judge Leon, below. Second, the DOL declared that third-party employers (like home care providers) would not be eligible to take advantage of the exemption at all. As a practical matter, this meant that 90% of workers providing companionship services – the approximate percentage employed by home care entities – would have been entitled to receive minimum wage and overtime, regardless of how those services were defined. The 10% of companionship services workers employed solely by individuals or families would have continued to be exempt from those requirements assuming that their schedules complied with the new, stricter definition of allowable services.
The National Association of Home Care, the Home Care Association of America, and the Independent Franchisers Association filed a lawsuit on behalf of their members to block the new regulations, arguing in part that the DOL did not have the authority to dictate which employers could take advantage of the exemption and which could not. Judge Leon agreed, stating in his opinion that Congress intended the exemption to apply to all employees who provide companionship services and that the DOL is not entitled to draw policy lines “based on who cuts a check rather than what work is performed.” Judge Leon went on to note that the purpose of the companionship exemption was to make it more financially feasible for families to care for infirm relatives at home and that whether home care entities were providing the workers is not of particular concern. If the decision stands, it will mean that all workers providing companionship services will be subject to the same rules regardless of who employs them.
While the TRO is in effect, home care providers can continue to pay home care aides and personal care attendants without added overtime compensation—except if state law requires otherwise. Providers should consult legal counsel to determine if they qualify for the exemption. For additional information on how these new developments impact your business and assistance with next steps, contact one of the following members of our Parker Poe Team: Sarah Ford (firstname.lastname@example.org, 919.835.4507) or Patti Bartis (email@example.com, 919.890.4161).