(The pdf for the issue in which this article appears is available for download: (Bifocal, Vol. 36, Issue 6).)
On August 21, 2015, the U.S. Court of Appeals for the District of Columbia Circuit, in the case Home Care Association of America v. Weil, reinstated regulations that will allow some 2 million home care workers to qualify for minimum wage and overtime protection.1 The rule which was originally slated to go into effect at the beginning of 2015 is now expected to be effective by January 2016.
Understanding this change of status of home care workers requires a little trip through history.
In 1974, the Fair Labor Standards Act expanded its minimum wage and overtime requirements to cover employees engaged in domestic services. This was a major expansion of workers’ rights. The regulations defined domestic services as services performed by employees such as:
companions, babysitters, cooks, waiters, butlers, valets, maids, housekeepers, nannies, nurses, janitors, laundresses, caretakers, handymen, gardeners, home health aides, personal care aides, and chauffeurs . . . .2
However, the Act specifically exempted companions from these new protections, defining companions as:
any employee employed on a casual basis in domestic service employment to provide babysitting services or any employee employed in domestic service employment to provide companionship services for individuals who (because of age or infirmity) are unable to care for themselves (as such terms are defined and delimited by regulations of the Secretary);3
In addition, an exclusion from only the overtime pay requirements of the Act was provided for:
any employee who is employed in domestic service in a household and who resides in such household;4
Thus, your live-in butler (a domestic worker) would have been entitled to minimum wage but not entitled to overtime, which pays workers 150% of pay for working over 40 hours per week. But, your live-in companion, would have been entitled to neither. The rules also provide guidelines for distinguishing work hours versus free time periods for live-in workers.
Regulations promulgated under the 1974 Act defined companionship services as:
services which provide fellowship, care, and protection for a person who, because of advanced age or physical or mental infirmity, cannot care for his or her own needs. Such services may include household work related to the care of the aged or infirm person such as meal preparation, bed making, washing of clothes, and other similar services. They may also include the performance of general household work: Provided, however, That such work is incidental, i.e., does not exceed 20 percent of the total weekly hours worked.5
As applied historically, this definition covered a broad swath of home care workers. The regulations specifically provided that third-party employers could claim the companionship services exemption or live-in domestic service employee exemption.6 In other words, the exemptions applied regardless of whether you personally hired the individual worker or you contracted with an agency that provided the worker.
Since 1974, the home care industry has undergone tremendous change resulting from a dramatically aging society and huge increases in home care services utilizing health aides and personal care services for persons with multiple medically complicated, chronic conditions. Most direct care workers today do far more than provide companionship. They assist consumers with activities of daily living (ADLs) and instrumental activities of daily living (IADLs), such as bathing, dressing, toileting, preparing meals, and household management. They often provide paramedical care, such as managing medications, wound care, or tracheostomy care.
Yet, most of these workers have not had a right to be paid minimum wage or overtime. In addition, the home care industry has become a major economic presence in health care services with many more workers dependent on it today for their livelihoods.
The Department of Labor’s 2013 revision of the rule was intended to address these societal changes in a realistic way, balancing the need for this growing workforce to be treated equitably with the challenges chronically ill or disabled individuals and their families face in maintaining a good quality and affordable life.
The new rule made three substantive changes:
- The rule revised the definition of “companionship services” to clarify and narrow the duties that fall within it.
Companionship services were narrowed primarily to the provision of fellowship and protection:
The provision of fellowship means to engage the person in social, physical, and mental activities, such as conversation, reading, games, crafts, or accompanying the person on walks, on errands, to appointments, or to social events. The provision of protection means to be present with the person in his or her home or to accompany the person when outside of the home to monitor.7
Companionship could also include the “provision of care” but only if it did not exceed 20% of the total hours worked. The provision of care means:
to assist the person with activities of daily living (such as dressing, grooming, feeding, bathing, toileting, and transferring) and instrumental activities of daily living, which are tasks that enable a person to live independently at home (such as meal preparation, driving, light housework, managing finances, assistance with the physical taking of medications, and arranging medical care).8
The new provision also made clear that companionship services do not include domestic services performed primarily for the benefit of other members of the household or the performance of medically related services. The determination of whether services are medically related is based on whether the services typically require and are performed by trained personnel, such as registered nurses, licensed practical nurses, or certified nursing assistants.
- The rule limited who could claim the exemption for “companionship services” to the individual, family, or household using the service.
Thus, home care agencies employing companions could no longer claim an exemption, even if the worker’s services fell within the new narrower definition of companion.9
- The rule limited who could claim the exemption for “live-in domestic service” to the individual, family, or household using the service.
So, if you hire a live-in worker to help your mother with activities of daily living, you will have to pay minimum wage, but you will not have to pay overtime. An agency employing the worker to do these services will have to pay both.10
On June 6, 2014, a number of trade associations who represent businesses employing home care workers filed suit against the Department of Labor in the D.C. Circuit Court. The associations argued that the Department of Labor ignored congressional intent when revising the rule, because Congress explicitly intended to exclude home care workers from receiving minimum wage and overtime pay.
In late 2014, the District Court vacated the revised third party regulation because the Department of Labor exceeded its authority and bypassed Congressional intent by singling out groups of employees who do not fall within the exemption based upon their employers. The District Court also noted that Congress has revisited the Fair Labor Standards Act of 1974 a number of times since its creation, but has not altered any exemptions that are at issue.
In a separate ruling in early 2015, the District Court overturned the Department of Labor’s redefinition of the companionship exemption. However, on August 21, 2015, the U.S. Court of Appeals for the District of Columbia reversed the lower court’s rulings and upheld the new rules.11 Whether an appeal to the U.S. Supreme Court will occur or be successful is unknown at this writing.
The impact of the new rule is clearly positive for direct care workers who have been providing personal care, homemaker, and home health aide services. The Bureau of Labor Statistics puts full-time personal care workers and home health aides near the bottom of the earnings scale at about $20,000 per year, yet it projects a growth rate of these occupations at nearly 50% between 2012 and 2022.12 Not surprisingly, this tracks the growth of the aging population and expanded need for long-term supportive services in the community.
Nevertheless, some predict negative consequences. The National Federation of Independent Business issued a statement saying:
Requiring overtime pay threatens to put the small firms which provide companion care out of business and jeopardizes the level of care their clients currently enjoy. By ending the companionship exemption, DOL has effectively mandated home care providers work in shorter shifts with reduced hours. At the same time, those who rely on these services can expect less personal care coupled with significantly rising prices.13
The plaintiffs in the law suit made similar claims in arguing that the rule as applied to third-party employers was an unreasonable interpretation of the Act. However, the Department of Labor noted that 15 states already provide minimum wage and overtime protections to all or most third party-employed home care workers, and another six states and Washington, D.C., mandate minimum wage protections. The Department argued that there was no evidence in those states that the extension of those protections cause any decline in access to or quality of home care services. In fact, in the comments to the new rule, the Department had pointed out:
Low wages and long, irregular hours may contribute to the high turnover rate in the industry, resulting in low continuity of care. For instance, the turnover rate (those leaving and entering home care work) for workers in the home care industry has been estimated to range from 44 to 65 percent per year. Other studies have found turnover rates to be much higher, up to 95 percent 194 and, in some cases, 100 percent annually . . . .
Application of the FLSA’s minimum wage and overtime compensation protections may reduce turnover rates. Frequent turnover is costly for employers in terms of recruitment costs and training of new direct care workers and also in terms of the likelihood of a reduction of quality care or not being able to provide care at all. The employee turnover rate in this industry is high because of low wages, poor or nonexistent benefits, and erratic and unpredictable hours.14
Some of the states that already offer these protections filed amicus briefs in support of the Department of Labor, including New York, Illinois, Massachusetts, and Maryland. But a group of other states filed a joint brief for the opposition, arguing that the rule will increase state Medicaid costs, expose states to an unfunded liability, and possibly lead to higher rates of institutionalization.15
While there is still a remote possibility of the case going to the Supreme Court, the real focus of everyone’s efforts will be on adapting to the rule, which is now expected to go fully into effect January 2016. The Department of Labor provides guidance on the rule for workers, consumers, and employers at http://www.dol.gov/whd/homecare. And, the National Resource Center for Participant-Directed Services (NRCPDS) publishes a free FLSA Home Care Rule Toolkit, available at http://www.bc.edu/schools/gssw/nrcpds/tools/flsahomecaretoolkit.html. Home care has finally come of age as an occupation.
[1] Home Care Association of America v. Weil, --- F.3d ----, 2015 WL 4978980 (C.A.D.C.).
[2] 29 C.F.R. § 552.3.
[3] 29 U.S.C.A. § 213 (a)(15).
[4] 29 U.S.C.A. § 213 (b)(21).
[5] 29 CFR § 552.6 (as in effect prior to January 1, 2015).
[6] 29 CFR § 552.109 (as in effect prior to January 1, 2015).
[7] 29 C.F.R. § 552.6.
[8] Id.
[9] Id.
[10] Id.
[11] --- F.3d ----, 2015 WL 4978980 (C.A.D.C.).
[12] http://www.bls.gov/emp/ep_table_103.htm.
[13] http://www.nfib.com/article/?cmsid=63806.
[14] 78 Fed. Register 60543 (October 1, 2013).
[15] The states are Arizona, Georgia, Kansas, Michigan, Nevada, North Dakota, Tennessee, Texas, and Wisconsin.