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Court Rules in Favor of DOL's Rule to Make Home Care Workers Eligible for Minimum Wage and Overtime

On Friday, the U.S. Court of Appeals for the D.C. Circuit ruled that the Department of Labor (DOL) does have the power to make home care providers eligible for minimum wage and overtime pay. This comes seven months after a lower court ruled that the administrative move was not within the powers of the Fair Labor Standard Act (FLSA). 

The DOL first proposed the final rule qualifying those who perform in-home companionship services for minimum wage and overtime pay under the FLSA on September 17, 2013. The rule was take effect on January 1, 2015, however, it was struck down by a lower court two weeks prior to its implementation. It will be the first significant change to pay requirements for home care workers in 40 years.

The FLSA’s companionship services rule largely eliminates the minimum wage and overtime exemption previously used by third-party employers such as home care agencies, resulting in an estimated 1.9 million U. S. employees who may be eligible to receive larger paychecks.

“The rule imposes much-heightened scrutiny on whether employers may classify their employees as exempt from FLSA rules, most notably minimum wage and overtime pay requirements,” said Joseph W. Gagnon, partner in the Houston office of labor and employment law firm Fisher & Phillips. “The new rule drastically reduces the number of employees who may be classified as exempt, leaving home-care agencies feeling the greatest impact.”

According to the DOL, when the exemption was originally written by Congress in 1974, it was intended to apply to family members and friends who were caring for someone who was sick or elderly, as well as live-in companions employed by individuals who lived in personal residences, rather than by third-party agencies.

Though the rule does not entirely eliminate the overtime and minimum wage exemption for home care workers, no third-party employers, including home care agencies, will now qualify for exemption treatment.  Under the new rule agencies are required to total up all hours an employee works for that particular employer, regardless of whether the work is performed in one or multiple households. If that total number exceeds 40 hours within an individual work week, employers must provide overtime pay.

In order to properly treat companionship workers as nonexempt under the FLSA, home care staffing agencies need to consider new compensation plans, timekeeping systems, and related policies. Employers also need to ensure that companionship workers and their managers are properly trained on these new requirements.

According to Gagnon, families and individuals who directly employ in-home services may still qualify for the overtime and minimum wage exemption, but their use of the exemption will likely be closely watched. Household eligibility will now be assessed on a week-by-week basis.

Gagnon added that it is likely the exemption will be lost if the home care companion performs services that fall into the category of incidental care, which the new rule has expanded. If a companionship worker spends more than 20 percent of their time performing services such as meal preparation, driving, grooming and bathing, the household may lose the exemption. They also may be at risk of losing the exemption if the companion performs duties for other members of the household. If the exemption is lost, the family or individual will be required to pay minimum wage and overtime pay. 

“Employers should remember that interpreting the change and meeting compliance standards is often difficult,” said Gagnon. “It is always best to receive legal counsel on the front end of such changes, rather than waiting until a government investigation is launched into your company or household practices.”

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Wednesday, August 26, 2015