DOL Announces Intent to Revamp Home Healthcare Industry by Narrowing FLSA Exemption

The US Department of Labor announced this week that it is geared-up to significantly narrow the scope of the regulations governing the minimum wage and overtime exemptions available to domestic employees who provide companionship services.  The proposed new rules are expected to be published before the end of this year.  If ultimately adopted (after the required comment period), the manner in which homecare workers are employed will be dramatically impacted.

Currently, workers providing in-home care are generally exempt from the FLSA’s overtime pay and minimum wage requirements.  In this regard, Section 13(a)(15) exempts “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).”  At issue is what is meant by “companionship services.” 

This term was hotly contested in a case which reached the Supreme Court on two occasions last decade, Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158 (2007).  Coke dealt with the issue of whether domestic service employees employed by third-party agencies instead of directly by the patient’s household fell under the exemption. The Court unanimously held that they do.

The case was an attempt by the SEIU (and the DOL) to alter the manner in which these services are typically provided, and to provide the caregivers with rights to minimum wage and overtime pay under the FLSA.  (These employees are entitled to minimum wages and overtime pay under some state laws.)  By formally changing the regulations as proposed, the DOL (and the SEIU) will essentially achieve much of what they were unable to achieve in the Coke case.

Under the current regulations, “companionship services” refers to:

 [T]hose 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. . . .

As announced by Secretary Solis on December 15, 2011, the DOL is proposing to change the regulation in at least two fundamental ways.  First, the types of services covered would be limited to “fellowship” and “protection”, which would only include such activities as playing cards, visiting with friends and neighbors, and taking walks.  Second, the exemption would only apply to those performing such duties who are soley and directly employed by the household of the infirmed.  Thus, the regulation would negate the outcome of Coke.

The DOL’s stated goal is to convert the exemption to only cover casual employees of households, such as babysitters.  Employees who care for the infirmed by dressing wounds, bathing, tube feeding, etc., would not be covered.  These types of services, according to the DOL, are too high level to fall under the exemption’s intended coverage.  The DOL believes that it is important to cover these employees who would otherwise be exempt since the demand for such services is growing, and higher wages would attract more workers to this industry.

Is the DOL correct?  While there may be the potential for higher wages for employees working in these jobs, there may also be some unintended consequences on the horizon should the proposed changes become law.  For instance, if employees are entitled to overtime pay, their services – which are already severely expensive for the families engaging them – could become so cost prohibitive that the demand for the services will drop.  In addition, and to avoid having to pass-through the higher costs to families, the employers could design schedules so that overtime pay never becomes due to the employees.  A consequence of this would be that the workers for whom the DOL wishes to receive more income would instead work fewer hours, and thereby net less income than under the current rules. Thus, instead of attracting more to work in the industry and providing workers with more pay, the new rules could make the opportunity for work and the level of income drop.  

The proposed rules have yet to be published and the comments have yet to be filed and considered.  Nonetheless, a battle is looming as the policymakers deal with these competing issues facing both vulnerable families and care providers.  Congressional leaders have already indicated their concern about the likely practical consequences of the proposed changes, versus the narrow economic protections desired by the DOL and the SEIU.  Perhaps a solution short of making these services unaffordable will be found.  Based on recent history in Washington, however, partisanship will likely get in the way.  Time will tell . . . .


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