Home healthcare agencies and other third party employers of home care workers recently lost a key fight to prevent the Department of Labor (“DOL”) from eliminating Fair Labor Standards Act (“FLSA”) exemptions for employees who provide companionship services and live-in care within a home. On August 21, the District of Columbia Court of Appeals reversed a district court decision invalidating the regulations, meaning that employers in at least 27 states (where state law has not afforded the home care workers with minimum wage or overtime protections) should now modify their pay practices to conform with the new regulations.
The FLSA provides employees, amongst other things, with a guaranteed minimum wage and overtime pay for hours worked in excess of 40. However, the FLSA has long exempted various categories of workers from the protections of the FLSA, such as certain workers providing services in a household. This includes persons who provide “companionship services” and persons who live in the homes where they provide care. Although not explicitly provided for in the text of the FLSA, in 1975, the DOL extended the “companionship” and “live-in domestic-service” exemptions to employees providing such services for third party employers.
In 2014, however, the DOL reversed course. Citing dramatic changes to the healthcare industry during the past several decades, the DOL issued new regulations specifically eliminating the companionship services and live-in domestic-service exemptions for third party employers. In addition, the department narrowed its definition of “companion services” so as to only apply to home care if the services do not exceed 20 percent of the total hours worked in a given week. According to the DOL, the purpose of the change was to realign the regulations to better reflect Congress’ original intent in passing the FLSA—namely, to protect workers who depend upon employers for their livelihood.
Naturally, a conglomerate of trade associations representing third-party home care providers brought suit to prevent the implementation of the new regulations, which were set to become effective on January 1, 2015. The trade associations argued that the FLSA did not delegate the DOL the authority to exclude a class of employers from the FLSA’s exemptions. The district court agreed and granted the trade associations summary judgment, Home Care Ass’n of Am. v. Weil, 76 F. Supp. 3d 138 (D.D.C. 2014), but the court of appeals promptly reversed. Home Care Ass’n of Am. v. Weil, 2015 WL 4978980 (D.C. Cir. Aug. 21, 2015).
The District of Columbia Court of Appeals explained that the DOL acted plainly within the scope of its rulemaking authority under the delegation of the 1974 Amendments, citing Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158 (2007). In Coke, the Supreme Court had specifically indicated that the question of “whether to include workers paid by third-parties within the scope of the [exemption’s] definitions” was precisely among the “details” that the statute leaves the “agency to work out.” 551 U.S. at 168. As such, the DOL could revise the regulations implementing the FLSA so long as its interpretation of the FLSA was reasonable. The court held that it was, pointing the department’s proffered explanation that the healthcare industry had changed significantly during the past several decades (shifting away from institutional-based care to home-based care).
Although the Home Care Association of America has already indicated that it will appeal the decision to the Supreme Court, employers should make preparations for the previously vacated regulations to go into effect. This means that employers should review their business models, employment policies and scheduling practices to ensure that companion and live-in workers receive minimum wage and either do not work more than 40 hours per week or receive overtime for any hours worked in excess of 40. Further, it also means that employers must ensure that they document all hours worked. This is especially true for live-in workers with whom employers should enter into agreements to exclude certain times from compensable hours worked, such as sleep time, meal time and other periods of complete freedom from work.