On August 21, 2015, the D.C. Court of Appeals in Home Care
Association of America v. Weill, Case No. 14-cv-967 (RJL),
issued a transformational decision upholding proposed U.S.
Department of Labor regulations regarding the Fair Labor Standards
Act's (FLSA) companionship and live-in exemptions. As a result
of this decision, third-party employers of individuals providing
companionship services to elderly or infirm people may no longer
treat such employees as FLSA exempt, and must therefore pay them at
the rate of 1½ times their regular rate of pay for all hours
worked in excess of 40 in a workweek.
Details and Background
Since 1975, individuals employed as in-home companions, including
those employed directly by a family or household, as well as those
employed by third-party employers, were exempt from the FLSA's
minimum wage and overtime requirements, assuming such individuals
met certain criteria. In 2013, the U.S. Department of Labor (DOL)
issued proposed regulations which would preclude third-party
employers, such as home healthcare agencies, from availing
themselves of the FLSA's companionship services and live-in
exemptions. The would-be regulations also proposed to amend the
definition of the term "companionship services" to mean
"the provision of fellowship and protection for an elderly
person or person with an illness, injury or disability who requires
assistance in caring for himself or herself." In order to
qualify for the companionship exemption, an individual could not
provide such services for more than 20 percent of his or her total
working hours per workweek.
In the wake of these sweeping proposed changes, the Home Care
Association of America (HCA) filed suit, challenging both of the
above-noted provisions of the DOL's proposed regulations. In
January 2015, the D.C. District Court ruled in favor of the HCA on
both accounts, vacating both of the DOL's proposed changes. The
DOL subsequently appealed the matter to the U.S. Court of Appeals
for the D.C. Circuit.
On August 21, 2015, the Court of Appeals reversed the District
Court, ruling that the DOL had the authority to act as it had, thus
eliminating the FLSA's exemption for companionship and live-in
employees who are employed by a third-party employer. The Court
declined to rule on the issue of the new definition of
"companionship services."
What Now?
- Overtime Compensation: As a result of this decision, third-party employers of companionship and live-in care employees may no longer avail themselves of the FLSA's companionship exemption. As such, formerly exempt companionship employees – such as home care aides – must now be compensated at the rate of 1½ times their regular rate of pay for all hours worked in excess of 40 in a given workweek.
- Timing: The DOL's proposed regulations were originally slated to go into effect on January 1, 2015. At that time, the DOL had stated that it would not penalize violators for six months after that date (though the regulations did not necessarily preclude individuals from filing private lawsuits). At present, the DOL has not indicated whether the six-month period will begin to run now, or whether the regulations will instead go into effect immediately. As such, for the moment, employers would be well-advised to begin changing their overtime practices as soon as possible.
- Strategies: Employers should also begin considering strategies for limiting the newly-heightened overtime costs triggered by the HCA decision. For example, employers may want to consider certain scheduling adjustments so as to limit the frequency with which employees work more than 40 hours in a workweek. Correspondingly, it may become necessary to hire additional staff in order to work the hours that would otherwise have been worked by existing employees. Moreover, compliance self-assessments are now more critical than ever.
Ultimately, the HCA decision drastically alters the financial landscape for home care companies and other third-party companionship service providers, nationwide.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
