United States: U.S. District Court Blocks U.S. DOL's New Definition of Companionship Services Under FLSA

Executive Summary:  The U.S. District Court for the District of Columbia has issued a Temporary Restraining Order ("TRO") blocking the U.S. Department of Labor ("DOL") from enforcing the new definition of Companionship Services in its Final Rule on the Application of the Fair Labor Standards Act to Domestic Service Order ("Final Rule"), which was set to take effect, January 1, 2015. On December 22, 2014, this same court had vacated the Final Rule's differing treatment of home care agencies versus direct-hire employers, such as individuals, families, and households, stating that both should benefit similarly from the "companionship services" and "live-in" exemptions under the Fair Labor Standards Act ("FLSA"). To determine whether a Preliminary Injunction should issue, the court will hold a hearing on January 9, 2015.

The DOL's Final Rule:  Reversing a decades long interpretation, The DOL's Final Rule stated: "[t]he new regulatory text precludes third party employers (e.g., home care agencies)from claiming the exemption[s] for companionship services or live-in domestic service employees." The DOL claimed that those "employed by home care staffing agencies are not the workers that Congress envisioned when it enacted the companionship exemption, (i.e., neighbors performing elder sitting) but are instead professional direct care workers" and the DOL "is no longer convinced that its prior reading (of the exemption) was the best one."

The Companionship Exemption:  The Final Rule narrowed the companionship exemption significantly, even for direct-hire employers, largely limiting it to "fellowship and protection," and excluding home care workers who (i) spent more than 20 percent of their work hours performing "care" services, namely, assistance 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)." Excluded entirely were any "medically related services," such as "catheter care, turning and repositioning, ostomy care, tube feeding, treating bruising or bedsores, and physical therapy." General household services, such as vacuuming, dusting, or cleaning up after individuals other than the elderly or ill family member (which are capped at 20 percent under the current companionship exemption) could not be provided at all. The primary duties of an exempt companion were limited to "fellowship," meaning "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," and "protection," meaning "being present with the person in their home, or to accompany the person when outside of the home to monitor the person's safety and well-being." Examples of "fellowship and protection" were activities such as "watching television together; visiting with friends and neighbors; taking walks; playing cards, or engaging in hobbies."

The Live-In Exemption:  The Final Rule also added conditions to the live-in domestic service employees' exemption, which was separate from the companionship exemption, and only applied to workers who actually resided in an elderly or ill person's home permanently or for extended periods of time. Although the DOL had always allowed a direct-hire employer and worker to enter into a voluntary agreement excluding from hours worked the worker's sleep time, meal time, and other duty-free time, under the Final Rule, written agreements were "strongly suggested" and direct-hire employers were required to maintain records showing the exact number of hours worked and to pay workers no less than the federal minimum wage for each of these hours. In addition, if a home care agency and a direct-hire employer were together found to be a live-in worker's joint employer, the agency would be liable for any overtime hours over 40 per week at one-half the worker's regular rate of pay, even though the direct-hire employer would not be held liable.

What To Do Now. The National Association for Home Care and Hospice, which brought the TRO motion, has advised: "During the time in which the TRO is in effect, home care companies can continue to pay home care aides and personal care attendants without added overtime compensation except where state law requires it. Home care companies are advised to consult competent counsel to determine if they qualify to use the exemption." At a minimum, home care agencies should comply with their State's laws and continue to prepare to comply with the DOL's Final Order, which includes taking the following steps:

1. Develop better policies and procedures to manage work hours by determining how low, medium, and high hour cases will be assigned; how contingencies that result in extra hours being worked will be handled; how casual workers or regular replacement workers will be assigned to pick up hours due to call-outs, worker absences, and emergencies; and how workers will be prevented from performing work that is neither authorized nor requested. Obtain worker sign-offs on all policies and procedures.

2. Investigate (a) time-tracking software to require workers to electronically record their hours worked, including non-service hours (e.g., intra-day travel time, in-service training, annual medical exam, and office meeting time), duty-free hours and sleep hours for 24-hour workers and any interruption of either duty-free or sleep hours; (b) scheduling software to avoid incurring unnecessary overtime, to assign replacement workers when needed, and to manage the number of workers on assignment at any given time and hours worked; and (c) monitoring software to track worker hours and overtime on a weekly basis, including average hours worked and active workers as a percent of available workers and comparative information from quarter to quarter and during periods of emergency.

3. Post signs at orientation and at in-service training sessions that state "no work outside regularly scheduled work hours is allowed" and "agency written authorization must be obtained for any emergency work-time." Warn workers that hours worked must be recorded accurately and that falsifying a time record is grounds for disciplinary action. Maintain accurate wage and hour records for at least seven years. If using an outside payroll company, ensure the contract states that the payroll records are the agency's property, the records will be maintained at a predetermined location in a readily accessible computer format for a minimum of seven years, the agency has the right at any time to inspect, audit, or request production of its records, and the records will be transferred to a new company immediately upon the agency's request.

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.

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