Executive Summary: Individuals and families who for years have directly employed domestic workers to care for elderly or ill family members will see their labor costs increase dramatically beginning January 1, 2015. Under the U.S. DOL's Final Rule Limiting Domestic Services, the Fair Labor Standards Act's "companionship exemption" will only cover workers whose primary duty is "eldersitting" and not "care" services. The Final Rule also provides detailed interpretations of "hours worked" rules as applied to these workers. Even before January 1, 2015, in states that follow U.S. DOL hours worked rules, this may expose individuals and families to claims by state Departments of Labor and lawsuits by plaintiffs' lawyers under state law.  

What is Changing?

The DOL is significantly narrowing the federal "companionship" exemption from minimum wage and overtime rules for individuals who hire direct care workers to perform home health and personal care for elderly and ill family members.  Excluded are home care workers who (i) spend more than 20% of their work hours performing "care" services, defined as assistance with independent living activities and the tasks of daily living; or (ii) spend any amount of time performing general household tasks, regardless of the percentage of the workweek. 

Beginning January 1, 2015, the primary duties of an exempt companion may only be "fellowship" and "protection," where "fellowship" means "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 social events," and "protection" means "to be present with the person in his or her own home, or to accompany the person when outside of the home to monitor the person's safety and well-being."  Example of activities that are "fellowship and protection" include  "watching television together; visiting with friends and neighbors; taking walks; playing cards, or engaging in hobbies."

Capped at no more than 20% of total weekly work hours are 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 are "medically related services," such as "catheter care, turning and repositioning, ostomy care, tube feeding, treating bruising or bedsores, and physical therapy." And, general household services, such as such as vacuuming, dusting, or cleaning up after other than the elderly or ill family member, which were capped at 20% under the current interpretation of the companionship exemption, can no longer be provided.

The overtime exemption for a "live-in" direct care worker, which is separate from the companionship exemption, is also affected. This exemption only applies to workers who actually reside in an elderly or ill person's home permanently or for extended periods of time. Though the DOL has always allowed an individual employer and worker to enter into a voluntary agreement excluding from hours worked the worker's sleep time, under the Final Rule, written agreements are "strongly suggested" by the DOL, individuals and families must maintain records showing the exact number of hours worked, and workers must be paid at no less than the federal minimum wage for each of these hours.  For example, an individual must have a written agreement to pay a live-in worker a daily rate of $125 per day (which exceeds the current federal minimum wage rate for 16 hours worked, if the worker receives at least five hours of uninterrupted sleep, qualifying for an 8-hour reduction in actual hours worked). This daily rate may be lower if additional "duty-free" hours are deducted from hours worked. The daily rate will be higher in states where the minimum wage rate is higher. If an employment agency is the joint employer with the individual of a live-in worker, the agency will be liable for any hours over 40 per week at one and one-half the worker's regular rate, even though the individual employer will not be held liable.

How Will This Affect Individuals and Families?

  1. The DOL admits that given the sharp reduction in care services permitted to only 20% of a worker's weekly hours worked, "it is  likely that almost all HHAs [home health aides] and many PCAs [personal care workers] will not be exempt under the Act."  Although the DOL believes that the delayed effective date until January 1, 2015, "will allow time for state budgets and other component of the public funding systems that support home care to adjust," this offers little solace to individuals and families who are "private pay" consumers of home care or who are using limited amount long-term care insurance. 
  2. To protect against having to pay overtime, individuals and families will have to make scheduling changes, hire and train additional workers, and modify worker service agreements.
  3. To protect against governmental wage and hour audits and lawsuits by plaintiffs' lawyers, individuals and families will have to keep contemporaneous records of hours worked and monitor any unpaid duty-free hours to verify that the worker is not being called to duty during that time. Though the worker can be asked to account for all hours worked, the burden of proving hours worked never shifts to the worker. In the cases we have defended, government auditors and plaintiffs' lawyers have claimed that time records were incomplete, the records were inaccurate, the workers did not know their rights, the workers objected but no corrections were made, and workers were coerced into signing their timesheets for fear of losing their jobs.
  4. To protect in defending against wage and hour lawsuits, individual employers will want to enter into written employment agreements with their workers, setting forth, among other things, the worker's pay rate per hour even if paid a weekly salary, whether the salary includes any overtime hours at time and one-half, the  specific hours scheduled for work and duty-free time, the worker's obligation to record  all hours worked each week, and the worker's obligation to bring to the employer's immediate attention any hours worked for which he or she was not paid.

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.