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Big News for the Home Health Industry: Federal Judge Vacates the DOL's Companionship Services Regulations on Minimum Wage and Overtime

Posted | by Devon D. Williams Devon D. Williams

As 2014 wound to a close, the United States District Court for the District of Columbia issued a significant decision impacting third-party agencies that provide in-home care to the elderly and ailing. On December 22, 2014, the D.C. federal court struck down the "Third Party Employment" regulation promulgated by the United States Department of Labor ("DOL"), codified at 29 C.F.R. § 552.109. This particular provision would have required third‑party employers, like home health agencies, to pay minimum wage and overtime to domestic service employees who provide companionship services to seniors and the infirm.

For many years, the Fair Labor Standards Act ("FLSA") exempted third-party in-home care providers from having to pay certain domestic service employees minimum wage and overtime. In October 2013, however, the DOL revised the definitions of "domestic service employment" and "companionship services," limiting the type of activities that would qualify as companionship services under the exemption.

Specifically, under the new definition, "companionship services" involves providing fellowship and protection for an elderly person or ailing individual. The companionship exception is lost if the employee performs any household work that benefits other members of the house, performs medically-related tasks that require certification or licensure, or spends more than 20% of his/her time providing care to the individual.

In addition to these restrictive requirements, the DOL issued the Third Party Employment regulation (which would have taken effect on January 1, 2015—with enforcement subsequently delayed until July 1, 2015), effectively excluding third-party in-home care providers from taking advantage of the exemption. As it was written, the limited companionship exemption was only applicable to home-health workers employed directly by the family or household needing the domestic companionship services. In December, the federal court concluded that Congress did not intend, nor did it give the DOL authority, to limit the applicability of the exemption based on who writes the employee's paycheck.

The court's decision in December only vacated the Third Party Employment provision; the decision did not impact the remaining portions of the DOL's regulations on domestic service employment and left intact (at least, for a few weeks) the new narrowed definition of what constitutes "companionship services." But three weeks later, on January 14, 2015, the same federal court struck down the remaining portion of the DOL's regulation defining "companionship services."

The court vacated the DOL's narrowed definition of companionship services for substantially the same reason it vacated the Third Party Employer rule: i.e., the DOL exceeded its regulatory rule-making authority by obliterating the exemption for companionship services from existence. The revised definition was limited to such an extent that few, if any, employees would qualify for the exemption—a result that thwarts Congress' intended purpose behind creating the exemption in the first place. As the court interpreted it, the main purpose of employees providing in-home care to the elderly and infirm is to actually provide care. By limiting how much care an in-home care employee could provide to the individual (specifically, no more than 20%), the DOL essentially eliminated a statutorily-created exemption through the regulatory process, thereby exceeding its authority.

So, what does this mean for the home-health industry?  The DOL has not yet announced whether it intends to appeal these decisions, but has publicly stated that it "strongly disagrees" with the decisions and is weighing its legal options.  Presumably, the DOL will appeal these decisions to the D.C. Circuit, which will perpetuate this legal limbo we are experiencing.  Currently, the vacated provisions, specifically the Third Party Employer rule and the definition of companionship services, are unenforceable by the DOL, unless and until the court's decision is overturned.  At that same time, however, it is unclear whether other federal courts would agree with the D.C. District Court's reasoning if the issue presented itself in another jurisdiction.  Despite the uncertainty facing other jurisdictions like North Carolina, for now, employers may treat their in-home care employees as they were before these two DOL provisions were implemented—particularly because the DOL announced it would delay enforcement until July 1, 2015.  Employers, however, must stay alert in the coming months because there likely will be more action on these issues which will impact how employers must treat their domestic services employees in regards to minimum wage and overtime pay.

The Labor and Employment attorneys at Ward and Smith, P.A. will continue monitoring these issues. Contact us for assistance in determining whether your in-home care employees satisfy the companionship services exemption.

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