Employment Law Report
Court Invalidates Rule Extending the FLSA’s Minimum Wage and Overtime Requirements to Home Health Care Workers Employed by Third Parties
The U.S. District Court for the District of Columbia struck down the U.S. Department of Labor’s regulations concerning the companionship services exemption to the minimum wage and overtime requirements of the Fair Labor Standards Act (FLSA). See Home Care Association of America v. Weil, No. 14-cv-967 (D.D.C. 2014). Under the FLSA, providers of home care services employed by a third party are deemed to fall within the FLSA’s domestic employee and/or companionship services exemptions. However, the Department of Labor’s Wage and Hour Division issued a Final Rule with an effective date of January 1, 2015 (but not to be enforced until July 1, 2015) effectively eliminating this exemption by revising the definition of “companionship services” and subjecting third-party providers to minimum wage and overtime requirements imposed by the FLSA.
The National Association for Home Care & Hospice, Home Care Association of America, and the International Franchise Association brought an action challenging the Final Rule under the Administrative Procedure Act arguing that the rule was arbitrary and capricious, and inconsistent with Congress’ intent. Specifically, the plaintiffs claimed the rule would “have a destabilizing impact on the entire home care industry and . . . adversely affect access to home care services for millions of the elderly and infirm.” Ninety percent of home health aides and personal care aides are employed by third parties.
On December 22, 2014, the federal court vacated the third-party provider portion of the regulation ruling that prohibiting the third-party employers from taking advantage of the companionship exemption was inconsistent with the FLSA. In its opinion, the court noted that “for over 40 years, Congress has exempted third-party providers of home care services from having to pay either minimum or overtime wages to their employees who provide domestic companionship services to seniors and individuals with disabilities, or to pay overtime wages to live-in domestic service employees.” Relying on Long Island Care at Home v. Coke, 551 U.S. 158 (2007), wherein the Supreme Court concluded that employees paid by third parties were within the companionship services exemption, and the “utter lack of congressional support to withdraw this exemption,” the court affirmatively stated it would not allow the Department of Labor “to do administratively what others had failed to achieve in either the judiciary or Congress.”
On January 14, 2015, the court issued an opinion and order vacating the second component of the regulation that redefines the FLSA’s “companionship services” exemption from overtime compensation. The court stated that the new regulation’s definition of companionship was so restrictive that it would have essentially written the companionship exemption out of existence. The Department of Labor indicated that it plans to appeal the court’s rulings.