Department of Labor Issues Proposed Rule Changing Companionship Services Exemption under the Fair Labor Standards Act

The U.S. Department of Labor released yesterday a Notice of Proposed Rulemaking (NPRM) setting out significant changes in the companionship services exemption under the federal minimum wage and overtime law, the Fair Labor Standards Act (FLSA). If the proposal becomes a final rule after the public comment period, the changes will effectively require that all home care and hospice companies pay overtime compensation to personal care attendants, home care aides, and home health aides whenever such employees exceed the 40 hour weekly threshold for hours worked. Minimum wage requirements also will apply, but that impact in home care is only incidental as nearly all the employees are compensated at or greater than minimum wage levels already.

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The proposed rule has been long expected as both President Obama and Labor Secretary Solis had voiced strong support for a change as early as the 2008 presidential campaign. The White House held a public unveiling of the proposed rule yesterday presenting it as part of the President’s efforts to take action outside of Congress. 

The Department of Labor proposes several changes to the existing companionship services exemption:

  1. “Companionship services” would be defined to include only the services of “fellowship” and “protection.” Incidental “care” would be allowed provided it is less than 20% of the work time. This proposed definition is in contrast to the current rule that includes “care” within the core definition and allows for 20%” housekeeping” work time.  Medicare home health aide services and Medicaid personal care services would not qualify as “companionship services” under the proposed definition.
  2. The exemption would not apply to “companionship services” provided through workers that are employed by a third party employer rather than the client or the client’s family. By eliminating the application of the exemption to third-party employers no services of any nature provided by a home care business would be exempt.
  3. The separate “live-in services” exemption would not apply to workers under the employment of a third-party. This would mean that companies providing live-ins would be required to pay minimum wage and overtime compensation regardless of the nature of the work performed.
  4. Employers of “live-in” workers would be required to keep detailed time records of the hours worked by the employee. Current rules allow for an agreement with the client to substitute for the recordkeeping.

The NPRM includes a lengthy impact analysis that includes consideration of the effect on workers, businesses, and government-based payment programs such as Medicaid and Medicare. Overall, the impact analysis is driven by an assumption that home care employers will control compensation costs by limiting working hours so that overtime thresholds are not exceeded. DoL also opines that workers will secure second jobs if they wish to have greater work hours. If these assumptions prove adequate, the proposal to require overtime compensation will have no real positive financial impact on workers.

The impact analysis also recognizes that employers will incur greater costs in terms of recordkeeping and worker hiring and management. That seems to indicate that the proposed rule has little or no benefit to anyone and generally just increases costs for employers and payers.

The National Association for Home Care & Hospice has had a longstanding involvement in the companionship services exemption issues. In 2000, a regulatory change similar to today’s issuance was proposed and later withdrawn. Legislative proposals to significantly reduce the exemption have not succeeded. NAHC also joined with others in spearheading two successful appeals to the U.S. Supreme Court to maintain the exemption. NAHC will release a survey on Friday that will be used to gather up-to-the-minute impact information from home care companies across the country.

It is NAHC’s position that the exemption should be maintained. Instead, NAHC recommends that any consideration of changes to compensation laws must be done in combination with an overall evaluation of what is best for home care clients, how new compensation obligations will be paid for, and what is the best use of limited financial support for care of the elderly and the disabled. NAHC believes that the full panoply of worker interests need to be considered, not simply overtime  compensation in isolation from all other matters such as base wages, career opportunities, and health insurance.

The NPRM is only a proposed rule. There is a 60 day public comment period which is a valuable opportunity that should not be missed by anyone interested in this issue. NAHC is working with a number of organizations with similar interests and will also be working to get input from state Medicaid programs and other payers that may face higher costs.

A further, detailed analysis is in the works as the 186 page rule is reviewed and analyzed. Stay tuned to NAHC Report. The full NPRM is available at: