Minimum Wage and Overtime Ruled a Regulation for Home Care Agencies

Who benefits and who loses with new overtime ruling?
Will the elderly and disabled suffer under harsher overtime laws?

Today the Supreme Court denied a requested Stay of the Court of Appeals ruling on the minimum wage and overtime regulations for home care workers. This means that if a home care agency has been using exemptions for minimum wage and overtime payments for employees who provide companionship services and live-in care within a home, they must abide by the new rules which will go into effect on or about October 13, 2015. In at least 27 states (where state law has not afforded the home care workers with minimum wage or overtime protections) pay practices will have to conform to the new regulations.

What does this mean to home care agencies (employers)? If an agency works within one of those 27 states, and has been using the exemption to pay workers less than minimum wage or has not been paying overtime, it means an immediate change in ways of doing business. Business models, employment policies and scheduling practices must ensure that companion and live-in workers receive minimum wage and either a) do not work more than 40 hours per week or b) receive overtime for any hours worked in excess of 40. This also means that employers must ensure that they document all hours worked by an employee. This is especially true for live-in workers. For live-in situations, the employer should create and enter into agreements to exclude certain specific times from hours worked, such as sleep time, meal time and other periods of complete freedom from work.

Since 1974, federal law has exempted home care workers hired through third-party staffing agencies from wage and overtime requirements. This change in exempt status for third-party party employers was a basic outcome of the 2007 ruling in Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158 (2007).

The healthcare industry is (hopefully) shifting away from institutional-based care to home-based care. The FLSA provides employees, amongst other things, with a guaranteed minimum wage and overtime pay for hours worked in excess of 40. However, the FLSA has long exempted various categories of workers from the protections of the FLSA, such as certain workers providing services in a household. This includes persons who provide “companionship services” and persons who live in the homes where they provide care. Although not explicitly provided for in the text of the FLSA, in 1975, the DOL extended the “companionship” and “live-in domestic-service” exemptions to employees providing such services for third party employers.

The DOL started pushing for an overhaul to the exemptions (citing dramatic changes to the healthcare industry during the past several decades) and issued new regulations specifically eliminating the companionship services and live-in domestic-service exemptions for third party employers. Additionally, the DOL narrowed its definition of “companion services” so as to only apply to home care if the services do not exceed 20 percent of the total hours worked in a given week. According to the DOL, the purpose of the change was to protect workers who depend upon employers for their livelihood.

With 10,000 boomers turning 65 each day, the government projects a 48 percent hike in employment of home health aides from 2012 to 2022. This makes at-home services to the elderly and disabled one of the fastest-growing occupations in the U.S.

This industry, estimated at $84 billion, is only expected to grow as we are in the midst of a large shift from caring for the elderly in their homes rather than in nursing homes, which labor advocates argue requires medical care and assistance that surpasses the “companionship” services envisioned in 1974.

Chief Justice Roberts of the U.S. Supreme Court denied the Application for a Stay of the Court of Appeals ruling. More to come about what this means to the healthcare industry. For now, it means that many home care companies across the United States have a short window to change how they are servicing this nations elderly and disabled.