Employers in the home health care industry should take note of a recent proposal by the U.S. Department of Labor (DOL) that could change the way employees providing companionship services and live-in domestic services are paid. The DOL recently announced a proposed rule that will reinstate the companionship exemption and live-in domestic services exemption to pre-2013 standards—broadening the availability of those exemptions in the face of what the DOL has emphasized as an increase in costs for domestic services and a departure from statutory intent.

If this proposal becomes a final rule, more employers could rely on the exemptions, meaning employees falling within the companionship services exemption would not be entitled to the federal minimum wage or overtime pay, and employees falling within the live-in domestic services exemption would not be entitled to overtime pay under federal law.

Under the Fair Labor Standards Act (FLSA), most employees must be paid at least the federal minimum wage, which is $7.25 per hour, and overtime for all hours worked over 40 hours in a workweek at a rate of at least 1.5 times the employee’s regular rate unless an employer can show that the position is “exempt.” Whether an employee is exempt or nonexempt has a consequential effect on employer responsibilities as it relates to record keeping and payment.

Starting in 1974, the FLSA applied to “domestic service employees” but exempted employees providing “companionship services” from minimum wage and overtime pay, and live-in domestic service employees from overtime pay. Under the FLSA, the companionship exemption applies to “any employee employed in domestic service employment to provide companionship services for individuals who (because of age or infirmity) are unable to care for themselves.” Trained personnel such as nurses are not exempt under this exemption but may be exempt under others. A live-in domestic service employee includes “any employee who is employed in domestic service in a household and who resides in such household.”  

In 1975, the DOL promulgated regulations further defining companionship services as “fellowship, care, and protection for a person who . . . cannot care for his or her own needs,” which included “household work related to the person’s care such as meal preparation, bed making, washing of clothes, and other similar services,” in addition to other general household work not exceeding “20 percent of the total weekly hours worked.” The regulations at that time permitted third-party employers to use both the companionship and live-in domestic service employee exemptions.

However, in 2013, the DOL revised these regulations, significantly narrowing the definition of companionship services to only include a worker who engages in the provision of care for a maximum of 20 percent of their weekly worktime and instead focused on “fellowship and protection,” rather than “fellowship, care, and protection.” The 2013 regulations also prevented third-party employers (such as home care agencies) from using either exemption. The exemptions are currently only available to the individual, family, or household solely or jointly employing the worker.

Last week, the DOL noted in its proposed rule their concern with the 2013 regulations, stating those regulations do not reflect the best interpretation of the FLSA and may discourage companionship services by increasing costs related to recruiting, hiring, and training. The DOL cites studies indicating that home care providers and states administering Medicaid-financed home care programs responded to the 2013 rule by imposing hours restrictions for employees to circumvent overtime costs.

Alongside that effect, the DOL cites that the 2013 rule incentivizes employers to spread employment by hiring additional workers—a particularly difficult and undesirable strategy for the home health care industry which focuses on, among other things, continuity of care, which has been subject to a qualified worker shortage and high turnover rates in recent years. The DOL indicates reverting to the pre-2013 regulations would reduce the cost of home care services by providing home care staffing agencies with greater scheduling flexibility and reduced labor costs. According to the DOL, returning to the 1975 regulations that had a broader definition of companionship services that encompassed more “care” duties, and which allowed third-party employers to utilize these exemptions would significantly reduce the regulatory burden for consumers and providers of home care services while expanding access to services.  

The DOL is inviting comments on these proposed changes to ensure the final rule appropriately balances the interests of consumers, workers, and providers. Employers in the home health care industry should pay particular attention to the status of this proposed rule in the months ahead as it could result in a significant change in compensation and legal obligations as it relates to home health care workers. We will continue to follow developments with the proposed rule and, if you have any questions about the proposed rule or its application, please contact any of the authors or your regular Robinson+Cole service provider.