2015 Will Usher In Increased FLSA Liability for Home Health Care Agencies

On Tuesday, September 17, 2013, the U.S. Department of Labor (DOL) issued a final rule extending the Fair Labor Standard Act’s (FLSA) minimum wage and overtime protections to an estimated two million home health care workers. Scheduled to take effect on January 1, 2015, this amendment narrows the FLSA’s “companionship” exemption. In 1974, Congress extended the FLSA’s wage protection provisions to virtually all domestic service workers; however, it provided a limited exception for workers who provided for the care, fellowship, and protection of persons who, because of advanced age or physical or mental infirmity, could not care for themselves. These “companionship” services, which are widely and popularly used for the in-home care of loved ones, most often include assistance with household work such as meal preparation, bed making, clothes washing and other similar personal services.

U.S. Secretary of Labor Thomas E. Perez recently summarized these types of services, stating, “Many American families rely on the vital services provided by direct care workers. Because of their hard work, countless Americans are able to live independently, go to work and participate more fully in their communities.”

The DOL points out that the home health care industry has grown significantly over the last 35 years and that the in-home care services provided to individuals today are markedly different from when the companionship services regulations were first promulgated. As a result, and in an effort to extend the FLSA’s protection to this ever-growing in-home workforce, the final rule removes the ability of third-party employers to avail themselves of the companionship exemption. However, it does permit the individual, family or household employer directly employing the worker to continue to take advantage of the exemption—so long as the employee still primarily provides the fellowship and protection contemplated by the exemption. Further, and among other amendments, the final rule explains that direct care workers who perform medically-related services for which training typically is a prerequisite, are not companionship workers and therefore are entitled to the minimum wage and overtime pay.

As a result of the final rule, many third-party employers—specifically home health care agencies—should be on the lookout for potential FLSA liability stemming from improper exemption classification and compensation issues. Why the delayed start date? The DOL indicates that the January 1, 2015 start date is intended to give employers “time to adjust” and as such, employers should begin conducting internal FLSA audits to ensure their continued legal compliance when the transition takes effect.