Employers of companionship and domestic employees can breathe a little easier now that a court has set aside major portions of a rule that may have required such employees to receive the minimum wage and overtime under the federal Fair Labor Standards Act (FLSA).
At issue was a Final Rule issued by the U.S. Department of Labor in 2013, which had been scheduled to take effect on January 1, 2015. Companionship workers have historically been exempt from the FLSA's minimum wage and overtime requirements, but the Final Rule substantially narrowed the definition of “companionship services” and excluded employees of third-party home health-care agencies from the exemptions.
If the Final Rule had remained in effect, many more companionship workers would have been entitled to the FLSA minimum wage and, where applicable, overtime.
Although the DOL announced a delayed enforcement start date, individuals could still have brought private lawsuits once the rule took effect. That concern was rendered moot by two court rulings issued in late December and January.
On December 22, a federal judge vacated the portion of the Final Rule that excluded employees of third-party providers from the minimum wage and overtime exemptions. The judge noted that the statutory language supporting the exemptions for third-party employers had been in place for decades and had been upheld by the U.S. Supreme Court.
In rejecting the DOL's approach, the judge wrote that efforts to change the law had consistently failed in Congress and that the agency could not accomplish by rulemaking what the Legislature had not approved.
Then, on January 14, the same judge vacated the DOL's narrowed definition of “companionship services,” granting emergency injunctive relief to a group of home care providers.
Under the Final Rule, the term “companionship services” had been interpreted to allow care only if it was provided attendant to fellowship and protection and if it did not exceed 20% of total hours worked per person and per workweek. The judge found no indication that Congress intended to impose a strict 20-percent limit on caregiving services provided under the longstanding exemption.
As a result of these orders, the DOL's Final Rule will not go into effect as applied to third-party employers and companionship services, though other parts of the Final Rule—such as certain definitions and recordkeeping requirements—were not addressed and could remain in effect unless altered by future order or appeal.
Employers that provide in-home care may wish to review their coverage; for some businesses, products like Difference in Limits (DOL) Insurance may be relevant to their risk and compliance planning.
Facilities and agencies should also consider protections that address resident and client claims related to care; one option to review is Adult Care Facilities Violation of Residents' Rights Insurance.
This summary was prepared with input from employment law practitioners and HR experts. Don Phin is VP of Strategic Business Solutions at ThinkHR and has decades of experience in HR and employment practices.
If you want to review insurance options or discuss how this may affect your organization, talk to an agent.
Frequently Asked Questions
Who traditionally qualified for the companionship services exemption?
Workers providing fellowship and protection to the elderly or disabled in a private home have historically been covered by the companionship services exemption to the FLSA.
Did the court ruling automatically reinstate the old exemptions for all employers?
The court vacated key parts of the Final Rule as applied to third-party employers and the narrowed definition of companionship services, but other provisions of the rule may remain subject to enforcement or appeal.
Can individual employees still bring private lawsuits over pay and overtime?
Private lawsuits can proceed under the FLSA independent of agency enforcement, so employers should assess their pay practices and recordkeeping carefully.
What practical steps should employers take now?
Employers should review job duties, payroll practices, and records, and consult HR or legal counsel to determine whether they need to adjust classification or pay policies.