Overview
The U.S. Department of Labor issued a final rule clarifying how the Fair Labor Standards Act applies to home-care workers employed through third-party agencies. The rule narrows the companionship exemption and makes many workers who provide in-home care eligible for minimum wage and overtime protections when their employer is a staffing agency or other third-party employer.
The rule has been the subject of litigation, but enforcement steps and guidance have been announced and are relevant to employers, workers, and organizations that arrange in-home care services.
Key takeaways
- Many in-home care workers employed through third-party agencies may be entitled to minimum wage and overtime protections.
- Employers should review classifications, timekeeping, and pay practices for home-care staff.
- Enforcement priorities may consider good-faith efforts to comply when assessing past violations.
How it works
The final rule redefines the scope of “companionship services” and clarifies when the exemption does not apply because a staffing agency or similar third-party is the employer. When a third party employs the caregiver, standard FLSA protections such as minimum wage and overtime typically apply.
Employers need to determine the employment relationship, track hours accurately, and calculate overtime where applicable. Recordkeeping and correct payroll classification are key operational changes required by the rule.
What it may cover (and what it may not)
Covered items generally include hourly pay, overtime for hours worked over the federal overtime threshold, and related wage protections for third-party-employed caregivers. Travel time, training, and on-call time can also carry pay implications depending on facts and applicable guidance.
Some narrowly defined companionship tasks may remain excluded when services are truly limited to social or fellowship activities, but broader personal care or medical-support tasks performed by third-party-employed workers are more likely to be covered.
Common mistakes to avoid
Misclassifying a worker as an independent contractor instead of an employee is a frequent error; classification depends on the actual working relationship and control rather than labels. Failing to track hours worked, including travel or split shifts, can create large back-pay liabilities.
Another common mistake is assuming the companionship exemption automatically applies to all in-home care roles; whether the exemption applies depends on both the worker’s duties and who is the employer.
Questions to ask an agent
Ask whether your existing policies and coverage limits consider wage-and-hour risks tied to in-home care staffing and third-party employment models.
Review available specialty products—see Difference in Limits (DOL) Insurance for policy options that may address regulatory or litigation exposure related to labor rules.
If your organization places or manages care in facilities, evaluate whether coverage for resident-rights exposures is appropriate by reviewing offerings such as Adult Care Facilities Violation of Residents' Rights Insurance or Nursing Home Facilities Violation of Residents' Rights Insurance.
Next steps
Employers should audit job descriptions, timekeeping systems, and payroll practices to confirm compliance with wage-and-hour requirements for in-home care staff employed through third parties.
Document any good-faith compliance efforts and consult with employment counsel or HR professionals to address ambiguous classifications and historic pay practices.
If you want a tailored insurance review or to discuss coverage gaps, be prepared to talk through payroll practices and claim history and then talk to an agent about appropriate policy options.
Frequently Asked Questions
Does the companionship exemption still exist?
Yes, a narrow companionship exemption still exists but applies in limited circumstances and often does not apply when a third-party employer hires the caregiver.
What should employers do first to comply?
Begin with an audit of timekeeping, job duties, and employment arrangements to determine which workers should receive minimum wage and overtime.
Can workers pursue back pay for past violations?
Workers may have remedies for past violations, but outcomes depend on the facts, applicable statutes of limitations, and how enforcement discretion is applied.