Department of Labor Issues Final Rule of Companionship Exemption
September 18, 2013 10:13 AM
The U.S. Department of Labor issued the Final Rule setting out changes to the longstanding regulations on the companionship services exemption from minimum wage and overtime compensation under the Fair labor Standards Act (FLSA). The Final Rule is available at: http://www.dol.gov/whd/homecare/final_rule.pdf.
NAHC continues to analyze the 358-page rule and will provide a more detailed review in the days to come. As a summary, the Final Rule:
Is effective on and after January 1, 2015. DoL delayed the effective date to provide for time for employers and funding sources to adjust.
Redefines “companionship services” to be limited to “fellowship”, “protection”, and limited direct care. Care related services are limited to no more than 20% of the hours worked. This definition means that the vast majority of Medicaid personal care services will be subject to minimum wage and overtime requirements. Private pay home care impact will vary on a client-specific basis.
Excludes employees employed by home care agencies (“third-party employers”) from any remaining exemption. The exemption will remain for workers directly employed by the client or a family member. However, that exemption will apply only if the services are within the new, limited definition of companionship.
Requires minimum wage and overtime for individuals with “joint employers”, e.g. individuals directly employed by the person receiving the services and a Medicaid public authority that has some control over pay, work schedule, work activities, or other indicia of an employer. This standard will likely mean that much of the Medicaid consumer directed care is subject to minimum wage and overtime even if it the services qualify as companionship under the new definition. Home care registries will need to do a operation-specific evaluation as some may be considered joint employers based on how they function.
Eliminates third-party and jointly employed live-ins from the live-in domestic services exemption.
The Labor Department justifies its action as a modernization of the exemptions to reflect the great growth in use of home care through organized businesses. DoL estimates that the rule will an annualized impact of $321.8 million over the next ten years that will be a “transfer of income” from home care agencies and their funding sources (Medicaid, consumers, etc.) to workers.
Andrea L. Devoti, Chairman of the National Association for Home Care & Hospice said of the ruling:
"Like many things that emanate from Washington, the repeal of the companionship exemption is not what it seems. While ostensibly intended to help hard working caregivers, it will have the very opposite effect. Also, according to the advocates for persons with disabilities, it will trigger great harm to many of this nation’s most vulnerable citizens.
It will mean that people will receive less care. Home care companies will have little choice but to employ workers part time rather than full time as Medicaid payment rates and consumers with limited incomes cannot afford higher costs. Caregivers will in the end receive less pay. The term "companionship," which is found in the statute, is being reinterpreted and narrowed in new rules released today by the U.S. Department of Labor.
The revised rules limit the exemption from overtime pay requirements for those caregivers who spend 80 percent or more of their time on fellowship activities. To put this another way, it bars a caregiver from spending more than 20 percent of their time on hands-on care. The new rules also narrow the interpretation of what is known in the industry as "live in" domestic help. Families will have a much more difficult time affording the costs of “live in” care for their disabled loved ones.
Federal programs such as Medicaid will end up paying a great deal more with no material improvement in access to care or in its quality.
Like the disability community, we believe it is better policy to affirm the decision of the U.S. Supreme Court which unanimously sustained the validity of the companionship exemption as it had been applied for over 35 years. We believe that there is much that Congress can do to put this matter right—which means helping people to receive the quality care they need and at the same time giving caregivers a fair and honorable wage.
The federal wage and hour laws were written when most health care was received in institutional settings. Today, more and more care is delivered in the home setting. These laws need to be re-evaluated by Congress in total rather than in piecemeal fashion. The central focus of this review should always be what is best for the people needing care"
NAHC, Private Duty Home Care Association, and the National Council on Medicaid Home Care are all exploring further advocacy efforts on the rule change including congressional legislation and federal court litigation.