Lawsuit Challenging Department of Labor Overtime Rule Progresses
September 18, 2014 04:08 PM
The lawsuit challenging the validity of the recent rule issued by the US Department of Labor modifying the "companionship services" and "live in domestic services" exemptions on the Fair Labor Standards Act is ready for hearing by the Federal District Court judge. All briefs have been filed by both NAHC and the Department of Labor and the parties are awaiting the scheduling of the case for oral argument before the judge.
The lawsuit raises the challenge that the Department of Labor rule is in direct conflict with the fair labor standards act as passed by Congress in 1974. That law allows an exemption from minimum wage and overtime compensation for work that is classified as "companionship services." It also exempts "live in domestic services" from overtime compensation. In December, 2013 the Department of Labor finalized significant changes in the rule that bans the exemption when the workers are employed by third-party entities. Also, the rule change completely redefines the nature of "companionship services."
The Department of Labor bases its defense on the argument that the law provides it with discretion to determine which employers can "avail themselves" of the exemptions. The department continues with its argument that it did not abuse its discretion in interpreting the law as it did in the December 2013 rule. The department supports its argument with the contention that the US Supreme Court requires a party challenging a federal rule to demonstrate that it is irrational or arbitrary and capricious in order to invalidate a requirement established within the discretion of the federal administrative agency.
NAHC and it's co-plaintiffs argue that the plain language of the law requires that the exemptions apply to "any employee" who is providing "companionship services" or engaged in work as a "live in domestic." In its briefs submitted to the federal court, NAHC and its co-plaintiffs explain that the language of the fair labor standards act led the department to establish the exemptions by regulations in 1975, applying the exemptions to any employee working for any type of employer. Plaintiffs argue that the department's new role is unprecedented in the history of the fair labor standards act in that it is the first time that the department is carving out a class of employers from the minimum wage and overtime exemptions. Were Congress expected a limited application of an exemption, the statutory language has specifically done so.
Plaintiffs also argue that the basis for the rule change, as advanced by the Department of Labor, is insufficient to justify the dramatic modifications in that rule. The Department has admitted that nearly 98% of all workers in the exempt categories would no longer have the exemption apply because their employer is someone other than the direct consumer of the services. The Department of Labor has argued that changes in the home care industry warrant a change in the rule. However NAHC and co-plaintiffs respond that there were no changes in the nature of the work provided as "companionship services" or "live in domestic services". Likewise, there is no change in the purpose behind the original exemption which the legislative history indicates is intended to benefit infirm, disabled, and elderly individuals who need personal care support to remain safely at home.
In 2007, NAHC and several state associations brought a case to the US Supreme Court in defense of the long-standing rule that had applied to third-party employers since 1975. The US Supreme Court found in NAHC's favor, concluding that the Department of Labor had the authority to include third-party employers within the scope of the exemptions. This current case put NAHC in an opposite position, challenging the validity of the new rule rather than defending the validity of the old rule. That different position creates significant complications in the litigation and pits NAHC against the Department of Labor rather than on the same side. The federal courts generally tend to favor administrative agency when rules are challenged. The courts do invalidate agency regulations when they are in direct conflict with the language of the law or represent an arbitrary capricious interpretation. The lawsuit alleges both have occurred here.
At this point, the parties are awaiting the scheduling of oral argument before the federal judge. It is hoped that that hearing will take place within a matter of weeks, providing the judge with the opportunity to issue a decision well in advance of the January 1, 2015 effective date of the new rule. If NAHC is successful, it will advance the lawsuit further by seeking an injunction to prevent the rule's implementation while also challenging the revised definition of "companionship services." That new definition virtually eliminates the application of the exemption in any form of homecare services given the wide-ranging restrictions on the provision of personal care to fit within the scope of "companionship services."
NAHC cautions home care companies that state laws in some states already have eliminated the application of an overtime exemption for personal care services provided by third-party home care providers. The outcome of the lawsuit will not affect those laws.