An Update on The Overtime Lawsuit: What Does the Court Ruling Mean?
December 26, 2014 10:39 AM
Following Monday’s court ruling in the lawsuit challenging the new overtime rules of the Department of Labor, NAHC had a discussion with the Department of Justice counsel representing DoL regarding the next steps in the case. The judge ruled that DoL’s regulations which excluded the application of the “companionship services” and “live-in domestic services” exemptions under the Fair Labor Standards Act to third-party employers, i.e. home care companies, were invalid.
NAHC asked that DoL agree to put a hold on the entire rule until the court could review the rest of our lawsuit’s claims. DoL refused to do so. While DoL previously decided not to enforce the rules for at least 6 more months, private enforcement by home care employees remains a serious risk.
For “live-in services,” this ruling will result in the continuation of the longstanding standards that home care business have applied to their operations.
However, for hourly or shift-based personal care services, the ruling is only one step towards maintaining the existing standards exempting such employees from both minimum wage and overtime requirements. The significantly revised definition of “companionship services” must still be addressed by the court.
If that revised definition is not invalidated before January 1, 2015, virtually all home care workers, other than live-ins, will become entitled to minimum wage and overtime provisions. The only such workers that would fall under the exemption would be those that predominately provide “fellowship” services with no more than 20% of work activities involving personal care or housekeeping tasks.
In an effort to address the definitional issue, NAHC has filed an emergency motion for a stay of the companionship services rule change. To succeed with that motion, NAHC needs to establish that home care will suffer irreparable harm if the new rule goes into effect along with a likelihood of success on the merits of our claim that the rule violates the FLSA. NAHC’s motion has been filed, and at this point it is in the hand of the judge.
The decision issued by the federal court on December 22, 2014 is a big win for home care, but much remains to be done to fully preserve the overtime exemptions for companionship services and live-in domestic services.
Below is a Q&A regarding some of the most important issues for home care and hospice agencies need to know to better understand the impact of the recent court decision and what it means to home care.
Q. What did the court rule?
A. The court ruled that the US Department of Labor violated the plain language of the Fair Labor Standards Act (FLSA) with its regulation that excluded third-party employers from the application of the “companionship services” and “live-in domestic services” overtime exemptions. Home care companies are considered third-party employers. Home care workers employed by the direct consumer of the care or their family members acting as the employer are the only parties that could have used the exemptions under the rule that was invalidated by the court. This does not change any state laws that already limit the exemptions or their application.
Q. Does this mean that home care companies do not have to pay hourly home care aides overtime?
A. No. The regulation also redefined companionship services, limiting that definition to fellowship services and no more than 20% of time on personal care or housekeeping tasks. The lawsuit also challenges that part of the new regulation as well. However, that part of the case has not yet been presented to the court. NAHC is preparing to do so.
Q. Why wasn’t the definition of “companionship services” presented to the court earlier?
A. A tactical decision was made on how the case would be litigated. If the definitional issue was presented before or concurrent with the third-party employer issue there was a serious risk that the lawsuit could make matters worse for home care companies. If the court invalidated the definition of “companionship services,” but upheld the exclusion of third-party employers from the application of the exemption, home care companies would be outside an expanded exemption. Workers directly employed by the consumer would have qualified for the exemption. That would put home care companies at a cost disadvantage to consumer/employer care. Consumers (and state Medicaid programs) would have bypassed the agency model of care in favor of direct employment to save money.
Q. When will there be a court ruling on the definition of “companionship services?”
A. A discussion occurred between legal counsel from both sides on December 23 (see above). It is hoped that the Department of Labor will agree to a temporary hold on the new rule consistent with its “policy action” under which the government will not enforce the rule for at least six months. To do so, the government only needs to agree that private enforcement will be put on hold as well. During the December 23 conversation, the DoL refused to do so.
Q. Since the government did not agree to hold off on the rule, what happens next?
A. NAHC will then need to go back into court to get a temporary injunction before January 1. That will require that we show that we are likely to succeed on the merits when the court fully hears the case and that home care companies will suffer irreparable harm if the court does not maintain the status quo with the current rule.
Q. What about live-in services?
A. The only substantive change that the new rule made to live-in services is the exclusion of workers employed by third-party employers from the exemption. “Live-in domestic services” is a much broader class of employees that would include personal care and housekeeping workers. As such, the court ruling effectively returns that exemption to it current state. Home care companies would not be required to pay live-in workers overtime unless state law requires such.
Q. What should we do now in our company?
A. The best advice NAHC can offer is to “stay tuned” over the next week as much can and will happen to clarify things. However, it would be prudent to continue to expect to trigger whatever action you planned to take on January 1 in the absence of the court’s decision. Things can change that dramatically, that quickly.
Q. Will the government appeal?
A. That is one option open to the Department of Labor. However, they would need to get the federal judge to stay his ruling pending any appeal. If the judge refuses to do so, the government would need to get the Court of Appeals to issue a stay.
Q. How can we “stay tuned?”
A. NAHC will provide updates through email and future NAHC Report alerts.
Read the court documents here and here.