NAHC Wins Lawsuit: What Home Care Providers Need to Know Now
Court Invalidates Department of Labor Overtime Rule
January 22, 2015 11:58 AM
The federal District Court for the District of Columbia issued an Order on January 14, 2015 invalidating the new regulation that defines “companionship services” under the Fair Labor Standards Act exemption from minimum wage and overtime compensation. This is the second victory in the case, following the December 22, 2014 decision that invalidated the Department of Labor’s new rule that blocked the application of the exemption when the home care worker was employed by a home care agency. Together, the two rulings from the court reinstate the standards for the longstanding exemption.
Judge Richard J. Leon ruled that “the statutory language of the exemption makes clear that companionship services are services provided to elderly and disabled individuals who are ‘unable to care for themselves.’” He found that while there may be some ambiguity in the term “companionship services,” Congress did not give the Department of Labor (DoL) a “blank check” to define it in a way that contradicts the law itself.
The DoL attempted to redefine “companionship services” by restricting the amount of time a home care worker could spend on personal care to no more than 20% of the total hours worked in a week. Given that the central element of “companionship services” under the law passed by Congress is care, Judge Leon concluded that “limiting that care to only 20 percent of a worker’s total hours defies logic, and Congressional intent.”
In his ruling, Judge Leon rejected the government’s claim that “companionship services,” as the elder equivalent to babysitting, justifies limiting the amount of personal care services allowed within the exemption. Instead, he concluded that such analogy supported NAHC’s position in the lawsuit as good babysitters routinely provide care to children that is the same as that needed by the elderly and persons with disabilities—assistance with ADLs and IADLs.
He also found that “the exemption Congress provided third-party employers and individual families with respect to minimum wage and overtime wages has been, and is, a central component of Congress’s efforts to insure that as many of those families as possible will be able to survive “ the struggle to care for their loved ones at home.
The penultimate statement by Judge Leon, which encapsulates his entire ruling, is that “the Department is trying to do through regulation what must be done through legislation.” In recent years, there has been increased complaint that the Administration is bypassing Congress and changing policy by issuing regulations that would not pass Congress. Judge Leon stated, “ [r]edefining a 40-year-old exemption out of existence may be satisfyingly efficient to the Department of Labor, but it strikes at the heart of the balance of power our Founding Fathers intended to rest in the hands of those who must face the electorate on a regular basis.”
What Does the Decision Mean?
The rulings “vacate” two regulations that the DoL promulgated in an attempt to eliminate any application of minimum wage or overtime exemptions in home care services. The decisions of the court restore the exemptions of “companionship services” and “live-in domestic services” to what had been in place essentially since 1975. That means that personal care services provided in the home by home care agencies are not subject to minimum wage and overtime requirements unless there is a state law providing for such. The decisions block the new rules from taking effect on January 1, 2015. In other words, a home care agency can continue its compensation practices for personal care aides that had been in place in 2014, assuming those practices were compliant then.
What Happens Next?
The DoL through its attorneys have asked the Court to issue a Final Judgment consistent with the rulings. That is a strong signal that DoL wants to prepare the case for an appeal as the rulings issued to date themselves are not appealable. Once the Final Judgment is issued, DoL has 60 days to appeal the case to the U.S. Court of Appeals for the District of Columbia Circuit. The appeals court is one step below the U.S. Supreme Court.
NAHC believes that the chances of an appeal are high given the rarity that federal regulations are invalidated, along with DoL’s publicly expressed dissatisfaction with the court rulings.
The path taken in any appeal can vary widely. If DoL wants to stay (suspend) the district court ruling it must first ask the judge to approve a stay. Judge Leon strongly hinted that he would deny such a request by DoL. If he denies a stay request, DoL can then ask the Court of Appeals to issue an emergency stay. The process in an emergency stay can take mere days or it may extend for months. Generally, it is not a quick process. If a stay is granted, the rules challenged in the lawsuit will go into effect. Since that result is a change in the “status quo,” the Court of Appeals may be disinclined to issue a stay.
Whether or not DoL seeks a stay of the district court rulings, the Court of Appeals will ultimately reach a decision on the merits of the case. The Court of Appeals has the power to review the lower court ruling as a “de novo” matter, meaning it is a fresh and full review not affected by the district court decisions. These reviews now take one to one and a half years typically in DC. If no stay has been issued, the district judges rulings remain in effect, permitting the use and application of the longstanding overtime exemptions.
If the Court of Appeals affirms or reverses the district judge, the next stop is the U.S. Supreme Court. Previously, NAHC successfully litigated issues related to the “companionship exemption” at the Supreme Court in 2005 and 2007.
What Should Home Care Agencies Do?
An employer’s compensation practices must be consistent with both state and federal law. If you have any question as to whether your state requires overtime for personal care aides, you should consult local legal counsel skilled in employment law. Otherwise, you have many business options to consider, including whether you want to pay overtime even if is not required.
NAHC believes that advocates for changes in overtime rights will continue the battle at the federal level, but that they will also shift efforts to include state law advocacy. For example, in 2014, California law was changed to establish some rights to overtime for personal care and home care aides. Home care companies should watch for similar efforts in their states.
Even with the favorable rulings in the lawsuit, it would be prudent for home care companies to evaluate whether their compensation practices are compliant with the FLSA. One area of risk is applying the companionship services exemption to Medicare-type home health aides who may provide health care related services to patients that goes beyond personal care. While DoL has not issued explicit guidance regarding what does and does not constitute “personal care,” the rulemaking challenged in the lawsuit offered hints that the DoL may consider blood pressure testing, wound care, medication administration, and therapeutic exercises to be outside the exemption.
Follow any emerging developments in the ongoing litigation. A court ruling does not usually give businesses a warning that requirements are changed. A decision of the Court of Appeals would take effect the day it is issued. NAHC will provide its members with up-to-the-minute reports on any such developments through its various media including the listserves, NAHC Report, and its website.
The federal court rulings represent significant victories for the home care community and its patients and clients, along with its hard-working caregivers. While the right to overtime would seem to benefit workers, in reality with low Medicaid reimbursements and the limited resources of private pay clients, it is more likely that companies would need to restrict working hours to avoid overtime. Such a change would mean lower overall pay for some home care workers.
The court rulings are not likely the final step in the controversy as DoL has a right of appeal and has hinted that it will do so. Nevertheless, the rulings are a positive first step.
NAHC recognizes that the lawsuit was a unified, collaborative effort of the entire home care community. NAHC was joined in the lawsuit by the International Franchise Association and the Home Care Association of American. In addition, NAHC recognizes the support from a number of home care companies that stepped up directly to help make the lawsuit possible.