The United States Department of Labor issued a rule last month limiting the ability of home health care employers to claim the companionship exemption for their employees under the Fair Labor Standards Act, which is likely to result in higher labor costs for employers, and higher costs for consumers of home health care services. While the changes are effective January 1, 2015, prudent home health care providers will act now to prepare for changes in record keeping and payroll for affected employees.
Background
On September 17, 2013, the United States Department of Labor issued a Final Rule that will extend minimum wage and overtime protections under the Fair Labor Standards Act (“FLSA”) to most health care workers who provide home care for an elderly person or an ill, injured or disabled person who needs assistance in caring for himself. The Final Rule has the potential to increase labor costs substantially for home health companies, staffing agencies, providers of mental health and development disability services, and other health care companies, because it will disallow the companionship exemption for many workers placed in consumers’ homes. Specifically, the Final Rule changes prior regulations in the following ways: (1) the tasks that comprise “companionship services” are more clearly defined and narrowed, thus limiting the companionship services exemption; (2) the exemptions for companionship services and live-in domestic service employees are limited to the individual, family, or household using the services, and third-party employers may not claim these exemptions; and (3) the record keeping requirements for employers of live-in domestic service employees are revised. The Final Rule will take effect on January 1, 2015.
Clarifies and Narrows “Companionship Services”
Current regulations under the FLSA exempt certain domestic service workers employed to provide “companionship services” from statutory minimum wage and overtime requirements. The Final Rule narrows the definition of “companionship services” and provides a more detailed description of the exact activities that qualify and do not qualify as “companionship services.”
The Final Rule defines “companionship services” as the provision of “fellowship and protection,” which includes engaging the person in activities such as conversation, playing games, reading, etc., while being present with the person in his or her home, accompanying the person when outside of the home, or monitoring the person’s safety and well-being. The term “companionship services” also includes the provision of “care,” which includes assisting with Activities of Daily Living (e.g., dressing, grooming, feeding, and bathing) and Instrumental Activities of Daily Living (i.e., tasks that enable a person to live independently at home, such as meal preparation, driving, and light housework), when the care is provided attendant to and in conjunction with the provision of fellowship and protection, and does not exceed 20 percent of the total hours worked per caregiver person each week.
The definition of “companionship services” does not include the performance of medical tasks that typically require training by medical personnel, such as catheter care, turning and repositioning, ostomy care, tube feeding, treating bruising or bedsores, and physical therapy. Household work performed primarily for the benefit of other members of the household is also excluded from the definition.
Limits Exemptions for Companionship Services and Live-in Domestic Service Workers
The Final Rule provides that the companionship services exemption is available only to the individual, family, or household solely or jointly employing the worker, and only if the companionship services duties test as described in the Final Rule is met. A third-party employer of direct home care workers, such as a home health care agency, may not claim the exemption for companionship services.
Domestic service workers who reside in the employer’s home and are employed by an individual, family, or household are exempt from the overtime pay requirement, although they must be paid at least the federal minimum wage for all hours worked. A third-party employer, such as a home health care agency, may not claim the overtime exemption for live-in domestic service workers, and must pay such workers at least the federal minimum wage for all hours worked and overtime pay at one and a half times the regular rate of pay for all hours worked over 40 in a workweek, even if the worker is jointly employed by the household.
Revises Record Keeping Requirements for Employers of Live-in Domestic Service Employees
The Final Rule imposes a record-keeping requirement for all employers of live-in domestic services employees. This new rule requires, among other things, that an employer keep and maintain a record of the exact number of hours worked by the employee.
Conclusions
The Final Rule will significantly impact employers’ ability to claim the companionship services exemption from the minimum wage and hour provisions of the FLSA. Third-party employers, such as staffing agencies, home health companies, and other health care providers, should be aware of the limitations imposed by the new rule and should begin preparing immediately to effectuate an orderly transition once the rule becomes effective on January 1, 2015.
