Update on FLSA Companionship and Live-In Exemptions Lawsuit

As reported in our Dec. 23 edition of Intelligence, a U.S. District judge has vacated a portion of new federal regulations governing the companionship and live-in services exemptions from certain wage and hour laws. Specifically, the court ruled, in Home Care Association of America v. David Weil, that the federal Fair Labor Standards Act exempts workers providing companionship and live-in services from certain wage and hour rules, regardless of whether they are employed by third-party employers or individual families and households. Thus, according to the court, the U.S. Department of Labor (DOL) cannot, by regulation, bar third-party employers (e.g., home care agencies) from claiming an exemption from wage and hour laws for workers delivering companionship or live-in domestic services. However, the court did not address the provision of the new regulations that narrowed the definition of companionship services and the scope of that exemption.

The plaintiffs have filed an emergency motion for a stay of the narrowed definition of companionship services, and a hearing on the motion has been set for tomorrow, Dec.31, 2014. If the regulation is not stayed, most home care workers in New York will be entitled to overtime based on their regular rate of pay, rather than minimum wage, as of Jan. 1, 2015. As described in more detail below, these requirements are in a state of flux, and providers should stay tuned for updates over the next several days.

The new DOL regulations had sought both to (i) bar home care agencies from claiming an exemption from the FLSA for companionship and live-in services; and (ii) narrow the definition of workers eligible for the “companionship exemption” under the FLSA, thus extending minimum wage and overtime provisions to most home care workers. The narrowing of the definition of companionship services remains in effect despite the judge’s ruling. Under the new definition, companionship services mean services that provide "fellowship and protection." Companionship services can no longer include any work that primarily benefits the entire household, and no more than 20 percent of a worker's hours per patient per week may be devoted to "care" tasks, such as dressing, toileting, feeding, meal preparation and bathing.

In New York State, the effects of the new regulations and the Weil decision will be felt principally in relation to overtime pay. Under New York State law, home care workers must be paid at least minimum wage (and in some areas of the State, a higher rate of pay based on living wage laws or wage parity) plus overtime. However, for these workers, overtime pay is currently calculated, under New York regulations, based on the minimum wage rather than the regular rate of pay. The new federal regulations would require that overtime be calculated based on the regular rate of pay.

Although the Weil decision allows agencies to continue to claim the companionship services exemption, it leaves untouched the narrower definition of companionship services and the resulting new requirement to pay a broader class of home care workers (those no longer classified as delivering "companionship services") overtime based on their regular rate of pay. Home care agencies seeking to use the companionship exemption after Jan. 1, 2015 must ensure that aides are engaged in fellowship and protection, do not spend more than 20 percent of their weekly hours per patient performing “care” services, and do not perform any work that primarily benefits members of the household other than the patient.

The Weil decision also allows home care agencies to continue to claim an exemption from the federal FLSA overtime requirements for live-in aides. The interactions of the new federal companionship exemption requirements, the federal definition of live-in services, the New York State regulations governing wages and hours for live-in aides and the court's decision remain unclear.

As the Jan. 1 effective date of the regulations approaches, it is important to recognize that the implications of the decision are uncertain, and the rules are in a state of flux. There are several key points to keep in mind:

The DOL is likely to appeal the Weil decision and/or seek a stay of the judge’s order.
On the other side, the plaintiffs have filed an emergency motion to stay the regulation's narrowed definition of companionship services, and a hearing has been set for Dec. 31, 2014.
The DOL has indicated that it will not enforce the regulations for six months. However, absent a stay of the new regulations, private actions by home care workers based on the new regulations could be filed as of Jan. 1.
The plaintiffs have so far sought summary judgment on a portion of their claims. Additional motions for summary judgments are anticipated.

With all of this in mind, providers should discuss with their counsels the implications of the decision for their caseload. Given the uncertain state of affairs, providers would be wise to proceed with preparations that were already underway to pay overtime based on the regular rate of pay to aides who may no longer qualify for a companionship or live-in exemption. However, providers should stand by for additional developments over the next few days.

The full text of the opinion is available by clicking here. The judge's order is available here.

Contact: Karen Lipson, klipson@leadingageny.org, 518-867-8383, ext. 124