Reversing a decision by the United States District Court for the District of Columbia, an August 21, 2015 decision by the Court of Appeals for the District of Columbia Circuit in Home Care Association of America v. Weil (pdf) has approved a regulation by the United States Department of Labor (“DOL”) extending federal minimum wage and overtime protections to home care workers and live-in domestic service employees employed by third parties.

We previously wrote about the decision by the District Court for the District of Columbia that vacated a DOL regulation that had been scheduled to go into effect January 1, 2015. The regulation would have eliminated a long-existing prior regulation and would have barred third-party employers from claiming minimum wage and overtime exemptions for “companionship” domestic service workers and live-in domestic service employees. The same court later also vacated a new, narrower definition of “companionship services.”

The D.C. Circuit thoroughly rejected the district court’s analysis and held that under the Supreme Court’s decision in Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158 (2007), the question of whether to include workers paid by third parties within the scope of the statutory exemptions for companionship series and live-in domestic service employees was within the discretion of the DOL under its general grant of authority to promulgate implementation regulations.

The D.C. Circuit further found that the new, narrower construction of the statutory exemption was appropriate and consistent with a Congressional intention to include within FLSA coverage employees whose vocation is domestic service, rather than the type of assistance provided by a neighbor or an “elder sitter,” and that this construction was not arbitrary and capricious because DOL justified its shift in policy based on the changes in the industry since the prior regulation issued in 1975.

Finally, the D.C. Circuit rejected arguments that the new regulation would make home care less affordable and create an incentive to re-institutionalize the elderly and disabled, in particular relying on a lack of evidence that this had occurred in states that already had minimum wage and overtime projections for third party-employed home care workers.

Home health care providers already work on narrow margins and typically cannot recover overtime costs from the Medicare, Medicaid or other government program that pay for most of their services only at a flat hourly rate (which sometimes does not reflect recent increases in state and local minimum wages). Providers in states where the exemption was previously available will now have to absorb the costs of any overtime pay. In many cases, this will mean changing schedules to limit to the number of hours a home health care provider works (thereby causing a reduction in the provider’s income rather than an increase) and hiring additional staff (with attendant additional administrative costs) to cover the hours that a single provider previously worked. This may also be be disruptive to the persons receiving the services, who may prefer having the same persons come every day, rather than multiple providers.

If no further review is sought, the previously vacated regulations could go into effect as early as September 21, 2015. Accordingly, home health providers should begin planning for this transition now. Note, however, that a petition for rehearing or for hearing en banc would delay effectiveness until two weeks after the petition is ruled upon. Also, if review is then sought before the Supreme Court, a stay may be sought. It is also possible that DOL will announce some type of transitional limited enforcement policy, similar to the policy it previously announced (pdf) of not bringing enforcement actions for the first six months of 2015 and exercising “prosecutorial discretion” in the next six months based on the extent to which there had been good faith efforts to bring home care programs into compliance. Home health providers should watch for DOL pronouncements in this regard.