In a unanimous decision, the U.S. Supreme Court upheld a U.S. Department of Labor ("DOL") regulation that provides for an exemption from the minimum wage and overtime requirements of the federal Fair Labor Standards Act ("FLSA") for companions to the aged and infirm who are employed by home health agencies and other employers other than the family or household of the recipients of the companionship services. Long Island Care At Home, Ltd. v. Coke. In most states, the Court's decision is significant for employers who are in the business of providing such services. However, the FLSA requires employers to comply with applicable state laws or local ordinances that contain minimum wage and/or overtime hours requirements that are more favorable to employees than the FLSA. Therefore, the Supreme Court's decision does not apply to employees of third parties who provide such companionship services in states or localities that do not provide for the companionship exemptions available under the FLSA.

Factual Background and History of the Case

In 1974 Congress amended the FLSA to extend the federal minimum wage and overtime requirements to many domestic service employees not previously covered by the FLSA. At the same time, Congress created an exemption that excluded from FLSA coverage employees employed in "domestic service in employment" who provide "companionship services" for individuals who, because of age or infirmity, are unable to care for themselves. The exemption left it up to the DOL to define and delimit the terms of the exemption by regulations.

The DOL then issued two sets of regulations that were involved in the Coke case. The first set, designated as "General Regulations," defines "domestic service in employment" in relevant part as "services of a household nature performed by an employee in or about a private home . . . of the person by whom he or she is employed . . . such as cooks, waiters, butlers, valets, maids, housekeepers. . . ." The second set of DOL regulations, entitled "Interpretations," states that exempt companionship workers include those who are employed by an employer or agency other than the family or household using their services. The Supreme Court described this regulation as the "third-party regulation."

Evelyn Coke had been employed by Long Island Care at Home to provide companionship services to the employer's elderly clients in the clients' homes. In 2002 she sued her then former employer for minimum wages and overtime under the FLSA in the federal court for the Eastern District of New York. Long Island Care argued that Coke was an exempt employee under the companionship exemption and the DOL third-party regulation. The district court granted Long Island Care's motion for judgment on the pleadings, and Coke appealed to the U.S. Court of Appeals for the Second Circuit in New York. The Second Circuit reversed the district court, finding that the DOL's third-party regulation was unenforceable because it was outside the scope of authority Congress had delegated to the DOL, was inconsistent with the more general General Regulations and was an interpretative regulation to which the courts were not required to grant deference.

The Supreme Court's Decision

The Supreme Court reversed the Second Circuit and held that the third-party regulation was valid. The Supreme Court rejected each of the reasons given by the Second Circuit in support of that court's holding. First, the Supreme Court reasoned that the DOL had not exceeded its authority in promulgating the third-party regulation because Congress had specifically left the defining of terms used in the exemption to the DOL. Second, based on the legal principle that the specific normally controls over the general, the Court reasoned that the more specific third-party regulation controlled the General Regulation. Third, the Court found that the third-party regulation was not an interpretative regulation because the DOL complied with the notice and comment procedures established by the Administrative Procedure Act in promulgating it, and such procedures are not normally employed in promulgating interpretive regulations.

What the Decision Means for Employers

As a result of the Coke decision, home health agencies and other third-party employers of employees that provide "companionship services" for the aged or infirm are not required in most states to pay their employees who provide such services the federal minimum wage or overtime pay at one and one-half times their regular hourly rate for working hours in excess of 40 in a work week. "Companionship services" include household work related to care of the aged or infirm person, such as making beds, washing clothes and other similar services. Companions may perform other general household work; however, if such other work exceeds 20 percent of the employee's total hours of work in a week, the exemption is lost. "Companionship services" do not include services for the care and protection of the aged or infirm that require or are performed by trained personnel, such as registered nurses or licensed practical nurses. Those employees are entitled to payment of the federal minimum wage and overtime as covered domestic workers when working in the residence, unless some other exemption from FLSA coverage applies to them.

Third-party employers in states or municipalities whose laws or ordinances do not provide for an exemption from the state or local minimum wage and overtime requirements for employees that provide companionship services for the aged or infirm must comply with those requirements. Some states do not exempt such employees from coverage for the state minimum wage or overtime pay, or both, or they provide for different variations and conditions concerning the exemption from the state minimum wage and overtime requirements for employees who provide such services. By way of example only, Illinois law requires employers to pay the state minimum wage and overtime pay to employees who provide such companionship services in that state. Similarly, Michigan law requires the payment of the state minimum wage and overtime pay to employees of third-party employers who provide companionship services to the aged or infirm in that state. New York law requires the payment of the state's minimum wage to employees of third-party employers who provide such services, as well as overtime pay at the rate of time and one-half of the state's minimum wage, rather than the employee's regular rate. The law in Minnesota requires the payment of that state's minimum wage and overtime pay to such employees except for payment of a total of up to eight hours per 24-hour day if the employee stays overnight with the client and is paid the state minimum wage for four overnight hours. There are a number of variations in state laws. Therefore, third-party employers engaged in the business of providing companionship services for the aged or infirm should be aware of the state and local laws and regulations applicable to their operations in the states and localities in which they engage in business.