On September 17, 2013, the U.S. Department of Labor’s (DOL) Wage and Hour Division (WHD) released its long-awaited final rule on the application of the Fair Labor Standards Act (FLSA) to domestic service workers. The final rule, set to become effective January 1, 2015, makes significant changes to the FLSA’s so-called “companionship exemption” - most notably, eliminating the exemption’s application to direct care workers employed by third-party agencies. As a result of the final rule’s changes, the vast majority of professional caregivers, i.e., home-healthcare workers, will no longer be exempted from the FLSA’s minimum wage and overtime requirements.

Almost 40 years ago, Congress amended the FLSA to extend minimum wage and overtime protections to most domestic service workers; however, in doing so, it specifically exempted persons employed “to provide companionship services for individuals who (because of age or infirmity) are unable to care for themselves.” Under existing regulations, this “companionship exemption” applies to most direct care workers including home health aides, personal support aides and certified nursing assistants, so long as those workers do not spend more than 20 percent of their time performing general household work and do not perform services requiring advanced medical training, such as that of a registered nurse. The Supreme Court’s 2007 opinion of Long Island Care at Home, Ltd. v. Coke clarified that the companionship exemption applies not only to home-healthcare workers employed directly by a member of the home in which they work, but also to such workers employed by third-party agencies.

The final rule changes existing wage-and-hour law in two significant ways. First, as noted above, the final rule effectively overturns the Supreme Court’s opinion in Coke by making the companionship exemption inapplicable to home-healthcare workers employed by agencies or any other third-party, regardless of the type of duties those workers are performing.

Second, with respect to those workers employed directly by a member of the home in which they work, the final rule narrows the scope of the exemption to true elder sitter-type duties. Under the final rule’s revised definitions, “companionship services” means the provision of fellowship and protection for an elderly person or person with an illness, injury or disability who requires assistance in caring for him or herself. “Fellowship” is in turn defined as engaging the person in social, physical and mental activities, and “protection” is defined as being present with the person in his or her home, or to accompany the person when outside the home to monitor the person’s safety and well-being. Traditional “care” activities may still be performed without losing the exemption, but only if such care activities are provided attendant to and in conjunction with fellowship and protection activities and do not exceed 20 percent of the worker’s total hours worked per person and per workweek. The provision of medically-related services is specifically excluded from the definition of “companionship services.”

The DOL estimates that the final rule will extend the FLSA’s minimum wage and overtime protections to almost two million workers, almost all of whom are employed by home-healthcare agencies. As a result of this sea change in the law, agencies will need to ensure that their home-healthcare employees are paid at or above the minimum wage for each hour worked and are paid time-and-a-half for all hours worked over 40 in a given week. Agencies will also need to ensure that such workers are paid for travel and waiting time between patient visits, to the extent required by the FLSA, to avoid potential “gap time” claims in addition to claims for failure to pay minimum wage and/or overtime.