On August 21, 2015, the U.S. Court of Appeals for the District of Columbia Circuit ruled in favor of the Department of Labor’s companionship rule that extended minimum wage and overtime coverage to home care workers in Home Care Association of America v. Weil.i The Final Rule was set to go into effect on January 1, 2015; but in December 2014, the U.S. District Court for the District of Columbia invalidated the Department of Labor’s (“DOL”)’s new regulation.ii The DOL appealed, and the D.C. Court of Appeals overturned the district court and upheld the DOL’s rule as a proper exercise of its rule-making authority.

The Fair Labor Standards Act (“FLSA”) requires that covered employers pay minimum wage and overtime compensation for any non-exempt employees.iii These protections were extended to employees in “domestic service.”iv Employees in “domestic service” are typically “private household workers,” that perform “in or about the private home of the employer.”vHowever, certain categories of domestic-service workers are exempted from the FLSA’s minimum wage and overtime requirements.vivii

In 1975, the DOL adopted regulations and found that the exemptions for companionship services and live-in workers included individuals who were employed by an employer other than the family or household using the individual’s services.viii

[C]ompanionship services shall mean those services which provide fellowship, care, and protection for a person who, because of advanced age or physical or mental infirmity, cannot care for his or her own needs. Such services may include household work related to the care of the aged or infirm person such as meal preparation, bed making, washing of clothes, and other similar services. They may also include the performance of general household work: Provided, however, That such work is incidental, i.e., does not exceed 20 percent of the total weekly hours worked.ix

Due to the changing landscape regarding long-term home care, on September 17, 2013, the DOL announced a Final Rule that reversed its 1975 regulations and extended the FLSA’s guarantee of minimum wage and overtime to home health care workers that were employed by third-parties.

The revised regulations explicitly state that “third party employers of employees engaged in companionship services . . . may not avail themselves of the minimum wage and overtime exemption provided in section [2]13(a)(15),”x and that “third party employers of employee engaged in live-in domestic service employment . . . may not avail themselves of the overtime exemption provided by section [2]13(b)(21).xi” “Companionship services” is also narrowed and re-defined to include provision of care such as “meal preparation, driving, light housework, managing finances, assistance with physical taking of medications, and arranging medical care,”—provided that this does not exceed 20% of the total hours worked.xii

The Court of Appeals determined that Congress intended for the FLSA’s protections to extend to workers employed by third parties as professional caregivers.xiii The Court found that when Congress first enacted the companionship exemption the majority of the household workers were employed directly by a member of the household, rather than third-party agencies.xiv Further, the duties of home care workers have changed since the exemption was first enacted—

[i]n the 1970s, many individuals with significant needs received care in institutional settings rather than in their homes. Since that time, there has been an increased emphasis on the value of providing care in the home and a corresponding shift away from institutional care. . . . [D]ue to significant changes in the home care industry over the last 25 years, workers who today provide in-home care to individuals needing assistance with activities of daily living are performing types of duties and working in situations that were not envisioned when the companionship-services regulations were promulgated.xv

The Court refused to accept the position that eliminating this exemption as applied to home care workers would increase the cost of this service and would increase institutionalization of the elderly and disabled.xvi The fact that 15 states had already provided minimum wage and overtime protections to this type of worker undercut these arguments.xvii The Court found reasonable the DOL’s position that the rule would improve the quality of home care services because it would create a more stable workforce, reduce turnover, and attract qualified workers.xviii

Accordingly, employers of home care workers can no longer claim the companionship exemption. Home care workers, including live-in workers, employed by a third-party are entitled to minimum wage and overtime. Barring a stay and successful appeal, home care providers must comply with the FLSA’s minimum wage and overtime requirements now when using home health aides, hospice aides and attendants, and other similar workers for companionship services.

Home Care Association of America et al., have 14 days, or until September 4, to decide whether they will continue their fight against the DOL.xix If the parties do not file a petition for rehearing, the Court of Appeals must issue a mandate to the District Court no later than September 11, 2015, after which time the District Court will enter a judgment in favor of the DOL.xx The Final Rule, originally set to go into effect on January 1, 2015, will become effective as soon as the United States District Court for the District of Columbia complies with the Court of Appeals’ mandate.