In a memorandum opinion issued December 22, 2014,1 the U.S. District Court for the District of Columbia struck down some, but not all, of the revised companionship services regulations (the “Regulations”) that are currently set to become effective on January 1, 2015. The ruling comes out of a legal challenge brought against the United States Department of Labor (“DOL”) by several trade associations (the “Plaintiffs”). The Plaintiffs’ complaint alleged that the Regulations were an arbitrary and capricious exercise of the DOL’s authority and were contrary to the language of the underlying statute and Congress’s intent.

The Plaintiffs argued that, at least as to part of the case, the parties had agreed on the facts, and therefore the Plaintiffs were entitled to win as a matter of law. Specifically, the Plaintiffs argued that when DOL revised the Regulations to exclude the application of the exemption to third party employers, the DOL ignored the clear wording of the underlying statute. The Plaintiffs claimed that the statute did not distinguish based upon the employee’s mode of employment – directly by the family or by a third party but distinguished between employees based upon their job duties.

In a strongly worded opinion, the D.C. Circuit agreed with the Plaintiffs. The D.C. Circuit reviewed the history of both the statute and regulation. The Court also touched on Evelyn Coke v. Long Island Care at Home (“Coke”) and the unsuccessful legislative efforts to alter the companionship services exemption in the wake of Coke. In reviewing this history, the Court noted how the DOL had previously considered the position of companions employed by third party employers. At that time, the DOL had “contemplated the question of whether employees of third parties should be exempt,” but the DOL had concluded that the exemptions applied only to those employees engaged in the enumerated services.

The Court noted that the U.S. Supreme Court had concluded the third party rule was valid and binding in Coke and that despite the introduction of several bills into both Chambers of Congress after Coke, the statute had remained unchanged. The Court stated that the DOL “undaunted by the Supreme Court’s decision in Coke and the utter lack of Congressional support to withdraw this exemption, the [DOL] amazingly decided to try to do administratively what others had failed to achieve in either the Judiciary or Congress.” The Court concluded that, based upon this history, Congress had spoken directly to whether or not third party employers should be excluded from this exemption.

The Court specifically overruled the DOL regulation that excludes third party employers from using the companionship services exemption. In doing so, it restores the exemptions availability to third party employers, such as home health agencies, hospice agencies and private duty agencies. However, the Court did not address other changes the Regulations make to the definition of companionship services. The Plaintiffs challenged those changes as well, but it appears those challenges will be dealt with in the future. This case is still ongoing, and it is possible additional favorable rulings will be forthcoming.

Because of this ruling, the companionship services exemption (the “Exemption”) is again available to third party employers. Unfortunately, the Regulations included a revised definition of “companionship services” that is much narrower than the previous definition. Note, the revised definition of companionship services is limited to individuals who are truly providing companionship services and not hands-on care. The Exemption defines companionship services as “the provision of fellowship and protection for an elderly person or person with any illness, injury, or disability who requires assistance in caring for himself or herself.”2 Companionship services also include the provision of care if the care is provided: (1) attendant to and in conjunction with the provision of fellowship and protection; and (2) if it does not exceed 20% of the total hours worked per person and per workweek. The Exemption is intended to apply to those direct care workers who are performing elder sitting rather than the professionalized workforce for whom home care is a vocation.

The narrower definition of the Exemption in the Regulations, which expressly limits the amount of hands-on care a companion provides, means home health aides, hospice aides and similar non-skilled hands-on care givers will, in most cases, still not qualify for the exemption.   Because of this narrower definition of companionship services, providers must still consider how to address overtime for these employees. This ruling does, however, mean that for certain hands-off companion workers, such as some overnight/sleep shift employees, or those the DOL referred to as “elder sitters” in the comments to the final regulation, the exemption is once again an option. For example, overnight employees who provide no hands-on care but are simply present in the patient’s home for patient safety might make the exemption. These “hands-off” individuals may once again be exempt from overtime and minimum wage. Providers who have been struggling with how they will handle overnight services should consider this ruling and the exemption, as this may ease some of the hands-off employee burdens.