On Tuesday, September 17, 2013, the Obama administration announced a new rule that narrows the companionship exemption under the Fair Labor Standards Act (FLSA) and extends minimum wage and overtime protections to individuals who provide in-home care to the elderly, ill and disabled.
IN-HOME HEALTH CARE WORKERS NOW ELIGIBLE FOR FEDERAL MINIMUM WAGE AND OVERTIME PAY
In the final regulation, which will take effect on January 1, 2015, the U.S. Department of Labor (DOL) made two major changes to the companionship exemption, which previously precluded in-home health care workers from federal minimum wage and overtime protections.
Under the new rule, individuals employed by home health care companies or third-party agencies, are entitled to be paid at least the federal minimum wage, as well as overtime pay. However, individuals employed directly by the person seeking assistance, or that person’s family or household may still fall under the companionship exemption.
The DOL also narrowed the definition of “companionship services,” a category previously exempt as part of “domestic services” employment under the FLSA. Now, the “companionship services” exemption will only apply if the worker assists with activities of daily living or tasks that help an individual live independently, provided that said care does not exceed twenty percent of the total hours worked in a workweek, and that the care is provided in combination with fellowship and protection. Individuals who perform medically related services for which training is usually required are not eligible for the companionship exemption under the new rule.
POLICY BEHIND THE CHANGES
Advocates for the new rule argued that in-home health care workers were wrongly classified in the “companionship services” exemption. Prior policy considerations for the exemption were based on the need to protect the elderly and disabled from being responsible for the hourly wages of an in-home care provider. Proponents of the new rule argued that this justification was no longer relevant because the in-home health care industry has been on an upward trend (valued at nearly $50 billion) and can afford the cost of higher wages and overtime pay. In fact, the federal government estimates that 6 million of the 40 million Americans over 65 years of age need some form of daily assistance to live independently. Officials predict that this number will double to 12 million by 2030.
In response, industry officials have said that the changes will cause an increase in Medicaid and Medicare spending, which will ultimately raises costs for individuals and families using such services, and will result in fewer in-home health care jobs because agencies will not want to pay additional wages and overtime pay. In a prepared statement, Chairman of the National Association for Home Care & Hospice, Andrea L. Devoti, said that the new rule “will mean that people will receive less care. Home care companies will have little choice but to employ workers part time rather than full time as Medicaid payment rates and consumers with limited incomes cannot afford higher costs. Caregivers will in the end receive less pay.”
Fifteen1 states currently extend state minimum wage and overtime protections to in-home health care workers. Six2 more states, and the District of Columbia, only extend state minimum wage requirements to these workers. While these states may be able to bear the costs of this new rule more easily than states that do not currently extend wage or overtime protections, in-home health care agencies will have just over a year to prepare for the new requirements.