On September 17, 2013, the Department of labor (DOL) issued a final rule concerning application of the Fair Labor Standards Act (FLSA) to domestic service workers.

The Final Rule, effective January 1, 2015, contains several significant changes from the prior regulations, including: (1) the tasks that comprise “companionship services” are more clearly defined; (2) the exemptions for companionship services and live-in domestic service employees are limited to the individual, family, or household using the services; and (3) the recordkeeping requirements for employers of live-in domestic service employees are revised.

The major effect of this Final Rule is that more domestic service workers will be protected by the FLSA’s minimum wage and overtime provisions.

Under the Final Rule, third party employers of direct care workers (such as home care staffing agencies) are not permitted to claim either the exemption for companionship services or the exemption for live-in domestic service employees. Third party employers may not claim either exemption even when the employee is jointly employed by the third party employer and the individual, family, or household using the services.

As a result of the rule change, employees performing companionship services for third-party employers must receive overtime pay for all hours worked in excess of 40 hours a work week, at a rate of not less than time and one-half their rate of pay. Under the FLSA, there are two elements to the determination of whether an employee has been paid the correct amount of overtime: (1) whether the employer correctly determined the number of hours worked (“work time” issue); and (2) whether the employer correctly calculated the employee’s regular rate (“regular rate” issue).

With respect to the work time issue, depending on the circumstances, work time might include time spent traveling, performing pre and post-shift work, sleeping, while on-call, in training, while on rest breaks and during meal periods. With respect to the regular rate issue, an employee’s regular rate could be effected by : (1) on-call pay; (2) bonuses promised for accuracy of work, good attendance, continuation of the employment relationship, incentive, production, and quality of work; (3) retroactive salary increases; (4) shift differentials; and (5) longevity pay.