Hunton Employment & Labor Perspectives

On December 22, 2014, the U.S. District Court for the District of Columbia vacated a new U.S. Department of Labor (DOL) regulation, scheduled to take effect on January 1, 2015, which eliminated an exemption from the Fair Labor Standards Act (FLSA) for employees who provide home companionship and live-in domestic services. Home Care Ass'n of Am. v. Weil, No. 14-cv-967 (D.D.C. Dec. 22, 2014). The DOL's new regulation was controversial not only because it reversed years of precedent under the FLSA, but because many questioned whether the DOL had exceeded its authority in promulgating this regulation.

The FLSA requires employers to pay employees a minimum wage for all hours worked, and overtime for hours worked in excess of 40 hours/week. Certain categories of employees are exempt from these requirements, including (since a 1974 amendment to the FLSA) those who provide in-home "companionship services," caring for elderly people or those with physical or mental impairments and who are employed by a third party, such as an agency. The exemption was intended to make companionship services more affordable for those responsible for elderly or disabled individuals. DOL regulations required that the companion spend at least 80% of his or her total weekly hours caring for the elderly or disabled; no more than 20% of that time could be dedicated to traditional household chores, such as dusting, vacuuming and doing laundry.

Over time, the home health industry expanded dramatically, and the exemption became increasingly controversial, particularly in light of public debate about the minimum wage. The United States Supreme Court addressed a challenge to the companionship exemption in Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158 (2007), in which a home aide argued that she should have received minimum and overtime wages under the FLSA. The Supreme Court disagreed, and upheld the exemption for employees who provided home companionship services through a third party, such as a home health agency. (In certain states, however, home companions sometimes were subject to minimum wage and overtime requirement.)

In the aftermath of the Court's decision in Coke, several bills were introduced in Congress to eliminate the exemption for third-party home care service providers. None of these bills, however, generated enough support to make it to the floor of either house of Congress.

Faced with the Coke decision and legislative inaction on this issue, the DOL decided to modify the exemption through administrative action. After giving notice of the proposed rulemaking, and receiving over 26,000 comments, the DOL issued a final regulation on October 1, 2013 which eliminated the exemption for home care workers who were employed by third parties.

The DOL's new rule narrowed the critical definition of "companionship services" in the domestic services regulations by eliminating "care" from a companion's approved list of duties; companions now would be employees who provided only fellowship and protection. Although they could provide incidental "care" services, such as bathing, dressing and toileting, such duties could not take more than 20% of their time in any work week. Further, the new regulation provided that workers who performed any household work during a work week would lose the exemption for that week. See Application of the Fair Labor Standards Act to Domestic Service, 78 Fed. Reg. 60, 454 (Oct. 1, 2013).

The home care industry protested that the new regulation would make the cost of home care prohibitive to families and destroy the economic model on which it operated, and challenged the regulation in court by filing Home Care Association of America v. Weil on June 6, 2014. On December 22, 2014, shortly before the new rule was to take effect, Judge Richard Leon of the U.S. District Court for the District of Columbia issued a decision in the Home Care Ass'n case which invalidated the portion of the new DOL regulation that had eliminated the third-party exemption.

The court found that Congress intended the exemption to apply to all employees who provide companionship and live-in domestic services. The DOL was not authorized to change the scope of the exemption by creating an artificial distinction between home care workers who are employed directly by their clients and those who are employed by a third party. The court noted with disapproval that the agency issued its notice of proposed rulemaking after Congress' several failed attempts to pass legislation, which was "nothing short of another thinly veiled effort to do through regulation what could not be done through legislation." Home Care Ass'n of Am. v. Weil, No. 14-cv-967, slip op. 17 (D.D.C. Dec. 22, 2014). It remarked that "Congress surely did not delegate to the Department of Labor here the authority to issue a regulation that transforms defining statutory terms into drawing policy lines based on who cuts a check rather than what work is being performed." Id. at 11.

Two days after the Court's decision, the Plaintiffs moved to stay the changes in the definition of "companionship services," arguing that the new, narrower, definition would effectively repeal the statutory exemption. Judge Leon granted the motion and issued a temporary restraining order. On January 14, 2015, the court vacated the DOL's revised companionship services definition. The court found that while Congress explicitly delegated authority to the DOL to define the term, Congress intended the definition to include the provision of care. The court remarked that the DOL was, yet again, "trying to do through regulation what must be done through legislation." Home Care Ass'n of Am. v. Weil, No. 14-cv-967, slip op. 12 (D.D.C. Jan. 14, 2015).

Although the DOL may appeal the court's ruling, the decision is an important win for third-party home care providers. Third-party home care providers should proceed with caution, however, as state laws may still require minimum and overtime wages.