What Happened?

The ongoing legal battle over the U.S. Department of Labor (DOL) Final Rule changing the definitions of “companionship services” and live-in domestic employees again turned against employers on August 21, 2015. The US Court of Appeals for the D.C. Circuit issued its decision in Home Care Association of America v. Weil and unanimously reversed a lower court decision holding the DOL exceeded its authority when it issued the Final Rule. The Final Rule was to take effect on January 1, 2015, but enforcement was stayed pending the appeal.

What Changes in the Final Rule?

Companionship services are redefined as follows:

“Fellowship and Protection” is redefined as follows:

“Care” is redefined as follows:

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. The exemption is unavailable even when the employee is jointly employed by the third-party employer and the individual, family, or household using the services. However, the individual, family, or household may claim any applicable exemption.

What Now?

The plaintiffs representing the home care industry recently announced plans to appeal the D.C. Circuit’s decision to the U.S. Supreme Court, so the final outcome is uncertain. For now, employers in states such as North Carolina and South Carolina without state laws already requiring minimum wage and overtime pay for these employees are back where they were in December 2014: facing the prospect of having to pay minimum wage and overtime to companionship services employees and live-in domestic service employees, and having to satisfy all recordkeeping requirements under the FLSA for these employees. Employers can potentially reduce wage expenses by managing schedules and staffing to minimize overtime (e.g., 40-hour workweeks only, or split schedules such as 25-hour workweeks followed by 50-hour workweeks) and by lowering base wages to reduce the overtime impact, keeping in mind they must pay at least minimum wage. Alternatively, employers can hire additional staff and split client services among multiple staff members to reduce or eliminate overtime obligations.

The August 21, 2015 order from the D.C. Circuit Court of Appeals became effective October 13, 2015 because the opponents of the Final Rule were not successful in having that date stayed pending further appeal. DOL did not begin enforcement of the Final Rule until November 12, 2015. From November 12, 2015 through December 31, 2015, DOL will exercise discretion in whether to enforce the Final Rule, with consideration given to the extent to which employers make good faith efforts to comply with the Final Rule. Full enforcement of the Final Rule will begin January 1, 2016. In addition to DOL enforcement of the Final Rule, individual employees might file FLSA lawsuits claiming violations of the law. Prudent employers should consult with employment counsel about best strategies for managing this risk while the legal process continues to the Supreme Court.

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