Caregivers to Earn Overtime

In newly-revised rules to become effective January 1, 2015, the Department of Labor has substantially narrowed the scope of the home companion exemption to the minimum wage and overtime provisions of the Fair Labor Standards Act (FLSA).

In 1974, domestic service employees were added as covered employees under the minimum wage and overtime pay provisions of the FLSA. A limited exception was carved out for "any employee employed in domestic service employment to provide companionship services for individuals who (because of age or infirmity) are unable to care for themselves (as such terms are defined and delimited by regulations of the Secretary [of Labor]) . . . ."  29 U.S.C. §213(a)(15). A year later, in 1975, the Secretary of Labor published rules discussing this limited minimum wage and overtime exemption at 29 C.F.R. Part 552. Although the rules have remained substantially unchanged since 1975, courts interpreting this exemption and regulations have differed on the scope and breadth of this exemption. Over time, and somewhat confusingly, the U.S. Department of Labor (DOL) has both expanded and contracted its enforcement of the scope and breadth of this exemption. The DOL has recently announced that home care workers employed through a third party are typically low paid and are in need of the protections of the minimum wage and overtime provisions of the Act.

As more aged and infirm individuals elect home care services rather than living in a nursing home or other institutional environment, the home care industry has expanded and evolved. The uncertainty surrounding this unsettled area of overtime rules has caused great confusion.

Under the newly-revised rules which become effective January 1, 2015, the DOL seeks to remove this uncertainty and offer protection to this group of employees by substantially narrowing the scope of the home companion exemption. Unless both the home worker and his duties meet the new rule's more restrictive definitions, the home worker is not exempt from the minimum wage and overtime pay provisions of the FLSA. Even more importantly, the exemption will no longer apply to home care workers provided by a third party employer – even if their duties would otherwise qualify as home companion duties under the new rules.

So, beginning January 1, 2015, home care agencies and other third-party employers must pay Direct Care Workers at least minimum wage for all hours worked (including travel time that is all part of the day's work) and overtime pay for all hours worked in excess of 40 in a workweek. If you have a business that employs this type of worker, you should prepare for the new requirements. Some of the issues that may arise when counting compensable hours (and overtime pay) for Direct Care Workers include:

• Workweek. Workers must be paid overtime if they work more than 40 hours in any workweek. If you do not already have one, you must establish a standard workweek and implement procedures to record and retain records of hours worked each workweek. 
• Travel. If workers travel during the day (say, from one residence to another), that time is compensable. Travel time from home to the office (or first appointment) at the start of the day as well as travel time from the office (or last appointment) to home at the end of the day generally does not have to be counted as work time. 
• Breaks. If workers take breaks or sleep while at a client's home, that time may be compensable work time. 
• Duties. It no longer matters what duties the Direct Care Worker is doing, whether it is viewed as direct care (such as helping the person to dress or eat) or domestic services (such as cleaning, cooking, laundry), it is all compensable (at no less than minimum wage) and counts toward hours worked for overtime purposes.

The DOL has committed substantial resources to identifying employers who do not comply with these rules, and the number of audits is increasing nationwide. Employers in general – and home care companies in particular – should ensure that their pay practices comply with the law. Without exaggeration, being on the receiving end of a DOL audit or an employee wage lawsuit can be financially devastating to a company. If a lawsuit ensues, employers typically are forced to pay wages found to be due to all affected employees going back two or three years, an equal amount as liquidated damages, and the employee's attorneys' fees (on top of the company's attorney fees). Awards in six figures are not uncommon.

If you have any questions regarding timekeeping and overtime generally, or are a home care company that must begin complying with these laws in January, please contact Karen Karr at kkarr@clarkhill.com | 480-684-1108, or your Clark Hill Labor and Employment Law attorney.