The U.S. Court of Appeals Upholds Minimum Wage and Overtime Protections for Home Care Workers
On August 21, 2015, in Home Care Ass’n of America v. Weil, 799 F.3d 1084 (D.C. Cir. 2015), the U.S. Court of Appeals for the District of Columbia Circuit upheld the Department of Labor (DOL) rule extending the Fair Labor Standard Act’s (FLSA) minimum wage and overtime provisions to third-party-agency home care employees. With the rule expected to come into effect in January 2016, approximately two million home care workers will qualify for FLSA minimum wage and overtime protections. Charlie Sabatino & Caroleigh A. Newman, The New Status of Home Care Workers Under the Fair Labor Standards Act, 36 Bifocal 130, 130 (2015). The rule, promulgated by the DOL in 2013, made a few important changes: it revised and narrowed the definition of “companionship services,” and limited the parties who could claim the “companionship services” and “live-in domestic services” exemptions. Sabatino & Newman, supra, at 131–32.
Until recently, home care workers were excluded from FLSA regulations. Id. Although in 1974 FLSA expanded protections for domestic services employees such as “cooks, butlers, valets, maids, housekeepers, governesses, janitors, laundresses, caretakers, handymen, gardeners, footmen, grooms, and chauffeurs of automobiles for family use,” certain domestic service workers—including “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”—were exempted from both minimum wage and overtime requirements. Home Care Ass’n of Am., 799 F.3d at 1088 (citation omitted); Sabatino & Newman, supra, at 130–31. Moreover, “the exemptions applied regardless of whether you personally hired the individual worker or you contracted with an agency that provided the worker.” Sabatino & Newman, supra, at 131.
Due to dramatic change in the home care industry since 1970s, the DOL proposed regulatory amendments to remove third-party-agency employees from the minimum wage and overtime exemptions. Home Care Ass’n of Am., 799 F.3d at 1088. As the District of Columbia Circuit Court explained:
Until recently, the Department of Labor interpreted the statutory exemptions for companionship services and live-in workers to include employees of third-party providers. The Department instituted that interpretation at a time when the provision of professional care primarily took place outside the home in institutions such as hospitals and nursing homes. Individuals who provided services within the home, on the other hand, largely played the role of an “elder sitter,” giving basic help with daily functions as an on-site attendant.
Since the time the Department initially adopted that approach, the provision of residential care has undergone a marked transformation. The growing demand for long-term home care services and the rising cost of traditional institutional care have fundamentally changed the nature of the home care industry. Individuals with significant care needs increasingly receive services in their homes rather than in institutional settings. And correspondingly, residential care increasingly is provided by professionals employed by third-party agencies rather than by workers hired directly by care recipients and their families.
Id. at 1087. In other words, “the home care industry has become a major economic presence in health care services” and many of its workers are “dependent on it today for their livelihoods.” Sabatino & Newman, supra, at 131. Thus, the DOL’s “2013 revision of the rule was intended to address these societal changes in a realistic way, balancing the need for this growing workforce to be treated equitably with the challenges chronically ill or disabled individuals and their families face in maintaining a good quality and affordable life.” Id.
In 2014, trade associations representing home care agencies challenged the rule. Home Care Ass’n of Am., 799 F.3d at 1089. The trial court vacated the revised third-party-employer regulation holding that the Department exceeded its authority and bypassed congressional intent. Sabatino & Newman, supra, at 132. The District of Columbia Circuit Court disagreed and reversed. Home Care Ass’n of Am., 799 F.3d at 1097. The court explained that the DOL’s revised third-party-employer regulation was within its rulemaking authority, and it was reasonable exercise of such authority. Id. at 1090. Moreover, the court agreed with the DOL that bringing these certain home care workers within FLSA realm would be consistent with legislative intent as FLSA protections are “broadly construed so as to give effect to its remedial purposes, and exceptions are narrowly interpreted”. Id. at 1093. Accordingly, the DOL’s interpretation is consistent with Congress’s “evident intention to include within the coverage of the Act all employees whose vocation is domestic service.” Id. at 1094 (internal quotation marks omitted). Moreover, “home care workers employed by third parties are professional caregivers, often with training or certification, who work for agencies that profit from the employees’ services.” Id. According to the court, the DOL’s revision of the rules is reasonable due to “dramatic transformation of the home care industry” and the change in duties of a typical home care worker. Id. at 1095. Therefore, the DOL’s “departure from past policy is neither arbitrary nor capricious.” Id. Further, the court discounted home care agencies’ concerns that the policy change would make home care less affordable. Id. The court stressed that the policy would actually increase the quality of home care by reducing turnover and retaining talent. Id. at 1096.
The positive impact of the new rule on home workers cannot be overstated: “[t]he Bureau of Labor Statistics puts full-time personal care workers and home health aides near the bottom of the earnings scale at about $20,000 per year, yet it projects a growth rate of these occupations at nearly 50% between 2012 and 2022.” Sabatino & Newman, supra, at 132. Although there is a “remote possibility” of the case being heard by the Supreme Court, “the real focus of everyone’s efforts will be on adapting to the rule.” Id. at 133. Only time will tell how the new policy impacts the home care industry.
Aiste Palskyte is a third year evening student at the University of Baltimore School of Law where she is a Royal Shannonhouse Distinguished Scholar and a staff editor for the Law Review. She has graduated from Mykolas Romeris University in Vilnius, Lithuania. Currently Ms. Palskyte is a real estate law clerk at Ballard Spahr. Prior to joining Ballard Spahr, she worked for a downtown Baltimore firm specializing in toxic tort litigation.