Overtime Proposal for Home Care Workers Draws Criticism and Support

Comment period extended to March 12, 2012

By Stephen Miller, CEBS Feb 27, 2012

The Obama administration has made stepped-up enforcement of mandatory overtime pay under the federal Fair Labor Standards Act (FLSA) one of its hallmarks. While businesses mostly have striven to comply with U.S. Department of Labor (DOL) directives, a recent effort to expand overtime regulations to home health care "companion" workers has triggered a vigorous pushback from providers while receiving cheers from labor advocates.

The DOL's proposal to eliminate the longstanding overtime exemptions for workers in the companion care industry "will significantly raise the cost of care for seniors and negatively impact a growing sector of the economy responsible for creating thousands of new jobs," according to a cost-impact study by the International Franchise Association (IFA), a business group representing the home care industry.

"This is a solution to a problem that does not exist and will only harm those who need companion care the most, our nation's seniors," said IFA President and CEO Steve Caldeira. "By requiring overtime pay for companion care workers, the Department of Labor is continuing its track record of imposing costly, burdensome and unnecessary regulations at a time when an increasing number of seniors are enjoying companion care as a cost-effective alternative to traditional care. We urge the DOL to withdraw its proposal in light of the impact this regulation will have on workers, small business owners and clients, including many seniors, in the companion care industry."

The IFA report, Economic Impact of Eliminating the FLSA Exemption for Companionship Services, follows a Dec. 27, 2011, DOL Notice for Proposed Rulemakingthat would eliminate the exemption from the FLSA's minimum wage and overtime provisions for workers who provide companionship services and live-in domestic services. A comment period was originally set to end on Feb. 27, 2012. After reviewing requests for an extension of up to 90 days from members of Congress and the public, including several home care providers, the comment period was extendedto March 12, 2012. (Comments may be submitted through regulations.gov.)

The IFA report, prepared from a survey of 542 franchise businesses in the home care sector, contends that:

  • The average amount of overtime worked by companion care employees in franchise agencies is three times greater than DOL's estimate. One out of 10 home health care companion clients requires 24-hour, live-in service, and one out of four clients requires more than 40 hours per week of companion care services.
  • DOL's analysis understates other expenses, such as not considering additional management costs for adding staff to avoid paying overtime.
  • The impact of price increases on customers to cover additional overtime costs was underestimated greatly. Home care agencies expect that nearly one quarter (23 percent) of their clients will be forced to seek institutional care or "underground services" from unlicensed providers if the proposal is enacted.

Home Care Industry Pushes Back

According to the IFA's survey, 78 percent of companion care franchise business owners expect the DOL's proposed rule changes to have a significant impact on their business, 69 percent expect a significant increase in costs, and 75 percent expect to raise fees to their clients if the DOL rules are enacted.

"Surveys consistently show that 85 to 90 percent of seniors prefer to age in their homes," said Roger Baumgart, CEO of Home Instead Inc. "The Department of Labor's proposed rule change jeopardizes the ability of seniors and those with disabilities to enjoy the benefits of home health care."

"If this rule is adopted, it will move caregivers to an unregulated 'underground' market as clients will no longer be able to pay for live-in care through a regulated agency," said Ben Solomon, owner and administrator at Right At Home—Northwest Homecare & Staffing Services. "Caregivers will lose take home pay as clients will not be able to pay overtime, resulting in an overall loss in jobs. Less taxes will be collected as more caregivers will be paid under the table and not report their income."

Labor Advocates Voice Support

Advocates for companion care workers have a different view. "Our nation’s 1.7 million home care workers are currently excluded from the basic minimum wage and overtime protections … that most other workers have depended on for decades," states a report from the National Employment Law Project, Fair Pay for Home Care Workers: Reforming the U.S. Department of Labor’s Companionship Regulations Under the Fair Labor Standards Act.

The result of a lack of overtime pay for home care workers been suppressed wages, "consigning millions of caregivers—the overwhelming majority of them women, many of them immigrants and women of color—to working poverty," the group said. It added, "Long hours are not only grueling for workers but can contribute to worse care for patients, as caregivers working 60 hours or more a week face fatigue and stress in performing what is a demanding job under any circumstances. These substandard working conditions have created very serious employee recruitment and retention problems, generating labor shortages that prevent us from meeting the nation’s rapidly growing need for home care."

This group's policy brief urges the DOL "to exercise its broad discretion to restore the companionship exemption to its properly narrow scope, thereby extending wage and hour protections to most of our nation’s home care workers."

Stephen Miller, CEBS, is an online editor/manager for SHRM.

Related Articles—SHRM:

Proposed Rule Would Narrow Application of FLSA Exemption, SHRM Online Legal Issues, December 2011

Survey: FLSA Inhibits Workplace Flexibility Policies, SHRM Online Legal Issues, November 2011

Wage and Hour Agency’s Recordkeeping Plans Concern Employers, SHRM Online Legal Issues, July 2011

Health Care Industry Targeted in FLSA Enforcement, SHRM Online Legal Issues, August 2010

Related Article—External:

A Shift from Nursing Homes to Managed Care at Home, New York Times, February 2012

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