Rule Extending FLSA to Home Care Workers Struck Down

By Allen Smith Jan 2, 2015
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Sometimes a portion of a final rule can be struck down, rather than the entire rule.

That was the case when the U.S. District Court for the District of Columbia struck down the part of a U.S. Department of Labor (DOL) final rule making home care workers paid by third-party providers subject to minimum wage and overtime requirements.

Home Care Association of America, the International Franchise Association (IFA) and the National Association for Home Care & Hospice (NAHC) brought an action challenging the third-party regulation portion of the final rule under the Administrative Procedure Act as an arbitrary and capricious exercise of authority inconsistent with Congress’ language and intent. They claimed that, if allowed to stand, the rule would “have a destabilizing impact on the entire home care industry and … adversely affect access to home care services for millions of the elderly and infirm.

“By the department’s own numbers, approximately 90 percent of home health aides and personal care aides, which include those providing companionship services, are employed by third parties, rather than by the individual or family needing services,” the court observed. Congress included third-party providers in the companionship services and live-in domestic employee exemptions for a reason, it added.

40-Year Exemption

The court noted on Dec. 22, 2014, that “for over 40 years, Congress has exempted third-party providers of home care services from having to pay either minimum or overtime wages to their employees who provide domestic companionship services to seniors and individuals with disabilities, or to pay overtime wages to live-in domestic service employees.” The providers of home care services had been deemed to fit within the Fair Labor Standards Act companionship services and/or domestic employee exemptions until the DOL issued a final rule slated to take effect Jan. 1, 2015 (but which the DOL has announced won’t be enforced until June 30, 2015).

The rule was issued despite a U.S. Supreme Court decision involving a challenge to the validity of the long-standing inclusion of employees paid by third parties within the companionship services exemption. The Supreme Court concluded in Long Island Care at Home v. Coke, 551 U.S. 158 (2007) that the inclusion of employees paid by third parties was valid and binding.

“Undaunted by the Supreme Court’s decision in Coke, and the utter lack of congressional support to withdraw this exemption, the Department of Labor amazingly decided to try to do administratively what others had failed to achieve in either the judiciary or Congress,” the district court stated.

The court noted that six bills have been introduced to legislatively overturn the Coke decision but have failed to get out of committee. “The fact that the department issued its notice of proposed rulemaking after all six of these bills failed to move is nothing short of yet another thinly veiled effort to do through regulation what could not be done through legislation,” the court said (emphasis in original). “Such conduct bespeaks an arrogance to not only disregard Congress’s intent, but seize unprecedented authority to impose overtime and minimum wage obligations in defiance of the plain language” of the statute.

Contrary Congressional Intent

When determining whether an agency rule is entitled to deference, a court first considers whether Congress has directly addressed the question at issue. If it has, the inquiry goes no further, because the court and agency must follow the unambiguously expressed intent of Congress.

“The language of the exemption provisions is quite clear,” the district court said. “ ‘Any employee’ who is employed to provide companionship services, or who resides in the household in which he or she is employed to perform domestic services, is covered by the exemption,” it said (emphasis in original).

“The focus is on the type of the services provided, not who pays the check,” the court added. “As such, Congress has clearly spoken on this issue, and the department’s new, conflicting rule therefore cannot survive.”

Plaintiff Welcomes Decision

IFA Executive Vice President of Government Relations & Public Policy Robert Cresanti welcomed the decision, stating, “Earlier this year, the IFA united with the Home Care Association of America and the National Association for Home Care & Hospice to fight yet another example of regulatory overreach of power by the U.S. Department of Labor. By promulgating regulations to eliminate the overtime exemption for companion care workers, the administration threatened affordable care for seniors and the disabled and put many franchise small businesses and their employees in jeopardy by subjecting them to potentially unsustainable costs. Today’s victory is a small but important step in protecting clients, workers and local franchise business owners in the home care industry. While we are mindful that only part of the DOL’s damaging regulation has been vacated thus far, we are encouraged by the court’s willingness to hold the administration accountable for misguided policies pursued in defiance of congressional intent and legal precedent.”

NAHC President Val Halamandaris said he and other members of the coalition look forward to the next phase of the lawsuit, which will be designed to fully restore the companionship exemption.

DOL Criticizes Decision

The DOL issued a statement noting, “On Dec. 31, 2014, Judge Leon issued a temporary restraining order staying the revised definition of companionship services for 14 days, until Jan. 15, 2015, in order to consider a motion plaintiffs made for a temporary stay of that regulatory change. The court will hold a hearing regarding a preliminary injunction on Friday, Jan. 9, 2015, and will rule before the temporary stay lapses. The department stands by the rule and is opposing plaintiffs’ motion.”

The DOL added that “the final rule’s extension of minimum wage and overtime protections to most home care workers is the right policy—both for those employees whose demanding work merits these fundamental wage guarantees and for recipients of services who deserve a stable and professional workforce allowing them to remain in their homes and communities.”

This decision is Home Care Association of America v. Weil, No. 14-cv-967 (D.D.C. 2014).

Allen Smith, J.D., is the manager of workplace law content for SHRM. Follow him @SHRMlegaleditor.

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