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D.C. Circuit’s Revival of U.S. DOL’s Final Rule is a Tough Hit to the Home Care Industry 

Wage & Hour Alert
August 28, 2015

The D.C. Court of Appeals August 21, 2015, decision to uphold the U.S. Department of Labor’s Home Care Final Rule eliminating the companionship and live-in domestic service exemptions for “third-party providers” is a blow for the already cash-strapped home care industry. The Final Rule requires that home health aides employed by third-party providers receive at least minimum wage and overtime at 1.5 times their “regular rate of pay” for all hours worked over 40 in a workweek. This is a significant departure from the U.S. Department of Labor’s longstanding position, which had extended the companionship and live-in exemptions to employees of third-party providers, and if fully implemented, will result in significant, additional costs to home care providers that are currently unreimbursed.

Days before the scheduled January 1, 2015, effective date of the Final Rule, a federal district court issued an order vacating its third-party employer provisions. The district court determined that Congress intended the companionship and live-in domestic service exemptions to be available to third-party providers of home care services. The D.C. Circuit flatly rejected this determination, finding that it was foreclosed by the Supreme Court’s decision in Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158 (2007). According to the D.C. Circuit, Coke vested the Department of Labor with the discretion to apply (or not to apply) the companionship-services and live-in exemptions to employees of third-party agencies.

The impact of the Final Rule varies from state to state. In the majority of states, which fully embrace the federal companionship and live-in exemptions, the Final Rule would extend minimum wage and overtime protections to home health aides for the first time. For employers in New York, where state regulation has only partially recognized the companionship and live-in exemptions, the primary impact of the Final Rule would be to increase the overtime rate from for aides from 1.5 times the New York minimum wage (currently 1.5 times $8.75, or $13.13 per hour) to 1.5  times the employee’s regular rate of pay, which for many aides is higher than minimum wage, especially for aides covered by New York’s Wage Parity Law.

In view of the ongoing litigation, the effective date of the Final Rule remains uncertain. The D.C. Circuit’s ruling will not become final until at least mid-October or potentially later, depending upon developments in the litigation. The home care industry litigants have stated that they intend to pursue an appeal to the U.S. Supreme Court. While the Department of Labor has indicated that it is not currently enforcing the Final Rule, some have suggested that private litigants might not be precluded from bringing lawsuits under the rule. Accordingly, home care providers should consult with their counsel regarding the Final Rule.