Spencer Fane LLP Logo

“Home Care Rule” Called Into Doubt by Federal Courts

A recent district court opinion invalidated the Department of Labor–Wage and Hour Division’s “Home Care Rule,” a regulation slated to become effective this year that would alter the scope of an exemption from the Fair Labor Standards Act’s (“FLSA”) minimum wage and overtime provisions. Health care employers that provide in-home care or in-home medical services to individual customers should watch this case closely. Whether the Home Care Rule is valid and enforceable will have major implications for the viability of many home care businesses.

The FLSA exempts certain domestic service employees from its coverage. Specifically, employees who provide companionship services for individuals who, because of age or infirmity, are unable to care for themselves are not entitled to minimum wages or overtime compensation under federal law.

The Department of Labor–Wage and Hour Division (“DOL”) had previously taken the position that this statutory exemption applied to all domestic service employees regardless of whether they were directly employed by the person receiving home care or employed by a corporate entity that serves a broad customer base of elderly and/or infirm individuals (i.e. a “third-party employer”). But in 2013, the DOL changed its mind and promulgated the Home Care Rule. The Home Care Rule is a regulation that limits the domestic service employee exemption such that it only applies to domestic care employees that are directly employed by the person receiving home care services. Under the Home Care Rule, third-party employers would be required to pay all their domestic service employees minimum wages plus overtime compensation. The Home Care Rule was slated to go into effect on January 1, 2015 and become enforceable on July 1, 2015.

The Home Care Association of America (“HCAA”) and other industry lobbying groups filed suit against the DOL under the Administrative Procedure Act (“APA”). They argued that such a dramatic change in the interpretation of FLSA Section 213(a) (15) must be accomplished by amending the underlying statute and could not be accomplished through the administrative rule making process.

In two key rulings, on December 22, 2014 and January 14, 2015, United States District Court Judge Richard J. Leon agreed with HCAA and held that the key components of the Home Care Rule are unenforceable as a matter of law.

In his December 22 ruling, Judge Leon found unenforceable the portion of the Home Care Rule that excluded employees of third-party providers from the exemption:

“Following the Coke decision, Congress contemplated adjusting the statutory language of the companionship exemption at least three times, but never did so. (citation omitted). Six bills were introduced – three in the House of Representatives, three in the Sentate – over the course of three Congressional sessions, where the sponsors were in the majority party of each, yet there was never sufficient support to get any of them to the floor of either house of Congress. This unequivocally represents the lack of Congressional intent to withdraw this exemption from third-party employers. 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. 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 Section 213. It cannot stand.” See Home Care Association of America v. Weil, Case No. 14-cv-967 (RJL), 2014 WL 7272406, at *8 (D.D.C. Dec. 22, 2014) (emphasis added).

In his January 14, 2015 ruling, Judge Leon granted Summary Judgment, vacating the portion of the Home Care Rule defining “companionship services”:

“[C]ompanionship services are services provided to elderly and disabled individuals who are ‘unable to care for themselves.’ Now the Department is attempting to issue a regulation that would write out of the exemption the very ‘care’ the elderly and disabled need, unless it were drastically limited in the quantity provided so as to be of little practical use.

. . .

Indeed, what services could possibly be required more by those ‘unable to care for themselves’ than care itself? Limiting that care to only 20 percent of a worker’s total hours defies logic, and Congressional intent.

. . .

Here, I am once again faced with a long-standing regulation left untouched by Congress for 40 years. . . . Thus, I cannot help but conclude that Congress’s intent in 1974 to exempt from minimum and overtime wage requirements domestic workers providing services, including care to the elderly and disabled, is still as clear today as it was forty years ago. Here, yet again, the Department is trying to do through regulation what must be done through legislation. And, therefore, it too must be vacated.” Home Care Association of America v. Weil, Case No. 14-cv-967 (RJL), 2015 WL 181712, at *5-6 (D.D.C. Jan. 14, 2015).

The DOL has appealed the December 22 and January 14 Orders. The full text of both Orders can be found by clicking the links below:

December 22, 2014 Opinion and Order

January 14, 2015 Opinion and Order