Blocked by U.S. District Court — Elimination of Companionship Exemption for Home Care Agencies

December 31, 2014 by Stephen E. Zweig

The U.S. District Court for the District of Columbia has issued a Temporary Restraining Order (“TRO”) blocking the U.S. Department of Labor from enforcing the new definition of Companionship Services in its Final Rule on the Application of the Fair Labor Standards Act to Domestic Service Order (“Final Rule”), which was set to take effect tomorrow, January 1, 2015.  Last week, on December 22, this same court vacated the Final Rule’s differing treatment of home care agencies versus direct employers, such as individuals, families, and households, stating that both should benefit similarly from the “companionship services” and “live-in” exemptions under the Fair Labor Standards Act (“FLSA”).

The Final Rule defined “companionship services” to be primarily “fellowship” and “protection.” The FLSA’s companionship exemption from federal minimum wage and overtime rules would not have allowed any home care agency to apply this exemption and would have severely narrowed the exemption for direct employers. As a consequence, almost all current home care workers would be eligible for overtime pay.  In addition, under the FLSA’s “hours worked” rules, home care workers would also be eligible for wages for various non-service hours, such as travel time between cases, time at agency-required medical exams, etc.

We understand that the D.C. District Court has scheduled a briefing and a hearing on January 9, 2015 to determine whether a Preliminary Injunction should be issued and the judge indicated that he may rule on the preliminary injunction at the hearing, but he would rule no later than January 13, 2015.

During the time the TRO is in effect, home care agencies will have to decide whether to continue to pay their home care workers for all hours worked, as defined by the FLSA, certain of which they may not currently be paying for, and whether to pay overtime as required under New York law or as would be required under the Final Rule. Please contact us if you wish for further analysis of your agency’s particular circumstances and legal advice on the approach your agency should take.

If you have any questions regarding this Alert, please contact the author, Stephen Zweig, Partner in FordHarrison’s New York City office, who has counseled and defended home care agencies for over 30 years, at szweig@fordharrison.com, or the FordHarrison attorney with whom you usually work.

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