Update on DOL Home Care Rule

Two important developments occurred this week regarding the Department of Labor’s (DOL’s) Home Care Rule limiting the use of the companionship exemption to the wage and hour requirements of the Fair Labor Standards Act (FLSA). The Department of Justice (DOJ) and the Director of the Office for Civil Rights (OCR) for the Department of Health and Human Services (HHS) issued a joint letter signaling that states who cap direct support professionals’ (DSP’s) hours in response to the new rule may violate their Olmstead obligations if they don’t include an exceptions process to ensure that those caps don’t lead to increased segregation. Meanwhile, a federal judge indicated that he would issue at least a partial ruling on a District Court case in which a group of home care providers are suing the DOJ to halt implementation of the rule before the rule’s effective date of January first, 2015.

DOJ and HHS Issue Joint Letter Calling for Exceptions Processes to Capping DSP Hours

The Acting Assistant Attorney General/Director in the Civil Rights Division of the Department of Justice (DOJ) and the Director of the Office for Civil Rights (OCR) for the Department of Health and Human Services (HHS) have issued a “Dear Colleague” letter reminding states to be cognizant of their Olmstead obligations as they make program adjustments in reaction to the Department of Labor’s (DOL’s) Home Care Rule. In the letter, the two federal agencies point out that “it is important that states implement the Department of Labor’s rule in ways that also comply with their obligations under Title II of the Americans with Disabilities Act (ADA).” The letter indicates that states who are considering capping direct care workers’ hours must create exceptions processes to ensure that such limits don’t put individuals at risk of institutionalization or segregation.

The Civil Rights Division and OCR “encourage states to conduct a thorough analysis of all their home care programs to determine whether any changes must be made to comply with the FLSA [Fair Labor Standards Act] once the Home Care Rule becomes effective.” In particular, the letter says, “because home care workers, such as personal care assistants and home health aides, often provide essential services that enable people with disabilities to live in their own homes and communities instead of in institutions, states should consider whether reasonable modifications are necessary to avoid placing individuals who receive home care services at serious risk of institutionalization or segregation.” The letter emphasizes that “a state’s obligation to make reasonable modifications to its policies, procedures, and practices applies even when a home care program is delivered through non-public entities.”

The two agencies directly address the strategy some states are adopting to set limits on or cap direct care workers’ hours or travel time. While acknowledging “states’ budgetary constraints,” the letter warns that “implementation of across-the-board caps risks violating the ADA if the caps do not account for the needs of individuals with disabilities and consequently places them at serious risk of institutionalization or segregation.” If a state prohibition on home care workers exceeding 40 hours a week of work, leads to service reductions because of scarcity of workers, or to issues with individuals, particularly those with extraordinary medical or behavioral needs, who can’t tolerate multiple workers in their home, the state may be violating its Olmstead obligations.  Emergency situations may also arise, the letter points out, “where a scheduled second worker is not available and the individual’s home care support needs would not be met without immediate authorization of overtime hours and pay.”

Therefore, the letter calls on states to “consider reasonable modifications to policies capping overtime and travel time for home care workers, including exceptions to these caps when individuals with disabilities otherwise would be placed at serious risk of institutionalization.” States should also “consider implementing processes that reliably and expeditiously enable individuals with disabilities to obtain cap exceptions when they are warranted.” Finally, where implementation of the Home Care Rule disrupts services, states should “collect and monitor data to ensure that the service disruption does not place individuals with disabilities at serious risk of institutionalization.”

Judge to Rule on Whether DOL can Enforce Third Party Employer Restriction on Companionship Exemption

On Friday, June 6, 2014 the Home Care Association of America (HCAA), the International Franchise Association (IFA), and the National Association for Home Care & Hospice (NACHH) filed a lawsuit in the United States District Court for the District of Columbia alleging that the Department of Labor’s changes to the FLSA companion exemption rule violate Federal law. The suit argues that the rule “illegally discriminates in the application of the FLSA exemptions based on the identity of the employer” by declaring that third party employers of employees covered by the exemptions “may not avail themselves” of the exemptions. The plaintiffs also claim that “the new Rule further departs from the statute and Congressional authority by significantly narrowing the types of companionship services that will be considered exempt for the few remaining employees who are not employed by third parties.” The suit asks that the regulation “be declared unlawful and set aside prior to its effective date.” The presiding judge has indicated that he will issue a ruling of some kind on the first issue, the question of the third party employer prohibition, before rule goes into effect on January first.

As the case brief points out, the FLSA statute “exempts from both the minimum wage and overtime compensation requirements of the Act ‘any employee employed in domestic service employment to provide companionship services for individuals who (because of age or infirmity) are unable to care for themselves (as such terms are defined and delimited by regulations of the Secretary).’” Therefore, the plaintiffs argue, prohibiting third party employers from making use of the exemption is tantamount to “require[ing] employers to pay overtime pay to employees who are otherwise exempt from the Act’s requirements,” a move the suit asserts exceeds DOL’s legal authority and the plain language of the statute. That is, because the statute applies the exemption to a type of employee, rather than a type of employer, the provision in the new rule prohibiting the use of the companionship exemption on the basis of the type of employer (i.e., third party) violates the clear language of the FLSA.

One possibility, acknowledged by DOL, is that the judge will issue an injunction against enforcing that part of the rule before the end of the month. Such an injunction would likely have limited impact. DOL has indicated that it is prepared to immediately appeal such a decision. This means that the injunction may be lifted if DOL wins its appeal, so the impact of the injunction may be temporary. If such an injunction is issued, then while it is in force, third party employers (i.e., any employer who is not the individual receiving services or members of that individual’s family) will be able to make use of the companionship exemption in the same manner as other employers. It is important here to distinguish between “third party employment” and “joint employment.” The number of employment relationships an individual provider has is irrelevant; even if the third party employer is the worker’s sole employer, they will have access to the companionship exemption. However, employers will still need to take into account the narrowed definition of companionship, which would still be in effect under an injunction solely against enforcement of the third party employer prohibition. Therefore, regardless of the injunction, an employer would not be able to make use of the companionship exemption if their employee spends more than 20% of their work hours providing “care,” which under the new rule includes any activities related to assistance with activities of daily living (ADLs) or instrumental activities of daily living (IADLs) rather than “companionship,” which is limited under the rule to fellowship and protection.

The suit plaintiffs also address that part of the rule in their lawsuit, arguing that “by removing the provision of ‘care’ from the definition [of companionship], except where provided ‘attendant to and in conjunction with” the provision of fellowship and protection and only if such care does not exceed 20 percent of the total hours worked per person and per workweek,’ and by expanding the meaning of care to encompass “not only the previously restricted incidental housework, but also ‘any assistance to the person with activities of daily living (such as dressing, grooming, feeding, bathing, toileting, and transferring) and instrumental activities of daily living, which are tasks that enable a person to live independently at home (such as meal preparation, driving, light housework, managing finances, assistance with the physical taking of medications, and arranging medical care),’ DOL has “so narrow[ed] the statutorily prescribed ‘care’ component of companionship services as to render it a nullity.” However, the judge has given no indication that he will rule on this part of the case before the end of the year, so it is entirely possible that the revised definition of companionship will become operable on January first while the restriction against third party employers making use of the exemption will be, at least temporarily, struck.

FMI: The DOJ/HHS letter is available at http://acl.gov/NewsRoom/NewsInfo/docs/2014-FLSA-Dear-Colleague-ltr.pdf.

View the court documents related to the lawsuit by clicking the following links: DC9-1–Plfs_MPA_ISO_MSJ_on_Claims12.pdf, DC13-1–Defs_MSJ_on_Claims_12.pdf, DC14–Defs_Opp_to_Pltfs_MSJ_on_Claims_12.pdf, DC15–Plfs_Reply_on_Claims_12.pdf, DC18–Defs_Reply.pdf.