November 13, 2013Client Alert

U.S. Department of Labor’s Expansion of FLSA Minimum Wage and Overtime Pay Requirements for In-Home Care Workers Will Impact Third-Party Employers’ Bottom Lines

The U.S. Department of Labor’s Wage & Hour Division recently issued regulations that will dramatically affect third-party employers of in-home care and live-in domestic workers, including staffing agencies and home health care agencies. Beginning January 1, 2015, these employers must pay their in-home care and live-in domestic employees overtime under the federal Fair Labor Standards Act (FLSA), and comply with the FLSA’s recordkeeping requirements for non-exempt employees.

The FLSA establishes the federal minimum wage and overtime pay requirements for most employers. The act previously did not require employers (including companies who provide home health care workers and individuals or families who retain them) to pay overtime to individuals who provide “companionship services” to elderly persons or persons with illnesses, injuries, or disabilities; or to live-in domestic service workers.

The new regulations, however, are a major revision to the FLSA’s domestic service regulations. The most significant changes for third-party (i.e., corporate) employers are that they will have to pay overtime to employees providing companionship services, and live-in domestic service workers, as well as comply with the FLSA’s recordkeeping requirements for non-exempt employees. These changes mean that (1) corporate home health care employers will have to pay their non-exempt employees one and one half times their regular rate of pay for all hours worked beyond the 40-hour workweek; and (2) that those employers will have to implement a system for accurately tracking their non-exempt employees’ hours of work.

Both the overtime and recordkeeping requirements will impose significant costs on affected employers. While the additional cost of overtime pay is obvious, employers in the home health care industry should also be aware of the issues related to implementing a new (or perhaps better) recordkeeping system. Those issues include the additional administrative burden of keeping required records for three years; ensuring that the employer’s timekeeping system accurately reflects employees’ actual hours worked (so as to avoid claims that employees performed unpaid, off-the-clock work); and negotiating the human resources challenges presented by employees who do not want to “punch a clock.”

Navigating these practical issues will present challenges for human resources professionals and in-house counsel working for companies in the home health care industry. We recommend contacting outside counsel not only to ensure compliance with the new regulations, but also to discuss how to solve the “on-the-ground” problems that will likely arise. Home health care industry employers should also consult counsel to ensure compliance with state-specific laws regarding minimum wage and overtime pay.
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