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September 3, 2015Client Alert

D.C. Circuit Upholds Department of Labor Rule That Makes Millions of Home Health Care Workers Eligible for Minimum Wage and Overtime Pay

The Court of Appeals for the District of Columbia Circuit recently upheld a Department of Labor (Department) regulation that makes in-home health care workers employed by third-party agencies eligible to receive minimum wage and overtime pay under the Fair Labor Standards Act (FLSA).

Since the 1970s, the Department had interpreted the FLSA’s “companionship” and live-in services exemptions from minimum wages and overtime to apply to home health care workers employed by third-party agencies. But the Department reversed course with a new regulation in 2013 that removed these home health care workers from both exemptions. 

The Department reasoned that the home health care industry had changed since the 1970s in that large numbers of home health care workers were now performing the same work as their institutional counterparts, but without receiving the FLSA’s minimum wage and overtime protections.

The D.C. Circuit upheld the Department’s 2013 regulation. The Court concluded that the FLSA did not specifically speak to whether home health care workers employed by third-party agencies were covered by the exemptions. Therefore, the Department of Labor was authorized to fill in the gaps in the FLSA by regulation, so long as the regulation was a reasonable interpretation of the FLSA. Because the Court determined that the Department’s third-party agency regulation was reasonable, the Court upheld its validity.

The timeline for complying with the regulation is uncertain. Several factors may determine whether and when the regulation will be enforced, including:

·  The challenge to the regulation could continue. The Home Care Association of America, which brought the challenge, can (and likely will) appeal the D.C. Circuit’s decision to the U.S. Supreme Court.

·  Even if the case does not proceed further, the effective date of the regulation is still uncertain. By default, the current decision is stayed until October 13, 2015. The Home Care Association of America has asked the Court to stay its decision pending appeal; the Department has asked the Court to expedite the effective date of its decision. Furthermore, when the decision becomes effective, the Department will wait another 30 days before it begins enforcing the regulation.

Home health care agencies should start evaluating how the new minimum pay and overtime obligations will affect their businesses now. The Department will begin enforcement efforts nationwide 30 days after the decision becomes effective, absent a ruling staying the D.C. Circuit’s decision. Furthermore, the U.S. Supreme Court only takes a fraction of the cases appealed to it, making it far from guaranteed that an appeal will be heard, let alone succeed.

Instead of using the coming months to “wait and see” what will happen, home health care agencies should use this time to determine how they will budget for their anticipated minimum wage and overtime obligations, and how they will track and manage their employees’ hours worked.

 

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