DOL Final Rule Impacts Home Health “Companionship Services” Exemption

DOL Final Rule Impacts Home Health “Companionship Services” Exemption


In October 2013, the Department of Labor (DOL) issued a Final Rule extending overtime and minimum-wage protections to most home care workers previously deemed exempt.  The home health industry received a reprieve in January 2015 when the district court invalidated the Final Rule. That reprieve, however, was short lived. After a series of events in the Court of Appeals in the D.C. Circuit, the DOL’s provisions were ultimately upheld and went into effect on October 13, 2015. The DOL, however, didn’t actively begin enforcing the rule until November 12, with full enforcement beginning January 1, 2016.

The home health industry has been busy in the months following the Court of Appeals’ decision upholding the Final Rule, looking for ways to minimize the increase in costs associated with the Final Rule.  Some have reduced significantly the number of hours employees are working so that they do not incur overtime -- while at the same time trying to meet the needs and demands of their patients for continuity of care.  Others have changed their model of “fee for service” to a “placement fee.”  The other option is simply to track hours worked and to calculate overtime pay for employees who are no longer exempt, which carries with it decreased revenues for operators.  But, whatever strategy the provider chooses, it is absolutely clear that home healthcare businesses no longer can rely upon the decades old “companionship services” exemption.

By revising the companionship services definition and specifying that the exemptions for companionship services and live-in domestic service employees may only be claimed by individuals or families — not by third-party employers such as home health agencies — the Final Rule effectively shrinks the companionship exemption under the Fair Labor Standards Act (FLSA) and bring nearly two million new workers under the statute's domain. The Final Rule, however, significantly narrows the definition of companions to those who spend no more than 20% of their time providing actual care, such as feeding and bathing. Perhaps even more importantly, it excludes from the exemption companionship workers employed by third parties, such as home healthcare providers.

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