On December 15, the Department of Labor's Wage and Hour Division proposed new regulations that would sharply curtail the applicability of the "companionship services" exemption to the Fair Labor Standards Act. This statutory exemption provides an exception to minimum wage and overtime provisions for workers who provide in-home companionship services to sick and elderly persons.

In recent years, there has been a considerable amount of litigation regarding the applicability of the companionship services exemption to various workers. In most cases, federal courts have interpreted the exemption to apply to third parties who spend time with their clients, and perhaps perform light housekeeping chores, as opposed to those persons providing medical care or physical therapy.

The DOL proposal would completely change this reading of the exemption. Any worker provided by a third party agency would automatically be excluded from the exemption, regardless of duties performed. The exemption would be limited to casual companionship services provided by friends, babysitters, and others not typically in the business of providing home care. In addition, exempt companionship services would be strictly limited to fellowship and protection rather than any type of housekeeping or personal services.

DOL justified the proposal on the basis that this interpretation is more consistent with the original statutory companionship services exemption. The agency also noted that the home care industry is dominated by low wage workers, and that this proposal is necessary to provide workers with a living wage. Industry representatives responded that the proposal was likely to reduce the demand for home care workers due to increased costs.

DOL is accepting comments on the proposed rule through February 27, 2012. The home care industry is expected to make a strong effort to derail or modify the proposed rules. If unsuccessful, the industry will likely challenge the new rules in court, contending that they are inconsistent with the original statutory exemption.