The home care industry received a welcomed holiday gift from the United States District Court in Washington, D.C. on December 22, when the court vacated a portion of a new regulation that would have required third-party employers to pay minimum wage and overtime to workers providing companionship services. The new regulations, first proposed in 2011, were scheduled to go into effect on January 1, 2015, and had home care providers scrambling to figure out how they would pay significantly increased labor costs. While the court’s ruling provides welcome relief, the rules’ final outcome remains uncertain, and a new more restrictive definition of companionship services will go into effect on January 1, 2015 unless the court issues a stay or the Department of Labor agrees to a voluntary suspension.

As background, the new rules involve the minimum wage and overtime provisions of the Fair Labor Standards Act. Employees who provide companionship services to individuals unable to care for themselves due to age or infirmity always have been exempted from the minimum wage and overtime rules. DOL wanted more workers to receive minimum wage and overtime, and it sought to narrow the exemption in two ways. First, DOL redefined the term “companionship services.” Second, DOL declared that third-party employers (like home care providers) would not be eligible to take advantage of the exemption at all. As a practical matter, this meant that 90% of workers providing companionship services – the approximate percentage employed by home care entities – would receive minimum wage and overtime, regardless of how those services were defined. The 10% of companionship services workers employed solely by individuals or families would have continued to be exempt from those requirements assuming that their schedules complied with the new, stricter definition of allowable services.

The National Association of Home Care, the Home Care Association of America and the Independent Franchisers Association filed a lawsuit on behalf of their members to block the new regulations, arguing in part that DOL did not have the authority to dictate which employers could take advantage of the exemption. The court agreed, stating that Congress intended the exemption to apply to all employees who provide companionship services. DOL cannot draw policy lines “based on who cuts a check rather than what work is performed.” The court went on to note that the purpose of the companionship exemption was to make it more financially feasible for families to care for infirm relatives at home. Whether home care entities  provide the workers is not of particular concern. If the decision stands, it will mean that all workers providing companionship services will be subject to the same rules regardless of who employs them.

DOL’s new and more restrictive definition of companionship services was not before the court, and it remains intact for now. Under the current rule, a worker providing companionship services can devote up to 20% of his/her time to general household work and engage in unlimited care tasks such as meal preparation, bed making and clothes washing. The new definition limits all household and incidental care services to 20% of the worker’s time with the remaining hours dedicated to engaging the recipient in social, physical and mental activities, such as conversation, reading and games.