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Money February 2015

Dollar Sense

The Cost of Some Home Care Workers Won’t Change After All

By Teresa Ambord

In plain English, if you employ a household worker whose duties go well beyond companionship, you may still have to pay overtime and minimum wages to that worker. And this is true whether you employ the worker privately or through a third party agency.

If you employ certain domestic helpers for yourself or for an elderly relative (because of age or infirmity) through a third party agency, you may know that the cost was supposed to go up as of January 1, 2015.

For decades, home health care workers who provide “companionship services” have long been exempt from getting minimum wage and overtime pay, according to the Fair Labor Standards Act. And live-in domestic workers have been exempt from overtime pay. The Department of Labor has been pushing new regulations to remove those exemptions, which would mean the cost to employ some types of household workers would greatly increase, making them eligible for overtime for work that exceeds 40 hours per week, and for the federal minimum wage, which is $7.25 per hour (or the applicable state minimum wage if it is higher).

These changes only applied to those workers who were employed through third party agencies, and not to workers who were privately employed. Even so, opponents of the regulations said because of these changes, the cost of home care workers to the public would skyrocket.


That’s Not Going to Happen

On December 22, 2014, the new regulations were stopped cold… just days before kicking in. The U.S. District Court for the District of Columbia struck down the changes, putting them on ice. Why?

After the Labor Department issued its new regulations, it was pounded with more than 26,000 public comments, from various groups and interested parties. Opponents who cited the soaring cost of home care also claimed that the Labor Department acted improperly in pushing through the changes. The Court agreed, finding that Congress never gave the Labor Department the authority to change the provisions of the existing law (the Fair Labor Standards Act).

Specifically opponents said, the Labor Department could not simply remove the rules that exempted companion-service workers from minimum wage and overtime, and they could not remove the rule that exempts live-in domestic workers from overtime pay. Judge Richard Leon, who presided over the case basically called the Labor Department’s new regulations a “wholesale arrogation of Congress’s authority” in this area.”

In plain English, it was a power grab. Game over.

There is one part of the Labor Department’s new regulations that will survive the Court’s scrutiny. The Court also said that the Labor Department was correct when it updated the definition of “companionship services.” The new definition, which went into effect on January 1, narrows the types of duties that remain exempt from the minimum wage and overtime rules. The new definition went into effect, as planned on January 1st. “All employers of home care workers, including third party employers, will be obligated to consider the duties such workers perform in evaluating whether they must pay wages in compliance with the minimum wage and overtime requirements,” said Jason Surbey, a spokesman for the Labor Department.

In plain English, if you employ a household worker whose duties go well beyond companionship, you may still have to pay overtime and minimum wages to that worker. And this is true whether you employ the worker privately or through a third party agency.


So What Is a Companion?

The Court cites this definition of what a companion does, “Companionship services” means “those services which provide fellowship, care, and protection for a person who, because of advanced age or physical or mental infirmity, cannot care for his or her own needs.” And services “which require and are performed by trained personnel do not qualify as companionship services.” The Court gives the example of nurses as trained personnel. And “live-in workers” are defined by the Court as “domestic service employees who reside in the household where they are employed.”

To further clarify the difference, a companion might go with a client for a scenic drive, for fresh air and recreation. But a drive to help a client keep a medical appointment goes beyond companionship, to direct care. A person who provides more than incidental direct care is not a companion, and is now eligible for minimum wage pay (and overtime pay if the worker is not a live-in worker).

Even a true “companion” can provide some direct care, as long as those tasks do not account for more than 20% of the job duties. That’s why it’s important, if you employ a companion, to keep records of the actual tasks that are performed and for how long, and whether they are fellowship and protection, or direct care.

Of course, as your mother ages, she may transition from needing companionship to needing a great deal more direct care. When that happens, the worker will be eligible for the overtime pay and the higher of the federal minimum wage, or your state’s minimum wage. If you are not sure what your state’s minimum wage is, you can find it here:

Whatever the nature of the work you need, to protect yourself from a misunderstanding with your employee, get the details in writing. “The duties should be agreed upon and tracked,” said Catherine Ruckelshaus, the legal co-director of the National Employment Law Project. If you hire a companion who is a true companion, he/she will not be eligible for minimum wage pay or overtime pay (though you are free to pay them these higher amounts if you wish). You need to be clear what the terms of the pay will be and have the employee sign the agreement.


Teresa Ambord is a former accountant and Enrolled Agent with the IRS. Now she writes full time from her home, mostly for business, and about family when the inspiration strikes.

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