Application of the Fair Labor Standards Act to Domestic Service, 60453-60557 [2013-22799]
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Vol. 78
Tuesday,
No. 190
October 1, 2013
Part III
Department of Labor
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Wage and Hour Division
29 CFR Part 552
Application of the Fair Labor Standards Act to Domestic Service; Final
Rule
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nearest Wage and Hour Division (WHD)
District Office. Please visit http://
www.dol.gov/whd for more information
and resources about the laws
administered and enforced by WHD.
Information and compliance assistance
materials specific to this Final Rule can
be found at: www.dol.gov/whd/
homecare. You may also call the WHD’s
toll-free help line at (866) 4US–WAGE
((866)-487–9243) between 8:00 a.m. and
5:00 p.m. in your local time zone..
SUPPLEMENTARY INFORMATION:
DEPARTMENT OF LABOR
Wage and Hour Division
29 CFR Part 552
RIN 1235–AA05
Application of the Fair Labor
Standards Act to Domestic Service
Wage and Hour Division,
Department of Labor.
ACTION: Final rule.
AGENCY:
In 1974, Congress extended
the protections of the Fair Labor
Standards Act (FLSA or the Act) to
‘‘domestic service’’ employees, but it
exempted from the Act’s minimum
wage and overtime provisions domestic
service employees who provide
‘‘companionship services’’ to elderly
people or people with illnesses, injuries,
or disabilities who require assistance in
caring for themselves, and it exempted
from the Act’s overtime provision
domestic service employees who reside
in the household in which they provide
services. This Final Rule revises the
Department’s 1975 regulations
implementing these amendments to the
Act to better reflect Congressional intent
given the changes to the home care
industry and workforce since that time.
Most significantly, the Department is
revising the definition of
‘‘companionship services’’ to clarify and
narrow the duties that fall within the
term; in addition third party employers,
such as home care agencies, will not be
able to claim either of the exemptions.
The major effect of this Final Rule is
that more domestic service workers will
be protected by the FLSA’s minimum
wage, overtime, and recordkeeping
provisions.
SUMMARY:
This regulation is effective
January 1, 2015.
DATES:
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Mary Ziegler, Director, Division of
Regulations, Legislation, and
Interpretation, U.S. Department of
Labor, Wage and Hour Division, 200
Constitution Avenue NW., Room
S–3502, FP Building, Washington, DC
20210; telephone: (202) 693–0406 (this
is not a toll-free number). Copies of this
Final Rule may be obtained in
alternative formats (Large Print, Braille,
Audio Tape, or Disc), upon request, by
calling (202) 693–0675 (not a toll-free
number). TTY/TTD callers may dial tollfree (877) 889–5627 to obtain
information or request materials in
alternative formats.
Questions of interpretation and/or
enforcement of the agency’s current
regulations may be directed to the
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I. Executive Summary
II. Background
III. Summary of Comments on Changes to
FLSA Domestic Service Regulations
A. Section 552.3 (Domestic Service
Employment)
B. Section 552.6 (Companionship Services)
C. Section 552.102 (Live-In Domestic
Service Employees) and Section 552.110
(Recordkeeping Requirements)
D. Section 552.109 (Third Party
Employment)
E. Other Comments
IV. Effective Date
V. Paperwork Reduction Act
VI. Executive Orders 12866 (Regulatory
Planning and Review) and 13563
(Improving Regulation and Regulatory
Review)
VII. Final Regulatory Flexibility Analysis
VIII. Unfunded Mandates Reform Act
IX. Executive Order 13132 (Federalism)
X. Executive Order 13175 (Indian Tribal
Governments)
XI. Effects on Families
XII. Executive Order 13045 (Protection of
Children)
XIII. Environmental Impact Assessment
XIV. Executive Order 13211 (Energy Supply)
XV. Executive Order 12630 (Constitutionally
Protected Property Rights)
XVI. Executive Order 12988 (Civil Justice
Reform Analysis)
List of Subjects in 29 CFR part 552
Signature
Amendments to Regulatory Text
I. Executive Summary
FOR FURTHER INFORMATION CONTACT:
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Table of Contents
Purpose of the Regulatory Action
Prior to 1974, the FLSA’s minimum
wage and overtime compensation
provisions did not protect domestic
service workers unless those workers
were employed by enterprises covered
by the Act (generally those that had at
least a certain annual dollar threshold in
business, see 29 U.S.C. 203(s)). Congress
amended the FLSA in 1974 to extend
coverage to all domestic service
workers, including those employed by
private households or companies too
small to be covered by the Act. See Fair
Labor Standards Amendments of 1974,
Public Law 93–259 § 7, 88 Stat. 55, 62
(1974). At the same time, Congress
created an exemption from the
minimum wage and overtime
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compensation requirements for
domestic service workers who provide
companionship services and an
exemption from the Act’s overtime
compensation requirement for domestic
service workers who reside in the
households in which they provide
services, i.e., live-in domestic service
workers. Id.; 29 U.S.C. 13(a)(15),
13(b)(21).1 The new statutory text
explicitly granted the Department the
authority to define the terms ‘‘domestic
service employment’’ and
‘‘companionship services.’’ See 29
U.S.C. 213(a)(15).
The legislative history of the 1974
amendments explains that the changes
were intended to expand the coverage of
the FLSA to include all employees
whose vocation was domestic service,
but to exempt from coverage casual
babysitters and individuals who
provided companionship services. The
‘‘companionship services’’ exemption
was to apply to ‘‘elder sitters’’ whose
primary responsibility was to watch
over an elderly person or person with an
illness, injury, or disability in the same
manner that a babysitter watches over
children. See 119 Cong. Rec. S24773,
S24801 (daily ed. July 19, 1973)
(statement of Sen. Williams). The
companionship services exemption was
not intended to exclude ‘‘trained
personnel such as nurses, whether
registered or practical,’’ from the
protections of the Act. See Senate
Report No. 93–690, 93rd Cong., 2d Sess.,
p. 20 (1974); House Report No. 93–913,
93rd Cong., 2d Sess., p. 36 (1974).
In 1975, the Department promulgated
regulations implementing the
companionship services and live-in
domestic service employee exemptions.
See 40 FR 7404 (Feb. 20, 1975); 29 CFR
part 552. These regulations defined
companionship services as ‘‘fellowship,
care, and protection,’’ which included
‘‘household work . . . such as meal
preparation, bed making, washing of
clothes, and other similar services’’ and
could include general household work
not exceeding ‘‘20 percent of the total
weekly hours worked.’’ 29 CFR 552.6.
Additionally, the 1975 regulations
permitted third party employers, or
employers of home care workers other
than the individuals receiving care or
their families or households, to claim
both the companionship services and
1 Congress simultaneously also created an
exemption from the Act’s minimum wage and
overtime requirements for domestic service
employees ‘‘employed on a casual basis . . . to
provide babysitting services.’’ 29 U.S.C. 213(a)(15).
This rulemaking does not make, nor did the
proposal it follows suggest, changes to the
Department’s regulations regarding the babysitting
exemption.
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live-in domestic service employee
exemptions. 29 CFR 552.109. These
regulations have remained substantially
unchanged since they were
promulgated.
The home care industry, however, has
undergone dramatic expansion and
transformation in the past several
decades. The Department uses the term
home care industry to include providers
of home care services, and the term
‘‘home care services’’ to describe
services performed by workers in
private homes and whose job titles
include home health aide, personal care
attendant, homemaker, companion, and
others.
In the 1970s, many individuals with
significant care needs were served in
institutional settings rather than in their
homes and their communities. Since
that time, there has been a growing
demand for long-term home care for
persons of all ages, largely due to the
rising cost of traditional institutional
care and, in response to the disability
civil rights movement, the availability of
federal funding assistance for home
care, reflecting the nation’s commitment
to accommodate the desire of
individuals to remain in their homes
and communities. As more individuals
receive services at home rather than in
nursing homes or other institutions,
workers who provide home care
services, referred to as ‘‘direct care
workers’’ in this Final Rule but
employed under titles including
certified nursing assistants, home health
aides, personal care aides, and
caregivers, perform increasingly skilled
duties. Today, direct care workers are
for the most part not the elder sitters
that Congress envisioned when it
enacted the companionship services
exemption in 1974, but are instead
professional caregivers.
Despite this professionalization of
home care work, many direct care
workers employed by individuals and
third-parties have been excluded from
the minimum wage and overtime
protections of the FLSA under the
companionship services exemption,
which courts have read broadly to
encompass essentially all workers
providing services in the home to
elderly people or people with illnesses,
injuries, or disabilities regardless of the
skill the duties performed require. The
earnings of these workers remain among
the lowest in the service industry,
impeding efforts to improve both jobs
and care. The Department believes that
the lack of FLSA protections harms
direct care workers, who depend on
wages for their livelihood and that of
their families, as well as the individuals
receiving services and their families,
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who depend on a professional, trained
workforce to provide high-quality
services.
Because the 1975 regulations define
companionship services and address
third-party employment in a manner
that, given the changes to the home care
services industry, the home care
services workforce, and the scope of
home care services provided, no longer
aligns with Congress’s intent when it
extended FLSA protections to domestic
service employees, the Department is
modifying the relevant regulatory
provisions in 29 CFR part 552. These
changes are intended to clarify and
narrow the scope of duties that fall
within the definition of companionship
services in order to limit the application
of the exemption. The Department
intends for the exemption to apply to
those direct care workers who are
performing ‘‘elder sitting’’ rather than
the professionalized workforce for
whom home care is a vocation. In
addition, by prohibiting employers of
direct care workers other than the
individual receiving services or his or
her family or household from claiming
the companionship services or live-in
domestic service employment
exemptions, the Department is giving
effect to Congress’s intent in 1974 to
expand coverage to domestic service
employees rather than to restrict
coverage for a category of workers
already covered.
Summary of the Major Provisions of the
Final Rule
This Final Rule makes changes to
several sections of 29 CFR part 552, the
Department’s regulations concerning
domestic services employment.
The Department is slightly revising
the definition of ‘‘domestic service
employment’’ in § 552.3 to clarify the
language and modernize the list of
examples of professions that fall within
this category.
This Final Rule also updates the
definition of ‘‘companionship services’’
in § 552.6 in order to restrict the term
to encompass only workers who are
providing the sorts of limited, nonprofessional services Congress
envisioned when creating the
exemption. Specifically, paragraph (a),
which uses more modern language than
appears in the 1974 amendments or
1975 regulations, provides that
‘‘companionship services’’ means the
provision of fellowship and protection
for an elderly person or person with an
illness, injury, or disability who
requires assistance in caring for himself
or herself. It also defines ‘‘fellowship’’
as engaging the person in social,
physical, and mental activities and
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‘‘protection’’ as being present with the
person in his or her home, or to
accompany the person when outside of
the home, to monitor the person’s safety
and well-being. Paragraph (b) provides
that the term ‘‘companionship services’’
also includes the provision of care if the
care is provided attendant to and in
conjunction with the provision of
fellowship and protection and if it does
not exceed 20 percent of the total hours
worked per person and per workweek.
It defines ‘‘care’’ as assistance with
activities of daily living and
instrumental activities of daily living.
Paragraph (c) provides that the term
‘‘companionship services’’ does not
include general domestic services
performed primarily for the benefit of
other members of the household.
Paragraph (d) provides that the term
‘‘companionship services’’ does not
include the performance of medically
related services, and it explains that the
determination of whether the services
performed are medically related is based
on whether the services typically
require and are performed by trained
personnel, such as registered nurses,
licensed practical nurses, or certified
nursing assistants, regardless of the
actual training or occupational title of
the individual providing the services.
In order to better ensure that live-in
domestic service employees are
compensated for all hours worked, the
Department is also changing the
language in §§ 552.102 and .110 to
require the keeping of actual records of
the hours worked by such employees.
The Department is revising § 552.109,
the regulatory provision regarding
domestic service employees employed
by third-party employers, or employers
other than the individual receiving
services or his or her family or
household. To better ensure that the
domestic service employees to whom
Congress intended to extend FLSA
protections in fact enjoy those
protections, the new regulatory text
precludes third party employers (e.g.,
home care agencies) from claiming the
exemption for companionship services
or live-in domestic service employees.
Effective Date
These changes will become effective
on January 1, 2015. The Department
believes that this extended effective date
takes into account the complexity of the
federal and state systems that are a
significant source of funding for home
care work and the needs of the diverse
parties affected by this Final Rule
(including consumers, their families,
home care agencies, direct care workers,
and local, state and federal Medicaid
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programs) by providing such parties,
programs and systems time to adjust.
Costs and Benefits
The Table below illustrates the
potential scale of projected transfers,
costs, and net benefits of the revisions
to the FLSA regulations addressing
domestic service employment. The
primary effect shown in the Table is the
transfer of income from home care
agencies (and payers because a portion
of costs will likely be passed through
via price increases) to direct care
workers, due to more workers being
protected under the FLSA; the
Department projects an average
annualized transfer of $321.8 million in
the medium-impact scenario (using a 7
percent real discount rate). These
income transfers result from the
narrowing of the companionship
services exemption, specifically:
payment for time spent by direct care
workers traveling between individuals
receiving services (consumers) for the
same employer, and payment of an
overtime premium when hours worked
exceed 40 hours per week. Transfers
resulting from the requirement to pay
the minimum wage are expected to be
zero because current wage data suggests
that few affected workers, if any, are
currently paid less than the federal
minimum wage per hour.
The Department projects that the
average annualized direct costs for
regulatory familiarization, hiring new
workers, and the deadweight loss due to
the potential allocative inefficiency
resulting from the rule will average $6.8
million per year over a 10-year period.
In perspective, regulatory
familiarization, hiring new workers, and
the deadweight loss represents about
0.007 percent of industry revenue, while
the disemployment impact of the rule
affects about 0.06 percent of direct care
workers. The relatively small
deadweight loss occurs because both the
demand for and supply of home care
services appear to be inelastic in the
largest component of this market, in
which public payers reimburse for home
care; thus, the equilibrium quantity of
home care services is not very
responsive to the changes in price.
The Department also expects the rule
will reduce the high turnover rate
among direct care workers, along with
its associated employment costs to
agencies, a key quantifiable benefit of
the Final Rule. Because overtime
compensation, hiring costs, and
reduction in turnover depend on how
employers choose to comply with the
rule, the Department estimated a range
of impacts based on three adjustment
scenarios; the table below presents the
intermediate scenario—‘‘Overtime
Scenario 2’’—which is, along with a
complete discussion of the data sources,
methods, and results of this analysis,
presented in Section VI, Executive
Orders 12866 and 13563.
TABLE—SUMMARY OF IMPACT OF CHANGES TO FLSA COMPANIONSHIP SERVICES EXEMPTION
Year 1
($ mil.)
Impact
Future years
($ mil.)
Average annualized value
($ mil.) a
3% Real rate
7% Real rate
$330.6
$321.8
Total Transfers
Minimum wages b + Travel wages + Overtime Scenario 2 .....................
(Lower bound—upper bound) ..........................................................
Total Cost of
$210.2
($104–$281)
$468.3
($119–$627)
($159–$442)
Regulations e
Regulatory Familiarization + Hiring Costs c + Deadweight Loss .............
(Lower bound—upper bound) ..........................................................
$240.9
$20.7
$4.2 $5.1
($19–$21)
($4–$5)
Disemployment (number of workers) .......................................................
812
885
$9.4
$20.5
$6.5
$6.8
($6–$7)
1,144 d
1,477
Net Benefits
Overtime Scenario 2 c ..............................................................................
(Lower bound—upper bound) ..........................................................
($¥4–20)
$15.5
($3–$31)
$17.1
$17.1
($4–$27)
a These
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costs represent a range over the nine year span. Costs are lowest in Year 2 and highest in Year 10 so these two values are reported.
b 2011 statistics on wages indicate that few affected workers, if any, are currently paid below the minimum wage (i.e. in no state is the 10th
percentile wage below $7.25 per hour). See the Bureau of Labor Statistics Occupational Employment Statistics (OES), 2011 state estimates.
Available at: http://stats.bls.gov/oes/.
c Based on overtime hours needed to be covered under Overtime Scenario 2.
d Simple average over 10 years.
e Excludes paperwork burden, estimated in Section V.
Not included in the table is the
opportunity cost of managerial time
spent adjusting worker schedules to
reduce or avoid overtime hours and
travel time. The Department expects
these costs to be relatively small
because employers, particularly home
care agencies, already manage the
schedules of nonexempt home care
employees and therefore have systems
in place to facilitate scheduling workers.
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Also unquantified is the potential
impact on direct care workers resulting
from employers making such schedule
changes.
The costs, benefits and transfer effects
of the Final Rule depend on the actions
of employers, decision-makers within
federal and state programs that provide
funding for home care services,
consumers, and workers. Depending
upon whether employers choose to
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continue current work practices,
rearrange worker schedules, or hire new
workers, the costs, benefits and transfers
will vary. The Department notes that the
delayed effective date of this Final Rule
creates a transition period during which
all entities potentially impacted by this
rule have the opportunity to review
existing policies and practices and make
necessary adjustments for compliance
with this Final Rule. We believe this
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transition period mitigates short-term
impacts for the regulated community,
relative to a regulatory alternative in
which compliance is required
immediately upon finalization. The
Department will work closely with
stakeholders and the Department of
Health and Human Services to provide
additional guidance and technical
assistance during the period before the
rule becomes effective, in order to
ensure a transition that minimizes
potential disruption in services and
supports the progress that has allowed
elderly people and persons with
disabilities to remain in their homes and
participate in their communities.
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II. Background
A. What the FLSA Provides
The FLSA requires, among other
things, that all covered employees
receive minimum wage and overtime
compensation, subject to various
exemptions. The FLSA as originally
enacted only covered domestic service
workers if they worked for a covered
enterprise, i.e., an agency or business
subject to the FLSA or were an
individual engaged in interstate
commerce, an unlikely occurrence.
Thus, prior to 1974, domestic service
workers employed by covered
businesses to provide cooking, cleaning,
or caregiving tasks in private homes
were entitled to the Act’s minimum
wage and overtime compensation
provisions. In 1974, Congress extended
FLSA coverage to ‘‘domestic service’’
employees employed in private
households. See 29 U.S.C. 202(a), 206(f),
207(l). Domestic service workers
include, for example, employees
employed as cooks, butlers, valets,
maids, housekeepers, governesses,
janitors, laundresses, caretakers,
handymen, gardeners, and family
chauffeurs. Senate Report No. 93–690,
93rd Cong., 2d Sess. p. 20 (1974). Thus,
workers performing domestic tasks,
such as cooking, cleaning, doing
laundry, driving, and general
housekeeping, and employed in private
homes, either by households or by third
party employers, are protected by the
basic minimum wage and overtime
protections of the FLSA.
Congressional committee reports state
the reasons for extending the minimum
wage and overtime protections to
domestic service employees were ‘‘so
compelling and generally recognized as
to make it hardly necessary to cite
them.’’ Senate Report No. 93–690, p. 18.
The reports also state that private
household work had been one of the
least attractive fields of employment
because wages were low, work hours
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were highly irregular, and non-wage
benefits were few. Id. The U.S. House of
Representatives Committee on
Education and Labor stated its
expectation ‘‘that extending minimum
wage and overtime protection to
domestic service workers will not only
raise the wages of these workers but will
improve the sorry image of household
employment . . . Including domestic
workers under the protection of the Act
should help to raise the status and
dignity of this work.’’ House Report No.
93–913, 93rd Cong., 2d Sess., pp. 33–34
(1974). During a debate on the
amendments, one Senator referred to the
importance of ‘‘the dignity and respect
that ought to come with honest work’’
and the low wages that left many
domestic service employees unable to
rise out of poverty. See 119 Cong. Rec.
S24773, S24799–80 (daily ed. July 19,
1973) (statement of Sen. Williams).
When Congress extended FLSA
protections to domestic service
employees, however, it created two
exemptions within that category. First,
it exempted from both the minimum
wage and overtime compensation
requirements of the Act casual
babysitters and ‘‘any employee
employed in domestic service
employment to provide companionship
services for individuals who (because of
age or infirmity) are unable to care for
themselves (as such terms are defined
and delimited by regulations of the
Secretary).’’ 29 U.S.C. 213(a)(15).
Second, it exempted from the overtime
pay requirement ‘‘any employee who is
employed in domestic service in a
household and who resides in such
household.’’ 29 U.S.C. 213(b)(21).
The legislative history explains:
It is the intent of the committee to include
within the coverage of the Act all employees
whose vocation is domestic service.
However, the exemption reflects the intent of
the committee to exclude from coverage . . .
companions for individuals who are unable
because of age and infirmity to care for
themselves. But it is not intended that
trained personnel such as nurses, whether
registered or practical, shall be excluded.
People who will be employed in the
excluded categories are not regular breadwinners or responsible for their families’
support. The fact that persons performing
. . . services as companions do some
incidental household work does not keep
them from being . . . companions for
purposes of this exclusion.
Senate Report No. 93–690, p. 20; House
Report No. 93–913, pp. 36. In addition,
Senator Williams, Chairman of the
Senate Subcommittee on Labor and the
Senate floor manager of the 1974
amendments to the FLSA, described
individuals who provided
companionship services as ‘‘elder
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sitters’’ whose primary responsibility
was ‘‘to be there and to watch’’ over an
elderly person or person with an illness,
injury, or disability in the same manner
that a babysitter watches over children,
‘‘not to do household work.’’ 119 Cong.
Rec. S24773, S24801 (daily ed. July 19,
1973). He explained that the category of
workers to which the term refers
includes ‘‘a neighbor’’ who ‘‘comes in
and sits with’’ ‘‘an aged father, an aged
mother, an infirm father, an infirm
mother.’’ Id. Senator Williams further
noted that ‘‘if the individual is [in the
home] for the actual purpose of being
. . . a companion,’’ any work that is
‘‘purely incidental’’ would not mean the
exemption did not apply. Id. Examples
of such incidental work in the
legislative history were ‘‘making lunch’’
or, in the babysitting context, ‘‘throwing
a diaper into the washing machine.’’ Id.
B. Regulatory History
On February 20, 1975, the Department
issued regulations at 29 CFR part 552
implementing the domestic service
employment provisions. See 40 FR
7404. Subpart A of the rule defined and
delimited the terms ‘‘domestic service
employment,’’ ‘‘employee employed on
a casual basis in domestic service
employment to provide babysitting
services,’’ and ‘‘employment to provide
companionship services to individuals
who (because of age or infirmity) are
unable to care for themselves.’’ Subpart
B of the rule set forth statements of
general policy and interpretation
concerning the application of the FLSA
to domestic service employees
including live-in domestic service
employees. Section 552.6 defined
companionship services as ‘‘fellowship,
care, and protection,’’ which included
‘‘household work . . . such as meal
preparation, bed making, washing of
clothes, and other similar services’’ and
could include general household work
not exceeding ‘‘20 percent of the total
weekly hours worked.’’ Section 552.109
provided that third party employers
could claim the companionship services
exemption or live-in domestic service
employee exemption.
On December 30, 1993, the
Department published a Notice of
Proposed Rulemaking (NPRM) in the
Federal Register, inviting public
comments on a proposal to revise 29
CFR 552.109 to clarify that, in order for
the exemptions under § 13(a)(15) and
§ 13(b)(21) of the FLSA to apply,
employees engaged in companionship
services and live-in domestic service
who are employed by a third party
employer or agency must be ‘‘jointly’’
employed by the individual, family, or
household using their services. Other
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minor updating and technical
corrections were included in the
proposal. See 58 FR 69310. On
September 8, 1995, the Department
published a Final Rule revising the
regulations to incorporate changes
required by the recently enacted
changes to Title II of the Social Security
Act and making other updating and
technical revisions. See 60 FR 46766.
That same day, the Department
published a proposed rule re-opening
and extending the comment period on
the proposed changes to § 552.109
concerning third party employment. See
60 FR 46797. The Department did not
finalize this proposed change.
On January 19, 2001, the Department
published an NPRM to amend the
regulations to revise the definition of
‘‘companionship services’’ to more
closely adhere to Congressional intent.
The Department also sought to clarify
the criteria used to determine whether
employees qualify as trained personnel
and to amend the regulations
concerning third party employment. On
April 23, 2001, the Department
published a proposed rule re-opening
and extending the comment period on
the January 2001 proposed rule. See 66
FR 20411. This rulemaking was
eventually withdrawn and terminated
on April 8, 2002. See 67 FR 16668.
On December 27, 2011, the
Department published an NPRM
inviting public comments for a period of
sixty (60) days on proposed changes to
the exemptions for employees
performing companionship services and
live-in domestic service employees. See
76 FR 81190. The proposed changes
were based on the Department’s
experience, including its previous
rulemaking efforts, a thorough review of
the legislative history, meetings with
stakeholders, as well as additional
research conducted concerning the
changes in the demand for home care
services, the home care industry, and
the home care services workforce. On
February 24, 2012, the Department
extended the period for filing written
comments. See 77 FR 11021. On March
13, 2012, the Department again
extended the period for filing written
comments with a final comment closing
date of March 21, 2012. See 77 FR
14688. This Final Rule is the result of
consideration of the comments received
in response to the December 27, 2011
NPRM.
C. Need for Rulemaking
Since the Department published its
regulations implementing the 1974
amendments to the FLSA, the home care
industry has undergone dramatic
transformation. In the 1970s,
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individuals who had significant care
needs went into institutional settings.
Over time, however, our nation has
come to recognize the importance of
providing services in private homes and
other community-based settings and of
supporting individuals in remaining in
their homes and communities. This shift
is in part a result of the rising cost of
traditional institutional care, and has
been made possible in significant part
by the availability of government
funding assistance for home care under
Medicare and Medicaid.2 The growing
demand for long-term home care
services is also due to the significant
increase in the percentage of elderly
people in the United States.3 The
Supreme Court’s decision in Olmstead
v. L.C., 527 U.S. 581 (1999), which held
that it is a violation of the Americans
with Disabilities Act for public entities
to fail to provide services to persons
with disabilities in the most integrated
setting appropriate, further solidified
our country’s commitment to decreasing
institutionalization and has also
influenced this important trend.
This shift is reflected in the increasing
number of agencies and workers
engaged in home care. The number of
Medicare-certified home care agencies
increased from 2,242 in 1975 to 7,747 in
1999 and by the end of 2009, had grown
to 10,581.4 There has been a similar
increase in the employment of home
health aides and personal care aides in
the private homes of individuals in need
of assistance with basic daily living or
health maintenance activities. The
number of workers in these jobs tripled
between 1988 and 2001; by 2001 there
were 560,190 workers employed as
home health aides and 408,360 workers
2 Public funds pay the overwhelming majority of
the cost for providing home care services. Medicare
payments represent over 40 percent of the
industry’s total revenues; other payment sources
include Medicaid, insurance plans, and direct pay.
The National Association for Home Care and
Hospice (NAHC) reports, based on data from the
Centers for Medicare and Medicaid Services (CMS),
state that Medicare and Medicaid together paid
roughly two-thirds of the funds paid to freestanding
agencies (41 and 24 percent, respectively). Centers
for Medicare and Medicaid Services (CMS), Office
of the Actuary, National Health Care Expenditures
Historical and Projections: 1965–2016. State and
local governments account for 15 percent of
revenues, while private health insurance accounts
for eight percent. Out-of-pocket funds account for
10 percent of agency revenues. http://www.bls.gov/
oes/current/oes399021.htm.
3 See Shrestha, Laura, The Changing
Demographic Profile of the United States,
Congressional Research Service p. 13–14 (2006).
4 See The National Association for Home Care &
Hospice (NAHC), Basic Statistics About Homecare:
Updated 2010, (2010). Available at: http://
web.archive.org/web/20120515112644/http://
nahc.org/facts/10HC_Stats.pdf.
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employed as personal care aides.5
Between 2001 and 2011, home health
aide employment increased 65 percent
to 924,650 and personal care aide
employment doubled, increasing to
820,600.6
Furthermore, as services for elderly
people and people with illnesses,
injuries, or disabilities who require
assistance in caring for themselves
(referred to in this Final Rule as
consumers) have increasingly been
provided in individuals’ homes rather
than in nursing homes or other
institutions, the duties performed in
homes have changed as well. Most
direct care workers are employed to do
more than simply sit with and watch
over the individuals for whom they
work. They assist consumers with
activities of daily living and
instrumental activities of daily living,
such as bathing, dressing, housework, or
preparing meals. They often also
provide medical care, such as managing
the consumer’s medications or
performing tracheostomy care, that was
previously almost exclusively provided
in hospitals, nursing homes, or other
institutional settings and by trained
nurses. This work is far more skilled
and professional than that of someone
performing ‘‘elder sitting.’’ Although
some direct care workers today still
perform the services Congress
contemplated, i.e., sit with and watch
over individuals in their homes, most
do much more.
Yet the growth in demand for home
care and the professionalization of the
home care workforce have not resulted
in growth in earnings for direct care
workers. The earnings of employees in
the home health aide and personal care
aide categories remain among the lowest
in the service industry. Studies have
shown that the low income of direct
care workers continues to impede efforts
to improve both the circumstances of
the workers and the quality of the
services they provide.7 Covering direct
care workers under the Act is, thus, an
important step in ensuring that the
home care industry attracts and retains
qualified workers that the sector will
need in the future.
These low wages are at least in part
the result of the application of the
companionship services exemption to a
wide range of direct care workers who
then may not be paid minimum wage
5 Bureau of Labor Statistics’ (BLS), Occupational
Employment Statistics (OES).
6 http://www.bls.gov/oes/current/oes399021.htm.
7 See Brannon, Diane, et al., ‘‘Job Perceptions and
Intent to Leave Among Direct Care Workers:
Evidence From the Better Jobs Better Care
Demonstrations’’ The Gerontologist, 47, 6, p. 820–
829 (2007).
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for all hours worked and likely do not
receive overtime wages for hours
worked over forty in a workweek. In
some instances, employers may be
improperly claiming the exemption as
to employees whose work falls outside
the existing definition of
companionship services in 29 CFR
552.6. In many others, however,
employers are relying on the
Department’s 1975 regulation, which
was written at a time when the scope of
direct care work was much more limited
and neither Congress nor the
Department predicted the developments
in home care services that were to come.
Courts have interpreted the current
regulation broadly such that the
companionship services exemption has
expanded along with the home care
industry and workforce; based on this
expansive reading of the current
regulation, essentially any services
provided for an elderly person or person
with an illness, injury, or disability in
the person’s private home constitute
companionship services for which
minimum wage and overtime need not
be paid. See, e.g., Sayler v. Ohio Bureau
of Workers’ Comp., 83 F.3d 784, 787
(6th Cir. 1996) (holding that a worker
who ‘‘helps [an adult with a serious
back injury] dress, gives him his
medication, helps him bathe, assists
him in getting around their home, and
cleans his bedclothes when he loses
control of his bowels’’ is providing
companionship services under § 552.6);
McCune v. Or. Senior Servs. Div., 894
F.2d 1107, 1108–09 (9th Cir. 1990)
(accepting that ‘‘full-time, live-in
attendants for elderly and infirm
individuals unable to care for
themselves’’ who perform ‘‘cleaning,
cooking, and hygiene and medical care’’
for those individuals were providing
companionship services because under
the current regulation, ‘‘the recipients of
these services [are] the determinative
factor in applying the [companionship
services] exception’’); Fowler v. Incor,
279 F. App’x 590, 596 (10th Cir. 2008)
(noting that ‘‘[c]are related to the
individual’’ that falls within the current
definition of companionship services
‘‘has been expanded to include more
frequent vacuuming and dusting for a
client with allergies, mopping and
sweeping for clients who crawl on the
floor, and habilitation training, which
often includes training the client to do
housework, cooking, and attending to
person hygiene’’); Cook v. Diana Hays
and Options, Inc., 212 F. App’x 295,
296–97 (5th Cir. 2006) (holding that a
direct care worker ‘‘employed by . . . a
non-profit corporation that provides
home health care’’ who ‘‘provided
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simple physical therapy, prepared
[consumers’] meals, assisted with
[consumers’] eating, baths, bed-making,
and teeth brushing, completed
housework . . . and accompanied them
on walks, to doctor visits, to Mass, and
to the grocery store’’ was exempt from
the FLSA under the companionship
services exemption as defined in current
§ 552.6). Furthermore, courts have
narrowly construed the regulation’s
exclusion of ‘‘trained personnel’’ from
companionship services such that direct
care workers providing medical care,
including certified nursing assistants
and often home health aides, are not
protected by the FLSA. See, e.g.,
McCune, 894 F.2d at 1110–11(holding
that certified nursing assistants were not
‘‘trained personnel’’ excluded from the
regulatory definition of companionship
services because, unlike registered
nurses and licensed practical nurses,
certified nursing assistants in that case
received only 60 hours of training); Cox
v. Acme Health Servs., Inc., 55 F.3d
1304, 1309–10 (7th Cir. 1995) (holding
that a home health aide who had
completed 75 hours of required training
and ‘‘performed patient care’’ including
‘‘administering complete bed baths,
position and turning patients in bed,
tube-feeding, the taking and recording of
vital signs, bowel and bladder training,
changing and cleaning patients’
catheters, administering enemas, rangeof-motion exercise training, speech
training, and inserting non-medicated
suppositories’’ did not qualify as
‘‘trained personnel’’ and therefore
provided ‘‘companionship services’’ as
defined in the Department’s
regulations).
In this Final Rule, the Department is
exercising its authority to amend the
domestic service employment
regulations to clarify and narrow the set
of employees as to whom the
companionship services and live-in
domestic service employee exemptions
may be claimed. See Long Island Care
at Home, Ltd. v. Coke, 551 U.S. 158, 165
(2007) (discussing the gaps in the FLSA,
including ‘‘the scope and definition of
statutory terms such as ‘domestic
service employment’ and
‘companionship services’’’ that Congress
‘‘entrusted the agency to work out’’
(citing 29 U.S.C. 213(a)(15))). These
limits are meant to ensure that these
exemptions are applied only to the
extent Congress intended in enacting
the 1974 amendments.
Furthermore, because of the
Department’s revisions to these
regulations, as home-based services
continue to expand, employers will
have clear guidance about the need to
afford most direct care workers the
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60459
protections of the FLSA, and the
continued growth of home-based
services will occur based on a realistic
understanding of the professional nature
of the home care workforce.
Specifically, as explained in detail in
this preamble, only direct care workers
who primarily provide fellowship and
protection are providing companionship
services. Direct care workers who are
employed by third party employers,
such as private home care agencies, are
the type of professional workers whose
vocation merits minimum wage and
overtime protections. Direct care
workers who provide medically related
services, such as certified nursing
assistants, are doing work that calls for
more skill and effort than that
encompassed by the term
‘‘companionship services.’’ The
Department believes that based on these
principles, most direct care workers
acting as home health aides, and many
whose title is personal care assistant,
will be entitled to minimum wage and
overtime. These workers are due the
respect and dignity that accompanies
the protections of the FLSA.
The Department recognizes that this
Final Rule will have an impact on
individuals and families who rely on
direct care workers for crucial assistance
with day-to-day living and community
participation. Throughout the
rulemaking process, the Department has
carefully considered the effects of the
rule on consumers and has taken into
account the perspective of elderly
people and people with illnesses,
injuries, and disabilities, as well as
workers, employers, public agencies,
and others. The Department has
responded to comments from members
of those groups and organizations
representing them throughout this Final
Rule. In particular, this preamble
explains that the Department does not
believe, as some commenters have
suggested, that the rule will interfere
with the growth of home- and
community-based caregiving programs
and thereby lead to increased
institutionalization. Furthermore, the
preamble explains that many states
require the payment of minimum wage
and often overtime to direct care
workers, and the detrimental effects on
the home care industry some
commenters predict have not occurred
in those states. To the contrary, the
Department believes that ensuring
minimum wage and overtime
compensation will not only benefit
direct care workers but also consumers
because supporting and stabilizing the
direct care workforce will result in
better qualified employees, lower
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turnover, and a higher quality of care.
Furthermore, as described in detail
throughout this preamble, the
Department has modified the proposed
regulations in response to comments to
make the rule easier for the regulated
community to understand and apply.
III. Summary of Comments on Changes
to the FLSA Domestic Service
Regulations
More than 26,000 individuals
commented on the Department’s Notice
of Proposed Rulemaking. Comments
were received from a broad array of
constituencies, including direct care
workers, consumers of home care
services, small business owners and
employers, worker advocacy groups and
unions, employer and industry
advocacy groups, law firms, Members of
Congress, state government agencies,
federal government agencies,
professional associations, the disability
community, and other interested
members of the public. Several
organizations attached the views of
some of their individual members:
National Partnership for Women and
Families (8,733 individual comments),
Progressive Jewish Alliance and Jewish
Funds for Justice (687 individual
comments), and Interfaith Worker
Justice (500 individual comments), for
example. Other organizations submitted
a comment and attached membership
signatures, such as the National
Women’s Law Center (Center) (3,392
signatures). Additional comments
submitted after the comment period
closed are not considered part of the
official record and were not considered.
All comments timely received may be
viewed on the www.regulations.gov Web
site, docket ID WHD–2011–0003.
Many comments received in response
to the NPRM are: (1) Very general
statements of support or opposition; (2)
personal anecdotes that do not address
a specific aspect of the proposed
changes; (3) comments that are beyond
the scope or authority of the proposed
regulations; or (4) identical or nearly
identical ‘‘form letters’’ sent in response
to comment initiatives sponsored by
various constituent groups. The
remaining comments reflect a wide
variety of views on the merits of
particular sections of the proposed
regulations. Many include substantive
analyses and arguments in support of or
in opposition to the proposed
regulations. The substantive comments
received on the proposed regulations are
discussed below, together with the
Department’s response to those
comments and a section-by-section
discussion of the changes that have been
made in the final regulatory text.
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Terminology
Several commenters indicated that
terms used by the Department in the
NPRM were inconsistent with industry
use and may be misinterpreted.
Commenters themselves used a number
of different terms in referring to the
industry, the workers potentially
impacted by the proposed rule, and the
individuals receiving services from
workers potentially impacted by the
proposed rule. The Department has
made an effort to modify its use of
language where possible in the Final
Rule except when quoting the statute,
legislative history, case law, or when
quoting a commenter. For example, the
Department notes that the terms ‘‘aged’’
and ‘‘infirmity’’ appear in the current
regulatory text due to the language
Congress used in the statutory
exemption. See 29 U.S.C. 213(a)(15).
However, where possible throughout the
preamble discussion, the Department
instead uses the term ‘‘consumers’’ or
‘‘elderly people or people with illnesses,
injuries, or disabilities’’ when
discussing those who receive home care
services, including companionship
services. When discussing the workers
who may be impacted by the Final Rule,
the Department instead uses the term
‘‘direct care worker’’ to encompass the
occupational categories of these
domestic service workers and the terms
used by commenters, such as home
health aides, personal care aides,
attendants, direct support professionals,
and family caregivers. Finally, in this
Final Rule, the Department uses the
term ‘‘home care’’ to reflect the broader
industry rather than home health care
which specifically covers medical
assistance performed by certified
personnel.
Section-by-Section Analysis of Final
Regulations
A. Section 552.3 (Domestic Service
Employment)
Section 552.3, which defines
domestic service employment, currently
reads, ‘‘[a]s used in section 13(a)(15) of
the Act, the term domestic service
employment refers to services of a
household nature performed by an
employee in or about a private home
(permanent or temporary) of the person
by whom he or she is employed.’’
Section 552.3 also provides an
illustrative list of various occupations
which are considered ‘‘domestic service
employment.’’
In the NPRM, the Department
proposed to update and clarify the
definition of domestic service
employment in § 552.3. Specifically, the
Department proposed to remove the
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qualifying introductory language ‘‘as
used in section 13(a)(15) of the Act’’
because section 13(a)(15) refers to the
Act’s exemption for those employed to
provide babysitting services on a casual
basis and those performing
companionship services. The definition
of domestic service employment has a
broader context than just the exemption
found in 13(a)(15). The Department also
proposed to remove the phrase ‘‘of the
person by whom he or she is employed’’
from the definition because the
Department believes this phrase may be
confusing and misread as impermissibly
narrowing coverage of domestic service
employees under the Act. In addition,
the Department proposed to delete the
more outdated occupations listed in
§ 552.3, such as ‘‘governesses,’’
‘‘footmen,’’ and ‘‘grooms,’’ and to
include more modern occupations, such
as ‘‘nannies,’’ ‘‘home health aides,’’ and
‘‘personal care aides.’’ The Department
also proposed to include babysitters and
companions on the list of domestic
service workers. For the reasons stated
below, this provision is adopted without
change in the Final Rule. An additional
conforming change has also been made
to § 552.101(a).
Several organizations wrote to
support the proposed changes,
commenting that the proposed revised
language would add clarity, thus
reducing confusion among workers and
employers. For example, the Equal
Justice Center (EJC) lauded the
Department’s deletion of the
introductory language referencing
section 13(a)(15) of the Act, noting that
‘‘the introductory language of section
552.3 . . . created a definitional
inconsistency by exempting a group of
workers Congress intended to include.
The proposed deletion of this language
effects clarity and serves as a
recognition of the broad spectrum of
occupations within the home Congress
intended to protect.’’
Other organizations supported the
Department’s proposal to remove the
language specifying that domestic
service work be performed in the home
of the person by whom he or she is
employed. The Center stated that the
removal of the language ‘‘will prevent
confusion that could lead to narrower
coverage of domestic service employees
under the FLSA. This is particularly
important given the high percentage of
home care workers employed by third
parties or agencies.’’ Similarly, the
American Federation of State, County
and Municipal Employees (AFSCME)
supported the Department’s revised
definition, stating, ‘‘removal of the
definitional interpretation potentially
limiting such work to a private home of
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the employer aptly adjusts the law to
existing workplace realities.’’
Commenters also voiced support for
the Department’s proposal to update the
list of occupations that fall within the
definition of domestic service
employment. The EJC supported the
Department’s change to the list of
illustrative occupations, explaining that,
the revision ‘‘limits litigation of
coverage by guiding the Courts through
modern and more accessible
terminology that denotes the
occupations that Congress intended to
cover since 1974.’’ This organization
also commended the Department’s
addition of home health aides and
personal care aides in the regulation,
reflecting the prominence of the
occupations in the burgeoning home
care industry. See also American Civil
Liberties Union (ACLU); PHI; and Susan
Flanagan.
Few comments were received in
opposition to the proposed definition.
Those that opposed the proposed
changes did so generally, such as the
Texas Association for Home Care and
Hospice, which commented that the
definition should not be amended to
include companions, home health aides,
or personal care aides. Additionally,
AARP, although generally supportive of
the changes, recommended adding
language to the regulation stating that a
job title does not control legal status.
The Department has carefully
considered all the comments regarding
the proposed change to the definition of
‘‘domestic service employment’’ and has
decided to adopt the regulation as
proposed. The Department is making a
conforming change to § 552.101(a) by
deleting the phrase ‘‘of the employer,’’
so that the definition of ‘‘domestic
service employment’’ is consistent with
§ 552.3. The Department believes that
updating and clarifying this definition
by deleting the limiting language ‘‘as
used in section 13(a)(15) of the Act’’
reflects the legislative history, which is
to extend FLSA coverage to all domestic
employees whose ‘‘vocation’’ was
domestic service. The Department also
believes that deleting the phrase ‘‘of the
person by whom he or she is employed’’
from the definition is more consistent
with the legislative history. As
discussed in the NPRM, this language
has been part of the regulations since
first implemented in 1975; however, the
Department believes the definition may
be confusing and may be misread as
impermissibly narrowing coverage of
domestic service employees under the
FLSA. The Senate Committee
responsible for the 1974 amendments
looked at regulations issued under the
Social Security Act for defining
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domestic service. The Department
borrowed this language from the Social
Security regulations without discussion
or elaboration, and has consistently
maintained that the phrase is an
extraneous vestige. See Long Island Care
at Home, Ltd. v. Coke, 551 U.S. 158,
169–70 (2007). This phrasing is not
applicable to the realities of domestic
service employment today, in which
many employees are employed, either
solely or jointly, by an entity other than
the person in whose home the services
are performed. Removal of this
extraneous language more accurately
reflects Congressional intent and
clarifies coverage of these workers. 76
FR 81192.
Private Home
The Department also received a few
comments concerning what constitutes
a ‘‘private home.’’ The ACLU noted that
a private home is distinguishable from
a building that an employer rents out to
strangers. One individual stated that the
Department’s definition of private home
is too restrictive and does not extend to
Independent Living or Assisted Living
communities. This individual suggested
that such residences should be
considered the private home of the
elderly individuals because they live
there, the living arrangements are not
temporary, and the individual’s
furniture, pictures, and personal files
remain in the residence.
As explained above, in order to
qualify as a domestic service employee,
an employee’s work must be performed
in or about a ‘‘private home.’’ §§ 552.3,
552.101. The Department did not
propose any changes to the definition of
‘‘private home,’’ and nothing in this
Final Rule is altering the determination
of whether work is being performed in
or about a private home. Nonetheless,
because this is a threshold question for
determining whether an employer is
entitled to claim the companionship
services exemption, the Department is
offering a summary of the definition of
‘‘private home’’ under existing law.
Under the Department’s regulations, a
private home may be a fixed place of
abode or a temporary dwelling.
§ 552.101(a). ‘‘A separate and distinct
dwelling maintained by an individual or
a family in an apartment house,
condominium or hotel may constitute a
private home.’’ Id. However,
‘‘[e]mployees employed in dwelling
places which are primarily rooming or
boarding houses are not considered
domestic service employees. The places
where they work are not private homes
but commercial or business
establishments.’’ § 552.101(b).
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60461
The Senate Report also discusses the
term ‘‘private home,’’ noting that ‘‘the
domestic service must be performed in
a private home which is a fixed place of
abode of an individual or family.’’ S.
Rep. No. 93–690, at 20 (1974). The
Senate Report notes that ‘‘[a] separate
and distinct dwelling maintained by an
individual or family in an apartment
house or hotel may constitute a private
home. However, a dwelling house used
primarily as a boarding or lodging house
for the purpose of supplying such
services to the public, as a business
enterprise, is not a private home.’’ Id.
Several courts have addressed
whether home care services were
performed in a private home. In Welding
v. Bios Corp., 353 F.3d 1214 (10th Cir.
2004), the Tenth Circuit Court of
Appeals analyzed whether a business
providing services to individuals with
developmental disabilities was entitled
to rely on the companionship services
exemption in paying its employees. The
court explained that to claim the
exemption, the business must establish
that the services were provided in a
private home. In assessing whether the
residences at issue were private homes,
the court described six factors
(discussed below) to consider. Id. at
1219–20; see Johnston v. Volunteers of
Am., Inc., 213 F.3d 559, 562 (10th Cir.
2000) (explaining that the employer
bears the burden of proving its
employees fit within the companionship
exemption). The court noted that the
‘‘key inquiries are who has ultimate
management control of the living unit
and whether the living unit is
maintained primarily to facilitate the
provision of assistive services.’’ Id. at
1219.
The first factor calls for considering
whether the client lived in the living
unit before he or she received any
services. If the person did not live in the
home before becoming a client, and if
the person would not live in the home
if he or she were not receiving services,
then the living unit would not be
considered a private home. Id.
The second factor analyzes who owns
the living unit; the court noted that
‘‘[o]wnership is significant because it
evidences control.’’ 353 F.3d at 1219. If
the living unit is owned by the client or
the client’s family, this is an indication
that the services are performed in a
private home. Id. However, if the living
unit is owned by a service provider, this
is an indication that the services are not
performed in a private home. Id. If the
client or the client’s family leases the
unit directly from the owner, the court
concluded that this is some indication
that it is a private home. Id.; see
Terwilliger v. Home of Hope, Inc., 21 F.
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Supp. 2d 1294, 1299 (N.D. Okla. 1998)
(holding that services were performed in
a private home when the clients owned
or leased the residences from a third
party and the service provider had no
legal interest in the residence). If the
service provider leases the unit, the
court concluded that this is some
indication that it is not a private home.
353 F.3d at 1219; Madison v. Res. for
Human Dev., Inc., 233 F.3d 175, 179 (3d
Cir. 2000) (holding that residences were
not private homes when clients selected
residences from provider-approved list
and service provider leased the
residences and subleased them to
clients).
The third factor looks to who manages
and maintains the residence, i.e., who
provides the essentials that the client
needs to live there, such as paying the
mortgage or rent, utilities, food, and
house wares. The court explained that
‘‘[i]f many of the essentials of daily
living are provided for by the client or
the client’s family, that weighs strongly
in favor of it being a private home. If
they are provided for by the service
provider, that weighs strongly in favor
of it not being a private home.’’ 353 F.3d
at 1220.
The fourth factor is whether the client
would be allowed to live in the unit if
the client were not receiving services
from the service provider. 353 F.3d at
1220. If the client would be allowed to
live in the unit without contracting for
services, then this factor would weigh in
favor of it being a private home. Id.;
Madison, 233 F.3d at 183 (concluding
that it is not a private home if clients
could not remain in the residence if
they terminated their relationship with
the service provider).
The fifth factor considers the relative
difference in the cost/value of the
services provided and the total cost of
maintaining the living unit. 353 F.3d at
1220. ‘‘If the cost/value of the services
is incidental to the other living
expenses, that weighs in favor it being
a private home.’’ Id.
The sixth factor addresses whether
the service provider uses any part of the
residence for the provider’s own
business purposes. 353 F.3d at 1220.
The court concluded that if the service
provider uses any part of the residence
for its own business purpose, then this
fact weighs in favor of it not being a
private home. Id.; see Johnston, 213
F.3d at 565 (concluding that a residence
is not a private home when the service
provider had an office in the home for
employees). If, however, the service
provider does not use any part of the
residence for its own business purpose,
then this factor weighs in favor of it
being a private home. 353 F.3d at 1220.
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Other courts have looked at additional
factors, emphasizing that all relevant
factors must be considered. Those
factors include: whether significant
public funding is involved; who
determines who lives together in the
home; whether residents live together
for treatment purposes as part of an
overall care program; the number of
residents; whether the clients can come
and go freely; whether the employer or
the client acquires the furniture; who
has access to the home; and whether the
provider is a for profit or not for profit
entity. See, e.g., Johnston, 213 F.3d at
563–65; Linn v. Developmental Services
of Tulsa, Inc., 891 F. Supp. 574 (N.D.
Okla. 1995); Lott v. Rigby, 746 F. Supp.
1084 (N.D. Ga. 1990).
Several courts have addressed the
question of whether particular group
residences of individuals in need of care
are private homes. For example, the
Tenth Circuit Court of Appeals held in
Johnston v. Volunteers of America, Inc.,
213 F.3d 559 (10th Cir. 2000), that a
business that provides care services to
individuals with developmental
disabilities in a supported living
program did not meet its burden of
proof to show that services were
provided in a private home when the
residents were placed outside the family
home with strangers who also needed
services and without the full-time, livein care of a relative. Id. at 565. The court
also relied on the facts that the clients’
diets and daily activities were
controlled by the business’ employees
and not a family member, and that the
business could appropriate a room to
use as an office. Id. Similarly, in
Madison v. Resources for Human
Development, Inc., 233 F.3d 175 (3d Cir.
2000), the Third Circuit held that a nonprofit corporation that provides
supported living arrangements for
adults with disabilities was not
providing services in a private home. Id.
at 184. In support of this holding, the
court noted that the clients do not have
a possessory interest in the homes; they
sublease the property from the
corporation, and they may only remain
in the home to the extent they maintain
a continued relationship with the
corporation. Id. at 183. The court also
relied on the fact that the clients do not
have full control over who may access
the home and that the clients did not
have unfettered freedom in their day-today conduct. Id.
Following the analysis provided for in
the case law, the Department has
recognized that whether a living
arrangement qualifies as a private home
is a fact-specific inquiry. See Wage and
Hour Opinion Letter, 2001 WL
15558952 (Feb. 9, 2001); Wage and Hour
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Opinion Letter, FLSA 2006–13NA (June
23, 2006). In evaluating whether a
residence is a private home, the
Department considers the six factors
identified by the Tenth Circuit in
Welding as well as the other factors
identified in Johnston, Linn and Lott.
See Wage and Hour Opinion Letter,
FLSA 2006–13NA (June 23, 2006). The
Department has made clear that the fact
that the home is the sole residence of
the individual is not enough to make it
a private home under the FLSA. See
Wage and Hour Opinion Letter, FLSA
2006–13NA (June 23, 2006), at 2; see
also Lott, 746 F. Supp. at 1087
(concluding that the fact that the home
was the client’s sole residence was not
enough to make it a private home). For
example, in an opinion letter, the
Department concluded that ‘‘adult
homes’’ designed for individuals who
are in need of assistance with certain
day-to-day functions, such as meal
preparation, housekeeping, and
medications, were not private homes.
See Wage and Hour Opinion Letter,
FLSA 2001–14, 2001 WL 1869966, at 1
(May 14, 2001). The Department’s
conclusion was based on the fact that
the clients are placed in a residence
outside the family home and without
the full-time live-in care of a relative. Id.
at 2. The clients are housed in a
residence with others who are also in
need of long-term residential care. Id.
Moreover, facility employees, and not a
family member, control the client’s diets
and daily activities (to some degree).
The Department also considered that the
adult homes may select the clients who
will share the same residence and can
set up two residents per room, although
the client has the right to request a
private room for a higher fee. Id. Finally,
despite the client’s participation in the
upkeep of the home, the service
provider is ultimately responsible for
the maintenance of the residence. Id.
However, in another case, the
Department concluded that supported
living services provided to consumers
were performed in a private home. See
Wage and Hour Opinion Letter, 1999
WL 1002387, at 2 (Apr. 8, 1999). In
support of this conclusion, the
Department noted that neither the
public agency nor the private agency
that provides the services determines
where a client will live or with whom.
Id. Rather, the client or the client’s
guardian makes these decisions and he
or she is responsible for leasing the
residence and paying the rent as well as
for furnishing it to suit the individual’s
tastes and resources. Id. The Department
also noted that the client typically lives
alone or with only one roommate, and
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that the private agency has no financial
interest in the client’s housing as it does
not own or lease any of the housing.
As explained above, determining
whether a particular living unit is a
private home requires a fact-intensive
analysis. Generally, such an inquiry
exists along a continuum: on one end,
a home owned and occupied for many
years by an elderly individual would be
a private home; on the other end of the
continuum, a typical nursing home
would not be considered a private home
under the regulations. This Final Rule
does not alter this inquiry in any way;
rather, the analysis to determine
whether an employee is working in a
‘‘private home’’ remains unchanged.
Thus, employees who are working in a
location that is not a private home were
never properly classified as domestic
service employees under the current
regulations, and employers were not
and are not entitled to claim the
companionship services or live-in
worker exemptions for such employees.
B. Section 552.6 (Companionship
Services)
Current § 552.6 defines the term
‘‘companionship services’’ as ‘‘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.’’ In the NPRM, the
Department stated its intention to
modernize and clarify what is
encompassed within the definition of
fellowship, care, and protection.
Specifically, the Department proposed
to divide § 552.6 into four paragraphs.
Proposed paragraph (a) defined
‘‘companionship services’’ as ‘‘the
provision of fellowship and protection’’
and described the duties and activities
that fall within the meaning of those
terms. Proposed paragraph (b) described
the ‘‘intimate personal care services’’
that could be part of companionship
services if provided ‘‘incidental’’ to
fellowship and protection. Proposed
paragraph (c) excluded from
companionship services household
work benefitting members of the
household other than the consumer.
Proposed paragraph (d) provided that
companionship services do not include
medical care of the type described.
The Final Rule maintains the general
organizational structure of this section
as proposed but modifies the proposed
regulatory text as described below.
As an initial note, in this Final Rule,
the Department has modified proposed
§ 552.6 by deleting the terms ‘‘aged,’’
‘‘advanced age,’’ ‘‘infirm,’’ ‘‘infirmity,’’
and ‘‘physical or mental infirmity’’ in
the title and regulatory text of this
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section. Where a descriptor is needed,
the Department has substituted ‘‘elderly
person or person with an illness, injury,
or disability.’’ In addition, the
Department has replaced in the
regulatory text the phrase ‘‘unable to
care for themselves’’ with ‘‘requires
assistance in caring for himself or
herself.’’ Although the language being
replaced is derived from FLSA section
13(a)(15) and the existing regulations at
§ 552.6, the Department recognizes that
such language is outdated and does not
reflect contemporary views regarding
the elderly and people with disabilities.
The Department therefore has modified
the text in the Final Rule and has made
conforming changes to the title and text
of § 552.106, which repeats the language
from § 552.6. In addition, throughout
this preamble, the Department has
sought to use updated language, except
when quoting from the statute, the
legislative history, the current or
proposed regulations, or comments
submitted in response to the NPRM. By
modernizing this language, the
Department does not in any way intend
to change the intent of Congress with
respect to those who use
companionship services.
Section 552.6(a) (Fellowship and
Protection)
Proposed § 552.6(a) defined
‘‘companionship services’’ as ‘‘the
provision of fellowship and protection’’
for an elderly person or person with an
illness, injury, or disability who
requires assistance in caring for himself
or herself. The proposed language
further defined the term ‘‘fellowship’’ to
mean ‘‘to engage the person in social,
physical, and mental activities,
including conversation, reading, games,
crafts, walks, errands, appointments,
and social events’’ and the term
‘‘protection’’ to mean ‘‘to be present
with the person in their home or to
accompany the person when outside of
the home to monitor the person’s safety
and well-being.’’ The Department
adopts paragraph (a) essentially as
proposed, with the slight modifications
described below.
Comments from employees, employee
advocacy groups and labor
organizations generally supported the
proposed revision of paragraph (a),
agreeing with the Department that the
definition more accurately reflected
Congress’s intent that the
companionship exemption be akin to
‘‘elder sitting.’’ See, e.g., Golden Gate
University School of Law, Women’s
Employment Rights Clinic; Center on
Wisconsin Strategy (COWS); National
Employment Law Project (NELP); see
also comments of several individual
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direct care workers stating that their
work is not ‘‘at all’’ like elder sitting.
Specifically, these individuals and
organizations noted that Congress
clearly wished to include under the
protections of the Act employees for
whom domestic work was a vocation,
while allowing a narrow exemption for
more casual arrangements. The Service
Employees International Union (SEIU)
explained that this distinction should
turn on whether ‘‘such tasks and duties
are of a nature more typically performed
by a worker engaged in his or her
livelihood or rather, on a less formal
basis, by a non-breadwinner.’’ See SEIU;
see also AFSCME, American Federation
of Labor–Congress of International
Organizations (AFL–CIO). In addition,
Senator Harkin, joined by 18 other
Senators, affirmed the Department’s
assessment of the legislative history,
explaining that ‘‘by the term
‘companion’ Congress meant someone
who sits with an elderly or infirm
person.’’
Some non-profit advocacy
organizations such as AARP, the
National Council on Aging, and the
National Consumers League (NCL) also
supported the revised definition. These
organizations noted that the revised
definition would be helpful in clarifying
what duties would be considered
exempt ‘‘companionship services’’ and
that the Department correctly identified
‘‘fellowship’’ and ‘‘protection’’ as the
primary duties of an exempt
companion. Similarly, the EJC stated
that the definition would provide
clarity, ‘‘thereby assisting attorneys and
courts to more readily find coverage by
effectively categorizing an employee’s
work as either domestic or
companionship services.’’
Several employers, employer
organizations and some associations
opposed the proposed § 552.6(a), stating
that its focus on fellowship and
protection was inconsistent with
legislative intent. Some of these
commenters stated that the scope of the
proposed definition is too restrictive,
and ‘‘goes too far conceptually in
relating companionship to baby or elder
‘sitting’.’’ See National Association of
State Directors of Developmental
Disabilities Services (NASDDDS). In
addition, although the American
Network of Community Options and
Resources (ANCOR), among others,
concurred that the focus of
companionship services should be
fellowship and protection, it also
requested that ‘‘most assistance with
dressing, grooming, meal preparation,
feeding, and driving’’ be included as
part of fellowship and protection.
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Commenters also sought further
guidance from the Department
concerning the scope of the
companionship services definition. For
example, the National Resource Center
for Participant-Directed Services
(NRCPDS) requested clarification
regarding the use of the ‘‘and’’ in the
phrase ‘‘fellowship and protection’’
because it suggests that it may be
insufficient to provide either fellowship
or protection alone, in the absence of
the other. Additionally, many industry
commenters were concerned that the
Department’s proposal excised the term
‘‘care’’ from the definitions of
companionship services. These
comments are discussed in greater detail
below, in the subsection addressing
§ 552.6(b).
After carefully considering the
comments concerning its proposed
definition of ‘‘companionship services,’’
the Department has decided to adopt
proposed § 552.6(a) with modifications.
For the reasons described above, the
Final Rule deletes the words ‘‘for a
person, who, because of advanced age or
physical or mental infirmity, is unable
to care for themselves’’ found in the first
sentence of proposed § 552.6(a) and uses
instead ‘‘for an elderly person or person
with an illness, injury, or disability who
requires assistance in caring for himself
or herself.’’ In addition, the adopted
regulatory text defining fellowship and
protection has been slightly edited for
clarity; these minor adjustments to
wording and punctuation do not change
the meaning of the regulation as
proposed. The second and third
sentences of § 552.6(a) read: ‘‘The
provision of fellowship means to engage
the person in social, physical, and
mental activities, such as conversation,
reading, games, crafts, or accompanying
the person on walks, on errands, to
appointments, or to social events. The
provision of protection means to be
present with the person in his or her
home, or to accompany the person when
outside of the home, to monitor the
person’s safety and well-being.’’
The Department believes this
definition of companionship services is
appropriate based on the legislative
history of the 1974 FLSA amendments
and dictionary definitions of relevant
terms. The legislative history indicates
that Congress intended to remove from
the FLSA’s minimum wage and
overtime compensation protections only
those domestic service workers for
whom domestic service was not their
vocation and whose actual purpose was
to provide casual babysitting or
companionship services. The legislative
history describes a companion as
someone who ‘‘sits with [an elderly
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person],’’ provides ‘‘constant
attendance,’’ and renders services
similar to a babysitter, i.e., ‘‘someone to
be there and watch an older person,’’ or
an ‘‘elder sitter.’’ See 119 Cong. Rec.
S24773, S24801 (daily ed. July 19,
1973).
Dictionary definitions are also
instructive in understanding the scope
of an exempt companion’s duties. The
dictionary defines companionship as
the ‘‘relationship of companions;
fellowship,’’ and the term ‘‘companion’’
is defined as a ‘‘person who associates
with or accompanies another or others;
associate; comrade.’’ See Webster’s New
World Dictionary, p. 288 (2d College Ed.
1972). It further defines ‘‘fellowship’’ as
including ‘‘a mutual sharing, as of
experience, activity, interest, etc.’’ Id. at
514. These definitions demonstrate that
a companion is someone in the home
primarily to watch over and care for the
elderly person or person with an illness,
injury, or disability.
For these reasons, the Department
believes it is appropriate for
‘‘companionship services’’ to be
primarily focused on the provision of
fellowship and protection, and that this
focus is consistent with the general
principle that coverage under the FLSA
is broadly construed so as to give effect
to its remedial purposes, and
exemptions are narrowly interpreted
and limited in application to those who
clearly are within the terms and spirit
of the exemption. See, e.g., A.H.
Phillips, Inc. v. Walling, 324 U.S. 490,
493 (1945). Examples of activities that
fall within fellowship and protection
may include: watching television
together; visiting with friends and
neighbors; taking walks; playing cards,
or engaging in hobbies. For the reasons
explained below, the Department’s
definition of ‘‘companionship services’’
also allows for certain ‘‘care’’ activities,
as defined in § 552.6(b), to be performed
attendant to and in conjunction with
fellowship and protection, as long as
those activities comprise no more than
20 percent of the direct care worker’s
time working for a particular person in
a particular workweek.
In response to commenters who
requested clarification as to the
Department’s use of the phrase
‘‘fellowship and protection,’’ it is the
Department’s intent that the great
majority of duties performed by a direct
care worker whose duties meet the
definition of companionship services
will encompass both fellowship and
protection, and that a caregiver would
be hired to perform both duties.
However, a direct care worker may, at
times, perform certain tasks that require
either fellowship or protection, such as
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sitting with a consumer while the
individual naps (in which case, only
protection would be provided) and still
meet the definition of performing
companionship services. The
Department notes that this type of
activity would not prevent application
of the exemption, because the worker
would be available to provide
fellowship services when the consumer
awakens.
Section 552.6(b) (Care)
Proposed § 552.6(b) provided that
‘‘[t]he term ‘companionship services’
may include intimate personal care
services that are incidental to the
provision of fellowship and protection
for the aged or infirm person.’’ The
proposed regulatory text further
provided that these intimate personal
care services ‘‘must be performed
attendant to and in conjunction with
fellowship and protection of the
individual’’ and ‘‘must not exceed 20
percent of the total hours worked in the
workweek’’ in order to fall within the
definition of companionship services.
Proposed § 552.6(b) next provided an
illustrative, detailed list of intimate
personal care services: (1) Dressing, (2)
grooming, (3) toileting, (4) driving, (5)
feeding, (6) laundry, and (7) bathing.
Each listed intimate personal care
service was preceded by the term
‘‘occasional’’ in the proposal. The
Department explained in the preamble
to the proposed rule that it was allowing
for some work incidental to the
fellowship and protection that primarily
constitutes companionship services
because the legislative history indicated
that Congress contemplated that a direct
care worker providing companionship
services might perform tasks such as
‘‘making lunch for the infirm person’’
and ‘‘some incidental household work.’’
See 119 Cong. Rec. at S24801; see also
76 FR 81193.
After a careful review of the
comments, and for the reasons
explained in greater detail below, the
Department has retained the
fundamental purpose of proposed
paragraph (b)—to define certain services
that, if provided to a limited extent and
incidentally to the fellowship and
protection that are the core duties of an
exempt companion, do not defeat the
exemption—but has modified the
proposed regulatory text in order to
make the additional services an exempt
companion may perform easier for the
regulated community to understand.
Section 552.6(b) now reads: ‘‘The term
companionship services also includes
the provision of care if the care is
provided attendant to and in
conjunction with the provision of
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fellowship and protection and if it does
not exceed 20 percent of the total hours
worked per person and per workweek.
The provision of care means to assist
the person with activities of daily living
(such as dressing, grooming, feeding,
bathing, toileting, and transferring) and
instrumental activities of daily living,
which are tasks that enable a person to
live independently at home (such as
meal preparation, driving, light
housework, managing finances,
assistance with the physical taking of
medications, and arranging medical
care).’’
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Care
Several commenters expressed
concern that the proposed definition of
companionship services did not
sufficiently emphasize the provision of
‘‘care.’’ For example, BrightStar
Healthcare of Baltimore City/County
(‘‘BrightStar’’) and the Texas
Association for Home Care and Hospice,
among others, noted that the plain
language of the statutory exemption
used the term ‘‘care,’’ and that the
legislative history also indicated a
desire by Congress to have ‘‘care’’
encompassed in the definition.
BrightStar asserted that ‘‘it is clear from
the legislative history that ‘care’ for
those who are ‘unable to care for
themselves’ is an integral part of what
was contemplated in creating the
companionship exemption.’’
Congressman Lee Terry agreed that the
Department’s proposed definition ‘‘is
altering the focus of the exemption in a
way that Congress neither intended nor
envisioned.’’
The Department does not disagree
with commenters who wrote that ‘‘care’’
should be explicitly included in the
regulatory definition of companionship
services. Indeed, the proposal did not
remove ‘‘care’’ from the regulatory
definition of companionship services;
rather, although proposed paragraph (a)
did not use the word care, the
Department sought in paragraph (b) to
define and delimit the type of care that
falls within the exemption. In the Final
Rule, § 552.6(b) uses the term ‘‘care’’
rather than ‘‘intimate personal care
services’’ to make more explicit that
care remains part of companionship
services.
Activities of Daily Living and
Instrumental Activities of Daily Living
The Department received thousands
of comments concerning the proposed
list of intimate personal care services.
These comments demonstrated
problems raised by the proposed list,
and the Department has modified this
Final Rule accordingly. Specifically,
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upon consideration of these comments,
the Final Rule describes the provision of
care as assistance with activities of daily
living (ADLs) and instrumental
activities of daily living (IADLs), with
examples of each type of task, rather
than using the term ‘‘intimate personal
care services’’ and providing a detailed
list of activities that fall into that
category.
Many commenters supported the
proposed list of intimate personal care
services. For example, AFSCME and
AARP agreed that the definition of
companionship services should be
narrowed and that only true ‘‘fellowship
and protection’’ services, accompanied
by personal care or household services
that are incidental to those
companionship services, should be
exempt from the FLSA. Care Group,
Inc., a provider of in-home medical
services registered in the State of
California, and NELP, among others,
supported the Department’s proposal
but urged the Department to make the
list of incidental services exclusive
rather than illustrative.
In contrast, employers and other
groups, such as the Texas Association
for Home Care and Hospice and
Americans for Limited Government
(ALG), generally expressed the view that
personal care should not be limited to
‘‘incidental’’ activities because the
exemption explicitly states that
consumers receiving services are
‘‘unable to care for themselves’’; these
commenters suggested that whatever
‘‘care’’ the consumer needs should be
included as part of unrestricted
companionship services. See also The
Virginia Association for Home Care and
Hospice. The Visiting Nurse
Associations of America (VNAA)
expressed the view that the federal
government should defer to existing
state and local regulations concerning
permissible duties. Similarly, California
Association for Health Services at Home
(CAHSAH) pointed to state guidance
that makes clear that a companion must
be allowed to perform all duties a client
needs to remain independent.
Commenters also addressed the
specific care tasks that the Department
had included in the proposed list
individually. In response to the
Department’s proposal to allow
assistance with toileting as an incidental
personal care service, the National
Council on Aging, NELP, and Workforce
Solutions expressed concern about
potential injury to workers associated
with this task. These commenters
recommended the Department not
include assistance with services such as
toileting and activities that require
positioning and mobility transfer
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assistance. See also The Workplace
Project. The Legal Aid Society
encouraged the Department to consider
that tasks such as toileting, assistance
with mobility, transfers, positioning, use
of toileting equipment and changing
diapers for persons with dementia are
not casual activities but require training
to be performed in a manner that is safe
for the worker and the consumer. They
suggested that if such activities
constitute part of the regular work
performed, the worker should not be
exempt. Direct Care Alliance (DCA)
stated that the permissible exempt
duties should not include those that
require physical strength or specialized
training. Women’s Employment Rights
Clinic suggested that allowing an
exempt companion to assist with
toileting should only be permitted when
exigent circumstances arise. They
indicated that this activity requires
training or experience that a companion,
as intended by Congress, would not
have.
Several commenters offered their
views on the task of driving the
consumer to appointments, errands, and
social events as an incidental personal
care service. ANCOR stated that driving
to social events should not be included
among the ‘‘personal care services’’ in
the 20 percent limitation, indicating that
‘‘many people with disabilities enjoy
drives and times away from home and
we do not believe this should be
limited.’’ The Texas Association for
Home Care and Hospice and PHI both
expressed the view that this section
should include not only driving but also
‘‘accompanying’’ the consumer. They
noted that other modes of transportation
may be utilized by the consumer.
Women’s Employment Rights Clinic
agreed with the Department’s proposal
to include occasionally driving a
consumer to appointments, errands, and
social events as part of incidental
personal care services defined in
§ 552.6(b).
A number of comments were received
on the proposed provision concerning
meal preparation. The Connecticut
Association for Home Care and Hospice
expressed concern about the
requirement that the client must
consume the food in the direct care
worker’s presence in order to maintain
the exemption. It pointed out that the
proposal failed to take into account the
possibility that the consumer may not
eat all of the food prepared and would
create an untenable situation whereby
the consumer is forced to eat on an
imposed schedule rather than as his or
her appetite dictates. Others, like ALG,
asserted that the proposal would force a
direct care worker to dispose of leftover
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food rather than to store it to be eaten
later. Some commenters, including
Women’s Employment Rights Clinic,
specifically supported the Department’s
qualification that any food prepared
must be eaten in the presence of the
direct care worker in order for the meal
preparation to be part of companionship
services. They indicated that this would
ensure that preparing meals for and
feeding the consumer remained
attendant to and in conjunction with
providing fellowship and protection.
Several commenters objected to
including laundry in the list of personal
care services. For example, Caring
Across Generations and DAMAYAN
Migrant Workers Association
(DAMAYAN) both indicated that
‘‘laundry is neither absolutely necessary
for an elderly or infirm person during
the companion worker’s shift nor does
it arise out of exigent circumstances that
justify including ‘occasional bathing’ in
proposed § 552.6(b)(7). Laundry services
fall under the type of household
services performed by housekeepers or
laundresses and thus should be
excluded.’’ Others, such as the Latino
Union of Chicago, similarly commented
that ‘‘an individual or family hiring a
companion worker could just as easily
hire a housekeeper or laundress to
regularly launder clothes.’’
With respect to bathing, some
commenters supported the proposal’s
limitation on bathing duties to ‘‘exigent
circumstances.’’ For example, Women’s
Employment Rights Clinic indicated
that they thought the limitation to
exigent circumstances was appropriate
as this duty is one which requires the
lifting, touching, and moving of a frail
individual, and this normally requires
increased training and experience.
The Department continues to believe
Congress intended fellowship and
protection to be the primary focus of an
employee exempt under the
companionship services exemption but
that flexibility to provide some tasks
incidental to fellowship and protection
is appropriate. In light of the comments
received concerning the proposed list of
intimate personal care services,
however, the Department has not
adopted the regulatory text as proposed.
Instead, section 552.6(b) now states, in
relevant part: ‘‘The provision of care
means to assist the person with
activities of daily living (such as
dressing, grooming, feeding, bathing,
toileting, and transferring) and
instrumental activities of daily living,
which are tasks that enable a person to
live independently at home (such as
meal preparation, driving, light
housework, managing finances,
assistance with the physical taking of
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medications, and arranging medical
care).’’
As reflected in the comments, the
Department now believes that the
proposed list of intimate personal care
services raised more questions than it
answered. See, e.g., ALG (stating that
the list of proposed intimate personal
care services created ‘‘practical
problems,’’ such as prohibiting an
exempt companion from operating a
vacuum cleaner). The Department also
agrees with commenters that the list was
too specific and not flexible enough in
its approach. The Department is
persuaded by the view expressed by
commenters such as the State of
Washington’s Department of Social and
Health Services, that the ‘‘use of
‘intimate personal care services’ should
be updated to reflect current service
categories: activities of daily living and
instrumental activities of daily living’’
and thus has modified the Final Rule to
reflect this change. Therefore, in lieu of
describing the permissible care services
an exempt companion may perform as
‘‘intimate personal care services,’’ the
Department instead has adopted the
commonly used industry terms
‘‘activities of daily living’’ (ADLs) and
‘‘instrumental activities of daily living’’
(IADLs) to describe which services are
allowed as part of ‘‘care’’ under the
exemption. See 76 FR 81212. The
Department has also replaced the
detailed list of activities that appeared
in proposed paragraph (b) with simple,
illustrative lists of services that are
commonly viewed as activities of daily
living and instrumental activities of
daily living. The Department intends
that any additional tasks not explicitly
named in the regulatory text but that fit
easily within the spirit of the
enumerated duties also qualify as ADLs
or IADLs.
The Department believes that by
replacing the proposed detailed list of
intimate personal care services with the
more commonly used industry phrases
‘‘activities of daily living’’ and
‘‘instrumental activities of daily living,’’
transition to the new regulation will be
simplified. The State of Tennessee and
the National Association of Medicaid
Directors (NAMD) indicated that home
health aides and personal care
attendants are focused primarily on
providing hands-on care and assistance
with ADLs that enable that consumer to
continue living safely in the
community. The Virginia Association
for Home Care and Hospice expressed
the view that individuals need
assistance with their ADLs and IADLs to
live independently, and that these
activities should be part of the
incidental duties. Additionally,
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hundreds of comments received from
workers referenced these terms as a sort
of shorthand for describing the work
commonly performed by direct care
workers. Furthermore, Medicaid and
Medicare programs also use these terms
to describe direct care work. As noted
by commenters such as NELP and PHI,
Medicaid instructs that assistance with
ADLs and IADLs ‘‘is the core focus of
home care services provided under
Medicaid.’’ Accordingly, the
Department believes the regulated
community is already familiar with
these concepts and they will be easy for
consumers, workers, and employers
alike to understand.
The Department also believes that by
broadening the base of services that a
direct care worker may perform and still
qualify for the companionship services
exemption, consumers will have more
of the immediate needs met that support
them in living independently in their
communities. Among the comments was
a letter writing campaign by several
hundred workers that requested that
companionship services only include
fellowship and protection, ‘‘thereby
excluding workers who assist clients
with activities of daily living or
instrumental activities of daily living.’’
The Department is persuaded, however,
by other comments that emphasized the
critical importance of including an
allowance for ADLs and IADLs in order
for certain consumers to continue to live
independently. See, e.g., Scott Ehrsam,
owner of a home care business; DCA.
The Department notes that the
intimate personal care services
proposed in the NPRM are encompassed
within the categories of ‘‘activities of
daily living’’ and ‘‘instrumental
activities of daily living’’ adopted in the
Final Rule. The Department emphasizes,
however, the provision of such services
only falls within the definition of
companionship services if it is
performed attendant to and in
conjunction with the fellowship and
protection provided to the consumer
and if it does not exceed 20 percent of
the total work hours of the direct care
worker for any particular consumer in
any particular workweek, as discussed
in greater detail below.
This Final Rule provides flexibility
within the bounds of Congressional
intent. The FLSA grants the Secretary of
Labor broad authority to define and
delimit the scope of the exemption for
companionship services. See 29 U.S.C.
213(a)(15). The Department believes its
definition of the types of services that
may be performed within the meaning
of ‘‘provision of care’’ in the Final Rule
is reasonable and consistent with
Congressional intent that all other work
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performed by an exempt companion
must be incidental to the companion’s
primary purpose ‘‘to watch over an
elderly or infirm person in the same
manner that a babysitter watches over
children.’’ 119 Cong. Rec. S24773,
S24801 (daily ed. July 19, 1973).
Twenty Percent Limitation
The Department also received a
significant number of comments
addressing the 20 percent limitation on
the provision of care. Some commenters
believed the cap was too high. See, e.g.,
Women’s Employment Rights Clinic;
EJC. The EJC emphasized that 20
percent is a significant portion of the
workweek and a lower percentage
would better effectuate the goal of
ensuring that the care tasks are truly
incidental. Other commenters, however,
thought the cap was too low. See, e.g.,
The Westchester Consulting Group.
Senior Helpers, among others, expressed
doubt that the listed tasks could be
accomplished in 20 percent of the direct
care worker’s workweek and expressed
concern that seniors would be hurried
through eating meals or forced to cancel
appointments due to the amount of time
allotted. Commenters including NCL
and Workforce Solutions were
concerned that the 20 percent cap
would be difficult to administer. A few
commenters expressed concern over the
cost of monitoring the 20 percent
limitation. The State of Oregon
indicated that the 20 percent limitation
should be eliminated, suggesting that
the limitation should not be based upon
tasks performed but rather should be
based upon for whom the service is
performed. CAHSAH asserted that the
duties that fall under the 20 percent cap
should be unrelated to the care of the
client.
Some commenters suggested
alternative methods for calculating
hours worked performing incidental
care duties. The National Council on
Aging, Workforce Solutions, NELP, and
others supported elimination of the 20
percent cap and replacing it with a twostep assessment. They suggested
requiring an initial assessment to
determine whether the worker had been
hired primarily to perform the duties of
fellowship and protection and whether
the worker was in fact performing those
duties. If the worker was not primarily
performing those duties, the subsequent
listings of permissible exempt activities
would not be considered. If the worker
were found to be hired primarily to
provide fellowship and protection, then
a second step review of the listed
services would be conducted to confirm
that the services were performed
occasionally and incidental to the
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provision of fellowship and protection,
and not as a regular part of the duties
performed.
Organizations like DAMAYAN, The
Workplace Project, and Houston
Interfaith Worker Justice also proposed
eliminating the 20 percent limitation
and replacing it with a different test
comprised of two steps: (1) If a direct
care worker visits a client greater than
three times per week and (2) performs
any of the listed incidental tasks for any
amount of time in greater than 50
percent of the visits, then the direct care
worker would not fall within the
companionship services exemption.
Finally, NCL and PHI suggested that
the Department modify the cap on
incidental activities across a workweek
to one that prohibits a worker from
spending more than 20 percent of work
time performing care tasks per
individual client per workweek.
The Department has carefully
considered the variety of suggestions
offered by commenters with respect to
this issue, and it adopts the 20 percent
limitation on care services essentially as
proposed, although it has modified the
text to explicitly state that the provision
of care is limited to no more than 20
percent of the hours worked per
workweek per consumer. The
Department’s view is that failing to
provide such a limitation would ignore
Congressional intent that making meals
and doing laundry would be incidental
to the exempt companion’s primary
purpose of watching over the consumer.
See 119 Cong. Rec. S24773, S24801
(daily ed. July 19, 1973). Indeed, during
a Senate floor exchange, Senators
Williams and Burdick indicated that
‘‘one may even require throwing some
diapers in the automatic washing
machine for the baby. This would be
incidental to the main purpose of
employment.’’ See 119 Cong. Rec. at
S24801. However, the Department also
recognizes that a limited allowance for
selected tasks, performed attendant to
and in conjunction with fellowship and
protection, is necessary as a matter of
practicality. The Department believes
that this 20 percent threshold, which is
based on the proportion of total hours
worked per workweek, will provide
consumers and direct care workers with
a needed flexibility in their day-to-day
activities. As described below, in
adopting the 20 percent figure, the
Department is utilizing a longestablished threshold that has been used
in a variety of regulations, including
current § 552.6. Employers are, thus,
familiar with this type of time
limitation, mitigating concerns that the
20 percent threshold would be difficult
and costly to administer. In addition,
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the Department views section 552.6(b)
of the Final Rule as a compromise
designed to expand the base of
allowable care while accommodating
the concerns expressed about workplace
safety for both the direct care worker
and the consumer, as such a limitation
restricts the amount of time spent
engaged in these activities.
As the Department indicated in the
preamble to the proposed regulation, the
home care industry has undergone a
dramatic transformation since the
Department published the
implementing regulations in 1975. In
the 1970s, many individuals with
significant care needs were served in
institutional settings rather than in their
homes and their communities, Since
that time, there has been a growing
demand for long-term home care for
persons of all ages, largely due to the
rising cost of institutional care, the
impact of the disability civil rights
movement, and the availability of
funding assistance for home care under
Medicaid, reflecting our nation’s
commitment to accommodate the desire
of individuals to remain in their homes
and communities. As the demand for
long-term home care has grown, so has
the complexity of duties performed in
the home by the direct care worker. It
is the Department’s view that the focus
of the companionship services
exemption should remain on
fellowship, protection, and care as
defined in paragraph (b). Based on the
wide scope of comments received
detailing the extent of the services
provided by direct care workers, the
Department is aware that there is a
significant continuum with respect to
the services consumers require. The
Department is not stating that all
workers providing ‘‘care,’’ as defined in
paragraph (b), will be able to
accomplish the required care in 20
percent of their workweek. Rather, the
Department is concluding that, if the
care that is being provided attendant to
and in conjunction with the provision of
fellowship and protection requires more
time than 20 percent of the workweek,
then the worker is being called upon to
provide services that are outside of the
scope of the companionship services
exemption. In such cases, minimum
wage and overtime pay protections
attach.
The Department believes that a 20
percent limitation for providing this
care, coupled with a primary focus on
the provision of fellowship and
protection, is appropriate for a worker
who is not entitled to the minimum
wage and overtime compensation
protections. The Department notes that
a 20 percent limitation has been
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implemented in this regulation for 38
years (concerning the provision of
general household work), as well as in
other regulations in this chapter such as
§ 552.5, Casual Basis (work that is
incidental does not exceed 20 percent of
hours worked in babysitting
assignment); § 552.104(c), Babysitting
services performed on a casual basis
(babysitter who devotes more than 20
percent of time to household work is not
exempt), as well as in other chapters
addressing employee work hours in
other enforcement contexts (e.g.,
§§ 786.100, 786.150, 786.200
(nonexempt work will be considered
substantial if it occupies more than 20
percent of the time worked by the
employee during the workweek)). See
also §§ 553.212, 783.37, 784.116,
788.17, and 793.21.
As previously noted, a suggested twostep test was offered by some as a
substitute for the 20 percent limitation
on intimate personal care services. The
suggested test was comprised of
examining those direct care workers
who visit a client more than three times
a week, and if so, making a
determination whether the direct care
worker has performed any of the
incidental personal care services for any
amount of time in greater than 50
percent of the visits. In such cases, the
organizations suggested that the direct
care worker should not fall within the
companionship services exemption. The
Department declines to adopt the
recommended test. The Department
believes that this option would have a
negative effect on continuity of care, an
issue many commenters raised as a
significant concern. See, e.g., National
Association of Area Agencies on Aging,
New York State Association of Health
Care Providers, Avalon Home Care, the
National Association of States United
for Aging and Disabilities (NASUAD);
see also Testimony of Marie Woodard
before the U.S. House of Representatives
Committee on Education and the
Workforce, Subcommittee on Workforce
Protection (March 20, 2012). This twostep proposal would create an incentive
to ensure that a particular direct care
worker only visits a consumer no more
than three times per week. As the
National Association of Area Agencies
on Aging points out in its comment,
‘‘providing fundamental labor
protections of minimum wage and
overtime will help reduce turnover,
improve continuity of care and help
lower costs.’’ The Department agrees
with commenters who indicated that
providing fundamental labor protections
such as minimum wage and overtime
compensation will improve continuity
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of care and wants to avoid offsetting
those improvements to continuity of
care by implementing a test that would
create an incentive to use a direct care
worker no more than three times per
workweek.
Finally, the Department has
incorporated the suggestion of NCL and
PHI by modifying the Final Rule text to
explicitly state that the 20 percent
limitation applies to the tasks a worker
performs per individual consumer.
Further, as proposed, the 20 percent
limitation also applies to total hours
worked per workweek. The inclusion of
the 20 percent limitation on a per
consumer basis is intended to assist
consumers and direct care workers in
determining whether the worker meets
the companionship services exemption
in any given workweek. Many direct
care workers provide services to more
than one consumer in a workweek, and
the proposed text did not account for
the reality that a consumer would not
typically know what percentage of time
the direct care worker spent performing
assistance with ADLs and IADLs for any
other consumer. For example, if a direct
care worker is employed for five
mornings a week for consumer A and
employed for four afternoons a week for
consumer B, consumer B would have no
way of knowing how much of the total
workweek had been spent providing
care to consumer A. The Department
has therefore revised the text to specify
that the 20 percent limitation applies to
the work performed each workweek for
a single consumer. Therefore, in
determining whether to claim the
companionship services exemption, a
consumer need only consider the
amount of care he or she has received
during the workweek, not any services
the direct care worker has provided to
other consumers. The Department notes
that this question only arises as to
individuals, families, and households
who employ direct care workers,
because, as explained in the section of
this preamble regarding third party
employment, under the Final Rule, a
third party employer of a direct care
worker is not permitted to claim the
companionship services exemption
regardless of the duties performed.
Section 552.6(c) (Domestic Services
Primarily for Other Members of the
Household)
Current § 552.6 permits the
companionship services exemption to
apply to a worker who spends up to 20
percent of his or her time performing
general household work which is
unrelated to the care of the person
receiving services. In the NPRM, the
Department proposed to revise the
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current regulation by adding paragraph
(c), which stated that ‘‘work benefitting
other members of the household, such
as general housekeeping, making meals
for other members of the household or
laundering clothes worn or linens used
by other members of the household’’
would not fall within the definition of
incidental intimate personal care duties
that may constitute part of
companionship services. Proposed
paragraph (c) also provided that
‘‘household services performed by, or
ordinarily performed by, employees
such as cooks, waiters, butlers, valets,
maids, housekeepers, nannies, nurses,
janitors, laundresses, caretakers,
handymen, gardeners, home health
aides, personal care aides, and
chauffeurs of automobiles for family
use, are not ‘companionship services’
unless they are performed only
incidental to the provision of fellowship
and protection as described in
paragraph (b) of this section.’’ For the
reasons explained below, in the Final
Rule, the Department adopts a
significantly simplified version of the
proposed text.
The Department received few
comments on the issue of household
work. Women’s Employment Rights
Clinic expressed support for the
‘‘Department’s effort to draw a clear line
between the duties of a companion and
the duties of domestic service workers
such as maids, cooks and laundresses,’’
writing ‘‘that general household services
such as window washing, vacuuming
and dusting, should not fall under the
duties of a companion.’’ Advocacy
organizations, such as ALG and
NRCPDS, expressed concern that a
direct care worker’s performance of
household work for the consumer
would not be included within the 20
percent allowance for intimate personal
care services listed in paragraph (b) of
this section if the work includes a
prohibited task, such as vacuuming. See
also Lynn Berberich, Joni Fritz, and
Georgetown University Law Center
students. AARP agreed with the
Department that ‘‘providing general
household services such as cooking a
meal or doing laundry for the whole
family, which significantly benefit all
household members, should not be
exempt.’’ However, AARP requested
that the Department provide examples
as to what household work is
considered incidental and therefore part
of companionship services. AARP
asked, ‘‘[i]f some tuna salad is left over
after the individual receiving
companionship services has eaten
lunch, and another member of the
household eats this left over tuna salad,
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would this be considered general
household work, thereby denying the
companionship exemption for the
week?’’
After carefully considering the
comments, the Department has decided
to revise proposed paragraph (c) to
avoid ambiguity and eliminate
redundancy in light of the revisions to
paragraph (b). Specifically, § 552.6(c) of
the Final Rule provides, in its entirety:
‘‘The term companionship services does
not include domestic services
performed primarily for the benefit of
other members of the household.’’ This
text much more simply and clearly
conveys the Department’s meaning,
which is that companionship services
are services provided specifically for the
individual who requires assistance in
caring for himself or herself rather than
for other members of that individual’s
household. This limit to the definition
of companionship services is consistent
with Congress’s central purpose in 1974
of extending FLSA coverage to domestic
service workers such as maids, cooks,
and housekeepers and excluding from
that coverage only direct care workers
who provide primarily fellowship and
protection.
The Department intends to exclude
from companionship services any
general domestic services unrelated to
care of the consumer as defined in
paragraph (b) of this section. The
determination of whether a particular
task constitutes the provision of care or
is instead a service performed primarily
for the benefit of others in the
household is based on a common sense
assessment of the facts at issue. For
example, in response to the question
posed by AARP, if a person other than
the consumer eats the leftover tuna
salad, but the direct care worker
prepared the meal for the consumer as
opposed to for other members of the
household, the meal preparation would
constitute the provision of care that, if
done attendant to and in conjunction
with fellowship and protection and if
within the 20 percent limitation on care,
is part of companionship services. An
exempt companion may also vacuum up
food that the consumer drops, or wash
a soiled blouse for the consumer; such
activities are part of the care discussed
in paragraph (b). Additionally, light
housework, such as dusting a bedroom
the consumer shares with another, that
only tangentially benefits others living
in the household may constitute care if
performed attendant to and in
conjunction with the provision of
fellowship and protection of the
consumer and within the 20 percent
limitation. However, washing only the
laundry of other members of the
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household or cooking meals for an
entire family is excluded from
companionship services under the Final
Rule. To provide an additional example:
if a direct care worker performs
fellowship and protection for the
consumer Monday through Thursday,
but spends Friday exclusively
performing light housework for the
household as a whole, then the
exemption is lost for the workweek,
because the direct care worker cannot
perform general household services for
the entire household and still maintain
the companionship services exemption
during that workweek.
Section 552.6(d) (Medically Related
Services)
The legislative history of the 1974
amendments makes clear that Congress
did not intend the companionship
services exemption to apply to domestic
service employees who perform medical
services, and the Department believed
in 1975, as it does today, that the
provision of medical care constitutes
work that is not companionship
services. Accordingly, under current
§ 552.6, companionship services do not
include services provided for an elderly
person or person with an illness, injury,
or disability that ‘‘require and are
performed by trained personnel, such as
a registered or practical nurse.’’ In the
NPRM, the Department proposed to
revise § 552.6(d) to describe the medical
care that is typically provided by
trained personnel by offering examples
of particular medical services rather
than by naming occupations. Based on
consideration of the comments received
and for purposes of simplicity and
clarity, the Department has decided not
to adopt the text as proposed, but has
instead adopted text closer to that
which appears in current § 552.6. For
the reasons explained below, § 552.6(d)
now excludes from companionship
services ‘‘medically related services,’’
defined as services that ‘‘typically
require and are performed by trained
personnel such as registered nurses,
licensed practical nurses, or certified
nursing assistants.’’ This section further
provides that the determination of
whether services are medically related
‘‘is not based on the actual training or
occupational title of the individual
providing the services,’’ so in many
cases, direct care workers outside these
named categories, particularly home
health aides, will be excluded from the
companionship services exemption
under paragraph (d).
Proposed § 552.6(d) provided that
‘‘[t]he term ‘companionship services’
does not include medical care (that is
typically provided by personnel with
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60469
specialized training) for the person,
including, but not limited to, catheter
and ostomy care, wound care,
injections, blood and blood pressure
testing, turning and repositioning,
determining the need for medication,
tube feeding, and physical therapy.’’ It
further provided that ‘‘reminding the
aged or infirm person of a medical
appointment or a predetermined
medicinal schedule’’ was part of
intimate personal care services as that
phrase was defined in proposed
§ 552.6(b). The NPRM’s preamble
discussion of § 552.6(d) set forth the
Department’s rationale for its proposed
change to the regulatory text. 76 FR
81195. The Department explained that
in addition to care provided by
registered nurses and licensed practical
nurses, the types of tasks performed by
certified nursing assistants and
sometimes personal care aides or home
health aides were the sort of medically
related services typically provided by
personnel with specialized training. Id.
The preamble listed examples of such
services, including medication
management, the taking of vital signs
(pulse, respiration, blood sugar
screening, and temperature), and
assistance with physical therapy. Id. In
addition to providing this explanation
of its position, the Department sought
comment on whether the proposal
appropriately reflected the medical care
tasks performed by home health aides
and personal care aides that require
training as well as whether the
regulation should include additional
examples of minor health-related
actions that could be part of
companionship services, such as
helping an elderly person take over-thecounter medication. Id.
Comments from labor organizations,
non-profit and civil rights organizations,
and worker advocacy groups generally
supported the proposal to exclude from
the definition of companionship
services medical care that requires
specialized training. See, e.g., AARP,
AFSCME, the Center, ACLU, Jobs with
Justice, SEIU. Even the many employers
and employer representatives who were
critical of proposed § 552.6(d)
recognized that medical care is beyond
the scope of the companionship services
exemption. See, e.g., Husch Blackwell
(agreeing with the Department that
direct care workers who change feeding
tubes, perform injections, or provide
ostomy care do not qualify for the
companionship services exemption but
asserting that because current § 552.6
already excludes nurses from the
exemption, there was no need to revise
the regulation), BrightStar franchisees
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(same), Senior Helpers (stating that
home health aides who perform
‘‘medical tasks like checking vital signs,
changing bandages, giving injections or
providing feeding tube or ostomy care’’
are not providing companionship
services but asserting that the
Department should withdraw the
NPRM).
Some commenters made suggestions
regarding specific occupations. One
individual commenter suggested that
the Department ‘‘expand the meaning of
trained personnel to include Certified
Nursing Assistants and other health care
providers who have State certification.’’
PHI and the AFL–CIO urged the
Department to state that personal care
aides and home health aides are not
companions. PHI reasoned that personal
care aides and home health aides are
trained personnel rather than exempt
companions because they provide
medically related and personal care
tasks that require specialized training,
noting that home health aides are
required, if paid with federal funds, to
receive at least 75 hours of initial
training, including at least 16 hours of
supervised practical training, and 12
hours per year of continuing training.
NAMD, on the other hand, wrote that
unlicensed direct care workers such as
home health aides and personal care
aides should not be treated in the same
manner as registered or licensed
practical nurses.
The Department also received
comments regarding specific medical
services. Some commenters wrote that
particular tasks should fall outside the
definition of companionship services.
For example, AFSCME believed that
‘‘treating bed sores and monitoring
physical manifestations of health
conditions like diabetes or seizure
disorders’’ are ‘‘medical or quasimedical services’’ that should be
excluded from the definition of
companionship services. Women’s
Employment Rights Clinic urged the
Department to add toileting and bathing
to the medically related tasks named in
§ 552.6(d).
Other commenters wrote that certain
tasks should fall within the definition of
companionship services. For example,
BrightStar franchisees wrote that
because ‘‘specialized medical training is
not necessary to take an individual’s
temperature with a regular home
thermometer, or to provide them with
hand lotion for ‘routine skin care,’ or to
go on walks or do exercises together as
recommended by a physical therapist,’’
those tasks should not be excluded from
companionship services. See also
ANCOR (suggesting that these tasks be
considered part of intimate personal
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care activities in proposed § 552.6(b)).
NASDDDS wrote that tasks including
wound care, injections, blood pressure
testing, and turning and repositioning
are routinely performed by family
members and friends and thus are not
necessarily associated with the type of
professional caregiving that should be
covered by the FLSA. The Oregon
Department of Human Services, without
providing specifics, recommended that
the types of personal and medical
services that a direct care worker may
perform while still qualifying for the
companionship services exemption be
expanded.
The Department also received
comments regarding the tasks it had
identified as intimate personal care
services rather than medically related
services. For example, ANCOR and
Pennsylvania Advocacy and Resources
for Autism and Intellectual Disabilities
stated that reminding the consumer of
medical appointments or a
predetermined medicinal schedule
should be part of fellowship and
protection in proposed § 552.6(a)
because these duties are not ‘‘intimate
personal care services’’ described in
proposed § 552.6(b). AFSCME suggested
that the Final Rule distinguish ‘‘between
infrequent reminders provided by a
person engaged in fellowship or
protection and those duties of a more
medical nature required to serve the
infirm and provided by vocational home
care workers.’’ AARP and Connecticut
Association for Home Care & Hospice,
among others, stated that applying a
bandage to a minor wound and assisting
with taking over-the-counter medication
should be part of companionship
services.
Finally, NRCPDS requested
clarification regarding whether an
agency administering a consumerdirected program may require a
companion to undergo first aid or
cardiopulmonary resuscitation (CPR)
training without jeopardizing the
applicability of the exemption, urging
the Department to explain that training
requirements that are limited and
generally non-medical in nature should
not disqualify a worker from the
companionship services exemption.
The Department continues to believe
it is crucial to exclude from
companionship services the provision of
services that are medical in nature
because the individuals who perform
those services are doing work that is far
beyond the scope of ‘‘elder sitting.’’ In
light of the comments received,
however, the Department has not
adopted the regulatory text as proposed.
Instead, § 552.6(d) now states: ‘‘The
term ‘companionship services’ does not
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include the performance of medically
related services provided for the person.
The determination of whether services
are medically related is based on
whether the services typically require
and are performed by trained personnel,
such as registered nurses, licensed
practical nurses, or certified nursing
assistants; the determination is not
based on the actual training or
occupational title of the individual
performing the services.’’ The Final
Rule thus makes two substantive
changes to the current rule’s treatment
of trained personnel, which excludes
from companionship services those
‘‘services relating to the care and
protection of the aged or infirm which
require and are performed by trained
personnel, such as a registered or
practical nurse.’’ 29 CFR 552.6. First,
the Final Rule adds certified nursing
assistants as an example of ‘‘trained
personnel’’ who perform medically
related services. Second, the Final Rule
clarifies that whether the individual
who performs medical tasks received
training is irrelevant to the
determination of whether the tasks are
medically related.8
The Department is revising § 552.6(d)
differently than proposed in the NPRM
because it believes an explanation of
what constitutes medically related
services is simpler and easier for the
regulated community to understand
when framed by occupation than when
described with a list of tasks. The
comments received in response to the
proposal highlight that direct care
workers perform numerous tasks that
that fall on both sides of the line
between medical care and other services
that fall within the meaning of ‘‘care’’ as
described in § 552.6(b). The diversity of
opinions commenters expressed
regarding which tasks should be part of
companionship services and which
8 The Final Rule also makes two non-substantive
changes to the current rule. First, it refers to
‘‘licensed practical nurses’’ instead of ‘‘practical
nurse[s].’’ (The term ‘‘registered nurses’’ is identical
to that used in the current rule.) This modification
is meant only to update the regulation to use the
more commonly used title for the occupation.
Second, unlike the current and proposed rules, the
Final Rule does not include a sentence stating that
medical care performed in or about a private home,
though not companionship services, is nevertheless
within the category of domestic service
employment. See 29 CFR 552.6; 76 FR 81244. Such
work plainly falls within the definition of domestic
services employment set out in § 552.3, and nurses,
home health aides, and personal care aides are
included in that provision’s list of employees
whose work may constitute domestic service
employment. The Department has therefore
determined that a sentence reiterating the point was
redundant and thus unnecessary. This deviation
from the current rule and proposed regulatory text
is not meant to indicate that the Department
believes the statements were incorrect or that the
Department has changed its position on this point.
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should not fall within the definition of
that term revealed that an illustrative
list of medically related services would
not provide clarity to the regulated
community. And as any list of such
services would necessarily be
illustrative; it would be nearly
impossible, as well as beyond the scope
of the Department’s expertise, to name
or describe all medically related
services.
The Department believes that the
alternative approach of defining
medically related services outside the
definition of companionship services as
those that should be and typically are
performed by workers who have
completed specialized training offers
better guidance to the regulated
community. Naming a small number of
occupations to illustrate the general sets
of duties in question is simpler and
more concise than referring to various
particular medical tasks. Furthermore,
the regulation that has been in place
since 1974 used this approach, so the
regulated community is already familiar
with it. The more significant deviation
from the existing text contained in the
proposed rule was not necessary to
achieve the Department’s goal of
ensuring that all direct care workers
who perform medically related services
that constitute work other than
companionship services are provided
the protections of the FLSA.
The decision to add certified nursing
assistants (CNAs) to the list of examples
of ‘‘trained personnel’’ is based on the
legislative history of section 13(a)(15) of
the Act as well as the training and work
of CNAs. The House and Senate Reports
addressing the 1974 amendments state
that ‘‘it is not intended that trained
personnel such as nurses, whether
registered or practical, shall be
excluded’’ from the protections of the
FLSA under the companionship
services exemption. House Report No.
93–913, p. 36; Senate Report No. 93–
690, p. 20. The Department’s current
regulations are modeled on this
language and reflect that without doubt,
registered nurses and licensed practical
nurses working in private homes do not
provide companionship services. But
Congress did not mean this list to be
exclusive; the Reports say that trained
personnel ‘‘such as’’ nurses are not
exempt from the FLSA. Id. It is plain
from these words and the surrounding
language in the House and Senate
Reports that ‘‘trained personnel’’ are a
category of those ‘‘employees whose
vocation is domestic service’’ and thus
are not exempt from the FLSA’s
protections. Id. Therefore, the
Department’s expressly delegated
authority to define companionship
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services includes the ability to exclude
from the term’s meaning medically
related occupations or other medically
related work beyond, to a reasonable
extent, those named in the Reports.
Based on the training and duties of
CNAs, the Department believes CNAs
are properly considered outside the
scope of the companionship services
exemption. In 1987, Congress
established federal requirements for
certification of nursing assistants,9 and
many states have requirements that
exceed these federal minimums.10
Specifically, by federal law, CNAs
(referred to in federal regulations as
‘‘nurse aide[s]’’) must receive at least 75
hours of training, including a minimum
of 16 hours of clinical training, 42 CFR
483.152(a), and as of 2009, thirty states
mandated between 80 to 180 hours of
training.11 The training curriculum for
CNAs must include, among other things,
‘‘basic nursing skills’’ (e.g., taking and
recording vital signs), ‘‘personal care
skills’’ (e.g., skin care, transfers,
positioning, and turning), and ‘‘basic
restorative skills’’ (e.g., maintenance of
range of motion, care and use of
prosthetic and orthotic devices). 42 CFR
483.152(b). In addition, all CNAs must
pass a competency examination that
includes a written or oral examination
and skills demonstration. 42 CFR
483.154. Each state must maintain a
registry of CNAs that contains the
names of the individuals who have
fulfilled these requirements. 42 CFR
483.156. The standardization of the
CNA training curriculum, the
competency exam requirement, and the
existence of state registries tracking and
confirming certification are all evidence
of the professionalization of this
category of workers. It is the
Department’s view that CNAs are the
sort of ‘‘trained personnel’’ who provide
direct care services as a vocation and
thus are entitled to the protections of
the FLSA.12
9 Nursing Home Reform Act, Subtitle C of Title IV
of the Omnibus Budget Reconciliation Act of 1987,
Public Law 11–203, § 4201–4214. http://
assets.aarp.org/rgcenter/il/2006_08_cna.pdf.
10 http://phinational.org/sites/phinational.org/
files/clearinghouse/state-nurse-aide-trainingrequirements-2009.pdf.
11 Id.
12 This change to the regulation makes obsolete
but does not conflict with a court opinion holding
that CNAs were not categorically excluded from the
companionship services exemption under the
current regulation. Specifically, in McCune v.
Oregon Senior Services Division, 894 F.2d 1107 (9th
Cir. 1990), the Ninth Circuit held—based on its
reading of the current regulation— that CNAs were
not the type of ‘‘trained personnel’’ who provide
services that are not companionship services
because the training for CNAs was not comparable
to that required for RNs or LPNs. Id. at 1110–11.
The Final Rule now makes clear, for the reasons
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Furthermore, CNAs perform many
tasks that are indisputably medical
services, which constitute the sort of
professional, skilled duties that are
outside the scope of companionship
services. Although the particular duties
of CNAs vary by state, CNAs’ core
duties include administering
medications or treatments, applying
clean dressings, observing patients to
detect symptoms that may require
medical attention, and recording vital
signs,13 and typical additional duties
include administering medications or
treatments such as catheterizations,
enemas, suppositories, and massages as
directed by a physician or a registered
nurse; turning and repositioning
bedridden patients; and helping patients
who are paralyzed or have restricted
mobility perform exercises.14
Additionally, CNAs often use
equipment such as blood pressure units,
medical thermometers, stethoscopes,
bladder ultrasounds, glucose monitors,
and urinary catheterization kits. It is the
Department’s view that these tasks
constitute the sort of work that falls
appropriately within FLSA protection.
Many of the duties of today’s CNAs
are similar to, or even more technical
than, tasks LPNs performed in the
1970s, when Congress created the
companionship services exemption with
the explicit notion that LPNs were
outside its scope. At that time, LPNs
took and recorded temperature and
blood pressure, changed dressings,
administered prescribed medications,
and helped with bathing or other
personal hygiene; in private homes, they
often assisted with meal preparation
and facilitated comfort in addition to
providing nursing care.15 In contrast to
today’s CNAs, in the 1970s, ‘‘nursing
aides’’ did not receive pre-employment
training and did not provide services
that required the technical training
nurses received.16 This shift in the field
of nursing provides additional support
for the Department’s conclusion that
explained, that the amount and type of training
CNAs must receive is sufficiently significant to
merit treatment as providing medically related,
rather than companionship, services.
13 O’NET, SOC 31–1014.00 (2012), http://
www.onetonline.org/link/summary/31-1014.00.
14 See, e.g., http://www.maine.gov/
boardofnursing/OLD%20WEBSITE/
CNA%20BAsic%20Curriculum%2010-2008.pdf;
https://www.flrules.org/gateway/
ruleno.asp?id=64B9-15.002; http://www.in.gov/
isdh/files/rescare.pdf; http://www.dphhs.mt.gov/
cna/SkillsChecklist.pdf; http://www.utahcna.com/
forms/UTcandidatehandbook.pdf; http://
www.oregon.gov/OSBN/pdfs/publications/
cnabooklet.pdf.
15 U.S. Department of Labor, Bureau of Labor
Statistics, Occupational Outlook Handbook, 1974–
75 Edition (1974).
16 Id.
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Congress’s original intent in creating the
companionship services exemption is
best fulfilled by adding CNAs to the
illustrative list of trained personnel.
The Department does not accept the
suggestion of some commenters that it
add home health aides (HHAs) and
personal care aides (PCAs) to its
illustrative list of trained personnel. The
work of practitioners of those
occupations does not necessarily
include medically related services.
Although Federal regulations require
that HHAs complete a minimum of 75
hours of training and must pass a
competency evaluation, these
requirements are distinguishable from
those for CNAs: the topics the training
must address are more limited than
those CNAs must study, the evaluation
requirements are less stringent than for
CNAs, and states need not maintain
registries of HHAs. Compare 42 CFR
484.36(a), (b) with 42 CFR 483.152(a),
(b); 42 CFR 483.156. PCAs are not
subject to any federal standards for
training and certification, nor are there
state registries of PCAs. In addition, one
of the core duties of an HHA is to
‘‘entertain, converse with, or read aloud
to patients to keep them mentally
healthy and alert,’’ 17 and one of the core
duties of a personal care aide is to
provide companionship.18 Other duties
of HHAs and PCAs often include
grooming, dressing, and meal
preparation. Therefore, HHAs and PCAs
typically do not have the medical
training CNAs receive, those titles are
not associated with an official licensing
system that allows their clear
identification as trained personnel, and
any particular HHA or PCA may
perform only fellowship and protection
and assistance with ADLs and IADLs. If
in the future the same sort of
professionalization that has occurred in
the nursing assistance field extends to
HHAs or PCAs such that either or both
of those occupations require the training
and perform the duties of CNAs today,
or if some future category of worker
arises that performs such skilled duties,
however, it is the Department’s intent
that such fields could properly be
considered ‘‘trained personnel.’’
The Department wishes to note two
important caveats regarding its decision
not to include HHAs or PCAs in its list
of trained personnel. First, the list of
occupations in the regulatory text is not
exclusive. If a state or employer refers
to a direct care worker by a title other
than RN, LPN, or CNA, but his or her
17 O’NET, SOC 31–1011.00, http://
www.onetonline.org/link/details/31-1011.00.
18 O’NET, SOC 39–9021.00, http://
www.onetonline.org/link/details/39-9021.00.
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training requirements and services
performed are roughly equivalent to or
exceed those of any of these
occupations, that worker does not
qualify for the companionship services
exemption. For example, according to
PHI, twelve states require HHAs to be
trained and credentialed as CNAs.
Where a worker is a CNA and provides
medically related services, regardless of
any other job title he or she may hold,
he or she is excluded from the
companionship services exemption. See
29 CFR 541.2; FOH 22a04; Wage and
Hour Fact Sheet #17A: Exemption for
Executive, Administrative, Professional,
Computer, and Outside Sales Employees
Under the Fair Labor Standards Act (all
explaining that job titles do not
determine exempt status under the
FLSA). Second, as explained below, any
HHA or PCA who performs medically
related services does not qualify for the
companionship services exemption.
Based on the Department’s
understanding of the typical duties of
these workers, the Department believes
that many HHAs will for this reason not
be subject to the exemption and
therefore will be entitled to the
protections of the FLSA. Of course, in
addition, any HHA or PCA who is
engaged in the provision of care during
more than 20 percent of his or her hours
worked for a particular consumer in a
given workweek also does not qualify
for the companionship services
exemption. Furthermore, as explained
in the section of this Final Rule
regarding § 552.109, any third party that
employs an HHA or PCA who works in
a private home will not be permitted to
claim the companionship services
exemption. Given these limitations on
the companionship services exemption,
and the services HHAs and PCAs often
provide, it is likely that almost all HHAs
and many PCAs will not be exempt
under the Act. Because almost all of
these workers are providing home care
as a vocation, the Department believes
this is the appropriate result under the
statute.
The second difference between the
current and newly adopted regulatory
text—that medically related services are
those that typically require training, not
only those performed by a person who
actually has the training—is primarily
based on the FLSA’s fundamental
premise that the tasks performed rather
than the job title or credentials of the
person performing them determines
coverage under the Act. As explained
elsewhere in this Final Rule, in enacting
the 1974 amendments, Congress
intended to exclude from FLSA
coverage the work of individuals whose
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services did not constitute a vocation; it
did not exclude domestic service
employees who happened not to have
training. The Department believes that
any direct care worker who performs
medical tasks that nurses or nursing
assistants are trained to perform is the
sort of employee whose work should be
compensated pursuant to the
requirements of the FLSA.19
Medically related services are not
within the scope of companionship
services whether the person performing
them is registered, licensed, or certified
to do so or not. Procedures performed
may be invasive, sterile, or otherwise
require the exercise of medical
judgment; examples include but are not
limited to catheter care, turning and
repositioning, ostomy care, tube feeding,
treating bruising or bedsores, and
physical therapy. Regardless of actual
training, these tasks require skill and
effort far beyond what is called for by
the provision of fellowship and
protection, such as activities like
reading, walks, and playing cards. They
are also outside the category of
assistance with instrumental activities
of daily living (IADLs), which may fall
under the provision of care described in
§ 522.6(b). The text of § 552.6(b) notes
that IADLs include assisting a consumer
with the physical taking of medications
or arranging a consumer’s medical
appointments; minor health-related
tasks such as helping a consumer put in
eye drops, applying a band-aid to a
minor cut, or calling a doctor’s office to
schedule an appointment are
distinguishable from the medically
related services RNs, LPNs, and CNAs
are trained to and do perform.
Furthermore, focusing on the tasks
assigned to, rather than the actual
training or occupational title of, the
direct care worker avoids
disincentivizing employers from hiring
workers who are not adequately
prepared for the duties they are assigned
in order to avoid minimum wage and
overtime requirements. This outcome,
which becomes increasingly significant
as services shift from institutions to
19 The Department notes that the Final Rule’s
instruction not to look to the actual training of the
person providing services calls for a shift in the way
courts approach challenges to the assertion of the
companionship services exemption. Courts have
read the Department’s current regulation to mean
that direct care workers without the extensive
training RNs and LPNs receive are not excluded
from the exemption regardless of the services they
provide. See, e.g., Cox v. Acme Health Servs., 55
F.3d 1304, 1310 (7th Cir. 1995); McCune v. Or.
Senior Servs. Div., 894 F.2d 1107, 1110–11 (9th Cir.
1990). The Final Rule, which for the reasons
explained reflects a reasonable reading of the
statutory provision the Department has express
authority to interpret, calls instead for a focus on
the tasks performed.
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homes, is not beneficial to workers or to
consumers.
Finally, the Department notes that the
purpose of § 552.6(d) is to exclude from
the companionship services exemption
those direct care workers who perform
medically related tasks on more than
isolated, emergency occasions. A direct
care worker who provides
companionship services but reacts to an
unanticipated, urgent situation by, for
example, performing cardiopulmonary
resuscitation (CPR), performing the
Heimlich maneuver, or using an
epinephrine auto-injector is not
excluded from the exemption.
Furthermore, in response to NRCPDS’s
question regarding first aid or CPR
training, the Department notes that such
training is not equivalent to that which
an RN, LPN, or CNA receives, and
therefore a worker who has been taught
these skills would not automatically be
excluded from the companionship
services exemption.
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C. Section 552.102 (Live-in Domestic
Service Employees) and Section 552.110
(Recordkeeping Requirements)
Live-in Domestic Service Employees
Section 13(b)(21) of the FLSA
exempts from the overtime provision
‘‘any employee who is employed in
domestic service in a household and
who resides in such household.’’ 29
U.S.C. 213(b)(21). The Department’s
current regulation at § 552.102(a)
provides that domestic service
employees who reside in the household
where they are employed are not
entitled to overtime compensation.
Section 552.102(a) also provides that
domestic service workers who reside in
the household of their employer are
entitled to at least the minimum wage
for all hours worked (unless they meet
the companionship services exemption).
Domestic service employees who reside
in the household where they are
employed are referred to as ‘‘live-in
domestic service employees.’’
Under § 552.102(a), the Department
allows the employer and live-in
domestic service employee to enter into
a voluntary agreement that excludes
from hours worked the amount of the
employee’s sleeping time, meal time
and other periods of complete freedom
from all duties when the employee may
either leave the premises or stay on the
premises for purely personal pursuits.20
In order for periods of free time (other
than those relating to meals and
sleeping) to be excluded from hours
worked, the periods must be of
sufficient duration to enable the
20 This requirement is nearly identical to the
requirement found in § 785.23.
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employee to make effective use of the
time. § 552.102(a). Section 552.102(a)
makes clear that if the sleep time, meal
time, or other periods of free time are
interrupted by a call to duty, the
interruption must be counted as hours
worked.
The Department allows for such an
agreement because it recognizes that
live-in employees are typically not
working all of the time that they are on
the premises and that, ordinarily, the
employees may engage in normal
private pursuits, such as sleeping,
eating, and other periods of time when
they are completely relieved from duty.
See also § 785.23. However, current
§ 552.102(a) makes clear that live-in
domestic service employees must be
paid for all hours worked even when an
agreement excludes certain hours. As an
example, assume an employer and livein domestic service employee enter into
a voluntary agreement that excludes
from hours worked the time between
11:00 p.m. and 7:00 a.m. for the
purposes of sleeping. If the employee is
required to perform any work during
those hours, for example, the employee
is required to assist the individual with
going to the bathroom, or is required to
periodically turn or reposition the
individual, the employer is then
required to pay the employee for the
time spent performing work activities
despite an agreement that typically
designates those hours as non-working
time. The proposed rule did nothing to
change this obligation.
In the NPRM, the Department
proposed changes to the recordkeeping
requirement for live-in domestic service
employees. Under proposed
§ 552.102(b), the Department would no
longer allow the employer of a live-in
domestic employee to use the agreement
as the basis to establish the actual hours
of work in lieu of maintaining an actual
record of such hours. Proposed
§ 552.102(b) would require the parties to
enter into a new agreement whenever
there is a significant deviation from the
existing agreement. Additionally, in the
proposed changes to § 552.110(b), the
Department would no longer permit an
employer to maintain a copy of the
agreement as a substitution for
recording actual hours worked by the
live-in domestic service employee.
Instead, the Department would require
the employer to maintain a copy of the
agreement as well as records showing
the exact number of hours worked by
the live-in domestic service employees
and pay employees for all hours actually
worked. As more fully explained in the
Recordkeeping Requirement section
below, the Department is adopting the
proposed recordkeeping requirements
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with minor modifications, as discussed
in the preamble to §§ 552.102, 552.110.
Live-in Situations
The Department received several
comments requesting clarification on
the definition of a live-in domestic
service employee. For example,
Women’s Employment Rights Clinic
stated that it is critical that the
regulations include a definition of a
live-in domestic service employee
because live-in domestic service
workers remain exempt from overtime,
and that the Department should provide
clarification of the definition of a ‘‘livein’’ so households and workers clearly
understand when overtime must be
paid. Women’s Employment Rights
Clinic suggested that the Department
adopt the following definition: ‘‘A livein employee is one who (1) resides on
the employer’s premises on a permanent
basis or for extended periods of time
and (2) for whom the employer makes
adequate lodging available seven days
per week.’’ Women’s Employment
Rights Clinic stated that this definition
will help draw a needed distinction
between workers on several consecutive
24-hour shifts and live-in employees, as
well as a distinction between short-term
assignments and assignments for
extended periods of time that might
appropriately be deemed live-in
situations. The Legal Aid Society of NY
also requested that the Department
clarify the definition of live-in domestic
service employee and make clear that
the definition does not include a worker
who spends only one night per week at
a residence or must pay any part of the
rent or mortgage or other expenses for
upkeep of another residence.
In addition, the Department received
comments questioning the continued
use and viability of the overtime
exemption for live-in domestic service
employees. Students from the
Georgetown University Law Center
stated that the Department should
eliminate the live-in domestic service
employee exemption, suggesting that it
is directly contrary to the Department’s
stated goals in the NPRM. The students
urged the Department to provide
overtime protections to live-in
employees. On the other hand, one
individual who hires direct care
workers to provide services for his
father requested that the Department not
eliminate the live-in domestic service
employee exemption.
Because the live-in domestic service
employee exemption is statutorily
created, the Department cannot
eliminate the exemption as suggested by
Georgetown Law students. Only
Congress could eliminate the overtime
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exemption for such workers. Moreover,
the Department did not propose any
changes to the definition of live-in
domestic service employee or otherwise
discuss the requirements for meeting the
live-in domestic service exemption in
the NPRM. It is the Department’s
intention to continue to apply its
existing definition of live-in domestic
service employees. Under the
Department’s existing regulations and
interpretations, an employee will be
considered to be a live-in domestic
service employee under § 552.102 if the
employee: (1) Meets the definition of
domestic service employment under
§ 552.3 and provides services in a
‘‘private home’’ pursuant to § 552.101;
and (2) resides on his or her employer’s
premises on a ‘‘permanent basis’’ or for
‘‘extended periods of time.’’ See also
§ 785.23; FOH § 31b20.
Employees who work and sleep on
the employer’s premises seven days per
week and therefore have no home of
their own other than the one provided
by the employer under the employment
agreement are considered to
‘‘permanently reside’’ on the employer’s
premises. See Wage and Hour Opinion
Letter FLSA–2004–7 (July 27, 2004).
Further, in accordance with the
Department’s existing policy, employees
who work and sleep on the employer’s
premises for five days a week (120 hours
or more) are considered to reside on the
employer’s premises for ‘‘extended
periods of time.’’ See FOH § 31b20. If
less than 120 hours per week is spent
working and sleeping on the employer’s
premises, five consecutive days or
nights would also qualify as residing on
the premises for extended periods of
time. Id. For example, employees who
reside on the employer’s premises five
consecutive days from 9:00 a.m.
Monday until 5:00 p.m. Friday (sleeping
four straight nights on the premises)
would be considered to reside on the
employer’s premises for an extended
period of time. Similarly, employees
who reside on an employer’s premises
five consecutive nights from 9:00 p.m.
Monday until 9:00 a.m. Saturday would
also be considered to reside on their
employer’s premises for an extended
period of time. Id.
Employees who work only
temporarily, for example, for only a
short period of time such as two weeks,
for the given household are not
considered live-in domestic service
workers, because residing on the
premises of such household implies
more than temporary activity. In
addition, employees who work 24-hour
shifts but are not residing on the
employer’s premises ‘‘permanently’’ or
for ‘‘extended periods of time’’ as
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defined above are not considered live-in
domestic service workers and, thus, the
employers are not entitled to the
overtime exemption. The Department
received many comments from
employers and advocacy groups that
serve persons with disabilities that
appeared to confuse the issue of ‘‘livein’’ care with 24-hour care. See, e.g.,
Bureau of TennCare, NASDDDS, Cena
Hampden, Scott Witt, and Gary Webb.
For example, one individual suggested
that her mother received ‘‘live-in’’ care
when the employee worked only a 16hour shift. The Department received
several comments noting that the home
care industry’s use of the term ‘‘live-in’’
is different than the Department’s use.
Specifically, John Gilliland Law Firm
stated that ‘‘the term ‘live-in’ is used
differently within the home care
industry than how it is used by the
Wage and Hour Division.’’ The law firm
noted that the home care industry uses
the term ‘‘live-in’’ to refer to 24-hour
assignments, often several consecutive
assignments, where the client’s location
is not the employee’s residence, and the
Wage and Hour Division refers to ‘‘livein’’ employees as those residing on the
client’s premises. Similarly, Women’s
Employment Rights Clinic noted that,
based on their experience representing
home care workers, employees who
work several consecutive 24-hour shifts
are often confused with live-in
employees.
The fact that an individual may need
24-hour care does not make every
employee who provides services to that
individual a live-in domestic service
employee. Rather, only those employees
who are providing domestic services in
a private home and are residing on the
employer’s premises ‘‘permanently’’ or
for ‘‘extended periods of time’’ are
considered live-in domestic service
employees exempt from the overtime
requirements of the FLSA. Employees
who work 24-hour shifts but are not
live-in domestic service employees must
be paid at least minimum wage and
overtime for all hours worked unless
they are otherwise exempt under the
companionship services exemption.
(See Hours Worked section for a
discussion of when sleep time is not
hours worked.)
The Department received a few
comments that argued that allowing
employers to maintain an agreement
under § 552.102(a) conflicts with the
simultaneous requirement that an
employer must maintain precise records
of hours worked under proposed
§ 552.102(b). For example, The
Workplace Project stated that allowing
an agreement of hours worked will
create confusion and will undermine
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the requirement that employers track
actual hours worked. As a result, The
Workplace Project recommended that
the Department eliminate § 552.102(a)
that allows employers of live-in
domestic service workers to enter into
an agreement. On the other hand, one
individual requested that the
Department continue to allow
employers and employees to use
agreements for live-in domestic service
employees. California Foundation for
Independent Living Centers (CFILC)
also suggested that the Department
should allow employers and employees
to ‘‘enter into mutually agreeable and
non-coercive employment agreements to
work compensated hours at a set hourly
wage or monthly salary without
triggering overtime compensation.’’
CFILC stated that the agreements could
guarantee the live-in domestic service
employee breaks, meal periods, and 8
hours of uninterrupted sleep, and the
agreements could be renegotiated to
account for any changes that might
arise.
The Department disagrees with the
comments that suggested that
continuing to allow employers and livein domestic service employees to enter
into mutually agreeable agreements is
inconsistent with the recordkeeping
requirements for live-in domestic
service employees. The Department’s
regulation allows the employer and livein employee to enter into a voluntary
agreement that excludes from hours
worked the amount of the employee’s
sleeping time, meal time and other
periods of complete freedom from all
duties when the employee may either
leave the premises or stay on the
premises for purely personal pursuits.
See §§ 552.102(a), 785.23. The
Department’s regulation also allows
employers and live-in employees to
enter into such voluntary agreements
(see, infra, Hours Worked section)
because the Department recognizes that
live-in employees are not necessarily
working all the time that they are on the
employer’s premises. When an
employee resides on the employer’s
premises it is in the employee’s and the
employer’s interest to reach an
agreement on the employee’s work
schedule so each may understand when
the employee is expected to be working
and when the employee is not expected
to be working and is completely
relieved from duty. The Department will
accept any reasonable agreement of the
parties, taking into consideration all of
the pertinent facts. Despite allowing for
voluntary agreements, however, the
Department has always required that
employers pay live-in domestic service
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employees at least the minimum wage
for all hours worked and that when
sleep time, bona fide meal periods, and
bona fide off-duty time are interrupted
then employees must be compensated
for such time regardless of whether an
agreement typically designates those
hours as non-working time. Under the
new recordkeeping requirements for
live-in domestic service employees
(more fully addressed below), the
Department simply requires the
employer to maintain a copy of the
agreement as well as records showing
the exact number of hours worked by
live-in domestic service employees and
pay live-in domestic service employees
for all hours actually worked. The
requirement to record hours actually
worked is no different than that
required for other employers under the
FLSA.
The Department also received
comments reflecting the belief that the
proposed rule required live-in
employees to be paid for all 24 hours,
or comments that were otherwise
confused about the pay requirements for
live-in and 24-hour shift workers. For
example, a Senior Helper franchise
owner believed that the Department’s
proposed rule required that domestic
service employees scheduled for 24hour shifts or deemed live-ins must be
paid for the entire 24-hour period even
when the employee is not working. The
owner suggested that such an outcome
would be unfair and that the rule should
be redrafted and modeled after New
Jersey law, which, based upon his
description, requires that live-in
employees be compensated for at least
eight hours each day when the hours
worked are irregular and intermittent.
Another employer also believed that the
Department’s proposed rule required
that agencies pay live-in employees for
all 24 hours that they are on the clients’
premises even if the employees receive
six to eight hours of uninterrupted
sleep. This employer suggested that this
would double the cost to the clients.
Several employers suggested that
employees who live in or work 24-hour
shifts should not be paid overtime
because they are not working all the
time. In addition, a few employers
suggested that live-in or sleep-over
employees should not be paid based on
an hourly rate; rather, the employer
should be allowed to pay the employee
based on a flat overnight rate.
The Department’s existing regulations
regarding when employees must be
compensated for sleep time, meal
periods, or off-duty time are discussed
in the Hours Worked section of this
Final Rule. The definition of hours
worked and the basis for taking any
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deductions outlined in that section
apply to live-in domestic service
employees and must be followed.
Generally, where an employee resides
on the employer’s premises
permanently or for extended periods of
time, all of the time spent on the
premises is not necessarily working
time. The Department recognizes that
such an employee may engage in normal
private pursuits and thus have enough
time for eating, sleeping, entertaining,
and other periods of complete freedom
from work duties. For a live-in domestic
service employee, such as a live-in
roommate, the employer and employee
may voluntarily agree to exclude sleep
time of not more than eight hours if (1)
adequate sleeping facilities are
furnished by the employer, and (2) the
employee’s time spent sleeping is
uninterrupted. § 785.22–.23. In addition,
meal periods may be excluded if the
employee is completely relieved of duty
for the purpose of eating a meal, and offduty periods may be excluded if the
employee is completely relieved from
duty and is free to use the time
effectively for his or her own purposes.
§§ 785.16, 785.19. However, an
employee who is required to remain on
call on the employer’s premises or so
close thereto that he or she cannot use
the time effectively for his or her own
purposes is considered to be working
while on call and must be compensated
for such time. § 785.17.
Concerning whether employers may
pay an hourly rate or a flat overnight or
daily rate to a live-in employee, the
Department notes that the FLSA is
flexible regarding the type of rate paid
and only requires that employers pay
the live-in domestic service employee at
least the minimum wage for all hours
worked, in accordance with our
longstanding rules. For example, an
employer may have an agreement to pay
a live-in employee $125 per day, which
exceeds the minimum wage required for
16 hours of work (compensable time), if
the employee receives eight hours of
uninterrupted sleep time off.
The Department also received several
comments requesting clarification on
the application and impact of the
companionship services and live-in
domestic service employee exemptions
to shared living or roommate
arrangements. The Department received
many comments from advocacy groups
that represent persons with disabilities,
such as the NASDDDS, and third party
employers, such as Community Vision,
requesting that the Department clarify
the wage and hour requirements on livein arrangements provided under
Medicaid-funded Home and
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60475
Community-Based Services (HCBS)
programs.
Specifically, NASDDDS described
shared living services as ‘‘an
arrangement in which an individual, a
couple or a family in the community
share life’s experiences with a person
with a disability.’’ Shared living
arrangements may also be known as
mentor, host family or family home,
foster care or family care, supported
living, paid roommate, housemate, and
life sharing. Under a shared living
program, consumers typically live in the
home of an individual, couple, or family
where they will receive care and
support services based on their
individual needs. NASDDDS stated that
shared living providers receive
compensation typically from a third
party provider agency or directly from
the state’s Medicaid program.
NASDDDS requested that the
Department conclude that shared living
providers meet the definition of
performing companionship services
under the proposed rule and thus that
those providers are not entitled to
minimum wage and overtime
compensation.
NASDDDS also discussed Medicaid
services described as ‘‘host families.’’
NASDDDS described a ‘‘host family’’ as
a family that accepts the responsibilities
for caring for one to three individuals
with developmental disabilities. The
host family helps the individual
participate in family and community
activities, and ensures that the
individual’s health and medical needs
are met. Such services may include
assistance with basic personal care and
grooming, including bathing and
toileting; assistance with administering
medication or performing other health
care activities; assistance with
housekeeping and personal laundry; etc.
NASDDDS noted that the provider
typically must comply with state
licensure or certification regulations.
NASDDDS further noted that the
provider is usually paid a flat monthly
rate to meet the individual’s support
needs and the payment will typically be
based on the intensity and difficulty of
care. The provider may also be paid for
room and board. NASDDDS suggested
that the Department work with CMS and
stakeholders to develop a greater
understanding of the programs and
financial structures for Medicaid HCBS
waiver programs. One individual
suggested that such living arrangements
should fall under the Department’s
foster care exemption or should be
exempt from the requirements under
§ 785.23.
Moreover, Arkansas Department of
Human Services noted that many
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individuals who receive supported
living services under HCBS waivers rely
on roommates or live-in scenarios where
the individuals receive services in their
own home or in that of a family
member. Community Vision and other
third party providers described live-in
roommates as ‘‘a major component of
the support system of an individual
with significant disabilities who live
independently in their own home.’’
Home Care & Hospice stated that livein roommate arrangements include
college students with Medicaid paid
‘‘roommates’’ who also attend college or
individuals who work and take a
caregiver to work with them, but who
need an overnight live-in roommate to
address intermittent needs. Home Care
& Hospice was concerned that the
Department’s proposed regulations
would put these programs at risk.
Community Vision stated that live-in
roommates are available in the rare case
of an emergency or for infrequent
support needs and that these
individuals receive free or reduced rent
and utilities in exchange for being a
roommate who on occasion can provide
support to the individual at night; the
type of services provided by live-in
roommates was not discussed.
Community Vision requested that the
exemptions from minimum wage and
overtime continue for live-in
roommates. It asserted that minimum
wage and overtime pay would make the
live-in roommates fiscally
unsupportable for agencies and their
clients, resulting in increased
institutionalization of their clients with
disabilities and a loss of housing for
their employees.
The Department also received several
comments that discussed the
application of the companionship
services and live-in domestic service
employee exemptions to paid family
caregivers. See, e.g., Joni Fritz, ANCOR,
and NASDDDS. Paid family caregivers
are described as family members of an
aging person or an individual with a
disability who provide care and receive
some income to provide support for
their family member, and who—without
pay—could not provide the needed
support. See Joni Fritz. Some states have
established payment systems under
Medicaid that will pay a family member
to provide intimate care and medically
related support.21 AARP noted that
some HCBS waiver programs allow the
individual to hire family caregivers to
provide services and may permit them
21 In some instances a family member may also
be paid for time spent performing some
housekeeping services in addition to the medical
and personal care services provided.
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to provide more than 40 hours of
assistance per week, assistance that is
vital to keeping their loved one at home
and out of an institution. AARP noted
that family caregivers frequently live
with the person for whom he or she
provides services. AARP was concerned
that requiring the payment of overtime
in these cases, merely because public
authorities or fiscal intermediaries are
involved in making these programs
possible, could prevent family
caregivers from providing more than 40
hours a week in paid care and impact
the ability of the individual to remain at
home. In addition, AARP noted that the
situation of a family caregiver who lives
with the person for whom they provide
services is analogous to the overtime
exemption for live-in domestic service
workers. AARP suggested that the
Department not require the payment of
overtime if: (1) The individual is
receiving HCBS under a publicly
financed consumer-directed program;
(2) a third party such as a public
authority or a fiscal intermediary is
involved; and (3) a family caregiver who
lives with the consumer is being paid
under the consumer-directed program to
provide services for the individual.
It appears that under these varied
shared living arrangements, the live-in
domestic service workers are living on
the same premises with the consumer
and would easily be able to meet the
‘‘permanently reside’’ or ‘‘extended
periods of time’’ requirements and
would therefore be exempt from
overtime requirements. There is a
question, however, whether the
consumer is receiving services in a
‘‘private home.’’ As the determination
whether domestic services are provided
in a private home is fact-specific and is
to be made on a case-by-case basis, the
Department cannot state categorically
whether a particular type of living
arrangement involves work performed
in a private home. In evaluating whether
a residence is a private home (see,
supra, private home discussion), the
Department considers the six factors
identified by the Tenth Circuit in
Welding as well as the other factors
identified in Johnston, Linn, and Lott.
See Wage and Hour Opinion Letter,
FLSA 2006–13NA (June 23, 2006).
The Department cannot address all
shared living arrangements raised in the
comments because the circumstances
are different under countless factual
scenarios. However, the Department is
providing, as an example, the following
guidance regarding how these
established rules will likely apply under
the most commonly raised shared living
arrangement—live-in roommates. In the
live-in roommate arrangement, the
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consumers appear to be living in their
own home and a roommate moved in to
the consumer’s home in order to
provide services on an as needed basis.
It also appears that the person receiving
services owns the home or leases the
home from an independent third party.
There is nothing in the comments to
suggest that the state or agency
providing the services maintains the
residences or otherwise provides the
essentials of daily living, such as paying
the mortgage or rent, utilities, food, and
house wares. Rather, either the service
provider pays rent or the individual
receiving services provides free lodging
as part of the remuneration due the livein roommate for providing services. The
cost/value of the services does not
appear to be substantial based on the
comments that suggested that live-in
roommates provide only intermittent or
infrequent care services. Thus, the costs
of the services provided appear to be a
small portion of the total costs of
maintaining the living unit. In addition,
there is nothing to suggest that the
service provider uses any part of the
residence for its own business purposes.
It also appears that the consumer hires
the roommate and determines who will
live in his or her home and is free to
come and go as he or she pleases.
Therefore, live-in roommate
arrangements appear to be performed in
a private home, and thus, the live-in
domestic service employee overtime
exemption will likely be available to the
individual, family, or household using
the worker’s services. Any slight change
in the specific facts of this scenario,
however, may lead to a different result.
However, as more fully discussed in the
third party employment section below,
the live-in domestic service employee
exemption will not be available to a
third party employer of the live-in
roommate. Moreover, to the extent the
live-in roommate meets the duties test
for the companionship services
exemption as outlined above (see,
supra, companionship services section),
the companionship exemption will
likely also be available to the
individual, family, or household using
the worker’s services. The overtime
exemption for a live-in domestic service
employee is a separate exemption
available even when an employee does
not meet the Department’s duties test in
the companionship services exemption.
For example, an individual, household
or family member employing a live-in
nurse or a live-in direct care worker
who provides cooking, driving, and
cleaning services for more than 20
percent of the weekly hours worked,
may still claim the live-in domestic
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service employee exemption from
overtime; if there is a third party
employer involved, however, then the
third party employer would be
responsible for overtime compensation.
For many of the same reasons
discussed above, the Department
believes that in most circumstances a
paid family caregiver is providing
services in a private home. In the
circumstances where the paid family
caregiver lives with the consumer, the
overtime exemption will be available to
the individual, family, or household. If
employed, jointly or solely, by a third
party, the paid family caregiver would
be entitled to overtime compensation for
all hours worked over 40 from the third
party employer subject to the analysis
described later in this preamble
discussing paid family and household
caregivers. However, as noted above, not
all time spent on the premises is
necessarily considered hours worked
and there may be circumstances where
the third party will not be considered a
joint employer of the paid family
caregiver because the third party is not
engaged in the factors that indicate an
employer-employee relationship exists
(see, infra, joint employment section).
The Department recognizes that
people living with disabilities continue
to explore innovative ways of
eliminating segregation and promoting
inclusion particularly through the
provision of services and supports in
home- and community-based settings.
The Department appreciates that a
number of commenters who care about
the viability of such arrangements raised
questions and concerns about the
impact of the proposed rule on such
arrangements, and the Department
supports the progress that has allowed
elderly people and persons with
disabilities to remain in their homes and
participate in their communities. As
noted above, in the most common
scenario described by commenters, the
live-in roommate situation, depending
on all of the facts of the arrangement,
the roommate may be exempt from the
overtime compensation requirements
under the live-in domestic service
employee exemption, and, depending
on the roommate’s duties, could also
qualify for the companionship services
exemption. In either case, the
longstanding FLSA hours worked
principles would apply, and time that is
not work time under those principles
would not have to be compensated.
The Department also recognizes that it
is possible that certain shared living
arrangements may fall within the
Department’s exception for foster care
parents, provided specific criteria are
met. See FOH § 10b29. In contrast to
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shared living arrangements that are not
foster care situations, individuals in
foster care programs are typically wards
of the state; the state controls where the
individuals will live, with whom they
will live, the care and services that will
be provided, and the length of the stays.
For example, in Wage and Hour
Opinion Letter WH–298, the WHD
concluded that where a husband and
wife agree to become foster parents on
a voluntary basis and take a child into
their home to be raised as one of their
own, the employer-employee
relationship would not exist between
the parents and the state where the
payment is primarily a reimbursement
of expenses for rearing the child. See
1974 WL 38737 (Nov. 13, 1974). Of
course, the Department recognizes that
there is a continuum of shared living
arrangements and a factual
determination with respect to FLSA
coverage must be made on a case-bycase basis.
As stated throughout this rule, the
Department believes that the positions
taken in the Final Rule are more
consistent with the legislative intent of
the companionship services and live-in
exemptions and that protecting
domestic service workers under the Act
will help ensure that the home care
industry attracts and retains qualified,
professional workers that the sector will
need in the future.
Recordkeeping Requirements
In the NPRM, the Department
proposed to revise the recordkeeping
requirements applicable to live-in
domestic service employees, in order to
ensure that employers maintain an
accurate record of hours worked by such
workers and pay for all hours worked in
accordance with the FLSA. Section
13(b)(21) of the Act provides an
overtime exemption for live-in domestic
service employees; however, such
workers remain subject to the FLSA
minimum wage protections. Current
§ 552.102 allows the employer and
employee to enter into an agreement
that excludes from hours worked
sleeping time, meal time, and other
periods of complete freedom from duty
when the employee may either leave the
premises or stay on the premises for
purely personal pursuits, if the time is
sufficient to be used effectively.
Paragraph 552.102(a) makes clear that if
the free time is interrupted by a call to
duty, the interruption must be counted
as hours worked. Current § 552.102(b)
allows an employer and employee who
have such an agreement to rely on it to
establish the employee’s hours of work
in lieu of maintaining precise records of
the hours actually worked. The
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employer is to maintain a copy of the
agreement and indicate that the
employee’s work time generally
coincides with the agreement. If there is
a significant deviation from the
agreement, a separate record should be
kept or a new agreement should be
reached.
The Department expressed concern in
the NPRM that not all hours worked by
a live-in domestic service employee are
actually captured by such an agreement,
which may result in a minimum wage
violation. The Department stated that
the current regulations do not provide a
sufficient basis to determine whether
the employee has in fact received at
least the minimum wage for all hours
worked. Therefore, the NPRM proposed
to revise § 552.102(b) to no longer allow
the employer of a live-in domestic
service employee to use the agreement
as the basis to establish the actual hours
of work in lieu of maintaining an actual
record of such hours. Instead, the
proposal required the employer to keep
a record of the actual hours worked.
Consequently, the language suggesting
that a separate record of hours worked
be kept when there is a significant
deviation from the agreement was
proposed to be deleted, and proposed
§ 552.102(b) required entering into a
new written agreement whenever there
is a significant deviation from the
existing agreement.
The Department also proposed to
amend § 552.110 with respect to the
records that must be kept for live-in
domestic service employees. Current
§ 552.110(b) provides that records of
actual hours worked are not required for
live-in domestic service employees;
instead, the employer may maintain a
copy of the agreement referred to in
§ 552.102. It also states, however, that
this more limited recordkeeping
requirement does not apply to third
party employers. No records are
required for casual babysitters. Current
paragraph 552.110(c) permits, when a
domestic service employee works a
fixed schedule, the employer to use the
schedule that the employee normally
works and either provide some notation
that such hours were actually worked
or, when more or less hours are actually
worked, show the exact number of
hours worked. Current § 552.110(d)
permits an employer to require the
domestic service employee to record the
hours worked and submit the record to
the employer.
Because of the concern that all hours
worked are not being fully captured, the
Department proposed in § 552.110(b) to
no longer permit an employer to
maintain a copy of the agreement as a
substitution for recording actual hours
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worked by the live-in domestic service
employee. Instead, the NPRM proposed
that the employer maintain a copy of the
agreement and maintain records
showing the exact number of hours
worked by the live-in domestic service
employee. Proposed § 552.110(b)
expressly stated that the provisions of
§ 516.2(c), pertaining to fixed-schedule
employees, do not apply to live-in
domestic service employees, which
meant that employers would no longer
be permitted to maintain a simplified
set of records for such employees. As a
result, a conforming change was
proposed in § 552.110(c), based on the
Department’s belief that the frequency
of schedule changes for live-in domestic
service employees simply makes
reliance on a fixed schedule, with
exceptions noted, too unreliable to
ensure an accurate record of hours
worked by these employees. In addition,
because the proposed changes to third
party employment in § 552.109 made
moot the reference in § 552.110(b) to
third party employers, it was removed
from proposed § 552.110(b). The NPRM
also proposed to revise § 552.110(d) to
make clear that the employer of the livein domestic service employee could not
require the live-in domestic service
employee to record the hours worked
and submit the record to the employer,
while employers of other domestic
service employees could continue to
require the domestic service employee
to record and submit their record of
hours worked. The proposal required
the employer to be responsible for
making, keeping, and preserving records
of hours worked and ensuring their
accuracy. Finally, the Department
proposed to move the sentence stating
that records are not required for casual
babysitters, as defined by § 552.5, to a
stand-alone paragraph at § 552.110(e).
The Department received a number of
comments on the proposed
recordkeeping requirements, discussed
below. Based on comments indicating
that the proposed change prohibiting
employers from requiring live-in
domestic service employees to record
and submit their hours could create
significant difficulties, particularly for
those employers who have Alzheimer’s
disease, dementia or developmental
disabilities, the Department modified
the Final Rule to allow an employer to
require the live-in domestic service
employee to record the hours worked
and submit the record to the employer.
The Final Rule adopts the other changes
as proposed.
The Department also received a
number of comments that stated that the
requirement for employers to keep a
record of actual hours worked would
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cause problems. For example, several
employers and their representatives,
including CAHSAH, stated that it is
unlikely that individual employers
would be aware of the requirement or be
able to comply with it, and that it would
place an undue burden on an elderly
employer receiving services to have to
comply with recordkeeping
requirements. AARP similarly stated
that consumers who are ill or have
cognitive impairments and need live-in
long-term services and supports may not
be able to monitor a worker’s hours
effectively or to keep proper records.
Therefore, while AARP stated its belief
that third party agencies could fulfill the
requirement to record hours, it sought
an adjustment where the individual or
family directly hires the employee;
AARP suggested allowing the agreement
to control unless deviations are noted
and allowing the employer to require
the employee to record and submit
hours. Other employers also expressed
concern about the ability of consumers
with Alzheimer’s disease, dementia, or
other disabilities to track hours, and
they stated their preference for
continuing to use a predetermined
schedule agreement or requiring the
employee to track hours. See, e.g., North
Shore Senior Services, Gentle Home
Services, Harrison Enterprises, Inc., and
Bright Star Healthcare of Baltimore.
Home care companies and their
representatives expressed concern about
the additional paperwork burdens,
stating that a household employer with
a live-in domestic service worker would
need to install a time clock, and that it
would be difficult for employers to track
sleep time versus awake time, or to track
time spent taking a break versus helping
the client. See, e.g., VNAA, Visiting
Nurse Service of New York (VNSNY),
Angels Senior Home Solutions,
Connecticut Ass’n for Home Care &
Hospice, Arizona Ass’n of Providers for
People with Disabilities, New York State
Ass’n of Health Care Providers, and
Home Care Ass’n of NY State. They
indicated that the requirement will be
burdensome to implement, particularly
when consumers wake up frequently
during the night and need assistance,
because care workers will have to keep
records of what time the person woke
up, what help was needed, and how
long their assistance was provided.
They expressed concern that, because
live-in domestic service workers are
generally unsupervised, their third party
employers have little ability to monitor
or audit their records of meal and sleep
periods versus work hours to determine
their accuracy. One company, Elder
Bridge, believed that using an electronic
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time management system was not
feasible because such systems cannot
account for the unpredictable down
time of employees; therefore, the
company suggested that caregivers
should be allowed to document their
break time manually in their care notes.
A trade association, Home Care Alliance
of Massachusetts, stated it had no
objection to recording the exact number
of hours worked, but it expressed
confusion about how it would know
that exact number if it could not require
live-in domestic service employees to
record their hours (see Harrison
Enterprises, Inc.). An employee agreed,
believing that employee-based reports
would be more accurate. A Georgetown
University Law Center student
commented that recording deviations
from an agreement was no more difficult
than recording every hour as it
happened and could be more accurate.
On the other hand, the Department
received a number of comments that
emphasized the importance of the
changes in the proposed recordkeeping
requirements for live-in domestic
service workers. For example, National
Council of La Raza stated that some care
workers work more than 60 hours in a
week, and that bolstering the
recordkeeping requirements ‘‘is an
excellent first step in ensuring that these
hardworking caregivers are accurately
compensated for time on the job.’’ The
ACLU supported the change, stating that
‘‘[i]t is common that live-in workers are
required to work more than the hours
they have contracted to perform.’’
Professor Valerie Francisco similarly
stated that her research shows that
employers of live-in domestic workers
do not keep accurate records of hours
worked. Numerous commenters,
including NELP, Workforce Solutions
Cameron, COWS, and DCA, agreed,
stating that the current rule’s tolerance
for use of an agreement has resulted in
underpayments for time worked by livein workers, who are isolated and may
fear retaliation if they complain. NELP
noted that ‘‘experts estimate that onethird of the victims of labor trafficking
are domestic workers.’’ Other groups
such as AFSCME, Women’s
Employment Rights Clinic and the
Center, noted that the revised
regulations will more effectively ensure
that hours are properly recorded and
that workers receive at least the
minimum wage for all hours worked.
The Center for Economic and Policy
Research stated that the difficulties that
arise in capturing live-in hours worked
‘‘are not qualitatively different from
monitoring issues that arise in other
contexts.’’
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The Legal Aid Society, The
Workplace Project, Care Group, Inc., the
Brazilian Immigrant Center and
DAMAYAN, asserted that live-in
domestic workers are subject to
exploitation and that requiring
employers to track hours will help to
create a fair environment. However,
several of these advocacy groups viewed
the requirement to track hours as
inconsistent with the ability to obtain an
agreement with the worker to exclude
sleep time and other periods of
complete freedom; they thought that
such agreements only create confusion
and undermine the requirement to track
hours. Other individuals emphasized
they wanted to ensure that employers of
live-in domestic service workers keep
records of the employees’ rate of pay,
total wages, and deductions, and they
noted that employers can keep such
records using technology like
computers, smartphones, etc. Several
consumers stated that they have always
kept records of hours worked and wages
paid and that it is easy to do. Finally,
several commenters, including Care
Group, Inc., National Domestic Workers
Alliance, and The Workplace Project,
suggested that the regulatory
requirement to have a record of the
employee’s Social Security Number
should also permit the use of an
Individual Taxpayer Identification
Number (ITIN).
In light of the comments indicating
that it would be very difficult for many
consumers of live-in services to monitor
and record hours worked accurately,
especially those who have Alzheimer’s
disease, dementia, or other conditions
affecting memory, concentration, or
cognitive ability, the Department has
modified § 552.110(d) of the Final Rule
to remove the proposed rule’s restriction
on employers of live-in domestic service
employees being able to require such
workers to record their hours worked
and submit that record to the employer,
thus, expanding the application of the
current rule to all employers of
domestic service employees.22 Of
course, even though employers may
require their employees to create and
submit time records, employers cannot
delegate their responsibility for
maintaining accurate records of the
employee’s hours and for paying at least
the minimum wage for all hours
worked. See § 552.102(a). See, e.g.,
Kuebel v. Black & Decker, Inc., 643 F3d
352, 363 (2nd Cir. 2011) (employer’s
duty to maintain accurate records nondelegable); Caserta v. Home Lines
Agency, Inc., 273 F.2d 943, 946 (2nd
22 The Department also made minor edits to
§ 552.110(b) and (d) to improve clarity.
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Cir. 1959) (rejecting as inconsistent with
the FLSA an employer’s contention that
its employee was precluded from
claiming overtime not shown on his
own timesheets, because an employer
cannot transfer its statutory burdens of
accurate recordkeeping, and of
appropriate payment, to the employee).
The Department modified the Final Rule
because it agrees that employees are, in
many situations, the individuals with
the best knowledge of when they were
working, and they may have the best
ability to track those hours.
With regard to the comments
suggesting that the Department continue
to allow the use of a reasonable
agreement reflecting the expected
schedule to establish a live-in domestic
service employee’s hours of work, the
Department does not agree that such a
system is appropriate. First, as stated in
the NPRM, the Department is concerned
that not all hours actually worked are
captured by such an agreement. Live-in
domestic service employees, including
those employed to provide care for the
elderly or individuals with disabilities,
have inherently variable schedules due
to the often unpredictable needs of their
employers. Therefore, reliance on the
system in the current regulations does
not provide a sufficient basis to
determine whether the employee has in
fact received at least the minimum wage
for all hours worked. As the comments
from employee representatives
emphasized, live-in domestic service
workers are in a vulnerable position due
to their isolation, and many fear
retaliation if they complain. Further,
numerous commenters stated that livein domestic service employees work
more hours than they have contracted to
perform. While some employer
representatives expressed concern that
tracking hours would be burdensome,
others—such as the Home Care Alliance
of Massachusetts and individuals who
said they have tracked hours for their
employees—stated they had no
objection to this requirement. AARP
stated that third party employers should
be able to fulfill the requirement. The
Department notes that, under current
§ 552.110(b), the simplified
recordkeeping system does not apply to
third party employers.
The Department believes that the
modification made in the Final Rule
allowing employers to require
employees to record and submit their
hours will further simplify the process.
The Department notes that there is no
need for an electronic time management
system. See 29 CFR 516.1(a). Some
employers might choose to develop
their own recordkeeping forms that, for
example, might require the employee to
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60479
identify what tasks were performed and
the hours spent in various activities;
some employers might simply require
employees to keep notes by hand of
their hours worked; and some
employers might decide to record the
hours themselves. But whatever method
is used, the Department believes that
recording the actual hours worked will
result in more accuracy than the current
system of simply relying upon an
agreement established months or years
in the past. The recording of actual
hours therefore will be, as many
commenters stated, an effective tool to
ensure that workers receive at least the
minimum wage for all hours worked.
Several employee representatives
expressed the view that the requirement
to track actual hours worked was
inconsistent with the ability under
§ 552.102(a) to have an employeremployee agreement to exclude sleep
time, meal time and other periods of
complete freedom from all duties. As
discussed above, there is no
inconsistency between these two
provisions. The Department recognizes
that live-in domestic service employees
are not necessarily working all the hours
that they are on the employer’s premises
and the regulations require that to
exclude such time requires an
agreement between the employer and
employee. Therefore, the parties may
agree to exclude sleep, meal and certain
other relief periods from hours worked.
See § 552.102(a). Nevertheless, all hours
actually worked must be compensated,
such as where the normal sleeping
period or the normal meal period is
interrupted by a call to duty. Id. The
Final Rule simply clarifies that,
although the parties may have an
agreement that sets forth the parties’
expectations regarding the normal
schedule of work time, and they may
agree to exclude sleep, meal and other
relief periods from hours worked, that
agreement does not control the
compensation due each week; rather,
records must be kept of the actual hours
worked in order to ensure that the
employee is properly compensated for
all hours worked.
Finally, several commenters stated
that the reference to Social Security
Numbers in § 552.102(a) should include,
as an alternative, an Individual
Taxpayer Identification Number (ITIN);
they also wanted to ensure that
employers of live-in domestic service
workers also keep records of rate of pay,
total wages paid and deductions made.
An ITIN is a tax processing number
issued by the Internal Revenue Service
(IRS). IRS issues ITINs to individuals
who are required to have a U.S. taxpayer
identification number for tax reporting
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or filing requirements but who do not
have, and are not eligible to obtain, a
Social Security Number. ITINs are
issued regardless of immigration status,
because both resident and nonresident
aliens may have a U.S. filing or
reporting requirement under the
Internal Revenue Code. See http://
www.irs.gov/individuals/article/
0,,id=96287,00.html. The Department
did not propose any changes to
§ 552.110(a), which simply mentions
Social Security Numbers in its summary
of the recordkeeping requirements in 29
CFR part 516 (see, e.g., § 516.2, which
also only mentions Social Security
Numbers). The Department therefore
does not think it is necessary to include
this minor suggested change in the Final
Rule, as it does not believe the failure
to mention ITINs will cause any
confusion. The recordkeeping
requirements in § 516.2(a) and
§ 552.110(a) already require employers
of nonexempt employees to maintain
records such as hours worked each
workweek, total wages paid, total
additions to or deductions from wages
and the basis therefore (such as board
and/or lodging), and the regular hourly
rate of pay when overtime
compensation is due. Therefore, no
further changes to the regulations in
§ 552.110 are necessary or appropriate.
D. Section 552.109 (Third Party
Employment)
Section 552.109 addresses whether a
third party employer, the term the
Department uses to refer to an employer
of a direct care worker other than the
individual receiving services or his or
her family or household, may claim the
FLSA exemptions specific to the
domestic service employment context.
Current § 552.109(a) permits third party
employers to claim the companionship
services exemption from minimum
wage and overtime pay established by
§ 13(a)(15) of the Act; current
§ 552.109(c) permits third party
employers to claim the live-in domestic
service employee exemption from
overtime pay established by § 13(b)(21)
of the Act. (Section 552.109(b) addresses
third party employment in the context
of casual babysitting, which is not a
topic within the scope of this
rulemaking.) In the NPRM, the
Department proposed to exercise its
expressly delegated rulemaking
authority and bring the regulation in
line with the legislative intent and the
realities of the home care industry by
revising current paragraphs (a) and (c) to
prohibit third party employers from
claiming these exemptions. Under the
proposed regulation, only an individual,
family, or household would be
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permitted to claim the exemptions in
§§ 13(a)(15) and 13(b)(21) of the FLSA.
In other words, where a direct care
worker is employed by a third party, the
individual, family or household using
the worker’s services could claim the
exemptions, but the third party
employer would be required to pay the
worker at least the federal minimum
wage for all hours worked and overtime
pay at one and one-half the employee’s
regular rate for all hours worked over 40
in a workweek. For the reasons
explained below, the Department is
adopting § 552.109 as proposed.
Many commenters, including
employees, labor organizations, workeradvocacy organizations, and consumer
representatives, expressed strong
support for the proposed change to
§ 552.109. See, e.g., the Center; SEIU
Healthcare Illinois Indiana; AFSCME;
Legal Aid Society. The National
Consumer Voice for Quality Long-Term
Care explained that ‘‘[e]ven though
some individuals who hire their own
workers may end up paying more under
the proposed rules, consumers and
advocates in our network believe that
providing minimum wage, overtime,
and pay for travel time for these crucial
health care workers is the right thing to
do.’’ AARP noted that it ‘‘strongly
agrees’’ with denying the exemptions to
third party agencies and asserted that
‘‘requiring all home care and home
health care agencies to pay minimum
wage and overtime to their employees is
a centrally important component of the
NPRM.’’
Numerous commenters agreed with
the Department’s assertion that the
proposed changes were consistent with
Congressional intent. See, e.g., PHI,
NELP, and EJC. A comment signed by
Senator Harkin and 18 other Senators
stated that ‘‘[a] close look at the
legislative history of the 1974 changes
establishes that Congress clearly
intended to include today’s home care
workforce within the FLSA’s
protections.’’ PHI argued that
‘‘employment by a home care agency
strongly suggests that the worker is
providing home care services as a
vocation and is a regular bread-winner
responsible for the support of her
family. Such a formal employment
arrangement is inconsistent with the
teenage babysitters and casual
companions for the elderly that
Congress intended to exclude.’’
Additionally, many advocacy groups
and others agreed with the Department’s
statements in the NPRM concerning the
increased professionalization and
standardization of the home care
workforce. See, e.g., DCA, Bruce
Vladeck, NELP. The Westchester
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Consulting Group noted that third party
employers ‘‘are in the trade and
business of providing services to the
public and experience financial profit
and loss’’ while household employers
are purchasing companionship services
‘‘for their personal use to address their
specific support needs.’’ Similarly, PHI
argued that one of the companionship
services exemption’s ‘‘main goals’’ was
to ‘‘limit application of [the] FLSA to
workers whose vocation is domestic
service (that is, not occasional
babysitters and companions)’’ and this
concern is not ‘‘relevant to agencyemployed home care workers.’’ The
Legal Aid Society explained that ‘‘the
proposed regulations appropriately
recognize that this work is not the kind
of casual neighborly assistance that
Congress had in mind when it created
the companionship services exemption.
Rather, these workers are professional
caregivers, who work long hours for
agencies that are businesses, whether
for-profit or not-for-profit.’’
Additionally, the ACLU and others
observed that many members of this
workforce, such as home health aides
and personal care assistants, are now
often subject to training requirements
and competency evaluations.
Employers and employer associations,
however, generally opposed the
proposed revision of § 552.109. See, e.g.,
CAHSAH, 24Hr Home Care, ResCare
Home Care, NASDDDS, Texas
Association for Home Care & Hospice,
Inc. Many of these commenters asserted
the proposal is contrary to Congress’s
intent as well as the Department’s
longstanding interpretation of the
companionship services exemption.
BrightStar franchisees, among others,
argued that the use of the words ‘‘any
employee’’ in §§ 13(a)(15) and 13(b)(21)
of the Act demonstrates that Congress
intended for the exemptions to apply
based upon the activities of the
employee rather than the identity of the
employer. BrightStar franchisees wrote
that ‘‘floor debate included several
statements related to concerns about the
ability of working families to afford
companionship services for their loved
ones and keep them out of
institutionalized nursing home care.’’ A
comment signed by Senator Alexander
and 13 other Senators stated that the
‘‘statute and history clearly demonstrate
that Congress intended to provide a
broad exemption from the FLSA
minimum wage and overtime
requirements for all domestic workers
providing companionship services.’’
Husch Blackwell further commented
that ‘‘Congress is certainly well aware of
the exemption’s application over these
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last several decades, and has not taken
action upon this issue during that time.
Its failure to do so is clear evidence that
the regulations as they currently stand
appropriately state Congressional
intent.’’ See also Chamber of Commerce.
CAHSAH and the National Association
of Home Care & Hospice (NAHC),
among others, questioned the propriety
of the Department’s shift in position as
to this issue, especially since it
defended the current regulation in Long
Island Care at Home, Ltd. v. Coke, 551
U.S. 158 (2007). Additionally, NRCPDS
asserted that ‘‘wages should be
determined based upon the value of the
tasks performed’’ and that the ‘‘idea that
the same tasks are valued differently
based solely upon the identity of the
employer seems unjustifiable.’’
Employers and employer
representatives also asserted that the
proposed revision to § 552.109 would be
harmful to direct care workers because
raising the cost of services provided
through home care agencies would
incentivize employment through
informal channels rather than through
such agencies. The Virginia Association
for Home Care and Hospice stated that
the proposed change would ‘‘encourage
workers to leave agencies and be hired
directly by the client,’’ and in this
‘‘underground economy,’’ taxes would
not be withheld, Social Security would
not be paid, and workers’ compensation
insurance would not be provided. See
also CAHSAH. VNAA asserted that by
discouraging joint employment, the
proposed change could undermine
Medicaid’s efforts to expand the use of
consumer-directed programs, which rely
on agencies to assist consumers who are
not capable of being solely responsible
for managing a direct care worker’s
employment.
Numerous commenters sought
clarification as to which employers
would be considered ‘‘third party
employers’’ and how the proposed
revisions would affect various types of
consumer-directed programs and other
arrangements that have developed to
provide home care—including
registries, ‘‘agency with choice’’
programs, and ‘‘employer of record’’ or
fiscal intermediary situations—in which
third parties have roles such as handling
tax and insurance compliance. See, e.g.,
Private Care Association; Jim Small;
ANCOR. Comments from these various
types of entities requested guidance
from the Department as to whether
direct care workers under their
particular programs could qualify for
either exemption under the Final Rule.
Additionally, several advocacy groups
expressed confusion regarding whether
the Department’s proposed revision
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would hold consumers or their families
jointly and severally liable for wages
owed pursuant to the FLSA. For
example, AARP noted that it ‘‘strongly
opposes the proposal to impose joint
and several liability for FLSA
compliance on consumers when the
worker is supplied and employed by a
third party employer such as an agency.
When agencies are involved, they
should be considered the sole
employer.’’ See also The National
Consumer Voice for Long-Term Care.
The Department has carefully
considered comments submitted
regarding the proposed revisions to
§ 552.109(a) and (c) and has decided to
adopt the regulation as proposed. The
rulemaking record includes views from
a broad and comprehensive array of
interested parties: Academics studying
this issue, advocates for the individuals
who need home care services, home
care agencies that currently claim the
companionship services exemption,
labor unions, associations representing
direct care workers, and representatives
of the disability community. As
explained in the NPRM and for the
reasons discussed below, the
Department believes that the revised
regulation is consistent with Congress’s
intent when it created these exemptions
and reflects the dramatic transformation
of the home care industry since this
regulation was first promulgated in
1975.
As an initial matter, the Department
observes that it is exercising its
expressly delegated rulemaking
authority in promulgating this rule. In
creating the companionship services
exemption, Congress ‘‘left a gap for the
agency to fill’’ as to the meaning and
scope of the exemption at section
13(a)(15), explicitly giving the Secretary
authority to define and delimit the
boundaries of the exemption. Chevron
U.S.A., Inc. v. Natural Res. Def. Council,
Inc., 467 U.S. 837, 843–44 (1984); see
Nat’l Cable & Telecomm Ass’n. v. Brand
X Internet Servs., 545 U.S. 967, 980
(2005) (‘‘Filling these gaps . . . involves
difficult policy choices that agencies are
better equipped to make than courts.’’).
When Congress expressly delegates
authority to the agency ‘‘to elucidate a
specific provision of the statute by
regulation,’’ any regulations
promulgated pursuant to that grant of
power and after notice and comment are
to be given ‘‘controlling weight unless
they are arbitrary, capricious, or
manifestly contrary to the statute.’’
Chevron, 467 U.S. at 844; see Long
Island Care at Home, Ltd. v. Coke, 551
U.S. 158, 165–68 (2007); Gonzales v.
Oregon, 546 U.S. 243, 255–256 (2006)
(Chevron deference is warranted ‘‘when
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it appears that Congress delegated
authority to the agency generally to
make rules carrying the force of law,
and that the agency interpretation
claiming deference was promulgated in
the exercise of that authority’’ (internal
quotation marks omitted)).
Accordingly, the Department is now
adopting a revised regulation that is, as
many commenters agreed, consistent
with Congress’s intent to provide the
protections of the FLSA to domestic
workers while providing narrow
exemptions for workers performing
companionship services and live-in
domestic service workers. Prior to 1974,
domestic service employees who
worked for a placement agency that met
the annual earnings threshold for FLSA
enterprise coverage, but were assigned
to work in someone’s home, were
covered by the FLSA. 39 FR 35385.
However, the Department’s 1975
regulations, by allowing those covered
enterprises to claim the exemption
denied those employees the Act’s
minimum wage and overtime
protections. This Final Rule reverses
this ‘‘roll back’’.
The legislative history makes clear
that in passing the 1974 amendments to
the Act, Congress intended to extend
FLSA coverage to all employees whose
‘‘vocation’’ was domestic service, but to
exempt from coverage casual babysitters
and companions who were not regular
breadwinners or responsible for their
families’ support. See House Report No.
93–913, p. 36. Indeed, it is apparent
from the legislative history that the 1974
amendments were intended only to
expand coverage to include more
workers, and were not intended to roll
back coverage for employees of third
parties who already had FLSA
protections (as employees of covered
enterprises). The focus of the floor
debate concerned the extension of
coverage to categories of domestic
workers who were not already covered
by the FLSA, specifically, those
employed by an individual or small
company rather than by a covered
enterprise. See, e.g., 119 Cong. Rec. at
S24800 (‘‘coverage of domestic
employees is a vital step in the direction
of insuring that all workers affecting
interstate commerce are protected by the
Fair Labor Standards Act’’); see also
Senate Report No. 93–690 at p. 20 (‘‘The
goal of the Amendments embodied in
the committee bill is to update the level
of the minimum wage and to continue
the task initiated in 1961—and further
implemented in 1966 and 1972—to
extend the basic protection of the Fair
Labor Standards Act to additional
workers and to reduce to the extent
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practicable at this time the remaining
exemptions.’’ (emphasis added)).23
Further, there is no indication that
Congress considered limiting enterprise
coverage for third party employers
providing domestic services. The only
expressions of concern by opponents of
the amendment related to the new
recordkeeping burdens on private
households. See, e.g., 119 Cong. Rec.
18,155 (statement of Rep. Harrington);
119 Cong. Rec. 24,797 (statement of Sen.
Dominick). Recognizing this intended
expansion of the Act, the exemptions
excluding employees from coverage
must therefore be defined narrowly in
the regulations to achieve the law’s
purpose of extending coverage broadly.
This is consistent with the general
principle that coverage under the FLSA
is broadly construed so as to give effect
to its remedial purposes, and
exemptions are narrowly interpreted
and limited in application to those who
clearly are within the terms and spirit
of the exemption. See, e.g., A.H.
Phillips, Inc. v. Walling, 324 U.S. 490,
493 (1945). The Department is not
persuaded by comments contending that
because section 13(a)(15) has never been
amended, the prior regulations were
therefore consistent with Congressional
intent. See, e.g., Husch Blackwell; U.S.
Chamber of Commerce. As the Supreme
Court has observed, Congressional
inaction ‘‘is a notoriously poor
indication of [C]ongressional intent.’’
Schweiker v. Chilicky, 487 U.S. 412, 440
(1988); see also Minor v. Bostwick Labs,
Inc., 669 F.3d 428, 436 (4th Cir. 2012).
Therefore, the Department now
acknowledges that the regulatory roll
back of coverage for workers employed
in private homes by covered enterprises
that resulted from the 1975 version of
§ 552.109 was not in accord with
Congress’s purpose of expanding
coverage.
By excluding direct care workers
employed by third party covered
enterprises from FLSA coverage, the
Department’s 1975 regulations created
an inequity that has increased over time.
As the home care workforce has grown,
the impact of the Department’s roll
back, which is inconsistent with the
1974 amendments, has become even
more magnified. As noted by many
commenters, today, few direct care
23 Several comments focused on statements made
during floor debate concerning the cost of care and
preventing nursing home placement. See BrightStar
Care of Tucson; Visiting Nurse Service of New
York. However, the Department notes that the floor
debate cited by these commenters took place in
1972 on earlier domestic service legislation not
containing the exemption that was considered by a
different Congress than the one enacting the 1974
amendments. See, e.g., 118 Cong. Rec. 24715 (July
20, 1972).
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workers are the ‘‘elder sitters’’
envisioned by Congress when enacting
the exemption. See 119 Cong. Rec. at
S24801. Instead, direct care workers
employed by third parties are the sorts
of domestic service employees Congress
specifically intended the FLSA to cover:
Their work is a vocation. See Senate
Report No. 93–690, p. 20; House Report
No. 93–913, pp. 36. For example, a
direct care worker who has sought out
work through a private home care
agency is engaged in a formal,
professional occupation and he or she
may well be the primary ‘‘breadwinner’’ for his or her family. Thus, it
is the Department’s position that
employees providing home care services
who are employed by third parties
should have the same minimum wage
and overtime protections that other
domestic service and other workers
enjoy.
Significantly, the Supreme Court
explicitly affirmed the Department’s
authority to address the issue of third
party employment in the domestic
service context in Long Island Care at
Home, Ltd. v. Coke, 551 U.S. 158 (2007).
The Supreme Court acknowledged that
the statutory text and legislative history
do not provide an explicit answer to the
‘‘third party employment question.’’ Id.
at 168. Rather, the Court explained that
the FLSA leaves gaps as to the scope
and definition of statutory terms such as
‘‘domestic service employment’’ and
‘‘companionship services,’’ and it
provides the Department with the power
to fill those gaps. Id. at 167. In
particular, the Court stated its belief that
‘‘Congress intended its broad grant of
definitional authority to the Department
to include the authority to answer’’
questions including ‘‘[s]hould the FLSA
cover all companionship workers paid
by third parties? Or should the FLSA
cover some such companionship
workers, perhaps those working for
some (say, large but not small) private
agencies . . .? How should one weigh
the need for a simple, uniform
application of the exemption against the
fact that some (but not all) third-party
employees were previously covered?’’
Id. at 167–68. Further, when the
Department fills statutory gaps with any
reasonable interpretation, and in
accordance with other applicable
requirements, the courts accept the
result as legally binding and entitled to
deference. Id. The Supreme Court
explicitly recognized that the
Department may interpret its
‘‘regulations differently at different
times in their history,’’ and may make
changes to its position, provided that
the change creates no unfair surprise. Id.
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at 170–71. The Court also recognized
that when the Department utilizes
notice-and-comment rulemaking in an
attempt to codify a new regulation, as it
has done with this Final Rule, such
rulemaking makes surprise unlikely. Id.
at 170.
Although the commenters who noted
that the Department is changing its
position as to the proper treatment of
third party employers in § 552.109 are
correct, such a change is not only
permissible, but also reasonable. The
Department did argue in Coke, as well
as in Wage and Hour Advisory
Memorandum (‘‘WHAM’’) 2005–1 (Dec.
1, 2005) (found at http://www.dol.gov/
whd/FieldBulletins/index.htm), that the
third party regulation as written in 1975
was the Department’s best reading of
these statutory exemptions. In the past,
however, the Department erroneously
focused on the phrase ‘‘any employee,’’
instead of focusing on the purpose and
objective behind the 1974 amendments,
which was to expand minimum wage
and overtime protections to workers
employed in private households that
did not otherwise meet the FLSA
coverage requirements. The Supreme
Court has ‘‘stressed that in expounding
a statute, we must not be guided by a
single sentence or member of a
sentence, but look to the provisions of
the whole law, and to its object and
policy.’’ U.S. Nat’l Bank of Oregon v.
Indep. Ins. Agents of Am., Inc., 508 U.S.
439, 455 (1993) (internal quotation
marks omitted). Moreover, in view of
the Supreme Court’s conclusion that the
text of the FLSA does not expressly
answer the third party employment
question, the statutory phrase ‘‘any
employee’’ cannot, standing alone,
answer the question definitively.
Moreover, the WHAM failed to consider
the industry changes that have taken
place over the decades since the
statutory amendment was enacted. After
considering the purpose and objectives
of the amendments as a whole,
reviewing the legislative history, and
evaluating the state of the home care
industry, the Department believes that
the companionship services exemption
was not intended to apply to third party
employers.
In addition, the Department does not
believe commenters’ concerns about the
harmful effect of the change to § 552.109
are warranted because the Department
did not identify or receive any
information suggesting that such effects
have occurred in the 15 states that
already provide minimum wage and
overtime protections to all or most third
party-employed home care workers who
may otherwise fall under the federal
companionship services exemption.
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These states are Colorado, Hawaii,
Illinois,24 Maryland, Massachusetts,
Michigan, Minnesota, Montana, Nevada,
New Jersey, New York, Pennsylvania,
Washington, and Wisconsin. In
addition, Maine extends minimum wage
and overtime protections to all
companions employed by for-profit
agencies. Some, but not all, privately
employed home care workers in
California are exempt from overtime
requirements as ‘‘personal attendants;’’
all receive at least the minimum wage.
Five more states (Arizona, Nebraska,
North Dakota, Ohio, and South Dakota)
and the District of Columbia provide
minimum wage coverage to home care
workers, including companions,
employed by third parties. Significantly,
several of the states, such as Colorado
and Michigan, have instituted these
protections in the last several years. The
existence of these state protections
diminishes the force of objections
regarding the feasibility and expense of
prohibiting third parties from claiming
the companionship services and live-in
domestic service worker exemptions.
Indeed, the comments received did not
point to any reliable data indicating that
state minimum wage or overtime laws
had led to increased institutionalization
or stagnant growth in the home care
industry in any state. Rather, the
Michigan Olmstead Coalition reported
‘‘we have seen no evidence that access
to or the quality of home care services
are diminished by the extension of
minimum wage and overtime protection
to home care aides in this state almost
six years ago.’’ PHI noted that the
growth of home care establishments in
Michigan ‘‘is actually higher in the
period after implementing wage and
hour protections than before—41
percent compared to 32 percent.’’ See
PHI; see also Workforce Solutions
(‘‘There is no data showing that states
with minimum wage and overtime
protections for home care workers have
higher rates of institutionalization.’’).
Indeed, as summarized by AARP, there
is no strong correlation between states
that have minimum wage and overtime
protections with expenditures on HCBS
versus institutionalized care.
Moreover, the Department does not
believe that this rule will create or
significantly expand an underground
economy where workers hired directly
by a consumer or a third party are not
treated as employees and thus are not
paid proper wages, income and FICA
24 In Illinois, 30,000 workers in the Home
Services Program under the Illinois Department of
Human Services are considered jointly employed by
the state and the consumer and do not receive
overtime pay.
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taxes are not withheld, and
unemployment and worker’s
compensation insurance are not
provided. Although difficult to predict,
the Department anticipates that rather
than significantly expanding any
underground economy, this rule will
bring more workers under the FLSA’s
protections, which in turn will create a
more stable workforce by equalizing
wage protections with other health care
workers and reducing turnover. A more
stable home care workforce also dilutes
arguments that continuity of care would
be negatively affected by the rule. This
industry is currently marked by high
turnover, which can be very disruptive
to consumers. The Department believes
that consumers would benefit from
reduced turnover among direct care
workers and the accompanying
improvement in quality of care.
Joint Employment
The Department wishes to clarify how
the third party regulation may apply in
evaluating instances of joint
employment, what constitutes a ‘‘third
party employer,’’ independent
contractors, and joint and several
liability. Direct care workers and
consumers explained that a variety of
care arrangements have been developed
in order to provide home care, many
involving potential joint employment
relationships. The Department notes
that this regulation does not change any
of the Department’s regulations or
guidance concerning the employment
relationship and joint employment. In
evaluating what constitutes a ‘‘third
party employer,’’ a ‘‘third party’’ will be
considered any entity that is not the
individual, member of the family, or
household retaining the services.
However, what entity constitutes an
‘‘employer’’ is governed by longstanding case law from the U.S.
Supreme Court and other federal
appellate courts interpreting the
language of the FLSA and applying the
‘‘economic realities’’ test discussed in
greater detail below.
As the Department has previously
explained, a single individual may be
considered an employee of more than
one employer under the FLSA. See 29
CFR Part 791. Joint employment is
employment by one employer that is not
completely disassociated from
employment by other employers.
Whether joint employment exists is to
be determined based upon all the facts
of the particular case. As an example, an
individual who hires a direct care
worker or live-in domestic service
worker to provide services pursuant to
a Medicaid-funded consumer directed
program may be a joint employer with
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the state agency that administers the
program. Generally, where a joint
employment relationship exists, ‘‘all
joint employers are responsible, both
individually and jointly, for compliance
with all of the applicable provisions of
the act.’’ § 791.2(a). However, under the
revised regulation, in joint employment
situations the individual, member of the
family or household employing the
direct care worker or live-in domestic
service worker will be able to claim an
exemption provided that the employee
meets the duties requirements for the
companionship services exemption or
the residence requirements for a ‘‘livein’’ domestic service worker exemption.
The third party employer will not be
able to claim that exemption.
Determinations about the existence of
an employment or joint employment
relationship are made by examining all
the facts in a particular case and
assessing the ‘‘economic realities’’ of the
work relationship. See, e.g., Goldberg v.
Whitaker House Cooperative, Inc., 366
U.S. 28, 33 (1961). Factors to consider
may include whether an employer has
the power to direct, control, or
supervise the worker(s) or the work
performed; whether an employer has the
power to hire or fire, modify the
employment conditions or determine
the pay rates or the methods of wage
payment for the worker(s); the degree of
permanency and duration of the
relationship; where the work is
performed and whether the tasks
performed require special skills;
whether the work performed is an
integral part of the overall business
operation; whether an employer
undertakes responsibilities in relation to
the worker(s) which are commonly
performed by employers; whose
equipment is used; and who performs
payroll and similar functions. An
economic realities test does not depend
on ‘‘isolated factors but rather upon the
circumstances of the whole activity.’’
Rutherford Food Corp. v. McComb, 331
U.S. 722, 730 (1947). In the past, the
Department has applied this economic
realities principle when it promulgated
regulations to clarify the definition of
‘‘joint employment’’ under the Migrant
and Seasonal Agricultural Worker
Protection Act, 29 CFR 500.20(h), and
the Family and Medical Leave Act, 29
CFR 825.106, both of which incorporate
the FLSA definition of ‘‘employ.’’
To illustrate how a home care services
scenario may be assessed utilizing the
economic realities test, consider the
following example:
Example: Mary contacts her state
government about receiving home care
services. The state has a ‘‘self-direction
program’’ that allows Mary to hire a direct
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care worker through an entity that has
contracted with the state to serve as the
‘‘fiscal/employer agent’’ for program
participants who employ direct care workers.
The ‘‘fiscal/employer agent’’ performs tasks
similar to those that commercial payroll
agents perform for businesses, such as
maintaining records, issuing payments,
addressing tax withholdings, and ensuring
that workers’ compensation insurance is
maintained for the worker, but is not
involved in any way in the daily supervision,
scheduling, or direction of the employee.
Mary has complete budget authority over
how to allocate the funds she receives under
the Medicaid self-direction program,
negotiates the wage rate with the direct care
worker, is wholly responsible for day-to-day
duty assignments, and has the sole power to
hire and fire her direct care worker.
In the above scenario, the fiscal/
employer agent is likely not an
employer of the direct care worker, and
the consumer is likely the sole
employer. The fiscal/employer agent has
no power to hire or fire, direct, control,
or supervise the worker and cannot
modify the pay rate or modify the
employment conditions. The work is
not performed on the fiscal/employer
agent’s premises, and the fiscal/
employer agent has provided no tools or
materials required for the tasks
performed. However, any change in the
specific facts of this scenario, such as if
direct care workers are required to
obtain approval from the fiscal/
employer agent in order to arrive late or
be absent from work or if the fiscal/
employer agent sets the direct care
workers’ specific hours worked, may
lead to a different conclusion regarding
the employer status of the fiscal/
employer agent.
The decision on joint employment
would likely be different under the
following scenario:
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Example: Mary contacts her state
government about receiving home care
services. The state has a ‘‘public authority
model’’ under which the state or county
agency exercises control over the direct care
workers’ conditions of employment by
deciding the method of payment, reviewing
worker time sheets and determining what
tasks each worker may perform. The agency
also exercises control over the wage rate
either by setting the wage rate.
In the above scenario, the state or
county agency is likely an employer of
the direct care workers under the FLSA.
See, e.g., Bonnette v. California Health
& Welfare Agency, 704 F.2d 1465, 1470
(9th Cir. 1983). The state or county
agency directs, controls, and supervises
the workers, and can modify the pay
rate and other employment conditions
such as the number of hours worked
and the tasks performed. In addition,
the agency may be an employer of the
direct care workers even if a private
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third party agency is also found to be an
employer; such joint employment
arrangements would result in the state
or county agency and the private third
party agency being jointly and severally
liable for the direct care workers’ wages.
It is critical to note that this factspecific economic realities test will be
applied to all situations when assessing
an employment relationship or potential
joint employment, regardless of the
name used by the third party (e.g.,
‘‘fiscal/employer agent,’’ ‘‘Agency with
Choice,’’ ‘‘fiscal intermediary,’’
‘‘employer of record’’) or worker (e.g.,
‘‘registry worker,’’ ‘‘independent
provider,’’ ‘‘independent contractor’’).
As the Department has repeatedly
noted, with respect to exemption status,
job titles are not determinative. See, e.g.,
§ 541.2; FOH 22a04; Wage and Hour
Fact Sheet #17A: Executive,
Administrative, Professional, Computer
and Outside Sales Employees Under the
Fair Labor Standards Act. This principle
holds true for determining employment
status as well.
With regard to potential
misclassification of employees as
independent contractors or other nonemployees, the Department will
continue its efforts to combat such
misclassification. As the Department
has explained, there is no single test for
determining whether an individual is an
independent contractor or an employee
for purposes of the FLSA. Rather, a
number of factors must be considered,
including the extent to which the
services rendered are an integral part of
the principal’s business; the
permanency of the relationship; the
amount of the alleged contractor’s
investment in facilities and equipment;
the nature and degree of control exerted
by the principal; the alleged contractor’s
opportunities for profit and loss; the
amount of initiative or judgment
required for the success of the
contractor; and the degree of
independent business organization and
operation. See, e.g., Donovan v. Sureway
Cleaners, 656 F.2d 1368, 1370 (9th Cir.
1981).
To further illustrate the economic
realities test, consider this example:
Example: ABC Company advertises as a
‘‘registry’’ that provides potential direct care
workers. The registry conducts a background
screening and verifies credentials of potential
workers, and assists clients by locating direct
care workers who may be able to meet a
client’s needs. ABC Company informs Ann,
a direct care worker, of the opportunity to
work for a potential client. If Ann is
interested in the opportunity, she is
responsible for contacting the client for more
information. Ann is not obligated to pursue
this or any other opportunity presented, and
she is not prohibited from registering with
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other referral services or from working
directly with clients independent of ABC
Company. The registry does not provide any
equipment to Ann, and does not supervise or
monitor any work Ann performs. ABC
Company has no power to terminate Ann’s
employment with a client. ABC Company
processes Ann’s payroll checks according to
information provided by clients, but does not
set the pay rate.
In this scenario, Ann is likely not an
employee of ABC Company. There is no
permanency in the relationship between
the registry and Ann. The registry does
not provide any equipment or facilities,
exercises no control over daily
activities, and has no power to hire or
fire. Ann is able to accept as many or
as few clients as she wishes. The client
sets the rate of pay and negotiates
directly with Ann about which services
will be provided. However, this does
not mean that every ‘‘registry’’ will not
be an employer. Rather, a fact-specific
assessment must be conducted. Indeed,
the Department has found registries to
be employers under different facts. See,
e.g., Wage and Hour Opinion Letter,
1975 WL 40973 (July 31, 1975) (finding
a nursing registry to be an employer
when the registry maintained a log of
assignments showing the shifts worked,
established the rate which would be
charged, and exercised control over the
nurse’s behavior and the work
schedule).
Some of the comments demonstrated
confusion about when a family or
household employing a direct care
worker may be jointly and severally
liable for wages owed. See, e.g., AARP;
National Consumer Voice for Long-Term
Care. The NPRM stated that ‘‘if the
employee fails to qualify as an exempt
companion, such as if the employee
performs incidental duties that exceed
the 20 percent tolerance allowed under
the proposed § 552.6(b), or the employee
provides medical care for which
training is a prerequisite, the individual,
family or household member cannot
assert the exemption and is jointly and
severally liable for the violation.’’ 76 FR
81198. There appeared to be a
misperception that joint and several
liability would attach in any joint
employment relationship. However, as
stated in the NPRM, an individual,
family, or household would be jointly
and severally liable for a violation only
in instances when an employee fails to
meet the ‘‘duties’’ requirement for the
companionship services exemption or
the residence requirements for the livein domestic service worker exemption.
This rulemaking is not altering the state
of the law under such circumstances; if
a domestic service employee is not
providing companionship services or
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does not meet the residence
requirements for the live-in domestic
service worker exemption, then the
family and any third party employer are
both responsible for complying with the
FLSA’s minimum wage, overtime, and
recordkeeping requirements.25 For
example, under both the current
regulations and this Final Rule, if a
family and an agency jointly employ a
home care worker, and that worker is
required to spend 50 percent of her time
cleaning the house, that worker is not
exempt under the companionship
services exemption and the family and
the third party are jointly and severally
liable for any back wages due. However,
under this Final Rule, in those
situations where an employee satisfies
the duties test for the companionship
services exemption, the individual,
family or household member may claim
the exemption, but the third party joint
employer cannot. In those instances, the
family or household member would not
be subject to joint and several liability.
Similarly, under the Final Rule, if a
family and an agency jointly employ a
live-in domestic service employee, the
family would be able to claim the
overtime pay exemption under
§ 13(b)(21), but the third party employer
could not. If there is overtime pay due,26
the third party employer would be liable
for overtime pay; however, the family
would not be subject to joint and several
liability, provided the worker satisfies
the live-in worker requirements
(namely, resides in the home the
requisite amount of time).
Finally, the revised regulation refers
to ‘‘the individual or member of the
family or household’’ who employs the
direct care worker or live-in domestic
worker. It is the Department’s intent that
the phrase ‘‘member of the family or
household’’ be construed broadly, and
no specific familial relationship is
necessary. For example, a ‘‘member of
the family or household’’ may include
an individual who is a child, niece,
guardian or authorized representative,
housemate, or person acting in loco
parentis to the individual needing
companionship or live-in services.
The Department will work closely
with stakeholders and the Department
of Health and Human Services to
provide additional guidance and
25 The Department notes that it is a good practice
for individuals, family members or household
members to keep a record of work performed in the
household whether or not the individual, family or
household member is an employer of the person
performing the work.
26 When an employee resides on his or her
employer’s premises, not all of the time spent on
the premises is considered working time. See the
Hours Worked section of this preamble for guidance
on determining compensable hours worked.
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technical assistance during the period
before the rule becomes effective, in
order to ensure a transition that
minimizes potential disruption in
services and supports the progress that
has allowed elderly people and persons
with disabilities to remain in their
homes and participate in their
communities.
E. Other Comments
As noted in various sections of this
preamble, the Department received a
number of comments raising concerns
about topics that are related to this
rulemaking but are not within the scope
of the revisions to the regulatory text.
These issues are discussed below. First,
the Department addresses comments
expressing concern that the rulemaking
will cause increased
institutionalization. Second, the
Department addresses comments raising
questions about paid family caregivers.
Finally, the Department responds to
commenters’ questions regarding FLSA
principles that are relevant in
determining the hours for which a nonexempt direct care worker must be paid
but which are not changed by this Final
Rule.
Community Integration and Olmstead
The Department received several
comments from groups that advocate for
persons with disabilities and employers
that raised concerns that requiring the
payment of minimum wage and
overtime to direct care workers would
increase the cost of home and
community based services (HCBS)
funded under Medicaid, which in turn
would result in a reduction of services
under those programs and increased
institutionalization of the elderly or
persons with disabilities. See, e.g.,
ADAPT, National Disability Leadership
Alliance (NDLA), Toolworks, Inc.,
National Council on Aging, and
VNSNY. Specifically, ADAPT expressed
concern that Medicaid reimbursement
rates under HCBS programs will not
increase to account for the additional
costs for personal care services as a
result of the Department’s proposed
rule, resulting in individuals going
without essential assistance and
eventually being forced into facilities.
As a result, ADAPT asserted that the
Department’s proposed rule would
promote institutionalization of such
individuals.
These views were shared by NDLA,
which stated that the Department’s
proposal would promote
institutionalization because it would
increase the cost of HCBS programs
without a concurrent increase in
Medicaid reimbursement rates or the
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Medicaid caps for available funding. As
a result, NDLA expressed concern that
persons with disabilities ‘‘will be left
with the choice of forgoing needed
assistance or subjecting themselves to
unwanted institutionalization and loss
of community connection.’’ In addition,
VNSNY, without providing specifics,
stated that the Department’s proposed
rule would be ‘‘inconsistent with the
efforts undertaken around the country
by public agencies to comply with the
Supreme Court’s decision in Olmstead
v. L.C. ex rel. Zimring, 527 U.S. 581
(1999).’’
The Michigan Olmstead Coalition
similarly stated that under the
Americans with Disabilities Act (ADA)
and the U.S. Supreme Court’s decision
in Olmstead, ‘‘governmental policies
must now support and promote
inclusion, not segregation, of people
living with disabilities’’ and that
‘‘[p]eople who need long-term supports
and services should not be forced to
receive those services in institutions
rather than their own homes and
apartments.’’ However, the Michigan
Olmstead Coalition stated that many
direct care workers do the same work as
workers in nursing homes and both
should receive minimum wage and
overtime protections. ‘‘Without similar
workplace compensation protections
applied to institutions and home care,
the home care industry faces another
governmental policy that creates a
disadvantage relative to nursing
homes.’’ In addition, the Michigan
Olmstead Coalition stated that without
minimum wage and overtime
protections for direct care workers,
‘‘nursing homes are better able to attract
and retain staff creating additional
burdens or competitive challenges on
home care agencies.’’ The Michigan
Olmstead Coalition asserted that the
proposal ‘‘will help end another
‘institutional bias’ that favors nursing
homes.’’
Citing Olmstead, the SEIU similarly
stated that the Department’s proposed
rule was unlikely to result in increased
institutionalization of individuals
because ‘‘there has been a decisive
policy shift toward home- and
community-based long-term care in this
country that is extremely unlikely to be
reversed.’’ The SEIU noted that it is
‘‘difficult to imagine’’ that publicly
funded programs would reverse course
from home and community based
services to institutionalization simply
because ‘‘labor standards are brought up
to those prevailing virtually everywhere
else.’’ The SEIU also noted that one of
the reasons for the shift to home and
community based services is due to the
substantial cost savings associated with
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non-institutional care. SEIU explained
that these cost savings are not ‘‘simply
a difference in hourly labor costs, as is
demonstrated by the fact that many of
the states that are leaders in
‘rebalancing’ away from institutions are
also leaders in setting adequate
homecare labor standards.’’ The
advantages of home and community
based services include that the services
can be tailored to each individual’s level
of need and home and community based
services do not include the overhead
costs of maintaining a care facility.
The Department in no way meant to
convey in the proposal that some
increased levels of institutionalization
would be considered acceptable. The
Department fully supports the ADA’s
and Olmstead’s requirement that
government programs provide needed
services and care in the most integrated
setting appropriate to an individual, and
recognizes the important role that home
and community based services have
played in making that possible. The
Department agrees with the Michigan
Olmstead Coalition’s assertion that
protecting direct care workers under the
FLSA will benefit home and community
based services by ensuring that the
home care industry can attract and
retain qualified workers, which will
improve overall quality of care. As
discussed in more detail below, in order
to comply with the ADA and Olmstead,
public entities must have in place an
individualized process—available to
any person whose service hours would
be reduced as a result of the Final
Rule—to examine if the service
reduction would place the person at
serious risk of institutionalization and,
if so, what additional or alternative
services would allow the individual to
remain in the community.
Congress enacted the ADA in 1990 ‘‘to
provide a clear and comprehensive
national mandate for the elimination of
discrimination against individuals with
disabilities.’’ 42 U.S.C. 12101(b)(1).
Congress found that ‘‘historically,
society has tended to isolate and
segregate individuals with disabilities,
and, despite some improvements, such
forms of discrimination against
individuals with disabilities continue to
be a serious and pervasive social
problem.’’ 42 U.S.C. 12101(a)(2). For
those reasons, Congress prohibited
discrimination against individuals with
disabilities by public entities under
Title II of the ADA:
[N]o qualified individual with a disability
shall, by reason of such disability, be
excluded from participation in or be denied
the benefits of the services, programs, or
activities of a public entity, or be subjected
to discrimination by any such entity.
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42 U.S.C. 12132.
Pursuant to Congressional authority,
the Attorney General issued regulations
implementing Title II of the ADA,
which are based on regulations issued
under section 504 of the Rehabilitation
Act of 1973. See 42 U.S.C. 12134(a); 28
CFR 35.190(a); Executive Order 12250,
45 FR 72995 (1980), reprinted in 42
U.S.C. 2000d–1. The Title II regulations
require public entities to ‘‘administer
services, programs, and activities in the
most integrated setting appropriate to
the needs of qualified individuals with
disabilities.’’ 28 CFR 35.130(d). The
preamble discussion to Title II explains
that ‘‘the most integrated setting’’ is one
that ‘‘enables individuals with
disabilities to interact with non-disabled
persons to the fullest extent possible.’’
28 CFR part 35, app. A (2010)
(addressing § 35.130); see also
Statement of the Dep’t of Justice on
Enforcement of the Integration Mandate
of Title II of the Americans with
Disabilities Act and Olmstead v. L.C., at
2 (June 22, 2011) (Olmstead
Enforcement Statement), available at
http://www.ada.gov/olmstead/q&a_
olmstead.htm. Moreover, ‘‘integrated
settings’’ are described as ‘‘those that
provide individuals with disabilities
opportunities to live, work, and receive
services in the greater community, like
individuals without disabilities.’’
Olmstead Enforcement Statement, at 3.
Giving deference to the Attorney
General’s regulations and interpretation
of the ADA, the Supreme Court in
Olmstead v. L.C., 527 U.S. 581 (1999),
held that Title II prohibits the
unjustified segregation of individuals
with disabilities. Id. at 597–98. The
Supreme Court concluded that public
entities are required to provide
community-based services to persons
with disabilities when (a) such services
are appropriate; (b) the affected persons
do not oppose community-based
treatment; and (c) community-based
services can be reasonably
accommodated, taking into account the
resources available to the entity and the
needs of others who are receiving
disability services from the entity. Id. at
607. The Court explained that this
holding ‘‘reflects two evident
judgments.’’ Id. at 600. ‘‘First,
institutional placement of persons who
can handle and benefit from community
settings perpetuates unwarranted
assumptions that persons so isolated are
incapable or unworthy of participating
in community life.’’ Id. ‘‘Second,
confinement in an institution severely
diminishes the everyday life activities of
individuals, including family relations,
social contacts, work options, economic
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independence, educational
advancement, and cultural enrichment.’’
Id. at 601.
The Department of Justice has issued
guidance further clarifying the scope of
a public entity’s Olmstead obligations.
Public entities may be in violation of the
ADA’s integration requirement when
they: (1) Directly or indirectly operate
facilities and/or programs that segregate
individuals with disabilities; (2) finance
the segregation of individuals with
disabilities in private facilities; or (3)
through planning service system design,
funding choices, or service
implementation practices, promote or
rely upon the segregation of individuals
with disabilities in private facilities or
programs. Olmstead Enforcement
Statement, at 3. ‘‘[B]udget cuts can
violate the ADA and Olmstead when
significant funding cuts to community
services creates a risk of
institutionalization or segregation.’’ Id.
at 5. If budget cuts require the
elimination or reduction of community
services for individuals who would be
at serious risk for institutionalization
without such services, such cuts or
reductions in services can violate the
ADA’s integration requirement. Id. at 6.
Institutionalization need not be
imminent or inevitable for a violation of
the ADA’s integration mandate to be
found. See M.R. v. Dreyfus, 663 F.3d
1100, 1116–17 (9th Cir. 2011); accord
Pashby v. Delia, 709 F.3d 307, 322 (4th
Cir. 2013). Rather, an Olmstead
violation can result when a public entity
fails to provide community services or
cuts services that ‘‘will likely cause a
decline in health, safety, or welfare that
would lead to the individual’s eventual
placement in an institution.’’ Olmstead
Enforcement Statement, at 5.
To comply with the ADA’s integration
requirement, public entities must
reasonably modify their policies,
procedures or practices when necessary
to avoid discrimination or unjustified
institutionalization. 28 CFR
35.130(b)(7); accord Pashby, 709 F.3d at
322. The obligation to make reasonable
modifications may be excused only
where a public entity demonstrates that
the modifications would
‘‘fundamentally alter’’ the programs or
services at issue. Id.; see also Olmstead,
527 U.S. at 604–07. ‘‘A ‘fundamental
alteration’ requires the public entity to
prove ‘that, in the allocation of available
resources, immediate relief for plaintiffs
would be inequitable, given the
responsibility the State [or local
government] has taken for the care and
treatment of a large and diverse
population of persons with
disabilities.’ ’’ Olmstead Enforcement
Statement, at 6 (citing Olmstead, 527
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U.S. at 604). DOJ has further indicated
that in order to raise a fundamental
alteration defense, a public entity must
show that it has developed a
comprehensive, effectively working
Olmstead plan and is implementing that
plan accordingly. Id. at 7.
Several appellate courts have
concluded that a fundamental alteration
defense based solely on budgetary
concerns is insufficient. See, e.g.,
Pashby, 709 F.3d at 323–24; M.R., 663
F.3d at 1118–19; Pa. Prot. & Advocacy,
Inc. v. Pa. Dep’t of Pub. Welfare, 402
F.3d 374, 380 (3d Cir. 2005);
Radaszewski v. Maram, 383 F.3d 599,
614 (7th Cir. 2004); Fisher v. Oklahoma,
335 F.3d 1175, 1181 (10th Cir. 2003).
‘‘Even in times of budgetary constraints,
public entities can often reasonably
modify their programs by re-allocating
funding from expensive segregated
settings to cost effective integrated
settings.’’ Olmstead Enforcement
Statement, at 7.
As previously noted, a public entity
has an affirmative obligation to ensure
its compliance with the ADA’s
integration mandate and take necessary
steps to ensure its policies do not place
individuals at risk of
institutionalization. See, e.g., Fisher,
335 F.3d at 1181–84. The Department of
Justice (DOJ) and the Office for Civil
Rights (OCR) at the Department of
Health and Human Services have taken
the position that in order to comply
with the ADA and the Supreme Court’s
decision in Olmstead, public entities
must have in place an individualized
process—available to any person whose
service hours would be reduced as a
result of the Final Rule—to examine if
the service reduction would place the
person at serious risk of
institutionalization and, if so, what
additional or alternative services would
allow the individual to remain in the
community. See October 22, 2012 Letter
from DOJ and OCR available at http://
www.ada.gov/olmstead/olmstead_
cases_list2.htm#mr. It will be important
for public entities to work closely with
advocates and persons with disabilities
to ensure that these processes address
critical elements for determining
whether a person is at risk and that
persons with disabilities are aware of
these processes.
For these reasons, the Department
agrees with those commenters who
argued that the proposed rule will
further the goals of Olmstead and will
not create needless institutionalization.
However, we will monitor
implementation of the rule and its
impact on consumers.
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Family or Household Care Providers
Paid Family or Household Members in
Certain Medicaid-Funded and Certain
Other Publicly Funded Programs
Offering Home Care Services
The Department received a number of
comments discussing the potential
impact of the proposed rule on paid
family care providers. See, e.g., Joni
Fritz, ANCOR, ADAPT and the National
Council on Independent Living,
NASDDDS, Foothills Gateway, Inc.
Arrangements in which a family
member of the consumer is paid to
provide home care services arise in
certain Medicaid-funded and certain
other publicly funded programs that
allow the consumer (or the consumer’s
representative) to select and supervise
the care provider, and further permit the
consumer to choose a family member as
a paid direct care worker. Family or
household members may also be hired
as paid direct care workers through
other types of Medicaid-funded
programs. The Department recognizes
that consumers need not be homebound
in order to qualify for home care
services. Under these programs, the
particular services to be provided and
the number of hours of paid work are
described in a written agreement,
usually called a ‘‘plan of care,’’
developed and approved by the program
after an assessment of the services the
consumer requires and the consumer’s
existing supports, such as unpaid
assistance provided by family or
household members.
Some commenters expressed concern
that the services paid family care
providers typically perform, such as
household work, meal preparation,
assistance with bathing and dressing,
etc., would not fall within the definition
of companionship services under the
proposed rule. See, e.g., National
Association of States United for Aging
and Disabilities, ANCOR, NASDDDS. If
paid family care providers are not
performing exempt companionship
services under the FLSA, these
commenters wrote, the services they
provide would become more expensive,
and consequently, the options for
employing family members through
Medicaid-funded programs or for more
than 40 hours per week would be
severely limited. Id. Additionally,
Foothills Gateway, Inc., a non-profit
agency that provides Medicaid-funded
services to individuals with
developmental disabilities in Colorado,
expressed concern that if paid family
care providers are entitled to minimum
wage and overtime for all hours during
which they provide services to the
consumer, including those that were
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previously unpaid, the costs of care
would far exceed those Medicaid will
reimburse, making the paid family
caregiving model unsustainable.
The Department is aware of and
sensitive to the importance and value of
family caregiving to those in need of
assistance in caring for themselves to
avoid institutional care. It recognizes
that paid family caregiving, in particular
through certain Medicaid-funded and
certain other publicly funded programs,
is increasing across the country, and
that such programs play a critical role
in allowing individuals to remain in
their homes. The Department also
recognizes that some paid or unpaid
caregivers who are not family but are
household members, meaning they live
with the person in need of care based on
a close, personal relationship that
existed before the caregiving began—for
example, a domestic partner to whom
the person is not married—are the
equivalent of family caregivers.
The Department cannot adopt the
suggestion of several commenters that
the services paid family care providers
typically perform be categorically
considered exempt companionship
services. Although as commenters
stated, family care providers may often
spend a significant amount of time
providing assistance with ADLs and
IADLs, the Department is defining
companionship services to include only
a limited amount of such assistance for
the reasons described in the section of
this Final Rule explaining the revisions
to § 552.6. Furthermore, there is no basis
in the FLSA for treating domestic
service employees who are family
members of their employers differently
than other workers in that category.
Congress explicitly exempts family
members when it is its intention to do
so. See 29 U.S.C. 203(e)(3); 203(s)(2);
213(c)(1)(A), (B). The provisions of the
statute regarding domestic service and
companionship services do not indicate
intention to exempt family members.
See 29 U.S.C. 206(f), 207(l), 213(a)(15).
Interpretation of ‘‘Employ’’ With Regard
to Family or Household Care Providers
The Department recognizes the
significance and unique nature of paid
family and household caregiving in
certain Medicaid-funded and certain
other publicly funded programs as
described above. In interpreting the
economic realities test to determine
when someone is employed (i.e.,
suffered or permitted to work, 29 U.S.C.
203(g)), the Department has determined
that the FLSA does not necessarily
require that once a family or household
member is paid to provide some home
care services, all care provided by that
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family or household member is part of
the employment relationship. In such
programs, as described above, the
Department will not consider a family
or household member with a preexisting close, personal relationship
with the consumer, to be employed
beyond a written agreement developed
with the involvement and approval of
the program and the consumer (or the
consumer’s representative), usually
called a plan of care, that reasonably
defines and limits the hours for which
paid home care services will be
provided. The determination of whether
such an agreement is reasonable
includes consideration of whether it
would have included the same number
of paid hours if the care provider had
not been a family or household member
of the consumer.
The Department believes this
interpretation follows from the
application of the FLSA ‘‘economic
realities’’ test to the unique
circumstances of home care provided by
a family or household member.
Ordinarily, a family or household
member who provides unpaid home
care to another family or household
member would not be in an
employment relationship with the
recipient of the support. But under the
FLSA, family members can be hired to
be domestic service employees of other
family members, in which case, unless
a statutory exemption applies, they are
entitled to minimum wage and overtime
for hours worked. See 29 U.S.C. 206(f),
207(l) (requiring the payment of
minimum wage and overtime
compensation to ‘‘any employee
engaged in domestic service’’ without
creating any exception for family
members); Velez v. Sanchez, 693 F.3d
308, 327–28 (2d Cir. 2012) (explaining
that a familial relationship does not
preclude the possibility that the
economic realities of the situation show
that an individual is a domestic service
employee). The decision to select a
family or household member as a paid
direct care worker through a Medicaidfunded or certain other publicly funded
program creates an employment
relationship under the FLSA, and the
services paid family or household care
providers perform in those
circumstances likely will not, because of
the nature of the paid duties and
possibly also the involvement of a third
party employer, be exempt
companionship services. Ordinarily,
under the FLSA, including in the
domestic service employment context, if
an employment relationship exists, all
hours worked by an employee for an
employer, as defined at 29 CFR part 785
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and § 552.102 and discussed elsewhere
in this Final Rule, are compensable. But
in the case of certain Medicaid-funded
and certain other publicly funded
programs, different considerations apply
where a prior familial or household
relationship exists which is separate
and apart from the creation of any
employment relationship and where the
relevant paid services are the provision
of home care services. Specifically, in
the context of direct care services under
a Medicaid-funded or certain other
publicly funded home care program, the
FLSA ‘‘economic realities’’ test does not
require that the decision to select a
family or household member as a paid
direct care worker means that all care
provided by that person is compensable.
In other words, in these circumstances,
the Department does not interpret the
law as transforming, and does not
intend anything in this Final Rule to
transform, all care by a family or
household member into compensable
work.
For example, a familial relationship,
but not an employment relationship,
would exist where a father assists his
adult, physically disabled son with
activities of daily living in the evenings.
If the son enrolled in a Medicaid-funded
or certain other publicly funded
program and the father decides to
become his son’s paid care provider
under a program-approved plan of care
that funds eight hours per day of
services that consist of assistance with
ADLs and IADLs, the father would then
be in an employment relationship with
his son (and perhaps the state-funded
entity) for purposes of the FLSA. As
explained in the sections of this Final
Rule addressing § 552.6 and § 552.109,
based on the nature of the paid services
and possibly also the involvement of a
third-party employer, the father’s paid
work would not fall under the
companionship services exemption. If
the relevant requirements (described
below) are met, including that the hours
of paid work described in a plan of care
or similar document are reasonable as
described above, the father’s
employment relationship with his son
(and, if a joint employment relationship
exists, the state or certain other publicly
funded employer administering the
program) extends only to the eight hours
per day of paid work contemplated in
the plan of care; the assistance he
provides at other times is not part of
that employment relationship (or those
employment relationships) and
therefore need not be paid.
The limits on the employment
relationship between a consumer and a
family or household care provider and
a third-party entity and that care
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provider arise from the application of
the ‘‘economic realities’’ test, described
in more detail in the section of this
Final Rule discussing joint employment.
Specifically, where a prior familial or
prior household relationship exists
separate and apart from any paid
arrangement for home care services, the
economic realities test applies
differently to the two roles played by
the family or household member. The
Second Circuit has identified a number
of useful factors for applying the
economic realities test in the family
domestic service employment context,
calling for consideration of: ‘‘(1) The
employer’s ability to hire and fire the
employee; (2) the method of recruiting
or soliciting the employee; (3) the
employer’s ability to control the terms
of employment, such as hours and
duration; (4) the presence of
employment records; (5) the
expectations or promises of
compensation; (6) the flow of benefits
from the relationship; and (7) the
history and nature of the parties’
relationship aside from the domestic
labor.’’ Velez, 693 F.3d at 330. Based on
an analysis of these factors in the
special situation of paid family or
household care providers, an
employment relationship would exist
only as defined and limited by a written
agreement developed with the
involvement and approval of a
Medicaid-funded or similar publicly
funded program, usually called a plan of
care, that reasonably sets forth the
number of hours for which paid home
care services will be provided.
Under an analysis of the economic
realities of the work compensated under
a plan of care or similar written
agreement, the consumer or the entity
administering the Medicaid-funded or
similar publicly funded home care
program (or perhaps both) are
employers of the family or household
care provider. (Again, whether the
entity administering a program is a third
party employer of the care provider is
determined as described in the section
of this preamble discussing joint
employment.) The consumer, and/or the
entity, recruit and hire the family or
household member to provide the
services described in the plan of care,
may fire the family or household
member from the paid position, and
control the number of hours of work and
the type of work the family or
household member must perform. There
is a clear expectation and promise of
compensation, and employment records
must be kept in order to receive
payment. During the hours for which a
family or household care provider is
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compensated under a plan of care, the
care provider is obligated to perform the
services he or she was hired to provide.
In addition, a paid family or household
care provider is not permitted to
substitute someone else to receive
payment from Medicaid for services
provided pursuant to the plan of care
without employer approval.
On the other hand, during the time
when the family or household care
provider may perform similar services
beyond the hours that he or she has
been hired to work under the plan of
care, an analysis of the economic
realities of the situation leads to the
conclusion that the caregiver is not
employed, and that the consumer and
any entity administering the Medicaidfunded or similar publicly funded
program are not employers. The family
or household member has not been
hired to perform this additional care,
nor was he or she recruited for a paid
position performing them. The family or
household member has no expectation
of compensation, nor has any been
promised, and there will not be
employment records regarding any
unpaid services. During this time, the
family or household member’s activities
are not restricted by an agreement to
provide certain services, and the family
or household member can choose to
come and go from the home and have
other family members or other people
provide the supports. Importantly, the
unpaid support stems from a prior
familial or household relationship that
is separate and apart from the initiation
of any employment relationship.
The discussion above addresses only
the unique circumstances that exist in
the context of domestic service
employment by paid family and
household member caregivers. The
Department believes this bifurcated
analysis is warranted because of the
special relationships between family
and household members and the special
environment of the home. It does not
apply outside the home care service
context; the Department views work for
a family business, for example, as
subject to the typical FLSA law and
regulations regarding the employment
relationship and hours worked. This
analysis also does not generally apply to
relationships that do not involve
preexisting family ties or a preexisting
shared household. Therefore, except as
noted below, it would not apply to a
direct care worker who did not have a
family or a household relationship with
the individual in need of services prior
to the individual’s need arising or the
creation of the plan of care. In other
words, a direct care worker who
becomes so close to the consumer as to
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be ‘‘like family,’’ or a direct care worker
who becomes part of the consumer’s
household when hired to be a live-in
employee, does not have a bifurcated
relationship with the consumer. In those
circumstances, all services the direct
care worker provides fall within the
employment relationship between the
consumer and worker and between any
third party employer and the worker;
therefore, if those direct care services do
not fall under the companionship
services exemption, they must be
compensated as required under the
FLSA. By contrast, if the consumer and
caregiver enter into a new family
relationship during the course of an
employment relationship (e.g., through
marriage or civil union), then, although
the family relationship did not predate
the employment relationship, the
bifurcated analysis described above
would apply.
Additionally, the discussion above
applies to third party employers that
administer or facilitate the
administration of certain Medicaidfunded or certain other publicly funded
home care programs. These entities may
be public agencies that run such
programs or private organizations that
have been designated to play a role in
the functioning of the programs. These
entities may benefit from this unique
analysis only because of the
entanglement with the special
relationships between family and
household members that necessarily
result from the selection of family and
household members as paid care
providers through certain Medicaidfunded or certain other publicly funded
programs.
Furthermore, the Department
emphasizes that under this bifurcated
analysis, the employment relationship is
limited to the paid hours contemplated
in the plan of care or other written
agreement developed and approved by
certain Medicaid-funded or certain
other publicly funded home care
programs only if that agreement is
reasonable. As noted above, a
determination of reasonableness will
take into account whether the plan of
care would have included the same
number of paid hours if the care
provider had not been a family or
household member of the consumer. In
other words, a plan of care that reflects
unequal treatment of a care provider
because of his or her familial or
household relationship with the
consumer is not reasonable. For
instance, the program may not reduce
the number of paid hours in a plan of
care because the selected care provider
is a family or household member. For
example, an older woman who can no
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longer care for herself may enroll in a
Medicaid-funded program. The program
is administered by the county in which
she lives and she has been assessed to
need paid services for 30 hours per
week beyond the existing unpaid
assistance she receives from her
daughter and other relatives. If the
hours in the plan of care are reduced by
the county to 15 hours per week because
the woman’s daughter is hired as the
paid care provider, the paid hours in the
plan of care do not reflect the economic
reality of the employment relationship
and therefore will not determine the
number of hours that must be paid
under the FLSA. In addition, a program
may not require an increase in the hours
of unpaid services performed by the
family or household care provider in
order to reduce the number of hours of
paid services. See 42 CFR 441.540(b)(5)
(mandating that as to certain types of
Medicaid-funded home care programs,
unpaid services provided by a family or
household member ‘‘cannot supplant
needed paid services unless the . . .
unpaid [services] . . . are provided
voluntarily to the individual in lieu of
an attendant’’); Final Rule, Medicaid
Program; Community Choice First
Option, Centers for Medicare and
Medicaid Services, 77 FR 26828, 26864
(May 7, 2012) (explaining that unpaid
services ‘‘should not be used to reduce
the level of [paid] services provided to
an individual unless the individual
chooses to receive, and the identified
person providing the support agrees to
provide, these unpaid [services] to the
individual in lieu of a paid attendant’’).
Although the Department distinguishes
between an unpaid familial or
household relationship and a paid
employment relationship between
family and household members, it does
not condone or intend to overlook
subterfuges that may seek to treat family
members less equally. This
interpretation may not be used in a
manner that interferes with the ability of
all direct care workers to enjoy the full
protections of the FLSA.
The ‘‘economic realities’’ analysis also
applies to certain private pay home care
situations, such as those funded by
long-term care insurance, where a
family or household member is paid for
home care services. Specifically, where
a program permits the selection of a
family or household member as a paid
home care provider, if a familial or
household relationship existed prior to
and separate and apart from any
employment relationship, use of the
bifurcated application of the economic
realities test would be appropriate.
Application of the factors for applying
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the economic realities test in the family
domestic service employment context
described earlier in this section could
lead to the conclusion that some of the
hours of caregiving are part of an
employment relationship and some
hours are part of a familial or household
relationship. How the divide between
the two relationships is determined may
vary depending on the structure of each
program but, as in certain Medicaid and
certain other publicly funded programs
described above, the Department would
look to a written agreement that
reasonably sets forth the number of
hours for which paid home care services
will be provided.
FLSA ‘‘Hours Worked’’ Principles
Although the Department did not
propose any changes to its existing rules
defining what are considered hours
worked under the FLSA, many
commenters asked how the hours
worked principles under the FLSA
apply to domestic service employment.
For instance, many commenters raised
questions about when domestic service
employees are considered to be working
even though some of their time is spent
sleeping, traveling, eating, or engaging
in personal pursuits. The Department
emphasizes that its regulations
regarding when employees must be
compensated for sleep time, travel time,
meal periods or on-call time were not a
part of this rulemaking, and they are
unchanged by this Final Rule. Domestic
service employees who do not qualify
for the companionship services
exemption or the live-in domestic
service employee exemption are subject
to existing rules on how to calculate
hours worked, like any other employee
covered under the FLSA. To address
commenters’ questions, however, the
Department is providing the following
guidance regarding the Department’s
established rules on compensable hours
worked.
The Department received several
comments requesting clarification on
when sleep time, meal periods, or other
off-duty periods would be compensable
as hours worked under the FLSA. For
example, a direct care worker requested
that the Department define hours
worked and differentiate between sleep
time and other periods when the
employee is awake. Another individual
wanted to know whether a direct care
worker who is on the job for a 24-hour
period must be paid overtime while
sleeping, eating a meal, watching
television or making a personal
telephone call. Other commenters
suggested that the Department make
clear that the final rules on
companionship services and live-in
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domestic service employees do not alter
the Department’s longstanding
regulations concerning the
compensability of sleep time and meal
periods.
The Department also received a
number of comments expressing
concerns about domestic service
employees being paid for sleep time or
meal periods. Several employers
suggested that their direct care workers
should not be paid overtime for sleep
periods or for other periods when the
employee is engaged in personal
activities and is not actively working.
See, e.g., Husky Senior Care; Scott Shaw
Enterprises; and Stephen McCollum.
One individual, who was starting a
home care business, stated that such
companies should not be required to
pay direct care workers for any time
they are sleeping, eating, or attending to
their own personal needs. Access Living
stated that a direct care worker who
stays overnight or is a live-in employee
and assists the consumer by taking him
or her to the bathroom or repositioning
the client at night should only be paid
for such activities and should not be
compensated for the entire night or for
periods when the direct care worker is
asleep. Access Living requested
clarification on the sleep time rules.
VNAA stated that direct care workers
who sleep over should not be paid
overtime during periods when they are
essentially ‘‘standing by’’ and not
actively providing support services.
VNAA urged the Department to provide
greater flexibility in the rule for paying
overtime to live-in or sleep-over
employees.
Similarly, the Department received
numerous comments from employers,
non-profits, and advocacy organizations
that serve persons with disabilities
requesting that live-in roommates not be
required to receive minimum wage and
overtime pay for periods of sleep time.
See, e.g., Community Vision; TASH;
Community Link; and Friends of
Broomfield. Community Vision, a nonprofit organization that provides
support services for many adults with
developmental disabilities, and many
others stated that ‘‘[r]equiring live-in
roommates to be paid for sleep time
puts solid agreements between
individuals with significant disabilities
and their live-in roommates at grave
risk, and unintentionally results in an
unnecessary burden for all interested
parties.’’
Both NELP and AARP recognized that
the Department has regulations that
address the compensability of waiting
time, on-call time, and sleep time.
AARP noted that for shifts of less than
24 hours, all hours are considered work
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hours even though the employee may
sleep and engage in other personal
activities (see discussion below of offduty hours). AARP further noted that for
a shift of 24 hours or more, the parties
may agree to exclude a sleep period of
eight hours, unless the sleep is
interrupted to such an extent that the
employee cannot get five hours of sleep
during the night. In addition, NELP
noted that live-in domestic service
employees and their employers are
permitted to come to an agreement to
exclude sleep time, time spent on meals
and rest breaks, and other periods when
the employee is completely relieved of
duty.
AARP stated that ‘‘[s]ome slight
modification [to the Department’s rules]
to account for the fact that both
consumer and the worker may be asleep
for most of the shift might make the new
regulations more workable for both the
employers and employees.’’ AARP
suggested that the Department allow
employers to pay only the regular rate
for sleep time even for overtime hours
if the sleep time is largely uninterrupted
or allow the parties to agree to an
overnight flat rate of sufficient size to
ensure that the worker is paid at least
the minimum wage for all shift hours.
Sleep Time
While the Department carefully
considered all of the comments received
on when sleep time should be
compensable, the Department notes that
no changes were proposed to its
longstanding interpretation regarding
the compensability of sleep time
discussed in 29 CFR 785.21–.23. The
sleep time rules have been in effect for
many decades and reflect case law,
including Supreme Court decisions, that
govern when time spent sleeping is
work time. Under the Department’s
regulations, an employee who is
required to be on duty for less than 24
hours is working even though he or she
is permitted to sleep or engage in other
personal activities when not busy. See
§ 785.21. Thus, an employee on duty for
less than 24 hours, such as a security
guard assigned to a hospital, would
need to be paid for the entire period
even though there may be times of
inactivity when the employee may, for
example, read a magazine. This general
rule applies in the same way to
domestic service employees who are on
duty for less than 24 hours.
Where an employee is required to be
on duty for 24 hours or more, the
employer and employee may agree to
exclude a bona fide meal period or a
bona fide regularly scheduled sleeping
period of not more than eight hours
from the employee’s hours worked
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under certain conditions. See § 785.22.
The conditions for the exclusion of such
a sleeping period from hours worked are
(1) that adequate sleeping facilities are
furnished by the employer, and (2) that
the employee’s time spent sleeping is
usually uninterrupted. When an
employee must return to duty during a
sleeping period, the length of the
interruption must be counted as hours
worked. If the interruptions are so
frequent that the employee cannot get at
least five hours of sleep during the
scheduled sleeping period, the entire
period must be counted as hours
worked. Id.; see also Wage and Hour
Opinion Letter, 1999 WL 1002352 (Jan.
7, 1999). Where no expressed or implied
agreement exists between the employer
and employee, sleeping time is
compensable.
Where an employee resides on the
employer’s premises permanently or for
extended periods of time, not all of the
time spent on the premises is
considered working time. See
§§ 552.102, 785.23. Such an employee
may engage in normal private pursuits
and thus have enough time for eating,
sleeping, entertaining, and other periods
of complete freedom from all duties
where he or she may leave the premises
for his or her own purposes. For a livein domestic service employee, such as a
live-in roommate, the employer and
employee also may agree to exclude the
amount of time spent during a bona fide
meal period, sleep period and off-duty
time. See §§ 552.102, 785.22, 785.23.
However, if the meal periods, sleep
time, or other periods of free time are
interrupted by a call to duty, the
interruption must be counted as hours
worked. In these circumstances, the
Department will accept any reasonable
agreement of the parties taking into
consideration all of the pertinent facts.
However, as more fully discussed above,
the employer must track and record all
hours worked by domestic service
employees, including live-in employees,
and the employee must be compensated
for all hours actually worked
notwithstanding the existence of an
agreement.
It is not necessary to create a special
exemption for live-in roommates. Both
AARP and NELP recognized the
Department’s longstanding position on
when employees who work 24 hours or
more or are live-in employees. The
Department believes that its existing
sleep time rules discussed above
address the concerns raised in the
comments regarding when sleep time
must be compensated. The Department’s
longstanding rules make clear that livein roommates need only be
compensated for hours worked and
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those hours exclude sleep time, mealtime, as well as other off-duty time if
there is an agreement to exclude such
time and the employees are not
performing work.
The Department received a few
comments expressing concern that if
there is no express or implied agreement
with respect to sleep time, all hours
must be counted as work time. Under
the existing sleep time rules,
uninterrupted time spent sleeping need
not be counted as work time so long as
an agreement exists between the
employer and employee. 29 CFR 785.22.
Bright Star Healthcare of Baltimore, for
example, expressed concern that it
would not be allowed to enter into
agreements with its current employees
to exclude sleep time. Bright Star feared
that it would be required to fire all of
its employees before asking whether
they will agree to enter into such
arrangements voluntarily, and then
rehire them on that condition. Bright
Star stated that terminating current
employees in order to enter into
agreements to exclude sleep time would
be a ridiculous hurdle for employers
and employees, and would not be in the
best interest of those parties.
The Department agrees that
terminating employees and then
requesting that they sign voluntary
agreements to exclude sleep time would
be a burdensome and unnecessary
hurdle for employers and employees.
Because many direct care workers may
not have been previously subject to the
sleep time rules due to application of
the companionship services exemption,
the Department recognizes that many
employers may currently exclude sleep
time, or wish to exclude sleep time, but
do not have an agreement with their
employees that would meet the
regulatory requirements. The
Department believes that sufficient time
exists before the effective date of this
Final Rule for the employer and
employee to enter into an agreement to
exclude a scheduled sleeping period of
not more than 8 hours from the
employee’s hours worked (subject to the
rules regarding interruptions to sleep
described above) if adequate sleeping
facilities are furnished by the employer
and the employee’s time spent sleeping
usually is uninterrupted.
The general rule is where there was
previously an express or implied
agreement to exclude sleep time from
compensable hours worked, the
employee can unilaterally withdraw his
or her consent, and the employer would
then be required to compensate the
employee for any future sleep time that
may occur. See Wage and Hour Opinion
Letter FLSA–1303, 1995 WL 1032483
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(Apr. 7, 1995). While the employer may
not terminate an employee for refusing
to enter into an agreement or for
otherwise withdrawing their consent,
see Cunningham v. Gibson County,
Tenn., 108 F.3d 1376, 1997 WL 123750
(6th Cir. Mar. 18, 1997) (unpublished),
the employer would not be required to
agree to a continuation of the same
terms and conditions of employment.
The employer and employee are free to
establish new conditions of employment
such as rate of pay, hours of work, or
reassignment. See Wage and Hour
Opinion Letter FLSA–1303 (April 7,
1995). For example, if an employee
refuses to enter into an agreement
regarding the exclusion of sleep time, an
employer might decide to assign that
employee only to shifts of less than 24
hours.
With regard to AARP’s suggestion that
the Department allow employers to pay
only the regular rate for sleep time even
for overtime hours, assuming such time
is otherwise compensable, the statute
precludes the Department from adopting
this proposal. Section 7 of the FLSA
requires the employer to pay overtime
compensation for hours worked over 40
in a workweek ‘‘at a rate not less than
one and one-half times the regular rate
at which [the employee] is employed.’’
29 U.S.C. 207(a). Thus, allowing the
employer to pay the regular rate or
straight time pay instead of time and
one-half of the regular rate of pay for
sleep time that is otherwise
compensable during overtime hours
would require amending the FLSA.
AARP also suggested that the
Department allow the employee and
employer to agree to a flat rate for
overnight hours so long as the employee
receives at least the FLSA minimum
wage for all shift hours. The FLSA
already allows an employer to pay an
employee a flat rate for work performed
during overnight hours so long as the
employee’s regular rate of pay during
the workweek is at least the FLSA
minimum wage and any overtime pay is
calculated at not less than time and onehalf of the regular rate of pay for all
hours worked over 40 in a workweek.
The employer may also pay a domestic
service employee a per diem rate (i.e.,
a day rate) under the FLSA, provided
the employee’s regular rate of pay is at
least the FLSA minimum wage for all
hours worked during the workweek and
overtime is paid at not less than time
and one-half of the regular rate of pay
for all hours worked over 40 in a
workweek. § 778.112.
Meal Periods
The Department carefully considered
all of the comments received on
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whether meal or eating periods should
be compensable and reiterates that no
changes were proposed to the
Department’s longstanding
interpretation on the compensability of
meal periods discussed in 29 CFR
785.19. An employer may exclude
‘‘bona fide meal periods’’ from a
domestic service employee’s hours
worked. § 785.19. Bona fide meal
periods are periods where the employee
is completely relieved from duty for the
purposes of eating a regular meal. Id.
Meal periods are not considered hours
worked if employees are completely
relieved from their duties, are allowed
to take their meals uninterrupted by the
employer, and are provided sufficient
time to eat their meal. It is not necessary
that an employee be permitted to leave
the premises during meal periods. See
Wage and Hour Opinion Letter, FLSA
2004–7NA, 2004 WL 5303035 (Aug. 6,
2004).
Bona fide meal periods do not include
coffee breaks or time for snacks; such
short rest periods are compensable.
Further, the employee is not relieved
from duty if he or she is required to
perform any duties while eating. For
instance, a domestic service employee is
not relieved from duty if he or she is
eating with the consumer and is
required to feed or otherwise assist that
individual with eating. Generally, 30
minutes is considered sufficient time for
a bona fide meal period; however, a
shorter period may be sufficient under
special circumstances. Section 31b23 of
the Wage and Hour Field Operations
Handbook (FOH) enumerates the factors
considered on a case-by-case basis in
determining whether a meal period of
less than 30 minutes is bona fide
including, for example, whether the
employees have sufficient time to eat a
regular meal, whether there are workrelated interruptions to the meal period,
and whether the employees have agreed
to the shorter period. The FOH provides
that periods less than 20 minutes will be
specially scrutinized by Wage and Hour
Investigators to ensure that the time is
sufficient to eat a regular meal under the
circumstances presented.
Off-Duty Time
While the Department did not receive
any comments specifically addressing
when employees are engaged in off-duty
time, the Department is describing its
current regulations in order to address
any confusion about the definition of
hours worked.
Under the Department’s longstanding
regulations, if an employee is
completely relieved from duty and is
free to use the time effectively for his or
her own purposes, such time periods are
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not hours worked. § 785.16. Typically,
the employee must be told in advance
that he or she may leave the premises
and will not have to resume work until
a definite time. Whether the time is long
enough to enable the employee to use
the time effectively for his or her own
purposes depends upon all of the facts
and circumstances of each case. For
example, a domestic service employee
who is completely relieved of his or her
duties from 1:00 p.m. to 5:00 p.m. and
chooses to watch television or run
personal errands is not performing
compensable work and need not be paid
for these hours. However, an employee
who is required to remain on call on the
employer’s premises or so close thereto
that he or she cannot use the time
effectively for his or her own purposes
is working while on call and must be
compensated for such time. In contrast,
an employee who is not required to
remain on the employer’s premises but
is merely required to leave word where
he or she may be reached is not working
while on call. § 785.17.
Further, an employer and a live-in
domestic service employee may exclude
by agreement periods of complete
freedom from all duties when the
employee may either leave the premises
or stay on the premises for purely
personal pursuits. § 552.102(a). These
periods must be of sufficient duration to
enable the employee to make effective
use of the time. For example, a live-in
direct care worker who assists her
roommate in the morning for three
hours, then goes to class at the local
university, returns home to study,
watches television, and does her own
laundry before assisting the roommate
for two hours in the evening, has only
worked five hours; the hours spent
engaged in personal pursuits are
considered bona fide off-duty time and
are not compensable hours worked.
Rest and Waiting Periods
As described above, the Department
received a few comments suggesting
that employees should not be paid
unless actively engaged in providing
services. The Department is not creating
a special set of rules for determining
compensable hours worked for domestic
service employees, but will continue to
determine work time in accordance with
longstanding administrative and judicial
interpretations of the FLSA. The FLSA
generally requires compensation for ‘‘all
time during which an employee is
necessarily required to be on the
employer’s premises, on duty or at a
prescribed work place.’’ Anderson v. Mt.
Clemens Pottery Co., 328 U.S. 680, 690–
91 (1946); see § 785.7 (compensable
time ordinarily includes all the time
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during which an employee is
necessarily required to be on the
employer’s premises, on duty or at a
prescribed work place). Employers must
typically pay for all time during the
workday ‘‘whether or not the employee
engages in work throughout all of that
period.’’ 29 CFR 790.6(b). For example,
a nurse who must watch over an ill
patient and be available to assist the
individual is on duty and must be paid
for this time. Thus, an employee who
reads a book, knits, or works a puzzle
while awaiting assignments is working
during the period of inactivity, because
the employee must be on the premises
and could be summoned to work at any
moment. In such cases, the employee is
‘‘engaged to wait.’’ See § 785.14;
Skidmore v. Swift, 323 U.S. 134 (1944).
As discussed above, there are
exceptions to this principle for bona
fide meal and sleep periods and off-duty
time. However, rest periods of short
duration, running from 5 to about 20
minutes, are counted as hours worked.
See § 785.18; FOH § 31a01; see also
Wage and Hour Opinion Letter, 1996
WL 1005233 (Dec. 2, 1996). Such
periods promote the efficiency of the
employee and are common in industry.
Thus, when a domestic service
employee—in the same manner as an
office or hospital employee—takes a 10minute rest break to drink coffee or
make a phone call, such time must be
counted as hours worked.
Travel Time
The Department also did not propose
any changes to its longstanding travel
time rules in the NPRM. Under the
travel time rules, normal home-to-work
travel is not compensable hours worked
whether the employee works at a fixed
location or at different job sites.
§ 785.36. On the other hand, travel time
from job site to job site during the
workday must be counted as hours
worked. § 785.38. These existing rules
apply to all employees, including
domestic service employees, who are
not otherwise exempt from the
minimum wage and overtime
requirements of the FLSA.
The Department received a number of
comments about the requirement to pay
direct care workers for travel time,
exclusive of commuting time. Many
worker advocacy organizations and
individuals supported the requirement
to pay direct care workers for travel
time. See, e.g., NELP and Worksafe. For
example, The National Consumer Voice
for Quality Long-Term Care and several
individuals stated that direct care
workers deserve FLSA protections,
including compensation for travel time.
Moreover, NELP recognized that the
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‘‘failure to pay for travel time
suppresses workers’ already low
earnings and not infrequently drives
their real hourly wages below the
minimum wage.’’ Worksafe similarly
noted that when direct care workers are
not paid for travel time, the employees
are working more hours than they are
paid for, which in turn drives down
their wages and increases the length of
their shifts. In addition, the IHS’s Global
Insight Survey (Survey) of home care
franchisees concluded that 50 percent of
the responding home care employers are
already paying for the time spent by
direct care workers traveling between
clients. The Survey further found that
many of these franchisees are paying for
travel time between clients, even in
states with no minimum wage and
overtime requirements for these
workers. The Department also received
comments from employers stating that
they were paying direct care workers for
travel time. See Comfort Keepers and
Home Care Partners. Further, AARP and
Senator Tom Harkin and 18 other
Senators stated that employers may be
able to minimize travel costs through
efficient scheduling.
Some third party employers as well as
the Consumer Directed Personal
Assistance Association of New York
State (CDPAANYS) objected to added
costs of paying employees for travel
time between clients. For example, A–
1 Health Care, Inc., a third party home
care provider, indicated that over half of
its employees spend an average of three
hours per day traveling between clients
for which they are not currently paid.
This employer noted that if the
Department’s travel time rules applied
to its employees, it would likely
schedule these workers to avoid travel
time. CDPAANYS suggested that
because an employee working for two
distinct employers, such as Macy’s and
the GAP, would not be compensated for
travel time between the two jobs, a
home care employee working for
multiple clients of the same employer
should not be compensated for time
traveling between clients. CDPAANYS
further speculated that the requirement
to pay for travel time between clients
may violate Medicaid or federal tax
requirements, and other comments from
advocacy groups that serve persons with
disabilities and third party employers
asked that the requirement to pay for
travel time be re-evaluated because
Medicaid may currently not pay for
such time. See, e.g., A–1 Health Care,
Inc. and National Disability Leadership
Alliance.
In addition, some employers,
coalitions of employers, individuals
with disabilities, and advocacy groups
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that serve persons with disabilities
objected to compensation for travel time
because they worried that potential
increased costs may make travel for
persons with disabilities who need the
assistance of a direct care worker in
order to travel—particularly overnight—
for vacation or work, to visit family, or
to attend conferences or medical
appointments, cost-prohibitive. See,
e.g., S.T.E.P., California Foundation for
Independent Living Centers (CFILC),
and NDLA.
While the Department did not
propose any changes to its longstanding
travel time rules in the NPRM, all
comments received concerning when
direct care workers should be paid for
travel time were considered. The
general FLSA principles applicable to
all employers on the compensability of
travel time continue to be applicable
under this rule and are discussed in
§§ 785.33–.41.
Although the comment from
CDPAANYS characterized time spent
traveling between multiple clients of a
single employer as ‘‘commuting time’’
for which compensation is not required,
the Department has long distinguished
between normal commuting time from
home to work and travel time between
worksites during the workday. Compare
§ 785.35, with § 785.38. CDPAANYS
speculated that the requirement to pay
for travel time between clients may
violate federal tax requirements;
however Internal Revenue Service
regulations regarding the deductibility
of the daily transportation expenses
incurred by the individual during
different commuting scenarios have no
bearing on whether such commute time
is compensable under the FLSA. IRS
Publication 463 (2012). Under the
Department’s longstanding regulations,
normal home-to-work travel is not hours
worked regardless of whether the
employee works at a fixed location or at
different job sites. § 785.35; see Wage
and Hour Opinion Letter, W–454, 1978
WL 51446 (Feb. 9, 1978). Thus, if a
direct care worker travels to the first
consumer site directly from home, and
returns directly home from the final
consumer site, this commuting travel
time generally does not need to be paid.
§ 785.35; see Wage and Hour Opinion
Letter, W–454, 1978 WL 51446 (Feb. 9,
1978). On the other hand, employees
who travel to more than one worksite
for an employer during the workday
must be paid for travel time between
each worksite. § 785.38; see Wage and
Hour Opinion Letter, W–454, 1978 WL
51446 (Feb. 9, 1978). Travel that is ‘‘all
in the day’s work’’ must be
compensated. § 785.38. For example, if
a domestic service employee drives a
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consumer to a doctor’s appointment or
to the grocery store, that time is ‘‘all in
the day’s work’’ and must be
compensated.
Thus, while an employee working for
two different employers need not be
compensated for time spent traveling
between the two employers, an
employee working for multiple
consumers of a single employer must be
compensated for the time spent
traveling between those consumers
because such travel is undertaken for
the benefit of the employer. § 785.38.
This Final Rule does nothing to alter
this longstanding policy.
Example: Jeff is a direct care worker
employed by a home care agency. At 8:00
a.m. he drives from his home to the home of
his first client, Sue. Jeff arrives at Sue’s home
at 8:45 a.m. He works at Sue’s home until
12:15 p.m. From 12:15 p.m. until 12:45 p.m.,
Jeff drives directly to the home of his second
client, Gertrude. Jeff works for Gertrude until
4:45 p.m., the end of his shift. From 4:45
until 5:45 p.m. Jeff drives to his home. The
home care agency must compensate Jeff for
the time he spent driving from Sue’s home
to Gertrude’s home. The agency need not
compensate Jeff for the time spent traveling
from his home to Sue’s home in the morning
or from Gertrude’s home to his home at night
because this time is spent in ordinary hometo-work commute.
Neither federal tax requirements nor
Medicaid rules counsel a departure from
normal FLSA travel rules for direct care
workers. The FLSA requirement that
employees be paid for time spent
traveling between multiple clients of a
single employer is longstanding and
does not conflict with these laws.
Though Medicaid may not provide
reimbursement for time that an
employee spends traveling between
clients, nothing in the Medicaid law
prevents a third party employer from
paying for that time. Medicaid,
however, may reimburse for the costs of
travel, including the costs of overnight
travel with an attendant when
‘‘necessary . . . to secure medical
examinations and treatment for a
recipient.’’ 42 CFR 440.170. Likewise,
whether travel expenses may be
deducted for tax purposes has no
bearing on whether time spent traveling
between clients is hours worked under
the FLSA.
Further, the Department agrees with
commenters, such as AARP and Senator
Harkin, who wrote that employers may
be able to minimize some of the cost of
travel between clients through
scheduling and thus have some control
over the amount of travel costs incurred.
Indeed, A–1 Health Care, Inc. stated that
it will likely adjust its workers’
schedules to avoid paying for travel
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time. This issue is more fully discussed
in the economic analysis.
Of particular concern to individuals
with disabilities, their advocates, and
employers was the requirement to pay
for travel time for periods of extended
travel. The Department fully supports
the right of individuals with disabilities
to participate in their communities and
to travel for various personal and workrelated purposes. The comments
received demonstrate that, while
traveling, direct care workers provide
valuable personal care and related
services to ensure the comfort, safety,
and health of individuals with
disabilities. For example, one direct care
worker commented:
I even traveled with my client after her
stroke so she could visit her friends. This was
much harder because we had to have oxygen,
get a hospital bed, and had to make sure the
hotels would accept a hospital bed. I also had
to be sure to have all her medications so we
wouldn’t run out. I ordered all of her
personal care items, too. On one occasion we
arrived late at night at the hotel [, and] the
hospital bed was not set up. My client was
tired after nine hours of travel and we had
to get the bed set up fairly quickly.
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The Department considers all travel
‘‘that keeps an employee away from
home overnight’’ to be a special class of
‘‘travel away from home.’’ See § 785.39;
see also Wage and Hour Opinion Letter
(Dec. 14, 1979). ‘‘Travel away from
home is clearly work time when it cuts
across the employee’s workday. The
employee is simply substituting travel
for other duties.’’ § 785.39. Thus, if a
direct care worker accompanies a
consumer on travel away from home,
the employee must be paid for all time
spent traveling during the employee’s
normal work hours. On the other hand,
the Department has adopted a nonenforcement policy for travel away from
home as a passenger on an airplane,
train, boat, bus or automobile if the
travel occurs outside of the employee’s
normal work hours. § 785.39; see Wage
and Hour Opinion Letter (Dec. 14,
1979). However, a direct care worker
who is required to travel as a passenger
with the consumer ‘‘as an assistant or
helper’’ and is expected to perform
services as needed is working even
though traveling outside of the
employee’s regular work hours. See
§ 785.41.
Example: Steve, a direct care worker,
ordinarily provides assistance to Beth on
Monday–Friday from 8:00 a.m. to 5:00 p.m.,
his normal work hours. Steve agrees to
provide home care services to Beth on a trip
to Phoenix to visit her family for a week.
Steve meets Beth at the airport at 11:00 a.m.
on Sunday for a three hour flight. The time
spent traveling is hours worked because it
occurs during Steve’s normal work hours of
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8:00 a.m. to 5 p.m., even though the travel
occurs on a Sunday, and Steve ordinarily
works only Monday–Friday.
Example: Gina, a direct care worker,
ordinarily works Monday–Friday from 8:00
a.m. to 5:00 p.m. providing services for
Daren. Gina agrees to provide home care
services on a weekend trip Daren takes to
Tulsa for his college reunion. Gina meets
Daren at the airport at 7:00 p.m. on Saturday
and is expected to provide care services to
Daren as needed throughout the four hour
flight. During the flight, Gina is on duty for
the entire trip and assists Daren with feeding
and toileting and gives him an insulin shot;
she spends the remainder of the flight time
reading a book. Because Daren has asked
Gina to accompany him on the flight to be
on duty and assist or help as needed, Gina
must be compensated for the entire flight,
although she was able to spend some of the
time reading. However, if Gina is completely
relieved of duties for the entire flight and is
able to use the time effectively for her own
purposes, such as taking a nap or watching
a movie, those hours would not be
compensable.
Moreover, direct care workers must be
compensated for all hours they work
while traveling for the benefit of
consumers in accordance with existing
FLSA rules. See § 785.41 (‘‘Any work
which an employee is required to
perform while traveling must, of course,
be counted as hours worked.’’).
However, it is clear that not all time
spent while away on travel is hours
worked under the FLSA, and there may
be significant periods of time while on
travel that a direct care worker is not
providing services to an elderly person
or individual with disabilities and is not
‘‘engaged to wait’’ and need not be
compensated. For example, periods
when the direct care worker is
completely relieved from duty and
which are long enough to enable the
employee to use the time effectively for
his or her own purposes are excluded
from hours worked as off-duty time, as
are bona fide meal and sleep periods, as
discussed previously in this section. See
Wage and Hour Opinion Letter (May 7,
1981).
Example: Horatio works as a direct care
worker and accompanies his client, Jamie, to
Washington, DC, where Jamie will attend a
conference. In the morning, Horatio assists
Jamie with toileting, bathing, and wound
care. At 8:30 a.m., Horatio drives Jamie to the
conference site, arriving at 9:00 a.m. From
9:00 a.m. until noon, Horatio is relieved of
all duty and uses the time to go to a museum.
At noon, Horatio meets Jamie at the site of
the conference and resumes work. The time
from 9:00 a.m. until noon is not hours
worked under the FLSA, and Horatio need
not be paid for that time.
As described above, not all time spent
by an employee in travel is compensable
hours work. Therefore, the Department
believes that the comments received
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may overestimate the costs associated
with overnight travel by a consumer
with a direct care worker.
IV. Effective Date
The Department has set an effective
date for this Final Rule of January 1,
2015. As discussed below, the
Department believes that this effective
date takes into account the complexity
of the federal and state systems that are
a significant source of funding for home
care work and the needs of the diverse
parties affected by this Final Rule
(including consumers, their families,
home care agencies, direct care workers,
and local, state and federal Medicaid
programs) by providing such parties,
programs and systems time to adjust.
A number of commenters requested
an extended phase-in period in order to
allow for systemic changes at the state
and local levels, to ensure that there is
no adverse impact on access to home
care services, and to accommodate the
hiring of new workers and scheduling
changes for the existing workforce. See,
e.g., VNAA, DCA, AARP, and NRCPDS.
Specifically, the AARP noted that the
changes to the Department’s regulations
would be new to direct care workers
and consumers, as well as many third
party employers, state Medicaid
programs, consumer-directed programs,
and other publicly financed programs.
‘‘Because it may take some time for
consumers and family caregivers to
learn about what the changes would
mean for them, take providers some
time to prepare to comply (for instance
by hiring additional staff), and take
public programs some time to determine
what the changes mean for them and
implement them, AARP urges DOL to
consider whether a reasonable transition
period (e.g., a phase-in period or a grace
period during which no penalties for
noncompliance are assessed) might be
advisable.’’ See AARP; see also Small
Business Administration’s Office of
Advocacy (Advocacy) (requesting a
delayed effective date in order to ‘‘allow
small business to change their business
practices’’).
The length of time requested by
commenters for any phase-in period
varied significantly. For example, the
VNAA requested an 18-month phase-in
period ‘‘to allow agencies to undertake
an orderly process for adding new
workers and that an accurate assessment
of the costs involved be provided.’’ The
Direct Care Alliance cited similar
reasons for a phase-in period, but
recommended a time period of only 90
days, ‘‘to allow time for consumers,
workers and employers to make any
adjustments that are necessary to
comply with the overtime pay
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requirements.’’ See also PHI (requesting
a 90-day phase-in period generally, and
a 180-day phase-in period for publicly
funded consumer-directed programs).
Other commenters requested that the
Final Rule become effective
‘‘immediately’’ or ‘‘without delay.’’ See,
e.g., 9to5, National Association of
Working Women; Catherine Joaquin,
Filipino Advocates for Justice;
individual family caregiver Annette
Heldeca.
Several commenters explicitly noted
the rule’s potential impact on consumerdirected programs and requested an
extended phase-in period ‘‘particularly
for publicly-funded consumer-directed
programs.’’ See, e.g., PHI. CDPAANYS
asked that the Department carve out
consumer-directed services from the
scope of the regulations. In the
alternative, CDPAANYS stated,
‘‘[b]arring this, we urge you to delay
implementation so that the numerous
technical issues that were raised can be
reexamined and worked through
individually. This will prevent longterm damage to [consumer-directed
programs] that ha[ve] successfully
improved the quality of life for millions
of Americans.’’ Similarly, Disability
Rights California asked the Department
to delay the implementation of the
change of regulations for consumerdirected programs so that states, such as
California, can review and assess the
impact of this Final Rule. Noting that
state and program administrators will
need to update service codes and
definitions and establish new operations
and monitoring systems to comply with
the new regulations, NRCPDS
recommended a 12-month period of
non-enforcement, in order to allow
‘‘states and program participants to
identify solutions that minimize a
negative impact on existing service
delivery.’’
The Department believes that because
this Final Rule will extend the FLSA’s
basic minimum wage, overtime and
recordkeeping protections to more
workers, the rule should become
effective as quickly as practicable. This
position is consistent with the broad
goals of the FLSA, a remedial statute
designed to correct ‘‘labor conditions
detrimental to the maintenance of the
minimum standard of living necessary
for health, efficiency and the general
well-being of workers.’’ 29 U.S.C.
202(a). The statute requires that these
corrections be made ‘‘as rapidly as
practicable . . . without substantially
curtailing employment or earning
power.’’ 29 U.S.C. 202(b). The
Department has determined that the
regulations issued in 1975 no longer
reflect Congress’s intent in enacting the
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1974 FLSA amendments given the
changes in the home care industry that
have taken place in the past 38 years.
Because of the unique circumstances
surrounding this rule, however, the
Department believes that a January 1,
2015 effective date is most appropriate.
Specifically, this extended effective date
is reasonable due to the integral role
played by complex federal and state
systems that are a significant source of
funding for home care work, and the
needs of the diverse parties affected by
this Final Rule. The Department
recognizes that the multiple federal and
state programs that often fund,
administer, and oversee direct care for
consumers will require a period of time
to adjust to the new regulations.
Federal, state, and local agencies, as
well as private entities, may need to
implement new protocols, apply for
changes to their Medicaid programs,
adjust funding streams, and legislatively
address budgetary and programmatic
changes. States will need time to work
with the Department of Health and
Human Services (HHS) to review
consumer-directed programs, make any
needed programmatic changes, and
prepare any necessary budget
allocations, in order to maintain the
important and growing role that
consumer-directed programs fulfill.
State and local entities will also need to
work with consumers and their families
to ensure they understand any
adjustments that may occur on the
provision of services. Furthermore,
employers will have to make many of
the usual adjustments associated with
revised FLSA regulations—such as
scheduling changes, hiring and training
additional workers, and modifying
service agreements—in conjunction
with any adjustments made by federal,
state and local agencies under the new
regulations. In view of the unique
nature of the publicly funded programs
that support a significant portion of
home care, the Department believes an
extended effective date allows time for
the regulated community to avoid
disruptions to home care services
because of the restrictions of federal or
state budget processes or the need to
comply with the HHS process for
modifying Medicaid programs.
Although not all home care is funded by
these complex public systems, the
Department is setting a single effective
date for the entire regulated community
to avoid the administrative burdens for
employers, confusion amongst
employees, and complications for
enforcement that would result from
accepting some commenters’ suggestion
that the rule’s effect be delayed only as
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60495
it applies to consumer-directed
programs.
Additionally, the Final Rule’s impact
falls on populations that depend on
home care services to remain in their
communities and the Department
anticipates that this effective date will
allow time for state budgets and other
components of the public funding
systems that support home care to
adjust. The Department also recognizes
that there will be individuals, families
and households who as employers will
have new obligations under this Final
Rule; an extended effective date will
allow families additional time to
become familiar with their
responsibilities under the FLSA and
evaluate scheduling or staffing needs in
order to comply with the regulations.
Thus, a January 1, 2015 effective date
provides time for these systemic
changes to take place, and for employers
to fully implement the Final Rule. This
effective date exceeds the 30-day
minimum delayed effective date
required under the Administrative
Procedure Act, 5 U.S.C. 553(d), and the
60-day delayed effective date for ‘‘major
rules’’ under the Congressional Review
Act, 5 U.S.C. 801(a)(3)(A). Although the
Department typically utilizes the
legislatively required effective dates, as
applicable, the Department has in the
past, in response to comments, extended
the effective date for a significant FLSA
rule. For example, the 2004 update to 29
CFR part 541, the regulations that
govern whether employees are
executives, administrative personnel,
professionals, outside sales or computer
employees exempt from minimum wage
and overtime requirements, adopted a
delayed effective date of 120 days in
response to public comments in that
rulemaking, including one seeking a
180-day delayed effective date. See 69
FR 22126 (Apr. 23, 2004). For this Final
Rule, the comments received concerning
a proposed effective date ranged from a
typical effective date to at least 18
months. The Department believes that
an effective date of January 1, 2015,
which falls well within the range
suggested by commenters, is reasonable
under these unique circumstances and
responsive to the comments received
from stakeholders, including employee
and employer advocacy groups, as well
as state agencies.
The Department will work closely
with stakeholders and HHS to provide
additional guidance and technical
assistance during the period before the
rule becomes effective, in order to
ensure a successful transition for all
involved parties.
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V. Paperwork Reduction Act
The Paperwork Reduction Act of 1995
(PRA), 44 U.S.C. 3501 et seq., and its
attendant regulations, 5 CFR part 1320,
requires that the Department consider
the impact of paperwork and other
information collection burdens imposed
on the public. Under the PRA, an
agency may not collect or sponsor the
collection of information, nor may it
impose an information collection
requirement unless it displays a
currently valid Office of Management
and Budget (OMB) control number. See
5 CFR 1320.8(b)(3)(vi).
The Office of Management and Budget
(OMB) has assigned control number
1235–0018 to the FLSA information
collections. In accordance with the PRA,
the December 27, 2011 NPRM solicited
comments on the FLSA information
collections as they were proposed to be
changed. 44 U.S.C. 3506(c)(2). The
Department also submitted a
contemporaneous request for OMB
review of the proposed revisions to the
FLSA information collections, in
accordance with 44 U.S.C. 3507(d). On
February 29, 2012, the OMB issued a
notice that continued the previous
approval of the FLSA information
collections under the existing terms of
clearance. The OMB asked the
Department to resubmit the information
collection request upon promulgation of
the Final Rule and after considering
public comments on the FLSA NPRM
dated December 27, 2011. OMB has preapproved the information collections
and will take effect on the same date as
this Final Rule.
Circumstances Necessitating
Collection: The Fair Labor Standards
Act (FLSA), 29 U.S.C. 201 et seq., sets
the federal minimum wage, overtime
pay, recordkeeping and youth
employment standards of most general
application. Section 11(c) of the FLSA
requires all employers covered by the
FLSA to make, keep, and preserve
records or employees and of wages,
hours, and other conditions and
practices of employment. An FLSA
covered employer must maintain the
records for such period of time and
make such reports as prescribed by
regulations issued by the Secretary of
Labor. The Department has promulgated
regulations at 29 CFR part 516 to
establish the basic FLSA recordkeeping
requirements. The Department has also
issued specific recordkeeping
requirements in 29 CFR part 552 which
is the subject of this collection. The
Department has amended recordkeeping
requirements in § 552.102 and § 552.110
regarding agreements for live-in
domestic workers. The Department also
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notes that the amendments to the
definition of companionship services
results in fewer employees being
exempt from the minimum wage and
overtime requirements of the FLSA.
Public Comments: In addition to
soliciting comments on the substantive
recordkeeping provisions discussed
above, the Department sought public
comments regarding the burdens
imposed by information collections
contained in the proposed rule. As
previously discussed, the Department
received some general comments
offering support for change to the
regulations addressing recordkeeping
requirements. Organizations such as
EJC, Jobs with Justice, DCA and others
expressed support for the revised
recordkeeping rules.
The Department also received some
general comments voicing opposition to
recordkeeping requirements.
Organizations such as the Visiting Nurse
Service of New York, and Home Care
Association of New York State
expressed concern about burdens
associated with the new recordkeeping
requirements identified in the NPRM.
The National Federation of
Independent Business (NFIB), for
instance, asserted that the Department
estimated that paperwork and
recordkeeping associated with the
proposed rule would cost in excess of
$22.5 million per year. They expressed
their view that this is a substantial
burden that will disproportionately
impact small businesses. The
Department seeks to clarify the
estimated $22,580,605 cost listed in the
NPRM; this amount reflected the cost
associated with the entire information
collection that is required of all
employers in the United States that are
subject to the FLSA minimum wage and
overtime requirements. As noted below,
the cost associated with the changes
resulting from this Final Rule is
estimated to be approximately $8.96
million. The PRA, in order to reduce
redundancy, requires a federal agency to
view any given information collection
requirement of a rule in light of other
existing information collections that
might meet the same purpose. The
regulations implementing the PRA also
require an agency to notify the public of
the full burden of an information
collection, including the burden
imposed by unchanged information
collections. 5 CFR 1320.5(a)(1)(iv)(B)(5).
The PRA discussion in a regulatory
preamble, therefore, will often include
burdens that are unaffected by changes
to the rule. This differs from how the
overall regulatory impact analysis is
summarized. The regulatory impact
analysis calculates the burden only for
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the marginal changes of a rule. This rule
addresses only employees who will
newly be subject to the minimum wage
and overtime requirements of the FLSA.
The rulemaking also coincides with the
periodic renewal required by the PRA of
the entire information collection under
the FLSA. The amount cited by NFIB
reflects the estimated cost to the wider
universe of all employers subject to the
FLSA recordkeeping requirements, of
which the overwhelming majority are
not impacted by this rule but are
included in the same information
collection as other employers since the
requirements are the same for those
employers.
VNAA makes the general statement
that the ‘‘rule does not accurately reflect
costs’’ in recordkeeping. The
organization indicates that the
requirement to make, keep, and preserve
a record showing the exact hours
worked by each employee will increase
recordkeeping responsibilities
dramatically. The organization,
however, does not provide alternate
methodologies or explain how or why
the recordkeeping requirements will
impact their organization so
significantly. Without alternative data,
the Department believes it is
appropriate to assign the same level of
recordkeeping burden as experienced by
other FLSA-covered employers to those
employers that will newly be required
to make, keep, and maintain records of
hours worked and those employers that
now must make, keep, and maintain
records for previously exempt workers.
The National Association for
Homecare & Hospice expressed concern
that the Department of Labor fell short
of the analysis required under the PRA
but failed to identify in what way the
methodology presented in the PRA
section of the proposed rule did not
address information collection
requirements or burdens. Further, the
commenter did not identify an
alternative methodology with which to
examine the burden associated with this
rule.
In addition, the Department received
a number of form letters that addressed
the recordkeeping requirements. Some
form letters made general comments in
support of the recordkeeping
requirements. Other form letters
expressed concern about the additional
costs associated with recordkeeping. No
comments, however, directly addressed
the methodology for estimating the
public burdens under the PRA or
offered alternative methods for
calculating burden under the PRA. With
respect to the concerns addressed about
cost of recordkeeping regulations, the
requirements to maintain records are no
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different for the employers who are the
subject of this rule than for other
employers in the United States that are
subject to the minimum wage and
overtime pay requirements under the
FLSA. Further, as noted in the economic
analysis, most of the agencies that
employ domestic workers have at least
one employee who is already subject to
FLSA recordkeeping requirements. As
explained in the PRA materials
submitted to OMB, the Department
utilized a 1979 study of domestic
service employees on the number of
live-in workers and assumed for
purposes of the PRA that a similar
percentage of the current domestic
service worker population is employed
in live-in service today. The Department
estimates that the total costs to
employers of the Final Rule’s
information collection requirements is
approximately $8.96 million of the total
of $29.78 million in information
collection costs of all employers subject
to the FLSA.
An agency may not conduct an
information collection unless it has a
currently valid OMB approval, and the
Department submitted the identified
information collection contained in the
proposed rule to OMB for review in
accordance with the PRA under Control
Number 1235–0018. See 44 U.S.C.
3507(d); 5 CFR 1320.11. The
Department has resubmitted the revised
FLSA information collection to OMB for
approval, and the Department intends to
publish a notice announcing OMB’s
decision regarding this information
collection request. A copy of the
information collection request can be
obtained at http://www.reginfo.gov or by
contacting the Wage and Hour Division
as shown in the FOR FURTHER
INFORMATION CONTACT section of this
preamble. A summary of the number of
respondents, annual responses, burden
hours and costs of all of the
recordkeeping provisions of the FLSA
follow.
OMB Control Number: 1235–0018.
Affected Public: Businesses or other
for profit, Not-for-profit institutions
Total Respondents: 3,911,600
(272,000 affected by this Final Rule).
Total Annual Responses: 40,998,533
(710,240 from this Final Rule).
Estimated Burden Hours: 1,250,164
(376,008 from this Final Rule)
Estimated Time per Response:
various, with an average of 1.8 minutes.
Frequency: various with an average of
10.54.
Total Burden Cost (capital/startup): 0.
Total Burden Costs (operation/
maintenance): $29,778,906 ($3,755,997
from this Final Rule) ($8,956,511 in
Year 1 from this Final Rule which drops
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substantially in Year 2 due to decrease
in regulatory familiarization).
VI. Executive Orders 12866 (Regulatory
Planning and Review) and 13563
(Improving Regulation and Regulatory
Review)
Executive Orders 12866 and 13563
direct agencies to assess all costs and
benefits of available regulatory
alternatives and, if the regulation is
necessary, to select regulatory
approaches that maximize net benefits
(including potential economic,
environmental, public health and safety
effects, distributive impacts, and
equity). Executive Order 13563
emphasizes the importance of
quantifying both costs and benefits, of
reducing costs, of harmonizing rules,
and of promoting flexibility. This rule is
economically significant within the
meaning of Executive Order 12866, or a
‘‘major rule’’ under the Small Business
Regulatory Flexibility Act. Therefore,
the Office of Management and Budget
has reviewed this rule. The Department
believes that this rule will have a
significant economic impact on a
substantial number of small entities;
therefore this Final Rule contains a final
regulatory flexibility analysis.
A. Regulatory Impact Analysis of the
Revisions to the Companionship
Regulations
Background
The provisions of the FLSA apply to
all enterprises that have employees
engaged in commerce or in the
production of goods for commerce and
have an annual gross volume of sales
made or business done of at least
$500,000 (exclusive of excise taxes at
the retail level that are separately
stated); or, are engaged in the operation
of a hospital, an institution primarily
engaged in the care of the sick, the aged,
or the mentally ill who reside on the
premises; a school for mentally or
physically disabled or gifted children; a
preschool, elementary or secondary
school, or an institution of higher
education (regardless whether such
hospital, institution or school is public
or private, or operated for profit or not);
or, are engaged in an activity of a public
agency.
There are two ways an employee may
be covered by the provisions of the
FLSA: (1) enterprise coverage, where
any employee of an enterprise covered
by the FLSA is covered by the
provisions of the FLSA, and (2)
individual coverage, where even if the
enterprise is not covered, individual
employees whose work engages the
employee in interstate commerce or in
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the production of goods for commerce
or in domestic service is covered by the
provisions of the FLSA. Covered
employers are required by the
provisions of the FLSA to: (1) pay
employees who are covered and not
exempt from the Act’s requirements not
less than the Federal minimum wage for
all hours worked and overtime premium
pay at a rate of not less than one and
one-half times the employee’s regular
rate of pay for all hours worked over 40
in a workweek, and (2) make, keep, and
preserve records of the persons
employed by the employer and of the
wages, hours, and other conditions and
practices of employment.
In 1974, Congress expressly extended
FLSA coverage to ‘‘domestic service’’
workers performing services of a
household nature in private homes not
previously subject to minimum wage
and overtime requirements. While
domestic service workers are covered by
the FLSA even if they work for a private
household and not a covered enterprise,
Congress created an exemption from the
minimum wage and overtime
compensation requirements for casual
babysitters and persons employed in
‘‘domestic service employment to
provide companionship services for
individuals who (because of age or
infirmity) are unable to care for
themselves,’’ and an exemption from the
overtime compensation requirement for
live-in domestic service employees.27
Need for Regulation and Why the
Department Is Considering Action
In 1974, Congress extended coverage
of the FLSA to many domestic service
employees performing services of a
household nature in private homes not
previously subject to minimum wage
and overtime compensation
requirements. Section 13(a)(15) of the
Act exempts from its minimum wage
and overtime compensation provisions
domestic service employees employed
‘‘to provide companionship services for
individuals who (because of age or
infirmity) are unable to care for
themselves (as such terms are defined
and delimited by regulations of the
Secretary).’’ Section 13(b)(21) of the
FLSA exempts from the overtime
compensation provision any employee
employed ‘‘in domestic service in a
household and who resides in such
household.’’
The Department issued regulations in
1975 to implement these exemptions.
Since the 1975 regulations were
promulgated, the home care industry
has evolved and expanded in response
27 29 U.S.C. 202(a), 206(f), 207(l), 213(a)(15), and
213(b)(21).
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to the increasing size of the population
in need of such services, the growing
demand for home- and communitybased care instead of institutional care
for persons of all ages, and the
availability of public funding assistance
for such services through public payers
(including Medicare, Medicaid, and
other federal programs such as the
Veterans Health Administration, and
other state and local programs).28 As the
industry has expanded, so has the range
of tasks performed by workers providing
home care services. The range now
includes assistance with activities of
daily living (ADLs), instrumental
activities of daily living (IADLs), and
paramedical tasks (such as catheter
hygiene or changing of aseptic
dressings).29 Public funding programs
do not typically cover services such as
social support, fellowship or
protection.30 According to the U.S.
Department of Health and Human
Services (HHS), ‘‘[s]imple
companionship or custodial observation
of an individual, absent hands-on or
cueing assistance that is necessary and
directly related to ADLs and IADLs, is
not a Medicaid personal care service.’’ 31
The Department believes that the
current application of the
companionship services exemption in
the home care industry is not consistent
with the original Congressional intent.
The scope of services provided to
individuals in their homes has
expanded beyond those provided in
1975 when the regulations were first
promulgated. In addition, courts have
interpreted the definition of
‘‘companionship services’’ to include a
broad range of workers. For example, in
McCune v. Oregon Senior Services
Division, 894 F.2d 1107 (9th Cir. 1990),
the Ninth Circuit held that certified
nursing assistants were not ‘‘trained
personnel’’ excluded from the
regulatory definition of companionship
services because, unlike registered
nurses and licensed practical nurses,
certified nursing assistants received
only 60 hours of training. Comparably,
28 Congressional Research Service. Memorandum
dated February 21, 2012, titled ‘‘Extending Federal
Minimum Wage and Overtime Protections to Home
Care Workers under the Fair Labor Standards Act:
Impact on Medicare and Medicaid,’’ p. 3, WHD–
2011–0003–5683.
29 Seavey and Marquand, 2011, p. 7. WHD–2011–
0003–3514. Available at: http://phinational.org/
sites/phinational.org/files/clearinghouse/
caringinamerica-20111212.pdf.
30 Seavey and Marquand, 2011, p. 8. WHD–2011–
0003–3514. Available at: http://phinational.org/
sites/phinational.org/files/clearinghouse/
caringinamerica-20111212.pdf.
31 Smith, G., O’Keefe, J., et al. (2000).
Understanding Medicaid Home and Community
Services: A Primer, George Washington University,
Center for Health Policy Research.
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the Seventh Circuit in Cox v. Acme
Health Servs, Inc., 55 F.3d 1304 (7th Cir.
1995), held that a home health aide who
completed 75 hours of required training
did not qualify as ‘‘trained personnel’’
subject to the Act’s minimum wage and
overtime compensation provisions and
instead performed ‘‘companionship
services’’ within the meaning of the
term as defined in the Department’s
regulations.
Therefore, in the NPRM the
Department proposed to modify, and the
Final Rule does modify, the definition
of companionship services to exclude
personnel who perform medically
related services that typically require
and are performed by trained personnel,
and to provide a 20 percent tolerance for
care (assistance with ADLs and IADLs).
As a result, to qualify for the
companionship services exemption,
workers must spend at least 80 percent
of their time in activities that constitute
fellowship or protection. Those workers
who provide services that exceed the 20
percent tolerance for the provision of
care (assistance with ADLs and IADLs)
must be paid in accordance with federal
minimum wage and overtime
requirements.
Objectives and Legal Basis for Rule
Section 13(a)(15) of the FLSA exempts
from its minimum wage and overtime
compensation provisions domestic
service employees who perform
companionship services. Due to
significant changes in the home care
industry over the last 38 years, workers
who today provide home care services
to individuals often are performing
duties and working in circumstances
that were not envisioned when the
companionship services regulations
were promulgated. During the 1970s
when the exemption was enacted such
work was generally performed in
institutional settings and not in the
service recipient’s private home.
Section 13(b)(21) provides an
exemption from the Act’s overtime
compensation requirements for live-in
domestic service workers. The current
regulations allow an employer of a livein domestic service worker to maintain
a copy of the agreement of hours to be
worked and to indicate that the
employee’s work time generally
coincides with that agreement, instead
of requiring the employer to maintain an
accurate record of hours actually
worked by the live-in domestic service
worker. The Department is concerned
that not all hours worked are actually
captured by such agreement and paid,
which may result in a minimum wage
violation. The current regulations do not
provide a sufficient basis to determine
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whether the employee has in fact
received at least the minimum wage for
all hours worked.
The Department has re-examined the
regulations and determined that the
regulations, as currently written, have
expanded the scope of the
companionship services exemption
beyond those employees whom
Congress intended to exempt when it
enacted § 13(a)(15) of the Act, and do
not provide a sufficient basis for
determining whether live-in domestic
service workers subject to § 13(b)(21) of
the Act have been paid at least the
minimum wage for all hours worked.
Therefore, the Department’s Final Rule
amends the regulations to revise the
definitions of ‘‘domestic service
employment’’ and ‘‘companionship
services,’’ and to require employers of
live-in domestic service workers to
maintain an accurate record of hours
worked by such employees. In addition,
the Final Rule limits the scope of duties
that may be performed under the
companionship services exemption, and
prohibits third party employers from
claiming the exemption for employees
performing companionship services.
The Final Rule also prohibits third party
employers from claiming the overtime
compensation exemption for live-in
domestic service employees. The
effective date for this Final Rule is
January 1, 2015.
Summary of Public Comments on the
Preliminary Regulatory Impact Analysis
A number of commenters, including
Americans for Limited Government,
International Franchise Association
(IFA), the Private Care Association
(PCA), the Private Duty Home Care
Association (PDHCA) and the National
Private Duty Association (NPDA),32
submitted comments on the economic
analysis included in the proposed rule.
The comments focused on seven major
topics: the terminology used to describe
the market; the number of affected
workers; the characterization of the
home care services market, including
the number of overtime hours worked;
the price elasticity of demand used in
the dead-weight loss analysis; the quasifixed costs associated with worker
turnover and hiring; the managerial
costs of regulatory familiarization and
scheduling; and possible scenarios for
management of overtime compensation
costs.
This section will describe each of
these concerns raised in the comments,
32 Since the submission of the comments the
NPDA has changed its name to the Home Care
Association of America. This Final Rule will refer
to the organization as the NPDA.
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the Department’s analysis and response
to the comment, and any revisions made
to the economic analysis.
Terminology
Several commenters, including AARP,
California Association for Health
Services at Home, and private citizens
such as Sue Ostrowski, Robert Melcher,
and Laurie Edwards-Tate, noted that the
terms used in the Department’s
economic analysis are not consistent
with industry usage and may be
misinterpreted. The Department agrees
and has revised the language in the
economic analysis to be more precise.
Specifically, the analysis uses the
following terms:
‘‘Home care:’’ The economic impact
analysis has been revised to refer to the
broader ‘‘home care’’ industry rather
than ‘‘home health care,’’ which
specifically covers medical assistance
performed by certified personnel. Thus,
the term home care industry includes
the home health care industry. The
current exemption has been applied to
both types of services and, therefore,
this Final Rule impacts both the home
health care industry and the home care
industry.
‘‘Direct care worker:’’ The NPRM used
a variety of terms to refer to the workers
potentially affected by the rule change;
commenters found this confusing. For
example, AARP pointed out that the
term ‘‘caregiver’’ is often used to refer
specifically to ‘‘family caregivers’’ rather
than other types of workers and
recommended that the Department use
the term ‘‘direct care worker’’ instead.
Therefore the terminology has been
refined to use direct care worker to refer
to those workers who may be affected by
the rule change because they may be
currently treated as exempt
companions. The term ‘‘direct care
worker’’ will be used unless the
Department is referring to a specific
occupation (e.g., home health aide or
personal care aide) as defined by our
data sources or directly quoting from a
comment.
‘‘Independent providers:’’
Independent providers are direct care
workers who may be hired directly by
the consumer to provide home care
services. Consumers may identify the
direct care worker through a registry,
referral service, advertising, or word of
mouth. Employment arrangements may
range from formal agreements with
administrative, liability, and payroll
services provided by a registry to
informal agreements between the direct
care worker and the consumer.
Numerous commenters, including
Members of Congress (Senator Lamar
Alexander, Congressman Lee Terry),
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employers (Matched Caregivers
Continuous Care, Angels Senior Home
Solutions), and members of the public
(Brandi Johnson, Lauren Reynolds, A.
Miller, Ryan Heideman, Kimberly Flair
and others) made it clear that the term
‘‘grey market’’ was easily misinterpreted
to mean possibly illegal arrangements.
Although difficult to predict, the
Department anticipates this rule will
bring more workers under the FLSA’s
protections, which in turn will create a
more stable workforce by equalizing
wage protections with other health care
workers and reducing turnover. The
Department has no basis for estimating
the percentage of such arrangements
where proper income and payroll taxes
are paid versus those where they are
not. In light of this, the analysis has
abandoned the term ‘‘grey market’’ and
now refers solely to independent
providers.
‘‘Consumer:’’ Several commenters
objected to the use of the terms ‘‘client,’’
‘‘patient,’’ and ‘‘care recipient’’ to
describe individuals who purchase
home care services. In particular, AARP
noted that the term ‘‘patient’’ is
inappropriate because not all consumers
of home care services are receiving
medical care. To be consistent with the
terminology in the field, the analysis
now refers to all such individuals as
‘‘consumers.’’
Number of Affected Workers
The Department also received
comments concerning the estimated
number of affected workers in two
particular states.
The Illinois Department of Human
Services explained that ‘‘home health
aide’’ and ‘‘personal care’’ employees
are exempt under state law if they are
jointly employed by the state (for the
purposes of collective bargaining) and
the consumer. These exempt employees
are currently covered by a collective
bargaining agreement that does not
include overtime. Other direct care
workers in the state are covered by both
minimum wage and overtime
compensation requirements. They note
that for the 30,000 workers in the
program ‘‘overtime pay, however, is not
mandated by Illinois statute and has not
been a benefit for these providers, as
allowed by the exemption for FLSA,
because of its cost to the state.’’
The Department incorporated the
30,000 jointly-employed Illinois
workers into the overtime analysis. The
Department estimates national-level
transfer payments based on nationallevel averages of wages and hours
worked, not for particular states or
subgroups of workers within states.
Although Illinois data indicates that
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more than 12 percent of these 30,000
direct care workers exceed 40 hours,
within any state or region, some direct
care workers or groups of workers will
exceed the national average while others
will work less than the national average.
At the national level, however, the
average will accurately represent the
burden of the rule despite this variance
at the state and local level.
Finally, review of the data submitted
by Illinois showed the data might not be
completely reliable. For example,
Illinois states that 10,000 HHAs and
PCAs worked close to 3 million hours
of overtime, and the cost of overtime
compensation would exceed $32
million.33 These figures suggest that the
overtime compensation differential
would be $10.67 per hour, which
implies the underlying straight-time
wage rate is approximately $21.34.
However, the comment stated that the
workers are paid $11.55 per hour or
more. As a result of these ambiguities
and inconsistencies, the Department
chose to add these workers to the
national overtime projection, but did
not use Illinois’ additional data.
A joint comment from the California
Association of Counties (CSAC), County
Welfare Directors Association of
California (CWDA), California
Association of Public Authorities for InHome Supportive Services (CAPA), and
California In-Home Supportive Services
(IHSS) Consumers Alliance (CICA)
points out that California provides
overtime for some workers under the
contract-agency mode, ‘‘but it is not the
case for individual providers who are
paid by the IHSS Program. Out of
approximately 440,000 IHSS cases in
California, less than 2,000 are under the
contract mode and the vast majority of
IHSS workers are individual providers.’’
Further, out of the 380,000 IHSS direct
care workers, ‘‘there are approximately
50,000 IHSS providers who routinely
submit timesheets who work more than
40 hours a week.’’ The comment further
noted that a 1983 ‘‘landmark ruling
established that IHSS providers were
employees of the state and counties for
the purposes of the minimum wage
provisions of the FLSA’’.34 Legal Aid
Society-Employment Law Center and
NELP also noted that most workers in
California do not receive overtime.
Based on the information received from
the commenters, the Department
adjusted the economic analysis to
include California and add 380,000
IHSS workers to the analysis in the
category of states not covered by
33 State
of Illinois DHS, WHD–2011–0003–7904.
CWDA, CAPA, and CICA. WHD–2011–
0003–9420, pg. 2.
34 CSAC,
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overtime provisions, as it appears that
these workers were not included in BLS
Occupational Employment Statistics
data (as discussed in more detail in the
Costs and Transfers section).
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Characterization of the Home Care
Services Market
The principal concerns about the
definition of the home care market were
related to the sources of funding used to
pay for home care services, and the size
of the non-medical, private pay market.
More specifically, NPDA references the
Navigant analysis of the NPRM which
comments that the assessment of
funding sources was made based on
limited information, and that the private
pay market is larger than estimated in
the NPRM. Note, the industry describes
this part of the home care market as
both ‘‘private duty’’ and ‘‘private pay,’’
using the terms synonymously.35 For
the purposes of this discussion, the
Department uses the term ‘‘private pay’’
to refer to the market for non-medical
services that are paid for privately (i.e.,
out-of-pocket payment or payment by
long-term care insurance).
Several industry organizations (IFA,
National Association for Home Care and
Hospice (NAHC), PDHCA, and NPDA)
administered two surveys in response to
the NPRM that suggest the existence of
a larger private pay market, but these
surveys failed to provide any conclusive
empirical evidence in support of this
claim. These surveys were fielded to
IFA members; the overall response rates
were fairly low, and respondents selfselected into the survey. This can lead
to selection bias; in other words, the
respondents who chose to participate in
the survey may be different from the
overall population in a way that shifts
the results of the survey. For example,
the IFA members that responded to the
survey may have been particularly
motivated to participate due to
campaigns to raise awareness of the
NPRM in specific states, and that would
lead the results to include a greater
proportion of members from those states
than a random sample would include.
As a result, it is not clear if the results
are representative of IFA members or
the industry as a whole.
In response to the comments on the
characterization of the home care
market in the NPRM, the Department
examined alternative data sources. The
35 See NPDA Web site, http://
www.privatedutyhomecare.org/sections/consumers/
whatisprivate.php (note: this Web site no longer
exists, however, WHD has the archived version,
which can be found at http://web.archive.org/web/
20120624032530/http://
www.privatedutyhomecare.org/sections/consumers/
whatisprivate.php).
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Department reviewed the nationally
representative source Medical
Expenditure Panel Survey (MEPS),
published by the Department of Health
and Human Services, Agency for
Healthcare Research and Quality, which
addresses the home care market. The
MEPS is intended to capture the use of
long-term non-medical care (e.g.,
companionship and homemaker
services) and short-term acute medical
home care.
MEPS data offered little in terms of
support for the premise that a large
private pay market for home care
services exists. Private pay appears to be
more frequently used with independent
providers, whereas Medicare and
Medicaid pay for the majority of agency
services. The data also showed only a
relatively small percentage of
consumers pay out-of-pocket for agency
care. Therefore, the assertion that the
Department underestimated the impact
of increased overall costs on the
purchase of home care services is
generally not warranted.
Closely related to the previous issue,
commenters also pointed out that
Medicare and Medicaid programs will
cover only home health care, but not
home care services. The Department
believes it is appropriate to include
Medicare and Medicaid as funding
sources for services potentially
impacted by this Final Rule.
Medicare provides eligible
individuals with skilled nursing
services when the services are provided
on a part-time or intermittent basis.
Skilled nursing services are provided
either by a registered nurse or a licensed
practical nurse. Home health aide
services may be Medicare-covered when
given on a part-time or intermittent
basis if needed as support services for
skilled nursing care. Home health aide
services must be part of the care for the
identified illness or injury. Medicare
does not cover home health aide
services unless the individual is also
receiving skilled care such as nursing
care or other physical therapy,
occupational therapy, or speechlanguage pathology services from the
home health agency. Medicare does not
pay for personal care services when that
is the only care the individual needs.36
The Department does not have data
regarding the extent to which Medicarecertified agencies have availed
themselves of the current
companionship services exemption for
home health aide or other services they
provide; however, to the extent that
36 Medicare and Home Health Care, pgs 8–10,
Available at: http://www.medicare.gov/Pubs/pdf/
10969.pdf.
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such agencies have used the current
exemption, the Department expects
those agencies to be impacted by this
Final Rule.
Medicaid is a federal-state partnership
providing health coverage to identified
populations, including seniors and
persons with disabilities. States are
required to cover home health benefits
and may offer to cover personal care
services, through Medicaid-funded
programs. Such services may be
provided through home and
community-based services (HCBS)
programs, including HCBS waivers, selfdirected personal assistance services
programs, Money Follows the Person
programs and Community First Choice
programs. The Department also expects
this Final Rule to impact Medicaidfunded home health and personal care
service providers.
A report by the Congressional
Research Service states:
‘‘Neither the Medicare nor the Medicaid
program explicitly covers services termed
‘companionship services’. However, to some
extent these programs provide certain home
care services to eligible beneficiaries through
home health services (under Medicare and
Medicaid) and personal care services (under
Medicaid). Furthermore, federal statute,
regulations, and guidance do not specify or
regulate wage and employee benefit levels in
Medicare (Title XVIII of the Social Security
Act) or Medicaid (Title XVIX of the Social
Security Act).’’ 37
Medicare and Medicaid directly
reimburse the service provider a
specified dollar amount to cover a
specified quantity of services or defined
episode of care. The agency uses this
revenue to pay the direct care worker’s
wages (which may include straight time,
overtime, and benefits), as well as to
cover other costs of doing business
(such as overhead and administrative
fees). Medicare and Medicaid rates do
not explicitly cover agency overhead,
nor do they dictate that the entire
amount must go to the direct care
worker’s wages. Thus, agencies are able
to use Medicare and Medicaid
reimbursement to cover training and
overtime costs.
Industry commenters (IFA, NAHC,
NPDA, and PCA) also stated that direct
care workers work considerably more
overtime than the impact analysis
suggested, thereby underestimating the
costs and impact of the rule. The
centerpiece of this argument was the
assertion that 24-hour care consumers
37 Congressional Research Service. Memorandum
dated February 21, 2012, titled ‘‘Extending Federal
Minimum Wage and Overtime Protections to Home
Care Workers under the Fair Labor Standards Act:
Impact on Medicare and Medicaid,’’ WHD–2011–
0003–5683.
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are a principal component of the market
and, because they prefer a single direct
care worker, using multiple direct care
workers to manage overtime costs may
be difficult and result in reduced quality
of care. These commenters asserted that
paying overtime in this situation may
make home care unaffordable, forcing
consumers into nursing homes.
In these comments, industry groups
appear to use the terms ‘‘24-hour care’’
and ‘‘live-in care’’ synonymously. These
terms are not identical and make
interpretation of at least some
comments, statements, and reported
survey results problematic. While 24hour care implies a single direct care
worker scheduled to cover a 24-hour
period, the Department defines a ‘‘livein’’ worker as one who resides on his or
her employer’s premises permanently or
for an extended period of time (e.g., for
at least five consecutive days or nights).
Thus, while a live-in worker might
provide 24-hour care, 24-hour care does
not require a live-in direct care worker.
The rules governing the determination
of overtime differ significantly between
the two types of direct care worker
schedules, as will be discussed in more
detail below. These differences may also
have implications for projecting
industry response to the rule.
For the NPRM, the Department
calculated that 10 percent of affected
direct care workers are employed 45
hours per week (5 hours of overtime),
and an additional 2 percent are
employed 52.5 hours per week (12.5
hours of overtime). These estimates are
derived from the PHI analysis of
National Home Health Aide Survey
(NHHAS) and U.S. Census Bureau’s
Annual Social and Economic
Supplement (ASEC) data on overtime
worked in this industry. The NHHAS is
a multistage probability sample survey
sponsored by the Department of Health
and Human Services’ Office of the
Assistant Secretary for Planning and
Evaluation (ASPE) that was designed to
provide nationally representative
estimates of agency-employed direct
care workers who assist with ADLs. The
two-stage sampling process first
randomly selected agencies with
probability proportionate to size, then
randomly sampled up to six direct care
workers from each agency selected; a
total of 3,377 workers were
interviewed.38
As a result of comments on overtime
estimates, the Department reviewed
38 Bercovitz, A, Moss, AJ, et al. (2010). Design and
Operation of the National Home Health Aide
Survey: 2007–2008. National Center for Health
Statistics. Vital Health Statistics. 1(49). Available at:
http://www.cdc.gov/nchs/data/series/sr_01/sr01_
049.pdf.
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hours worked by direct care workers as
reported in the 2007 NHHAS. When
calculating overtime directly instead of
using estimates based on summaries
reported in publicly available analyses
of the NHHAS, the Department found
that those direct care workers who work
for a single employer more than 40
hours, but less than 50 hours per week,
average 6.4 hours of overtime, while
those who work for a single employer 50
hours or more per week average 21.0
hours of overtime per week. Therefore,
the Department made appropriate
changes, described below, in the
analysis.
Price Elasticity
Price elasticity represents the
percentage change in quantity
demanded induced by a percentage
point change in labor cost, i.e., how
responsive the home care services
market is to changes in workers’ wages.
Price elasticity of demand for labor is
composed of two separate effects: the
substitution effect, driven by the change
in the cost of labor relative to its
substitutes holding output constant, and
the scale effect, driven by making labor
more expensive relative to agency
budget. PCA suggested that the NPRM’s
deadweight loss analysis for home care
services only included the substitution
effect. The Department reviewed this
assertion and found that it was accurate,
i.e., the cited elasticity does not
incorporate the industry scale effects.
PCA also provided an alternative
estimate that used aggregated state-level
data on the average wages and
employment of home health aides and
personal care aides for the period
between 2001 and 2009. While PCA’s
econometric estimate suggested that
demand is price elastic 39 (responsive to
changes in price), their estimate’s
validity is questionable. For example,
the estimate did not pass a basic set of
robustness checks designed to control
for state-level differences in variation.
Accounting for these differences
rendered PCA’s estimate statistically
indistinguishable from zero. The
39 By convention, if the price elasticity of demand
lies between 0 and ¥1.0, economists call demand
‘‘inelastic;’’ if the price elasticity of demand lies
between ¥1.0 and ¥∞, demand is ‘‘elastic.’’ When
demand is inelastic, a given change in supply,
resulting from increased labor costs for example,
will have relatively little impact on how much of
the product or service is purchased, but will result
in a relatively large increase in price. Conversely,
if demand is elastic, then the equivalent change in
supply will have a much larger impact on the
quantity purchased, but a much smaller impact on
price. Thus, the significance of PCA’s estimated
price elasticity of demand is that, if correct, it
would result in a much larger decrease in home
care services and a much larger deadweight loss as
a result of the rule.
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Department attempted to use PCA’s
analysis with improved data and
methods, but the analysis did not return
a valid result.
In the absence of a reliable method to
estimate the price elasticity of demand
from existing data, the Department
surveyed academic literature to find
suitable substitutes. The Department
accepts PCA’s point that the market
contains a private pay sector and a
public-funds-reimbursed sector that
might differ substantially in terms of
consumer response to price changes.
More specifically, the price elasticity of
demand is considerably greater (in
absolute terms) for consumers who pay
for home care services predominantly
out of pocket, though this segment is
small relative to the overall home care
market. Likewise, the Department
believes that the demand for home care
services reimbursed by a third party is
highly inelastic.
The Department used the market for
health care services, where the final
consumer is only responsible for a
relatively small fraction of the cost, to
approximate the consumer response to
changes in the price of home care
services that are reimbursed by public
funds. The RAND Health Insurance
Experiment (HIE), which took place
between 1974 and 1975 and covered
7,791 individuals in 6 U.S. cities, is still
considered the ‘‘gold standard’’ in the
estimation of demand for health care
services because it remains to date the
only large-scale study based on a
randomized controlled trial. A study
using HIE data estimated a ¥0.17 price
elasticity of the demand for outpatient
medical care for those paying for 0 to 25
percent of care out-of-pocket.40 Similar
non-experimental studies return
comparable price elasticity values.41
The Department used the market for
non-reimbursed nursing home care,
where there are often considerable outof-pocket costs, to approximate
consumer response in the private pay
sector. Long-term home care and
nursing homes can be considered
substitutes in the sense that long-term
40 Manning, W. et al. (1992). Health Insurance and
the Demand for Medical Care: Evidence from a
Randomized Experiment. The American Economic
Review, 77(3), pp. 251–277.
41 Mueller, C. and A. Monheit (1988), Insurance
Coverage and the Demand for Dental Care: Results
for Non-Aged White Adults, Journal of Health
Economics, 7(1), pp. 59–72.
Smith, D. (1993). The Effects of Copayments and
Generic Substitution on the Use and Costs of
Prescription Drugs. Inquiry, 30(2), pp. 189–198.
Contoyannis, P. et al. (2005). Estimating the Price
Elasticity of Expenditure for Prescription Drugs in
the Presence of Non-Linear Price Schedules: An
Illustration from Quebec, Canada, Health
Economics, 14(9), pp. 909–923.
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home care provides assistance with
activities of daily living (ADLs) and
instrumental activities of daily living
(IADLs) to those who would be unable
to live independently in the absence of
support services. Many elderly
individuals and people with disabilities,
often given limited options, have
entered facilities such as a nursing
home or assisted living community
where those services are provided along
with room and board. Some home care
appears to be priced accordingly; the
Department’s calculations of flat fee
home care (i.e., 24-hour care) rates
charged to consumers show they are
quite similar to published average daily
nursing home rates.42
The National Long Term Care Survey,
a nationally representative sample of
elderly persons with disabilities living
in community-based and institutional
settings, has served as the basis for
multiple analyses of the demand for
nursing home care. In 1993, a study of
survey data estimated a price elasticity
of the hazard of nursing home entry of
¥0.7, and another study from 1998
found that the price elasticity of
demand for institutionalized care is
¥0.98. Estimates of the price elasticity
of demand for nursing home care based
on state-specific data range from ¥0.69
to ¥3.85.43 Although the range of
estimated elasticities is large, three of
the four studies found elasticities in the
range ¥0.69 to ¥0.98. Therefore the
Department judged that a value of ¥1.0
best represented the overall evidence on
the price elasticity of demand for
42 See discussion of private pay pricing structure
in the ‘‘Tasks, Wages, and Hours’’ section of the
analysis; agencies charge approximately $250 per
day for 24-hour care while the average private
nursing home rate in 2011 was about $240 per day
according to the MetLife market Survey of Longterm Care Costs. However, the IHS Global Insight
survey, Economic Impact of Eliminating the FLSA
Exemption for Companionship Services, 2012,
WHD–2011–0003–8952, shows that less than 10
percent of consumers cared for by survey
respondents receive 24-hour home care, while 65
percent require less than 40 hours of care per week.
Thus, for the vast majority of consumers, home care
is less expensive than institutional care, and for the
10 percent (or less) of consumers receiving 24-hour
home care, the cost is about the same as
institutional care.
43 Headen, A. (1993). Economic Disability and
Health Determinants of the Hazard of Nursing
Home Entry, Journal of Human Resources, 28(1),
pp. 81–110.
Rechovsky, J. (1998). The Roles of Medicaid and
Economic Factors in the Demand for Nursing Home
Care, Health Services Research, 33(4 Pt 1), pp. 787–
813.
Knox, K., E. Blankmeyer and J. Stutzman. (2006).
Private Pay Demand for Nursing Facilities in a
Market with Excess Capacity. Atlantic Economic
Journal. 34(1), pp. 75–83.
Mukamel and Spector (2002).The Competitive
Nature of the Nursing Home Industry: Price Mark
Ups and Demand Elasticities.’’ Applied Economics,
34(4), pp. 413–420.
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nursing home care, and thus the best
proxy for private pay home care as well.
The use of proxies for the price
elasticities of demand for reimbursed
and unreimbursed home care services
due to the lack of direct estimates
creates uncertainty concerning their true
value and the subsequent impacts of the
rule on the market for these services.
The numerical value of an elasticity is
a function of the availability of
reasonable substitutes for the product or
service, amongst other things. Thus, to
the extent that unpaid services provided
by family members and/or the use of
inferior quality caregivers are
considered good substitutes for agency
caregivers, the demand for reimbursed
home care services might be more
elastic than ¥0.17. Similarly, the extent
to which a nursing home is an
unacceptable substitute for
unreimbursed home care services might
make the demand for those services less
elastic than ¥1.0.
Although both these statements
concerning these elasticities may be
true, the Department believes this will
have relatively little effect on the results
of the model. First, the specified
elasticities create natural limits:
although demand for reimbursed
services might be larger than ¥0.17, it
is unlikely to be larger than the demand
for unreimbursed services, while the
converse is true concerning the demand
for unreimbursed services. Thus it is
likely that the true values lie between
¥0.17 and ¥1.0. Second, if the demand
for reimbursed home care services is
more elastic, it will increase the impact
of the rule (e.g., greater reduction in
services utilized; larger deadweight
loss); conversely, a less elastic demand
for unreimbursed services will decrease
the impact of the rule. Thus, if both
statements are true, the impacts will be
to some extent offsetting. Third, the
total impact of the rule is essentially a
weighted average of the two market
components (reimbursed and
unreimbursed home care services);
increasing the elasticity of the
reimbursed market segment and
reducing it for the unreimbursed market
segment is likely to result in a small
change in the weighted average, and
therefore would have a small effect on
impacts.
In the NPRM, the Department stated
that the overwhelming majority of home
care (75 percent) is paid with public
funds. Commenters such as NPDA, IFA,
and the Small Business
Administration’s Office of Advocacy
(Advocacy) expressed concern that the
size of the non-medical, private pay
market may be larger than the impact
analysis suggests. More specifically,
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they argued there are a large number of
small home care businesses in the
private pay sector that are not
adequately reflected in the economic
analysis.44 The Department surveyed
several academic and industry sources
in an attempt to gain a better
understanding of the private pay
market. However, we find no
representative, national-level data that
suggests that there exists a larger private
pay market for which the Final Rule
does not account.
To reflect the findings discussed
about the price elasticity of demand and
the market share of the private pay
sector, the Department agrees that it is
necessary to revise the method it used
to project the deadweight loss caused by
the Final Rule. The Department
calculated separately the impacts for the
market in which care is primarily
reimbursed through public funds, which
accounts for 75 percent of all direct care
workers, and has a price elasticity of
demand of ¥0.17, and the private pay
market, which accounts for 25 percent
of all direct care workers, and has a
price elasticity of demand of ¥1.0.
The changes that the Department
made in response to PCA’s comments
concerning the price elasticity of
demand for home care services had a
relatively small effect on the results of
the analysis. First, the price elasticity
for reimbursed services (¥0.17) used in
the final analysis is of a very similar
magnitude to that used in the NPRM
(¥0.15); indeed the conceptual basis for
selecting reimbursed medical care as a
proxy is the same concept used in the
NPRM, although in practice the
derivation of the NPRM value was
flawed. Second, although we use a price
elasticity of demand for private pay
home care that is close to the value
found by PCA (¥1.0 compared to PCA’s
estimate of ¥1.18), again the impact of
using this value in the final analysis is
relatively small because it applies to
only 25 percent of the total market for
home care services.
Quasi-Fixed Costs
According to PCA, the quasi-fixed
costs are non-trivial and may account
for up to 19 percent of annual wages.45
Quasi-fixed costs are those that change
with the number of workers hired rather
than with the number of hours worked.
Examples include hiring costs, training
costs, social insurance and other private
benefits.
44 Small Business Administration (SBA) Office of
Advocacy, WHD–2011–0003–7756.
45 William Dombi, WHD–2011–0003–9595, pg.
25.
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The Department believes that
although this figure might be accurate
for the home care industry in general, it
is too large for companionship services.
Recruiting and training costs appear to
be small for direct care workers. For
example, evidence from the 2011
Annual Private Duty Home Care
Benchmarking Study indicates that the
median initial training is between 4 and
9 hours, and less than 25 percent of
establishments provide more than 9
hours. In the same source, employee
referrals and listings on the Internet
were cited as the two most popular
recruiting methods. In addition,
reductions in employee turnover rates
may result in lower net costs associated
with hiring and turnover, as discussed
below in an analysis of turnover and
hiring costs. However, the Department
accepts that hiring costs constitute a
direct cost, rather than a transfer from
employers to employees, and includes
these costs in determining the impacts
of the Final Rule.
compensation and must therefore
manage these workers accordingly. In
the NPRM, the Department requested
information on the incremental time
and cost of managing workers subject to
the FLSA’s overtime compensation
requirement, but none was provided. In
the absence of new evidence, the
Department did not change its estimate.
Managerial Costs of Scheduling
NPDA and others argued that the
NPRM underestimated the cost of
regulatory familiarization and the
managerial cost of scheduling
complications due to overtime. The
Department assumed industry would
incur minimal regulatory familiarization
costs because most of the affected firms
already have employees covered by the
FLSA. For example, the BLS National
Employment Matrix data report for
Home Health Care Services (62–1600) in
2010 includes over 200 occupations
including nursing aides, therapists, and
health practitioners who provide
services other than companionship
services to consumers in their homes.46
Therefore, the Department believes most
agencies will already be well acquainted
with the minimum wage and overtime
compensation requirements of the
FLSA, and will only need to familiarize
themselves with the regulations that
apply to one distinct group of workers.
The regulatory text is quite limited in
scope and length, and because agencies
are third party employers and will not
be eligible to claim the exemption, the
time required for familiarization will be
quite limited. Furthermore, the
Department expects that many firms
will rely on guidance and educational
materials from the Department and
industry to familiarize themselves with
changes to the rule. Similarly, the
Department believes that most firms
already employ staff entitled to overtime
Overtime Scenarios
Industry groups such as IFA and
NPDA, and private citizens such as
Martin Hayes, Henri Chazaud, and
Melina Cowan expressed concern over
the Department’s handling of overtime.
These comments typically focused on
two aspects of overtime. First, many
agencies stated they would engage in at
least some form of overtime
management to avoid paying for
overtime. Second, while overtime
management would typically involve
scheduling additional direct care
workers, industry group criticism also
appears to rely on the implicit
assumption that using multiple direct
care workers is often not a realistic
alternative because of the need for
continuity of care.
However, continuity of care does not
necessarily require a single direct care
worker, but rather can involve a small
group of direct care workers intimately
familiar with the consumer and his or
her needs. In this way care will not be
disrupted if one of those direct care
workers is no longer willing or able to
provide the needed services. Moreover,
although consumers may prefer single
direct care workers, with an industry
turnover rate apparently exceeding 40
percent, it is likely that many
consumers already receive care from
more than one worker or a combination
of direct care workers and family
members when other workers are
unavailable. As previously discussed,
24-hour care is not necessarily
synonymous with having a live-in direct
care worker. Assuming at least two
direct care workers are currently used to
provide 24-hour care, 7 days per week,
adding a third direct care worker may
allow effective management of overtime
while introducing relatively little
disruption to continuity of care. For
example, if one of the three direct care
workers can get from 5 to 8 hours of
non-compensable sleep time per 24hour period, hours entitled to overtime
compensation might vary from zero to
15 hours per week, compared to 18 to
46 overtime hours per week with two
direct care workers.47 Modifying work
46 BLS National Employment Matrix, Home
Health Care Services (62–1600) 2010. Available at:
http://www.bls.gov/emp/ep_table_109.htm.
47 With two direct care workers, one working
three 24-hour shifts a week and the other working
four 24-hour shifts a week, weekly overtime ranges
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60503
patterns to increase the number of direct
care workers (and therefore reduce the
need for overtime compensation) does
not preclude the industry from offering
consumers the option to pay a higher
rate in return for fewer direct care
workers.
Survey results submitted by the
NAHC 48 distinguished whether
respondents are currently required to
pay overtime, i.e., are located in
‘‘overtime states.’’ These reports provide
some support for the position that the
rule will not be as onerous to the private
pay market as claimed. For example, 15
to 20 percent of agencies that responded
to the industry’s surveys that operate in
non-overtime states already pay
overtime voluntarily. Moreover, firms
operating in overtime and non-overtime
states already have very similar
characteristics. Firms operating in states
requiring overtime compensation not
only have a similar percentage of
consumers receiving 24-hour care as
firms operating in states without
overtime compensation requirements,
but actually have higher rates of
overtime worked per employee than
firms that do not have to pay the
overtime wage differential.
In addition, firms in states without a
state overtime compensation
requirement anticipate considerably
worse impacts than those actually
experienced by firms in states with a
state overtime compensation
requirement. It is possible that statespecific conditions might result in
different impacts in the states that have
not yet implemented overtime
compensation requirements than in
those states that have already
implemented such requirements.
However, the 15 percent of survey
respondents that voluntarily pay
overtime compensation reported
from 18 to 46 hours. Each day, 24-hours are spent
on site but between 6 and 10 hours are not
compensated (for bona fide sleep and meal periods),
resulting in between 14 and 18 hours worked per
day. For the worker employed three days, weekly
hours are between 42 and 54 hours. The worker
employed four days a week works between 56 and
72 hours. Overtime ranges from 18 ((42¥40)
+(56¥40)) to 46 hours ((54¥40) + (72¥40)). With
three direct care workers, each works two 24-hour
shifts a week, and two of the three split the
remaining day into two 12-hour shifts. This results
in one direct care worker being on site 48 hours a
week, but once sleeping and eating time is deducted
(between 12 and 20 hours) this worker is paid for
between 28 and 36 hours per week, resulting in no
overtime. The other two workers have the same
schedule, plus one 12-hour shift. Shifts less than 24
hours are not entitled to deducted sleep time, but
0.5–1 hour is assumed to be deducted for meal
breaks. Therefore, these two workers will work
between 39 and 47.5 hours a week, resulting in
between no overtime and 15 hours of overtime per
week.
48 WHD–2011–0003–9496.
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impacts similar to those reported by
agencies that were required to pay
overtime. For example, 86 percent of
firms in non-overtime states report they
intend to limit overtime, but only 62
percent of firms in overtime states and
60 percent of voluntary overtime
compensation payers found it necessary
to do so. Likewise, 76 percent of firms
in non-overtime states anticipate a
significant increase in cost due to
overtime requirements, but only 40
percent of firms in states that already
require overtime compensation, and 34
percent of voluntary payers reported
experiencing a significant increase in
cost. Unfortunately, the term
‘‘significant increase’’ is not defined in
the survey and therefore this experience
cannot be used for projecting costs and
impacts.
Empirical research has also found that
employers are likely to respond to
mandated overtime premiums by
making adjustments so as to not absorb
the entire cost of overtime.49 For
example, similar to the NAHC survey,
the IFA survey found 95 percent of
respondents in states where there are no
overtime regulations stated they would
eliminate all scheduled overtime hours,
while two percent said they would
reduce overtime hours and three percent
said they would make no changes to
current scheduling.50 In view of the
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49 Barkume, Anthony. (2010). The Structure of
Labor Costs with Overtime Work in U.S. Jobs,
Industrial and Labor Relations Review, 64(1), pp.
128–142.
50 The IFA survey does not compare anticipated
business responses in states without current
overtime regulations with actual business responses
in states with current overtime regulations.
However, other responses provided in the IFA
survey (WHD–2011–0003–8952) show similar
patterns to the NAHC survey. First, respondents in
states that require overtime do not differ
substantially from those in states without such
requirements in terms of customers receiving livein care, customers receiving more than 40 hours of
care per week, and average overtime worked per
week by employees. Second, among respondents in
states without current overtime regulations, 18
percent already pay overtime premiums and 50
percent already pay travel time voluntarily. Third,
other questions demonstrate considerable
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research, employer comments and
industry survey evidence, the
Department believes employers
responding to the Final Rule changes by
paying for 100 percent or 0 percent of
overtime are highly unlikely scenarios.
Therefore, in the Final Rule the
Department adjusted OT Scenario 1 to
reflect 60 percent of overtime paid, OT
Scenario 2 to reflect 40 percent of
overtime paid, and OT Scenario 3 to
reflect 10 percent of overtime paid. The
latter two scenarios represent the more
aggressive responses to the rule
indicated in the industry surveys and
comments. Based on the combination of
two industry surveys, empirical
research, and employer comments, the
Department believes that OT Scenario 2
reflects the most likely impacts of the
Final Rule, and therefore focuses on the
results of that scenario in the following
analysis.
Travel Time Compensation
Several industry groups, including
IFA and PDHCA, expressed concern
over the method used to estimate travel
time between consumers, which under
the revised rule must be compensated.
The Department based its ratio of travel
time compensation to overtime
compensation on New York City’s
amicus brief for the U.S. Supreme Court
case, Long Island Care at Home, Ltd. v.
Coke, 551 U.S. 158 (2007). The
Department received criticism that this
ratio (travel time compensation as 19.2
percent of total overtime compensation)
underestimated the true cost of travel
time compensation. The estimate relies
inconsistencies in their responses. For example,
many respondents anticipate raising the rates
charged to their customers; on average, the reported
rate increases would be an amount in excess of that
needed to offset the cost of any overtime pay
incurred. However, if 95 percent of firms are
eliminating all overtime, there will be little reason
to increase fees. Thus, although the Department
agrees that employers will likely respond so as not
to absorb the entire cost of overtime, industry
survey responses concerning the anticipated
magnitude of this affect cannot be accepted at face
value.
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on New York City data and, therefore,
the geographic scope is limited; travel
time compensation may be higher in
other locations, such as remote rural
areas. Additionally, since travel time
compensation is proportional to
estimated overtime compensation, the
reliability of this estimate is dependent
upon accurately estimated overtime
compensation.
Although the Department requested
additional data on travel time,
commenters did not provide alternative
methods or data to estimate travel time.
The Department considered alternative
sources, most notably the National
Home Health Aid Survey (NHHAS).51
The NHHAS is a nationally
representative survey of agencyemployed home health aides who assist
with ADLs. The NHHAS reports travel
time for the last day worked; however,
attempts to estimate weekly and annual
travel time from these data suffer from
several limitations. These limitations
include evident reporting error (such as
reporting travel time between
consumers when the respondent cares
for a single consumer) and the lack of
some data necessary to estimate cost
(such as days worked per week). Due to
lack of confidence in its estimate of
travel time from NHHAS data and a lack
of alternative data sources, the
Department continues to rely on the
ratio provided by New York City in its
amicus brief for the Final Rule analysis.
Moreover, although the Department
revised the overtime scenarios for the
Final Rule, the Department continues to
project travel time based on the
proposed rule’s overtime scenario in
which agencies compensate 100 percent
of all overtime hours. Thus, travel time
estimates in the Final Rule are
conservative estimates which
significantly overestimate the cost of
travel time.
51 United States Department of Health and Human
Services. Centers for Disease Control and
Prevention. National Center for Health Statistics.
National Home Health Care Survey, 2007.
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$54.4 million per year).53 As discussed
in the previous section, this represents
a change from the overtime scenarios in
the NPRM, which used payment of 100
percent, 50 percent, and 0 percent to
represent possible adjustments. The
Department revised these scenarios in
response to the many comments,
including comments from International
Franchise Education Association, NPDA
and private citizens, indicating agencies
would respond to the rule by
eliminating overtime from direct care
worker schedules. While 100 percent
payment of overtime remains a
theoretical upper bound estimate, it is
so unlikely that it loses validity in
representing projections of how the
market might adjust and the costs it
might incur. Therefore, the Department
selected payment of 60 percent of
current overtime hours to represent the
upper bound of overtime compensation
(OT Scenario 1). Similarly, it would be
more costly for agencies to completely
eliminate overtime than pay at least
some overtime when unavoidable, such
as when the cost of hiring a new worker
might exceed the cost of paying
overtime. In addition, comments on the
NPRM, such as the survey results
submitted by NAHC, indicated some
agencies already pay overtime in states
with no overtime requirements. Thus,
no overtime compensation seemed
equally unlikely to occur, and the
Department now uses OT Scenario 3, in
52 As will be explained in further detail, the
Department examined three scenarios on how firms
adjust overtime hours worked in response to the
overtime compensation premium requirement;
within each of these overtime scenarios, we
consider three benchmarks for reallocating overtime
hours between new hires and current part time
workers, for a total of 9 combinations of overtime
and hiring decisions. However, to simplify the
presentation, we include only three combinations of
overtime adjustment and new hiring in the tables;
these are: OT Scenario 1: 60 percent of current
overtime hours are paid the overtime premium, and
of the remaining 40 percent of overtime hours, 30
percent are allocated to new hires while 70 percent
are redistributed to current part-time employees;
OT Scenario 2: 40 percent of current overtime hours
are paid the overtime premium, and of the
remaining 60 percent of overtime hours, 20 percent
are allocated to new hires while 80 percent are
redistributed to current part-time employees; OT
Scenario 3: 10 percent of current overtime hours are
paid the overtime premium, and of the remaining
90 percent of overtime hours, 10 percent are
allocated to new hires and 90 percent redistributed
to current part-time employees. Under this
combination of overtime and hiring decisions, OT
Scenarios 1 and 2 incur the same hiring costs in
year 1 as shown in Table 1.
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Summary of Impacts
Table 1 illustrates the potential scale
of projected costs, transfer effects and
other impacts of the revisions to the
FLSA regulations implementing the
companionship services exemption. The
Department projects that the average
annualized direct costs of the rule will
total about $6.2 to $6.8 million per year
over 10 years (depending on how firms
handle overtime and additional
hiring).52 In addition to the direct cost
to employers of the rule, there are also
transfer effects resulting from the rule.
The primary impacts shown in Table 1
are income transfers to direct care
workers in the form of: Compensation
for time spent traveling between
consumers (average annualized value of
$104.3 million per year); and payment
of an overtime premium when hours
worked exceed 40 hours per week.
Because overtime compensation
depends on how employers adjust
scheduling to eliminate or reduce
overtime hours, the Department
considered three adjustment scenarios
resulting in payment of: 60 percent of
current overtime hours worked (OT
Scenario 1, with an average annualized
value of $326.3 million per year); 40
percent of current overtime hours
worked (OT Scenario 2, with an average
annualized value of $217.5 million per
year); and 10 percent of current
overtime hours worked (OT Scenario 3,
with an average annualized value of
53 Estimated total overtime hours, and therefore
total overtime wage premiums, are larger for the
Final Rule than for the proposed rule. This results
from four factors. First, the Department increased
its estimate of average overtime worked for that
fraction of direct care workers who work overtime
(we now estimate 12 percent of workers average 8.8
hours of overtime per week instead of 6.3 hours per
week as in the proposed rule). Second, the
Department determined that 26,000 of California’s
agency-employed direct care workers that were
considered entitled to overtime under the proposed
rule are not, in fact, entitled to overtime
compensation under state law. Third, the 380,000
direct care workers in California’s In-Home
Supportive Services (IHSS) program are also not
generally entitled to overtime compensation; 50,000
of these workers routinely exceed 40 hours per
week. Finally, 30,000 direct care workers
considered jointly employed by the state of Illinois
and the consumer are not currently entitled to
overtime compensation. The total number of all
overtime hours being worked by workers without
overtime coverage is estimated to be 73.5 million
hours. Thus estimated overtime costs increased
substantially due to both an increase in the
estimated number of overtime hours worked, and
an increase in the number of those who work
overtime.
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which agencies pay 10 percent of
baseline overtime, for its lower bound
overtime cost scenario.
Although the transfer of income to
workers in the form of higher wages is
not considered a cost of the rule from
a societal perspective, higher wages do
increase the cost of providing home care
services, potentially resulting in the
provision of fewer services. This
potential reduction in the provision of
services may cause market inefficiency
if it raises marginal labor costs and if we
consider the current labor market to be
in a competitive equilibrium, and this
allocative inefficiency is a cost from a
societal perspective. On the other hand,
marginal labor cost may rise by less than
the amount of the wage change because
higher wages for workers may result in
lower turnover rates and reduced
recruitment and training costs for firms.
With a 7 percent real rate, the
Department measures the range of
average annualized deadweight loss
attributable to this allocative
inefficiency as $177,000 when 60
percent overtime compensation
adjustment is assumed, $99,000 when
40 percent overtime compensation
adjustment is assumed and $24,000
when a 10 percent adjustment in
overtime compensation is assumed. In
perspective, the deadweight loss
represents approximately 0.0001
percent of industry revenue with an
associated disemployment impact of
0.06 percent of workers under OT
Scenario 2. The relatively small
deadweight loss occurs because both the
demand for and supply of home care
services appear to be inelastic in the
largest component of this market, in
which public payers reimburse home
care; thus, the equilibrium quantity of
home care services is not very
responsive to changes in price. Average
annualized benefits from reduced
turnover range from $10.1 million per
year under OT Scenario 3 to $34.1
million per year under OT Scenario 1,
with average annualized net benefits
ranging from $3.9 million per year
(Scenario 3) to $27.3 million per year
(Scenario 1). Under OT Scenario 2,
which the Department believes to be the
most likely outcome, average
annualized benefits total $23.9 million
per year with average annualized net
benefits of $17.1 million per year.
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TABLE 1—SUMMARY OF IMPACT OF CHANGES TO FLSA COMPANIONSHIP SERVICES EXEMPTION
Average annualized value
($ mil.)
Future years
($ mil.) a
Year 1
($ mil.)
Year 2
Year 10
3% Real rate
7% Real rate
Costs i
Regulatory Familiarization:
Agencies .......................................................................
Families Hiring Self-Employed Workers .......................
Hiring Costs b:
30% OT remaining
20% OT remaining
10% OT remaining
Total costs (30% of OT
Total costs (20% of OT
Total costs (10% of OT
in OT 1 ..........................................
in OT 2 ..........................................
in OT 3 ..........................................
1) ...................................................
2) ...................................................
3) ...................................................
$6.9
$5.4
$0.6
$2.8
$0.6
$3.6
$1.3
$3.4
$1.4
$3.5
$8.4
$8.4
$6.3
$20.6
$20.6
$18.6
$0.8
$0.8
$0.6
$4.2
$4.2
$4.0
$0.8
$0.8
$0.6
$5.0
$5.0
$4.8
$1.6
$1.6
$1.2
$6.4
$6.4
$6.0
$1.8
$1.8
$1.3
$6.7
$6.7
$6.2
$0.0
$0.0
$68.1
$0.0
$0.0
$78.1
$0.0
$0.0
$151.8
$0.0
$0.0
$107.1
$0.0
$0.0
$104.3
$213.2
$142.1
$35.5
$244.2
$162.8
$40.7
$474.8
$316.5
$79.1
$335.2
$223.5
$55.9
$326.3
$217.5
$54.4
$626.5
$468.3
$230.9
$442.3
$330.6
$163.0
$430.5
$321.8
$158.7
$0.257
$0.144
$0.035
$0.182
$0.101
$0.025
$0.177
$0.099
$0.024
$5.2
$5.1
$4.8
$6.6
$6.5
$6.0
$6.8
$6.8
$6.2
1,976
1,477
728
1,531
1,144
564
(h)
(h)
( h)
$34.9
$24.7
$10.7
$30.9
$20.7
$7.7
$33.8
$23.6
$9.9
$34.1
$23.9
$10.1
$30.6
$20.5
$6.7
$25.7
$15.5
$2.9
$27.3
$17.1
$3.9
$27.3
$17.1
$3.9
Transfers
Minimum Wages (MW) c:
to Agency-Employed Workers ......................................
to Self-Employed Workers ............................................
Travel Wages .......................................................................
Overtime Scenarios:
OT 1 d ............................................................................
OT 2 e ............................................................................
OT 3 f ............................................................................
Total Transfers by Scenario
MW + Travel + OT 1 ............................................................
MW + Travel + OT 2 ............................................................
MW + Travel + OT 3 ............................................................
$281.3
$210.2
$103.7
$322.3
$240.9
$118.8
Deadweight Loss ($ millions)
MW + Travel + OT 1 ............................................................
MW + Travel + OT 2 ............................................................
MW + Travel + OT 3 ............................................................
$0.116
$0.065
$0.016
$0.132
$0.074
$0.018
Total Cost of Regulations g
RF + HC + DWL(OT 1) ........................................................
RF + HC + DWL(OT 2) ........................................................
RF + HC + DWL(OT 3) ........................................................
$20.8
$20.7
$18.6
$4.3
$4.2
$4.0
Disemployment (number of workers)
MW + Travel + OT 1 ............................................................
MW + Travel + OT 2 ............................................................
MW + Travel + OT 3 ............................................................
1,086
812
400
1,184
885
436
Benefits from Reduced Turnover b g
OT 1 .....................................................................................
OT 2 .....................................................................................
OT 3 .....................................................................................
$40.3
$30.2
$14.9
Net Benefits g
OT 1 .....................................................................................
OT 2 .....................................................................................
OT 3 .....................................................................................
$19.6
$9.4
¥$3.7
a These
costs represent a range over the nine-year span. Costs are lowest in Year 2 and highest in Year 10 so these two values are reported.
use three scenarios under which agencies redistribute overtime hours to either current part-time workers or new hires to manage overtime costs: 40 percent of overtime hours are redistributed under OT Scenario 1, 60 percent under OT Scenario 2, and 90 percent under OT Scenario 3. Of this redistributed overtime, various percentages are redistributed to part-time workers and new hires: New hires constitute 30 percent
of redistributed hours under OT Scenario 1 (12 percent of total overtime), 20 percent under OT Scenario 2 (12 percent of total), and 10 percent
under OT Scenario 3 (9 percent of total).
c 2011 statistics on HHA and PCA wages indicate that few workers, if any, are currently paid below minimum wage (i.e., in no state is the 10th
percentile wage below $7.25 per hour). See the BLS Occupational Employment Statistics, 2011 state estimates. Available at: http://stats.bls.gov/
oes/.
d Of the total, about 31 percent (e.g., $66.6 million in Year 1) is attributable to IHSS direct care workers; 30 percent of IHSS costs (e.g., $20.0
million in Year 1) are included in the turnover and deadweight loss analyses.
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e Of the total, about 31 percent (e.g., $44.4 million in Year 1) is attributable to IHSS direct care workers; 30 percent of IHSS costs (e.g., $13.3
million in Year 1) are included in the turnover and deadweight loss analyses.
f Of the total, about 31 percent (e.g., $11.1 million in Year 1) is attributable to IHSS direct care workers; 30 percent of IHSS costs (e.g., $3.3
million in Year 1) are included in the turnover and deadweight loss analyses.
g Results based on the combination of overtime scenario and hiring costs presented under Hiring Costs.
h Annual average.
i Excludes paperwork burden, estimated in Section V.
Note that there are additional impacts
that are not presented in this table
because they could not be quantified;
these include impacts such as the
opportunity cost of managerial time to
optimize worker schedules to reduce or
avoid overtime hours or reduce travel
time. The Department also
acknowledges the potential costs to
direct care workers who may receive
fewer hours from their home care
agency employers and therefore will
have to search for and coordinate
multiple jobs for an increased number of
consumers. The Department anticipates
that these impacts will likely in the long
run be small compared to the impacts
presented in Table 1. First, most
impacted employers already employ
workers subject to the FLSA and are
familiar with scheduling such workers.
Second, high industry turnover rates
suggest that agencies frequently have
openings and are looking to hire new
workers. Furthermore, if most agencies
respond to the rule by reducing
overtime hours worked by current
employees and hiring additional
employees to work those hours, the
number of job openings can be expected
to increase. Thus, the Department
expects direct care workers who lose
hours at one agency will readily be able
to find an opening at another agency.
Likewise, the Department has not
attempted to quantify potential benefits
such as decreased injury rates, or
transfers such as the change in reliance
on public assistance.
Also not captured in Table 1 are the
special circumstances surrounding
entities that administer Medicaidfunded or other publicly funded
programs that would, under the Final
Rule, be subject to the provisions
relating to third-party employers
because they qualify as employers under
the FLSA’s economic realities test (as
described in the section of this preamble
discussing joint employment). For
example, in the short run, continuation
of direct care workers’ current work
schedules that exceed 40 hours per
week may be infeasible for such entities,
thus potentially resulting in reduced
continuity of care for high-needs
consumers. Other effects may also result
from this Final Rule. Such
consequences may be avoidable in the
long run if Medicaid and other relevant
programs adapt to allow overtime
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billing. Further, as discussed elsewhere
in this preamble, long-term continuity
of care may improve as a result of this
Final Rule due to both decreased
turnover rates and reduced disruption,
because another worker already familiar
to the consumer is available as a
substitute when the primary direct care
worker is temporarily unavailable.
Regulatory Alternatives
The Department believes it has
chosen the most effective option that
updates and clarifies the Application of
the Fair Labor Standards Act to
Domestic Service Final Rule. Based on
the commenters’ suggestions, among the
options considered by the Department
but not described in the NPRM, the least
restrictive option was taking no
regulatory action. A more restrictive
option was to add to the provisions
being finalized a limit on the personal
care services that can be performed.
NELP and the National Council on
Aging among others suggested that the
Department require an initial
assessment be conducted to determine if
a direct care worker is performing
primarily fellowship and protection for
the consumer. They suggested that if it
is found that the direct care worker is
not engaged primarily in fellowship and
protection, then the subsequent list of
personal care services should not be
considered at all and the worker should
not be considered exempt. The National
Council on Aging further expressed the
view that toileting, bathing, driving, and
tasks involving positioning and/or
transfers be excluded from the list of
permissible duties. ANCOR suggested
that the list be made exclusive and
include fewer tasks. The commenter
added that the Department should
consider providing an allowance for
household work defined as no more
than one hour in a seven day period.
AFSCME expressed the view that those
workers who regularly engage in
mobility tasks should not be considered
companions. The Department carefully
considered such views in the
development of this Final Rule. The
Department ultimately settled on a
broader set of permissible care services
than initially proposed as well as less
restrictive than options suggested by
some of these commenters. The
Department views inclusion of
assistance with activities of daily living
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and instrumental activities of daily
living as a balanced approach that
allows for some delivery of care services
by the direct care worker under the
companionship services exemption
while at the same time recognizing and
making an effort to address the health
and safety concerns of direct care
workers and consumers. Taking no
regulatory action does not address the
Department’s concerns discussed above
under Need for Regulation. The
Department found the most restrictive
option to be overly burdensome on
business.
Pursuant to the OMB Circular A–4,
the Department considered several other
approaches to accomplish the objectives
of the rule and minimize the economic
impact on home care entities and other
employers, including those suggested in
comments on the NPRM as well as more
traditional approaches.
Many commenters indicated a
concern with the cost of overtime
compensation and less of a concern
with the FLSA’s minimum wage
provision. See e.g., Henry Chazuad,
ANCOR. One suggested alternative was
to maintain the exemption from
overtime compensation for third party
employers of live-in workers, consistent
with the laws in at least three states
(Michigan, Nevada, and Washington).
The Department recognizes that this
approach would represent incremental
progress towards narrowing the
exemption for this set of workers and
result in a very small economic impact
on the industry from the Final Rule.
However, the Department believes this
approach is inconsistent with
Congress’s intent to provide FLSA
protections to domestic service workers,
while providing a narrow exemption for
live-in domestic service workers. It is
apparent from the legislative history
that the 1974 amendments were
intended to expand coverage to include
more workers, and were not intended to
roll back coverage for employees of
third parties who already had FLSA
protections as employees of covered
enterprises. Moreover, this approach
does not support the objectives of the
rule or the purposes of the overtime
requirements of the FLSA, one of which
is to spread employment.
Another alternative suggested was to
allow employers to exclude some
nighttime hours from ‘‘hours worked’’ to
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reduce the potential burden of overtime
compensation to workers providing care
on higher hour cases (12- or 24-hour
shifts). For example, Minnesota and
North Dakota state laws exclude up to
eight hours from the overnight hours
(from 10:00 p.m. to 9:00 a.m.) from the
‘‘hours worked’’ for purposes of
minimum wage and overtime
calculations. This Final Rule does not
include revisions to the longstanding
regulations applicable to all FLSAcovered employers addressing when
sleep time constitutes hours worked and
when sleep time may be excluded from
hours worked. Therefore, employers
still have the opportunity to exclude
bona fide sleep hours; however, there
would be no basis under the FLSA for
treating sleep time hours differently for
domestic service workers than for other
employees. The Department’s existing
regulations already provide for the
exclusion of sleep time from
compensable hours worked under
certain conditions. As previously
discussed in the Hours Worked section
of this preamble, under the
Department’s existing regulations, an
employee who is required to be on duty
for less than 24 hours is working even
though he or she is permitted to sleep
or engage in other personal activities
when not busy. See § 785.21. Where an
employee is required to be on duty for
24 hours or more, the employer and
employee may agree to exclude a bona
fide meal period or a bona fide regularly
scheduled sleeping period of not more
than eight hours from the employee’s
hours worked under certain conditions.
See § 785.22. The conditions for the
exclusion of such a sleeping period from
hours worked are (1) that adequate
sleeping facilities are furnished by the
employer, and (2) that the employee’s
time spent sleeping is usually
uninterrupted. When an employee must
return to duty during a sleeping period,
the length of the interruption must be
counted as hours worked. If the
interruptions are so frequent that the
employee cannot get at least five hours
of sleep during the scheduled sleeping
period, the entire period must be
counted as hours worked. Id.; see also
Wage and Hour Opinion Letter, 1999
WL 1002352 (Jan. 7, 1999). Where no
expressed or implied agreement exists
between the employer and employee,
the eight hours of sleeping time
constitute compensable hours worked.
This description of these longstanding
rules in the Final Rule’s preamble is
provided to help to educate small
business employers regarding their
ability to exclude sleep time from hours
worked. See § 785.22. However, because
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there would be no basis under the FLSA
for treating sleep time hours differently
for domestic service workers than for
other employees, the commenters’
suggestion was not adopted.
Another approach suggested would be
to calculate overtime compensation
based on a different rate of pay than
straight time; for example, under New
York state law overtime hours are paid
at one and a half times the minimum
wage rather than the worker’s regular
rate of pay for some workers. Again,
there is no legal basis in the FLSA for
calculating overtime compensation at a
rate other than one-and-one-half times
the employee’s regular rate of pay.
Moreover, the Department does not
believe that this supports the objective
of the rule or the spread of employment
under the Act. In terms of economic
burden, this alternative could reduce
the cost to employers of overtime by
approximately 25 percent under OT
Scenario 2; however, 15 states currently
require payment of overtime at time and
a half of regular pay with no evidence
of significant economic burden. Quoting
the Michigan Olmstead Coalition ‘‘we
have seen no evidence that access to or
the quality of home care services are
diminished by the extension of
minimum wage and overtime protection
to home care aides in this state almost
six years ago.’’
Another alternative discussed by
commenters is to exclude travel time
from hours worked in order to decrease
the burden of overtime compensation.
However, the comments provided little
justification for a departure from the
general FLSA principles applicable to
all employers on the compensability of
travel time set forth in 29 CFR 785.33.41. Excluding travel time that is ‘‘all in
the day’s work’’ from compensable
hours worked, for example, would be
inconsistent with the Portal-to-Portal
Act amendment to the FLSA and
inconsistent with how such travel time
is treated for all other employees.
§§ 785.38; 790.6. Furthermore, the
analysis above suggests that travel time
adds a relatively small amount to the
burden of this rulemaking.
The Department also considered
several traditional alternatives. Those
alternatives include:
• Informational measures rather than
regulation. The Department has made a
variety of informational and educational
assistance materials related to this Final
Rule available on its Web site and will
add to those materials during the period
in which employers are reviewing and
revising their policies and practices to
come into compliance with this Final
Rule. In addition, WHD offices
throughout the country are available to
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provide compliance assistance at no
charge to employers. The Department
has planned robust outreach efforts and
will make every effort to work with
employers to ensure compliance.
• Differing requirements based on
size of firm or geographic region. The
FLSA sets a floor below which
employers may not pay their employees.
To establish differing compliance
requirements for businesses based on
size or geographic location would
undermine this important purpose of
the FLSA. The Department makes
available a variety of resources to
employers for understanding their
obligations and achieving compliance.
Therefore the Department declines to
establish differing compliance
requirements based on the size or
location of a business.
• Use of performance rather than
design standards. Under the Final Rule,
the employer may achieve compliance
through a variety of means. The
employer may: hire additional workers
and/or spread employment over the
employer’s existing workforce to ensure
employees do not work more than 40
hours in a workweek, and/or pay
employees time and one-half for time
worked over 40 hours in a workweek. In
addition, the FLSA recordkeeping
provisions require no particular order or
form of records to be maintained so
employers may create and maintain
records in the manner best fitting their
situation. The Department makes
available a variety of resources to
employers for understanding their
obligations and achieving compliance.
• Compliance periods of various
lengths. The Department has set an
effective date for this Final Rule of
January 1, 2015. The Department
believes this delayed effect date takes
into account the complex federal and
state systems that are a significant
source of funding for home care work,
and the needs of the diverse parties
affected by this Final Rule (including
consumers, their families, home care
agencies, direct care workers, and local,
state, and federal Medicaid programs)
by providing such parties, programs and
systems time to adjust. The Department
considered application of a 60-day
delayed effective date, the minimum
legally permitted effective date for a
major rule (Congressional Review Act, 8
U.S.C. 801(a)(3)). A 60-day delayed
effective date would most expeditiously
extend the FLSA’s protections to
workers affected by this rule; however,
the Department was concerned that
such an effective date would not be
sufficient for Federal, state, and local
agencies, as well as private entities, to
implement new protocols, apply for
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changes to their Medicaid programs,
adjust funding streams, and legislatively
address budgetary and programmatic
changes. The Department also
considered a delayed effective date of
two years. While a two-year delayed
effective date would, in the
Department’s view, provide more than
ample time for Federal, state, and local
entities to complete any necessary
programmatic changes, the workforce
affected by this rule would continue to
be without the wage protections
available to most other workers,
contributing to high turnover rates
which negatively impact continuity of
care. The Department believes that the
January 1, 2015 effective date for this
rule appropriately balances the needs of
workers and the consumers utilizing
their services.
B. State Law Requirements
There are numerous state laws
pertaining to direct care workers; as the
industry has grown and expanded over
the past 38 years the laws have
increased in number and complexity to
match the demands placed on workers.
The State Medicaid Manual requires
states to develop qualifications or
requirements (such as background
checks, training, age, supervision,
health, literacy, or education, or other
requirements) for Medicaid-financed
personal care attendants. These state
programs can each have multiple
delivery models, including agencydirected or consumer-directed with care
given by agencies or independent
providers. These delivery models are
not necessarily mutually exclusive. In
general, for the purposes of this
analysis, we refer to independent
providers as workers who are hired
directly by the consumer, and therefore
they are not counted in the statistics on
home care providers used as the basis
for this analysis, with the exception of
independent providers who advertise
their availability through state registries.
When Congress created the
companionship services exemption in
1974, a ‘‘companion’’ was likely to be a
family member or friend with the time
for and interest in providing support to
an elderly family member or friend or a
family member or friend with a
disability. A direct care worker today
must meet a more extensive and
60509
expanding set of criteria—such as
background checks and training—to
provide services in most states. A 2006
report by the HHS Office of the
Inspector General (OIG) found that
states have established multiple sets of
worker requirements that often vary
among the programs within a state and
among the delivery models within
programs, resulting in 301 sets of
requirements nationwide.54 Four of the
consumer-directed programs in the OIG
review had no attendant requirements.
Furthermore, states define these
requirements differently, and specify
different combinations of requirements
in different programs. The most
common requirements include:
background checks; training;
supervision; minimum age; health;
education/literacy; and other, such as
meeting state motor vehicle and
licensure requirements if providing
transportation.
The number of states that included
each requirement in at least one
program and the number of state
program sets that include each
requirement are summarized in Table 2.
TABLE 2—SIX MOST COMMON ATTENDANT REQUIREMENTS
Number of States that
utilized requirement in at
least one program
Requirement
Background Checks .................................................................................................................
Training ....................................................................................................................................
Age ...........................................................................................................................................
Supervision ..............................................................................................................................
Health .......................................................................................................................................
Education/Literacy ...................................................................................................................
Number of sets
containing
requirement
(of 301 sets)
50
46
42
43
39
31
245
227
219
198
162
125
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Source: DHSS OIG, 2006. p. 9.
States’ laws also vary in whether they
extend minimum wage and overtime
provisions to direct care workers. In
many states ‘‘companions’’ are not
explicitly named in the regulations, but
workers providing such services often
fall under those regulations that apply
to domestic service employees.
Fifteen states extend minimum wage
to most, and overtime coverage to some,
direct care workers who would
otherwise be excluded under the current
Federal regulations: Colorado, Hawaii,
Illinois, Maine, Maryland,
Massachusetts, Michigan, Minnesota,
Montana, Nevada, New Jersey, New
York, Pennsylvania, Washington, and
Wisconsin. However, in some states
certain types of these workers remain
exempt, such as those employed
directly by households or by non-profit
organizations. In Illinois, 30,000
personal care and home health aide
workers in the Home Services Program
under the Illinois Department of Human
Services do not receive overtime
compensation. Additionally, New
York’s overtime law provides that
workers who are exempt from the FLSA
and employed by a third party agency
need only be paid time and one-half the
minimum wage (as opposed to time and
one-half of the worker’s regular wage).55
Minnesota’s overtime provision applies
only after 48 hours of work.
Six states (Arizona, California,
Nebraska, North Dakota, Ohio, and
South Dakota) and the District of
Columbia extend minimum wage, but
not overtime, protection to direct care
workers. There are again some
exemptions for those workers employed
directly by households or who live in
the household. Per Wage Order 15 in
California, some direct care workers in
California receive overtime; others are
exempt from overtime requirements as
‘‘personal attendants’’ based upon the
duties they perform; all receive
minimum wage.
Twenty-nine states do not include
direct care workers in their minimum
wage and overtime provisions: Alabama,
54 U.S. Department of Health and Human Services
(HHS) Office of the Inspector General (OIG). (2006).
States’ Requirements for Medicaid-Funded Personal
Care Service Attendants, available at: http://
oig.hhs.gov/oei/reports/oei-07–05–00250.pdf.
55 Under the 2010 Domestic Workers Bill of
Rights, most New York direct care workers
employed directly by the household in which they
work receive full time-and-a-half overtime
protections. The law applies to third party
employers if any household services, such as
cleaning, are performed.
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Alaska, Arkansas, Connecticut,
Delaware, Florida, Georgia, Idaho,
Indiana, Iowa, Kansas, Kentucky,
Louisiana, Mississippi, Missouri, New
Hampshire, New Mexico, North
Carolina, Oklahoma, Oregon, Rhode
Island, South Carolina, Tennessee,
Texas, Utah, Vermont, Virginia, West
Virginia, and Wyoming.56
Of the 21 states plus the District of
Columbia that extend the minimum
wage to at least some direct care
workers, 12 have a state minimum wage
that is higher than the current federal
minimum wage of $7.25 an hour.57
These state laws are summarized in
Table 3.
TABLE 3—STATE MINIMUM WAGE AND OVERTIME COVERAGE OF NON-PUBLICLY EMPLOYED DIRECT CARE WORKERS
State minimum wage a
MW
OT
Neither
AL ...........
AK ..........
AZ ..........
....................................
$7.75 .........................
$7.80 .........................
................
................
x
................
................
................
x
x
................
AR ..........
CA ..........
$6.25 .........................
$8.00 .........................
................
x
................
................
x
................
CO ..........
$7.78 .........................
x
x
................
CT ..........
DE ..........
DC ..........
$8.25 .........................
$7.25 .........................
$8.25 .........................
................
................
x
................
................
................
x
x
................
FL ...........
GA ..........
HI ...........
$7.79 .........................
$5.15 .........................
$7.25 .........................
................
................
x
................
................
x
x
x
................
ID ...........
IL ............
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State
$7.25 .........................
$8.25 .........................
................
x
................
x
x
................
IN ...........
IA ............
KS ..........
KY ..........
LA ...........
ME ..........
$7.25 .........................
$7.25 .........................
$7.25 .........................
$7.25 .........................
....................................
$7.50 .........................
................
................
................
................
................
x
................
................
................
................
................
x
x
x
x
x
x
................
56 National Employment Law Project (NELP).
2012. WHD–2011–0003–9452, Fair Pay for Home
Care Workers, available at: http://www.nelp.org/
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Analysis and citations b
Minimum wage but no overtime coverage for companions as defined
in the FLSA. No state overtime law. See Ariz. Rev. Stat. Ann.
§§ 23–362, 23–363; see also Office of the Attorney General of the
State of Arizona, Opinion No. I07–002 (Feb. 7, 2007).
All companions as defined in the FLSA are entitled to minimum wage.
Privately employed direct care workers who are classified as ‘‘personal attendants’’ employed by either ‘‘a private householder or by
any third party employer recognized in the healthcare industry to
work in a private household’’ and paid family caregivers are exempt
from overtime requirements. Whether home care employees are exempt ‘‘personal attendants’’ is fact-specific and based upon the duties performed by the workers. Generally home care employees who
are part of California’s In-Home Supportive Services program are
not entitled to overtime.
Industrial Welfare Commission Order No. 15–2001; see also State of
California, Department of Industrial Relations, Opinion Ltr. ‘‘Interpretation of IWC Wage Order 15: Definition of ‘personal attendant’ ’’
(Nov. 23, 2005).
Minimum wage and overtime coverage for third party-employed direct
care workers who do work beyond Colorado’s definition of ‘‘companion.’’ Colorado’s definition of ‘‘companion’’ is much narrower
than the FLSA definition. Companions may not help to bathe and
dress the person, do any amount of housekeeping, or remind the
person to take medication. People who do those tasks are more
than just ‘‘companions’’ they are ‘‘personal care’’ attendants. Personal care attendants are entitled to minimum wage and overtime.
However, PCAs employed directly by private households are exempt from minimum wage and overtime. Colorado Minimum Wage
Order No. 26 § 5; 7 Colo. Code Regs. § 1103–1:5.
Minimum wage for companions as defined in the FLSA. D.C. Mun.
Regs. tit. 7, § 902.1, 902.3, 902.4 (West 2011).
Minimum wage and overtime coverage for companions as defined in
the FLSA, but exemption for those employed directly by private
households. Haw. Rev. Stat. § 387–1.
Minimum wage and overtime coverage for any person whose primary
duty is to be a companion for individual(s) who are aged or infirm or
workers whose primary duty is to perform health care services in or
about a private home. The 30,000 personal care and home health
aide workers in the Home Services Program under the Illinois Department of Human Services do not receive overtime compensation.
Those employed solely by private households may be exempt under
a general exemption for employers with fewer than four employees.
820 Ill. Comp. Stat. § 105/3(d); Ill. Adm. Code § 210.110.
Minimum wage and overtime coverage for all companions as defined
in the FLSA. No relevant exemptions. Me. Rev. Stat. Ann. tit. 26,
§§ 663, 664.
page/-/Justice/2011/
FairPayforHomeCareWorkers.pdf?nocdn=1.
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57 U.S. Department of Labor (DOL). 2013.
Minimum Wage, available at: http://www.dol.gov/
whd/minwage/america.htm#Consolidated.
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60511
TABLE 3—STATE MINIMUM WAGE AND OVERTIME COVERAGE OF NON-PUBLICLY EMPLOYED DIRECT CARE WORKERS—
Continued
State minimum wage a
MW
OT
Neither
Analysis and citations b
MD .........
$7.25 .........................
x
x
................
MA ..........
$8.00 .........................
x
x
................
MI ...........
$7.40 .........................
x
x
................
MN .........
$6.15 or $5.25 for
employers grossing
under $625,000 per
year.
....................................
$7.35 .........................
$7.80 .........................
x
x
................
Minimum wage coverage for all companions as defined in the FLSA.
Overtime coverage for most direct care workers but exemption for
workers employed by non-profit agencies that provide ‘‘temporary
at-home care services’’. Md. Code Ann., Lab. & Empl. § 3–415.
Minimum wage and overtime coverage for all companions as defined
in the FLSA. No relevant exemptions. Mass. Gen. Laws Ch. 151,
§ 1.
Minimum wage and overtime coverage for companions as defined in
the FLSA, but exemption for live-in workers. Mich. Comp. Laws
§ 408.394(2)(a). Exemption for workers employed solely by private
household as a result of exemption for employer with fewer than two
employees. Mich. Comp. Laws § 408.382(c).
Minimum wage and overtime coverage after 48 hours for all companions as defined in the FLSA, but nighttime hours where companion
is available to provide services but does not actually do so need not
be compensated. Minn. Stat. § 177.23(11).
MS ..........
MO .........
MT ..........
................
................
x
................
................
x
x
x
................
NE ..........
$7.25 .........................
x
................
................
NV ..........
$8.25 c .......................
x
x
................
NH ..........
NJ ...........
$7.25 .........................
$7.25 .........................
................
x
................
x
x
................
NM .........
NY ..........
$7.50 .........................
$7.25 .........................
................
x
................
x
x
................
NC ..........
ND ..........
$7.25 .........................
$7.25 .........................
................
x
................
................
x
................
OH ..........
$7.85 .........................
x
................
................
OK ..........
OR ..........
PA ..........
sroberts on DSK5SPTVN1PROD with RULES
State
$7.25 .........................
$8.95 .........................
$7.25 .........................
................
................
x
................
................
x
x
x
................
RI ...........
SC ..........
SD ..........
$7.75 .........................
....................................
$7.25 .........................
................
................
x
................
................
................
x
x
................
TN
TX
UT
VT
VA
....................................
$7.25 .........................
$7.25 .........................
$8.60 .........................
$7.25 .........................
................
................
................
................
................
................
................
................
................
................
x
x
x
x
x
..........
..........
..........
..........
..........
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Minimum wage and overtime coverage for companions as defined in
the FLSA, but exemption for those employed directly by private
households. Mont. Code. Ann. § 39–3–406(p).
Minimum wage but no overtime coverage for companions as defined
in the FLSA. No state overtime law. De facto exemption for most
households as a result of general exemption for employers with
fewer than four employees. Neb. Rev. Stat. §§ 48–1202, 48–1203.
Minimum wage and overtime coverage for companions as defined in
the FLSA, but exemption for live-in workers. Also, business enterprises with less than $250,000 annually in gross sales volume need
not pay overtime. Nev. Rev. Stat. § 608.250(2)(b).
Minimum wage and overtime coverage for all companions as defined
in the FLSA. No relevant exemptions. N.J. Stat. Ann.§ 34:11–56a et
seq.
Minimum wage coverage for all companions as defined in the FLSA.
N.Y. Labor Law § 651(5). There is overtime coverage for all companions but those employed by third party agencies receive overtime at a reduced rate of 150% of the minimum wage (rather than
the usual 150% of their regular rate of pay). N.Y. Labor Law
§§ 2(16), 170; N.Y. Comp. Codes R. & Regs. tit. 12, § 142–2.2.
Overtime coverage for live-in workers after 44 hours/week (rather
than the usual 40 hours) at the same rates detailed above. Id.
Minimum wage but no overtime coverage for companions as defined
in the FLSA. However, companions who are certain first or seconddegree relatives of the person receiving care do not receive minimum wage. Additionally, nighttime hours where companion is available to provide services but does not actually do so need not be
compensated. N.D. Cent. Code § 34–06–03.1.
Minimum wage but not overtime coverage for companions as defined
in the FLSA. Ohio Rev. Code Ann. § 4111.03(A), § 4111.14 (West
2011). Additional overtime exemptions for live-in workers. Id.
§ 4111.03(D)(3)(d).
Minimum wage and overtime coverage for companions as defined in
the FLSA, but exemption for those employed solely by private
households. Pa. Stat. Ann. tit. 43, § 333.105(a)(2). Bayada Nurses
v. Commonwealth of Pennsylvania, 8 A.3d 866 (Pa. 2010).
Minimum wage but no overtime coverage for companions as defined
in the FLSA. No state overtime law. S.D. Codified Laws §§ 60–11–3,
60–11–5.
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TABLE 3—STATE MINIMUM WAGE AND OVERTIME COVERAGE OF NON-PUBLICLY EMPLOYED DIRECT CARE WORKERS—
Continued
State
State minimum wage a
MW
OT
Neither
Analysis and citations b
WA .........
$9.19 .........................
x
x
................
Washington minimum wage and overtime coverage for most companions as defined in the FLSA, but exemption for live-in workers.
Wash. Rev. Code § 49.46.010(5)(j).
WV .........
WI ...........
$7.25 .........................
$7.25 .........................
................
x
................
x
x
................
WY .........
$5.15 .........................
................
................
x
Minimum wage and overtime coverage for most companions as defined in the FLSA, but overtime exemption for those employed directly by private households, Wis. Admin. Code § 274.015, and
those employed by non-profit organizations. Wis. Admin. Code
§§ 274.015, 274.01. Companions who spend less than 15 hours a
week on general household work and reside in the home of the employer are also exempt from minimum wage. Wis. Admin. Code
§ 272.06(2).
Abbreviations: MW = Minimum Wage, OT = Overtime, FLSA = Fair Labor Standards Act.
Sources: a DOL, 2013; b NELP, 2011. c Nevada minimum wage is $7.25 per hour for employees to whom qualifying health benefits have been
made available by the employer.
C. Data Sources
The primary data services used by the
Department to estimate the number of
workers, establishments, and customers
likely to be impacted by the rule
include:
sroberts on DSK5SPTVN1PROD with RULES
2011 Bureau of Labor Statistics (BLS)
Occupational Employment Survey,
employment and wages by state for SOC
codes 39–9021 (Personal Care Aides) and 31–
1011 (Home Health Aides);
2011 BLS Quarterly Census of
Employment and Wages, for NAICS 6216 and
62412;
2010 BLS National Employment Matrix;
2007 Statistics of U.S. Businesses, for
NAICS 6216 and 62412; and
2007 Economic Census, by state for
NAICS 6216 and 62412.
BLS does not have a separate
Standard Occupational Classification
(SOC) code for ‘‘Companions;’’ instead,
workers who provide companionship
services are often classified as Personal
Care Aides (PCAs; SOC 39–9021).
However, considerable overlap exists
between the duties of PCAs and Home
Health Aides (HHAs; SOC 31–1011).
While HHAs are trained to provide more
medicalized care (e.g., wound care) than
PCAs, they may also provide personal
care services and assistance with
ADLs.58 The Seventh Circuit Court of
Appeals has found home health aides to
qualify for the companionship services
exemption. Cox v. Acme Health Servs,
Inc., 55 F.3d 1304 (7th Cir. 1995).
Therefore, the Department selected
these two occupations to represent the
universe of potentially affected direct
care workers.
For the purposes of this analysis, the
Department further assumed that all
58 See http://www.bls.gov/oes/current/
oes399021.htm and http://www.bls.gov/oes/current/
oes311011.htm; most recently accessed May 18,
2013.
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HHAs and PCAs included in the
analysis currently are treated as exempt
under the companionship services
exemption, but that none of them will
qualify for the companionship services
exemption under this Final Rule.
Making these assumptions is likely to
result in an overestimate of the
projected costs and other impacts of the
rule. First, although the Department is
able to make some adjustments to the
data to better identify the potentially
affected worker population (e.g.,
including only HHAs and PCAs
employed in states with no minimum
wage and overtime compensation laws
applicable to workers who provide
companionship services to individuals
in their homes rather than facilities and
including only the percentage of HHAs
and PCAs who likely work in private
homes), it has insufficient data to
determine how many direct care
workers who are treated as exempt
under the current companionship
services exemption will qualify for
exemption under the revised definition
of companionship services. Because of
this data limitation, and by assuming
that 100 percent of HHAs and PCAs
included in the analysis will no longer
qualify for the exemption, the
Department has overestimated the
number of direct care workers who are
currently not protected by the Act’s
minimum wage and overtime
compensation provisions but who will
receive these protections as a result of
this rule.
An additional limitation of this set of
data sources stems from the fact that the
Department’s best estimate of agencyemployed direct care workers is based
on the 2011 BLS Occupational
Employment Statistics, and its best
estimate of independent providers
directly employed by families is based
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on the 2010 BLS National Employment
Matrix. The Occupational Employment
Statistics (OES) is employer based, and
does not collect data from the selfemployed. The National Employment
Matrix (NEM) obtains estimates on the
self-employed from the Current
Population Survey. However, it is not
possible to match the OES estimates by
subtracting the estimated number of
self-employed workers from the NEM.
Because these two estimates cannot be
completely reconciled, the Department
uses each source as the best estimate for
one segment of the labor market and
acknowledges there is some
inconsistency between the two. In
practice, the effect of that inconsistency
on the analysis is likely to be quite
small. In addition, the Congressional
Research Service performed an analysis
of the potential number of workers
affected by the NPRM solely using data
from the Current Population Survey
Annual Social and Economic
Supplement that resulted in comparable
estimates of the numbers of workers
affected by the minimum wage and
overtime provisions.59
D. Consumers and Demand for Services
Demand for home care services is
anticipated to continue to grow in the
next few decades with the aging of the
‘‘baby boomer generation.’’ According to
PHI:
Nearly one out of four U.S. households
provides care to a relative or friend aged 50
or older and about 15 percent of adults care
for a seriously ill or disabled family member.
Over the next two decades the population
59 Congressional Research Service. Memorandum
dated March 2, 2012, titled ‘‘The Fair Labor
Standards Act: Proposed Changes to the
Exemptions for Employees Who Provide
Companionship Services and Live-In Domestic
Workers,’’ pgs. 11 and 13.WHD–2011–0003–7820.
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While many consumers of home care
services are elderly, about two-fifths of
those in need of these services are under
65 and include those with varying
degrees of mental, physical, or
developmental disabilities. This group
Agency Model
Under the agency model a third party
provider of home care services (usually
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60 2011
Statistical Abstract, U.S. Census Bureau.
Alliance for Caregiving and the
American Association of Retired Persons. (1997).
Family Caregiving in the U.S.: Findings from a
National Study. Available at: http://assets.aarp.org/
rgcenter/il/caregiving_97.pdf. See also Center for
Health Care Strategies, Inc. Medcaid-funded Longterm Care: Toward more Home- and Communitybased Options. May 2010. Available at: http://
www.chcs.org/usr_doc/LTSS_Policy_Brief_.pdf.
61 National
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of consumers is also anticipated to grow
rapidly as more individuals opt for
home-based care over institutional
care.62 It is estimated that the demand
for direct care workers will grow to
approximately 5.7 to 6.6 million
workers in 2050, an increase in the
current demand for workers of between
3.8 and 4.6 million (200 percent and 242
percent respectively).63 The home care
industry has grown significantly over
the past decade and is projected to
continue growing rapidly; for example:
The number of establishments in Home
Health Care Services (HHCS) grew by 101
percent between 2001 and 2011; during that
same period, the number of establishments in
Services for the Elderly and Persons with
Disabilities (SEPD) grew by 466 percent.64
Between 2010 and 2020 the number of
home health aides is projected to increase by
69 percent and the number of personal care
aides by 70 percent.65
Employers
This section focuses on the employers
of workers who are currently classified
as exempt under the companionship
services exemption and common
sources of funding for the services they
provide; the next section describes the
workers and the work they do. Services
in the home care industry are provided
through two general delivery models:
Agencies and consumer-directed (which
often use independent providers and
family caregivers).
Figure 2 provides a visual overview of
the home care industry and the two
primary models for service provision,
which are discussed in more detail in
the sections that follow.
a home health care company) employs
the direct care workers and is
responsible for ensuring that services
authorized by a public program or
contracted for by a private party are in
62 PHI, 2003. The Personal Assistance Services
and Direct-Support Workforce: A Literature Review.
Available at: http://phinational.org/sites/
phinational.org/files/clearinghouse/CMS_Lit_Rev_
FINAL_6.12.03.pdf.
63 United States Department of Health and Human
Services (2003). The Future Supply of Long-Term
Care Workers in Relation to the Aging Baby Boom
Generation: Report to Congress, p. v. Available at:
http://aspe.hhs.gov/daltcp/reports/ltcwork.pdf.
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64 Bureau of Labor Statistics, U.S. Department of
Labor, Quarterly Census of Employment and Wages
(QCEW). NAICS 6216 and 62412. Available at
http://www.bls.gov/cew/.
65 Bureau of Labor Statistics, U.S. Department of
Labor, Occupational Outlook Handbook, 2012–13
Edition, Home Health and Personal Care Aides.
Available at: http://www.bls.gov/ooh/healthcare/
home-health-and-personal-care-aides.htm (visited
February 15, 2013).
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over age 65 will grow to more than 70 million
people [the U.S. population 65 years and
older was estimated at 40 million in 2009 60].
Additionally, with significant increases in
life expectancy and medical advances that
allow individuals with chronic conditions to
live longer, the demand for caregiving is
expected to grow exponentially. The growth
in the demand for in-home services is further
amplified by an increasing preference for
receiving supports and services in the home
as opposed to institutional settings. This
emphasis has been supported by the
increased availability of publicly funded inhome services under Medicaid and Medicare
as an alternative to traditional and
increasingly costly institutional care.61
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fact delivered.66 There are currently
about 89,400 establishments providing
these services. These establishments
also provide a variety of other healthrelated services, in addition to or
concurrently with companionship
services. In the following paragraphs we
describe the industry as a whole since
detailed information by the service
provided is not available.
Agencies providing home care
services are covered by two primary
industries: Home Health Care Services
(HHCS, NAICS 6216), and Services for
the Elderly and Persons with
Disabilities (SEPD, NAICS 62412).67
HHCS is dominated by for-profit
agencies that are Medicare-certified and
depend on public programs for threequarters of its revenue.68 SEPD is a
rapidly growing industry that is
dominated by small enterprises. Table 4
provides an overview of these two
industries in terms of number of
establishments and estimated revenues.
The services provided by HHCS and
SEPD are paid for through either public
programs such as Medicaid, Medicare,
or state programs, or through private
sources such as private health insurance
or out-of-pocket payments. In 2009,
public programs (Medicare, Medicaid,
and other government spending)
accounted for about 75 percent of the
annual revenue dispersed to the home
health care services industry.69 70 A
review of funding sources by the CRS
confirmed this finding but attributed a
higher percentage of spending, 89
percent ($96.3 billion), to public payers
(including Medicare, Medicaid, and
other public programs such as the
Veterans Health Administration and
other state and local programs).71 Due to
data limitations we cannot identify
funding sources for individual services
provided (e.g., companionship services
only) and therefore the Department
analyzes funding for the establishments
as a whole.
TABLE 4—SUMMARY OF HHCS AND SEPD, 2011
Industry
Establishments
SEPD + HHCS ............................................................................................................................................
SEPD ...........................................................................................................................................................
HHCS ...........................................................................................................................................................
89,400
61,100
28,300
Estimated revenue
($ mil.)
90,800
32,600
58,000
Sources: BLS QCEW 2011; BLS NEM, 2010.
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These two industries primarily
employ workers as home health aides
(HHAs) and personal care aides (PCAs)
in addition to other occupations (e.g.,
nursing aides, orderlies, administrative
personnel). However, not all of the
HHAs and PCAs employed by these
agencies perform companionship
services as defined under the current
exemption; these agencies provide a
variety of health-related services that
may be delivered in private homes
(potentially companionship services) or
in public or private facilities (not
domestic service employment and
therefore not companionship services).
Additionally, the job duties of some
HHAs and PCAs make them ineligible
for the current companionship services
exemption. Simply put, only a fraction
of the workers employed by these
establishments are currently performing
companionship services and therefore
may see changes in their wages and/or
work schedules as a result of this Final
Rule.
Within these two industries there are
two broad employer types: Home health
care companies and private pay home
care companies. Home health care
companies provide medically-oriented
home health care services and nonmedical home care or personal
assistance services. Some of these
agencies are Medicare-certified; those
that avoid obtaining certification do so
because they do not provide the skilled
nursing care required by Medicare.
These companies also derive a
significant portion of their revenue from
the provision of medical devices to
customers.72
Private pay agencies are smaller,
emerging employers that primarily
provide non-medical care for consumers
and typically earn a large percentage of
their revenues from private sources (e.g.
out-of-pocket, long-term health
insurance).73 Although some agencies
characterized as private pay are
Medicare-certified, many do not provide
substantial skilled health care services
but instead focus on paramedical
services as well as support services such
as personal care, homemaker services,
and companionship services (as defined
by the current regulations).74 As of
2009, 28 states required private pay
agencies to be licensed, but due to the
variation in license requirements at least
some of those agencies are likely to be
Medicare-certified, or provide services
to Medicaid beneficiaries, causing
double-counting when identifying
private pay agencies.75 Based on a very
limited sample, perhaps one-third of
private pay agencies are not-for-profit.76
Private pay agencies comprise a small
fraction of the total market. Some
industry sources suggest the number of
private pay agencies might range from
15,000 to 17,000, but admit it is difficult
66 Seavey and Marquand, 2011, p. 26. Available
at: http://phinational.org/sites/phinational.org/
files/clearinghouse/caringinamerica-20111212.pdf.
67 These two industries are the primary employers
of workers who currently perform companionship
services; however, based on data reported by BLS
in the National Employment Matrix there are
approximately 33 other industries that also employ
these workers. Since these other industries employ
so few of the workers under consideration here,
they will be minimally affected by this Final Rule.
68 Seavey and Marquand, 2011, pgs 20–22. WHD–
2011–0003–3514. Also available at: http://
phinational.org/sites/phinational.org/files/clearing
house/caringinamerica-20111212.pdf.
69 Seavey and Marquand, 2011, pgs 22, 23. WHD–
2011–0003–3514. Also available at: http://
phinational.org/sites/phinational.org/files/clearing
house/caringinamerica-20111212.pdf.
70 Data is not available for the Services for the
Elderly and Persons with Disabilities industry.
71 The figures are based on CRS analysis of CMS
National Health Expenditure Account data for 2009.
Congressional Research Service. Memorandum
dated February 21, 2012, titled ‘‘Extending Federal
Minimum Wage and Overtime Protections to Home
Care Workers under the Fair Labor Standards Act:
Impact on Medicare and Medicaid,’’ p. 4. WHD–
2011–0003–5683.
72 Seavey and Marquand, 2011, p. 15. WHD–
2011–0003–3514. Also available at: http://
phinational.org/sites/phinational.org/files/clearing
house/caringinamerica-20111212.pdf.
73 Seavey and Marquand, 2011, p. 18, WHD–
2011–0003–3514. Also available at: http://
phinational.org/sites/phinational.org/files/clearing
house/caringinamerica-20111212.pdf.
74 Seavey and Marquand, 2011, page 18. BLS data
also support this: 2011, Employment and Wages
from Occupational Employment Statistics (OES)
survey, Multiple occupations for one industry:
Home Health Care Services (NAICS code 621600)
and Services for the Elderly and Persons with
Disabilities (NAICS code 624120). Available at:
http://data.bls.gov/oes/. Accessed April 20, 2012.
75 Leading Home Care. 2010. 2010 Private Pay in
Home Health Care Benchmarking and State of the
Industry Report, p. 17.
76 Leading Home Care. 2010. 2010 Private Pay in
Home Health Care Benchmarking and State of the
Industry Report, p. 22.
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to determine the overlap with other
types of home care agencies.77 Since in
some states private pay agencies do not
need to be licensed, it is difficult to
determine the exact size of this market.
Of these private pay agencies, 4,100 to
4,700 are franchises; however, this
segment of the market is growing
quickly, and perhaps fewer than 150
started operating before 2000.78
Therefore, the importance of this
segment of the industry may grow over
time.
Comments on the NPRM indicated
many private pay agencies do not
provide the types of skilled services that
Medicare reimburses and rely on private
pay for the majority of their revenues.79
BLS data supports this contention that
private pay agencies provide fewer
skilled care services; however, it is
difficult to determine the degree of
specialization in non-skilled support
care because data are unavailable to
determine how many of these agencies
are Medicare-certified or are associated
with Medicare-certified agencies.80 In
addition, the Companionship Services
Exemption Survey (CSES) showed that
private pay agencies rely on private pay
and in addition the survey showed over
50 percent of respondents provided
services covered by public payers such
as Medicare, Medicaid, and the
Department of Veterans Affairs (VA).
With a focus on less skilled home care
services, agencies in the private pay
sector generally appear to be more
reliant on private payers than home
health care companies are, but the
degree of reliance is unclear.81
77 Home Care Pulse. 2011. 2011 Annual Private
Duty Home Care Benchmarking Study. Highlights
Edition, p. 5; Leading Home Care. 2010. 2010
Private Pay in Home Health Care Benchmarking and
State of the Industry Report, p. 17. In addition, the
industry benchmark reports appear to double-count
licensed agencies; thus the number might be
significantly smaller.
78 Home Care Pulse. 2011. 2011 Annual Private
Duty Home Care Benchmarking Study. Highlights
Edition, pp. 5 and 21.
79 Private Duty Homecare Association. (2012).
Companionship Services Exemption Survey (CSES),
January 23. WHD–2011–0003–9175.
80 Bureau of Labor Statistics. May 2011.
Employment and Wages from Occupational
Employment Statistics (OES) survey, Multiple
occupations for one industry: Home Health Care
Services (NAICS code 621600) and Services for the
Elderly and Persons with Disabilities (NAICS code
624120). Available at: http://data.bls.gov/oes/.
Accessed April 20, 2012. Leading Home Care.
(2010). 2010 Private Pay in Home Health Care
Benchmarking and State of the Industry Report.
81 Comments on the NPRM indicated many
private pay agencies do not provide the types of
skilled services that are Medicare reimbursable and
rely on private pay for the majority of their
revenues (e.g., Private Duty Homecare Association.
(2012). Companionship Services Exemption Survey
(CSES), January 23, WHD–2011–0003–9175). BLS
data supports this contention that fewer skilled care
services are provided (id.). However, it is difficult
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Consumer-Directed Models
Under the consumer-directed models,
the consumer or his/her representative
has more control than in the agencydirected model over the services
received, as well as when, how, and by
whom the services are provided. Some
consumer-directed services are
purchased privately—that is, out-ofpocket or with private long-term care
insurance; however, most consumerdirected services are paid with public
funds, primarily Medicaid waiver and
state plan programs.82 The following
discussion provides an overview of
Medicaid-funded consumer-directed
programs.
There are two distinct types of
Medicaid-funded ‘‘consumer-directed
services’’ programs: ‘‘employer
authority’’ and ‘‘budget authority’’. The
‘‘employer authority’’ model gives
consumers and their representatives
choice and control only with respect to
the employment of ‘‘independent
providers’’ of direct care in the
consumer’s home. The ‘‘budget
authority’’ model gives consumers a
‘‘budget’’ (usually a monthly allowance,
but unspent funds may be carried
month-to-month within the year) that
may be used to purchase a range of
goods and services of the consumer’s
choosing that include, but are not
limited to, human assistance from
directly hired workers, and other goods
and services that may include, for
example, assistive devices, home
modifications, home-delivered meals,
and transportation.83
Both models permit self-directing
consumers and/or their representatives
(usually family caregivers) to hire/fire,
schedule, and supervise individual
independent providers (direct care
workers) to provide home care. The
direct care workers are often recruited
from among existing networks of the
consumer’s family, friends, and
neighbors. In addition, consumers train
to determine the degree of specialization in nonskilled support care because data are unavailable to
determine how many of these agencies are
Medicare-certified or are associated with Medicarecertified agencies (Leading Home Care. 2010. 2010
Private Pay in Home Health Care Benchmarking and
State of the Industry Report). In addition, the same
survey that showed these agencies rely on private
pay also showed over 50 percent of respondents
provided services covered by public payers such as
Medicare, Medicaid, and the Veterans
Administration (CSES).
82 ‘‘Growth and Prevalence of ParticipantDirection: Findings from the National Survey of
Publicly-Funded Participant-Directed Services
Programs, by Mark Sciegaj and Isaac Selkow,
available at http://web.bc.edu/libtools/
details.php?entryid=340.
83 Doty, P., Mahoney, K.J. & Sciegaj, M. 2010
(January). New State Strategies to Meeting Longterm Care Needs. Health Affairs, 29 (1) 49–56.
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60515
or participate in training the direct care
workers they employ. They also
participate in paying their direct care
workers, most typically by co-signing
their direct care workers’ timesheets
before they are submitted to the public
program for payment, certifying that the
work was performed in accordance with
the information on the timesheet, which
serves as the direct care worker’s bill or
claim for reimbursement. The budget
authority model differs from the
employer authority model primarily in
giving consumers more flexibility to
determine how many hours of direct
care service they wish to obtain and to
make agreements directly with their
direct care workers regarding hourly
wages and benefits, so long as the cost
of consumer-directed home care
services does not exceed the amount of
funds available in the consumer’s
budget.
The budget authority model of
consumer direction is often referred to
colloquially as ‘‘cash and counseling’’,
based on the name of former, special,
time-limited Medicaid research and
demonstration (‘‘1115’’) waiver
programs. These and subsequent
programs based on the cash and
counseling model are now fully
integrated into the Medicaid programs
in their respective states and operate
under ongoing state plan or HCBS
waiver authority, and some states have
incorporated elements of budget
authority consumer direction in
programs funded by CMS’ Money
Follows the Person grants to states.
Other HCBS programs that rely
exclusively or primarily on public
funding sources other than Medicaid
have also incorporated consumerdirected options patterned after original
cash and counseling programs.
Although consumer-direction of
HCBS is not new,84 a number of
developments greatly spurred growth in
consumer-directed services programs in
the 2000s. Medicaid-funded budget
authority consumer-directed programs
did not exist until the first three Cash
& Counseling demonstration programs
(in Arkansas, Florida, and New Jersey)
began in the late 1990s. Favorable
evaluation findings from these early
demonstration programs led to changes
to Medicaid law, regulation, and policy
specifically designed to facilitate and
encourage states to offer budget
authority consumer-directed services
84 California’s In-Home Supportive Services
program, which currently has 440,000 participants,
began in 1973, and other sizable programs in
Washington, Oregon, Michigan, and Massachusetts
began in the late 1970s or early 1980s.
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options.85 In addition, Older Americans
Act funding for the National Family
Caregiver Support program provided an
impetus to consumer-directed services
that allow family caregivers more choice
and control in accessing respite
services.86
A major characteristic of consumerdirected services programs is that they
permit public program participants to
hire direct care workers who are family
members, friends, and neighbors and
research has found that most consumers
choose to recruit direct care workers
who are relatives or individuals with
whom they were previously acquainted.
A minority of consumers in consumerdirected programs locate individuals
known to them who are seeking work as
providers of home care services via
referrals from worker registries, through
newspaper ads, or through internet
social media and advertising sites.
According to the comment from the
California State Association of Counties
(CSAC), County Welfare Directors
Association of California (CWDA),
California Association of Public
Authorities for In-Home Supporting
Services (CAPA) and California IHSS
Consumers Alliance (CICA) on the
NPRM, approximately 70 percent of all
IHSS providers in California are family
members of the consumer.87 Research
projects conducted by HHS also show
that consumers often hire their family
members as direct care workers. For
example, in the original Cash &
Counseling Demonstration programs, 58
percent of directly hired workers in
Florida, 71 percent in New Jersey, and
78 percent in Arkansas were related to
the consumer. About 80 percent of those
directly hired workers had provided
unpaid care to the consumer before the
demonstration began and continued to
provide additional unpaid care after
becoming paid workers.88 In addition,
since the passage of the National Family
Caregiver Support Program enacted
85 Doty, Mahoney and Sciegaj, Health Affairs,
January 2010.
86 Feinberg, L. & Newman, S. (2005). Consumer
Direction and Family Caregiving: Results from a
National Survey, State Policy in Practice. Available
at: http://www.hcbs.org/files/79/3926/Consumer
Direction&FamilyCaregivingNWEB.pdf. Feinberg, L.
et al. (2004). The State of the States in Family
Caregiver Support: A 50-State Study. San Francisco,
CA: Family Caregiver Alliance. Available at: http://
www.caregiver.org/caregiver/jsp/content_
node.jsp?nodeid=1276.
87 WHD–2011–0003–9420
88 U.S. Department of Health and Human
Services. (2005). Experiences of Workers Hired
Under Cash and Counseling: Findings from
Arkansas, Florida and New Jersey. Available at:
http://aspe.hhs.gov.daltcp/reports/workerexp.pdf.;
Foster, Leslie, Dale, Stacy B.& Brown, Randall S.
2007 (February). How Caregivers and Workers
Fared in Cash and Counseling. Health Services
Research 42(1) Part II: 510–532.
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under the Older Americans Act
Amendments of 2000, Medicaid and
other state-funded programs have
provided the bulk of public financing to
support family caregiving.89 A survey of
state consumer-directed and family
caregiving programs found that:
• Over one-half (86 out of 150, or 57
percent) of the programs in 44 states and
the District of Columbia allow family
members to be paid to provide care.
Only six states (Alaska, Delaware,
Mississippi, Nevada, Pennsylvania, and
Tennessee) did not allow payments to
family members in any of their
programs at the time of the study.90
• Of the 86 programs that allow
relatives to be paid providers, 73
percent allow family members to
provide personal care, 70 percent allow
family members to provide respite care,
20 percent allow family members to act
as homemakers or do chores, and 6
percent allowed family members to
provide any service needed.91
• Some programs place restrictions
on what type of family members are
allowed to be paid providers. Among
these 86 programs, 61 percent do not
permit spouses to be paid providers,
while others do not permit parents/
guardians (37 percent), primary
caregivers (18 percent), legal guardians
(8 percent), children 18 and under (6
percent), or other relatives (4 percent).92
As noted in the research, while many
consumer-directed programs allow paid
family caregivers, some consumerdirected programs place restrictions on
the employment of relatives. Such
restrictions are usually limited to
prohibiting paid caregivers who are
‘‘legally responsible’’ relatives—that is,
those who may have financial
obligations to public program
participants (consumers) under state
laws, such as spouses, parents of minor
children, and guardians, especially
when their income could be counted in
determining the program participant’s
future eligibility for means-tested public
benefits.
Of those states that offer Medicaidfunded consumer-directed services,
some have implemented a ‘‘public
authority’’ design. The public authority
design applies to both the employer
89 Feinberg, L. & Newman, S. (2005). Consumer
Direction and Family Caregiving: Results from a
National Survey, State Policy in Practice. Available
at: http://www.hcbs.org/files/79/3926/Consumer
Direction&FamilyCaregivingNWEB.pdf. Feinberg, L.
et al. (2004). The State of the States in Family
Caregiver Support: A 50-State Study. San Francisco,
CA: Family Caregiver Alliance. Available at: http://
www.caregiver.org/caregiver/jsp/content_
node.jsp?nodeid=1276.
90 Feinberg & Newman, 2005. p. 8.
91 Feinberg & Newman, 2005. p. 8.
92 Feinberg & Newman, 2005. p. 9.
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authority and budget authority models
of consumer-directed programs. Under
the public authority design, the public
authority or some other governmental or
quasi-governmental entity (often termed
a ‘‘home care quality commission’’ or
‘‘workforce council’’) plays a role in
setting compensation and providing
other benefits of employment for the
direct care worker, who is compensated
by public funds. In an effort to connect
participants in consumer-directed
programs with direct care workers, some
states and public authorities have
created matching registries. While use of
these registries is voluntary on the part
of consumers and direct care workers,
these systems provide some insight into
how consumers identify care providers
to meet their needs. Depending on the
registry, consumers can either search
the worker database online, or speak to
trained staff who conduct the search
and report the results to the consumer.
Some registries may also offer worker
screening and orientation, access to
consumer and worker training, and
recruitment and outreach to potential
workers.93 Others stipulate that
providers in the database have not been
pre-screened in any way and such
responsibilities lie with the consumer.
The Department also identified private
sector registries that operate under a
number of models. For example, one
not-for-profit registry 94 recruits,
screens, and checks the references of
local care providers, but the care
workers are self-employed and work as
independent providers. Other private
sector entities refer to themselves as
registries,95 96 97 98 but appear to be
operated under an agency or quasiagency model, with the consumer
paying the company a weekly or biweekly registry fee in addition to paying
the direct care worker, or with the
company receiving some portion of the
direct care worker’s hourly rate.
The public authority or other
governmental or quasi-governmental
93 PHI, 2011a. The PHI Matching Services Project.
Available at: http://phinational.org/policy/the-phimatching-services-project/.
94 Meals on Wheels and Senior Outreach Services.
(2011). Home Care Registry. Available at: http://
www.mowsos.org/about-us/.
95 Experienced Home Care Registry. (2011). About
Us. Available at: http://www.experiencedhomecare/
about-experienced-home-care/.
96 Angelic Nursing & Home Care Registry, Inc.
(2011). Home Care Services for Seniors in Tolland
and Hartford Counties in Connecticut. Available at:
http://www.linkedin.com/company/angelicnursing-&-home-health-care-services-registry-inc-.
97 Golden Care Co. Inc. 2011. Billing Policy.
Available at: http://www.goldencareco.com/.
98 American HealthCare Capital. (2011). $1.5
Million Oregon Private Pay Homecare Registry for
Sale. Available at: http://www.americanhealthcare
capital.com/listings/completed-listings/.
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entity acts as the ‘‘employer-of-record’’
of consumer-directed workers for the
purpose of engaging in collective
bargaining with a union representing
consumer-directed workers. Direct care
workers in this system have the option
to select representatives for collective
bargaining with the state. Direct care
workers providing services to
consumers through consumer-directed
programs in states such as California,
Washington, Oregon, Illinois, and
Massachusetts have collective
bargaining rights. In those states, unions
may engage in collective bargaining
with the state over wages and benefits
for workers whose wages and benefits
are paid for with Medicaid funding. In
other states, unionization of consumerdirected home care workers has been
authorized by the legislature and the
process is underway but collective
bargaining over Medicaid provider rates
has not yet been implemented.99 In
some states with consumer-directed
programs, consumer-directed home care
workers do not have collective
bargaining rights.
Funding Sources
There are a variety of different
funding sources for provision of home
60517
care services of all types. Table 5
provides an overview of these funding
sources, consumer eligibility
requirements, and types of home care
services covered. Public funding sources
such as Medicare and Medicaid provide
a majority of the reimbursement for
services.100 In 2009, Medicare and
Medicaid accounted for 73 percent of
home care services revenue, followed by
14 percent from private insurance
coverage, 4 percent from consumers
paying out-of-pocket, and the remaining
8 percent contributed by a mix of other
sources.101
TABLE 5—SUMMARY OF HOME CARE SERVICE PAYERS AND SERVICE COVERAGE
Payer
Description
Eligibility
Home care service coverage
Individual is under the care of a doctor
and receiving services under plan of
care; has a certified need for intermittent skilled nursing care, physical
therapy, speech-language pathology
services, continued occupational
therapy; and must be homebound.
HHA providing services is Medicarecertified; services needed are parttime or intermittent, and are required
<7 days per week or <8 hours per
day over 21 day period.
Intermittent skilled nursing care, physical therapy, speech-language pathology services, continued occupational therapy.
Public
Medicare ................
Federal government program to provide health insurance coverage, including home health care, to eligible
individuals who are disabled or over
age 65.
The program pays a certified home
health agency for a 60 day episode
of care during which the agency provides services to the beneficiary
based on the physician approved
plan of care.
Medicaid ................
A joint federal-state medical assistance
program administered by each state
to provide coverage for low income
individuals..
The program pays home health agencies and certified independent providers.
Department of Veterans Affairs.
Provides federal funding for state and
local social service programs that
provide services so that frail, disabled, older individuals may remain
independent in their communities.
Home health care services provided by
VA employees and contractors.
Social Services
Block Grant.
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Older Americans
Act.
Federal block grants to states for stateidentified service needs.
99 Seavey and Marquand, 2011, p. 28. WHD–
2011–0003–3514. Available at: http://
phinational.org/sites/phinational.org/files/clearing
house/caringinamerica-20111212.pdf.
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Eligibility and benefits vary by state. In
general, states provide health care
coverage to low income families with
dependent
children;
pregnant
women; children; and aged, blind
and disabled individuals. Beginning
in 2014, states have the option to
extend coverage to additional non-elderly low-income individuals.
States also have the option to provide
home and community-based services to individuals who meet eligibility for institutional care or meet
state-defined criteria based on need.
Must be 60 yrs of age or older .............
All enrolled Veterans and Veterans
who can receive outpatient care
without enrollment.
Varies by state ......................................
100 Congressional Research Service.
Memorandum dated February 21, 2012, titled
‘‘Extending Federal Minimum Wage and Overtime
Protections to Home Care Workers under the Fair
Labor Standards Act: Impact on Medicare and
Medicaid,’’ p. 4. WHD–2011–0003–5683.
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Does not cover 24 hr/day care at
home; meals delivered to home;
homemaker services when it is only
service needed or when not related
to plan of care; personal care given
by home health aides when it is only
care needed.
Coverage of home health services
must include part-time nursing, home
care aide services, medical supplies
and equipment. Optional state coverage may include audiology; physical, occupational, and speech therapies; and medical social services.
Coverage is provided under: Medicaid
Home Health, State Plan Personal
Care Services benefit, and Home
and Community-Based state plan
services and waivers.
Home care aides, personal care,
chore, escort, meal delivery, and
shopping services.
Interdisciplinary Home Based Primary
Care, Skilled home health care services, home hospice and palliative
care, home respite, and homemaker
and home health aide services.
Often includes program providing
home care aide, homemaker, or
chore worker services.
101 Seavey and Marquand, 2011, p. 23. WHD–
2011–0003–3514. Also available at: http://
phinational.org/sites/phinational.org/files/clearing
house/caringinamerica-20111212.pdf.
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TABLE 5—SUMMARY OF HOME CARE SERVICE PAYERS AND SERVICE COVERAGE—Continued
Payer
Description
Eligibility
Home care service coverage
Community organizations.
Some community organizations provide
funds for home health and supportive care.
Varies by program ................................
Covers all or a portion of needed services. Vary by program.
Private
Commercial Health
Insurance Companies.
Supplemental Insurance.
Private pay .............
Many policies cover home care services for acute, and less often, longterm needs.
May cover some personal care services when a Medicare beneficiary is
receiving covered home health services.
The individual receiving the services
pays ‘‘out of pocket.’’
Varies by policy ....................................
Varies by insurance policy.
Varies by policy; not required for
standard Medigap insurance.
Individuals who are not eligible for covered services under third party public
or private payers.
Services that do not meet the eligibility
criteria of other payers.
sroberts on DSK5SPTVN1PROD with RULES
Sources: National Association for Home Care. 1996. Who Pays for Home Care Services? Available at: www.nahc.org/consumer/wpfhcs.html;
Centers for Medicare and Medicaid Services (CMS). Medicare and Home Health Care. Available at: http://www.medicare.gov/publications/pubs/
pdf/10969.pdf.
Industry commenters (NPDA, IFA)
suggest that Medicare covers little
provision of companionship services.
However, the Department believes the
key to understanding Medicare
reimbursement of these types of services
lies not in the ‘‘does not cover’’
statements in the Table 5 summaries,
but rather in the qualifying clauses that
clarify that Medicare does not
reimburse: ‘‘homemaker services when
it is only service needed or when not
related to plan of care; personal care
given by home health aides when it is
only care needed’’ [emphasis added].
Analysis of the 2009 Medical
Expenditure Panel Survey (MEPS)
showed that of 14.4 million home care
episodes paid for by Medicare (and no
Medicaid), the consumer received care
from an HHA, PCA, Companion or
Homemaker in 6.1 million episodes
(42.5 percent).102 As noted above, the
workers performing this work may be
classified as exempt from the FLSA’s
minimum wage and overtime
compensation requirements under the
current companionship services
exemption. Although the percent of care
provided by these workers during each
episode cannot be determined from
MEPS, the Department believes these
data are sufficient to show that services
frequently provided by direct care
workers commonly classified as
‘‘Companions’’ (who may meet the
current companionship exemption) may
be included in a Medicare-covered
episode of care in certain circumstances
102 For Medicaid with no Medicare, MEPS shows
5.04 of 8.71 million episodes (57.9 percent) of home
care utilized an HHA, PCA, Companion or
Homemaker; for consumers paying any out-ofpocket for home care, 1.05 of 4.19 million episodes
(25 percent) used at least one of those categories of
workers.
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though provision of such services is not
separately billed or paid by Medicare.
In 2012, HHS outlays for Medicare
programs were projected to total $591
billion and HHS and state outlays in
support of Medicaid totaled $459
billion. Under Medicare, an estimated
$34.1 billion went to home health
programs.103 Medicaid expenditures on
home care programs are concentrated in
three types of programs: State Home
Health, State Personal Care Services
(PCS), and Home and Community-Based
Services (HCBS) 1915(c) waiver
programs. In 2009, Medicaid spent
approximately $50.0 billion of $374
billion in total expenditures on these
programs, including $5.3 billion on
Home Health, $11 billion on PCS, and
$33.7 billion on HCBS waiver
programs.104 105 Thus, payments for
home care programs composed
approximately 6 percent of Medicare
spending, and about 13 percent of
Medicaid spending.
Both Medicare and Medicaid pay the
service provider directly. The Medicare
program uses a prospective payment
system (PPS) to reimburse home health
103 Centers for Medicare and Medicaid Studies,
Office of the Actuary, National Health Expenditure
Projections, 2011–2021. Available at: http://
www.cms.gov/Research-Statistics-Data-andSystems/Statistics-Trends-and-Reports/National
HealthExpendData/Downloads/Proj2011PDF.pdf.
104 Detailed Medicaid data by type of home care
are not yet available past 2009.
105 Kaiser commission on Medicaid and the
Uninsured. 2012 Medicaid Home and CommunityBased Services Programs: 2009 Data Update.
Note, not all of the HCBS goes to personal care
services; a more detailed breakdown of this
spending is not available. For additional data, see
Kaiser Family Foundation, State Health Facts, p. 2:
http://kaiserfamilyfoundation.files.wordpress.com/
2013/01/7720-06.pdf. Centers for Medicare and
Medicaid Studies, Office of the Actuary, National
Health Expenditure Projections, 2011–2021.
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agencies a pre-determined base payment
for an episode of care; this base payment
is adjusted for the condition and needs
of the beneficiary as well as geographic
variation in wages.106 Under Medicaid,
the state agency implementing the
program pays the service provider
directly except under certain consumerdirected programs.
The Medicare and Medicaid programs
also work together to provide services
for a group of consumers referred to as
‘‘dual eligibles,’’ that is, consumers that
are eligible for both Medicare and
Medicaid coverage. Studies have found
that individuals covered by both
Medicare and Medicaid are among the
most expensive groups to cover and are
more likely to use more Medicarecovered home care services than
Medicare home care consumers not also
covered by Medicaid. Also, states with
low Medicaid spending appear to shift
costs to the Medicare home care
program spending.107 Most of the public
matching registries are funded by the
state, with a few receiving federal
dollars through reimbursement for
Medicaid administrative costs or
receiving initial funding through federal
Medicaid Systems Transformation
grants.108
Just focusing on raw percentages of
services paid through public funding,
however, obscures an important
characteristic of private pay account
106 For additional detail see Center for Medicare
& Medicaid Services (CMS). 2011a. Home Health
PPS. Available at: http://www.cms.gov/
HomeHealthPPS/.
107 Center for Medicare & Medicaid Services
(CMS). 2011b. Home Health Study Report:
Literature Review, pg.16. Available at: http://
www.cms.gov/HomeHealthPPS/Downloads/
HHPPS_LiteratureReview.pdf.
108 Seavey & Marquard, 2011.
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home care, i.e., that any single episode
of home care service utilization appears
to be paid almost completely by a single
payer. The Department found that data
from MEPS provided insight into this
issue. MEPS is a set of large-scale
surveys of families and individuals,
their medical providers, and employers
across the United States published by
AHRQ. MEPS collects data on the
specific health services that Americans
use, how frequently they use them, the
cost of these services, and how they are
paid for, as well as data on the cost,
scope, and breadth of health insurance
held by and available to consumers. The
Home Health section of the survey asks
whether: (1) The care was medical or
non-medical; (2) the direct care worker
was from an agency, an independent
provider, or an informal direct care
worker; (3) the care resulted from
specific or general health problem
(including ‘‘old age’’); (4) the consumer
received care associated with activities
of daily living or personal care; and (5)
the direct care worker provided
companionship. The Department
therefore believes that private pay home
care services provided by private pay
agencies are captured by this survey.
In MEPS the Department found that of
9.8 million episodes of care for which
Medicaid paid any amount, Medicaid
paid for almost 94 percent and Medicare
paid for almost 6 percent of all
expenditures; less than 1 percent of
expenditures were paid for by other
sources. Similarly, of the 14.4 million
episodes of care for which Medicare
paid some amount (after excluding
those episodes for which Medicaid was
paid), Medicare paid for over 97 percent
of expenditures. Although only 3.2
million episodes of home care were paid
for primarily out-of-pocket (after
excluding episodes in which any part of
expenditures were paid by Medicare or
Medicaid), almost 99 percent of
expenditures on those services were
paid out-of-pocket.109
This pattern of payments affects the
impact of increased costs resulting from
this rule on the providers (e.g., agencies
and independent providers) and
consumers of home care services. To the
extent that providers’ costs increase, but
Medicare and Medicaid reimbursement
rates do not increase, part of the impact
may be incurred by the providers in the
form of a smaller profit margin for these
services. Consumers paying out-ofpocket, however, might be more
sensitive to a rate increase because the
109 ERG analysis of MEPS data. Agency for
Healthcare Research and Quality (AHRQ). Medical
Expenditures Panel Survey. 2009. Available at:
http://meps.ahrq.gov/mepsweb/data_stats/
download_data_files.jsp. Accessed March, 2012.
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individual pays the entire amount, and
the provider risks inducing a reduction
in demand for its services. The majority
of the direct care workers documented
in the MEPS data are agency-employed,
and the agency would not be able to
claim the exemption under the Final
Rule; however, in the event that the
consumer has selected an independent
provider as the direct care worker, the
worker would continue to be considered
exempt, provided the direct care worker
meets the duties requirements for the
exemption, and therefore the consumer
may not experience an increase in costs.
E. Direct Care Workers
This section provides an estimate of
the total number of direct care workers
who may be impacted by the Final Rule
as well as the characteristics of these
workers, the services they provide, and
the wages they receive for their work.
Number of Affected Workers
The workers who will be directly
affected by the change to the
companionship exemption are
concentrated in two occupations: Home
Health Aides (SOC 31–1011) and
Personal Care Aides (39–9021). These
workers are concentrated in two
industries: Home Health Care Services
(NAICS 6216) and Services for the
Elderly and Persons with Disabilities
(NAICS 62412).
These workers are predominantly
women in their mid-forties or older,
minorities, with a high school diploma
or less education but this varies highly
by region. A similar percentage of PCAs
are Black and Hispanic (22 percent and
18 percent, respectively), but a much
higher percentage of HHAs are Black (35
percent) than Hispanic (8 percent). One
in four (23 percent) PCAs are foreignborn, with higher percentages (over 45
percent) in certain regions of the
country, e.g., California and New York.
California also has a high percentage of
direct care workers who are paid family
members.110
Direct care workers are called by a
variety of titles, including: Home health
aides, home care aides, personal care
aides, personal assistants, home
attendants, homemakers, companions,
personal care staff, resident care aides,
and direct support professionals. They
are tracked by the following
occupational titles.111
110 Seavey and Marquand, 2011, pgs. 11 and 29.
WHD–2011–0003–3514. Available at: http://
phinational.org/sites/phinational.org/files/clearing
house/caringinamerica-20111212.pdf.
111 BLS. 2011. Standard Occupational
Classification, available at: http://www.bls.gov/soc/
home.htm.
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Personal Care Aides (SOC 39–9021):
‘‘Assist the elderly, convalescents, or
persons with disabilities with daily
living activities at the person’s home or
in a care facility. Duties performed at a
place of residence may include keeping
house (making beds, doing laundry,
washing dishes) and preparing meals.
May provide assistance at nonresidential care facilities. May advise
families, the elderly, convalescents, and
persons with disabilities regarding such
things as nutrition, cleanliness, and
household activities.’’ The BLS does not
have a separate SOC for ‘‘Companions,
elderly’’; they are classified as PCAs.
Home Health Aides (SOC 31–1011):
‘‘Provide routine individualized
healthcare such as changing bandages
and dressing wounds, and applying
topical medications to the elderly,
convalescents, or persons with
disabilities at the patient’s home or in
a care facility. Monitor or report changes
in health status. May also provide
personal care such as bathing, dressing,
and grooming of patient.’’
Companionship services as defined in
this Final Rule are separate from the
services provided by home health and
personal care aides as defined by BLS
above and outlined in detail below. For
the reasons described in the summary of
public comments, throughout this
analysis the Department refers to HHAs
and PCAs when referring to the workers
that fit the occupational definitions
above, and uses the more general term
‘‘direct care workers’’ to refer to the
broader group of workers (e.g., HHAs,
PCAs, and companions) providing the
types of services described above.
The Department uses BLS’ employerbased OES estimates of the number of
workers in the HHA and PCA
occupational categories as its best
estimate of the number of direct care
workers employed by agencies that
might be affected by the Final Rule.
There were approximately 1.75 million
direct care workers employed by
agencies in 2011, composed of
• 924,700 HHAs, and
• 820,600 PCAs.112
These data do not include workers
providing these services as independent
providers who may be affected by the
Final Rule. As described above, the
Department determined that an
estimated additional
• 24,000 HHAs, and
• 158,700 PCAs 113
112 2011 BLS Occupational Employment Survey,
employment and wages for SOC codes 39–9021 and
31–1011.
113 BLS, NEM 2010, adjusted to reflect 2011
values.
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can be considered independent
providers directly employed by families.
Thus, we estimate
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• 948,600 HHAs, and
• 979,300 PCAs
for a total of 1.93 million direct care
workers who might be affected by the
Final Rule.
However, not all 1.93 million of these
HHAs and PCAs are employed as FLSAexempt companions, and some of these
workers are already covered by
minimum wage and overtime provisions
at the state level. Many of these workers
are employed at agencies that provide a
variety of health-related services that
may or may not be provided in the
home; HHAs and PCAs employed in
facilities, such as nursing homes and
hospitals, are not engaged in domestic
service employment and cannot be
classified as providing companionship
services. Furthermore, HHAs and PCAs
who work in the home might be
employed to perform services that fall
outside the definition of companionship
services, and therefore, do not qualify
for the companionship services
exemption. As will be discussed in
further detail below, direct care workers
in these occupational classifications
provide a similar range of services, but
the services provided by any specific
direct care worker vary in emphasis and
intensity depending on the specific job
or consumer. Thus, this category of
direct care worker might best be thought
of as providing a mix of services along
a continuum ranging from one end of
the spectrum that focuses more on
medicalized care, to the opposite end
that might consist primarily of
providing fellowship and protection.
Those direct care workers at the more
medicalized end of the spectrum may
not be performing services considered to
be companionship services and might
not currently be employed under the
companionship services exemption
(although the case law interpreting the
current exemption allows for the
performance of significant medical
duties). Thus, the Department considers
the category of direct care workers used
as the basis for this analysis, composed
of HHAs and PCAs employed in the
home, as an upper-bound estimate of
the number of direct care workers
employed as companions. An unknown,
but potentially significant, percentage of
these workers are not currently
employed under the existing
companionship exemption and will not
be affected by this rulemaking. The
Department will estimate the number of
workers directly affected by both the
minimum wage and overtime
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compensation provisions of the Final
Rule.
While many agency-employed direct
care workers might work in various
facilities that make them ineligible for
the FLSA companionship services
exemption, there is little information
available concerning independent
providers, particularly independent
providers who provide services to
consumers in consumer-directed
programs. Because these sometimes
informal arrangements are made directly
between the consumer and the direct
care worker/independent provider,
there are limited data on the total
number of consumers and limited
information on the total number of
providers. The Department estimated
the number of independent providers in
2011 using BLS National Employment
Matrix (NEM) data for 2010 and
inflating the values to reflect 2011 (the
base year in the model). Approximately
92,200 PCAs (10.3 percent) are
employed in private households and
66,500 (7.4 percent) are self-employed,
for a total of 158,700 workers (17.7
percent) who may provide services as
independent providers.114 Fewer HHAs
are employed in this manner, with 3,600
(less than one percent) working for
private households and 20,300 (about
two percent) who are self-employed for
a total of approximately 23,900 (2.2
percent) workers who may provide
services as independent providers.
Combining the data for HHAs and PCAs
suggests that 182,600 of these workers
(9.5 percent) may be either selfemployed or employed in private
households. The Department believes
that these workers can reasonably be
described as independent providers
who provide direct care worker services
to individuals or families.
However, it is likely that not all
independent providers of home care are
captured in the NEM. For example, in
its comment on the proposed rule, the
National Resource Center for
Participant-Directed Services (NRCPDS)
cited a study of 298 publicly funded
participant-directed programs serving
approximately 810,000 people.115 The
study found that California accounted
for 59 percent of enrollments in
participant-directed programs. The
study did not provide information on
the number of direct care workers,
including independent providers, of
114 BLS, 2010, projected to reflect 2011
employment.
115 WHD–2011–0003–9474; ‘‘Growth and
Prevalence of Participant-Direction: Findings from
the National Survey of Publicly-Funded ParticipantDirected Services Programs, by Mark Sciegaj and
Isaac Selkow, available at http://web.bc.edu/
libtools/details.php?entryid=340.
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publicly-funded home care employed by
these program participants; however,
this number is undoubtedly larger than
the BLS estimate of independent
providers of home care employed in
private homes, which was not restricted
to those whose services were purchased
with public funds. As discussed in
detail below, to the extent that data on
direct care workers, other than that
included in the OES or NEM was made
available to the Department, we have
revised the analysis of the number of
direct care workers in an attempt to
better reflect direct care workers
providing services through consumerdirected programs. The Department
assumes that all HHAs and PCAs
classified in the NEM as self-employed
or employed by households are
independent providers directly
employed by the family, meet the
requirements for exemption, and are
thus by assumption currently exempt
from the FLSA’s minimum wage and
overtime compensation requirements.
Tasks, Wages, Hours
The Final Rule defines
companionship services to include
fellowship, protection, and care, defined
as a limited amount of assistance with
activities of daily living and
instrumental activities of daily living.
• Fellowship means ‘‘to engage the
person in social, physical, and mental
activities, such as conversation, reading,
games, crafts, or accompanying the
person on walks, on errands, to
appointments, or to social events.’’
Fellowship services are typically not
covered by public programs.
• Protection means ‘‘being present
with the person in their home or to
accompany the person when outside of
the home to monitor the person’s safety
and well-being.’’ Some states reimburse
specific types of consumers (i.e., those
living with mental disabilities) for
protection services.
• Care means to assist the person
with activities of daily living (such as
dressing, grooming, feeding, bathing,
toileting, and transferring) and
instrumental activities of daily living,
which are tasks that enable a person to
live independently at home (such as
meal preparation, driving, light
housework, managing finances,
assistance with the physical taking of
medications, and arranging medical
care).
Since enactment of the
companionship services exemption, the
spectrum of tasks performed by workers
for whom the exemption is claimed has
expanded to include: Activities of daily
living (ADLs), instrumental activities of
daily living (IADLs), and paramedical
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(‘‘medicalized’’) tasks.116 Paramedical
tasks may include tasks such as
changing of aseptic dressings,
administration of non-injectable
medications (e.g., blood pressure
medication in tablet form); 117 and
ostomy, catheter and bowel hygiene.
As mentioned above, the Department
believes the services provided by these
direct care workers can best be thought
of as existing along a continuum; the
Department found data in MEPS which
supports this view of the tasks currently
classified as companionship services.
MEPS shows that of the estimated 6.3
million individuals receiving home care
services in 2009, 92 percent (5.8
million) received care from agencyprovided direct care workers. Of these
consumers, 37 percent received care
from HHAs, 9.7 percent from PCAs, and
3.8 percent from ‘‘Companions’’ (MEPS
uses job titles rather than SOCs for the
survey). In describing the services
provided by these direct care workers, it
was difficult to distinguish major
differences between types of workers.
For example:
• 100 percent of those receiving care
from Companions received
‘‘companionship services,’’ about 53
percent of those receiving care from
HHAs and PCAs also received such
services from their HHA or PCA.
• 90 percent of those receiving care
from PCAs received help with daily
activities from their PCA; 71 percent
receiving care from Companions also
received help with daily activities from
their Companion.
• 45 percent of those receiving care
from HHAs received medical treatment
from their HHA, 20 percent receiving
care from Companions also received
medical treatment from their
Companion.
• 22 percent of those receiving care
from a Companion received services
such as homemaking from their
Companion; 7 percent of those receiving
care from a PCA also received such
services from their PCA.
Therefore, the Department believes
those employed under the job titles of
HHA, PCA, and Companion (hereafter
described as direct care workers for
consistency with the remainder of the
document) are best considered as
providing a mix of services along a
continuum ranging from more
medicalized care at one end of the
116 Seavey and Marquand, 2011, pg. 7. WHD–
2011–0003–3514, http://phinational.org/sites/
phinational.org/files/clearinghouse/caringin
america-20111212.pdf.
117 Administration of an injectable medication is
a medical task generally performed by workers with
additional training in medical tasks, such as
Certified Nurse Assistants (CNAs).
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spectrum, to the opposite end that might
consist primarily of providing
fellowship and protection.
While HHAs and PCAs overlap in the
type of services they provide, it is
primarily HHAs who are employed by
Medicare-certified agencies who may be
asked to perform paramedical tasks.
Those workers are required by Medicare
to be trained and certified to perform
these types of tasks.
Generally speaking, a home health
aide or agency is authorized to provide
a specific number of hours of service to
consumers depending on their needs in
the case of public funding, or agrees to
provide a specific number of hours of
service in the case of private pay.
Agencies work to schedule direct care
workers to cover the number of hours
needed for the portfolio of cases they
have, often taking into account
continuity of service to each recipient,
total number of hours each worker is
scheduled per week, frequency of
weekend services needed, and the
distance between the direct care
worker’s home residence and the
consumer’s residence.
In the home care industry, agencies
may offer to provide services seven days
a week and 24 hours a day. One survey
indicated private pay agencies provide
24-hour or live-in care to 10 percent of
their consumers.118 This type of
schedule is frequently staffed using 12hour shifts, 24-hour shifts, or by having
the direct care worker live in the
consumer’s home. These cases are of
particular concern with respect to
overtime. A 12-hour case is a consumer
who requires services to be provided by
a direct care worker for a 12-hour block
of time; a 24-hour case is a consumer
who requires a direct care worker to be
present to provide services around the
clock. The key scheduling concerns that
agencies contend exist with these cases
are that:
• It is difficult to redistribute
overtime hours to workers with fewer
hours because workers are scheduled to
work in lengthy shifts (up to 24 hours);
• Direct care workers are typically
paid an hourly rate, and the employer
118 See, for example, IHS Global Insight (IHSGI).
2012. Economic Impact of Eliminating the FLSA
Exemption for Companionship Services. WHD–
2011–0003–8952. However, this analysis is based
on a survey administered by IHSGI on behalf of the
International Franchise Association in response to
the NPRM; the survey was received by those private
pay franchisees belonging to the 9 franchise chains
that facilitated the survey, and response was
voluntary. Therefore it is impossible to determine
whether the responses are representative of the
industry as a whole, or the degree of response bias.
The survey represents the work patterns for at least
one group of agencies in this industry; it simply
cannot be determined how representative the
responses are for the entire industry.
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60521
would be required to pay an hourly
overtime premium when applicable;
however, Medicaid and other payers
often reimburse agencies for these cases
on a flat rate that does not account for
overtime premiums or other costs;
• 24-hour shifts usually include a
five- to eight-hour period to allow the
worker to sleep while on site; however,
the aide is not necessarily off-duty
because s/he would be expected to
assist the consumer if an urgent need
arose. If the agency is required to count
sleep hours toward the total number of
hours worked per week then it may
become costly to provide 24-hour care.
• Because of the intimate nature of
providing such services in the
consumer’s home, consumers prefer
having a single or a small number of
direct care workers. This limits the
ability of agencies to avoid paying
overtime premiums by having more staff
work fewer hours. In addition, having
too many direct care workers can reduce
continuity of care for the consumer; on
the other hand, having too few direct
care workers may also result in reduced
continuity of care if one of those direct
care workers becomes unavailable.
Private pay agencies have developed
a two-tier pricing structure to make 24hour private pay care cost competitive
with nursing home care. Consumers
may choose between paying for service
on an hourly basis or pay a single flat
rate for 24-hour care. According to the
IHSGI survey, direct care workers are
paid on average $9.87 per hour or $133
for 24 hours under the flat rate. The
Department estimates that agencies
charge consumers about $18.30 per hour
for hourly service, and about $250
under the 24-hour flat rate.119
According to the MetLife Market Survey
of Long-Term Care Costs, the average
private room nursing home rate in 2011
was about $240 per day.120 Although it
is reasonable to assume that consumers
are willing to pay a premium to be able
to stay in their homes, these results
indicate that private pay agencies face
constraints concerning how much they
can increase their rates without having
consumers choose to switch to a nursing
home.121 This affects a small minority of
119 The Department multiplied the reported pay
rates by the ratio of revenues to wages from Home
Care Pulse, 2011. We were able to confirm that the
hourly rates were approximately the right
magnitude from the MetLife Market Survey of LongTerm Care Costs (MetLife Mature Market Institute.
October 2011).
120 MetLife, 2011.
121 Conversely, this does raise the question as to
what percent of consumers need 24-hour care to
remain in their homes. With the two-tier pricing
structure, there is a discontinuity in the demand
curve: for 13 hours of care or less, it is cheaper to
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consumers. Based on the IHSGI survey,
less than 10 percent of consumers cared
for by survey respondents receive 24hour home care. Indeed, 65 percent
require less than 40 hours of care per
week.
To add to the complexity of concerns
about the size of potential overtime
premiums when the consumer needs 24hour care 7 days a week, industry
publications and comments on the
NPRM appear to use the terms ‘‘24hour’’ and ‘‘live-in’’ synonymously.
However, these terms have precise and
separate meanings under the FLSA, and
very different implications for overtime
compensation. Under the general FLSA
requirements:
• Employees on duty for periods of 24
hours or more may have bona fide
scheduled sleeping periods of not more
than 8 hours excluded from hours
worked (with certain additional criteria
concerning conditions, including that
the employee must be able to get at least
5 hours of sleep). Thus, an employee on
a shift of 24 hours or more might be
eligible to be paid for 16 to 19 of the 24
hours, although additional
uninterrupted meal time can reduce
that. Since overtime is not incurred
until after 40 hours of work in the
workweek are accrued, a worker
scheduled for 24-hour shifts (with sleep
time) might start accruing the overtime
compensation premium on their third
shift in a week, or sooner if unable to
get the minimum amount of sleep.
• To be considered ‘‘live-in,’’ an
employee must reside on the employer’s
premises permanently or for extended
periods of time. The Department has
allowed an employee who lives at the
place of employment at least 5
consecutive days per week to be
considered as residing on the
employer’s premises for extended
periods of time. Live-in workers need
only be paid for compensable hours
worked. The Department’s longstanding existing regulations recognize
that an employee who resides on his or
her employer’s premises is not working
all the time he or she is on the premises.
Ordinarily, live-in workers may engage
in normal private pursuits and thus
have enough time for eating, sleeping,
entertaining, and other periods of
complete freedom from all duties when
they may leave the premises for their
own purposes. Live-in domestic service
workers must be paid at least minimum
wage for all hours worked, but are not
required to be paid for overtime when
more than 40 hours of work are
use the hourly rate; for more than 13 hours of care
it is cheaper to opt for 24-hour care under the flat
rate.
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performed per week (unless employed
by a third party employer). Thus,
determining the potential impact of the
revised rule on ‘‘24-hour live-in’’ care
depends very much on whether the
worker is ‘‘24-hour’’ or ‘‘live-in.’’
Similarly, the Department received
comments on the application of
overtime provisions to direct care
workers who are essentially roommates
of persons with disabilities. These direct
care workers live with the consumer,
assist the consumer in the morning and
evening, but otherwise are free during
the day to go to their own job or school.
Thus, these direct care workers are
likely ‘‘live-in’’ as described above, and
are not entitled to overtime
compensation under this Final Rule
unless employed by a third party
employer.
Some agencies take a proactive
approach to scheduling these cases in
order to manage the total number of
hours on duty required from each
worker. For example, an agency may
split a 24-hour, seven days per week
case between two direct care workers by
having one aide provide services
Sunday through half of the Wednesday
shift (three 24-hour shifts and one 12hour shift) when the second aide would
take over and work through Saturday.122
This reduces the total number of hours
each aide must work, limits the work to
one weekend day, and avoids
overwhelming the consumer with too
many different care providers.123
The direct care workers themselves
report working an average of 31 to 34
hours per week and available data
suggest that very few work overtime.124
Based on an analysis of the 2007
National Home Health Aide Survey
(NHHAS) and the 2009 Annual Social
and Economic Supplement (ASEC) of
the Current Population Survey, PHI
reports that 92 percent of HHAs and 88
percent of PCAs work 40 hours or less
per week for an average of 31 hours and
34 hours per week, respectively. By
extension, only 8 percent of HHAs and
122 Elsas, M. & Powell, A. 2011. Interview of
Michael Elsas, President, and Adria Powell,
Executive Vice President of Cooperative Health
Care Associates by Calvin Franz and Lauren
Jankovic of ERG. April, 2011.
123 Elsas, M. & Powell, A. 2011. Some agencies
have experimented with breaking a 24-hour case
into two 12-hour cases that are staffed by four direct
care workers; this reduces total number of hours
worked and eliminates the need for the 8-hour rest
period but also increases the number of direct care
workers that the consumer must become
comfortable with.
124 Seavey and Marquand, 2011, pgs. 61–64.
Available at: http://phinational.org/sites/
phinational.org/files/clearinghouse/caringin
america-20111212.pdf; HHS, 2011, p. 26.
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12 percent of PCAs reported working
more than 40 hours per week.
However, this information may not
fully capture the total number of hours
worked by these individuals because
some direct care workers work for
multiple employers, many direct care
workers work part-time jobs, and some
employers do not compensate workers
for travel time between consumers
(because they are not reimbursed for
this time). Furthermore, there is very
limited information on hours worked by
independent providers or those workers
employed as live-in, on-call, or night
shift workers. The Department assumes
that in general independent providers
directly employed by individuals,
families, or households work similar
hours as direct care workers employed
by agencies.
The wages for these workers vary
widely by occupation and geographic
location. Based on detailed wage data
from the BLS Occupational Employment
Statistics Survey, the hourly wages of
HHAs and PCAs range from about $7.55
to $19.84 (less than 10 percent earn
below $7.55 and less than 10 percent
earn more than $19.84) with the median
wage for HHAs being approximately
$9.94 and for PCAs $9.67 per hour.125
As discussed above, wages for PCAs
tend to be slightly lower on average than
those for HHAs. The Department
assumes that in general independent
providers directly employed by families
receive similar hourly wages as direct
care workers employed by agencies. In
approximately 90 percent of states (46
states), average hourly wages for PCAs
were below 200 percent of the federal
poverty level wage ($11.25) for
individuals in one-person households
working full-time.126 Current research
suggests that these workers find it
difficult to support their households on
these wages; approximately 50 percent
of PCAs have to rely on public benefits
(e.g., Medicaid, food and nutrition
assistance, cash welfare, or assistance
with housing, energy or transportation)
and 37 percent of direct care workers
employed by agencies in HHCS lack
health insurance.127
F. Costs and Transfers
This section describes the costs and
transfers associated with the Final Rule
125 BLS,
OES, 2011.
federal poverty level calculated
assuming full-time (40 hours per week) and fullyear (52 weeks per year) employment. 2011 federal
poverty levels provided by the U.S. Census Bureau.
Available at: http://www.census.gov/hhes/www/
poverty/data/threshld/index.html.
127 Seavey and Marquand, 2011, pgs. 55–58.
WHD–2011–0003–3514. Also available at: http://
phinational.org/sites/phinational.org/files/clearing
house/caringinamerica-20111212.pdf
126 Hourly
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and the Department’s approach to
estimating their magnitude. The
Department estimates the first-year
regulatory familiarization and hiring
costs of the rule will vary between $18.6
and $20.6 million. In following years,
costs are projected to increase from
around $4 million in Year 2, to about $5
million in Year 10 as new firms enter
the market and new individuals,
families and households hire direct care
workers.
Transfers result from the wage
increases to comply with minimum
wage and overtime compensation
requirements. Total estimated transfers
depend in part on the response of
employers to the regulatory changes; in
other words, will employers respond by
paying overtime to current workers,
changing scheduling practices to avoid
paying overtime, hiring additional
workers, or some combination of these
approaches. Based on the methods
described below, the Department
estimates that first-year transfers from
the rule will range from $103.7 to
$281.3 million. In Years 2 through 10,
total transfers using OT Scenario 1 are
projected to increase from $322.3
million to $626.5 million while total
transfers using OT Scenario 3 are
projected to increase from $118.8
million to $230.9 million.
Regulatory Familiarization
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When a new rule is promulgated, all
the establishments affected by the rule
will need to invest time to read and
understand the components of the new
rule; this is commonly referred to as
regulatory familiarization. Each
establishment will spend resources to
familiarize itself with the requirements
of the rule and ensure it is in
compliance.
Each home care establishment will
require about two hours of an HR staff
person’s time to read and review the
new regulation, update employee
handbooks and make any needed
changes to the payroll systems. Based
on our analysis of the industry and
occupational data, the Department
judges that each employer in HHCS and
SEPD likely employs workers who will
be affected by the Final Rule, and will
therefore need to review the Final Rule.
There are about 89,400 establishments
in HHCS and SEPD; 128 assuming a mid128 This includes the 58 counties in California to
account for costs to the IHSS program at the county
level to become familiar with the requirements. For
the purposes of the analysis (and to capture
potential transfers), the Department is assuming
that the IHSS could be considered the employer and
therefore become responsible for ensuring payment
of minimum wage and overtime to the workers (in
particular, the 50,000 workers who regularly report
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level HR loaded wage of $38.44 per hour
over two hours equals about $6.9
million for regulatory familiarization in
the first year following promulgation of
the rule.129
The Department received comments
from industry groups such as NPDA and
the U.S. Chamber of Commerce, arguing
that the unit time estimates for
regulatory familiarization are too small.
However, the commenters provided no
data to form a more appropriate
estimate. After further consideration,
the Department maintains its original
estimate of two hours per establishment
for regulatory familiarization. This
rulemaking is a revision to an FLSA
regulation that applies to a component
of the home care industry workforce.
The Department believes that most, if
not all, affected firms are already
covered by the FLSA, and employ other
workers who are not exempt from its
overtime and minimum wage
provisions. For example, the BLS NEM
data report that Home Health Care
Services (6216) in 2010 includes over
200 occupations including nursing
aides, therapists, and health
practitioners that are not exempt from
overtime and minimum wage
provisions.130 Therefore the Department
believes that firms are already familiar
with the relevant provisions of the
FLSA and merely have to apply those
provisions to one additional group of
workers. The Final Rule is limited in
scope and length, limiting the time
required for familiarization.
Furthermore, we believe that most firms
will make use of guidance and
educational materials from the
Department, industry trade groups,
franchisers and other organizations to
help them review the regulations more
efficiently. Finally, the Department
believes that most, if not all, affected
firms already use payroll systems with
the capability of handling overtime
calculations, and already employ
workers for whom overtime might have
to be calculated. Based on interviews
with payroll and human resources
professionals, the Department estimates
that, in general, the vast majority of
employers use payroll systems to
distribute wage statements to their
employees.131 Thus, it is once again a
matter of extending activities they
already perform for one group of their
employees to another group of
employees. Therefore, the additional
time necessary to perform the types of
tasks listed in this section should be
relatively minimal.
For independent providers, the
employer is considered to be the
individual, family, or household that
hires them. Therefore, families who
directly employ these direct care
workers will also have to review the
regulatory revisions. Some commenters,
including the Chamber of Commerce,
stated that this estimate was too low
because of the length of the preamble.
Because the employer-employee
relationship is less complex than for an
agency that employs multiple workers
caring for multiple consumers, the
Department expects the burden of
regulatory familiarization will be
smaller. In addition, the regulatory text
is quite short and the preamble
discussion is intended simply as an aide
to employers regarding a variety of
FLSA issues. We believe that most
individuals, families, and households
will rely on guidance and educational
materials from the Department and
advocacy organizations. The
Department therefore assumes that each
individual, family, or household who
directly hires a direct care worker will
spend one hour on regulatory
familiarization. The Department uses
the national average hourly wage of
$29.60 (loaded) to represent the
opportunity cost of reviewing the
regulatory revisions.132
The Department has found no data to
support an estimate of the number of
individuals, families, and households
that directly hire independent
providers. The Department assumes
each independent provider is hired by
a single individual, family, or
household, and therefore, because it
estimates there are 182,600 independent
providers nationally, 182,600
individuals, families, and households
will incur one hour of time at an
opportunity cost of $29.60 per hour for
a total of about $5.4 million for
regulatory familiarization in the first
year following promulgation of the rule.
more than 40 hours of worker per week). In
practice, this determination would need to be made
on a case by case basis based on the employment
relationship between consumer, direct care worker,
and IHSS.
129 BLS, 2011, National Compensation Survey
(Occupation 13–1078), Median Hourly Wage.
130 BLS National Employment Matrix, Home
Health Care Services (62–1600) 2010. Available at:
http://www.bls.gov/emp/ep_table_109.htm.
131 Lucy Key Price, 2010. Interview with Lucy
Key Price of L.K. Price Associates, Calvin Franz and
Lauren Jankovic, both of ERG. Polly Wright, 2010.
Interview with Polly Wright of HR Consultants,
Inc., Calvin Franz and Lauren Jankovic, both of
ERG. Jennifer Wise, 2010. Interview with Jennifer
Wise of Wise Consulting, Calvin Franz and Lauren
Jankovic, both of ERG.
132 BLS, 2011, National Compensation Survey,
Hourly mean wage for full-time Civilian Worker is
$22.77; the Department estimates the fully loaded
wage at the hourly wage × 1.3. Available at http://
www.bls.gov/eci/.
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Wages and Overtime 133
Many direct care workers are already
protected by minimum wage and
overtime provisions at the state level
and will not drive additional costs
related to the Final Rule. Fifteen states
require minimum wage for all hours
worked for most direct care workers and
guarantee some type of overtime
compensation for some direct care
workers who would otherwise be
excluded under the FLSA.134 Six states
and the District of Columbia require
minimum wage for all hours worked but
do not guarantee overtime to most direct
care workers.135 Twenty-nine states do
not require minimum wage or overtime.
Table 6 summarizes the wages for HHA
and PCA occupations based on state
level minimum wage and overtime
coverage.
TABLE 6—SUMMARY OF WAGES BY STATE MINIMUM WAGE AND OVERTIME REQUIREMENTS FOR HHAS AND PCAS
Area name
Minimum 10th
percentile
wage
Employment
Hourly wages
weighted
average
median wage
Maximum 90th
percentile
wage
All States:
Total ..........................................................................................................
PCA ...................................................................................................
HHA ...................................................................................................
1,745,290
820,630
924,660
........................
$7.55
7.60
........................
$9.67
9.94
........................
$19.84
18.23
States with Minimum Wage and Overtime Requirements:
Total ..........................................................................................................
PCA ...................................................................................................
HHA ...................................................................................................
765,220
343,280
421,940
........................
........................
........................
........................
10.35
10.32
........................
........................
........................
States with Minimum Wage but not Overtime Requirements:
Total ..........................................................................................................
PCA ...................................................................................................
HHA ...................................................................................................
240,630
82,250
158,380
........................
........................
........................
........................
10.15
9.97
........................
........................
........................
States without Minimum Wage or Overtime Requirements:
Total ..........................................................................................................
PCA ...................................................................................................
HHA ...................................................................................................
739,440
395,100
344,340
........................
........................
........................
........................
8.98
9.47
........................
........................
........................
Source: BLS OES, 2011.
In order to estimate the number of
workers from the table that will be
directly affected by the minimum wage
and overtime components of the Final
Rule, the Department made three
primary calculations: (1) Removed from
the data set those workers not currently
employed in private homes (those
providing services in facilities); (2)
added employees of tax exempt
organizations in states with overtime
requirements to the set of workers
without state-level overtime
requirements (as they are sometimes
exempt from the state overtime laws);
and (3) identified the number of workers
currently receiving less than the federal
minimum wage ($7.25 per hour).
The data presented in Table 6 do not
differentiate the workers who provide
services in the homes of consumers
(engaged in domestic service
employment) and those who provide
services primarily in facility settings
(not engaged in domestic service
employment). To identify agencyemployed HHAs and PCAs likely to be
providing services in facilities and
exclude them from the estimation of
costs, the Department examined the BLS
NEM of industries for each occupation
and identified 32 industries that employ
HHAs and PCAs. Based on the
description of the industry employing
the HHA or PCA, the Department made
a judgment of whether the actual
services were being provided in a
facility or in a private home. This is
then used to estimate the number of
workers likely to be providing services
in the home and the percent of that
occupation providing services in the
home. Table 7 summarizes the data as
well as the determination of whether the
industry would be home- or facilitybased. This percentage, approximately
50 percent of HHAs and 76 percent of
PCAs, is used in the detailed
calculations described below. By
definition, the Department assumes that
100 percent of the HHAs and PCAs
working as independent providers are
working in private homes.
TABLE 7—SUMMARY OF INDUSTRIES EMPLOYING HHAS AND PCAS IN 2010 AND LIKELIHOOD OF THE AIDE WORKING IN A
HOME OR FACILITY
HHA
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Industry
Percent of
agency
employment
Total, All workers a ................................................................................................
Home .............................................................................................................
133 These costs to employers are also transfer
payments that will benefit employees. See Benefits,
below.
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Home or
facility
100.0
50
134 Colorado, Hawaii, Illinois, Maine, Maryland,
Massachusetts, Michigan, Minnesota, Montana,
Nevada, New Jersey, New York, Pennsylvania,
Washington, and Wisconsin. NELP, 2012, WHD–
2011–0003–9452.
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PCA
Percent of
agency
employment
Home or
facility
100.0
76
135 Arizona, California, Nebraska, North Dakota,
Ohio, and South Dakota. NELP, 2012, WHD–2011–
0003–9452.
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60525
TABLE 7—SUMMARY OF INDUSTRIES EMPLOYING HHAS AND PCAS IN 2010 AND LIKELIHOOD OF THE AIDE WORKING IN A
HOME OR FACILITY—Continued
HHA
Industry
Percent of
agency
employment
Facility ............................................................................................................
By Industry
Accounting, tax preparation, bookkeeping, and payroll ................................
Activities related to real estate ......................................................................
Child day care services .................................................................................
Civic and social organizations .......................................................................
Community food and housing, and emergency and other relief services ....
Educational services, public and private .......................................................
Employment services ....................................................................................
Government, excluding education and hospitals ..........................................
Grantmaking and giving services ..................................................................
HHCS .............................................................................................................
Hospitals, public and private .........................................................................
Lessors of real estate ....................................................................................
Management of companies and enterprises .................................................
Management, scientific, and technical consulting .........................................
Nursing and community care facilities ..........................................................
Offices of all other health practitioners .........................................................
Offices of mental health practitioners (except physicians) ...........................
Offices of physical, occupational, and speech therapists, and audiologists
Offices of physicians .....................................................................................
Other ambulatory health care services .........................................................
Other financial investment activities ..............................................................
Other investment pools and funds ................................................................
Other miscellaneous ......................................................................................
Other personal services ................................................................................
Other residential care facilities ......................................................................
Outpatient mental health and substance abuse centers ..............................
Residential mental health and substance abuse facilities ............................
Residential mental retardation facilities .........................................................
SEPD .............................................................................................................
Social advocacy organizations ......................................................................
Unpaid family workers ...................................................................................
Vocational rehabilitation ................................................................................
PCA
Home or
facility
50
0.0
NA
0.1
NA
0.0
0.1
3.1
2.9
NA
35.5
0.9
NA
0.0
NA
19.1
0.1
0.0
0.1
0.1
0.0
NA
NA
0.0
NA
1.9
0.3
2.2
17.3
14.3
0.0
NA
1.8
Percent of
agency
employment
Home or
facility
24
Facility .........
NA ...............
Facility .........
NA ...............
Facility .........
Facility .........
Facility .........
Facility .........
NA ...............
Home ...........
Facility .........
NA ...............
Facility .........
NA ...............
Facility .........
Facility .........
Facility .........
Facility .........
Facility .........
Home ...........
NA ...............
NA ...............
Facility .........
NA ...............
Facility .........
Facility .........
Facility .........
Facility .........
Home ...........
Facility .........
NA ...............
Facility .........
0.3
0.0
0.1
0.1
0.3
0.1
3.1
2.3
0.4
33.1
0.5
0.1
0.5
0.1
2.8
0.1
0.1
0.1
0.3
0.0
0.1
0.0
0.0
0.3
0.6
0.3
0.3
3.5
42.5
1.2
0.3
6.4
Facility.
Facility.
Facility.
Facility.
Facility.
Facility.
Facility.
Facility.
Facility.
Home.
Facility.
Facility.
Facility.
Facility.
Facility.
Facility.
Facility.
Facility.
Facility.
Home.
Facility.
Facility.
Facility.
Home.
Facility.
Facility.
Facility.
Facility.
Home.
Facility.
Home.
Facility.
sroberts on DSK5SPTVN1PROD with RULES
Source: BLS 2010 NEM; note that the percent of the occupation employed in the home versus a facility is calculated based on the actual sum
of the number appearing in the table. Values are rounded to the nearest 10th of a percent and columns may not sum to totals due to rounding.
a This excludes self-employed workers and those employed in private households because they are considered independent providers and will
be added to the population of affected workers separately.
It is important to note that the
determination of whether the industry is
home- or facility-based is an estimate;
some industries that appear to provide
services primarily in a nursing facility,
for example, may employ a few direct
care workers who provide services in
the private homes of consumers to assist
with transitioning of the consumers
from the facility back to their homes.
Some industries that appear to provide
services primarily in the private home,
HHCS for example, may also employ
direct care workers who work primarily
in facilities.
Next, the workers in the states with
minimum wage and overtime
compensation are, in general, already
receiving at least the minimum wage
and some form of overtime premium for
hours worked beyond 40 hours. These
workers do not need to be included
when calculating the costs and transfers
associated with additional wages
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resulting from the application of the
federal minimum wage or payment of an
overtime premium. The exception is for
workers employed by public agencies,
non-profit organizations, and other tax
exempt entities who are exempt from
many of the applicable state laws (such
as the employees of the Illinois
Department of Human Services’ Home
Services Program). To account for these
workers, the Department used the 2007
Economic Census to estimate the
proportion of workers in those states
who are employed in establishments
exempt from Federal income tax. The
proportion varies by state but is 42
percent on average. The proportion in
each relevant state was multiplied by
the number of HHA and PCA workers in
each state to estimate the number of
workers likely to be employed by an
employer not covered by the state level
laws related to minimum wage and
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overtime.136 These workers, about
302,500, were added to the total number
of workers without overtime coverage in
order to estimate the costs of providing
overtime compensation to workers
under the Final Rule. States vary widely
in terms of exemptions from minimum
wage and overtime rules and not all
states have these types of exemptions; as
a result, this approach results in an
overestimate of the number of workers
who will receive additional overtime
wages as a result of the rule. The
Department judges that this is the best
136 The Department used a proportion of 100
percent for workers in New York to account for the
fact that New York law establishes an overtime
premium of one and one-half the FLSA minimum
wage (rather than the workers’ regular rate) for
workers employed by a third party employer in a
private. This produces an overestimate of the
number of workers who will receive additional
overtime compensation as a result of the rule.
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available method to estimate these
additional workers given available data.
For the NPRM, the Department
analyzed the 2009 BLS OES data on
HHA and PCA wages by percentile to
identify those workers receiving less
than the federal minimum wage (usually
those in the 10th and 25th percentiles
in states without minimum wage
coverage). For example, in North
Dakota, the 10th percentile wage was
$7.20 in 2009, roughly equal to the
federal minimum wage of $7.25; the
Department therefore assumed 10
percent of HHAs and PCAs in North
Dakota would be impacted by the
extension of the FLSA’s minimum wage
provision. When newer data became
available, the Department updated this
analysis using 2011 BLS OES data on
HHA and PCA wages. Using the 2011
data, the Department found no states in
which workers in the 10th or 25th
percentile received less than the Federal
minimum wage, and therefore now
assumes that a negligible number of
workers will be affected by the
minimum wage provision.
Due to lack of data, the Department
selected the assumptions it would use to
analyze independent providers directly
employed by individuals, families, and
households. The Department assumes
that independent providers: (1)
Generally will not be entitled to
overtime wage premiums, and (2) earn
less than the current federal minimum
wage in the same proportion as agencyemployed direct care workers. This
rulemaking does not eliminate the
companionship services exemption for
direct care workers directly hired by
individuals, families, and households.
Therefore, since independent providers
by definition do not work for a third
party, we assume they will be directly
hired by the individual, family, or
household and will not be entitled to
overtime compensation when they work
more than 40 hours per week (provided,
of course, that the direct care worker
performs companionship services as
defined in § 552.6 or is a live-in
domestic service worker). The
Department was unable to find data on
the average number of hours worked per
week by independent providers, but
assumes that independent providers
provide home care to multiple
consumers and it is unlikely that an
independent provider will work more
than 40 hours per week for any single
family. This assumption is based on
available data which suggests that the
majority of consumers receive less than
40 hours per week of services.
By assuming that the proportion of
independent providers earning less than
the federal minimum wage is identical
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to that for agency-employed direct care
workers, the Department implicitly
assumes independent providers work in
similar patterns as agency-employed
direct care workers. That is,
independent providers are distributed
across states in the same proportion as
agency-employed direct care workers,
and are as likely to earn less than
minimum wage as those employed by
agencies.
Finally, the Department must account
for those who work in Illinois’
Department of Human Services (DHS)
and in California’s IHSS program. These
workers were excluded from the
estimate of potentially affected workers
in the NPRM because review of state
law suggested that they were already
eligible for minimum wage and
overtime. Comments submitted by
Illinois and California clarified the
employment arrangement, their status
with respect to minimum wage and
overtime, and the number of workers
affected.137 138
For the NPRM, the Department
erroneously determined that all direct
care workers in Illinois are currently
eligible for overtime and removed all
such workers from the analysis to
estimate transfer payments. In its
comment on the NPRM, the Illinois DHS
clarified that 30,000 direct care workers
are jointly employed by the state and
the consumer and, although they receive
employment benefits such as subsidized
health insurance, are not eligible for
overtime pay under state statute. Based
on this comment, the Department
returned 30,000 workers to the OES data
for Illinois, and assumes these workers
will incur overtime hours at the same
rate as other agency-employed workers.
California’s IHSS workers share some
attributes with independent providers
but are considered employees of the
county level public authority for some
purposes. Under the IHSS program,
county level public authorities provide
home care services to qualifying
residents. The services are paid for by
a mix of federal, state and county
funding. The county authority screens
and refers direct care workers to
consumers with the selection of the
direct care worker as well as scheduling
and supervision determined by the
consumer. The county authority also
acts as the employer of record for direct
care workers. In addition, in California’s
system the county authority is
responsible for collective bargaining
with the union representing direct care
workers to determine wage rates and
benefits.139
There are approximately 380,000
direct care workers employed through
IHSS caring for about 440,000
consumers. All IHSS direct care
workers’ pay exceeds the minimum
wage, while about 50,000 direct care
workers routinely work more than 40
hours per week.140 In Bonnette v.
California Health & Welfare Agency, 704
F.2d 1465 (9th Cir. 1983), the Ninth
Circuit held that IHSS direct care
workers were employees of the state and
counties. For purposes of this analysis,
the Department initially assumed that
direct care workers for IHSS were
considered employees of the county
authority and were included in OES
data. However, review of OES found a
total of 105,000 PCAs and HHAs in
California, including those that work in
facilities. The Department concluded
that the 380,000 direct care workers for
IHSS were not included in the OES for
California, and therefore added those
workers to the pool of workers without
overtime coverage. Furthermore, the
comment concerning California’s IHSS
program indicates that 50,000 of the
380,000 IHSS direct care workers (13.2
percent) routinely work overtime, which
is a somewhat higher proportion than
the national average of 12 percent.
Therefore the Department included
50,000 IHSS workers in projections of
overtime compensation rather than
apply the standard percentage used for
other affected workers.141 142
Table 8 summarizes the number of
workers estimated to be directly
impacted by the minimum wage and
overtime provisions of this Final Rule.
As explained in more detail above, to
estimate the total number of workers
potentially affected by the overtime
provisions of this rule, the Department:
• Used OES data to identify agency
employed workers in occupations that
may provide companionship services
under the current definition (i.e.,
1,745,300 PCAs and HHAs). The OES is
based on a nationally representative
sample of private employers as well as
state and local governments, and is a
better measure of agency employment
than the NEM.
137 CSAC, CWDA, CAPA, and CICA, WHD–2011–
0003–9420; State of Illinois DHS, Comments, WHD–
2011–0003–7904.
138 The Department received no other data
suggesting that affected workers were not accurately
represented in the OES or NEM, or appropriately
considered in the Preliminary Regulatory Impact
Analysis. Therefore, the Department had no basis
for additional review of other states.
139 CSAC, CWDA, CAPA, and CICA. WHD–2011–
0003–9420.
140 CSAC, CWDA, CAPA, and CICA. WHD–2011–
0003–9420.
141 Ibid.
142 For the purposes of regulatory familiarization,
we assumed that the 58 counties in California
would incur familiarization costs.
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• Estimated the percentage of agencyemployed workers who are employed in
homes rather than facilities from the
NEM and applied those percentages to
the workers identified in the OES to
estimate 1,086,600 agency-employed
PCAs and HHAs work in homes.
Because the NEM is based on the
Current Population Survey, it permits us
to identify the industry in which the
worker is employed.
• Subtracted 472,100 direct care
workers from states that already require
overtime pay using state-level OES data
leaving 614,500 workers in states that
do not currently require overtime
coverage.
• Added 302,500 direct care workers
back into the OES. These workers are
employed in states that require overtime
pay, but are not eligible for overtime for
various reasons: They work for taxexempt organizations; they work for the
IL DHS; or they work in the state of New
York.143 This results in an estimated
917,000 agency-employed direct care
workers who are not currently eligible
for overtime pay.
• To this the Department added
380,000 IHSS workers not currently
eligible for overtime to estimate a total
of 1,297,000 direct care workers are
without overtime coverage.
• Due to a lack of data concerning the
prevalence of use of the companionship
exemption, the Department assumes
that all 1,297,000 direct care workers in
states without overtime protection are
currently paid as exempt companions,
and are thus potentially eligible for
overtime pay after the rule is
promulgated. This assumption clearly
60527
leads to an overestimate of the
magnitude of transfer payments
resulting from the rule; this
overestimate may be significant.
• Finally, the Department identified
those PCAs and HHAs in the NEM who
reported themselves as self-employed or
employed by private households; this
results in an estimated 182,600
independent providers.
Since the data suggest that none of the
agency-employed PCAs earn less than
minimum wage, the Department also
assumes that none of the 158,700 PCA
independent providers earn less than
minimum wage. Similarly, because no
agency-employed HHAs earn less than
minimum wage, the Department
assumes that none of the 24,000 HHA
independent providers earn less than
minimum wage.
TABLE 8—SUMMARY OF WORKERS THAT ARE DIRECTLY IMPACTED BY FINAL RULE
Number of
workers
Affected workers
Agency-employed PCA and HHA ...............................................................
PCA ......................................................................................................
HHA ......................................................................................................
Agency-employees working in the home:
Percent PCA and HHA in homes:
PCA
HHA
Number of PCA and HHA in homes:
PCA
HHA
1,745,290
820,630
924,660
Total .......................................................................................
1,086,559
Workers without OT Coverage:
Number of PCA and HHA in States without OT Coverage .................
614,508
Source
Number of PCA and HHA in public agencies and nonprofits in states
with OT but who are ineligible; and NY, and IL DHS.
Total number of PCAs and HHAs not currently entitled to
OT coverage.
76.2%
49.9%
625,323
461,236
302,531
a 917,039
2011 OES; State-level occupational employment and
wages for SOC 39–9021 and 31–1011 (see Table
6).
2010 NEM for SOC 39–9021 and 31–1011 (see Table
7).
Total Workers multiplied by percent working in homes;
2011 OES and 2010 NEM.
Sum of employees working in homes in selected
states; 2011 OES.
Total workers in states with OT laws multiplied by proportion of workers in state employed by tax-exempt
organizations, plus workers in NY, and the 30,000
workers in the IL DHS Home Services Program;
plus workers of CA IHSS; 2011 OES and 2007 Economic Census.
Number of California IHSS workers .....................................................
b 380,000
Total workers without OT coverage ......................................
1,297,039
Workers below Minimum Wage ..................................................................
0
Number of workers with wage below $7.25; 2011
OES.
Family-employed Independent Providers ....................................................
PCA ......................................................................................................
HHA ......................................................................................................
Independent Providers below MW ..............................................................
182,604
158,651
23,953
0
Projections for 2011 based on the 2010 NEM for SOC
39–9021 and 31–1011.
Number of workers paid below minimum wage; 2011
OES.
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a Of the 917,039 total direct care workers not currently covered by overtime laws; 531,924 are PCAs and 385,115 HHAs. Estimated from statelevel OES data with adjustments for tax-exempt employers, employees of IL DHS, and workers in NY state.
b Based on public comment, the Department assumes 50,000 of the 380,000 IHSS direct care workers (13.2 percent) work overtime; for the
917,039 agency-employed workers estimated from the OES, the Department assumes 12 percent work overtime based on an analysis of
NHHAS data.
143 Because conflicting information was available
concerning overtime provisions for direct care
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workers in New York state, the Department
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Minimum Wage
In the NPRM, the Department
estimated the number of workers
earning less than the minimum wage
based on 2009 data. Using the 2009 BLS
data on the wages of HHAs and PCAs
by percentile, the Department estimated
that approximately 14,200 HHAs and
30,700 PCAs in 13 states earned less
than the federal minimum wage of
$7.25. However, for this Final Rule the
Department reviewed the 2011 BLS
data, which suggests that no HHAs or
PCAs are currently earning less than the
minimum wage.144 145 Therefore the
Department estimates no increase in
wages will result from application of the
minimum wage provision of the FLSA
to direct care workers employed by
agencies. With no evidence to the
contrary, we maintain our working
assumption that wages for independent
providers track those of agencyemployed direct care workers, and
therefore the same result is obtained for
independent providers.
The Department will not attempt to
estimate impacts of future increases in
the minimum wage. Since Congress
extended FLSA protections to domestic
workers in 1974, it has acted four times
to increase the Federal minimum wage.
Congress passed amendments to the
FLSA increasing the minimum wage in
1977 (Pub. L 95–151), 1989 (Pub. L 101–
157), 1996 (Pub. L 104–188) and 2007
(Pub. L 110–28). In each case, the
minimum wage was gradually increased
over a series of steps. Given that the
minimum wage has reached the
maximum rate contained in the most
recent amendments (Pub. L 110–28),
any estimate of the cost of this rule
accounting for increases in the
minimum wage would be purely
speculative.
Overtime
Limited data exist on the amount of
overtime worked by this population. A
PHI analysis of the 2007 NHHAS and
U.S. Census Bureau’s Current
Population Survey, ASEC on direct care
workers found 8 to 12 percent of HHAs
and PCAs may work overtime. Among
HHAs, 8 percent worked more than 40
hours per week, and 2 percent worked
more than 50 hours per week; 12
percent of PCAs appeared to work more
than 40 hours per week; however, PHI
believes this may be an overestimate
based on the 2010 ASEC supplement
144 BLS, OES, by state, 2000–2010. Available at:
http://stats/bls/gov/oes/.
145 Because the Department finds no evidence of
HHAs and PCAs currently earning less than the
FLSA minimum wage, estimates of costs and
transfers from this point forward will not include
mention of the minimum wage.
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which suggests approximately 42
percent of direct care workers in HHCS
work full-time year round.146
A significant overtime compensation
issue in this industry is associated with
24-hour care. Attending staff may be
entitled to pay up to 16 of every 24
hours or even more (if the staff is not
provided a bona fide sleep period). The
City of New York and New York State
Association of Counties filed an amicus
brief with the U.S. Supreme Court in
Long Island Care at Home, Inc. v. Coke
on this issue.147 The brief asserted that
changing the FLSA companionship
services exemption would significantly
increase the cost to the City and State
for providing home health services and
included an estimate of the increased
costs. The additional costs for direct
care workers in New York City
attending consumers requiring 24-hour
care is by far the largest component of
these costs, exceeding the Department’s
estimate of nationwide overtime for all
workers in all states not currently
covered by overtime.
Unfortunately, the brief does not
adequately describe how it arrived at
the cost estimates, nor does it provide
estimates of the number of consumers
requiring 24-hour care or the workers
caring for them. The numbers presented
in the brief suggest over 33.6 million
hours of annual overtime are worked
just to care for consumers requiring 24hour care plus an additional 14.6
million hours of overtime hours are
worked to care for other consumers.148
This comprises 45.7 percent of the total
amount of overtime the Department
estimated for the 35 states and
Washington, DC that do not currently
require overtime compensation (73.5
million hours).149 Furthermore, this
sample, from the Current Population
Survey ASEC, should reflect all hours
worked, including that of direct care
146 Seavey and Marquand, 2011, pgs. 61–64.
WHD–2011–0003–3514. Available at: http://
phinational.org/sites/phinational.org/files/clearing
house/caringinamerica-20111212.pdf.
147 551 U.S. 158 (2007). Brief of Amici Curiae City
of New York and New York State Association of
Counties in Support of Petitioners.
148 The incremental cost of requiring overtime
compensation under this regulation is the
difference between the current hourly rate paid for
direct care workers, and the rate that would be paid
if this regulation is promulgated (i.e., the overtime
differential) applied to hours worked in excess of
40 hours per week. If straight time pay is currently
about $10 per hour, the incremental cost will be $5
per hour. New York City projects the rule will cost
$168 million per year for care of patients requiring
24-hour care; $168 million divided by $5 suggests
that roughly 33.6 million overtime hours per year
are worked in New York City alone to care for these
consumers.
149 See discussion later in this section for the
methodology used to estimate the 73.5 million
hours.
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workers providing services to
consumers requiring 24-hour care. In
addition, the need to provide a
consumer with 24-hour care does not
necessarily result in 72 hours of
overtime per week. Maintaining
continuity of care does not require a
single direct care worker in attendance
for the entire week; service can be
provided with adequate continuity of
care by two to four workers.150
Therefore, because the brief does not
explain the basis for the numbers, nor
were the estimates in the brief clarified
or explained in comments on the
NPRM, the Department has not relied
upon those estimates.
In addition, although industry
commenters (IFA, NAHC, NPDA, PCA)
stated that direct care workers work
considerably more overtime than the
impact analysis suggested, it was
impossible to derive a reliable estimate
of patterns of overtime from the
provided data. While responses
characterized the percent of direct care
workers who might work more than 40
hours per week, or consumers who
receive ‘‘live-in’’ or 24-hour service, not
enough information was presented that
would permit estimation of the number
of direct care workers who have such
schedules or their typical hours
worked.151 Furthermore, much of their
claim that overtime hours were
underestimated was based on the
prevalence of ‘‘24-hour care’’ and ‘‘livein care.’’ Although commenters used
these terms synonymously, these terms
are not identical and have very
significant implications for how hours
worked are calculated, and it was highly
problematic to interpret reported survey
results in a meaningful way (see
discussion of public comments on
overtime scenarios for further
explanation of this issue). Finally, the
reported data were gathered in two
industry surveys, as described above,
that suffered from flawed sampling
approaches and cannot be considered
representative of the industry as a
whole. Thus, the Department also could
not estimate overtime hours based on
industry data. Therefore, the
Department has generally relied upon
nation-wide data from BLS and the
nationally representative NHHAS in
developing the overtime analysis.
BLS data show there are about
614,500 total direct care workers in
private homes in states without statemandated overtime coverage, plus
302,500 workers employed in New York
or by tax-exempt organizations in states
150 Elsas
151 IHSS
& Powell, 2011.
Global Insight 2012,. WHD–2011–0003–
8952.
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with overtime requirements who are not
entitled to overtime compensation
(including the 30,000 workers in the
Illinois Department of Human Services
Home Services Program) and 380,000
workers in the California IHSS program
who are not entitled to overtime. In
total, the Department estimates that
there are 1.30 million agency-employed
workers without overtime compensation
protection who will be entitled to it as
a result of the Final Rule (See Table 8).
For the NPRM, the Department
calculated that 10 percent of affected
direct care workers are employed 45
hours per week (5 hours of overtime),
and an additional 2 percent are
employed 52.5 hours per week (12.5
hours of overtime) based on the PHI
analysis of NHHAS and ASEC data on
overtime worked in this industry. As a
result of public comment on these
overtime estimates, the Department
reviewed hours worked by direct care
workers as reported in the 2007
NHHAS. When calculating overtime
directly instead of using estimates based
on the summary provided by PHI, the
Department found that those direct care
workers who work more than 40 hours,
but no more than 50 hours per week,
average 6.4 hours of overtime; those
who work more than 50 hours per week
average 21.0 hours of overtime per
week. The Department calculates
overtime hours worked assuming that
10 percent of these 917,000 direct care
workers (excluding California’s IHSS
workers) are employed 46.4 hours per
week (6.4 hours of overtime), and an
additional 2 percent are employed 61.0
hours per week (21.0 hours of overtime).
The joint comment from potentially
affected groups in California 152 stated
that 50,000 IHSS workers work more
than 40 hours per week, but did not
indicate how many additional hours
they worked. Therefore, the Department
assigned the same overtime work
pattern to them: 83.3 percent of these
workers (10 out of every 12) work 46.4
hours per week, and 16.7 percent (2 out
of every 12) work 61 hours per week. In
total, 73.5 million hours of overtime are
worked per year. Using the weighted
median HHA wage of $9.84 and the
weighted median PCA wage of $9.54 per
hour, these workers would earn an
overtime premium of $4.92 and $4.77
per hour, respectively. Under these
assumptions the additional cost of
overtime compensation would be
approximately $355.3 million per year,
absent changes to employment practices
152 CSAC, CWDA, CAPA, and CICA. WHD–2011–
0003–9420, p. 2.
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that could reduce or even eliminate
overtime for these employees.
Industry Adjustments to Overtime
Requirement
It is reasonable to anticipate that
agencies will evaluate and potentially
change operating and staffing policies in
response to overtime. Commenters
universally agreed, with many home
care agencies suggesting that they would
limit employees’ hours rather than pay
overtime. See e.g., IFA, NPDA, Martin
Hayes, Henri Chazaud, and Melina
Cowan. Currently, agencies have little
incentive to manage overtime because
hours worked in excess of 40 per week
are paid at the same rate as hours less
than 40 per week. Because overtime
hours will now cost agencies more, they
will have an incentive to manage those
hours so as to reduce costs.
The Department identified at least
three possible agency responses to
overtime compensation requirements.
First, the agency might manage existing
staff to reduce overtime hours while
maintaining the same caseload and
staffing levels. For example, two direct
care employees—one previously
scheduled to work 50 hours per week
and another previously scheduled to
work 30 hours per week—may be
rescheduled so that they both work 40
hours every week, thus leaving caseload
and number of employees unchanged
while eliminating the need for overtime
compensation. Henri Chazaud notes that
‘‘work schedules will be based on
reduction and elimination of overtime.’’
This sentiment is echoed by Martin
Hayes who states that ‘‘[i]f our agency
is required to pay overtime for these
caregivers—their hours will be reduced.
Our agency will not pay overtime
because our clients cannot afford it and
it would cost us more than we make to
foot the bill our self.’’ However, there is
little evidence on which to predict how
agencies might reorganize staff time to
support the same caseload. It seems
doubtful that many agencies can
support their caseload without paying at
least some overtime compensation, but
it is unclear how much overtime could
be reduced. In addition, the time spent
reorganizing staffing plans is not
costless. In this scenario agencies will
also incur opportunity costs for
managerial time even if management
pay is unchanged. In addition,
employees will experience adjustment
costs as they adapt to new work
schedules.
Second, as suggested in the City of
New York’s amicus brief, agencies might
choose to hire new employees to avoid
having current staff exceed 40 work
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60529
hours per week.153 After the Court of
Appeals for the Second Circuit
concluded in Coke that direct care
workers were entitled to overtime
compensation, the experience of New
York City indicates this might be a
common response in some regions.
Such an approach will require increased
staffing to cover the existing caseload.
The New York City experience suggests
it became common for staff who worked
more than 40 hours per week at a single
agency to continue to work more than
40 hours per week, but for multiple
agencies.154 For example, a direct care
worker might work 25 hours per week
for each of two different agencies, and
not be entitled to overtime
compensation despite working 50 hours
per week. Once again, agencies will
incur additional managerial costs as
they hire and manage additional staff.
Employees who begin to work for more
than one agency will also incur
opportunity costs as they coordinate
their schedules with multiple agencies.
Finally, agencies might increase staffing
by hiring workers who are new to the
industry; depending on the tightness of
the labor market, this might necessitate
increasing hourly wages to attract new
workers.
The third scenario comprises a mix of
the first and second approaches. Neither
of those approaches is costless to
agencies. Under the FLSA, agencies will
be required to pay their employees an
additional 50 percent premium for each
hour worked in excess of 40 per week.
Conversely, managing workers to reduce
or avoid working employees overtime
hours will require additional time spent
managing schedules. If agencies must
hire additional workers to absorb the
potential overtime hours, managerial
time will be spent screening candidates
and processing and training new hires.
In addition to balancing overtime and
managerial costs, agencies will have to
consider potential impacts on consumer
satisfaction; scheduling multiple
workers for each consumer to avoid
paying overtime might affect the
agency’s ability to retain existing
consumers or attract new consumers.
Therefore, the Department expects that
agencies will weigh the cost of hiring
additional workers with the cost of
paying overtime to existing workers to
determine the optimal mix of overtime
and new hires appropriate to their
circumstances. Agency caseload,
consumer preferences, current staffing
patterns, the cost of hiring new workers,
and managerial preferences for staffing
mix will affect the final decision.
153 Brief
154 Elsas
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Because the potential magnitude of
managerial time to handle more
complex scheduling is unknown, the
Department requested comments on this
cost to agencies. Unfortunately, no
estimates of this time were provided.
The Department will discuss the cost of
hiring new workers in detail below.
One factor that may help determine
how many employees currently
exceeding 40 hours of work per week
would receive overtime compensation
rather than have their hours reduced
below 40 per week is the potential for
existing workers to absorb additional
hours without exceeding 40 hours per
week. Available data suggest many
employees are working significantly less
than 40 hours per week and at least
some of those workers are interested in
working additional hours. As has been
mentioned, studies show that direct care
workers work, on average,
approximately 34 hours per week, and
many work part-time.155 Seavey and
Marquand, citing the 2010 CPS ASEC
found that about 45.4 percent of workers
report working part-time, and asked
those part-time workers why they did
not work full-time; 22 percent indicated
they could only find part-time work and
18 percent stated they worked part-time
due to business conditions. Thus,
potentially 40 percent of part-time
direct care workers might be interested
in increasing their hours worked if more
hours were available.
This suggests that of 917,000 agencyemployed HHAs and PCAs not currently
entitled to overtime protections,
approximately 416,300 (45.4 percent)
are part-time, and 166,500 (40 percent of
part-time workers) might be interested
in increasing their hours worked.156
Employees in this industry currently
average about 35 hours worked per
week, and those who do not typically
work overtime average about 28 hours
per week.157 If each of the 166,500
agency employed part-timers who might
like to work additional hours increased
their average hours worked by
approximately seven hours per week,
they could absorb the estimated 57.4
million hours of overtime currently
155 Seavey and Marquand, 2011, p. 62–63. WHD–
2011–0003–3514. Available at: http://
phinational.org/sites/phinational.org/files/clearing
house/caringinamerica-20111212.pdf. HHS, 2011.
p.26.
156 The analysis of the availability of part-time
workers to absorb additional work hours does not
include IHSS workers because they differ from
agency workers. In particular, many IHSS workers
provide services to only one client, often a family
member, and therefore seem unlikely to be
interested in adding additional work hours to their
schedule by adding an additional client.
157 This hours estimate, 28 hours, was estimated
by the Department based on the 2007 NHHAS data.
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worked per year by agency employed
workers and non-family IHSS workers
without exceeding 40 hours per week
themselves.158 Not all employers will be
able to redistribute hours to interested
part-time workers in this way, and it
may be difficult for agencies to adjust
worker schedules to come close to, but
not exceed, 40 hours due to the nature
of the work; the types of services they
provide do not necessarily fit into onehour increments.
However, those employers who can
adjust schedules and redistribute hours
can be expected to decrease overtime
costs significantly.
Hiring Costs
When agencies reduce the number of
overtime hours worked, they must hire
new workers or reallocate hours to
under-employed workers to cover the
hours that would have been overtime
prior to the rule. The Department
estimates cost per hire based on Seavey
(2004), who concludes that $3,000
(inflated to 2011 dollars) is a
conservative estimate of the direct cost
of replacing a worker who quits (a
turnover). About 75 percent of this cost
is attributable to hiring the replacement
worker (about $2,230), while the
remainder is attributable to the costs of
separation and vacancy.159 The
additional hiring costs agencies incur
will depend on their allocation of the
remaining overtime hours over new
hires and current part-time workers.
As described in more detail below,
the Department considers three
scenarios for the reduction in overtime
hours. OT Scenario 1 involves agencies
paying for 60 percent of current
overtime hours and allocating the
remainder between current part-time
employees and new hires. In OT
Scenario 2, we assume agencies will pay
for 40 percent of current overtime hours
and allocate the remainder between
current part-time employees and new
hires. Under OT Scenario 3, agencies
pay for 10 percent of current overtime
158 Note: The total number of overtime hours
available to the 166,500 agency employed part-time
workers (57.4 million per year) differs from the total
number of overtime hours worked by all workers
without overtime coverage (73.5 million per year)
used elsewhere in the analysis. The total number
of overtime hours available to agency employed
part-time workers is based on the number of
overtime hours worked by agency employed
workers plus the subset of IHSS workers who both
work overtime and are not likely to be employed
by a family member.
159 Seavey, D. 2004. The Cost of Frontline
Turnover in Long-Term Care. Washington, DC:
IFAS/AAHSa. Available at: http://phinational.org/
sites/phinational.org/files/clearinghouse/TOCost
Report.pdf. The Department attributes 75 percent of
the cost to hiring replacement workers based on the
compilation of findings reported by Seavey.
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and allocate 90 percent to part-timers
and new hires. Based on a review of
relevant literature, the Department
believes that, at the upper bound,
employers will adjust so that 60 percent
of the current overtime worked is paid
at time and one-half the employee’s
regular rate of pay and that the
remaining 40 percent of current
overtime worked will be worked by new
hires and current part-time workers.
However, based on employer comments
and the industry surveys, the
Department believes that the actual
response will most likely be OT
Scenario 2.
Within each of the three overtime
scenarios, the Department considers a
range of potential allocations of the
remaining overtime hours to new hires:
30 percent, 20 percent, and 10 percent.
The Department chose 30 percent as the
maximum hours allocated to new hires
since hiring is costly, and converting
less than 40 percent of the current parttime workers to full-time workers would
be sufficient to cover the total estimated
overtime hours. We expect most
agencies would hire a smaller percent of
new workers as it would result in
unnecessary hiring costs if reallocation
of hours to part-timers is feasible.
Table 9 lists the estimates of hiring
costs in each of the overtime scenarios
and the inputs used to calculate these
estimates. In OT Scenario 1, agencies
reallocate hours to the specified
combinations of new and current parttime workers to cover the 40 percent of
overtime hours they wish to avoid. This
corresponds to converting from 43,700
to 56,200 part-time workers to full-time,
hiring between 1,200 and 3,700 fulltime workers, and incurring additional
hiring costs of $2.8 to $8.4 million. In
OT Scenario 2, agencies convert from
65,500 to 84,300 part-time workers to
full-time, hire between 1,900 and 5,600
full-time workers, and incur additional
hiring costs of $4.2 to $12.5 million.160
160 Hiring costs are identical under OT Scenario
1 with 30 percent of reallocated overtime hours
used for new hires and OT Scenario 2 with 20
percent of reallocated overtime hours used for new
hires because both result in 12 percent of overtime
hours going to new hires. Under OT Scenario 1, 60
percent of current overtime hours are paid to
current employees and 40 percent are reallocated to
new hires and current part-timers; 30 percent of the
reallocated hours are used for new hires, resulting
in 12 percent of overtime hours going to new hires
(i.e., 40 percent of hours reallocated multiplied by
the 30 percent of reallocated hours going to new
hires). Under OT Scenario 2, 40 percent of current
overtime hours are paid to current employees and
60 percent are reallocated to new hires and current
part-timers; 20 percent of the reallocated hours are
used for new hires, resulting in 12 percent of
overtime hours going to new hires (i.e., 60 percent
of hours reallocated multiplied by the 20 percent
of reallocated hours going to new hires). This only
occurs in Year 1.
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OT Scenario 3 involves converting
98,300 to 126,400 part-time workers to
full-time, hiring 2,800 to 8,400 new full-
time workers, and incurring additional
hiring costs of $6.3 to $18.8 million.
These are direct costs incurred by
60531
agencies, not a transfer of income from
agencies or payers to employees (like
overtime compensation).
TABLE 9—YEAR 1 IMPACT ON HIRING COSTS
New hires a
Part-time
workers to
full-time
Additional
hiring costs
($ mil.)
OT Scenario 1 (60 Percent of Overtime Paid)
Hiring full-time workers to cover:
30% of remaining OT hours .............................................................................................................
20% of remaining OT hours .............................................................................................................
10% of remaining OT hours .............................................................................................................
3,746
2,497
1,249
43,699
49,941
56,184
8.4
5.6
2.8
5,618
3,746
1,873
65,548
74,912
84,276
12.5
8.4
4.2
8,428
5,618
2,809
98,322
112,368
126,414
18.8
12.5
6.3
OT Scenario 2 (40 Percent of Overtime Paid)
Hiring full-time workers to cover:
30% of remaining OT hours .............................................................................................................
20% of remaining OT hours .............................................................................................................
10% of remaining OT hours .............................................................................................................
OT Scenario 3 (10 Percent of Overtime Paid)
Hiring full-time workers to cover:
30% of remaining OT hours .............................................................................................................
20% of remaining OT hours .............................................................................................................
10% of remaining OT hours .............................................................................................................
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a The number of new hires is the number of full-time (35 hours per week) workers needed to cover the specified proportion of the total estimated 1.1 million overtime hours per week currently available to part-time workers (i.e., overtime hours worked by agency-employed workers and
non-family IHSS workers). The number of part-time workers converted to full-time is calculated as the number of workers whose hours are increased from 28 to 35 per week needed to cover the specified proportion of current overtime hours per week. The hiring costs are based on an
estimated cost of $2,230 per hire.
Travel Time
The FLSA requires that employees
who, in the normal course of work,
travel to more than one worksite during
the workday be paid for travel time
between each worksite. If the direct care
worker travels to the first consumer
directly from home, and returns directly
home from the final consumer, travel
time for the first trip and last trip
generally are not considered to be
compensable hours worked. It is clear
that at least some direct care workers
travel between consumers for the same
employer and are thus entitled to be
paid for that time. However, the
Department has been unable to find
evidence concerning how many workers
routinely travel as part of the job, the
number of hours spent on travel, or
what percentage of that travel time
currently is compensated.
New York City’s amicus brief does
suggest, however, that projected travel
time pay would be about 19.2 percent of
the size of overtime costs.161 As
discussed in the summary of public
comments, the Department received no
comments providing additional data or
alternative methods to revise this
calculation; an alternative method using
data on travel time in the NHHAS
suffered from too many limitations to
161 Brief
of Amici Curiae City of New York. 2007.
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produce a suitable estimate. With no
other data available, the 19.2 percent
figure seems reasonable to estimate
potential travel time pay. A number of
qualifications apply to the use of this
ratio. First, there is anecdotal evidence
that agencies that operate in the city
make little effort to minimize travel on
the part of their workers; since travel is
‘‘free’’ to the agency, there is little
incentive to manage travel time. Second,
because there is no explanation of how
either overtime or travel time estimates
were generated, a closer examination of
the data might change either or both
estimates.162 Third, it is unclear how
work and travel patterns in New York
City apply to the rest of the country. For
example, anecdotal evidence suggests
that direct care workers in rural areas
might have to travel further between
consumers, but their typical caseload
patterns and total travel time are
unknown. A survey of 261 direct care
workers in Maine found workers
traveled between 0 and 438 miles per
week for an average unreimbursed
mileage of 45 miles per week. One
survey participant’s comment was
compelling: ‘‘I had to give up my other
162 Thus, it is plausible that a modification in the
assumptions used to generate one estimate might
also affect the second estimate. The ratio of travel
time to overtime might remain relatively stable even
if the absolute values of the estimates change.
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clients because the price of gas and low
wages I wasn’t making ends meet.’’ 163
However, it is not possible to estimate
whether travel would involve longer or
shorter periods of time than travel in
New York City, which presumably often
involves travel by public transportation
or by car in heavily congested road
conditions.
The Department expects few
independent providers will be affected
by the travel time provision. Although
the FLSA requires that employees who
travel to more than one worksite during
the workday for one employer be paid
for travel time between each worksite,
in the case of independent providers,
any travel between work sites most
likely represents travel from one
employer to another, not travel between
sites for the same employer. Therefore
the Department anticipates that few
independent providers will be entitled
to travel time pay, and included no
independent providers in the cost
model (because they would be traveling
between separate employers and thus
the time is not considered work time).
163 Ashley, A., Butler, S., Fishwick, N. (2010).
Home Care Aide’s Voices from the Field: Job
Experiences of Personal Support Specialists. The
Maine Home Care Worker Retention Study. Home
Healthcare Nurse, 28(7), 399–405. Available at:
http://www.ncbi.nlm.nih.gov/pmc/articles/
PMC2946202/.
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Subject to the qualifications described
above, applying New York City’s 19.2
percent figure to the total overtime cost
with no adjustments to direct care
worker schedules and pay for 100
percent of current overtime hours, the
Department estimates that the
requirement to pay travel time under the
FLSA might add approximately $104.3
million per year to employer costs (7
percent annualization rate).164 In
estimating travel time pay, the
Department assumes that agencies will
make no scheduling adjustments to
overtime hours (thereby paying 100
percent of overtime costs) and that
travel time pay will maintain a constant
proportion to overtime hours.
Industry groups suggest that a
significant portion of agencies already
pay for overtime, including agencies
that voluntarily pay for travel and
overtime in states that do not require
overtime compensation. The IHS Global
Insight comment reports that 50 percent
of its survey respondents pay travel
time, including 39 percent of those in
states that do not require it. Because this
survey is not a random sample it is
unknown how representative the results
are of the industry in general. However,
given the uncertainty concerning the
travel estimate, the Department did not
adjust it downwards to reflect these
comments. Furthermore, because the
Department’s estimate of travel time pay
assumes agencies pay 100 percent of
overtime costs, the travel time pay
figures presented in this analysis
overestimate travel time pay costs
resulting from the Final Rule.
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Industry Adjustments Response to
Travel Time Requirement
As a result of this provision, agencies
should have significant incentive to
reduce travel between consumers for
their employees, and therefore reduce
costs. It is difficult, however, to predict
the potential magnitude of the cost
reduction. It might be difficult to reduce
travel due to consumer preferences for
specific direct care workers, or the
geographical dispersion of consumers
(especially in rural areas).
Therefore, although the Department
anticipates travel will be reduced as a
result of the Final Rule, it cannot
164 It is unknown whether travel hours will be
paid at straight time or overtime rates; this will vary
according to the circumstances of the individual
worker. If we assume all travel hours are overtime
hours, and are paid at approximately $14.50 per
hour, then the $68.1 million in incremental travel
time pay in Year 1 suggests about 4.7 million hours
per year are spent in travel. If we assume all travel
hours are straight time hours, and are paid at
approximately $9.67 per hour, then the $68.1
million in incremental travel time pay suggests
about 7.0 million hours per year are spent in travel.
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predict the magnitude of this reduction.
First, there may be some minimum level
of necessary travel that is irreducible.
Second, although agencies have
incentive to more carefully manage
costs associated with employee travel,
they might be able to do so in such a
way that agencies avoid increased costs,
but results in little reduction in travel
by their employees. For example,
employees currently working overtime
may have their hours reduced and
obtain a second job in order to work
more hours. This would likely increase
the uncompensated travel time of such
workers.
Live-in Domestic Service Employees
The Final Rule limits the application
of the overtime exemption contained in
§ 13(b)(21) of the Act to the individual,
family or household employing the livein domestic worker. Third party
employers would no longer be entitled
to claim the exemption. In addition, the
rule requires employers of live-in
domestic workers to maintain an
accurate record of hours worked, rather
than simply keeping a copy of the
agreement made by the employer and
employee covering hours of work. The
cost to employers of the recordkeeping
requirement, discussed more fully in the
Paperwork Reduction Act (PRA) section
of this preamble, is estimated to be
$29.7 million (which reflects the
amount for the entire information
collection–approximately $8.95 million
of which stems from this Final Rule).
These figures reflect year 1 only.
Following year 1, the regulatory
familiarization burden associated with
this Final Rule will drop substantially.
The Department utilized a 1979 study of
Domestic Service Employees which
incorporated 1974 data on the number
of live-in domestic service workers and
assumed for purposes of the PRA that a
similar percentage of the current
domestic service worker population is
employed in live-in domestic service
work today. The Department has been
unable, however, to identify current
data to estimate the number of live-in
domestic service workers employed by
third party agencies, but based on the
1979 data, we do not expect the impact
of the change concerning third party
employment to be substantial. Although
the Department has estimated the
number of live-in domestic service
workers for purposes of the PRA, we
have not included the 1979 data in the
economic analysis because the data does
not provide information to estimate the
number of hours worked by live-in
domestic service workers per week (and
whether the hours exceed 40), or
information to estimate the percentage
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of live-in domestic service workers
employed by third party entities. The
Department also received no relevant
comments providing such information.
G. Total Transfers
Due to the continuum of different
responses to the regulation, the
Department analyzed three possible
scenarios with respect to overtime. As
previously discussed, in view of the
comments received, the Department
believes that paying for 100 percent or
0 percent of overtime are highly
unlikely scenarios. Therefore, in the
Final Rule the Department assumes 60
percent of current overtime will be paid
in OT Scenario 1, 40 percent of current
overtime will be paid in OT Scenario 2,
and 10 percent will be paid in OT
Scenario 3. Based on the combination of
two industry surveys, empirical
research, and employer comments, the
Department believes that OT Scenario 2
reflects the most likely impacts of the
Final Rule. Scenario 1 assumes the
agency pays employees the overtime
premium for over half of overtime hours
worked. Conversely, the employer might
change scheduling practices to avoid the
majority of overtime costs to the extent
practicable and hire additional workers
as necessary to work the extra hours. In
addition, it is assumed that additional
staff can be hired at the current going
wage rate under all three of these
scenarios. As described above,
additional managerial costs to agencies
might occur as a result of changes in
staffing; the Department has no basis for
estimating these costs, but believes they
are relatively small. Therefore, they are
not included in the three scenarios.
The three scenarios in rank order from
highest to lowest amount of overtime
that will be paid by employers are:
• OT Scenario 1: The Department
assumes agencies pay 60 percent of the
overtime currently worked. Agencies
use a combination of hiring additional
direct care workers and increasing hours
of current part-time workers to cover the
remaining 40 percent of current
overtime hours.
• OT Scenario 2: The Department
assumes agencies make a partial
adjustment to staffing; overtime
compensation is reduced, but not
eliminated, by hiring some additional
staff or increasing hours to part-time
workers. OT Scenario 2 assumes
employers will pay the direct care
workers for 40 percent of the overtime
currently worked and hire additional
direct care workers or increase hours for
part-time workers to cover the
remaining hours.
• OT Scenario 3: The Department
assumes agencies ban overtime to the
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some agencies already pay overtime
voluntarily. Thus, the Department
believes 10 percent of the overtime
currently worked is a reasonable
expectation for the level of overtime
achieved under this scenario.
extent possible and increase staffing to
ensure few employees work more than
40 hours per week. The Department
assumes that because of rigidities in
staff and consumer preferences and
schedules it will not be possible to
reduce overtime to zero. Furthermore,
60533
Table 10 presents an overview of the
total estimated transfers of this rule
where the scenarios represent a range of
potential outcomes; actual transfers will
depend on the response of employers to
the Final Rule.
TABLE 10—SUMMARY OF YEAR 1 TRANSFERS
Total
transfers
($ mil.)
Transfer components
Travel Time Compensation ............................................
Overtime Scenarios:
OT 1 a ......................................................................
OT 2 b ......................................................................
OT 3 c ......................................................................
Total Transfers by Scenario ..........................................
Travel + OT Scenario 1 ..........................................
Travel + OT Scenario 2 ..........................................
Travel + OT Scenario 3 ..........................................
Comments
$68.1
213.2
142.1
35.5
281.3
210.2
103.7
60% of $355.3 million.
40% of $355.3 million.
10% of $355.3 million.
Employers of workers not currently entitled to overtime protections:
Allocate all but 60 percent of overtime to non-overtime workers.
Allocate all but 40 percent of overtime to non-overtime workers.
Allocate all but 10 percent of overtime to non-overtime workers.
a The Department estimates that 50,000 IHSS workers currently work overtime and about 110,000 (12% of 917,000) non-IHSS workers currently work overtime. Therefore, of the total estimated transfer, about 31 percent (e.g., $66.6 million in Year 1) is attributable to IHSS direct care
workers.
b Of the total, about 31 percent (e.g., $44.4 million in Year 1) is attributable to IHSS direct care workers.
c Of the total, about 31 percent (e.g., $11.1 million in Year 1) is attributable to IHSS direct care workers.
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The Department examined three
scenarios representing varying agencies’
potential responses to the overtime
compensation requirement. There is
little hard evidence concerning which
scenario is most likely to occur based
upon employer comments.165 However,
agencies have reasonable alternatives to
paying the overtime premium:
Spreading existing overtime hours to
other workers, either new employees or
current employees who want more
hours. The Department expects that OT
Scenario 1 is the least likely to occur;
there is no reason to believe agencies
will pay workers for significant amounts
of overtime if they can avoid it. OT
Scenario 1 represents an upper estimate
that projected transfer effects will
probably not exceed. OT Scenario 3
represents a lower estimate below
which projected transfers are unlikely to
fall. Based on the combination of two
industry surveys, empirical research,
and employer comments, the
Department believes that OT Scenario 2
reflects the most likely impacts of the
Final Rule and thus, believes that OT
165 National-level quantitative analyses have
produced results consistent with the Department’s
qualitative analysis for this labor market:
Barkume, Anthony. (2010). The Structure of
Labor Costs with Overtime Work in U.S. Jobs,
Industrial and Labor Relations Review, 64(1): 128–
142.
Trejo, Stephen. (1991). The Effects of Overtime
Pay Regulation on Worker Compensation, American
Economic Review, 81(4): 719–40.
Trejo, Stephen. (2003). Does the Statutory
Overtime Premium Discourage Long Workweeks?
Industrial and Labor Relations Review, 56(3): 530–
551.
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Scenario 2 best represents the true
transfer effects resulting from the
overtime requirement.
There are multiple channels through
which hours can be spread to additional
workers without significantly increasing
non-overtime wages. For example, the
Department examined scheduling
patterns for consumers who require 24hour care 7 days per week. With 2 direct
care workers overtime might range from
18 to 46 hours per week depending on
scheduling (assuming an average of 6.25
hours of sleep and 1.5 hours for
mealtime for each 24 hour shift). By
adding one more direct care worker,
overtime can be reduced to perhaps 15
hours or less per week with similar
assumptions concerning sleep and meal
time.
The extent to which current
employees work more than 40 hours per
week provides little evidence of a
potential labor shortage in this industry;
because most agencies are not required
to comply with overtime compensation
requirements for these workers, they
have had little incentive to manage
workers in a way to avoid overtime.
Furthermore, the existence of a
significant pool of part-time workers
who would prefer to work more hours
suggests that a general labor shortage
does not exist (although there might be
some localized shortages).
Projected Future Costs and Transfer
Effects Due to Industry Growth
As documented above in this analysis,
the demand for direct care workers has
grown significantly over the past decade
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and is projected to continue growing
rapidly. One researcher has projected at
least a 200 percent increase in demand
for direct care workers over the next 40
years.166 Therefore, the Department
examined how the provisions in the
Final Rule might impact a rapidly
growing industry.
To project regulatory familiarization
costs, the Department first estimated
both the number of agencies and the
number of independent providers likely
to enter the market. The Department
used U.S. Census’ Business Dynamics
Statistics to estimate an average annual
firm ‘‘birth’’ rate of 8.6 percent of
existing firms.167 With 89,400 affected
agencies in the baseline, this projects to
7,700 new agencies per year that will
incur incremental regulatory
familiarization costs.
The projected number of families
expected to hire independent providers
was calculated using U.S. Census
population projections by age. Census
projected that the number of individuals
age 65 and older will increase from 40.3
million in 2010 to 56.0 million in 2020
(39 percent), while those age 85 and
older will increase from 5.5 million to
6.7 million (22 percent) over the same
time period.168 The Department selected
166 HHS,
2001. pgs. 4, 5, and 7.
Census Bureau, Center for Economic
Studies. Business Dynamics Statistics: Firm Age by
Firm Size. Available at: http://www.census.gov/ces/
dataproducts/bds/data_firm.html. Accessed April
10, 2013.
168 U.S. Census Bureau, Population Division.
Table 1: Intercensal Estimates of the Resident
167 U.S.
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the weighted midpoint of these two age
groups to estimate the growth rate of the
population most likely requiring
assistance. This growth rate over 10
years (37 percent) was applied to the
number of independent home care
providers in the baseline year (182,600)
to estimate that 250,000 independent
providers would be supplying services
to 250,000 families by 2021, an average
of 6,744 new workers per year from
2012 to 2021.169
However, this estimate does not
account for turnover among individuals,
families, and households hiring
independent home care providers; the
Department accounted for this by
assuming that 50 percent of the previous
year’s independent home care providers
would gain a new consumer, and that
consumer or consumer’s family would
require regulatory familiarization. Thus,
on average, regulatory familiarization
costs among families hiring
independent providers each year was
calculated at 50 percent of the previous
year’s providers plus 6,744.
Consistent with the baseline estimate,
new agencies projected to incur
regulatory familiarization costs are
assumed to require two incremental
hours at a rate $38.44 per hour. Families
hiring independent providers are
assumed to require one hour of
regulatory familiarization at a rate of
$29.60. Table 11 summarizes the
estimation of projected regulatory
familiarization costs. The analytic
baseline for projecting the costs of this
rule is 2011 due to data availability, and
therefore the projected first and second
year costs of the rule appear to be in the
past. This approach is necessary
because the projections rely on and are
later compared to year-specific
estimates from other sources (e.g.,
projected home health expenditures).
For Table 11, 2011 data should be
interpreted as the pre-rule baseline,
with 2012 representing projected costs
for Year 1 following promulgation of the
rule, 2013 representing Year 2, and so
on. When comparing numbers projected
by other agencies (e.g., BLS
Occupational Outlook, CMS Office of
the Actuary), the actual year label is
appropriate.
TABLE 11—PROJECTED REGULATORY FAMILIARIZATION COSTS
Agencies requiring
regulatory familiarization
Families requiring regulatory familiarization
Year
Number
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
.....................................................................
.....................................................................
.....................................................................
.....................................................................
.....................................................................
.....................................................................
.....................................................................
.....................................................................
.....................................................................
.....................................................................
.....................................................................
89,446
7,718
7,718
7,718
7,718
7,718
7,718
7,718
7,718
7,718
7,718
Costs
($ mil.)
Total IPs
6.88
0.59
0.59
0.59
0.59
0.59
0.59
0.59
0.59
0.59
0.59
182,604
189,348
196,092
202,836
209,581
216,325
223,069
229,813
236,557
243,301
250,045
New IPs
Turnover
....................
6,744
6,744
6,744
6,744
6,744
6,744
6,744
6,744
6,744
6,744
....................
94,794
98,046
101,418
104,790
108,162
111,534
114,906
118,279
121,651
125,023
Costs
($ mil.)
5.41
2.80
2.90
3.00
3.10
3.20
3.30
3.40
3.50
3.60
3.70
Costs
($ mil.)
12.28
3.39
3.50
3.60
3.70
3.80
3.89
3.99
4.09
4.19
4.29
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Projected hiring costs under the three
overtime scenarios are based on the
projected growth in overtime hours.
Projections of employment growth and
projections of future overtime hours
worked and overtime compensation are
explained and quantified below. Only
those new hires and their associated
hiring costs that can be considered to be
caused by this rule are considered (see
Table 12). That is, the vast majority of
new employees represented by job
growth occur regardless of the rule and
therefore the costs of hiring those
workers are not attributable to the rule.
It is only when an agency has to hire an
additional worker as a result of the rule
(i.e., a worker the agency would not
have otherwise hired in the absence of
the rule) that regulatory costs are
attributed to this Final Rule.
The number of new hires attributable
to the rule is a small fraction of the
projected growth in employment in this
industry. First, since we assume future
overtime work patterns resemble current
patterns, only 12 percent of each year’s
new employees are expected to work
overtime. Second, because on average
they work 8.8 hours of overtime per
week, total overtime hours per 100 new
hires is analogous to 2.6 full-time
equivalent (FTE) positions. Third, the
Department expects agencies will pay
the overtime premium for some of those
hours (10 to 60 percent): Thus, of the
potential 2.6 FTE overtime hours, only
1.0 to 2.3 FTE overtime hours are
necessary to cover reallocated overtime.
Finally, the Department believes most
(70 to 90 percent) of those 1.0 to 2.3 FTE
overtime hours are likely to be
reallocated to current part-time workers,
and only 10 percent to 30 percent of
those hours are allocated to new hires.
Thus, the projected number of new hires
that can be attributed to the rule is a
very small percentage of the total
number of new workers the industry is
expected to hire over the next 10 years.
Table 12 shows the estimated number
of new hires attributable to this rule and
their associated costs. The Department
projects that the average number of new
hires caused by this rule ranges from
228 to 1,542, depending on the overtime
and hiring scenario. Using a 7 percent
real rate, the average annualized costs
associated with hiring these workers
range from $0.6 to $1.8 million in OT
Scenario 1, $0.9 to $2.7 million in OT
Scenario 2 and from $1.3 to $4.0 million
in OT Scenario 3.
Population by Sex and Age for the United State:
April 1, 2000 to July 1, 2010. Available at: http://
www.census.gov/popest/data/intercensal/national/
nat2010.html. Accessed April 10, 2013; U.S. Census
Bureau. 2012. National Population Projections.
Table 2: Projections of the Population by Selected
Age Groups and Sex for the United States: 2015 to
2060. Available at: http://www.census.gov/
population/projections/data/national/2012/
summarytables.html. Accessed April 10, 2013.
169 These do not include families that are using
the services of IHSS direct care workers.
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TABLE 12—PROJECTED HIRING COSTS a
Average annualized
value
($ mil.)
Future years
($ mil.) b
Year 1
($ mil.)
Hiring full-time workers to cover:
Year 2
OT Scenario 1.
30% of remaining
20% of remaining
10% of remaining
OT Scenario 2.
30% of remaining
20% of remaining
10% of remaining
OT Scenario 3.
30% of remaining
20% of remaining
10% of remaining
Year 10
3% Real
rate
Number of hires
Year
1
7% Real
rate
Average c
OT hours .........................................
OT hours .........................................
OT hours .........................................
8.4
5.6
2.8
$0.8
0.5
0.3
$0.8
0.5
0.3
$1.6
1.1
0.5
$1.8
1.2
0.6
3,746
2,497
1,249
685
457
228
OT hours .........................................
OT hours .........................................
OT hours .........................................
12.5
8.4
4.2
1.2
0.8
0.4
1.2
0.8
0.4
2.5
1.6
0.8
2.7
1.8
0.9
5,618
3,746
1,873
1,028
685
343
OT hours .........................................
OT hours .........................................
OT hours .........................................
18.8
12.5
6.3
1.7
1.2
0.6
1.7
1.2
0.6
3.7
2.5
1.2
4.0
2.7
1.3
8,428
5,618
2,809
1,542
1,028
514
a Projected
number of hires and hiring costs are based on the projected growth in the number of overtime hours in Table 16.
costs represent a range over the nine-year span. Costs are lowest in Year 2 and highest in Year 10 so these two values are reported.
c Simple average over 10 years.
b These
To estimate the number of
incremental direct care workers who
might earn overtime compensation or
travel time compensation under the
revisions, the Department utilized BLS
Occupational Outlook employment
projections for 2020.170 The Department
interpolated employment data for 2012
through 2019, and extrapolated the time
series through 2021 using a constant
rate of growth assumption. Wage data
were directly extrapolated through 2021
using the time trend from 2000 through
2011. Based on these time series:
• Home Health Aide employment
will increase by an average of 8.7
percent per year; 171 their median
nominal wage will increase by an
average of 2.72 percent per year while
median real wage will increase by an
average of 1.53 percent per year.172
• Personal Care Aide employment
will increase by an average of 8.0
percent per year; their median nominal
wage will increase by an average of 3.88
percent per year, and the median real
wage will increase by an average of 2.70
percent per year.
Table 13 summarizes the projections
of HHA and PCA employment and
wages developed for this analysis.
TABLE 13—PROJECTED EMPLOYMENT AND HOURLY WAGE, HHAS AND PCAS, 2011–2021 a
Home health aides
Year
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
Total
employment
(mil.)
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
a Derived
0.92
1.01
1.10
1.19
1.28
1.37
1.46
1.55
1.64
1.72
1.81
Personal care aides
Median wage
Inflationadjusted b
Nominal
$9.91
10.16
10.47
10.78
11.09
11.40
11.71
12.03
12.34
12.65
12.96
Total
employment
(mil.)
$9.91
10.05
10.23
10.42
10.59
10.76
10.93
11.09
11.24
11.39
11.54
0.82
0.89
0.96
1.04
1.11
1.18
1.25
1.32
1.40
1.47
1.54
Median wage
Nominal
$9.49
10.34
10.73
11.13
11.52
11.91
12.30
12.69
13.08
13.48
13.87
Inflationadjusted b
$9.49
10.23
10.50
10.75
11.01
11.25
11.49
11.72
11.94
12.16
12.37
from BLS Occupational Outlook.
based on 10 year average change in PPI for Home Health Services.
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b Estimates
The Department did not project future
(Year 2 and beyond) transfer effects
associated with minimum wage
provisions of the FLSA being extended
to these occupations. BLS Occupational
Employment Statistics on HHA and
PCA wages for 2010 indicate that few,
if any, workers are currently paid below
minimum wage. BLS found no state in
which the tenth percentile wage was
below $7.25 per hour.173 As previously
discussed, Congress passed
amendments to the FLSA increasing the
Federal minimum wage only four times
since it extended FLSA protections to
170 Bureau of Labor Statistics, U.S. Department of
Labor, Occupational Outlook Handbook, 2010–11
Edition, Home Health Aides and Personal and
Home Care Aides. Available at: http://www.bls.gov/
oco/ocos326.htm. Accessed September 20, 2011.
171 Total hours worked and overtime hours
worked will increase at the same rate in this model.
172 The Department adjusted nominal wages for
inflation using the average increase in the PPI for
Home Health Services over the last 10 years (1.2
percent).
173 BLS Occupational Employment Statistics,
2010 state estimates. Available at: http://
stats.bls.gov/oes/.
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domestic workers in 1974. Given that
the minimum wage has reached the
maximum rate contained in the most
recent amendments, any estimate of the
cost of this rule accounting for increases
in the minimum wage would be purely
speculative.
Projected Cost Impacts
This section draws on the estimates of
costs to determine the anticipated
impact of this Final Rule in terms of
total cost across all industries as well as
estimated cost per firm and per
employee.
Table 14 presents the impact of
regulatory direct costs on existing
agencies and individuals, families, and
households in the first year. First year
regulatory familiarization costs total
$12.3 million; when annualized at a 7
percent discount rate over 10 years, total
annualized costs are $4.9 million per
year. Cost per agency is $77, while
families employing independent
providers will incur costs of $30 per
individual, family, or household. Hiring
costs annualized at a 7 percent real
discount rate over 10 years range from
$0.6 to $1.8 million in OT Scenario 1,
from $0.9 million to $2.7 million in OT
Scenario 2, and from $1.3 million to
$4.0 million in OT Scenario 3. These
correspond to Year 1 costs per
establishment of $31 to $94 in OT
Scenario 1, $47 to $140 in OT Scenario
2, and $70 to $211 in OT Scenario 3.
TABLE 14—IMPACT OF REGULATORY DIRECT COSTS
Total projected compliance costs ($mil.) b
Annualized at
7%
Future years
Component
Year 1
Year 2
Year 10
Year 1 cost
per
establishment
component a
Regulatory familiarization costs
Home Healthcare Agencies .................................................
Families Employing IPs .......................................................
$6.9
5.4
$0.6
2.8
$0.6
3.6
$1.4
3.5
$77
30
Hiring Costs
OT Scenario 1:
30% of OT
20% of OT
10% of OT
OT Scenario 2:
30% of OT
20% of OT
10% of OT
OT Scenario 3:
30% of OT
20% of OT
10% of OT
hours ..........................................................
hours ..........................................................
hours ..........................................................
$8.4
5.6
2.8
$0.8
0.5
0.3
$0.8
0.5
0.3
$1.8
1.2
0.6
$94
62
31
hours ..........................................................
hours ..........................................................
hours ..........................................................
12.5
8.4
4.2
1.2
0.8
0.4
1.2
0.8
0.4
2.7
1.8
0.9
140
94
47
hours ..........................................................
hours ..........................................................
hours ..........................................................
18.8
12.5
6.3
1.7
1.2
0.6
1.7
1.2
0.6
4.0
2.7
1.3
211
140
70
a Regulatory
b Excludes
familiarization applies to 89,446 establishments; independent provider regulatory familiarization will impact 182,604 entities.
paperwork burden, estimated in Section V.
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Market Impacts
There are almost no data, such as
price elasticities of supply or demand,
that can directly be used to model the
market for companionship services.
Furthermore, because approximately 75
percent of expenditures on home care
services are reimbursed by public
payers, the effect of the rule depends on
how the public payers respond to the
increase in the cost of providing home
care services. However, despite these
limitations, the Department used
available data combined with best
professional judgment concerning
appropriate parameter values, to project
deadweight loss and disemployment
effects of the Final Rule. The selection
of specific values and the rationale for
those decisions are explained in further
detail below.
In this section, the Department first
presents estimated transfer effects for
each provision of the rule, along with
qualitative discussion of potential
market adjustments and impacts of that
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provision. The Department then
presents the projected deadweight loss
and disemployment effects of the Final
Rule using a market model framework.
The Department estimates:
• Projected travel time pay represents
a transfer of $68.1 million per year from
agencies to employees (Table 10,
although this might decline as agencies
will now have incentive to more closely
manage travel time). If these payments
are spread equally over all agencies in
this industry, they represent about a
0.15 percent increase in wages to
employees. It is more likely that these
payments will be distributed less
uniformly; employees of some agencies
might receive significant travel transfer
effects, while others receive less.
• Transfer effects associated with
overtime are most difficult to project. In
Scenario 2 the $142.1 million in
additional wages compose about 0.31
percent of annual wages if overtime is
spread over all workers, or about 0.16
percent of average industry annual
revenues if spread over all
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establishments. Again, it is likely that
overtime compensation will be
distributed less uniformly in a way that
is difficult to predict.
However, changes in wages are not
the only determinant of how the market
might tend to respond to the Final Rule;
the demand for home care services, and
therefore the demand for workers in this
industry, also affects the market
response. Conceptually, the demand for
companionship services has two
distinct components: Consumers
covered by public payers, and out-ofpocket payers. Multiple sources
estimate that the percent of home care
expenditures accounted for by Medicare
and Medicaid range from about 75
percent to 90 percent.174 175 176 177 178 The
174 Seavey and Marquand, 2011, pgs 22, 23.
WHD–2011–0003–3514. Available at: http://
phinational.org/sites/phinational.org/files/clearing
house/caringinamerica-20111212.pdf.
175 Congressional Research Service.
Memorandum dated February 21, 2012, titled
‘‘Extending Federal Minimum Wage and Overtime
Protections to Home Care Workers under the Fair
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remaining expenditures are accounted
for by out-of-pocket payers, private
insurance, and a mix of other
governmental sources.
Currently, Medicare will cover,
without a copayment requirement, all—
or almost all—of the allowed payment
for home health care services for
consumers eligible for Medicare
payments. Thus, the demand for
services by these consumers is likely to
be highly inelastic, and the purchase of
these services is dependent primarily on
need and eligibility rather than price.179
The increase in the payment rate
resulting from an increase in costs may
vary depending on the type of cost
increase. Because an increase in the
minimum wage is an unavoidable cost
of providing these services, it seems
reasonable to assume that it will
eventually be reflected in payment rates.
The impact of overtime and travel on
reimbursement rates is more uncertain.
Several commenters stated that
Medicare/Medicaid only pay for
services and not travel or overtime. For
example, Daniel Berland of the National
Association of State Directors of
Disabilities Services observed that
‘‘Medicaid doesn’t pay for time that is
spent not working directly for the
consumer.’’ The CRS observed that
‘‘payments by Medicare or Medicaid to
an agency to provide home health aide
services or Medicaid personal care
services are not the same as the wage
that that the agency pays to the worker’’
and stated that over time the payments
under both Medicare and Medicaid
could be adjusted to reflect additional
costs to agencies providing these
services.180
Labor Standards Act: Impact on Medicare and
Medicaid,’’ p. 4. WHD–2011–0003–5683.
176 U.S. Census Bureau: Health Care and Social
Assistance, Estimated Year-to-Year Change in
Revenue for Employer Firms by Source, Table 8.10.
Available at: http://www.census.gov/services/sas_
data.html.
177 Home Health Care Services Payment System.
The Medicare Payment Advisory Commission
(MedPAC). October 2010. Available at: http://
www.medpac.gov/documents/MedPAC_Payment_
Basics_08_HHA.pdf.
178 ERG analysis of MEPS data. Agency for
Healthcare Research and Quality (AHRQ). Medical
Expenditures Panel Survey. 2009. Available at:
http://meps.ahrq.gov/mepsweb/data_stats/
download_data_files.jsp. Accessed March, 2012.
179 Home Health Care Services Payment System.
The Medicare Payment Advisory Commission
(MedPAC). October 2010. Available at: http://
www.medpac.gov/documents/MedPAC_Payment_
Basics_08_HHA.pdf. Medicare, for example, does
not require copayment for eligible patients.
180 Congressional Research Service.
Memorandum dated February 21, 2012, titled
‘‘Extending Federal Minimum Wage and Overtime
Protections to Home Care Workers under the Fair
Labor Standards Act: Impact on Medicare and
Medicaid.’’ WHD–2011–0003–5683.
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Consumers who pay all, or a
significant share, of costs out-of-pocket
might have a significantly different
price elasticity of demand for home care
services. Little information is known
about this market segment, including
the percent of home care consumers
actually pay out-of-pocket, as opposed
to having private insurance to cover
costs. Because public payers account for
about 75 percent of total payments for
home care services, it is likely that the
private pay market segment is
significantly smaller than the public pay
market. To the extent that these
consumers are not covered by private
insurance and pay out-of-pocket, they
are likely to have a more elastic demand
for services; if the prices for home care
services increase, these consumers are
more likely to search for lower cost
alternatives. However, the size of such
an effect is difficult to predict on the
basis of extant information.
The Department expects the impact of
this Final Rule on the market for home
care services to be relatively small
because incremental transfers are
projected to be small relative to industry
wages and revenues, and because the
market for these services is dominated
by government payers. However, to the
extent that some transfers are not
reimbursed by government payers, and
that agencies might therefore increase
the price to consumers, they might
result in some consumers seeking
alternatives to the organized market for
home care services.
Deadweight Loss
Deadweight loss from a regulation
results from a wedge driven between the
price consumers pay for a product or
service, and the price received by the
suppliers of those services. In this case,
the transfer of income from agency
owners to agency employees through
overtime provisions reduces agencies’
willingness to provide home care
services. Because consumers and their
families must now pay more to receive
the same hours of service, they may
reduce the number of hours of services
they purchase; it is this potential
reduction in services that causes the
allocative inefficiency (deadweight loss)
of the rule.
To estimate deadweight loss, the
Department must estimate the reduction
in services agencies are willing to
provide at the current market price, the
resulting increase in market price paid
by consumers and families, and their
reduced purchases of home care
services. To do this, the Department
uses: (1) The current market wage and
hours of home care services; (2) the
estimated income transfers resulting
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60537
from the rule; and (3) the price elasticity
of demand for and supply of home care
services.
PCA criticized the deadweight loss
analysis in the NPRM because it used an
incorrect price elasticity of demand for
direct care workers.181 Upon further
investigation, the Department
determined that the comment was
accurate, although the commenter’s
suggested alternative value was also
flawed. Issues associated with the
estimation of the price elasticity of
demand and deadweight loss are
discussed in detail in the Summary of
Public Comments on the Preliminary
Regulatory Impact Analysis Section.
In addition, the Department accepts
the commenter’s point that the market
for direct care workers contains a
private pay sector and a public-fundsreimbursed sector that might differ
substantially in terms of consumer
response to price changes. Therefore,
the Department now evaluates
deadweight loss projections by
explicitly modeling the two distinct
market sectors; the larger public pay
market segment (75 percent of the
market) is characterized by a highly
inelastic price elasticity of demand
(–0.17), while the smaller private pay
segment (25 percent of the market) has
more elastic demand (–1.0).
The Department has estimated
approximately 385,000 HHAs and
532,000 PCAs currently work without
overtime protection. An additional
50,000 of 380,000 IHSS direct care
workers routinely work more than 40
hours per week but do not receive
overtime compensation. These direct
care workers are potentially affected by
the overtime provisions of the Final
Rule. The median hourly wage in these
states is $9.91 for HHAs and $9.49 for
PCAs. The Department used the number
of employees affected by overtime
provisions in its calculation of
deadweight loss because: (1) The
populations of affected workers in states
without minimum wage and overtime
provisions are largely overlapping (i.e.,
states without minimum wage
protection also do not have overtime
protection) because the same worker
might be paid less than the minimum
wage and also be working overtime,
including both counts creates a doublecounting problem; (2) minimum wage
impacts of the Final Rule are estimated
to be zero; and (3) spreading transfers
over a smaller worker population results
in a more conservative estimate of
deadweight loss (that is, the Department
is more likely to overestimate, than
underestimate, deadweight loss).
181 William
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The Department included 30 percent
of California IHSS direct care workers in
the deadweight loss analysis. Comments
from the California State Association of
Counties, et al., indicate that perhaps 70
percent of IHSS direct care workers are
family members. This suggests they are
different from other agency-employed
direct care workers. For example, IHSS
workers may not consider direct care to
be their vocation (outside of caring for
their family members), and thus might
be more likely to quit than care for a
non-family member after their family
member no longer needs care.182
Therefore, the Department believes most
IHSS direct care workers are likely to
respond to market forces in different
ways than agency-employed direct care
workers, and should not be included in
the deadweight loss analysis. The
Department assumed that those IHSS
workers who exceed 40 hours of work
per week are evenly distributed among
family and nonfamily direct care
workers, and therefore also included 30
percent of overtime premiums for IHSS
workers in the deadweight loss analysis.
The Department estimated a range of
income transfers depending on the
assumptions made concerning business
response to the regulation. The
Department assumes a split of overtime
costs between agencies, who pay at least
some limited amount of overtime, and
direct care workers, whose hours of
work are reduced by that agency
(although the direct care workers might
seek additional hours to work at other
agencies). Combining the $142.1 million
estimated overtime compensation costs
under OT Scenario 2 (expected by the
Department to be the most probable of
the three scenarios), with the amounts
due based upon the travel time
compensation provisions, the
Department estimated the deadweight
loss of the rule based on first year
transfer costs of $210.2 million; this
excludes 70 percent of overtime
payments to IHSS workers. Thus, the
rule might cost $159 per potentially
affected worker, or approximately $0.09
per hour assuming workers average 35
hours per week, about 0.89 percent of
the current hourly wage for HHAs and
0.92 percent for PCAs.
There are no econometric estimates of
the price elasticity of demand or supply
for home care services. The Department
reviewed econometric literature to
identify alternatives to use as proxies for
a direct estimate of the price elasticity
of demand for home care services. For
the price elasticity of demand for home
care services that are largely reimbursed
182 CSAC, CWDA, CAPA, and CICA, WHD–2011–
0003–9420.
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by third party payers (e.g., public
payers, private insurance), the
Department chose the price elasticity of
demand for ‘‘health care services’’ to use
as a proxy for this analysis. The primary
consideration in selecting this value is
that the demand for home care should
be largely inelastic due to the high
degree of reimbursement; this
characteristic is similar to the demand
for health care services. A literature
review shows that the price elasticity of
demand for health care services is
generally in the ¥0.10 to ¥0.20 range.
As discussed earlier in the analysis, the
Department will use a value of ¥0.17 in
the deadweight loss model.
The price elasticity of demand for
private pay care is expected to be more
elastic because this type of demand is
often for long-term chronic care, and is
typically not reimbursed by third party
payers. Therefore the Department
selected the price elasticity of demand
for nursing home care to use as a proxy:
nursing home care appears to be a close
substitute for long-term private pay
home care because consumers
frequently must choose between living
at home with assistance, or entering a
nursing home or assisted living facility
if that assistance is unavailable or too
expensive. Literature shows price
elasticities of demand for nursing care
in the ¥0.7 to about ¥4.0 range. For the
reasons previously discussed, the
Department will use a value of –1.0 in
the deadweight loss model.183
For the purpose of estimating
deadweight loss, the Department will
assume that the private pay sector
composes perhaps 25 percent of the
home care services market; the private
pay market segment will be assumed to
employ 25 percent of direct care
workers and incur 25 percent of
transfers in the form of overtime and
travel time compensation. This
judgment is based primarily on the
percentage of home care services paid
by public payers. Although private pay
industry commenters on the NPRM
asserted the private pay market is large,
they provided little data to document
this assertion. The only portion of the
private pay market that could be
documented (e.g., private pay
franchisees) was a fraction of the
number of agencies claimed to operate
in the private pay market.
In addition, the Department could
find no corroboration to support the
claim of a large private pay segment in
other databases. The Department
183 Rechovsky, J. (1998). The Roles of Medicaid
and Economic Factors in the Demand for Nursing
Home Care, Health Services Research, 33(4 Pt 1):
787–813.
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examined alternative data sources such
as the nationally-representative MEPS
database, which captures the use of
long-term non-medical care (e.g.,
companionship and homemaker
services) in addition to short-term acute
medical home care. The MEPS data
offered little support for the existence of
a large private pay market for home care
services. Private pay appears to be more
frequently used with independent
providers, whereas payment for agency
services was dominated by Medicare
and Medicaid with a relatively small
percentage of consumers paying out-ofpocket for agency care.
The price elasticity of supply for
hourly labor has been estimated at 0.1
(a 1 percent increase in wages will cause
a 0.1 percent increase in hours
supplied). However, among women, that
price elasticity of supply is estimated to
be about 0.14; because hours worked in
this labor market are primarily supplied
by women, the Department selected a
value of 0.14 to use as the price
elasticity of supply of home care
services in this analysis.
Based on these price elasticities of
supply and demand, the estimated cost
per direct care worker hour, and
baseline employment and wages, the
Department projects that for:
• HHAs, hourly wage will increase by
$0.03 to $9.94, and employment will
decrease by about 332 (less than 0.1
percent of affected HHAs), or about
604,900 hours of home care services
annually; deadweight loss will be
$26,400 annually (less than 0.0001
percent of industry revenues).
• PCAs, hourly wage will increase by
$0.03 to $9.52, and employment will
decrease by 479 (less than 0.1 percent of
affected PCAs), or about 872,500 hours
of home care services annually;
deadweight loss will be $38,100
annually (less than 0.0001 percent of
industry revenues).
In addition, transfers to direct care
workers will be borne by the consumers
and their families in the form of higher
prices, and by agencies and their owners
in the form of reduced profit. The
determination of who pays these
transfers is a function of the relative
price elasticities of supply and demand;
the weighted average results for the two
market sectors shows that about 38
percent of transfers will be borne by
consumers, their families, and public
payers, with the remainder borne by
agencies (about 62 percent). For:
• HHAs, about $26.1 million is
estimated to be paid by consumers, their
families, and public payers; while $42.8
million is estimated to be paid by
agencies and their owners in the form of
reduced income.
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• PCAs, consumers, their families,
and public payers are estimated to pay
about $36.1 million, and $59.1 million
is estimated to be paid by agencies and
their owners in the form of reduced
income.
Table 15 summarizes both the values
of the parameters used in the
60539
deadweight loss analysis and the results
of the analysis.
TABLE 15—SUMMARY OF DEADWEIGHT LOSS ESTIMATION
Medicare/Medicaid reimbursed
HHA
PCA
Total
Private pay
HHA
Total
PCA
Total
HHA
PCA
Total
¥1.00
0.14
$9.49
132,976
................
................
................
................
................
229,254
$36.1
$0.0866
N/A
N/A
$9.91
432,987
................
................
N/A
N/A
$9.49
598,028
$164.3
................
................
................
................
1,031,015
$9.50
$0.011
132,827
¥149
$11,748
12.3%
$2.6
87.7%
$18.4
................
................
229,001
¥252
$19,893
12.3%
$4.4
87.7%
$31.7
$9.94
$0.033
432,654
¥332
$26,445
37.9%
$26.1
62.1%
$42.8
$9.52
$0.033
597,549
¥479
$38,142
37.9%
$36.1
62.1%
$59.1
................
................
1,030,203
¥812
$64,587
37.9%
$62.3
62.1%
$101.9
Values Used in Deadweight Loss Analysis
Price Elasticity of Demand ............................................
Price Elasticity of Supply ..............................................
Baseline Hourly Wage ..................................................
Baseline Employment a .................................................
Compliance Costs ($ mil.) b ..........................................
Compliance Costs per Hour c ........................................
¥0.17
0.14
$9.91
336,709
................
................
¥0.17
0.14
$9.49
465,052
................
................
................
................
................
801,761
$128.1
$0.0878
¥1.00
0.14
$9.91
96,278
................
................
$0.0875
Results of Deadweight Loss Analysis
Post-Rule Hourly Wage ................................................
Change in Hourly Wage ................................................
Post-Rule Total Employment ........................................
Change in Employment .................................................
Deadweight Loss ...........................................................
% Paid by Purchasers d ................................................
Amount Paid by Purchasers ($ mil.) .............................
% Paid by Employers e .................................................
Amount Paid by Employers ($ mil.) ..............................
$9.95
$0.040
336,480
¥229
$18,300
45.2%
$24.3
54.8%
$29.5
$9.53
$0.040
464,722
¥330
$26,394
45.2%
$33.5
54.8%
$40.7
................
................
801,202
¥559
$44,694
45.2%
$57.8
54.8%
$70.2
$9.92
$0.011
96,174
¥103
$8,145
12.3%
$1.9
87.7%
$13.3
a Agency employment in states without minimum wage and/or overtime laws and tax-exempt employers plus independent providers in states without minimum wage
laws.
b Estimated sum of transfers and costs from overtime Scenario 2, travel, minimum wage, and regulatory familiarization costs. Values do not include independent
providers.
c Assumes each direct care worker works 35 hours per week 52 weeks per year.
d Costs and transfers paid by purchasers in the form of higher prices; includes direct purchase of home care services and services purchased through public payers.
e Costs and transfers paid by employers in the form of lower profits.
sroberts on DSK5SPTVN1PROD with RULES
Impact to Medicare and Medicaid
Budgets
In 2012, HHS outlays for Medicare
programs totaled $591 billion, and an
estimated $34.1 billion went to home
health programs.184 In 2009, HHS and
state outlays in support of Medicaid
totaled $374 billion and approximately
$50 billion went to home health
services.185 186 In 2009, Medicare and
Medicaid accounted for nearly 75
percent of home care services revenue;
thus, the impact of the Final Rule on
home care will depend on how
Medicare and Medicaid respond to
increased labor costs.
Although increased compensation to
workers under this Final Rule
associated with travel and overtime
hours are considered transfer effects
184 Center for Medicare and Medicaid Studies,
Office of the Actuary. National Health Expenditure
Accounts 2011–2021. Available at: http://
www.cms.gov/Research-Statistics-Data-andSystems/Statistics-Trends-and-Reports/National
HealthExpendData/Downloads/Proj2011PDF.pdf.
185 Detailed Medicaid data by type of home
healthcare is not yet available for 2012.
186 Kaiser Commission on Medicaid and the
Uninsured. 2012 Medicaid Home and CommunityBased Services Programs: 2009 Data Update.
Note, not all of the HCBS goes to personal care
services; a more detailed breakdown of this
spending is not available. For additional data, see
Kaiser Family Foundation, State Health Facts:
http://statehealthfacts.org/compare
table.jsp?ind=242&cat=4.
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from a societal perspective, the
Department expects agencies will try to
pass these transfers through to Medicare
and Medicaid to the extent they are
able. As described in the comment
summary, several commenters
expressed concern that public funding
does not pay for travel and overtime;
however, CRS notes that federal
regulations do not explicitly regulate
direct care worker wage or benefit levels
with respect to service reimbursements.
Agencies already pay workers only a
portion of the reimbursement as wages,
and the remainder presumably covers
other costs of doing business. The CRS
report also notes that although initially
the costs may be passed through to
consumers, over time Medicare and
Medicaid reimbursements may be
adjusted to reflect the added costs to
agencies.187
Under the three overtime scenarios
examined, average first year transfer
payments range from $103.7 to $281.3
million depending on how home care
agencies respond to overtime
requirements. Assuming transfer
payments are incurred proportionately
187 Congressional Research Service.
Memorandum dated February 21, 2012, titled
‘‘Extending Federal Minimum Wage and Overtime
Protections to Home Care Workers under the Fair
Labor Standards Act: Impact on Medicare and
Medicaid.’’ WHD–2011–0003–5683.
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to the percentage of baseline home care
costs, then services funded by public
payers might account for approximately
75 percent of these overtime and travel
payments, about $77.7 million to $211.0
million in the first year. These payments
compose 0.13 to 0.35 percent of total
HHS and state outlays for home care
services ($60.4 billion in 2011).188
Projected Future Transfer Effects Due to
Industry Growth
This section projects transfer effects
and other impacts over 10 years. The
Department used several key
assumptions to develop these
projections. First, the Department
assumed that the number of home care
workers directly employed in the homes
and employed in states without current
overtime premium requirements will
remain a constant percentage of total
employment in those occupations
between 2012 and 2021 (about 41.6
percent of HHAs and 64.8 percent of
PCAs).189 We also assume that IHSS
188 Center for Medicare and Medicaid Studies,
Office of the Actuary. National Health Expenditures
by type of service and source of funds, CY 1960–
2011. Available at: http:www.cms.gov/ResearchStatistics-Data-and-Systems/Statistics-Trends-andReports/NationalHealthExpendData/
NationalHealthAccountsHistorical.html.
189 These percentages are derived by dividing the
number of workers without overtime coverage
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employment grows at the same rate as
HHA and PCA employment, and that 70
percent of IHSS workers care for family
members.
Second, the Department also
maintained the assumptions that 12
percent of HHAs and PCAs exceed 40
hours worked per week and that 10
percent of these direct care workers
work 6.4 hours of overtime per week
while 2 percent work 21.0 hours of
overtime per week. We assume IHSS
workers exceeding 40 hours per week
remain a constant percent of total IHSS
workers. These overtime assumptions
are identical to those used to estimate
costs and transfers for the Year 1
baseline analysis.
Third, consistent with the baseline
analysis, we project three overtime
scenarios. In these scenarios, employers
adjust schedules as follows:
• OT Scenario 1: Employers adjust
the hours worked and pay workers an
overtime premium for 60 percent of the
overtime hours worked prior to the rule.
• OT Scenario 2: Employers adjust
the hours worked and pay workers an
overtime premium for 40 percent of the
overtime hours worked prior to the rule.
• OT Scenario 3: Employers adjust
the hours worked and limit overtime
hours to 10 percent of the overtime
hours worked prior to the rule.
Finally, we continue to estimate travel
time pay as 19.2 percent of overtime
evaluated at 100 percent of baseline
overtime hours worked.
The Department excluded potential
transfer effects associated with the
minimum wage provision from the
projections because the number of
workers earning less than the minimum
wage has declined steadily, to the point
of being at or near zero, as nominal
wages have increased: thus, the
Department estimates that the minimum
wage provisions of this Final Rule will
have negligible impact if the federal
minimum wage stays at its current level.
As previously discussed, based on the
infrequency with which Congress
historically has enacted updates to the
minimum wage, the Department did not
assume any minimum wage increase in
the analysis. Although the Department
expects that the parameters used in this
analysis will not remain constant
through 2021, it has insufficient
information on which to base estimates
of how these key variables might change
over time. Therefore, maintaining the
assumptions used in the Year 1 analysis
provide the best basis for projecting
future costs and transfer effects.
Based on the data and assumptions
described in this section, and the
employment and wage projections in
Table 13, Table 16 presents the
Department’s projections through 2021
of overtime and travel time
compensation attributable to the
revisions to the companionship
regulations in this Final Rule.
TABLE 16—PROJECTED HHA AND PCA OVERTIME HOURS, OVERTIME COMPENSATION AND TRAVEL TIME COMPENSATION
ATTRIBUTABLE TO FINAL RULE, 2012–2021 a
Overtime hours worked
(millions)
Year
Scenario 1
Overtime and travel time compensation
(millions)
Scenario 2
Scenario 3
Scenario 1
Scenario 2
Scenario 3
Travel
Nominal Dollars
2012
2013
2014
2015
2016
2017
2018
2019
2020
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
48.1
52.1
56.2
60.2
64.2
68.2
72.2
76.3
80.3
32.1
34.8
37.4
40.1
42.8
45.5
48.2
50.8
53.5
8.0
8.7
9.4
10.0
10.7
11.4
12.0
12.7
13.4
$247.0
276.9
308.3
341.1
375.3
411.0
448.1
486.6
526.6
$164.6
184.6
205.5
227.4
250.2
274.0
298.7
324.4
351.0
$41.2
46.1
51.4
56.8
62.6
68.5
74.7
81.1
87.8
$78.9
88.5
98.5
109.0
120.0
131.4
143.2
155.5
168.3
2021 .........................................................
84.3
56.2
14.0
568.0
378.6
94.7
181.5
Inflation-Adjusted Dollars b
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
.........................................................
48.1
52.1
56.2
60.2
64.2
68.2
72.2
76.3
80.3
84.3
32.1
34.8
37.4
40.1
42.8
45.5
48.2
50.8
53.5
56.2
8.0
8.7
9.4
10.0
10.7
11.4
12.0
12.7
13.4
14.0
$244.2
270.7
297.9
325.8
354.4
383.6
413.5
443.9
474.8
506.2
$162.8
180.5
198.6
217.2
236.3
255.8
275.6
295.9
316.5
337.5
$40.7
45.1
49.7
54.3
59.1
63.9
68.9
74.0
79.1
84.4
$78.1
86.5
95.2
104.1
113.3
122.6
132.2
141.9
151.8
161.8
a Calculations
sroberts on DSK5SPTVN1PROD with RULES
b Inflation
based on employment and wage data in Table 13 and specified assumptions.
estimates based on 10-year average change in PPI for Home Health Services.
The Department projects that paid
overtime hours will increase from 48.1
million to 84.3 million between 2012
and 2021 with a consequent increase in
overtime compensation from $247.0
million to $568.0 million (OT Scenario
1). This corresponds to a $244.2 to
$506.2 million increase in inflationadjusted overtime compensation. In OT
Scenario 2, overtime compensation is
projected to increase from $162.8
million to $337.5 million in inflationadjusted dollars. Assuming employers
only cover 10 percent of overtime, and
the other 90 percent of overtime hours
(917,039 total; 385,115 HHAs plus 531,924 PCAs)
by the total employment (1.75 million; 924,660
HHAs plus 820,630 PCAs). Specifically, for HHAs,
the source of the percentage is 385,115/924,660 and
for PCAs, it is 531,923/820,630 (see Table 8).
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are eliminated through scheduling
changes and/or hiring additional
workers (OT Scenario 3), the projected
increase ranges from $40.7 million to
$84.4 million in inflation-adjusted
dollars. Travel time compensation is
projected to increase from $78.1 million
to $161.8 million in inflation-adjusted
dollars over that same period.
To place these projected future
transfer effects resulting from the Final
Rule in context, the Department
compared nominal transfer effects to
projected Medicare and Medicaid
spending over the same period. The
Centers for Medicare & Medicaid
Services report that in 2012 Medicare
expenditures totaled $590.8 billion,
while Medicaid expenditures were
$458.9 billion; $34.1 billion of Medicare
and $29.7 billion of Medicaid
expenditures were spent on the
provision of home care services.190 By
2021, annual Medicare and Medicaid
expenditures are projected to total
$1,964 billion of which annual home
care expenditures under both programs
might increase to $126 billion .
After adjusting projected overtime
and travel transfer effects, the
Department expects that these
incremental transfers will compose 0.40
percent of projected Medicare and
Medicaid Home Health Care
expenditures under OT Scenario 1, 0.30
percent under Scenario 2, and 0.154
percent of those expenditures under OT
Scenario 3. Table 17 summarizes the
projected National Health Care budgets,
incremental payments attributable to the
Final Rule, and those payments as a
percent of National Health Care
expenditures from 2012 through 2021.
Projected overtime and travel payments
resulting from the rule account for a
similar, but slightly larger, percentage of
National Home Health Care (i.e., all U.S.
public and private home health care
spending) than they do for public
spending programs on home care.
TABLE 17—PROJECTED OVERTIME AND TRAVEL TIME COMPENSATION AS PERCENT OF PROJECTED NATIONAL HOME
HEALTH CARE EXPENDITURES
Projected
expenditures
(billions) a b
Adjusted overtime & travel time
compensation in nominal dollars
(millions)
OT & Travel
as % projected home health care
Year
Total
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
.................................................................
.................................................................
.................................................................
.................................................................
.................................................................
.................................................................
.................................................................
.................................................................
.................................................................
.................................................................
$2,809
2,915
3,130
3,308
3,514
3,723
3,952
4,207
4,487
4,781
Home
health
care
OT 1 +
Travel
$77.5
81.9
88.3
94.5
101.2
108.4
117.1
126.6
137.0
148.3
OT 2 +
Travel
$326.5
366.0
407.4
450.7
495.9
543.0
591.9
642.8
695.5
750.2
OT 3 +
Travel
$244.2
273.7
304.7
337.0
370.8
406.0
442.6
480.6
520.0
560.8
OT 1 +
Travel
$120.7
135.3
150.5
166.5
183.1
200.5
218.5
237.3
256.7
276.9
OT 2 +
Travel
0.42
0.45
0.46
0.48
0.49
0.50
0.51
0.51
0.51
0.51
OT 3 +
Travel
0.31
0.33
0.34
0.36
0.37
0.37
0.38
0.38
0.38
0.38
0.16
0.17
0.17
0.18
0.18
0.19
0.19
0.19
0.19
0.19
a Centers for Medicare and Medicaid Studies, Office of the Actuary, National Health Expenditure Projections, 2011–2021. Available at: http://
www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/Downloads/Proj2011PDF.pdf.
b ‘‘National Health Care’’ indicates all U.S. public and private health care spending, as tabulated by the CMS Office of the Actuary.
The Department also projected
deadweight loss and employment
impacts over 10 years. These projections
are calculated maintaining the
assumptions concerning the market
shares and the price elasticities of
supply and demand discussed in the
first year deadweight loss analysis and
projected overtime and travel time
compensation presented in Table 16.
The Department’s calculated
deadweight loss and employment
impacts over 10 years are summarized
in Table 18.
TABLE 18—PROJECTED DEADWEIGHT LOSS AND EMPLOYMENT IMPACTS
Other Years
($ mil.) a
Year 1
($ mil.)
Year 2
Average Annualized Value
($ mil.)
Year 10
3%
Real Rate
7%
Real Rate
Costs h
sroberts on DSK5SPTVN1PROD with RULES
Regulatory Familiarization:
Agencies .......................................................................
Families Hiring Self-Employed Workers .......................
Hiring Costs b:
30% OT remaining in OT 1 ..........................................
190 The 2009 Medicaid home care expenditures of
$50 billion cited earlier in the report is composed
of three types of programs: Home Health, Personal
Care Services, and HCBS 1915 waiver programs.
These data are compiled retrospectively by the
Kaiser Commission on Medicaid and the
Uninsured, and the Department believes that
spending in these three types of programs best
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$6.9
$5.4
$0.6
$2.8
$0.6
$3.6
$1.3
$3.4
$1.4
$3.5
$8.4
$0.8
$0.8
$1.6
$1.8
characterizes Medicaid home health expenditures.
CMS Office of the Actuary classifies home health
care expenditures somewhat differently in its
National Health Expenditures Projections; in 2009
the NHE value for home health care was about half
the Kaiser value at $24.3 billion. The Department
chose to use the official CMS projections for home
health care for consistency in methodology with all
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other expenditure projections used in this section
and presented in Table 17. The Department believes
these projections underestimate future Medicaid
home health expenditures; however, note that if
larger projected values were used in the analysis,
the impacts presented in Table 17 would be
proportionately smaller.
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TABLE 18—PROJECTED DEADWEIGHT LOSS AND EMPLOYMENT IMPACTS—Continued
Other Years
($ mil.) a
Year 1
($ mil.)
Year 2
20% OT remaining
10% OT remaining
Total costs (30% of OT
Total costs (20% of OT
Total costs (10% of OT
in OT 2 ..........................................
in OT 3 ..........................................
1) ...................................................
2) ...................................................
3) ...................................................
$8.4
$6.3
$20.6
$20.6
$18.6
Average Annualized Value
($ mil.)
Year 10
3%
Real Rate
7%
Real Rate
$0.8
$0.6
$4.2
$4.2
$4.0
$0.8
$0.6
$5.0
$5.0
$4.8
$1.6
$1.2
$6.4
$6.4
$6.0
$1.8
$1.3
$6.7
$6.7
$6.2
$68.1
$78.1
$151.8
$107.1
$104.3
$213.2
$142.1
$35.5
$244.2
$162.8
$40.7
$474.8
$316.5
$79.1
$335.2
$223.5
$55.9
$326.3
$217.5
$54.4
$626.5
$468.3
$230.9
$442.3
$330.6
$163.0
$430.5
$321.8
$158.7
$0.257
$0.144
$0.035
$0.182
$0.101
$0.025
$0.177
$0.099
$0.024
$5.2
$5.1
$4.8
$6.6
$6.5
$6.0
$6.8
$6.8
$6.2
1,976
1,477
728
1,531
1,144
564
(g)
(g)
( g)
$34.9
$24.7
$10.7
$30.9
$20.7
$7.7
$33.8
$23.6
$9.9
$34.1
$23.9
$10.1
$30.6
$20.5
$6.7
$25.7
$15.5
$2.9
$27.3
$17.1
$3.9
$27.3
$17.1
$3.9
Transfers
Travel Wages .......................................................................
Overtime Scenarios:
OT 1 c ............................................................................
OT 2 d ............................................................................
OT 3 e ............................................................................
Total Transfers by Scenario
Travel + OT 1 ......................................................................
Travel + OT 2 ......................................................................
Travel + OT 3 ......................................................................
$281.3
$210.2
$103.7
$322.3
$240.9
$118.8
Deadweight Loss ($ millions)
Travel + OT 1 ......................................................................
Travel + OT 2 ......................................................................
Travel + OT 3 ......................................................................
$0.116
$0.065
$0.016
$0.132
$0.074
$0.018
Total Cost of Regulations f
RF + HC + DWL (OT 1) ......................................................
RF + HC + DWL (OT 2) ......................................................
RF + HC + DWL (OT 3) ......................................................
$20.8
$20.7
$18.6
$4.3
$4.2
$4.0
Disemployment (number of workers)
Travel + OT 1 ......................................................................
Travel + OT 2 ......................................................................
Travel + OT 3 ......................................................................
1,086
812
400
1,184
885
436
Benefits from Reduced Turnover b f
OT 1 .....................................................................................
OT 2 .....................................................................................
OT 3 .....................................................................................
$40.3
$30.2
$14.9
Net Benefits f
OT 1 .....................................................................................
OT 2 .....................................................................................
OT 3 .....................................................................................
$19.6
$9.4
¥$3.7
a These
costs represent a range over the nine-year span. Costs are lowest in Year 2 and highest in Year 10 so these two values are reported.
use three scenarios under which agencies redistribute overtime hours to either current part-time workers or new hires to manage overtime costs: 40 percent of overtime hours are redistributed under OT Scenario 1, 60 percent under OT Scenario 2, and 90 percent under OT Scenario 3. Of this redistributed overtime, various percentages are redistributed to part-time workers and new hires: New hires constitute 30 percent
of redistributed hours under OT Scenario 1 (12 percent of total overtime), 20 percent under OT Scenario 2 (12 percent of total), and 10 percent
under OT Scenario 3 (9 percent of total).
c Of the total, about 31 percent (e.g., $66.6 million in Year 1) is attributable to IHSS direct care workers; 30 percent of IHSS costs (e.g., $20.0
million in Year 1) are included in the turnover and deadweight loss analyses.
d Of the total, about 31 percent (e.g., $44.4 million in Year 1) is attributable to IHSS direct care workers; 30 percent of IHSS costs (e.g., $13.3
million in Year 1) are included in the turnover and deadweight loss analyses.
e Of the total, about 31 percent (e.g., $11.1 million in Year 1) is attributable to IHSS direct care workers; 30 percent of IHSS costs (e.g., $3.3
million in Year 1) are included in the turnover and deadweight loss analyses.
f Results based on the combination of overtime scenario and hiring costs presented under Hiring Costs.
g Simple average over 10 years.
h Excludes paperwork burden, estimated in Section V.
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b We
Average annualized minimum wage,
overtime premium, and travel time
compensation range from $158.7 million
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to $430.5 million per year based on how
employers adjust to the requirement to
pay overtime wage premiums using a 7
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percent discount rate. These transfers
are projected to cause average
annualized deadweight loss ranging
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from $24,000 to $177,000 per year.
These transfers are also projected to
cause disemployment impacts ranging
from 564 to 1,531 workers per year. In
general, approximately 70 percent of
deadweight loss and disemployment
occurs in the publicly funded market
and 30 percent in the private pay
market.
Non-Monetized Projected Impacts
Two additional aspects of home care
services might be affected by the rule.
The rule might result in increased
purchases of home care services through
informal arrangements with
independent providers and, although
the hours of care received by consumers
might be unaffected by the increased
costs of care, additional caregivers may
be required to provide the same number
of hours of services. These additional
aspects are discussed in turn below.
sroberts on DSK5SPTVN1PROD with RULES
Independent Providers
An unknown number of consumers
receive home care services through
more informal arrangements with care
provided by independent providers.
Here, informal agreements are reached
between the consumer (or consumer’s
family) and the direct care worker
regarding hours of care and hourly pay
rates. Services can be provided at lower
cost than when provided through
agencies because the independent
provider does not incur administrative
and overhead costs and may have more
flexibility to negotiate on prices and
scheduling.
The Final Rule will increase costs to
home care agencies that offer services in
states where they are not currently
required to pay the minimum wage and/
or overtime compensation and an
unknown percentage of those costs
might be reimbursed by public payers.
If the costs are not fully reimbursed,
home care agencies might increase the
rates they charge consumers, have their
profit margin squeezed, or both. If costs
are passed through to consumers and
their families, they will have incentive
to look for lower cost alternatives, such
as informal arrangements with
independent providers. In addition,
workers who desire to work more than
40 hours per week might have
opportunities to provide services as
independent providers rather than work
for multiple agencies. Although the rule
might increase incentives on both sides
to use informal arrangements with
independent providers, there is no
information available to project
potential changes to that market.
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Continuity of Care
Continuity of care ‘‘is commonly
framed as being composed of provider
continuity (a relationship between a
consumer and provider over time),
information continuity (availability and
use of data from prior events during
current consumer encounters) and
management continuity (coherent
delivery of care from different
doctors).’’ 191 In the home care scenario,
concerns have been raised that
continuity of care, specifically provider
continuity, may suffer if employers opt
not to pay overtime for direct care
workers who, for example, work more
than 40 hours per week for a single
consumer and the employers instead
schedule other direct care workers to
provide home care services to that
consumer in the same workweek. Some
are concerned that a break in the
continuity of care may result in a
reduction in the quality of care.
The Department understands that
home care involves more than the
provision of impersonal services; when
a direct care worker spends significant
time with a consumer in the consumer’s
home, the personal relationship
between direct care worker and
consumer can be very important.
Certain consumers may prefer to have
the same direct care worker(s), rather
than a sequence of different direct care
workers. The extent to which home care
agencies choose to spread employment
(hire more direct care workers) rather
than pay overtime may cause an
increase in the number of direct care
workers for a consumer; the consumer
may be less satisfied with that care, and
communication between direct care
workers might suffer, affecting the
quality of care for the consumer.192
Alternatively, having additional direct
care workers may improve continuity of
care by minimizing disruption of care
when the primary direct care worker is
unavailable due to vacation or being
sick.
Continuity of care may suffer from the
provision of too few direct care workers.
This may occur currently because, as
discussed below, an agency can
schedule direct care workers without
regard for the number of hours worked
each week, which may cause increased
turnover rates. Although matching
consumer and direct care worker in a
long-term personal relationship is the
ideal for many consumers, it may not be
191 Van Walraven, C., Oake, N., Jennings, A., et al.
(2009). The Association Between Continuity of Care
and Outcomes: A Systematic and Critical Review.
Journal of Evaluation in Clinical Practice, 16(5):
947–956.
192 Brief of Amici Curiae City of New York. 2007.
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60543
the norm. Low wages and long, irregular
hours may contribute to the high
turnover rate in the industry, resulting
in low continuity of care. For instance,
the turnover rate (those leaving and
entering home care work) for workers in
the home care industry has been
estimated to range from 44 to 65 percent
per year.193 Other studies have found
turnover rates to be much higher, up to
95 percent 194 and, in some cases, 100
percent annually.195 Thus, many
consumers already experience a
sequence of different direct care
workers, and it is not apparent that the
Final Rule will necessarily exacerbate
that experience.
Application of the FLSA’s minimum
wage and overtime compensation
protections may reduce turnover rates.
Frequent turnover is costly for
employers in terms of recruitment costs
and training of new direct care workers
and also in terms of the likelihood of a
reduction of quality care or not being
able to provide care at all. The employee
turnover rate in this industry is high
because of low wages, poor or
nonexistent benefits, and erratic and
unpredictable hours. Job satisfaction,
and the desire to remain in a given
position, is highly correlated with
wages, workload, and working
conditions. Increased pay for the same
amount of work and overtime
compensation likely would aid in
employee retention and attracting new
hires. Those employers who choose not
to pay overtime would need to spread
the hours among their employees,
resulting in more consistent work hours
for many direct care workers. As one
study found, for this low-income
workforce, ‘‘higher wages, more hours,
and travel cost reimbursement are found
to be significantly associated with
reduced turnover.’’ 196 Another report
determined that ‘‘increases in the
federal or state minimum wage can
make home care employment more
193 Seavey and Marquand, 2011, p. 70. WHD–
2011–0003–3514. Also available at: http://
phinational.org/sites/phinational.org/files/clearing
house/caringinamerica-20111212.pdf.
194 Zontek, T., Isernhagen, J., Ogle, B. (2009).
Psychosocial Factors Contributing to Occupational
Injuries Among Direct Care Workers. American
Association of Occupational Health Nurses Journal,
338–347.
195 Ashley, A., Butler, S., Fishwick, N. (2010).
Home Care Aide’s Voices from the Field: Job
Experiences of Personal Support Specialists. The
Maine Home Care Worker Retention Study. Home
Healthcare Nurse, 28(7), 399–405.
196 Morris, L. (2009). Quits and Job Changes
Among Home Care Workers in Maine: The Role of
Wages, Hours and Benefits. The Gerontologist,
49(5), 635–650.
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desirable.’’ 197 This finding was echoed
in comments submitted by Steven
Edelstein of PHI and the Women’s
Employment Rights Clinic.
For the estimated 8 to 12 percent of
direct care workers who work more than
40 hours per week, only a portion of
that percentage likely provides services
for the same consumer. Many who work
overtime accrue long hours in the
service of at least a few consumers,
traveling between consumer homes
during the workweek. For example, the
2011 Private Duty Homecare
Benchmarking Study found that firms
with annual revenue greater than $2
million attribute about 23 percent of
weekly billable hours to live-in care
(which presumably exceeds 120 hours
of paid work per week per consumer),
yet the average consumer only receives
25 hours of service per week.198 Thus,
if the average consumer receives 25
hours of care per week, yet a
disproportionate number of service
hours are accrued by the minority of
patients receiving 24-hour care, then
most consumers must be receiving
substantially less than 25 hours of care
per week and their direct care workers
must be responsible for multiple
consumers. Such consumers should
probably not lose any continuity of care
as a result of agencies spreading some
overtime hours to other workers. It is
also conceivable that, in a minority of
cases, the direct care worker provides
home care services around the clock for
a stretch of a few days.
Analysis of the NHHAS shows that
those direct care workers who typically
work overtime work 49 hours per week
on average, not including travel time
between consumer homes. Provider
continuity that results in overtime work
has drawbacks. From the aide’s
perspective, the long work hours can be
a burden. For instance, ‘‘shifts beyond
the traditional 8 hours have been
associated with increased risk of errors,
incidents, and accidents.’’ 199
Many regard having the same direct
care worker for long hours as a
cornerstone of ‘‘continuity of care’’ and
having more direct care workers to
cover the same number of direct care
worker hours for a consumer as
negatively impacting quality of care. As
197 Burbridge, L. (1993). The Labor Market for
Home Care Workers: Demand, Supply, and
Institutional Barriers. The Gerontologist, 33(1), 41–
46.
198 Home Care Pulse. 2011. 2011 Annual Private
Duty Home Care Benchmarking Study. Highlights
Edition, p. 24.
199 Keller, S. (2009). Effects of extended work
shifts and shift work on patient safety, productivity,
and employee health. American Association of
Occupational Health Nurses Journal, 57(12), 497–
502.
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discussed above, however, the opposite
may be true. Working extended hours
may affect the quality of care that the
aide is able to provide and even the
aide’s own health and well-being.
Furthermore, paying employees below
minimum wages, not paying for all
hours worked or overtime, and
providing no training or benefits is not
the only path to financial success for
employers in the home care industry.
Another business model, in which
employees receive training, an overtime
wage differential, and health care
benefits, has been successful.
Cooperative Home Care Associates
(CHCA), based in New York, for
example, has always paid workers
overtime. Although overtime at CHCA is
carefully managed, it can still be
substantial (e.g., 30 percent or more of
employees exceed 40 work hours per
week); allowing, even expecting
overtime, permits CHCA, however, to
use a staffing plan that maintains
continuity of care. These policies have
driven CHCA’s turnover rate far below
the industry average, a major factor in
its financial success.200 In terms of
employee coverage, CHCA cases
requiring weekday and weekend
coverage are assigned permanent direct
care workers who work on alternate
weekends. Also, cases requiring 24-hour
coverage, seven days per week, are
shared among four direct care workers,
requiring only some overtime hours.201
Other agencies such as Community
Care Systems, Inc., in Springfield,
Illinois, have reduced overtime costs by
distributing extra hours more evenly
among workers through better tracking
of work hours. Close monitoring of
employee workloads and spreading of
work hours also curbed overtime use for
Illinois-based Addus HealthCare, one of
the nation’s largest home care
employers. These employers pay
overtime even in those states that do not
require it, demonstrating that ‘‘wage and
hour protections are economically
realistic for the industry, and can be
achieved without excessive use of costly
overtime hours.’’ 202 These examples
suggest that requiring overtime
compensation in this industry does not
inevitably cause disruption of employeremployee relationships and direct care
worker-consumer relationships leading
to higher turnover, discontinuity of
consumer care, and increased use of
independent providers.
200 Elsas
& Powell, 2011.
report, p. 26.
202 NELP report, pgs 25–26.
201 NELP
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Transfer Effects
Perhaps the most visible effect of the
Final Rule is the transfer of income from
businesses and their owners to workers,
and potentially, from one group of
workers to another group of workers. In
economics, a transfer payment is
broadly defined as a redistribution of
income in the market system that does
not affect total output.
Transfer Effects Associated With Travel
Provisions
The Final Rule leads to an
unambiguous transfer from employers to
employees in those states that currently
do not require compensation for travel
time—approximately $68.1 million in
Year 1.
Two factors could change the
dynamics of this transfer scenario. First,
increased wages for compensating travel
time might be passed through to
consumers in the form of higher prices
for home care services. If those higher
prices result in consumers finding
alternatives to home care services (e.g.,
accessing independent providers for
services), then the income transfer from
travel compensation is partially
mitigated because the provision of home
care services is reduced, resulting in
reduced revenues to agencies, and a
deadweight loss to the economy. This
reduction in demand by households
will be less pronounced if the demand
for home care services is inelastic (i.e.,
the hours of home care services
purchased does not change significantly
when price increases, as in the public
pay market). However, the Department’s
deadweight loss analysis did not show
significant reductions in the private pay
market for which the price elasticity of
demand is much larger than the market
for publicly funded care.
Second, the Department expects that
over time some of these costs may be
reimbursed. To the extent that public
payers increase reimbursement rates to
cover these costs, the transfer is from
the federal and state agencies to
workers.
Transfer Effects Associated With
Overtime Provisions
The transfer of income associated
with the payment of the overtime
differential is more ambiguous.
Employers are likely to respond to
overtime compensation requirements
along a spectrum ranging from (1)
reducing overtime work to the extent
possible and spreading hours to other
workers or hiring new workers to fill the
available hours, to (2) maintaining
current staffing patterns and paying
overtime for all work hours exceeding
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40 per week. To the extent that
employers choose to pay overtime, the
income transfer is from businesses and
their owners to workers. However, to
the extent that employers eliminate
overtime and spread the now available
hours to other employees or new hires,
the transfer is from worker to worker.
Employees who used to exceed 40 hours
of work per week will work fewer hours,
transferring income to fellow workers
who will absorb the extra hours. It is
also possible that those employees
working more than forty hours per week
may distribute those hours among
multiple employers.
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Reduced Reliance on Public Assistance
An increase in wages might reduce
direct care worker reliance on public
assistance programs to meet the needs of
their own households. Recent research
finds that approximately 50 percent of
personal care aides rely on public
assistance.203 Almost 90 percent of
these workers are women.204
Assuming these workers are in a
family consisting of themselves and two
children, the average amount of public
assistance for such families is about
$10,300.205 In addition, many minimum
wage workers also receive food stamps.
The federally-assisted Supplemental
Nutrition Assistance Program (SNAP,
previously referred to as the Food
Stamp Program) provided aid to 44.7
million participants in an average
month in 2011 with total annual
expenditures of $71.8 billion, an average
of $1,600 in food stamps expenditures
per participant.206 This would entail
$4,800 per family for an assumed family
of three. In total, the average direct care
worker might receive $15,100 in public
assistance and food stamps to provide
for her/his family.
Increased wages should reduce
demand for public assistance services
resulting in a savings to these programs;
however, the Department is unable to
quantify the savings due to the lack of
data on how the benefits of these
programs vary with income. The savings
associated with the minimum wage
provisions under the Final Rule might
203 Seavey and Marquand, 2011, p. 58. WHD–
2011–0003–3514. Also available at: http://
phinational.org/sites/phinational.org/files/clearing
house/caringamerica-20111212.pdf.
204 Seavey and Marquand, 2011, p. 10. WHD–
2011–0003–3514. http://phinational.org/sites/
phinational.org/files/clearinghouse/caringin
america-20111212.pdf
205 TANF Eighth Annual Report to Congress.
206 Characteristics of Supplemental Nutrition
Assistance Program Households: Fiscal Year 2011,
U.S. Department of Agriculture, Food and Nutrition
Service, November 2012. Available at: http://
www.fns.usda.gov/ora/MENU/Published/
snap?FILES/Participation/2011Characteristics.pdf.
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be negligible since the Department
estimates that no workers currently earn
less than the minimum wage. To the
extent that the employees’ work requires
significant travel time and overtime, or
added hours of work due to employer
schedule adjustments, they will also
receive additional income (note that
some workers may lose hours or pay as
a result of employer schedule
adjustments, which may actually
increase their reliance on public
assistance). The Department did not
estimate this portion of the potential
economic impact due to uncertainty
about the number of workers who
would receive compensation for travel
time or additional hours of work.
H. Benefits
This section describes the expected
benefits of the changes to the
companionship services exemption
made by this Final Rule. Potential
benefits of this revision to the
‘‘companionship services exemption’’
flow from the transfer of regular and
overtime wages to workers from their
employers, and include: Reduced
worker turnover and potentially
reduced worker injury rates.
Reduction in Employee Turnover Rates
Researchers have found that lower
wages are associated with higher
turnover and lower quality of care, and
that increases in wages for direct care
workers result in decreased turnover
rates.207 Frequent turnover is costly for
employers in terms of recruitment costs
and training of new direct care workers
and also in terms of the likelihood of a
reduction in the quality of care or not
being able to provide care at all. The
employee turnover rate in this industry
is high because of low wages, poor or
nonexistent benefits, and erratic and
unpredictable hours. Job satisfaction,
and the desire to remain in a given
position, is highly correlated with
wages, workload, and working
conditions. Increased pay for the same
amount of work and overtime
compensation likely would aid in
employee retention.
Studies estimating the relationship
between wage rate and turnover rate
often express that relationship as an
elasticity—the percentage change in
turnover rate associated with a one
percent change in the wage rate. Studies
have found turnover rates in the home
care industry that range from 44 to 95
percent per year, and even approach 100
207 Powers, E., Powers, N. (2010). Causes of
Caregiver Turnover and the Potential Effectiveness
of Wage Subsidies for Solving the Long-Term Care
Workforce ‘Crisis.’ The B.E. Journal of Economic
Analysis & Policy 10(1): Article 5.
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60545
percent per year.208 Based on the study
most relevant to our analysis, the
Department judges that the elasticity of
the turnover rate with respect to a
change in the wage rate is ¥2.17.209
However, the Department acknowledges
that when many agencies are
simultaneously increasing wages, the
overall impact on turnover might be
smaller. Therefore the Department also
presents a sensitivity analysis using a
smaller turnover elasticity of ¥0.844.
For the purpose of estimating the impact
of the rule on turnover costs, we assume
the initial turnover rate is 50 percent.
The Department estimates the value of
the excess cost to the business of
employee turnover as about $3,000 in
2011 dollars based on Seavey (2004).
About 75 percent of this cost is
attributable to hiring the replacement
worker, while the remainder is
attributable to the costs of separation
and vacancy.210
The Department estimated the impact
of applying the minimum wage and
overtime provisions of the FLSA on
turnover costs. The Department believes
few, if any, direct care workers currently
earn less than the minimum wage.
Therefore, we project no decline in
turnover rates as a result of the
minimum wage requirement.
Table 19 also shows the estimated
change in turnover costs due to travel
reimbursement and overtime
compensation in the three overtime
scenarios. The Department estimates
that the turnover rate will decrease by
1.3 percentage points due to an average
increase in compensation of 1.21
percent in OT Scenario 1. This
corresponds to a $40.3 million decrease
in turnover costs in Year 1. In OT
Scenario 2, the Department calculates
that the turnover rate will decrease by
1.0 percentage point due to an average
increase in the hourly wage of 0.91
percent, corresponding to a reduction in
turnover costs of $30.2 million. When
agencies pay only 10 percent of the
current overtime hours (OT Scenario 3),
the turnover rate will decrease by 0.5
percentage points due to an average
increase in the hourly wage of 0.45
percent; this corresponds to a $14.9
million reduction in Year 1 turnover
costs.
208 PHI 2010a; Zontek, T., Isernhagen, J., Ogle, B.,
(2009); Ashley, A., Butler, S., Fishwick, N., (2010).
209 The study most comparable used data from the
San Francisco County home care workers (Howes,
C. (2005). Living Wages and Retention of Homecare
Workers in San Francisco. Industrial Relations: A
Journal of Economy and Society. 44(1): 139–163).
210 Seavey, D. 2004. The Cost of Frontline
Turnover in Long-Term Care. Washington, DC:
IFAS/AAHSa, p. 11. Available at: http://
phinational.org/sites/phinational.org/files/clearing
house/TOCostReport.pdf.
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TABLE 19—YEAR 1 IMPACT ON TURNOVER COSTS
Initial values
Resulting values
50.0%
0
$0.0
................................
45.6%
................................
$0.0
$0.0
50.0%
1,031,015
$1,534.6
................................
48.7%
................................
$1,494.3
¥$40.3
50.0%
1,031,015
$1,534.6
................................
49.0%
................................
$1,504.5
¥$30.2
50.0%
1,031,015
$1,534.6
................................
49.5%
................................
$1,519.8
¥$14.9
Application of the minimum wage provision
Turnover Rate ..........................................................................................................................................
Workers Impacted ....................................................................................................................................
Annual Turnover Cost (in millions) ..........................................................................................................
Change in Year 1 Turnover Cost (in millions) a ......................................................................................
Application of the overtime provision
OT Scenario 1 b:
Turnover Rate ...................................................................................................................................
Workers Impacted ............................................................................................................................
Annual Turnover Cost (in millions) ...................................................................................................
Change in Year 1 Turnover Cost (in millions) c ...............................................................................
OT Scenario 2 b:
Turnover Rate ...................................................................................................................................
Workers Impacted ............................................................................................................................
Annual Turnover Cost (in millions) ...................................................................................................
Change in Year 1 Turnover Cost (in millions) d ...............................................................................
OT Scenario 3 b:
Turnover Rate ...................................................................................................................................
Workers Impacted ............................................................................................................................
Annual Turnover Cost (in millions) ...................................................................................................
Change in Year 1 Turnover Cost (in millions) e ...............................................................................
a Because no workers are currently believed to be paid less than minimum wage, no reduction in turnover costs is attributed to the minimum
wage provision.
b This analysis is performed on the same basis as the deadweight loss analysis (e.g., the same pool of workers, and overtime and travel time
compensation).
c The change in annual turnover cost is the reduction in turnovers (13,552) multiplied by the estimate of the cost per turnover.
d The change in annual turnover cost is the reduction in turnovers (10,129) multiplied by the estimate of the cost per turnover.
e The change in annual turnover cost is the reduction in turnovers (4,994) multiplied by the estimate of the cost per turnover.
The first column in Table 20 presents
the estimated net impact on turnover in
Year 1 due to travel and overtime in
each of the overtime scenarios. For OT
Scenario 1, combining the impacts on
turnover costs due to the application of
overtime regulations shown in Table 19
above yields an estimated reduction in
turnover costs of $40.3 million. The
Department estimates that OT Scenario
2 corresponds to a $30.2 million
decrease in costs, while OT Scenario 3
corresponds to a $14.9 million decrease
in costs.
Table 20 also summarizes the total
impact on turnover costs for Years 1 and
10. Based on the Department’s
estimation of the growth in overtime
hours, agencies will need to continue to
hire workers to cover these additional
hours in subsequent years. The annual
turnover rate will remain at the lower
rate, while the total number of
employees is larger in each subsequent
year due to the hiring of additional
workers to cover some of the overtime
hours; these additional workers would
not have been hired in the absence of
the overtime requirement. Thus, the
absolute number of turnovers per year is
increasing because the lower turnover
rate is partly offset by the larger number
of workers to whom it is applied. This
reduces the annual savings attributable
to the reduced turnover rate. Employers
will continue to accrue cost savings due
to reduced turnover, but those savings
will be diminishing over time due to the
increased employment. The Department
calculates the net impact on annual
turnover costs by subtracting the
turnover cost associated with the initial
1.03 million positions and 50 percent
turnover rate from the turnover costs
based on the increased number of
positions but decreased turnover rate as
estimated in Year 1. The growth in the
number of workers depends on
agencies’ allocation of the additional
overtime hours among paying the
overtime premium, hiring new workers,
and distributing the hours over existing
workers. Within the three overtime
scenarios, the Department considers
three proportions of the remaining
overtime hours covered by new hires as
discussed in the hiring costs section—
30 percent, 20 percent, and 10 percent.
Using a 7 percent real discount rate, the
annualized decrease in turnover costs
will range from $34.1 to $38.3 million
per year in OT Scenario 1. In OT
Scenario 2, the annualized decrease in
turnover costs will range from $20.7 to
$27.0 million each year. In OT Scenario
3, the annualized decrease in turnover
costs will range from $0.6 to $10.1
million each year.
TABLE 20—SUMMARY OF IMPACT OF CHANGES TO FLSA ON TURNOVER COSTS
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Future years
($ mil.) b
Year 1
($ mil.) a
Hiring full-time workers to cover
Year 2
Average annualized value
($ mil.)
Year 10
3% Real rate
7% Real rate
OT Scenario 1
30% of remaining OT hours ............................
20% of remaining OT hours ............................
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¥36.7
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60547
TABLE 20—SUMMARY OF IMPACT OF CHANGES TO FLSA ON TURNOVER COSTS—Continued
Future years
($ mil.) b
Year 1
($ mil.) a
Hiring full-time workers to cover
Year 2
¥40.3
10% of remaining OT hours ............................
Average annualized value
($ mil.)
Year 10
¥38.5
3% Real rate
7% Real rate
¥37.2
¥38.2
¥38.3
¥15.9
¥20.7
¥25.4
¥20.3
¥23.6
¥26.9
¥20.7
¥23.9
¥27.0
.7
¥0.5
¥7.7
0.0
¥5.0
¥9.9
¥0.6
¥5.3
¥10.1
OT Scenario 2
¥30.2
¥30.2
¥30.2
30% of remaining OT hours ............................
20% of remaining OT hours ............................
10% of remaining OT hours ............................
¥22.0
¥24.7
¥27.4
OT Scenario 3
¥14.9
¥14.9
¥14.9
30% of remaining OT hours ............................
20% of remaining OT hours ............................
10% of remaining OT hours ............................
a Year
¥2.4
¥6.6
¥10.7
1 estimates are the sum of the impacts on turnover costs due to the application of the overtime provision.
costs represent a range over the nine-year span. Costs are lowest in Year 2 and highest in Year 10 so these two values are reported.
b These
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The Department also performed a
sensitivity analysis by repeating the
calculations using a turnover elasticity
of ¥0.844.211 With a 7 percent real
discount rate, the annualized decrease
in turnover costs ranges from $9.4 to
$13.6 million per year in OT Scenario
1. In OT Scenario 2, average annualized
turnover costs are decreased by $2.2 to
$8.6 million. Under OT Scenario 3,
average annualized turnover costs range
from a $1.0 million decrease to an
increase of $8.6 million per year.
The Department notes that the
estimates above do not reflect possible
offsetting effects related to employees
who previously worked overtime and
who, as a result of the rule, experience
a reduction in their scheduled hours
and thus in their compensation. To
compensate for their lower earnings,
these workers may accept a second job,
although this would not affect the
turnover rate in a meaningful way.
However, if some agencies continue to
pay overtime, while a worker’s current
employer does not, the employee with
reduced hours may be more likely to
leave, thus resulting in increased
turnover in the short-run, although
turnover may still decrease in the long
run since the worker may be more likely
to remain longer with the employer that
pays overtime.
Reduction in Worker Injuries and
Illnesses
Many studies have shown that
extended work hours result in increased
fatigue, decreased alertness, and
decreased productivity, negatively
211 Clabby II, Robert T. 2002. Report to the Joint
Appropriations Committee on the Impact of
Funding for Direct Staff Salary Increases in Adult
Developmental Disabilities Community-Based
Programs. Wyoming Department of Health,
Cheyenne, WY.
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affecting employee health and wellbeing. Long work hours in the health
care field ‘‘have adverse effects on
patient outcomes and increase health
care errors and patient injuries.’’ 212 For
example, nurses working more than 8
hours report more medication errors,
falling asleep at work, a decrease in
productivity, and impaired critical
thinking abilities. The error rates double
when nurses work 12.5 or more
consecutive hours. A 2004 National
Institute for Occupational Safety and
Health report evaluated the literature
and found studies ‘‘examining 12-hour
shifts combined with more than 40
hours of work per week reported
increases in health complaints,
deterioration in performance, or slower
pace of work.’’ 213 One study that
analyzed 13 years’ worth of data and
nearly 100,000 job records notes that
‘‘long working hours indirectly
precipitate workplace accidents through
a causal process, for instance, by
inducing fatigue or stress in affected
workers.’’ 214 It is therefore telling that
‘‘[d]irect care workers have the highest
injury rate in the United States,
primarily due to work-related
musculoskeletal disorders.’’ 215 The rate
212 Keller, S. 2009. pg. 498. Available at: http://
www.healio.com/∼/media/Journals/AAOHN/2009/
12_December/Effects%20of%20Extended%20Work
%20Shifts%20and%20Shift%20Work%20on%20
Patient%20Safety%20Productivity%20and%20
Employ%2059601/Effects%20of%20Extended%20
Work%20Shifts%20and%20Shift%20Work%20on
%20Patient%20Safety%20Productivity%20and
%20Employ%2059601.ashx.
213 Caruso, C., Hitchcock, E., Dick, R., et al.
(2004). Overtime and Extended Work Shifts: Recent
Findings on Illnesses, Injuries, and Health
Behaviors. National Institute for Occupational
Safety and Health, U.S. Department of Health and
Human Services. Available at: http://www.cdc.gov/
niosh/docs/2004-143/pdfs/2004-143.pdf.
214 Dembe, A., Erickson J., Delbos, R., et al. 2005.
215 Zontek, Isernhagen, and Ogle, 2009.
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of days away from work (work days
missed due to on-the-job injuries) for
nursing aides, orderlies, and attendants
was almost four times greater than the
all-worker rate, 449 per 10,000
compared to 113 per 10,000 for all
workers.216 One of the results of the
FLSA’s overtime compensation
requirement is that employers may hire
more people to work fewer hours each.
Doing so in those circumstances where
excessive overtime hours are worked
may therefore result in fewer injuries
and illnesses incurred. On the other
hand, a possible effect of this rule is that
direct care employees currently working
more than 40 hours per week for one
employer will spread those hours over
multiple employers, which may
increase fatigue due to, for example,
increased travel time as a result of
working for multiple employers; these
conflicting theoretical possibilities make
the rule’s likely impact on injuries and
illnesses an empirical question.
The Department looked at total injury
numbers and injury rates from the
Survey of Occupational Injuries and
Illnesses (SOII) of the Bureau of Labor
Statistics. To the best of our knowledge,
this is the only available database
providing data simultaneously on the
state and industry level for multiple
years. The goal was to determine
whether it was possible to perform a
‘‘difference-in-differences’’ analysis of
injuries; this type of analysis can
determine whether there is a
statistically significant difference in
injuries before and after minimum wage
and overtime regulations were passed in
some states.
Only four states had adopted direct
care worker minimum wage and/or
overtime provisions during the period
216 NELP
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for which industry-specific data are
available (2003–2011): Arizona
(minimum wage, January 2007), Maine
(minimum wage and overtime,
September 2007), Ohio (minimum wage,
April 2007), and Colorado (minimum
wage and overtime, January 2010). Of
these, only Arizona and Maine had
usable data (for a total of 6
observations), which was not sufficient
to perform conclusive analysis.
Improved Quality of Care
As has been stated previously, one of
the main benefits of this Final Rule is
that the professionals who are entrusted
to care for consumers in their homes
will have the same protections in the
labor market as almost all other
employees. Guaranteed minimum wage
and overtime compensation for home
care jobs, comparable to similar
occupations, will attract more workers
to the home care industry. The
increased availability of direct care
workers will allow employers to meet
the growing demand for home care
services without requiring workers to
perform services for excessive hours.
Additionally, this may improve the
quality of care since workers may be
less fatigued and have more energy to
devote to the consumers to whom they
provide home care services. However,
the Department understands that the
continuity of care for some individuals
may be affected, such as by having more
care providers as a result of this rule. In
addition, with the standard of pay
raised, more highly trained and certified
workers will seek out and remain in the
HHA and PCA occupations, and a
higher quality of service may be
provided to the consumer. While a
monetary value cannot be placed on
increased professionalism and improved
care, those expected benefits are
noteworthy.
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VII. Final Regulatory Flexibility
Analysis
The Regulatory Flexibility Act of 1980
(RFA) as amended by the Small
Business Regulatory Enforcement
Fairness Act of 1996 (SBREFA),
hereafter jointly referred to as the RFA,
requires agencies to evaluate the
potential effects of their proposed and
Final Rules on small businesses, small
organizations and small governmental
jurisdictions. See 5 U.S.C. 604.
The RFA requires agencies to prepare
and make available for public comment
a final regulatory flexibility analysis
(FRFA) describing the impact of Final
Rules on small entities. The RFA
specifies the content of a FRFA. Each
FRFA must contain:
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• A succinct statement of the need
for, and objectives of the Final Rule;
• A summary of the significant issues
raised by the public comments in
response to the NPRM, a summary of
the agency assessment of the issues, and
a statement of any changes made as a
result of such comments;
• The agency’s response to any
comments filed by the Chief Counsel for
Advocacy of the Small Business
Administration;
• A description of an estimate of the
number of small entities to which the
Final Rule will apply;
• A description of the projected
reporting, recordkeeping and other
compliance requirements of the Final
Rule including an estimate of the classes
of small entities which will be subject
to the requirement and the type of
professional skills necessary for
preparation of the report or record;
• Description of the steps the agency
has taken to minimize the significant
economic impact on small entities
consistent with the stated objectives of
applicable statutes, including a
statement of the factual, policy, and
legal reasons for selecting the alternative
adopted in the Final Rule and why other
alternatives were rejected.
1. Objectives of, and need for, the Final
Rule
Section 13(a)(15) of the FLSA exempts
from its minimum wage and overtime
compensation provisions domestic
service employees employed ‘‘to
provide companionship services for
individuals who (because of age or
infirmity) are unable to care for
themselves (as such terms are defined
and delimited by regulations of the
Secretary).’’ Due to significant changes
in the home care industry over the last
38 years, workers who today provide
home care services to individuals are
performing duties and working in
circumstances that were not envisioned
when the companionship services
regulations were promulgated. Section
13(b)(21) provides an exemption from
the Act’s overtime compensation
requirements for live-in domestic
service workers. The current regulations
allow an employer of a live-in service
domestic worker to maintain a copy of
the agreement of hours to be worked
and to indicate that the employee’s
work time generally coincides with that
agreement, instead of requiring the
employer to maintain an accurate record
of hours actually worked by the live-in
domestic worker. The Department is
concerned that not all hours worked are
actually captured by such agreement
and paid, which may result in a
minimum wage violation. The current
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regulations do not provide a sufficient
basis to determine whether the
employee has in fact received at least
the minimum wage for all hours
worked.
The Department has re-examined the
regulations and determined that the
regulations, as currently written, have
expanded the scope of the
companionship services exemption
beyond those employees whom
Congress intended to exempt when it
enacted § 13(a)(15) of the Act, and do
not provide a sufficient basis for
determining whether live-in workers
subject to § 13(b)(21) of the Act have
been paid at least the minimum wage
for all hours worked. Therefore, this
document revises the definitions of
‘‘domestic service employment’’ and
‘‘companionship services,’’ and requires
employers of live-in domestic service
workers to maintain accurate records of
hours worked by such employees. In
addition, the regulation limits the scope
of duties a direct care worker may
perform and still be considered to
perform companionship services, and
prohibits employees of third party
employers from claiming either
exemption.
There has been an increase in the
employment of home health aides and
personal care aides in the private homes
of individuals in need of assistance with
basic daily living or health maintenance
activities. BLS’s national occupational
employment and wage estimates from
the OES survey show that the number
of workers in these jobs tripled during
the decade between 1988 and 1998, and
by 1998 there were 430,440 workers
employed as home health aides and
255,960 workers employed as personal
care aides. The combined occupations
of personal care and home health aides
continue to constitute a rapidly growing
occupational group. BLS statistics
demonstrate that between 1998 and
2009, this occupational group again
more than doubled with home health
aides increasing to 955,220 and personal
care aides increasing to 630,740.217
The growth in demand, however, has
not resulted in growth in earnings for
workers providing home care services.
The earnings of employees in the home
health aide and personal care aide
categories remain among the lowest in
the service industry. Studies have
shown that the low income of direct
care workers continues to impede efforts
to improve both jobs and care.218
217 See 1998 and 2009 Occupational Employment
and Wage Estimates, National Cross-Industry
Estimates, Available at: http://www.bls.gov/oes/oes_
dl.htm.
218 See Brannon, Diane, et al. (2007). Job
Perceptions and Intent to Leave Among Direct Care
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Protecting domestic service workers
under the Act is an important step in
ensuring that the home care industry
attracts and retains qualified workers
that the sector will need in the future.
Moreover, the workers that are
employed by home care staffing
agencies are not the workers that
Congress envisioned when it enacted
the companionship exemption (i.e.,
neighbors performing elder sitting) but
are instead professional direct care
workers entitled to FLSA protection
based on the expanded nature of the
duties many of them perform. In view
of the dramatic changes in the home
care sector in the 38 years since these
regulations were first promulgated and
the growing concern about the proper
application of the FLSA minimum wage
and overtime protections to domestic
service employees, the Department
believes it is appropriate to narrow the
scope of the definition of
‘‘companionship services’’ and limit the
companion and live-in exemptions to
the individual, household, or family
using the services to more accurately
reflect Congressional intent.
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2. Summary of Significant Issues Raised
by Public Comments, Assessment of the
Agency and Response
3. The Agency’s Response to the
Comment Filed by the Chief Counsel for
Advocacy of the Small Business
Administration
The Small Business Administration’s
Office of Advocacy (Advocacy)
submitted a comment summarizing key
issues raised by small business
representatives during a roundtable and
in subsequent conversations; the small
business representatives focused on
three key issues with the IRFA and also
suggested several alternatives for
consideration (the alternatives are
addressed under number 5, below).219
Specifically, small businesses
suggested that the Department reevaluate the private pay sector of the
companion services market, the
incidence of overtime among these
workers because it may be
underestimated, and account for the
costs of restricting hours and hiring
additional workers to avoid the cost of
overtime compensation.
The Department appreciates this
feedback from small businesses and
endeavored to refine the final economic
analysis to include it. First, the
Department analyzed available data on
the private pay sector and incorporated
this sector into the discussion of the
Workers: Evidence From the Better Jobs Better Care
Demonstrations. The Gerontologist, 47(6): 820–829.
219 Winslow Sargeant, WHD–2011–0003–7756.
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market and the analysis of deadweight
loss and disemployment resulting from
the Final Rule. The available data did
not support the assertion of the
significant size of the private pay
market, as discussed in the Executive
Orders 12866 and 13563 analysis. As
stated earlier in this final rule, limited
data exists regarding the private pay
sector and overtime utilization within
that sector. However, based on the
analysis, it is clear that this sector
behaves differently than the publicly
funded market and should be analyzed
differently.
Second, the Department reviewed the
references used to estimate the
incidence of overtime among these
workers in addition to any other
available data on this issue and
determined that, in the absence of new
statistically reliable data sources, the
two national surveys of direct care
workers provide the best source of
information on the amount of overtime
worked. However, the estimated total
number of overtime hours worked and
the associated overtime compensation
transfers have increased due to the
addition approximately 80,000 workers
who were previously unaccounted for
(30,000 in Illinois, 50,000 in California).
The estimated total number of overtime
hours worked also increased because,
after further evaluation of the data in the
NHHAS, the Department determined
that the estimated 12 percent of workers
who work overtime average 8.8 hours of
overtime per week instead of the 6.3
hours estimated in the proposed rule.
Third, the Department agrees with
commenters that adjusting worker
schedules and hiring additional workers
in order to eliminate overtime hours is
not costless. This cost has been
incorporated into the analysis by
adjusting the assumption on OT
Scenario 3 to account for administrative
costs and local rigidities in the
availability of additional workers;
specifically, the NPRM assumed that
employers could adjust to absorb all of
the overtime hours currently worked,
and the final analysis assumes that
employers could adjust to absorb all but
10 percent of overtime hours due to the
costs associated with administration.
The U.S. Chamber of Commerce also
submitted a comment expressing serious
concerns with the impact of the rule on
small entities, stating that the
Department underestimated the costs of
regulatory familiarization, especially to
families, and inappropriately labeled
some costs of the rule as transfers. The
comment references data from the
Chamber of Commerce’s members, but
does not provide any additional detail.
Thus, as explained in some detail in the
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60549
section describing the estimation of
regulatory familiarization costs, the
Department maintains its assumptions
concerning regulatory familiarization.
As stated previously, most third party
employers are already covered by the
FLSA and employ other workers who
are not exempt, so they are familiar with
the FLSA’s minimum wage and
overtime compensation requirements.
Therefore, they simply need to apply
the FLSA to an additional category of
workers. The Department will provide
guidance and educational materials that
individuals and families who employ
direct care workers can rely on to learn
about the rule’s requirements. With
respect to the Chamber of Commerce’s
comment relating to whether transfers
are costs, the Department describes the
estimated transfers due to payment of
travel time and overtime compensation
as transfers in the economic analysis
because those payments are not a loss to
the larger economy; however, the
transfers are treated as compliance costs
to employers for the purpose of
estimating the deadweight loss and
disemployment effects of the Final Rule
in recognition of the fact that it will
impact the behavior of employers.
Advocacy also suggested that the
Department clarify that registries are not
third party employers. The employment
relationship was not addressed by the
proposed rule and the Department
proposed no changes to its longstanding
test of what constitutes an employment
relationship under the FLSA. However,
in response to Advocacy’s suggestion,
the Department has included in the
preamble to this Final Rule a lengthy
description of the employment
relationship test and how it applies in
various factual scenarios including
registries. This discussion is found in
the Joint Employment section of this
preamble.
4. Description and Estimate of the
Number of Small Entities To Which the
Final Rule Will Apply
The RFA defines a ‘‘small entity’’ as
a (1) small not-for-profit organization,
(2) small governmental jurisdiction, or
(3) small business. The Department used
standards defined by SBA to classify
entities as small for the purpose of this
analysis. For the two industries that are
the focus of this analysis, the SBA
defines a small business as one that has
average annual receipts of less than $14
million for HHCS and $10 million for
SEPD.220
220 These thresholds were updated in 2012 from
$13.5 and $7 million, respectively. See: http://
www.fns.usda.gov/ora/MENU/Published/snap/
FILES/Participation/2011Characteristics.pdf.
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Based on the estimated average
annual revenues per establishment in
each employment size category derived
from Statistics of U.S. Businesses
(SUSB) data and attributed to the
establishments in the HHCS and SEPD
industries, it appears that no employers
exceed the SBA size standards of $14
million in annual revenues for HHCS
and $10 million in annual revenues for
SEPD. Thus, for the purposes of this
analysis, the entire HHCS and SEPD
industries (89,400 establishments) are
composed of small businesses.
Although in reality it is possible that
there are some firms in the 100–499 and
500+ employee categories that earn
revenues in excess of the SBA standard
for their industry, we include all
establishments in order to not
underestimate the number of small
firms affected by the rule. We also
believe we have not mischaracterized
this sector in any meaningful way: We
believe these industries are primarily, if
not completely, composed of small
businesses by SBA standards.
In order to better understand the
impact of the rule on businesses of
different sizes, the Department analyzed
small business impacts using
establishment size as a proxy for firm
size. The Department combined
Quarterly Census of Employment and
Wages data for the HHCS and SEPD
industries and then used the SUSB,
2007, data set to distribute
establishments and employees to the
following size categories: 0–4, 5–9,
10–19, 20–99, 100–499, and 500+
employees.
Although basing this analysis on
establishment size will bias results, the
bias will tend to overestimate the
number of small businesses affected by
the rule and the impacts to those small
businesses. First, the analysis
overestimates the number of small
entities; a firm composed of multiple
establishments might earn aggregate
revenues that exceed the threshold the
SBA used to define ‘‘small’’ in these
industries. Second, costs are in part a
function of the number of firms in the
industry due to the need for each firm
to become familiar with the Final Rule.
Our cost model thus assigns those
familiarization costs to each
establishment. Again, to the extent that
firms own multiple establishments,
compliance costs associated with
regulatory familiarization will be
smaller than estimated here. Third,
compliance costs are also a function of
the number of establishment employees.
Because there are no data linking the
use of the companionship services
exemption to establishment size, there
is no direct way to measure the impact
of this rule’s minimum wage and
overtime requirements by size
categories. The Department thus
assumed compliance costs associated
with meeting those requirements would
be proportionate to the number of
establishment employees. Therefore,
these costs increase in proportion to
establishment size (as measured by the
number of employees), and smaller
establishments are not unduly impacted
relative to larger establishments. This
proportionate approach may not capture
the full impact of the regulatory
requirements on smaller establishments
given the lack of available data.
Table 21 presents the estimated
number of establishments, employees,
and revenue by establishment size. The
table shows that the 500+ employee
category employs 42 percent of workers,
and accounts for 20 percent of
establishments and 43 percent of
revenue for the combined industries.
Conversely, establishments with fewer
than 20 employees account for only six
percent of employment but more than
44 percent of establishments.
TABLE 21—AFFECTED ESTABLISHMENTS, WORKERS, AND REVENUE BY EMPLOYMENT SIZE a
Total
employees
(1,000)
Percent of
total
employment
0–4 ..............................................................
5–9 ..............................................................
10–19 ..........................................................
20–99 ..........................................................
100–499 ......................................................
500 + ...........................................................
22
29
64
421
573
804
1.1
1.5
3.3
22.0
29.9
42.1
Total .....................................................
1,912
100.0
Number of employees
a Data
Total
establishments
Percent of
establishments
0
0
0
0
0
0
10,426
14,080
30,471
201,744
274,541
385,776
24,548
7,262
7,685
18,495
13,287
18,111
27.5
8.1
8.6
20.7
14.9
20.3
$1,954
1,779
3,752
18,422
25,860
39,079
2.2
2.0
4.1
20.3
28.5
43.0
$80
245
488
996
1,946
2,158
0
917,039
89,388
100.0
90,846
100.0
1,016
Revenue
($ mil.)
Percent
industry
revenue
Average
revenue
per
establishment
($1,000)
Workers
without OT
in this Table are distributed across categories using percentages from SUSB, 2007.
5. Description of the Projected
Reporting, Recordkeeping and Other
Compliance Requirements for Small
Entities
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Workers
without
MW
The FLSA sets minimum wage,
overtime compensation, and
recordkeeping requirements for
employment subject to its provisions.
All non-exempt covered employees
must be paid at least the minimum wage
and not less than one and one-half times
their regular rates of pay for overtime
hours worked. Workers performing
domestic service but not meeting the
definition of companionship services
and live-in domestic service workers
employed by third parties will need to
be paid in accordance with the FLSA’s
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minimum wage and overtime
compensation provisions.
This Final Rule provides no differing
compliance requirements and reporting
requirements for small entities. The
Department has strived to minimize
respondent recordkeeping burden by
requiring no order or specific form of
records under the FLSA and its
corresponding regulations. Moreover,
employers would normally maintain the
records under usual or customary
business practices.
Every covered employer must keep
certain records for each non-exempt
worker. The regulations at 29 CFR part
516 require employers to maintain
records for employees subject to the
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minimum wage and overtime
compensation provisions of the FLSA.
The recordkeeping requirements under
29 CFR part 516 are not new
requirements; however, some additional
employees will be included in the
universe of covered employees under
the Final Rule. As indicated in this
analysis, the Final Rule expands
minimum wage and overtime
compensation coverage to
approximately 1.30 million workers.
This results in an increase in employer
burden and is estimated in the
Paperwork Reduction Act (PRA) section
of this Final Rule. Note that the burdens
reported for the PRA section of this
Final Rule include the entire
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information collection and not merely
the additional burden estimated as a
result of this Final Rule.
Cost to Small Entities
Table 22 presents the results of the
first year, recurring years, and
annualized cost and impact analyses as
distributed by establishment size. The
figures in the table include the costs of
regulatory familiarization, hiring costs,
complying with minimum wage
requirements, travel time compensation,
and overtime compensation, assuming
employers respond by adjusting work
schedules so that overtime hours are
reduced to 60 percent of the current
value (Scenario 1; in addition, we
assume 30 percent of reallocated
overtime hours are assigned to new
hires). This scenario is the most costly
of the three examined, and thus the
results presented here show the
anticipated upper bound.
TABLE 22—FIRST YEAR, RECURRING, AND ANNUALIZED COMPLIANCE COSTS BY EMPLOYMENT SIZE a
Number of employees
Percent of
total cost
Cost ($1,000)
Cost per
establishment
Cost per
establishment
as a percent
of average
revenue
First Year
0–4 ...................................................................................................
5–9 ...................................................................................................
10–19 ...............................................................................................
20–99 ...............................................................................................
100–499 ...........................................................................................
500 + ................................................................................................
$4,423
3,983
8,003
50,494
67,801
95,228
1.9
1.7
3.5
22.0
29.5
41.4
$180
548
1,041
2,730
5,103
5,258
0.23
0.22
0.21
0.27
0.26
0.24
Total ..........................................................................................
229,933
100.0
2,572
0.25
Recurring Costs
0–4 ...................................................................................................
5–9 ...................................................................................................
10–19 ...............................................................................................
20–99 ...............................................................................................
100–499 ...........................................................................................
500 + ................................................................................................
2,450
3,308
7,159
47,402
64,506
90,642
1.1
1.5
3.3
22.0
29.9
42.1
100
456
932
2,563
4,855
5,005
0.13
0.19
0.19
0.26
0.25
0.23
Total ..........................................................................................
215,468
100.0
2,410
0.24
Annualized Costs, at 7% Real Rate
0–4 ...................................................................................................
5–9 ...................................................................................................
10–19 ...............................................................................................
20–99 ...............................................................................................
100–499 ...........................................................................................
> 500 ................................................................................................
2,712
3,398
7,272
47,813
64,945
91,252
1.2
1.6
3.3
22.0
29.9
42.0
110
468
946
2,585
4,888
5,038
0.14
0.19
0.19
0.26
0.25
0.23
Total ..........................................................................................
217,393
100.0
2,432
0.24
a Totals
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in this Table exclude costs related to California’s IHSS workers because these workers are not employed by private small establishments and therefore the employer will not incur costs associated with IHSS workers.
First year costs range from $180 for
entities where the owner has fewer than
five employees in addition to him- or
herself (a 0–4 employee establishment),
to $5,258 per establishment for entities
with more than 500 employees (Table
22). Annual recurring costs are
somewhat smaller, ranging from $100
per year per establishment in the 1 to 4
employee class, to $5,005 in the 500
employee or more size class. Over ten
years, the rule is projected to cost
establishments an annual average
ranging from $110 for establishments
with fewer than five employees to
$5,038 for 500+ employee
establishments per year when cost are
annualized using a 7 percent real
interest rate.
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Total costs and cost per establishment
are consistently proportionate to
establishment size as measured by
either revenues or employment
regardless of cost type (first year,
recurring, or annualized). For example,
employers with more than 500
employees are projected to incur 41.4
percent of total first year costs, which is
proportionate to their share of the
industry employment and revenues (see
Table 21 and Table 22). In addition, the
ratio of compliance costs to average
establishment revenue is relatively
similar regardless of establishment size.
For example, the table shows that
average annualized compliance costs
vary between 0.14 and 0.26 percent of
average annual revenues for all
establishments ranging from the 0 to 4
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employee class to the 500+ employee
class.
In summary, first year compliance
costs do not exceed $2,730 for
establishments with fewer than 100
employees, and do not exceed $5,258
for those with more than 100
employees; first-year compliance costs
do not exceed 0.27 percent of
establishment revenue for all
establishment size classes; average
annualized compliance costs do not
exceed $2,585 for establishments with
fewer than 100 employees, and do not
exceed $5,038 for those with more than
100 employees; and average annualized
compliance costs do not exceed 0.26
percent of establishment revenue
regardless of establishments size.
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Impacts to small businesses are
unlikely to vary significantly over time.
Existing firms incur regulatory
familiarization costs once, and these
costs do not impose a significant
economic burden. It is possible,
however, that the actual cost burdens to
small entities may differ from the
Department’s estimates. The Department
estimates that recurring costs such as
overtime and travel time compensation
(transfer payments in the EO 12866
analysis) are proportionate to firm size.
These costs will increase if the firm
grows, but in proportion to the firm’s
ability to bear them. As new firms enter
the market, they will bear the same
costs: One-time regulatory
familiarization costs, and recurring
payments for overtime and travel.
Again, recurring costs will be
proportionate to firm size. Therefore,
based on these assumptions, if the
revisions to the companionship services
regulations are affordable for existing
firms, they will be affordable to new
market entrants as well.
There are limitations to this analysis.
It is assumed that the distribution of
employees by establishment size has not
changed significantly since 2007
(although the number of employees has
increased significantly). We also assume
that the occupations of HHA and PCA
are distributed by establishment size
similarly to other occupations in the
HHCS and SEPD industries. With the
exponential growth in these industries,
it is possible that the distribution of
workers by employment size class has
shifted. In addition, the cost analysis
conducted in this report is unable to
capture the difference in costs for urban
versus rural home care agencies.
6. Description of the Steps the Agency
Has Taken To Minimize the Significant
Economic Impact on Small Entities
Consistent With the Stated Objectives of
Applicable Statutes, Including a
Statement of the Factual, Policy, and
Legal Reasons for Selecting the
Alternative Adopted in the Final Rule
and Why Other Alternatives Were
Rejected
As previously discussed, the
Department believes it has chosen the
most effective option that updates and
clarifies the rule. Based on the
commenters’ suggestions, among the
options considered by the Department
but not described in the NPRM, the least
restrictive option was taking no
regulatory action. A more restrictive
option was to add to the provisions
being finalized a limit on the personal
care services that can be performed.
NELP and the National Council on
Aging among others suggested that the
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Department require an initial
assessment be conducted to determine if
a direct care worker is performing
primarily fellowship and protection for
the consumer. If it is found that the
direct care worker is not engaged
primarily in fellowship and protection,
then the subsequent list of personal care
services should not be considered at all
and the worker should not be
considered exempt. The National
Council on Aging further expressed the
view that toileting, bathing, driving, and
tasks involving positioning and/or
transfers be excluded from the list of
permissible duties. ANCOR suggested
that the list be made exclusive and
include fewer tasks. The commenter
added that the Department should
consider providing an allowance for
household work defined as no more
than one hour in a seven day period.
AFSCME expressed the view that those
workers who regularly engage in
mobility tasks should not be considered
companions. The Department carefully
considered such views in development
of the Final Rule. The Department
ultimately settled on a less restrictive
list of permissible care services
(assistance with ADLs and IADLs) than
initially proposed as well as less
restrictive than options suggested by
some of these commenters. The
Department views the resulting list as a
compromise that allows for some
delivery of care services by the exempt
companion while at the same time
recognizing and making an effort to
address the health and safety concerns
of direct care workers and consumers.
Taking no regulatory action does not
address the Department’s concerns
discussed above under Need for
Regulation. The Department found the
most restrictive option to be overly
burdensome on business in general and
specifically small business.
Pursuant to the RFA, the Department
considered several other approaches to
accomplish the objectives of the rule
and minimize the economic impact on
small entities including those suggested
in comments on the NPRM as well as
more traditional approaches.
In its comment, Advocacy noted that
small businesses are most concerned
with the cost of overtime compensation
and less so the minimum wage
provision. One suggested alternative
was to maintain the exemption from
overtime compensation for third party
employers of live-in workers, consistent
with the laws in at least three states
(Michigan, Nevada, and Washington).
The Department recognizes that this
approach would represent incremental
progress towards narrowing the
exemption for this set of workers and
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result in a very small economic impact
on the industry from the Final Rule.
However, the Department believes
this approach is inconsistent with
Congress’s intent to provide FLSA
protections to domestic service workers,
while providing a narrow exemption for
live-in domestic service workers. It is
apparent from the legislative history
that the 1974 amendments were
intended to expand coverage to include
more workers, and were not intended to
roll back coverage for employees of
third parties who already had FLSA
protections as employees of covered
enterprises. Moreover, this approach
does not support the objectives of the
rule or the purposes of the overtime
requirements of the FLSA, one of which
is to spread employment.
Another alternative suggested by
Advocacy and the participants at the
Small Business Roundtable hosted by
Advocacy was to allow employers to
exclude some nighttime hours from
‘‘hours worked’’ to reduce the potential
burden of overtime compensation to
workers providing care on higher hour
cases (12- or 24-hour shifts). For
example, Minnesota and North Dakota
state laws exclude up to eight hours
from the overnight hours (from 10:00
p.m. to 9:00 a.m.) from the ‘‘hours
worked’’ for purposes of minimum wage
and overtime calculations. This Final
Rule does not include revisions to the
longstanding regulations applicable to
all FLSA-covered employers addressing
when sleep time constitutes hours
worked and when sleep time may be
excluded from hours worked. Therefore,
employers still have the opportunity to
exclude bona fide sleep hours; however,
there would be no basis under the FLSA
for treating sleep time hours differently
for domestic service workers than for
other employees. The Department’s
existing regulations already provide for
the exclusion of sleep time from
compensable hours worked under
certain conditions. As previously
discussed in the Hours Worked section
of this preamble, under the
Department’s existing regulations, an
employee who is required to be on duty
for less than 24 hours is working even
though he or she is permitted to sleep
or engage in other personal activities
when not busy. See § 785.21. Where an
employee is required to be on duty for
24 hours or more, the employer and
employee may agree to exclude a bona
fide meal period or a bona fide regularly
scheduled sleeping period of not more
than eight hours from the employee’s
hours worked under certain conditions.
See § 785.22. The conditions for the
exclusion of such a sleeping period from
hours worked are (1) that adequate
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sleeping facilities are furnished by the
employer, and (2) that the employee’s
time spent sleeping is usually
uninterrupted. When an employee must
return to duty during a sleeping period,
the length of the interruption must be
counted as hours worked. If the
interruptions are so frequent that the
employee cannot get at least five hours
of sleep during the scheduled sleeping
period, the entire period must be
counted as hours worked. Id.; see also
Wage and Hour Opinion Letter, 1999
WL 1002352 (Jan. 7, 1999). Where no
expressed or implied agreement exists
between the employer and employee,
the eight hours of sleeping time
constitute compensable hours worked.
This description of these longstanding
rules in the Final Rule’s preamble is
provided to help to educate small
business employers regarding their
ability to exclude sleep time from hours
worked. See § 785.22. However, because
there would be no basis under the FLSA
for treating sleep time hours differently
for domestic service workers than for
other employees, the commenters’
suggestion was not adopted.
Another approach suggested by small
business representatives at the Small
Business Roundtable and in subsequent
conversations between small businesses
and Advocacy would be to calculate
overtime compensation based on a
different rate of pay than straight time;
for example, under New York state law
overtime hours are paid at one and a
half times the minimum wage rather
than the worker’s regular rate of pay for
some workers. Again, there is no legal
basis in the FLSA for calculating
overtime compensation at a rate other
than one-and-one-half times the
employee’s regular rate of pay.
Moreover, the Department does not
believe that this supports the objective
of the rule or the spread of employment
under the Act. In terms of economic
burden, this alternative could reduce
the cost to employers of overtime by
approximately 25 percent under OT
Scenario 2; however, 15 states currently
require payment of overtime at time and
a half of regular pay with no evidence
of significant economic burden. Quoting
the Michigan Olmstead Coalition ‘‘we
have seen no evidence that access to or
the quality of home care services are
diminished by the extension of
minimum wage and overtime protection
to home care aides in this state almost
six years ago.’’
Another alternative discussed by
commenters is to exclude travel time
from hours worked in order to decrease
the burden of overtime compensation.
However, the comments provided little
justification for a departure from the
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general FLSA principles applicable to
all employers on the compensability of
travel time set forth in 29 CFR 785.33–
785.41. Excluding travel time that is ‘‘all
in the day’s work’’ from compensable
hours worked, for example, would be
inconsistent with the Portal-to-Portal
Act amendment to the FLSA and
inconsistent with how such travel time
is treated for all other employees.
§§ 785.38; 790.6. Furthermore, the
analysis above suggests that the
economic impacts of combined overtime
and travel time pay are not significant,
and travel time is merely a fraction of
overtime cost. Thus, travel time adds a
relatively small amount to the burden of
this rulemaking.
The Department also considered
several traditional alternatives suggested
in the SBA guide ‘‘How to Comply with
the Regulatory Flexibility Act.’’ 221
Those alternatives include:
• Compliance Assistance. The
Department has made a variety of
educational assistance materials related
to this Final Rule available on its Web
site, and WHD offices throughout the
country are available to provide
compliance assistance at no charge to
employers. The Department intends to
engage in robust outreach efforts and
make every effort to work with
employers to ensure compliance. As
mentioned elsewhere in this preamble,
the Department will work closely with
stakeholders and the Department of
Health and Human Services to provide
additional guidance and technical
assistance so that stakeholders,
including employee and employer
advocacy groups, as well as state
agencies, understand their rights and
responsibilities under the FLSA and this
Final Rule.
• Differing compliance or reporting
requirements that take into account the
resources available to small entities. The
FLSA sets a floor below which
employers may not pay their employees.
As shown above, nearly all employers
affected by the rule meet the criteria for
small entities and the costs to the
smallest of these employers are not
overly burdensome; for example, the
annualized cost of the rule is estimated
to be $110 for an employer with 0–4
employees and $5,038 for an employer
with 500 or more employees. See Table
22. To establish differing compliance or
reporting requirements for small
businesses would undermine this
important purpose of the FLSA and
appears to not be necessary given the
221 SBA, A Guide for Government Agencies: How
to Comply with the Regulatory Familiarization
Flexibility Act, Implementing the President’s Small
Business Agenda and Executive Order 13272. June
2010. pgs 47–58. Available at: www.sba.gov/advo.
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60553
small annualized cost of the rule. The
Department makes available a variety of
resources to employers for
understanding their obligations and
achieving compliance. Therefore the
Department declines to establish
differing compliance or reporting
requirements for small businesses.
• Clarification, consolidation, or
simplification of compliance and
reporting requirements for small
entities. This rule simplifies and
clarifies compliance requirements for
employers of workers performing
companionship services. The rule
imposes no reporting requirements. The
recordkeeping requirements imposed by
this rule are necessary for the employer
to determine their compliance with the
rule as well as for the Department and
domestic service employees to
determine the employer’s compliance
with the law. The recordkeeping
provisions apply generally to all
businesses—large and small—covered
by the FLSA; no rational basis exists for
creating an exemption from compliance
and recordkeeping requirements for
small businesses in the HHCS and SEPD
industries. The Department makes
available a variety of resources to
employers for understanding their
obligations and achieving compliance.
• Use of performance rather than
design standards. Under the Final Rule,
the employer may achieve compliance
through a variety of means. The
employer may: hire additional workers
and/or spread employment over the
employer’s existing workforce to ensure
employees do not work more than 40
hours in a workweek, and/or pay
employees time and one-half for time
worked over 40 hours in a workweek. In
addition, the FLSA recordkeeping
provisions require no particular order or
form of records to be maintained so
employers may create and maintain
records in the manner best fitting their
situation. The Department makes
available a variety of resources to
employers for understanding their
obligations and achieving compliance.
• An exemption from coverage of the
rule, or any part thereof, for such small
entities. The FLSA contains no
authority to allow the Department to
create an exemption for certain
employers based on size of their
workforce. Furthermore, creating an
exemption from coverage of this rule for
businesses with as many as 500
employees, those defined as small
businesses under SBA’s size standards,
is inconsistent with Congressional
intent in expanding FLSA coverage to
workers providing domestic services in
private households and its creation of a
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narrow companionship services
exemption.
The Department notes that while it is
not appropriate to employ all of these
traditional alternatives to lessen the
impact of this Final Rule on small
entities, the delayed effective date of
this Final Rule creates a transition
period during which all entities
potentially impacted by this rule,
including small entities, have the
opportunity to review existing policies
and practices and make necessary
adjustments for compliance with this
Final Rule. This transition period
coupled with the Department’s
compliance assistance efforts lessens the
impacts of complying with this Final
Rule, relative to a regulatory alternative
in which compliance is required
immediately upon finalization.
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VIII. Unfunded Mandates Reform Act
The Unfunded Mandates Reform Act
of 1995, 2 U.S.C. 1501, requires agencies
to prepare a written statement that
identifies the: (1) Authorizing
legislation; (2) cost-benefit analysis; (3)
macro-economic effects; (4) summary of
state, local, and tribal government input;
and (5) identification of reasonable
alternatives and selection, or
explanation of non-selection, of the least
costly, most cost-effective or least
burdensome alternative; for rules for
which a general notice of proposed
rulemaking was published and that
include any federal mandate that may
result in increased expenditures by
state, local, and tribal governments, in
the aggregate, or by the private sector, of
$100 million ($141 million in 2012
dollars, using the Gross Domestic
Product deflator) or more in any one
year.
Authorizing Legislation
This rule is issued pursuant to
Sections 13(a)(15), 13(b)(21), and 11(c)
of the Fair Labor Standards Act (FLSA),
29 U.S.C. 213(a)(15), 213(b)(21), 211(c).
Section 13(a)(15) of the FLSA exempts
from its minimum wage and overtime
provisions domestic service employees
employed ‘‘to provide companionship
services for individuals who (because of
age or infirmity) are unable to care for
themselves (as such terms are defined
and delimited by regulations of the
Secretary).’’ Section 13(b)(21) of the
FLSA exempts from the overtime
provision any employee employed ‘‘in
domestic service in a household and
who resides in such household.’’ The
requirements to maintain the
exemptions provided by these sections
are contained in this Final Rule, 29 CFR
part 552. Section 3(e) of the FLSA
defines ‘‘employee’’ to include an
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individual employed by the government
of a state or political subdivision of a
state, or interstate governmental agency.
Section 3(x) of the FLSA, also defines
public agencies to include the
government of a state or political
subdivision thereof, or any interstate
governmental agency. Section 11(c) of
the FLSA indicates that employers
subject to minimum wage and/or
overtime requirements must make, keep,
and preserve records as the
Administrator prescribes by regulation.
Cost-Benefit Analysis
For purposes of the Unfunded
Mandates Reform Act of 1995, this rule
includes a Federal mandate that might
result in increased expenditures by the
private sector or state, local, and tribal
governments of more than $100 million
in any one year. The primary impact on
state, local, and tribal governments may
be through increased Medicaid
reimbursement rates. The magnitude of
that impact will depend on two factors:
(1) How home care agencies adjust
scheduling to reduce or eliminate
overtime hours; and (2) how states
adjust Medicaid budgets in response to
the rule.
On average, Medicaid expenditures
are one of the most significant
components of state budgets, second
only to primary and secondary
education as a source of expenditures
from state general revenues. In fiscal
year 2011, the National Association of
State Budget Officers estimated that the
state share of Medicaid expenditures
accounted for 17.4 percent of state
general revenues.222 Although some
direct care workers are employed, or
jointly employed, by state or county
agencies (e.g., California, Illinois), these
state or county agencies primarily serve
the states’ Medicaid population. Impacts
to these agencies and direct care
workers are thus a subset of the impact
of the rule on the state share of
Medicaid expenditures; to analyze these
impacts separately would constitute
double-counting. Therefore the
Department will focus this section on
the potential impact of the rule on the
state share of Medicaid expenditures.
The Department estimated a range of
total transfers of overtime and travel
wages based on three adjustment
scenarios, depending upon the
percentage of current overtime hours
222 Office of the Actuary, Centers for Medicare &
Medicaid Services, U.S. Department of Health &
Human Services. 2012 Actuarial Report on the
Financial Outlook for Medicaid. Available at:
http://medicaid.gov/Medicaid-CHIP-ProgramInformation/By-Topics/Financing-andReimbursement/Downloads/medicaid-actuarialreport-2012.pdf. Accessed April 17, 2013.
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worked that employers continue to
provide to employees (10 percent, 40
percent or 60 percent); the middle
scenario (described in the Regulatory
Impact Analysis as OT Scenario 2)
results in payment of 40 percent of
current overtime hours worked (average
annualized value of $321.8 million per
year). For the reasons discussed in the
Regulatory Impact Analysis, the
Department believes OT Scenario 2
represents the most likely impact of the
Final Rule.
As described in the regulatory impact
analysis (with respect to the Agency
Model in Section VI.D), home health
care expenditures accounted for by
Medicare and Medicaid range from
about 75 to 90 percent of total home
health care expenditures. However, as
previously described, not all Medicaid
expenditures on home care services are
included in the standard Medicaid
accounting classification; in 2009 the
sum of State Home Health, PCS, and
HCBS 1915(c) waiver programs223
($50.0 billion) was about twice the size
of the NHE line item for Medicaid home
health care expenditures ($24.3
billion).224
To avoid underestimating the
Medicaid share of home care
expenditures, the Department added
these additional sources of home care
spending to the NHE values and
calculated that as much as 55 percent of
home care expenditures may be
accounted for by Medicaid.225 Thus,
perhaps $175.3 million of the $321.8
million in additional average
annualized transfers under OT Scenario
2 might be attributed to Medicaid
programs. It is unlikely that the entire
amount will be expenditures from state
budgets because the federal government
also contributes to Medicaid
expenditures. The CMS Office of the
223 Kaiser Commission on Medicaid and the
Uninsured. 2012 Medicaid Home and CommunityBased Services Programs: 2009 Data Update.
http://statehealthfacts.org/
comparetable.jsp?ind=242&cat=4.
224 Centers for Medicare and Medicaid Studies,
Office of the Actuary, National Health Expenditure
Projections, 2011–2021. Available at: http://
www.cms.gov/Research-Statistics-Data-andSystems/Statistics-Trends-and-Reports/
NationalHealthExpendData/Downloads/
Proj2011PDF.pdf.
225 In 2009, the NHE listed total home health care
expenditures as $66.1 billion, $29.9 billion (45
percent) of which were accounted for by Medicare,
$24.3 billion by Medicaid (37 percent), with the
remainder attributed to a mix of other government
programs, private insurance, and private out-ofpocket spending. The Department calculated its
adjusted Medicaid percent of expenditures by
adding $25.7 billion ($50.0 billion minus $24.3
billion) to both total and Medicaid expenditures,
then dividing $50.0 billion by $91.8 billion ($66.1
billion plus $25.7 billion) to estimate that roughly
54.5 percent of home care expenditures may be
attributable to Medicaid.
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Actuary projects that the federal share of
Medicaid expenditures will average 60.2
percent through 2020; thus, the state
share of additional wages under this
scenario may be about 39.8 percent of
the $175.3 million, or $69.8 million in
average annualized wages.226 Based on
data from the CMS, we calculated that
in 2011 state Medicaid expenditures
totaled $158.6 billion and the average
annualized value of projected state
Medicaid expenditures is $232.5 billion
per year from 2011 through 2020 (after
adjusting for inflation).227 Thus, if state
Medicaid programs reimburse agencies
for the entire amount of additional
wages expected under OT Scenario 2, it
will increase state Medicaid budgets by
approximately 0.03 percent per year
over that time horizon. This estimate
represents an average across states;
some will experience impacts greater
than 0.03 percent and other less than
0.03 percent depending on whether
state-level laws already require overtime
or travel time payments for direct care
workers. Information about state-level
requirements appears in Table 3.
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Macro-Economic Effects
Agencies are expected to estimate the
effect of a regulation on the national
economy, such as the effect on
productivity, economic growth, full
employment, creation of productive
jobs, and international competitiveness
of United States goods and services, if
accurate estimates are reasonably
feasible and the effect is relevant and
material. 5 U.S.C. 1532(a)(4). However,
OMB guidance on this requirement
notes that such macro-economic effects
tend to be measureable in nationwide
econometric models only if the
economic impact of the regulation
reaches 0.25 percent to 0.5 percent of
the Gross Domestic Product,228 or in the
range of $39 to $77 billion. A regulation
with smaller aggregate effect, such as
226 Office of the Actuary, Centers for Medicare &
Medicaid Services, United States Department of
Health & Human Services. 2012 Actuarial Report on
the Financial Outlook for Medicaid. Available at:
http://medicaid.gov/Medicaid-CHIP-ProgramInformation/By-Topics/Financing-andReimbursement/Downloads/medicaid-actuarialreport-2012.pdf. Accessed April 17, 2013.
227 Centers for Medicare and Medicaid Studies,
Office of the Actuary, National Health Expenditure
Projections, 2011–2021. Available at: http://
www.cms.gov/Research-Statistics-Data-andSystems/Statistics-Trends-and-Reports/
NationalHealthExpendData/Downloads/
Proj2011PDF.pdf.
228 Real Gross Domestic Product for the first
quarter of 2012 was $15.454 trillion. Bureau of
Economic Analysis, News Release: National Income
and Product Accounts Gross Domestic Product, 1st
quarter 2012 (second estimate); Corporate Profits,
1st quarter 2012 (preliminary estimate). Available
at: http://www.bea.gov/newsreleases/national/gdp/
gdpnewsrelease.htm.
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this one, is not likely to have a
measurable impact in macro-economic
terms unless it is highly focused on a
particular geographic region or
economic sector.
This regulation is focused on two subindustries (HHCS and SEPD) within the
Health Care and Social Assistance
industry (NAICS 62), which account for
just over 10 percent of total employment
in this industry.229 The Department’s
RIA estimates that the total first-year
impacts of the rule on employers of
workers providing home health care
services will be approximately $20.7
million, with additional transfers of
approximately $210.2 million,
depending on the approach employers
choose to manage overtime hours.
However, given OMB’s guidance, the
Department has determined that a full
macro-economic analysis is not likely to
show any measurable impact on the
economy.
The total first-year costs of $20.7
million comprise 0.04 percent of payroll
in the two industries nationwide, and
total first-year costs as a percent of
revenues are 0.02 percent nationwide.
The total first-year transfers of $210.2
million as a percent of HHCS and SEPD
payrolls are 0.5 percent, and the total
first-year transfers as a percent of
revenues are about 0.2 percent.
Summary of State, Local, and Tribal
Government Input
Several state employers commented
on specific aspects of the proposed rule.
These comments have been addressed
above in the preamble and Paperwork
Reduction Act sections of the Final
Rule. During the public comment
period, representatives of the state of
Washington, Tennessee, Arkansas,
California, Virginia, and Oregon
submitted written comments to the
agency for review. Additionally,
organizations such as the National
Association of Medicaid Directors and
the California State Association of
Counties submitted written comments
for review. While such associations are
not representatives of specific states,
many of their members are
representatives of state and local
government.
Representatives of individual states
expressed concern about cost (and
income transfers). For example, the
State of California Health and Human
Services Agency referenced the state’s
budget issues and requested that the
229 BLS Quarterly Census of Employment and
Wages: 2011 Annual employment for NAICS 62
(18,368,506). Total annual employment in 2011 for
NAICS 6216 (HHCS) and 62412 (SEPD) was
1,912,306. Available at: http://www.bls.gov/cew/
#databases.
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Department postpone acting on the
requirement of overtime wages to be
paid to home care workers who are
employed by third parties, such as home
care staffing agencies.230 The State of
Washington, Aging and Disability
Services Administration, stated that the
proposed rule’s discussion concerning
costs requires further research. See State
of Washington.231 The Arkansas
Department of Human Services
expressed the view that implementing
these changes without also identifying
additional funding sources is ‘‘ill
advised.’’ See Arkansas Department of
Human Services.232 In the same general
category of cost, some representatives of
individual states expressed concern
over the requirement to pay overtime
compensation to direct care workers.
The Department also held a listening
session with state Medicaid directors or
their representatives where the state
participants reiterated these concerns.
The Department notes that there was
little objection among commenters that
individuals providing companionship
services be paid the minimum wage.
Indeed, many commenters indicated
that such employees are already
receiving at least the federal minimum
wage for hours worked. Additionally, as
noted in the Department’s Final Rule
Defining and Delimiting the Exemptions
for Executive, Administrative,
Professional, Outside Sales and
Computer Employees (April 23, 2004)
(69 FR 22122), Congress amended the
FLSA in 1985 following the Garcia
decision to readjust how the FLSA
would apply to public sector employers
by allowing compensatory time off in
lieu of cash overtime compensation.
Pursuant to the definition section of the
Unfunded Mandates Reform Act, the
term ‘‘direct costs’’ shall be determined
on the assumption that state, local, and
tribal governments and the private
sector will take all reasonable steps
necessary to mitigate the costs resulting
from a Federal mandate. See 2 U.S.C.
658; Public Law 104–4, (March 22,
1995). Further, nothing in the Final Rule
requires that employers schedule
employees for more than 40 hours per
workweek. Employers can avoid the
overtime premium payment (or in the
case of the public sector, compensatory
time off) merely by limiting the
employee to 40 hours of work in a
workweek. Limiting workers to 40 hours
per week should affect very few
consumers. The Department’s analysis
of overtime hours worked showed 88
percent of direct care workers do not
230 WHD–2011–0003–9531.
231 WHD–2011–0003–6166.
232 WHD–2011–0003–9232.
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typically work more than 40 hours per
week, and consumers served by those
workers should not be affected by the
rule. Although consumers served by
those direct care workers who exceed 40
hours per week are likely to be affected,
not all such workers will have their
hours adjusted (e.g., agencies that
voluntarily pay overtime compensation
are less likely to adjust worker
schedules, and other agencies may not
completely eliminate overtime hours).
Thus, only some subset of consumers
cared for by direct care workers
currently working overtime hours are
likely to be affected by the rule.
Least Burdensome Option or
Explanation Required
The Department’s consideration of
various options has been described
throughout the preamble and the
Regulatory Flexibility Analysis. The
Department believes it has chosen the
most effective option that updates and
clarifies the rule and which, given the
changes made in the Final Rule in
response to comments received,
minimizes the burden to the extent
possible. Based on the commenters’
suggestions, among the options
considered by the Department but not
described in the NPRM, the least
restrictive option was taking no
regulatory action. A more restrictive
option was to add to the provisions
being finalized a limit on the personal
care services that can be performed.
NELP and the National Council on
Aging among others suggested that the
Department require an initial
assessment be conducted to determine if
a direct care worker is performing
primarily fellowship and protection for
the consumer. If it is found that the
direct care worker is not engaged
primarily in fellowship and protection,
then the subsequent list of personal care
services should not be considered at all
and the worker should not be
considered exempt. The National
Council on Aging further expressed the
view that toileting, bathing, driving, and
tasks involving positioning and/or
transfers be excluded from the list of
permissible duties. ANCOR suggested
that the list be made exclusive and
include fewer tasks. The commenter
added that the Department should
consider providing an allowance for
household work defined as no more
than one hour in a seven day period.
AFSCME expressed the view that those
workers who regularly engage in
mobility tasks should not be considered
companions. The Department carefully
considered such views in development
of the Final Rule. The Department
ultimately settled on a broader set of
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permissible care services than initially
proposed as well as less restrictive than
options suggested by some of these
commenters. The Department views the
inclusion of assistance with activities of
daily living and instrumental activities
of daily living as a compromise that
allows for some delivery of care services
under the companionship services
exemption while at the same time
recognizing and making an effort to
tailor the types of permissible duties to
Congress’ original intent and to address
the health and safety concerns of direct
care workers and consumers. Taking no
regulatory action does not address the
Department’s concerns discussed above
under Need for Regulation. The
Department found the most restrictive
option to be overly burdensome on
business in general and specifically
small business.
IX. Executive Order 13132 (Federalism)
The Final Rule does not have
federalism implications as outlined in
Executive Order 13132 regarding
federalism. The Final Rule does not
have substantial direct effects on the
states, on the relationship between the
national government and the states, or
on the distribution of power and
responsibilities among the various
levels of government.
X. Executive Order 13175, Indian
Tribal Governments
This Final Rule was reviewed under
the terms of Executive Order 13175 and
determined not to have ‘‘tribal
implications.’’ The Final Rule does not
have ‘‘substantial direct effects on one
or more Indian tribes, on the
relationship between the federal
government and Indian tribes, or on the
distribution of power and
responsibilities between the federal
government and Indian tribes.’’ As a
result, no tribal summary impact
statement has been prepared.
XI. Effects on Families
The undersigned hereby certifies that
this Final Rule will not adversely affect
the well-being of families, as discussed
under section 654 of the Treasury and
General Government Appropriations
Act, 1999.
XII. Executive Order 13045, Protection
of Children
Executive Order 13045, dated April
23, 1997 (62 FR 19885), applies to any
rule that (1) is determined to be
‘‘economically significant’’ as defined in
Executive Order 12866, and (2) concerns
an environmental health or safety risk
that the promulgating agency has reason
to believe may have a disproportionate
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effect on children. This Final Rule is not
subject to Executive Order 13045
because it has no environmental health
or safety risks that may
disproportionately affect children.
XIII. Environmental Impact Assessment
A review of this Final Rule in
accordance with the requirements of the
National Environmental Policy Act of
1969 (NEPA), 42 U.S.C. 4321 et seq.; the
regulations of the Council on
Environmental Quality, 40 CFR 1500 et
seq.; and the Departmental NEPA
procedures, 29 CFR part 11, indicates
that the Final Rule will not have a
significant impact on the quality of the
human environment. As a result, there
is no corresponding environmental
assessment or an environmental impact
statement.
XIV. Executive Order 13211, Energy
Supply
This Final Rule is not subject to
Executive Order 13211. It will not have
a significant adverse effect on the
supply, distribution, or use of energy.
XV. Executive Order 12630,
Constitutionally Protected Property
Rights
This Final Rule is not subject to
Executive Order 12630, because it does
not involve implementation of a policy
‘‘that has takings implications’’ or that
could impose limitations on private
property use.
XVI. Executive Order 12988, Civil
Justice Reform Analysis
This Final Rule was drafted and
reviewed in accordance with Executive
Order 12988 and will not unduly
burden the federal court system. The
Final Rule was: (1) Reviewed to
eliminate drafting errors and
ambiguities; (2) written to minimize
litigation; and (3) written to provide a
clear legal standard for affected conduct
and to promote burden reduction.
List of Subjects in 29 CFR Part 552
Companionship, Domestic service
workers, Employment, Labor, Minimum
wages, Overtime pay, Wages.
Laura A. Fortman,
Principal Deputy Administrator, Wage and
Hour Division.
For the reasons discussed in the
preamble, 29 CFR part 552 is amended
as follows:
PART 552—APPLICATION OF THE
FAIR LABOR STANDARDS ACT TO
DOMESTIC SERVICE
1. The authority citation for part 552
continues to read as follows:
■
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Authority: 29 U.S.C. 213(a)(15), (b)(21), 88
stat. 62; Sec. 29(b) of the Fair Labor
Standards Act Amendments of 1974 (Pub. L.
93–259, 88 Stat. 76).
■
2. Revise § 552.3 to read as follows:
§ 552.3
Domestic service employment.
The term domestic service
employment means services of a
household nature performed by an
employee in or about a private home
(permanent or temporary). The term
includes services performed by
employees such as companions,
babysitters, cooks, waiters, butlers,
valets, maids, housekeepers, nannies,
nurses, janitors, laundresses, caretakers,
handymen, gardeners, home health
aides, personal care aides, and
chauffeurs of automobiles for family
use. This listing is illustrative and not
exhaustive.
■ 3. Revise § 552.6 to read as follows:
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§ 552.6
Companionship services.
(a) As used in section 13(a)(15) of the
Act, the term companionship services
means the provision of fellowship and
protection for an elderly person or
person with an illness, injury, or
disability who requires assistance in
caring for himself or herself. The
provision of fellowship means to engage
the person in social, physical, and
mental activities, such as conversation,
reading, games, crafts, or accompanying
the person on walks, on errands, to
appointments, or to social events. The
provision of protection means to be
present with the person in his or her
home or to accompany the person when
outside of the home to monitor the
person’s safety and well-being.
(b) The term companionship services
also includes the provision of care if the
care is provided attendant to and in
conjunction with the provision of
fellowship and protection and if it does
not exceed 20 percent of the total hours
worked per person and per workweek.
The provision of care means to assist
the person with activities of daily living
(such as dressing, grooming, feeding,
bathing, toileting, and transferring) and
instrumental activities of daily living,
which are tasks that enable a person to
live independently at home (such as
meal preparation, driving, light
housework, managing finances,
assistance with the physical taking of
medications, and arranging medical
care).
(c) The term companionship services
does not include domestic services
performed primarily for the benefit of
other members of the household.
(d) The term companionship services
does not include the performance of
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19:12 Sep 30, 2013
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medically related services provided for
the person. The determination of
whether services are medically related
is based on whether the services
typically require and are performed by
trained personnel, such as registered
nurses, licensed practical nurses, or
certified nursing assistants; the
determination is not based on the actual
training or occupational title of the
individual performing the services.
■ 4. Amend § 552.101 by revising the
first three sentences of paragraph (a) to
read as follows:
§ 552.101
Domestic service employment.
(a) The definition of domestic service
employment contained in § 552.3 is
derived from the regulations issued
under the Social Security Act (20 CFR
404.1057) and from ‘‘the generally
accepted meaning’’ of the term.
Accordingly, the term includes persons
who are frequently referred to as
‘‘private household workers.’’ See. S.
Rep. 93–690, p. 20. The domestic
service must be performed in or about
a private home whether that home is a
fixed place of abode or a temporary
dwelling as in the case of an individual
or family traveling on vacation. * * *
*
*
*
*
*
■ 5. Amend § 552.102 by revising
paragraph (b) to read as follows:
§ 552.102 Live-in domestic service
employees.
*
*
*
*
*
(b) If it is found by the parties that
there is a significant deviation from the
initial agreement, the parties should
reach a new agreement that reflects the
actual facts of the hours worked by the
employee.
■ 6. Revise § 552.106 to read as follows:
§ 552.106
Companionship services.
The term ‘‘companionship services’’
is defined in § 552.6. Persons who
provide care and protection for babies
and young children who do not have
illnesses, injuries, or disabilities are
considered babysitters, not companions.
The companion must perform the
services with respect to the elderly
person or person with an illness, injury,
or disability and not generally to other
persons. The ‘‘casual’’ limitation does
not apply to companion services.
■ 7. Amend § 552.109 by revising
paragraphs (a) and (c) to read as follows:
§ 552.109
Third party employment.
(a) Third party employers of
employees engaged in companionship
services within the meaning of § 552.6
may not avail themselves of the
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60557
minimum wage and overtime exemption
provided by section 13(a)(15) of the Act,
even if the employee is jointly
employed by the individual or member
of the family or household using the
services. However, the individual or
member of the family or household,
even if considered a joint employer, is
still entitled to assert the exemption, if
the employee meets all of the
requirements of § 552.6.
*
*
*
*
*
(c) Third party employers of
employees engaged in live-in domestic
service employment within the meaning
of § 552.102 may not avail themselves of
the overtime exemption provided by
section 13(b)(21) of the Act, even if the
employee is jointly employed by the
individual or member of the family or
household using the services. However,
the individual or member of the family
or household, even if considered a joint
employer, is still entitled to assert the
exemption.
8. Amend § 552.110 by revising
paragraphs (b), (c), and (d) and adding
new paragraph (e) to read as follows:
■
§ 552.110
Recordkeeping requirements.
*
*
*
*
*
(b) In the case of an employee who
resides on the premises, the employer
shall keep a copy of the agreement
specified by § 552.102 and make, keep,
and preserve a record showing the exact
number of hours worked by the live-in
domestic service employee. The
provisions of § 516.2(c) of this chapter
shall not apply to live-in domestic
service employees.
(c) With the exception of live-in
domestic service employees, where a
domestic service employee works on a
fixed schedule, the employer may use a
schedule of daily and weekly hours that
the employee normally works and either
the employer or the employee may:
(1) Indicate by check marks, statement
or other method that such hours were
actually worked; and
(2) When more or less than the
scheduled hours are worked, show the
exact number of hours worked.
(d) The employer is required to
maintain records of hours worked by
each covered domestic service
employee. However, the employer may
require the domestic service employee
to record the hours worked and submit
such record to the employer.
(e) No records are required for casual
babysitters.
[FR Doc. 2013–22799 Filed 9–30–13; 8:45 am]
BILLING CODE 4510–27–P
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Agencies
[Federal Register Volume 78, Number 190 (Tuesday, October 1, 2013)]
[Rules and Regulations]
[Pages 60453-60557]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-22799]
[[Page 60453]]
Vol. 78
Tuesday,
No. 190
October 1, 2013
Part III
Department of Labor
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Wage and Hour Division
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29 CFR Part 552
Application of the Fair Labor Standards Act to Domestic Service; Final
Rule
Federal Register / Vol. 78 , No. 190 / Tuesday, October 1, 2013 /
Rules and Regulations
[[Page 60454]]
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DEPARTMENT OF LABOR
Wage and Hour Division
29 CFR Part 552
RIN 1235-AA05
Application of the Fair Labor Standards Act to Domestic Service
AGENCY: Wage and Hour Division, Department of Labor.
ACTION: Final rule.
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SUMMARY: In 1974, Congress extended the protections of the Fair Labor
Standards Act (FLSA or the Act) to ``domestic service'' employees, but
it exempted from the Act's minimum wage and overtime provisions
domestic service employees who provide ``companionship services'' to
elderly people or people with illnesses, injuries, or disabilities who
require assistance in caring for themselves, and it exempted from the
Act's overtime provision domestic service employees who reside in the
household in which they provide services. This Final Rule revises the
Department's 1975 regulations implementing these amendments to the Act
to better reflect Congressional intent given the changes to the home
care industry and workforce since that time. Most significantly, the
Department is revising the definition of ``companionship services'' to
clarify and narrow the duties that fall within the term; in addition
third party employers, such as home care agencies, will not be able to
claim either of the exemptions. The major effect of this Final Rule is
that more domestic service workers will be protected by the FLSA's
minimum wage, overtime, and recordkeeping provisions.
DATES: This regulation is effective January 1, 2015.
FOR FURTHER INFORMATION CONTACT: Mary Ziegler, Director, Division of
Regulations, Legislation, and Interpretation, U.S. Department of Labor,
Wage and Hour Division, 200 Constitution Avenue NW., Room S-3502, FP
Building, Washington, DC 20210; telephone: (202) 693-0406 (this is not
a toll-free number). Copies of this Final Rule may be obtained in
alternative formats (Large Print, Braille, Audio Tape, or Disc), upon
request, by calling (202) 693-0675 (not a toll-free number). TTY/TTD
callers may dial toll-free (877) 889-5627 to obtain information or
request materials in alternative formats.
Questions of interpretation and/or enforcement of the agency's
current regulations may be directed to the nearest Wage and Hour
Division (WHD) District Office. Please visit http://www.dol.gov/whd for
more information and resources about the laws administered and enforced
by WHD. Information and compliance assistance materials specific to
this Final Rule can be found at: www.dol.gov/whd/homecare. You may also
call the WHD's toll-free help line at (866) 4US-WAGE ((866)-487-9243)
between 8:00 a.m. and 5:00 p.m. in your local time zone..
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Executive Summary
II. Background
III. Summary of Comments on Changes to FLSA Domestic Service
Regulations
A. Section 552.3 (Domestic Service Employment)
B. Section 552.6 (Companionship Services)
C. Section 552.102 (Live-In Domestic Service Employees) and
Section 552.110 (Recordkeeping Requirements)
D. Section 552.109 (Third Party Employment)
E. Other Comments
IV. Effective Date
V. Paperwork Reduction Act
VI. Executive Orders 12866 (Regulatory Planning and Review) and
13563 (Improving Regulation and Regulatory Review)
VII. Final Regulatory Flexibility Analysis
VIII. Unfunded Mandates Reform Act
IX. Executive Order 13132 (Federalism)
X. Executive Order 13175 (Indian Tribal Governments)
XI. Effects on Families
XII. Executive Order 13045 (Protection of Children)
XIII. Environmental Impact Assessment
XIV. Executive Order 13211 (Energy Supply)
XV. Executive Order 12630 (Constitutionally Protected Property
Rights)
XVI. Executive Order 12988 (Civil Justice Reform Analysis)
List of Subjects in 29 CFR part 552
Signature
Amendments to Regulatory Text
I. Executive Summary
Purpose of the Regulatory Action
Prior to 1974, the FLSA's minimum wage and overtime compensation
provisions did not protect domestic service workers unless those
workers were employed by enterprises covered by the Act (generally
those that had at least a certain annual dollar threshold in business,
see 29 U.S.C. 203(s)). Congress amended the FLSA in 1974 to extend
coverage to all domestic service workers, including those employed by
private households or companies too small to be covered by the Act. See
Fair Labor Standards Amendments of 1974, Public Law 93-259 Sec. 7, 88
Stat. 55, 62 (1974). At the same time, Congress created an exemption
from the minimum wage and overtime compensation requirements for
domestic service workers who provide companionship services and an
exemption from the Act's overtime compensation requirement for domestic
service workers who reside in the households in which they provide
services, i.e., live-in domestic service workers. Id.; 29 U.S.C.
13(a)(15), 13(b)(21).\1\ The new statutory text explicitly granted the
Department the authority to define the terms ``domestic service
employment'' and ``companionship services.'' See 29 U.S.C. 213(a)(15).
---------------------------------------------------------------------------
\1\ Congress simultaneously also created an exemption from the
Act's minimum wage and overtime requirements for domestic service
employees ``employed on a casual basis . . . to provide babysitting
services.'' 29 U.S.C. 213(a)(15). This rulemaking does not make, nor
did the proposal it follows suggest, changes to the Department's
regulations regarding the babysitting exemption.
---------------------------------------------------------------------------
The legislative history of the 1974 amendments explains that the
changes were intended to expand the coverage of the FLSA to include all
employees whose vocation was domestic service, but to exempt from
coverage casual babysitters and individuals who provided companionship
services. The ``companionship services'' exemption was to apply to
``elder sitters'' whose primary responsibility was to watch over an
elderly person or person with an illness, injury, or disability in the
same manner that a babysitter watches over children. See 119 Cong. Rec.
S24773, S24801 (daily ed. July 19, 1973) (statement of Sen. Williams).
The companionship services exemption was not intended to exclude
``trained personnel such as nurses, whether registered or practical,''
from the protections of the Act. See Senate Report No. 93-690, 93rd
Cong., 2d Sess., p. 20 (1974); House Report No. 93-913, 93rd Cong., 2d
Sess., p. 36 (1974).
In 1975, the Department promulgated regulations implementing the
companionship services and live-in domestic service employee
exemptions. See 40 FR 7404 (Feb. 20, 1975); 29 CFR part 552. These
regulations defined companionship services as ``fellowship, care, and
protection,'' which included ``household work . . . such as meal
preparation, bed making, washing of clothes, and other similar
services'' and could include general household work not exceeding ``20
percent of the total weekly hours worked.'' 29 CFR 552.6. Additionally,
the 1975 regulations permitted third party employers, or employers of
home care workers other than the individuals receiving care or their
families or households, to claim both the companionship services and
[[Page 60455]]
live-in domestic service employee exemptions. 29 CFR 552.109. These
regulations have remained substantially unchanged since they were
promulgated.
The home care industry, however, has undergone dramatic expansion
and transformation in the past several decades. The Department uses the
term home care industry to include providers of home care services, and
the term ``home care services'' to describe services performed by
workers in private homes and whose job titles include home health aide,
personal care attendant, homemaker, companion, and others.
In the 1970s, many individuals with significant care needs were
served in institutional settings rather than in their homes and their
communities. Since that time, there has been a growing demand for long-
term home care for persons of all ages, largely due to the rising cost
of traditional institutional care and, in response to the disability
civil rights movement, the availability of federal funding assistance
for home care, reflecting the nation's commitment to accommodate the
desire of individuals to remain in their homes and communities. As more
individuals receive services at home rather than in nursing homes or
other institutions, workers who provide home care services, referred to
as ``direct care workers'' in this Final Rule but employed under titles
including certified nursing assistants, home health aides, personal
care aides, and caregivers, perform increasingly skilled duties. Today,
direct care workers are for the most part not the elder sitters that
Congress envisioned when it enacted the companionship services
exemption in 1974, but are instead professional caregivers.
Despite this professionalization of home care work, many direct
care workers employed by individuals and third-parties have been
excluded from the minimum wage and overtime protections of the FLSA
under the companionship services exemption, which courts have read
broadly to encompass essentially all workers providing services in the
home to elderly people or people with illnesses, injuries, or
disabilities regardless of the skill the duties performed require. The
earnings of these workers remain among the lowest in the service
industry, impeding efforts to improve both jobs and care. The
Department believes that the lack of FLSA protections harms direct care
workers, who depend on wages for their livelihood and that of their
families, as well as the individuals receiving services and their
families, who depend on a professional, trained workforce to provide
high-quality services.
Because the 1975 regulations define companionship services and
address third-party employment in a manner that, given the changes to
the home care services industry, the home care services workforce, and
the scope of home care services provided, no longer aligns with
Congress's intent when it extended FLSA protections to domestic service
employees, the Department is modifying the relevant regulatory
provisions in 29 CFR part 552. These changes are intended to clarify
and narrow the scope of duties that fall within the definition of
companionship services in order to limit the application of the
exemption. The Department intends for the exemption to apply to those
direct care workers who are performing ``elder sitting'' rather than
the professionalized workforce for whom home care is a vocation. In
addition, by prohibiting employers of direct care workers other than
the individual receiving services or his or her family or household
from claiming the companionship services or live-in domestic service
employment exemptions, the Department is giving effect to Congress's
intent in 1974 to expand coverage to domestic service employees rather
than to restrict coverage for a category of workers already covered.
Summary of the Major Provisions of the Final Rule
This Final Rule makes changes to several sections of 29 CFR part
552, the Department's regulations concerning domestic services
employment.
The Department is slightly revising the definition of ``domestic
service employment'' in Sec. 552.3 to clarify the language and
modernize the list of examples of professions that fall within this
category.
This Final Rule also updates the definition of ``companionship
services'' in Sec. 552.6 in order to restrict the term to encompass
only workers who are providing the sorts of limited, non-professional
services Congress envisioned when creating the exemption. Specifically,
paragraph (a), which uses more modern language than appears in the 1974
amendments or 1975 regulations, provides that ``companionship
services'' means the provision of fellowship and protection for an
elderly person or person with an illness, injury, or disability who
requires assistance in caring for himself or herself. It also defines
``fellowship'' as engaging the person in social, physical, and mental
activities and ``protection'' as being present with the person in his
or her home, or to accompany the person when outside of the home, to
monitor the person's safety and well-being. Paragraph (b) provides that
the term ``companionship services'' also includes the provision of care
if the care is provided attendant to and in conjunction with the
provision of fellowship and protection and if it does not exceed 20
percent of the total hours worked per person and per workweek. It
defines ``care'' as assistance with activities of daily living and
instrumental activities of daily living. Paragraph (c) provides that
the term ``companionship services'' does not include general domestic
services performed primarily for the benefit of other members of the
household. Paragraph (d) provides that the term ``companionship
services'' does not include the performance of medically related
services, and it explains that the determination of whether the
services performed are medically related is based on whether the
services typically require and are performed by trained personnel, such
as registered nurses, licensed practical nurses, or certified nursing
assistants, regardless of the actual training or occupational title of
the individual providing the services.
In order to better ensure that live-in domestic service employees
are compensated for all hours worked, the Department is also changing
the language in Sec. Sec. 552.102 and .110 to require the keeping of
actual records of the hours worked by such employees.
The Department is revising Sec. 552.109, the regulatory provision
regarding domestic service employees employed by third-party employers,
or employers other than the individual receiving services or his or her
family or household. To better ensure that the domestic service
employees to whom Congress intended to extend FLSA protections in fact
enjoy those protections, the new regulatory text precludes third party
employers (e.g., home care agencies) from claiming the exemption for
companionship services or live-in domestic service employees.
Effective Date
These changes will become effective on January 1, 2015. The
Department believes that this extended effective date takes into
account the complexity of the federal and state systems that are a
significant source of funding for home care work and the needs of the
diverse parties affected by this Final Rule (including consumers, their
families, home care agencies, direct care workers, and local, state and
federal Medicaid
[[Page 60456]]
programs) by providing such parties, programs and systems time to
adjust.
Costs and Benefits
The Table below illustrates the potential scale of projected
transfers, costs, and net benefits of the revisions to the FLSA
regulations addressing domestic service employment. The primary effect
shown in the Table is the transfer of income from home care agencies
(and payers because a portion of costs will likely be passed through
via price increases) to direct care workers, due to more workers being
protected under the FLSA; the Department projects an average annualized
transfer of $321.8 million in the medium-impact scenario (using a 7
percent real discount rate). These income transfers result from the
narrowing of the companionship services exemption, specifically:
payment for time spent by direct care workers traveling between
individuals receiving services (consumers) for the same employer, and
payment of an overtime premium when hours worked exceed 40 hours per
week. Transfers resulting from the requirement to pay the minimum wage
are expected to be zero because current wage data suggests that few
affected workers, if any, are currently paid less than the federal
minimum wage per hour.
The Department projects that the average annualized direct costs
for regulatory familiarization, hiring new workers, and the deadweight
loss due to the potential allocative inefficiency resulting from the
rule will average $6.8 million per year over a 10-year period. In
perspective, regulatory familiarization, hiring new workers, and the
deadweight loss represents about 0.007 percent of industry revenue,
while the disemployment impact of the rule affects about 0.06 percent
of direct care workers. The relatively small deadweight loss occurs
because both the demand for and supply of home care services appear to
be inelastic in the largest component of this market, in which public
payers reimburse for home care; thus, the equilibrium quantity of home
care services is not very responsive to the changes in price.
The Department also expects the rule will reduce the high turnover
rate among direct care workers, along with its associated employment
costs to agencies, a key quantifiable benefit of the Final Rule.
Because overtime compensation, hiring costs, and reduction in turnover
depend on how employers choose to comply with the rule, the Department
estimated a range of impacts based on three adjustment scenarios; the
table below presents the intermediate scenario--``Overtime Scenario
2''--which is, along with a complete discussion of the data sources,
methods, and results of this analysis, presented in Section VI,
Executive Orders 12866 and 13563.
Table--Summary of Impact of Changes to FLSA Companionship Services Exemption
----------------------------------------------------------------------------------------------------------------
Average annualized value ($
Future years ($ mil.) \a\
Impact Year 1 ($ mil.) mil.) ---------------------------------
3% Real rate 7% Real rate
----------------------------------------------------------------------------------------------------------------
Total Transfers
----------------------------------------------------------------------------------------------------------------
Minimum wages \b\ + Travel wages + $210.2 $240.9 $468.3 $330.6 $321.8
Overtime Scenario 2....................
---------------------------------
(Lower bound--upper bound).......... ($104-$281) ($119-$627) ($159-$442)
----------------------------------------------------------------------------------------------------------------
Total Cost of Regulations \e\
----------------------------------------------------------------------------------------------------------------
Regulatory Familiarization + Hiring $20.7 $4.2 $5.1 $6.5 $6.8
Costs \c\ + Deadweight Loss............
---------------------------------
(Lower bound--upper bound).......... ($19-$21) ($4-$5) ($6-$7)
---------------------------------
Disemployment (number of workers)....... 812 885 1,477 1,144 \d\
----------------------------------------------------------------------------------------------------------------
Net Benefits
----------------------------------------------------------------------------------------------------------------
Overtime Scenario 2 \c\................. $9.4 $20.5 $15.5 $17.1 $17.1
---------------------------------
(Lower bound--upper bound).......... ($-4-20) ($3-$31) ($4-$27)
----------------------------------------------------------------------------------------------------------------
\a\ These costs represent a range over the nine year span. Costs are lowest in Year 2 and highest in Year 10 so
these two values are reported.
\b\ 2011 statistics on wages indicate that few affected workers, if any, are currently paid below the minimum
wage (i.e. in no state is the 10th percentile wage below $7.25 per hour). See the Bureau of Labor Statistics
Occupational Employment Statistics (OES), 2011 state estimates. Available at: http://stats.bls.gov/oes/.
\c\ Based on overtime hours needed to be covered under Overtime Scenario 2.
\d\ Simple average over 10 years.
\e\ Excludes paperwork burden, estimated in Section V.
Not included in the table is the opportunity cost of managerial
time spent adjusting worker schedules to reduce or avoid overtime hours
and travel time. The Department expects these costs to be relatively
small because employers, particularly home care agencies, already
manage the schedules of nonexempt home care employees and therefore
have systems in place to facilitate scheduling workers. Also
unquantified is the potential impact on direct care workers resulting
from employers making such schedule changes.
The costs, benefits and transfer effects of the Final Rule depend
on the actions of employers, decision-makers within federal and state
programs that provide funding for home care services, consumers, and
workers. Depending upon whether employers choose to continue current
work practices, rearrange worker schedules, or hire new workers, the
costs, benefits and transfers will vary. The Department notes that the
delayed effective date of this Final Rule creates a transition period
during which all entities potentially impacted by this rule have the
opportunity to review existing policies and practices and make
necessary adjustments for compliance with this Final Rule. We believe
this
[[Page 60457]]
transition period mitigates short-term impacts for the regulated
community, relative to a regulatory alternative in which compliance is
required immediately upon finalization. The Department will work
closely with stakeholders and the Department of Health and Human
Services to provide additional guidance and technical assistance during
the period before the rule becomes effective, in order to ensure a
transition that minimizes potential disruption in services and supports
the progress that has allowed elderly people and persons with
disabilities to remain in their homes and participate in their
communities.
II. Background
A. What the FLSA Provides
The FLSA requires, among other things, that all covered employees
receive minimum wage and overtime compensation, subject to various
exemptions. The FLSA as originally enacted only covered domestic
service workers if they worked for a covered enterprise, i.e., an
agency or business subject to the FLSA or were an individual engaged in
interstate commerce, an unlikely occurrence. Thus, prior to 1974,
domestic service workers employed by covered businesses to provide
cooking, cleaning, or caregiving tasks in private homes were entitled
to the Act's minimum wage and overtime compensation provisions. In
1974, Congress extended FLSA coverage to ``domestic service'' employees
employed in private households. See 29 U.S.C. 202(a), 206(f), 207(l).
Domestic service workers include, for example, employees employed as
cooks, butlers, valets, maids, housekeepers, governesses, janitors,
laundresses, caretakers, handymen, gardeners, and family chauffeurs.
Senate Report No. 93-690, 93rd Cong., 2d Sess. p. 20 (1974). Thus,
workers performing domestic tasks, such as cooking, cleaning, doing
laundry, driving, and general housekeeping, and employed in private
homes, either by households or by third party employers, are protected
by the basic minimum wage and overtime protections of the FLSA.
Congressional committee reports state the reasons for extending the
minimum wage and overtime protections to domestic service employees
were ``so compelling and generally recognized as to make it hardly
necessary to cite them.'' Senate Report No. 93-690, p. 18. The reports
also state that private household work had been one of the least
attractive fields of employment because wages were low, work hours were
highly irregular, and non-wage benefits were few. Id. The U.S. House of
Representatives Committee on Education and Labor stated its expectation
``that extending minimum wage and overtime protection to domestic
service workers will not only raise the wages of these workers but will
improve the sorry image of household employment . . . Including
domestic workers under the protection of the Act should help to raise
the status and dignity of this work.'' House Report No. 93-913, 93rd
Cong., 2d Sess., pp. 33-34 (1974). During a debate on the amendments,
one Senator referred to the importance of ``the dignity and respect
that ought to come with honest work'' and the low wages that left many
domestic service employees unable to rise out of poverty. See 119 Cong.
Rec. S24773, S24799-80 (daily ed. July 19, 1973) (statement of Sen.
Williams).
When Congress extended FLSA protections to domestic service
employees, however, it created two exemptions within that category.
First, it exempted from both the minimum wage and overtime compensation
requirements of the Act casual babysitters and ``any employee employed
in domestic service employment to provide companionship services for
individuals who (because of age or infirmity) are unable to care for
themselves (as such terms are defined and delimited by regulations of
the Secretary).'' 29 U.S.C. 213(a)(15). Second, it exempted from the
overtime pay requirement ``any employee who is employed in domestic
service in a household and who resides in such household.'' 29 U.S.C.
213(b)(21).
The legislative history explains:
It is the intent of the committee to include within the coverage
of the Act all employees whose vocation is domestic service.
However, the exemption reflects the intent of the committee to
exclude from coverage . . . companions for individuals who are
unable because of age and infirmity to care for themselves. But it
is not intended that trained personnel such as nurses, whether
registered or practical, shall be excluded. People who will be
employed in the excluded categories are not regular bread-winners or
responsible for their families' support. The fact that persons
performing . . . services as companions do some incidental household
work does not keep them from being . . . companions for purposes of
this exclusion.
Senate Report No. 93-690, p. 20; House Report No. 93-913, pp. 36. In
addition, Senator Williams, Chairman of the Senate Subcommittee on
Labor and the Senate floor manager of the 1974 amendments to the FLSA,
described individuals who provided companionship services as ``elder
sitters'' whose primary responsibility was ``to be there and to watch''
over an elderly person or person with an illness, injury, or disability
in the same manner that a babysitter watches over children, ``not to do
household work.'' 119 Cong. Rec. S24773, S24801 (daily ed. July 19,
1973). He explained that the category of workers to which the term
refers includes ``a neighbor'' who ``comes in and sits with'' ``an aged
father, an aged mother, an infirm father, an infirm mother.'' Id.
Senator Williams further noted that ``if the individual is [in the
home] for the actual purpose of being . . . a companion,'' any work
that is ``purely incidental'' would not mean the exemption did not
apply. Id. Examples of such incidental work in the legislative history
were ``making lunch'' or, in the babysitting context, ``throwing a
diaper into the washing machine.'' Id.
B. Regulatory History
On February 20, 1975, the Department issued regulations at 29 CFR
part 552 implementing the domestic service employment provisions. See
40 FR 7404. Subpart A of the rule defined and delimited the terms
``domestic service employment,'' ``employee employed on a casual basis
in domestic service employment to provide babysitting services,'' and
``employment to provide companionship services to individuals who
(because of age or infirmity) are unable to care for themselves.''
Subpart B of the rule set forth statements of general policy and
interpretation concerning the application of the FLSA to domestic
service employees including live-in domestic service employees. Section
552.6 defined companionship services as ``fellowship, care, and
protection,'' which included ``household work . . . such as meal
preparation, bed making, washing of clothes, and other similar
services'' and could include general household work not exceeding ``20
percent of the total weekly hours worked.'' Section 552.109 provided
that third party employers could claim the companionship services
exemption or live-in domestic service employee exemption.
On December 30, 1993, the Department published a Notice of Proposed
Rulemaking (NPRM) in the Federal Register, inviting public comments on
a proposal to revise 29 CFR 552.109 to clarify that, in order for the
exemptions under Sec. 13(a)(15) and Sec. 13(b)(21) of the FLSA to
apply, employees engaged in companionship services and live-in domestic
service who are employed by a third party employer or agency must be
``jointly'' employed by the individual, family, or household using
their services. Other
[[Page 60458]]
minor updating and technical corrections were included in the proposal.
See 58 FR 69310. On September 8, 1995, the Department published a Final
Rule revising the regulations to incorporate changes required by the
recently enacted changes to Title II of the Social Security Act and
making other updating and technical revisions. See 60 FR 46766. That
same day, the Department published a proposed rule re-opening and
extending the comment period on the proposed changes to Sec. 552.109
concerning third party employment. See 60 FR 46797. The Department did
not finalize this proposed change.
On January 19, 2001, the Department published an NPRM to amend the
regulations to revise the definition of ``companionship services'' to
more closely adhere to Congressional intent. The Department also sought
to clarify the criteria used to determine whether employees qualify as
trained personnel and to amend the regulations concerning third party
employment. On April 23, 2001, the Department published a proposed rule
re-opening and extending the comment period on the January 2001
proposed rule. See 66 FR 20411. This rulemaking was eventually
withdrawn and terminated on April 8, 2002. See 67 FR 16668.
On December 27, 2011, the Department published an NPRM inviting
public comments for a period of sixty (60) days on proposed changes to
the exemptions for employees performing companionship services and
live-in domestic service employees. See 76 FR 81190. The proposed
changes were based on the Department's experience, including its
previous rulemaking efforts, a thorough review of the legislative
history, meetings with stakeholders, as well as additional research
conducted concerning the changes in the demand for home care services,
the home care industry, and the home care services workforce. On
February 24, 2012, the Department extended the period for filing
written comments. See 77 FR 11021. On March 13, 2012, the Department
again extended the period for filing written comments with a final
comment closing date of March 21, 2012. See 77 FR 14688. This Final
Rule is the result of consideration of the comments received in
response to the December 27, 2011 NPRM.
C. Need for Rulemaking
Since the Department published its regulations implementing the
1974 amendments to the FLSA, the home care industry has undergone
dramatic transformation. In the 1970s, individuals who had significant
care needs went into institutional settings. Over time, however, our
nation has come to recognize the importance of providing services in
private homes and other community-based settings and of supporting
individuals in remaining in their homes and communities. This shift is
in part a result of the rising cost of traditional institutional care,
and has been made possible in significant part by the availability of
government funding assistance for home care under Medicare and
Medicaid.\2\ The growing demand for long-term home care services is
also due to the significant increase in the percentage of elderly
people in the United States.\3\ The Supreme Court's decision in
Olmstead v. L.C., 527 U.S. 581 (1999), which held that it is a
violation of the Americans with Disabilities Act for public entities to
fail to provide services to persons with disabilities in the most
integrated setting appropriate, further solidified our country's
commitment to decreasing institutionalization and has also influenced
this important trend.
---------------------------------------------------------------------------
\2\ Public funds pay the overwhelming majority of the cost for
providing home care services. Medicare payments represent over 40
percent of the industry's total revenues; other payment sources
include Medicaid, insurance plans, and direct pay. The National
Association for Home Care and Hospice (NAHC) reports, based on data
from the Centers for Medicare and Medicaid Services (CMS), state
that Medicare and Medicaid together paid roughly two-thirds of the
funds paid to freestanding agencies (41 and 24 percent,
respectively). Centers for Medicare and Medicaid Services (CMS),
Office of the Actuary, National Health Care Expenditures Historical
and Projections: 1965-2016. State and local governments account for
15 percent of revenues, while private health insurance accounts for
eight percent. Out-of-pocket funds account for 10 percent of agency
revenues. http://www.bls.gov/oes/current/oes399021.htm.
\3\ See Shrestha, Laura, The Changing Demographic Profile of the
United States, Congressional Research Service p. 13-14 (2006).
---------------------------------------------------------------------------
This shift is reflected in the increasing number of agencies and
workers engaged in home care. The number of Medicare-certified home
care agencies increased from 2,242 in 1975 to 7,747 in 1999 and by the
end of 2009, had grown to 10,581.\4\ There has been a similar increase
in the employment of home health aides and personal care aides in the
private homes of individuals in need of assistance with basic daily
living or health maintenance activities. The number of workers in these
jobs tripled between 1988 and 2001; by 2001 there were 560,190 workers
employed as home health aides and 408,360 workers employed as personal
care aides.\5\ Between 2001 and 2011, home health aide employment
increased 65 percent to 924,650 and personal care aide employment
doubled, increasing to 820,600.\6\
---------------------------------------------------------------------------
\4\ See The National Association for Home Care & Hospice (NAHC),
Basic Statistics About Homecare: Updated 2010, (2010). Available at:
http://web.archive.org/web/20120515112644/http://nahc.org/facts/10HC_Stats.pdf.
\5\ Bureau of Labor Statistics' (BLS), Occupational Employment
Statistics (OES).
\6\ http://www.bls.gov/oes/current/oes399021.htm.
---------------------------------------------------------------------------
Furthermore, as services for elderly people and people with
illnesses, injuries, or disabilities who require assistance in caring
for themselves (referred to in this Final Rule as consumers) have
increasingly been provided in individuals' homes rather than in nursing
homes or other institutions, the duties performed in homes have changed
as well. Most direct care workers are employed to do more than simply
sit with and watch over the individuals for whom they work. They assist
consumers with activities of daily living and instrumental activities
of daily living, such as bathing, dressing, housework, or preparing
meals. They often also provide medical care, such as managing the
consumer's medications or performing tracheostomy care, that was
previously almost exclusively provided in hospitals, nursing homes, or
other institutional settings and by trained nurses. This work is far
more skilled and professional than that of someone performing ``elder
sitting.'' Although some direct care workers today still perform the
services Congress contemplated, i.e., sit with and watch over
individuals in their homes, most do much more.
Yet the growth in demand for home care and the professionalization
of the home care workforce have not resulted in growth in earnings for
direct care workers. The earnings of employees in the home health aide
and personal care aide categories remain among the lowest in the
service industry. Studies have shown that the low income of direct care
workers continues to impede efforts to improve both the circumstances
of the workers and the quality of the services they provide.\7\
Covering direct care workers under the Act is, thus, an important step
in ensuring that the home care industry attracts and retains qualified
workers that the sector will need in the future.
---------------------------------------------------------------------------
\7\ See Brannon, Diane, et al., ``Job Perceptions and Intent to
Leave Among Direct Care Workers: Evidence From the Better Jobs
Better Care Demonstrations'' The Gerontologist, 47, 6, p. 820-829
(2007).
---------------------------------------------------------------------------
These low wages are at least in part the result of the application
of the companionship services exemption to a wide range of direct care
workers who then may not be paid minimum wage
[[Page 60459]]
for all hours worked and likely do not receive overtime wages for hours
worked over forty in a workweek. In some instances, employers may be
improperly claiming the exemption as to employees whose work falls
outside the existing definition of companionship services in 29 CFR
552.6. In many others, however, employers are relying on the
Department's 1975 regulation, which was written at a time when the
scope of direct care work was much more limited and neither Congress
nor the Department predicted the developments in home care services
that were to come.
Courts have interpreted the current regulation broadly such that
the companionship services exemption has expanded along with the home
care industry and workforce; based on this expansive reading of the
current regulation, essentially any services provided for an elderly
person or person with an illness, injury, or disability in the person's
private home constitute companionship services for which minimum wage
and overtime need not be paid. See, e.g., Sayler v. Ohio Bureau of
Workers' Comp., 83 F.3d 784, 787 (6th Cir. 1996) (holding that a worker
who ``helps [an adult with a serious back injury] dress, gives him his
medication, helps him bathe, assists him in getting around their home,
and cleans his bedclothes when he loses control of his bowels'' is
providing companionship services under Sec. 552.6); McCune v. Or.
Senior Servs. Div., 894 F.2d 1107, 1108-09 (9th Cir. 1990) (accepting
that ``full-time, live-in attendants for elderly and infirm individuals
unable to care for themselves'' who perform ``cleaning, cooking, and
hygiene and medical care'' for those individuals were providing
companionship services because under the current regulation, ``the
recipients of these services [are] the determinative factor in applying
the [companionship services] exception''); Fowler v. Incor, 279 F.
App'x 590, 596 (10th Cir. 2008) (noting that ``[c]are related to the
individual'' that falls within the current definition of companionship
services ``has been expanded to include more frequent vacuuming and
dusting for a client with allergies, mopping and sweeping for clients
who crawl on the floor, and habilitation training, which often includes
training the client to do housework, cooking, and attending to person
hygiene''); Cook v. Diana Hays and Options, Inc., 212 F. App'x 295,
296-97 (5th Cir. 2006) (holding that a direct care worker ``employed by
. . . a non-profit corporation that provides home health care'' who
``provided simple physical therapy, prepared [consumers'] meals,
assisted with [consumers'] eating, baths, bed-making, and teeth
brushing, completed housework . . . and accompanied them on walks, to
doctor visits, to Mass, and to the grocery store'' was exempt from the
FLSA under the companionship services exemption as defined in current
Sec. 552.6). Furthermore, courts have narrowly construed the
regulation's exclusion of ``trained personnel'' from companionship
services such that direct care workers providing medical care,
including certified nursing assistants and often home health aides, are
not protected by the FLSA. See, e.g., McCune, 894 F.2d at 1110-
11(holding that certified nursing assistants were not ``trained
personnel'' excluded from the regulatory definition of companionship
services because, unlike registered nurses and licensed practical
nurses, certified nursing assistants in that case received only 60
hours of training); Cox v. Acme Health Servs., Inc., 55 F.3d 1304,
1309-10 (7th Cir. 1995) (holding that a home health aide who had
completed 75 hours of required training and ``performed patient care''
including ``administering complete bed baths, position and turning
patients in bed, tube-feeding, the taking and recording of vital signs,
bowel and bladder training, changing and cleaning patients' catheters,
administering enemas, range-of-motion exercise training, speech
training, and inserting non-medicated suppositories'' did not qualify
as ``trained personnel'' and therefore provided ``companionship
services'' as defined in the Department's regulations).
In this Final Rule, the Department is exercising its authority to
amend the domestic service employment regulations to clarify and narrow
the set of employees as to whom the companionship services and live-in
domestic service employee exemptions may be claimed. See Long Island
Care at Home, Ltd. v. Coke, 551 U.S. 158, 165 (2007) (discussing the
gaps in the FLSA, including ``the scope and definition of statutory
terms such as `domestic service employment' and `companionship
services''' that Congress ``entrusted the agency to work out'' (citing
29 U.S.C. 213(a)(15))). These limits are meant to ensure that these
exemptions are applied only to the extent Congress intended in enacting
the 1974 amendments.
Furthermore, because of the Department's revisions to these
regulations, as home-based services continue to expand, employers will
have clear guidance about the need to afford most direct care workers
the protections of the FLSA, and the continued growth of home-based
services will occur based on a realistic understanding of the
professional nature of the home care workforce. Specifically, as
explained in detail in this preamble, only direct care workers who
primarily provide fellowship and protection are providing companionship
services. Direct care workers who are employed by third party
employers, such as private home care agencies, are the type of
professional workers whose vocation merits minimum wage and overtime
protections. Direct care workers who provide medically related
services, such as certified nursing assistants, are doing work that
calls for more skill and effort than that encompassed by the term
``companionship services.'' The Department believes that based on these
principles, most direct care workers acting as home health aides, and
many whose title is personal care assistant, will be entitled to
minimum wage and overtime. These workers are due the respect and
dignity that accompanies the protections of the FLSA.
The Department recognizes that this Final Rule will have an impact
on individuals and families who rely on direct care workers for crucial
assistance with day-to-day living and community participation.
Throughout the rulemaking process, the Department has carefully
considered the effects of the rule on consumers and has taken into
account the perspective of elderly people and people with illnesses,
injuries, and disabilities, as well as workers, employers, public
agencies, and others. The Department has responded to comments from
members of those groups and organizations representing them throughout
this Final Rule. In particular, this preamble explains that the
Department does not believe, as some commenters have suggested, that
the rule will interfere with the growth of home- and community-based
caregiving programs and thereby lead to increased institutionalization.
Furthermore, the preamble explains that many states require the payment
of minimum wage and often overtime to direct care workers, and the
detrimental effects on the home care industry some commenters predict
have not occurred in those states. To the contrary, the Department
believes that ensuring minimum wage and overtime compensation will not
only benefit direct care workers but also consumers because supporting
and stabilizing the direct care workforce will result in better
qualified employees, lower
[[Page 60460]]
turnover, and a higher quality of care. Furthermore, as described in
detail throughout this preamble, the Department has modified the
proposed regulations in response to comments to make the rule easier
for the regulated community to understand and apply.
III. Summary of Comments on Changes to the FLSA Domestic Service
Regulations
More than 26,000 individuals commented on the Department's Notice
of Proposed Rulemaking. Comments were received from a broad array of
constituencies, including direct care workers, consumers of home care
services, small business owners and employers, worker advocacy groups
and unions, employer and industry advocacy groups, law firms, Members
of Congress, state government agencies, federal government agencies,
professional associations, the disability community, and other
interested members of the public. Several organizations attached the
views of some of their individual members: National Partnership for
Women and Families (8,733 individual comments), Progressive Jewish
Alliance and Jewish Funds for Justice (687 individual comments), and
Interfaith Worker Justice (500 individual comments), for example. Other
organizations submitted a comment and attached membership signatures,
such as the National Women's Law Center (Center) (3,392 signatures).
Additional comments submitted after the comment period closed are not
considered part of the official record and were not considered. All
comments timely received may be viewed on the www.regulations.gov Web
site, docket ID WHD-2011-0003.
Many comments received in response to the NPRM are: (1) Very
general statements of support or opposition; (2) personal anecdotes
that do not address a specific aspect of the proposed changes; (3)
comments that are beyond the scope or authority of the proposed
regulations; or (4) identical or nearly identical ``form letters'' sent
in response to comment initiatives sponsored by various constituent
groups. The remaining comments reflect a wide variety of views on the
merits of particular sections of the proposed regulations. Many include
substantive analyses and arguments in support of or in opposition to
the proposed regulations. The substantive comments received on the
proposed regulations are discussed below, together with the
Department's response to those comments and a section-by-section
discussion of the changes that have been made in the final regulatory
text.
Terminology
Several commenters indicated that terms used by the Department in
the NPRM were inconsistent with industry use and may be misinterpreted.
Commenters themselves used a number of different terms in referring to
the industry, the workers potentially impacted by the proposed rule,
and the individuals receiving services from workers potentially
impacted by the proposed rule. The Department has made an effort to
modify its use of language where possible in the Final Rule except when
quoting the statute, legislative history, case law, or when quoting a
commenter. For example, the Department notes that the terms ``aged''
and ``infirmity'' appear in the current regulatory text due to the
language Congress used in the statutory exemption. See 29 U.S.C.
213(a)(15). However, where possible throughout the preamble discussion,
the Department instead uses the term ``consumers'' or ``elderly people
or people with illnesses, injuries, or disabilities'' when discussing
those who receive home care services, including companionship services.
When discussing the workers who may be impacted by the Final Rule, the
Department instead uses the term ``direct care worker'' to encompass
the occupational categories of these domestic service workers and the
terms used by commenters, such as home health aides, personal care
aides, attendants, direct support professionals, and family caregivers.
Finally, in this Final Rule, the Department uses the term ``home care''
to reflect the broader industry rather than home health care which
specifically covers medical assistance performed by certified
personnel.
Section-by-Section Analysis of Final Regulations
A. Section 552.3 (Domestic Service Employment)
Section 552.3, which defines domestic service employment, currently
reads, ``[a]s used in section 13(a)(15) of the Act, the term domestic
service employment refers to services of a household nature performed
by an employee in or about a private home (permanent or temporary) of
the person by whom he or she is employed.'' Section 552.3 also provides
an illustrative list of various occupations which are considered
``domestic service employment.''
In the NPRM, the Department proposed to update and clarify the
definition of domestic service employment in Sec. 552.3. Specifically,
the Department proposed to remove the qualifying introductory language
``as used in section 13(a)(15) of the Act'' because section 13(a)(15)
refers to the Act's exemption for those employed to provide babysitting
services on a casual basis and those performing companionship services.
The definition of domestic service employment has a broader context
than just the exemption found in 13(a)(15). The Department also
proposed to remove the phrase ``of the person by whom he or she is
employed'' from the definition because the Department believes this
phrase may be confusing and misread as impermissibly narrowing coverage
of domestic service employees under the Act. In addition, the
Department proposed to delete the more outdated occupations listed in
Sec. 552.3, such as ``governesses,'' ``footmen,'' and ``grooms,'' and
to include more modern occupations, such as ``nannies,'' ``home health
aides,'' and ``personal care aides.'' The Department also proposed to
include babysitters and companions on the list of domestic service
workers. For the reasons stated below, this provision is adopted
without change in the Final Rule. An additional conforming change has
also been made to Sec. 552.101(a).
Several organizations wrote to support the proposed changes,
commenting that the proposed revised language would add clarity, thus
reducing confusion among workers and employers. For example, the Equal
Justice Center (EJC) lauded the Department's deletion of the
introductory language referencing section 13(a)(15) of the Act, noting
that ``the introductory language of section 552.3 . . . created a
definitional inconsistency by exempting a group of workers Congress
intended to include. The proposed deletion of this language effects
clarity and serves as a recognition of the broad spectrum of
occupations within the home Congress intended to protect.''
Other organizations supported the Department's proposal to remove
the language specifying that domestic service work be performed in the
home of the person by whom he or she is employed. The Center stated
that the removal of the language ``will prevent confusion that could
lead to narrower coverage of domestic service employees under the FLSA.
This is particularly important given the high percentage of home care
workers employed by third parties or agencies.'' Similarly, the
American Federation of State, County and Municipal Employees (AFSCME)
supported the Department's revised definition, stating, ``removal of
the definitional interpretation potentially limiting such work to a
private home of
[[Page 60461]]
the employer aptly adjusts the law to existing workplace realities.''
Commenters also voiced support for the Department's proposal to
update the list of occupations that fall within the definition of
domestic service employment. The EJC supported the Department's change
to the list of illustrative occupations, explaining that, the revision
``limits litigation of coverage by guiding the Courts through modern
and more accessible terminology that denotes the occupations that
Congress intended to cover since 1974.'' This organization also
commended the Department's addition of home health aides and personal
care aides in the regulation, reflecting the prominence of the
occupations in the burgeoning home care industry. See also American
Civil Liberties Union (ACLU); PHI; and Susan Flanagan.
Few comments were received in opposition to the proposed
definition. Those that opposed the proposed changes did so generally,
such as the Texas Association for Home Care and Hospice, which
commented that the definition should not be amended to include
companions, home health aides, or personal care aides. Additionally,
AARP, although generally supportive of the changes, recommended adding
language to the regulation stating that a job title does not control
legal status.
The Department has carefully considered all the comments regarding
the proposed change to the definition of ``domestic service
employment'' and has decided to adopt the regulation as proposed. The
Department is making a conforming change to Sec. 552.101(a) by
deleting the phrase ``of the employer,'' so that the definition of
``domestic service employment'' is consistent with Sec. 552.3. The
Department believes that updating and clarifying this definition by
deleting the limiting language ``as used in section 13(a)(15) of the
Act'' reflects the legislative history, which is to extend FLSA
coverage to all domestic employees whose ``vocation'' was domestic
service. The Department also believes that deleting the phrase ``of the
person by whom he or she is employed'' from the definition is more
consistent with the legislative history. As discussed in the NPRM, this
language has been part of the regulations since first implemented in
1975; however, the Department believes the definition may be confusing
and may be misread as impermissibly narrowing coverage of domestic
service employees under the FLSA. The Senate Committee responsible for
the 1974 amendments looked at regulations issued under the Social
Security Act for defining domestic service. The Department borrowed
this language from the Social Security regulations without discussion
or elaboration, and has consistently maintained that the phrase is an
extraneous vestige. See Long Island Care at Home, Ltd. v. Coke, 551
U.S. 158, 169-70 (2007). This phrasing is not applicable to the
realities of domestic service employment today, in which many employees
are employed, either solely or jointly, by an entity other than the
person in whose home the services are performed. Removal of this
extraneous language more accurately reflects Congressional intent and
clarifies coverage of these workers. 76 FR 81192.
Private Home
The Department also received a few comments concerning what
constitutes a ``private home.'' The ACLU noted that a private home is
distinguishable from a building that an employer rents out to
strangers. One individual stated that the Department's definition of
private home is too restrictive and does not extend to Independent
Living or Assisted Living communities. This individual suggested that
such residences should be considered the private home of the elderly
individuals because they live there, the living arrangements are not
temporary, and the individual's furniture, pictures, and personal files
remain in the residence.
As explained above, in order to qualify as a domestic service
employee, an employee's work must be performed in or about a ``private
home.'' Sec. Sec. 552.3, 552.101. The Department did not propose any
changes to the definition of ``private home,'' and nothing in this
Final Rule is altering the determination of whether work is being
performed in or about a private home. Nonetheless, because this is a
threshold question for determining whether an employer is entitled to
claim the companionship services exemption, the Department is offering
a summary of the definition of ``private home'' under existing law.
Under the Department's regulations, a private home may be a fixed
place of abode or a temporary dwelling. Sec. 552.101(a). ``A separate
and distinct dwelling maintained by an individual or a family in an
apartment house, condominium or hotel may constitute a private home.''
Id. However, ``[e]mployees employed in dwelling places which are
primarily rooming or boarding houses are not considered domestic
service employees. The places where they work are not private homes but
commercial or business establishments.'' Sec. 552.101(b).
The Senate Report also discusses the term ``private home,'' noting
that ``the domestic service must be performed in a private home which
is a fixed place of abode of an individual or family.'' S. Rep. No. 93-
690, at 20 (1974). The Senate Report notes that ``[a] separate and
distinct dwelling maintained by an individual or family in an apartment
house or hotel may constitute a private home. However, a dwelling house
used primarily as a boarding or lodging house for the purpose of
supplying such services to the public, as a business enterprise, is not
a private home.'' Id.
Several courts have addressed whether home care services were
performed in a private home. In Welding v. Bios Corp., 353 F.3d 1214
(10th Cir. 2004), the Tenth Circuit Court of Appeals analyzed whether a
business providing services to individuals with developmental
disabilities was entitled to rely on the companionship services
exemption in paying its employees. The court explained that to claim
the exemption, the business must establish that the services were
provided in a private home. In assessing whether the residences at
issue were private homes, the court described six factors (discussed
below) to consider. Id. at 1219-20; see Johnston v. Volunteers of Am.,
Inc., 213 F.3d 559, 562 (10th Cir. 2000) (explaining that the employer
bears the burden of proving its employees fit within the companionship
exemption). The court noted that the ``key inquiries are who has
ultimate management control of the living unit and whether the living
unit is maintained primarily to facilitate the provision of assistive
services.'' Id. at 1219.
The first factor calls for considering whether the client lived in
the living unit before he or she received any services. If the person
did not live in the home before becoming a client, and if the person
would not live in the home if he or she were not receiving services,
then the living unit would not be considered a private home. Id.
The second factor analyzes who owns the living unit; the court
noted that ``[o]wnership is significant because it evidences control.''
353 F.3d at 1219. If the living unit is owned by the client or the
client's family, this is an indication that the services are performed
in a private home. Id. However, if the living unit is owned by a
service provider, this is an indication that the services are not
performed in a private home. Id. If the client or the client's family
leases the unit directly from the owner, the court concluded that this
is some indication that it is a private home. Id.; see Terwilliger v.
Home of Hope, Inc., 21 F.
[[Page 60462]]
Supp. 2d 1294, 1299 (N.D. Okla. 1998) (holding that services were
performed in a private home when the clients owned or leased the
residences from a third party and the service provider had no legal
interest in the residence). If the service provider leases the unit,
the court concluded that this is some indication that it is not a
private home. 353 F.3d at 1219; Madison v. Res. for Human Dev., Inc.,
233 F.3d 175, 179 (3d Cir. 2000) (holding that residences were not
private homes when clients selected residences from provider-approved
list and service provider leased the residences and subleased them to
clients).
The third factor looks to who manages and maintains the residence,
i.e., who provides the essentials that the client needs to live there,
such as paying the mortgage or rent, utilities, food, and house wares.
The court explained that ``[i]f many of the essentials of daily living
are provided for by the client or the client's family, that weighs
strongly in favor of it being a private home. If they are provided for
by the service provider, that weighs strongly in favor of it not being
a private home.'' 353 F.3d at 1220.
The fourth factor is whether the client would be allowed to live in
the unit if the client were not receiving services from the service
provider. 353 F.3d at 1220. If the client would be allowed to live in
the unit without contracting for services, then this factor would weigh
in favor of it being a private home. Id.; Madison, 233 F.3d at 183
(concluding that it is not a private home if clients could not remain
in the residence if they terminated their relationship with the service
provider).
The fifth factor considers the relative difference in the cost/
value of the services provided and the total cost of maintaining the
living unit. 353 F.3d at 1220. ``If the cost/value of the services is
incidental to the other living expenses, that weighs in favor it being
a private home.'' Id.
The sixth factor addresses whether the service provider uses any
part of the residence for the provider's own business purposes. 353
F.3d at 1220. The court concluded that if the service provider uses any
part of the residence for its own business purpose, then this fact
weighs in favor of it not being a private home. Id.; see Johnston, 213
F.3d at 565 (concluding that a residence is not a private home when the
service provider had an office in the home for employees). If, however,
the service provider does not use any part of the residence for its own
business purpose, then this factor weighs in favor of it being a
private home. 353 F.3d at 1220.
Other courts have looked at additional factors, emphasizing that
all relevant factors must be considered. Those factors include: whether
significant public funding is involved; who determines who lives
together in the home; whether residents live together for treatment
purposes as part of an overall care program; the number of residents;
whether the clients can come and go freely; whether the employer or the
client acquires the furniture; who has access to the home; and whether
the provider is a for profit or not for profit entity. See, e.g.,
Johnston, 213 F.3d at 563-65; Linn v. Developmental Services of Tulsa,
Inc., 891 F. Supp. 574 (N.D. Okla. 1995); Lott v. Rigby, 746 F. Supp.
1084 (N.D. Ga. 1990).
Several courts have addressed the question of whether particular
group residences of individuals in need of care are private homes. For
example, the Tenth Circuit Court of Appeals held in Johnston v.
Volunteers of America, Inc., 213 F.3d 559 (10th Cir. 2000), that a
business that provides care services to individuals with developmental
disabilities in a supported living program did not meet its burden of
proof to show that services were provided in a private home when the
residents were placed outside the family home with strangers who also
needed services and without the full-time, live-in care of a relative.
Id. at 565. The court also relied on the facts that the clients' diets
and daily activities were controlled by the business' employees and not
a family member, and that the business could appropriate a room to use
as an office. Id. Similarly, in Madison v. Resources for Human
Development, Inc., 233 F.3d 175 (3d Cir. 2000), the Third Circuit held
that a non-profit corporation that provides supported living
arrangements for adults with disabilities was not providing services in
a private home. Id. at 184. In support of this holding, the court noted
that the clients do not have a possessory interest in the homes; they
sublease the property from the corporation, and they may only remain in
the home to the extent they maintain a continued relationship with the
corporation. Id. at 183. The court also relied on the fact that the
clients do not have full control over who may access the home and that
the clients did not have unfettered freedom in their day-to-day
conduct. Id.
Following the analysis provided for in the case law, the Department
has recognized that whether a living arrangement qualifies as a private
home is a fact-specific inquiry. See Wage and Hour Opinion Letter, 2001
WL 15558952 (Feb. 9, 2001); Wage and Hour Opinion Letter, FLSA 2006-
13NA (June 23, 2006). In evaluating whether a residence is a private
home, the Department considers the six factors identified by the Tenth
Circuit in Welding as well as the other factors identified in Johnston,
Linn and Lott. See Wage and Hour Opinion Letter, FLSA 2006-13NA (June
23, 2006). The Department has made clear that the fact that the home is
the sole residence of the individual is not enough to make it a private
home under the FLSA. See Wage and Hour Opinion Letter, FLSA 2006-13NA
(June 23, 2006), at 2; see also Lott, 746 F. Supp. at 1087 (concluding
that the fact that the home was the client's sole residence was not
enough to make it a private home). For example, in an opinion letter,
the Department concluded that ``adult homes'' designed for individuals
who are in need of assistance with certain day-to-day functions, such
as meal preparation, housekeeping, and medications, were not private
homes. See Wage and Hour Opinion Letter, FLSA 2001-14, 2001 WL 1869966,
at 1 (May 14, 2001). The Department's conclusion was based on the fact
that the clients are placed in a residence outside the family home and
without the full-time live-in care of a relative. Id. at 2. The clients
are housed in a residence with others who are also in need of long-term
residential care. Id. Moreover, facility employees, and not a family
member, control the client's diets and daily activities (to some
degree). The Department also considered that the adult homes may select
the clients who will share the same residence and can set up two
residents per room, although the client has the right to request a
private room for a higher fee. Id. Finally, despite the client's
participation in the upkeep of the home, the service provider is
ultimately responsible for the maintenance of the residence. Id.
However, in another case, the Department concluded that supported
living services provided to consumers were performed in a private home.
See Wage and Hour Opinion Letter, 1999 WL 1002387, at 2 (Apr. 8, 1999).
In support of this conclusion, the Department noted that neither the
public agency nor the private agency that provides the services
determines where a client will live or with whom. Id. Rather, the
client or the client's guardian makes these decisions and he or she is
responsible for leasing the residence and paying the rent as well as
for furnishing it to suit the individual's tastes and resources. Id.
The Department also noted that the client typically lives alone or with
only one roommate, and
[[Page 60463]]
that the private agency has no financial interest in the client's
housing as it does not own or lease any of the housing.
As explained above, determining whether a particular living unit is
a private home requires a fact-intensive analysis. Generally, such an
inquiry exists along a continuum: on one end, a home owned and occupied
for many years by an elderly individual would be a private home; on the
other end of the continuum, a typical nursing home would not be
considered a private home under the regulations. This Final Rule does
not alter this inquiry in any way; rather, the analysis to determine
whether an employee is working in a ``private home'' remains unchanged.
Thus, employees who are working in a location that is not a private
home were never properly classified as domestic service employees under
the current regulations, and employers were not and are not entitled to
claim the companionship services or live-in worker exemptions for such
employees.
B. Section 552.6 (Companionship Services)
Current Sec. 552.6 defines the term ``companionship services'' as
``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.'' In the NPRM, the Department
stated its intention to modernize and clarify what is encompassed
within the definition of fellowship, care, and protection.
Specifically, the Department proposed to divide Sec. 552.6 into four
paragraphs. Proposed paragraph (a) defined ``companionship services''
as ``the provision of fellowship and protection'' and described the
duties and activities that fall within the meaning of those terms.
Proposed paragraph (b) described the ``intimate personal care
services'' that could be part of companionship services if provided
``incidental'' to fellowship and protection. Proposed paragraph (c)
excluded from companionship services household work benefitting members
of the household other than the consumer. Proposed paragraph (d)
provided that companionship services do not include medical care of the
type described.
The Final Rule maintains the general organizational structure of
this section as proposed but modifies the proposed regulatory text as
described below.
As an initial note, in this Final Rule, the Department has modified
proposed Sec. 552.6 by deleting the terms ``aged,'' ``advanced age,''
``infirm,'' ``infirmity,'' and ``physical or mental infirmity'' in the
title and regulatory text of this section. Where a descriptor is
needed, the Department has substituted ``elderly person or person with
an illness, injury, or disability.'' In addition, the Department has
replaced in the regulatory text the phrase ``unable to care for
themselves'' with ``requires assistance in caring for himself or
herself.'' Although the language being replaced is derived from FLSA
section 13(a)(15) and the existing regulations at Sec. 552.6, the
Department recognizes that such language is outdated and does not
reflect contemporary views regarding the elderly and people with
disabilities. The Department therefore has modified the text in the
Final Rule and has made conforming changes to the title and text of
Sec. 552.106, which repeats the language from Sec. 552.6. In
addition, throughout this preamble, the Department has sought to use
updated language, except when quoting from the statute, the legislative
history, the current or proposed regulations, or comments submitted in
response to the NPRM. By modernizing this language, the Department does
not in any way intend to change the intent of Congress with respect to
those who use companionship services.
Section 552.6(a) (Fellowship and Protection)
Proposed Sec. 552.6(a) defined ``companionship services'' as ``the
provision of fellowship and protection'' for an elderly person or
person with an illness, injury, or disability who requires assistance
in caring for himself or herself. The proposed language further defined
the term ``fellowship'' to mean ``to engage the person in social,
physical, and mental activities, including conversation, reading,
games, crafts, walks, errands, appointments, and social events'' and
the term ``protection'' to mean ``to be present with the person in
their home or to accompany the person when outside of the home to
monitor the person's safety and well-being.'' The Department adopts
paragraph (a) essentially as proposed, with the slight modifications
described below.
Comments from employees, employee advocacy groups and labor
organizations generally supported the proposed revision of paragraph
(a), agreeing with the Department that the definition more accurately
reflected Congress's intent that the companionship exemption be akin to
``elder sitting.'' See, e.g., Golden Gate University School of Law,
Women's Employment Rights Clinic; Center on Wisconsin Strategy (COWS);
National Employment Law Project (NELP); see also comments of several
individual direct care workers stating that their work is not ``at
all'' like elder sitting. Specifically, these individuals and
organizations noted that Congress clearly wished to include under the
protections of the Act employees for whom domestic work was a vocation,
while allowing a narrow exemption for more casual arrangements. The
Service Employees International Union (SEIU) explained that this
distinction should turn on whether ``such tasks and duties are of a
nature more typically performed by a worker engaged in his or her
livelihood or rather, on a less formal basis, by a non-breadwinner.''
See SEIU; see also AFSCME, American Federation of Labor-Congress of
International Organizations (AFL-CIO). In addition, Senator Harkin,
joined by 18 other Senators, affirmed the Department's assessment of
the legislative history, explaining that ``by the term `companion'
Congress meant someone who sits with an elderly or infirm person.''
Some non-profit advocacy organizations such as AARP, the National
Council on Aging, and the National Consumers League (NCL) also
supported the revised definition. These organizations noted that the
revised definition would be helpful in clarifying what duties would be
considered exempt ``companionship services'' and that the Department
correctly identified ``fellowship'' and ``protection'' as the primary
duties of an exempt companion. Similarly, the EJC stated that the
definition would provide clarity, ``thereby assisting attorneys and
courts to more readily find coverage by effectively categorizing an
employee's work as either domestic or companionship services.''
Several employers, employer organizations and some associations
opposed the proposed Sec. 552.6(a), stating that its focus on
fellowship and protection was inconsistent with legislative intent.
Some of these commenters stated that the scope of the proposed
definition is too restrictive, and ``goes too far conceptually in
relating companionship to baby or elder `sitting'.'' See National
Association of State Directors of Developmental Disabilities Services
(NASDDDS). In addition, although the American Network of Community
Options and Resources (ANCOR), among others, concurred that the focus
of companionship services should be fellowship and protection, it also
requested that ``most assistance with dressing, grooming, meal
preparation, feeding, and driving'' be included as part of fellowship
and protection.
[[Page 60464]]
Commenters also sought further guidance from the Department
concerning the scope of the companionship services definition. For
example, the National Resource Center for Participant-Directed Services
(NRCPDS) requested clarification regarding the use of the ``and'' in
the phrase ``fellowship and protection'' because it suggests that it
may be insufficient to provide either fellowship or protection alone,
in the absence of the other. Additionally, many industry commenters
were concerned that the Department's proposal excised the term ``care''
from the definitions of companionship services. These comments are
discussed in greater detail below, in the subsection addressing Sec.
552.6(b).
After carefully considering the comments concerning its proposed
definition of ``companionship services,'' the Department has decided to
adopt proposed Sec. 552.6(a) with modifications. For the reasons
described above, the Final Rule deletes the words ``for a person, who,
because of advanced age or physical or mental infirmity, is unable to
care for themselves'' found in the first sentence of proposed Sec.
552.6(a) and uses instead ``for an elderly person or person with an
illness, injury, or disability who requires assistance in caring for
himself or herself.'' In addition, the adopted regulatory text defining
fellowship and protection has been slightly edited for clarity; these
minor adjustments to wording and punctuation do not change the meaning
of the regulation as proposed. The second and third sentences of Sec.
552.6(a) read: ``The provision of fellowship means to engage the person
in social, physical, and mental activities, such as conversation,
reading, games, crafts, or accompanying the person on walks, on
errands, to appointments, or to social events. The provision of
protection means to be present with the person in his or her home, or
to accompany the person when outside of the home, to monitor the
person's safety and well-being.''
The Department believes this definition of companionship services
is appropriate based on the legislative history of the 1974 FLSA
amendments and dictionary definitions of relevant terms. The
legislative history indicates that Congress intended to remove from the
FLSA's minimum wage and overtime compensation protections only those
domestic service workers for whom domestic service was not their
vocation and whose actual purpose was to provide casual babysitting or
companionship services. The legislative history describes a companion
as someone who ``sits with [an elderly person],'' provides ``constant
attendance,'' and renders services similar to a babysitter, i.e.,
``someone to be there and watch an older person,'' or an ``elder
sitter.'' See 119 Cong. Rec. S24773, S24801 (daily ed. July 19, 1973).
Dictionary definitions are also instructive in understanding the
scope of an exempt companion's duties. The dictionary defines
companionship as the ``relationship of companions; fellowship,'' and
the term ``companion'' is defined as a ``person who associates with or
accompanies another or others; associate; comrade.'' See Webster's New
World Dictionary, p. 288 (2d College Ed. 1972). It further defines
``fellowship'' as including ``a mutual sharing, as of experience,
activity, interest, etc.'' Id. at 514. These definitions demonstrate
that a companion is someone in the home primarily to watch over and
care for the elderly person or person with an illness, injury, or
disability.
For these reasons, the Department believes it is appropriate for
``companionship services'' to be primarily focused on the provision of
fellowship and protection, and that this focus is consistent with the
general principle that coverage under the FLSA is broadly construed so
as to give effect to its remedial purposes, and exemptions are narrowly
interpreted and limited in application to those who clearly are within
the terms and spirit of the exemption. See, e.g., A.H. Phillips, Inc.
v. Walling, 324 U.S. 490, 493 (1945). Examples of activities that fall
within fellowship and protection may include: watching television
together; visiting with friends and neighbors; taking walks; playing
cards, or engaging in hobbies. For the reasons explained below, the
Department's definition of ``companionship services'' also allows for
certain ``care'' activities, as defined in Sec. 552.6(b), to be
performed attendant to and in conjunction with fellowship and
protection, as long as those activities comprise no more than 20
percent of the direct care worker's time working for a particular
person in a particular workweek.
In response to commenters who requested clarification as to the
Department's use of the phrase ``fellowship and protection,'' it is the
Department's intent that the great majority of duties performed by a
direct care worker whose duties meet the definition of companionship
services will encompass both fellowship and protection, and that a
caregiver would be hired to perform both duties. However, a direct care
worker may, at times, perform certain tasks that require either
fellowship or protection, such as sitting with a consumer while the
individual naps (in which case, only protection would be provided) and
still meet the definition of performing companionship services. The
Department notes that this type of activity would not prevent
application of the exemption, because the worker would be available to
provide fellowship services when the consumer awakens.
Section 552.6(b) (Care)
Proposed Sec. 552.6(b) provided that ``[t]he term `companionship
services' may include intimate personal care services that are
incidental to the provision of fellowship and protection for the aged
or infirm person.'' The proposed regulatory text further provided that
these intimate personal care services ``must be performed attendant to
and in conjunction with fellowship and protection of the individual''
and ``must not exceed 20 percent of the total hours worked in the
workweek'' in order to fall within the definition of companionship
services. Proposed Sec. 552.6(b) next provided an illustrative,
detailed list of intimate personal care services: (1) Dressing, (2)
grooming, (3) toileting, (4) driving, (5) feeding, (6) laundry, and (7)
bathing. Each listed intimate personal care service was preceded by the
term ``occasional'' in the proposal. The Department explained in the
preamble to the proposed rule that it was allowing for some work
incidental to the fellowship and protection that primarily constitutes
companionship services because the legislative history indicated that
Congress contemplated that a direct care worker providing companionship
services might perform tasks such as ``making lunch for the infirm
person'' and ``some incidental household work.'' See 119 Cong. Rec. at
S24801; see also 76 FR 81193.
After a careful review of the comments, and for the reasons
explained in greater detail below, the Department has retained the
fundamental purpose of proposed paragraph (b)--to define certain
services that, if provided to a limited extent and incidentally to the
fellowship and protection that are the core duties of an exempt
companion, do not defeat the exemption--but has modified the proposed
regulatory text in order to make the additional services an exempt
companion may perform easier for the regulated community to understand.
Section 552.6(b) now reads: ``The term companionship services also
includes the provision of care if the care is provided attendant to and
in conjunction with the provision of
[[Page 60465]]
fellowship and protection and if it does not exceed 20 percent of the
total hours worked per person and per workweek. The provision of care
means to assist the person with activities of daily living (such as
dressing, grooming, feeding, bathing, toileting, and transferring) and
instrumental activities of daily living, which are tasks that enable a
person to live independently at home (such as meal preparation,
driving, light housework, managing finances, assistance with the
physical taking of medications, and arranging medical care).''
Care
Several commenters expressed concern that the proposed definition
of companionship services did not sufficiently emphasize the provision
of ``care.'' For example, BrightStar Healthcare of Baltimore City/
County (``BrightStar'') and the Texas Association for Home Care and
Hospice, among others, noted that the plain language of the statutory
exemption used the term ``care,'' and that the legislative history also
indicated a desire by Congress to have ``care'' encompassed in the
definition. BrightStar asserted that ``it is clear from the legislative
history that `care' for those who are `unable to care for themselves'
is an integral part of what was contemplated in creating the
companionship exemption.'' Congressman Lee Terry agreed that the
Department's proposed definition ``is altering the focus of the
exemption in a way that Congress neither intended nor envisioned.''
The Department does not disagree with commenters who wrote that
``care'' should be explicitly included in the regulatory definition of
companionship services. Indeed, the proposal did not remove ``care''
from the regulatory definition of companionship services; rather,
although proposed paragraph (a) did not use the word care, the
Department sought in paragraph (b) to define and delimit the type of
care that falls within the exemption. In the Final Rule, Sec. 552.6(b)
uses the term ``care'' rather than ``intimate personal care services''
to make more explicit that care remains part of companionship services.
Activities of Daily Living and Instrumental Activities of Daily Living
The Department received thousands of comments concerning the
proposed list of intimate personal care services. These comments
demonstrated problems raised by the proposed list, and the Department
has modified this Final Rule accordingly. Specifically, upon
consideration of these comments, the Final Rule describes the provision
of care as assistance with activities of daily living (ADLs) and
instrumental activities of daily living (IADLs), with examples of each
type of task, rather than using the term ``intimate personal care
services'' and providing a detailed list of activities that fall into
that category.
Many commenters supported the proposed list of intimate personal
care services. For example, AFSCME and AARP agreed that the definition
of companionship services should be narrowed and that only true
``fellowship and protection'' services, accompanied by personal care or
household services that are incidental to those companionship services,
should be exempt from the FLSA. Care Group, Inc., a provider of in-home
medical services registered in the State of California, and NELP, among
others, supported the Department's proposal but urged the Department to
make the list of incidental services exclusive rather than
illustrative.
In contrast, employers and other groups, such as the Texas
Association for Home Care and Hospice and Americans for Limited
Government (ALG), generally expressed the view that personal care
should not be limited to ``incidental'' activities because the
exemption explicitly states that consumers receiving services are
``unable to care for themselves''; these commenters suggested that
whatever ``care'' the consumer needs should be included as part of
unrestricted companionship services. See also The Virginia Association
for Home Care and Hospice. The Visiting Nurse Associations of America
(VNAA) expressed the view that the federal government should defer to
existing state and local regulations concerning permissible duties.
Similarly, California Association for Health Services at Home (CAHSAH)
pointed to state guidance that makes clear that a companion must be
allowed to perform all duties a client needs to remain independent.
Commenters also addressed the specific care tasks that the
Department had included in the proposed list individually. In response
to the Department's proposal to allow assistance with toileting as an
incidental personal care service, the National Council on Aging, NELP,
and Workforce Solutions expressed concern about potential injury to
workers associated with this task. These commenters recommended the
Department not include assistance with services such as toileting and
activities that require positioning and mobility transfer assistance.
See also The Workplace Project. The Legal Aid Society encouraged the
Department to consider that tasks such as toileting, assistance with
mobility, transfers, positioning, use of toileting equipment and
changing diapers for persons with dementia are not casual activities
but require training to be performed in a manner that is safe for the
worker and the consumer. They suggested that if such activities
constitute part of the regular work performed, the worker should not be
exempt. Direct Care Alliance (DCA) stated that the permissible exempt
duties should not include those that require physical strength or
specialized training. Women's Employment Rights Clinic suggested that
allowing an exempt companion to assist with toileting should only be
permitted when exigent circumstances arise. They indicated that this
activity requires training or experience that a companion, as intended
by Congress, would not have.
Several commenters offered their views on the task of driving the
consumer to appointments, errands, and social events as an incidental
personal care service. ANCOR stated that driving to social events
should not be included among the ``personal care services'' in the 20
percent limitation, indicating that ``many people with disabilities
enjoy drives and times away from home and we do not believe this should
be limited.'' The Texas Association for Home Care and Hospice and PHI
both expressed the view that this section should include not only
driving but also ``accompanying'' the consumer. They noted that other
modes of transportation may be utilized by the consumer. Women's
Employment Rights Clinic agreed with the Department's proposal to
include occasionally driving a consumer to appointments, errands, and
social events as part of incidental personal care services defined in
Sec. 552.6(b).
A number of comments were received on the proposed provision
concerning meal preparation. The Connecticut Association for Home Care
and Hospice expressed concern about the requirement that the client
must consume the food in the direct care worker's presence in order to
maintain the exemption. It pointed out that the proposal failed to take
into account the possibility that the consumer may not eat all of the
food prepared and would create an untenable situation whereby the
consumer is forced to eat on an imposed schedule rather than as his or
her appetite dictates. Others, like ALG, asserted that the proposal
would force a direct care worker to dispose of leftover
[[Page 60466]]
food rather than to store it to be eaten later. Some commenters,
including Women's Employment Rights Clinic, specifically supported the
Department's qualification that any food prepared must be eaten in the
presence of the direct care worker in order for the meal preparation to
be part of companionship services. They indicated that this would
ensure that preparing meals for and feeding the consumer remained
attendant to and in conjunction with providing fellowship and
protection.
Several commenters objected to including laundry in the list of
personal care services. For example, Caring Across Generations and
DAMAYAN Migrant Workers Association (DAMAYAN) both indicated that
``laundry is neither absolutely necessary for an elderly or infirm
person during the companion worker's shift nor does it arise out of
exigent circumstances that justify including `occasional bathing' in
proposed Sec. 552.6(b)(7). Laundry services fall under the type of
household services performed by housekeepers or laundresses and thus
should be excluded.'' Others, such as the Latino Union of Chicago,
similarly commented that ``an individual or family hiring a companion
worker could just as easily hire a housekeeper or laundress to
regularly launder clothes.''
With respect to bathing, some commenters supported the proposal's
limitation on bathing duties to ``exigent circumstances.'' For example,
Women's Employment Rights Clinic indicated that they thought the
limitation to exigent circumstances was appropriate as this duty is one
which requires the lifting, touching, and moving of a frail individual,
and this normally requires increased training and experience.
The Department continues to believe Congress intended fellowship
and protection to be the primary focus of an employee exempt under the
companionship services exemption but that flexibility to provide some
tasks incidental to fellowship and protection is appropriate. In light
of the comments received concerning the proposed list of intimate
personal care services, however, the Department has not adopted the
regulatory text as proposed. Instead, section 552.6(b) now states, in
relevant part: ``The provision of care means to assist the person with
activities of daily living (such as dressing, grooming, feeding,
bathing, toileting, and transferring) and instrumental activities of
daily living, which are tasks that enable a person to live
independently at home (such as meal preparation, driving, light
housework, managing finances, assistance with the physical taking of
medications, and arranging medical care).''
As reflected in the comments, the Department now believes that the
proposed list of intimate personal care services raised more questions
than it answered. See, e.g., ALG (stating that the list of proposed
intimate personal care services created ``practical problems,'' such as
prohibiting an exempt companion from operating a vacuum cleaner). The
Department also agrees with commenters that the list was too specific
and not flexible enough in its approach. The Department is persuaded by
the view expressed by commenters such as the State of Washington's
Department of Social and Health Services, that the ``use of `intimate
personal care services' should be updated to reflect current service
categories: activities of daily living and instrumental activities of
daily living'' and thus has modified the Final Rule to reflect this
change. Therefore, in lieu of describing the permissible care services
an exempt companion may perform as ``intimate personal care services,''
the Department instead has adopted the commonly used industry terms
``activities of daily living'' (ADLs) and ``instrumental activities of
daily living'' (IADLs) to describe which services are allowed as part
of ``care'' under the exemption. See 76 FR 81212. The Department has
also replaced the detailed list of activities that appeared in proposed
paragraph (b) with simple, illustrative lists of services that are
commonly viewed as activities of daily living and instrumental
activities of daily living. The Department intends that any additional
tasks not explicitly named in the regulatory text but that fit easily
within the spirit of the enumerated duties also qualify as ADLs or
IADLs.
The Department believes that by replacing the proposed detailed
list of intimate personal care services with the more commonly used
industry phrases ``activities of daily living'' and ``instrumental
activities of daily living,'' transition to the new regulation will be
simplified. The State of Tennessee and the National Association of
Medicaid Directors (NAMD) indicated that home health aides and personal
care attendants are focused primarily on providing hands-on care and
assistance with ADLs that enable that consumer to continue living
safely in the community. The Virginia Association for Home Care and
Hospice expressed the view that individuals need assistance with their
ADLs and IADLs to live independently, and that these activities should
be part of the incidental duties. Additionally, hundreds of comments
received from workers referenced these terms as a sort of shorthand for
describing the work commonly performed by direct care workers.
Furthermore, Medicaid and Medicare programs also use these terms to
describe direct care work. As noted by commenters such as NELP and PHI,
Medicaid instructs that assistance with ADLs and IADLs ``is the core
focus of home care services provided under Medicaid.'' Accordingly, the
Department believes the regulated community is already familiar with
these concepts and they will be easy for consumers, workers, and
employers alike to understand.
The Department also believes that by broadening the base of
services that a direct care worker may perform and still qualify for
the companionship services exemption, consumers will have more of the
immediate needs met that support them in living independently in their
communities. Among the comments was a letter writing campaign by
several hundred workers that requested that companionship services only
include fellowship and protection, ``thereby excluding workers who
assist clients with activities of daily living or instrumental
activities of daily living.'' The Department is persuaded, however, by
other comments that emphasized the critical importance of including an
allowance for ADLs and IADLs in order for certain consumers to continue
to live independently. See, e.g., Scott Ehrsam, owner of a home care
business; DCA.
The Department notes that the intimate personal care services
proposed in the NPRM are encompassed within the categories of
``activities of daily living'' and ``instrumental activities of daily
living'' adopted in the Final Rule. The Department emphasizes, however,
the provision of such services only falls within the definition of
companionship services if it is performed attendant to and in
conjunction with the fellowship and protection provided to the consumer
and if it does not exceed 20 percent of the total work hours of the
direct care worker for any particular consumer in any particular
workweek, as discussed in greater detail below.
This Final Rule provides flexibility within the bounds of
Congressional intent. The FLSA grants the Secretary of Labor broad
authority to define and delimit the scope of the exemption for
companionship services. See 29 U.S.C. 213(a)(15). The Department
believes its definition of the types of services that may be performed
within the meaning of ``provision of care'' in the Final Rule is
reasonable and consistent with Congressional intent that all other work
[[Page 60467]]
performed by an exempt companion must be incidental to the companion's
primary purpose ``to watch over an elderly or infirm person in the same
manner that a babysitter watches over children.'' 119 Cong. Rec.
S24773, S24801 (daily ed. July 19, 1973).
Twenty Percent Limitation
The Department also received a significant number of comments
addressing the 20 percent limitation on the provision of care. Some
commenters believed the cap was too high. See, e.g., Women's Employment
Rights Clinic; EJC. The EJC emphasized that 20 percent is a significant
portion of the workweek and a lower percentage would better effectuate
the goal of ensuring that the care tasks are truly incidental. Other
commenters, however, thought the cap was too low. See, e.g., The
Westchester Consulting Group. Senior Helpers, among others, expressed
doubt that the listed tasks could be accomplished in 20 percent of the
direct care worker's workweek and expressed concern that seniors would
be hurried through eating meals or forced to cancel appointments due to
the amount of time allotted. Commenters including NCL and Workforce
Solutions were concerned that the 20 percent cap would be difficult to
administer. A few commenters expressed concern over the cost of
monitoring the 20 percent limitation. The State of Oregon indicated
that the 20 percent limitation should be eliminated, suggesting that
the limitation should not be based upon tasks performed but rather
should be based upon for whom the service is performed. CAHSAH asserted
that the duties that fall under the 20 percent cap should be unrelated
to the care of the client.
Some commenters suggested alternative methods for calculating hours
worked performing incidental care duties. The National Council on
Aging, Workforce Solutions, NELP, and others supported elimination of
the 20 percent cap and replacing it with a two-step assessment. They
suggested requiring an initial assessment to determine whether the
worker had been hired primarily to perform the duties of fellowship and
protection and whether the worker was in fact performing those duties.
If the worker was not primarily performing those duties, the subsequent
listings of permissible exempt activities would not be considered. If
the worker were found to be hired primarily to provide fellowship and
protection, then a second step review of the listed services would be
conducted to confirm that the services were performed occasionally and
incidental to the provision of fellowship and protection, and not as a
regular part of the duties performed.
Organizations like DAMAYAN, The Workplace Project, and Houston
Interfaith Worker Justice also proposed eliminating the 20 percent
limitation and replacing it with a different test comprised of two
steps: (1) If a direct care worker visits a client greater than three
times per week and (2) performs any of the listed incidental tasks for
any amount of time in greater than 50 percent of the visits, then the
direct care worker would not fall within the companionship services
exemption.
Finally, NCL and PHI suggested that the Department modify the cap
on incidental activities across a workweek to one that prohibits a
worker from spending more than 20 percent of work time performing care
tasks per individual client per workweek.
The Department has carefully considered the variety of suggestions
offered by commenters with respect to this issue, and it adopts the 20
percent limitation on care services essentially as proposed, although
it has modified the text to explicitly state that the provision of care
is limited to no more than 20 percent of the hours worked per workweek
per consumer. The Department's view is that failing to provide such a
limitation would ignore Congressional intent that making meals and
doing laundry would be incidental to the exempt companion's primary
purpose of watching over the consumer. See 119 Cong. Rec. S24773,
S24801 (daily ed. July 19, 1973). Indeed, during a Senate floor
exchange, Senators Williams and Burdick indicated that ``one may even
require throwing some diapers in the automatic washing machine for the
baby. This would be incidental to the main purpose of employment.'' See
119 Cong. Rec. at S24801. However, the Department also recognizes that
a limited allowance for selected tasks, performed attendant to and in
conjunction with fellowship and protection, is necessary as a matter of
practicality. The Department believes that this 20 percent threshold,
which is based on the proportion of total hours worked per workweek,
will provide consumers and direct care workers with a needed
flexibility in their day-to-day activities. As described below, in
adopting the 20 percent figure, the Department is utilizing a long-
established threshold that has been used in a variety of regulations,
including current Sec. 552.6. Employers are, thus, familiar with this
type of time limitation, mitigating concerns that the 20 percent
threshold would be difficult and costly to administer. In addition, the
Department views section 552.6(b) of the Final Rule as a compromise
designed to expand the base of allowable care while accommodating the
concerns expressed about workplace safety for both the direct care
worker and the consumer, as such a limitation restricts the amount of
time spent engaged in these activities.
As the Department indicated in the preamble to the proposed
regulation, the home care industry has undergone a dramatic
transformation since the Department published the implementing
regulations in 1975. In the 1970s, many individuals with significant
care needs were served in institutional settings rather than in their
homes and their communities, Since that time, there has been a growing
demand for long-term home care for persons of all ages, largely due to
the rising cost of institutional care, the impact of the disability
civil rights movement, and the availability of funding assistance for
home care under Medicaid, reflecting our nation's commitment to
accommodate the desire of individuals to remain in their homes and
communities. As the demand for long-term home care has grown, so has
the complexity of duties performed in the home by the direct care
worker. It is the Department's view that the focus of the companionship
services exemption should remain on fellowship, protection, and care as
defined in paragraph (b). Based on the wide scope of comments received
detailing the extent of the services provided by direct care workers,
the Department is aware that there is a significant continuum with
respect to the services consumers require. The Department is not
stating that all workers providing ``care,'' as defined in paragraph
(b), will be able to accomplish the required care in 20 percent of
their workweek. Rather, the Department is concluding that, if the care
that is being provided attendant to and in conjunction with the
provision of fellowship and protection requires more time than 20
percent of the workweek, then the worker is being called upon to
provide services that are outside of the scope of the companionship
services exemption. In such cases, minimum wage and overtime pay
protections attach.
The Department believes that a 20 percent limitation for providing
this care, coupled with a primary focus on the provision of fellowship
and protection, is appropriate for a worker who is not entitled to the
minimum wage and overtime compensation protections. The Department
notes that a 20 percent limitation has been
[[Page 60468]]
implemented in this regulation for 38 years (concerning the provision
of general household work), as well as in other regulations in this
chapter such as Sec. 552.5, Casual Basis (work that is incidental does
not exceed 20 percent of hours worked in babysitting assignment); Sec.
552.104(c), Babysitting services performed on a casual basis
(babysitter who devotes more than 20 percent of time to household work
is not exempt), as well as in other chapters addressing employee work
hours in other enforcement contexts (e.g., Sec. Sec. 786.100, 786.150,
786.200 (nonexempt work will be considered substantial if it occupies
more than 20 percent of the time worked by the employee during the
workweek)). See also Sec. Sec. 553.212, 783.37, 784.116, 788.17, and
793.21.
As previously noted, a suggested two-step test was offered by some
as a substitute for the 20 percent limitation on intimate personal care
services. The suggested test was comprised of examining those direct
care workers who visit a client more than three times a week, and if
so, making a determination whether the direct care worker has performed
any of the incidental personal care services for any amount of time in
greater than 50 percent of the visits. In such cases, the organizations
suggested that the direct care worker should not fall within the
companionship services exemption. The Department declines to adopt the
recommended test. The Department believes that this option would have a
negative effect on continuity of care, an issue many commenters raised
as a significant concern. See, e.g., National Association of Area
Agencies on Aging, New York State Association of Health Care Providers,
Avalon Home Care, the National Association of States United for Aging
and Disabilities (NASUAD); see also Testimony of Marie Woodard before
the U.S. House of Representatives Committee on Education and the
Workforce, Subcommittee on Workforce Protection (March 20, 2012). This
two-step proposal would create an incentive to ensure that a particular
direct care worker only visits a consumer no more than three times per
week. As the National Association of Area Agencies on Aging points out
in its comment, ``providing fundamental labor protections of minimum
wage and overtime will help reduce turnover, improve continuity of care
and help lower costs.'' The Department agrees with commenters who
indicated that providing fundamental labor protections such as minimum
wage and overtime compensation will improve continuity of care and
wants to avoid offsetting those improvements to continuity of care by
implementing a test that would create an incentive to use a direct care
worker no more than three times per workweek.
Finally, the Department has incorporated the suggestion of NCL and
PHI by modifying the Final Rule text to explicitly state that the 20
percent limitation applies to the tasks a worker performs per
individual consumer. Further, as proposed, the 20 percent limitation
also applies to total hours worked per workweek. The inclusion of the
20 percent limitation on a per consumer basis is intended to assist
consumers and direct care workers in determining whether the worker
meets the companionship services exemption in any given workweek. Many
direct care workers provide services to more than one consumer in a
workweek, and the proposed text did not account for the reality that a
consumer would not typically know what percentage of time the direct
care worker spent performing assistance with ADLs and IADLs for any
other consumer. For example, if a direct care worker is employed for
five mornings a week for consumer A and employed for four afternoons a
week for consumer B, consumer B would have no way of knowing how much
of the total workweek had been spent providing care to consumer A. The
Department has therefore revised the text to specify that the 20
percent limitation applies to the work performed each workweek for a
single consumer. Therefore, in determining whether to claim the
companionship services exemption, a consumer need only consider the
amount of care he or she has received during the workweek, not any
services the direct care worker has provided to other consumers. The
Department notes that this question only arises as to individuals,
families, and households who employ direct care workers, because, as
explained in the section of this preamble regarding third party
employment, under the Final Rule, a third party employer of a direct
care worker is not permitted to claim the companionship services
exemption regardless of the duties performed.
Section 552.6(c) (Domestic Services Primarily for Other Members of the
Household)
Current Sec. 552.6 permits the companionship services exemption to
apply to a worker who spends up to 20 percent of his or her time
performing general household work which is unrelated to the care of the
person receiving services. In the NPRM, the Department proposed to
revise the current regulation by adding paragraph (c), which stated
that ``work benefitting other members of the household, such as general
housekeeping, making meals for other members of the household or
laundering clothes worn or linens used by other members of the
household'' would not fall within the definition of incidental intimate
personal care duties that may constitute part of companionship
services. Proposed paragraph (c) also provided that ``household
services performed by, or ordinarily performed by, employees such as
cooks, waiters, butlers, valets, maids, housekeepers, nannies, nurses,
janitors, laundresses, caretakers, handymen, gardeners, home health
aides, personal care aides, and chauffeurs of automobiles for family
use, are not `companionship services' unless they are performed only
incidental to the provision of fellowship and protection as described
in paragraph (b) of this section.'' For the reasons explained below, in
the Final Rule, the Department adopts a significantly simplified
version of the proposed text.
The Department received few comments on the issue of household
work. Women's Employment Rights Clinic expressed support for the
``Department's effort to draw a clear line between the duties of a
companion and the duties of domestic service workers such as maids,
cooks and laundresses,'' writing ``that general household services such
as window washing, vacuuming and dusting, should not fall under the
duties of a companion.'' Advocacy organizations, such as ALG and
NRCPDS, expressed concern that a direct care worker's performance of
household work for the consumer would not be included within the 20
percent allowance for intimate personal care services listed in
paragraph (b) of this section if the work includes a prohibited task,
such as vacuuming. See also Lynn Berberich, Joni Fritz, and Georgetown
University Law Center students. AARP agreed with the Department that
``providing general household services such as cooking a meal or doing
laundry for the whole family, which significantly benefit all household
members, should not be exempt.'' However, AARP requested that the
Department provide examples as to what household work is considered
incidental and therefore part of companionship services. AARP asked,
``[i]f some tuna salad is left over after the individual receiving
companionship services has eaten lunch, and another member of the
household eats this left over tuna salad,
[[Page 60469]]
would this be considered general household work, thereby denying the
companionship exemption for the week?''
After carefully considering the comments, the Department has
decided to revise proposed paragraph (c) to avoid ambiguity and
eliminate redundancy in light of the revisions to paragraph (b).
Specifically, Sec. 552.6(c) of the Final Rule provides, in its
entirety: ``The term companionship services does not include domestic
services performed primarily for the benefit of other members of the
household.'' This text much more simply and clearly conveys the
Department's meaning, which is that companionship services are services
provided specifically for the individual who requires assistance in
caring for himself or herself rather than for other members of that
individual's household. This limit to the definition of companionship
services is consistent with Congress's central purpose in 1974 of
extending FLSA coverage to domestic service workers such as maids,
cooks, and housekeepers and excluding from that coverage only direct
care workers who provide primarily fellowship and protection.
The Department intends to exclude from companionship services any
general domestic services unrelated to care of the consumer as defined
in paragraph (b) of this section. The determination of whether a
particular task constitutes the provision of care or is instead a
service performed primarily for the benefit of others in the household
is based on a common sense assessment of the facts at issue. For
example, in response to the question posed by AARP, if a person other
than the consumer eats the leftover tuna salad, but the direct care
worker prepared the meal for the consumer as opposed to for other
members of the household, the meal preparation would constitute the
provision of care that, if done attendant to and in conjunction with
fellowship and protection and if within the 20 percent limitation on
care, is part of companionship services. An exempt companion may also
vacuum up food that the consumer drops, or wash a soiled blouse for the
consumer; such activities are part of the care discussed in paragraph
(b). Additionally, light housework, such as dusting a bedroom the
consumer shares with another, that only tangentially benefits others
living in the household may constitute care if performed attendant to
and in conjunction with the provision of fellowship and protection of
the consumer and within the 20 percent limitation. However, washing
only the laundry of other members of the household or cooking meals for
an entire family is excluded from companionship services under the
Final Rule. To provide an additional example: if a direct care worker
performs fellowship and protection for the consumer Monday through
Thursday, but spends Friday exclusively performing light housework for
the household as a whole, then the exemption is lost for the workweek,
because the direct care worker cannot perform general household
services for the entire household and still maintain the companionship
services exemption during that workweek.
Section 552.6(d) (Medically Related Services)
The legislative history of the 1974 amendments makes clear that
Congress did not intend the companionship services exemption to apply
to domestic service employees who perform medical services, and the
Department believed in 1975, as it does today, that the provision of
medical care constitutes work that is not companionship services.
Accordingly, under current Sec. 552.6, companionship services do not
include services provided for an elderly person or person with an
illness, injury, or disability that ``require and are performed by
trained personnel, such as a registered or practical nurse.'' In the
NPRM, the Department proposed to revise Sec. 552.6(d) to describe the
medical care that is typically provided by trained personnel by
offering examples of particular medical services rather than by naming
occupations. Based on consideration of the comments received and for
purposes of simplicity and clarity, the Department has decided not to
adopt the text as proposed, but has instead adopted text closer to that
which appears in current Sec. 552.6. For the reasons explained below,
Sec. 552.6(d) now excludes from companionship services ``medically
related services,'' defined as services that ``typically require and
are performed by trained personnel such as registered nurses, licensed
practical nurses, or certified nursing assistants.'' This section
further provides that the determination of whether services are
medically related ``is not based on the actual training or occupational
title of the individual providing the services,'' so in many cases,
direct care workers outside these named categories, particularly home
health aides, will be excluded from the companionship services
exemption under paragraph (d).
Proposed Sec. 552.6(d) provided that ``[t]he term `companionship
services' does not include medical care (that is typically provided by
personnel with specialized training) for the person, including, but not
limited to, catheter and ostomy care, wound care, injections, blood and
blood pressure testing, turning and repositioning, determining the need
for medication, tube feeding, and physical therapy.'' It further
provided that ``reminding the aged or infirm person of a medical
appointment or a predetermined medicinal schedule'' was part of
intimate personal care services as that phrase was defined in proposed
Sec. 552.6(b). The NPRM's preamble discussion of Sec. 552.6(d) set
forth the Department's rationale for its proposed change to the
regulatory text. 76 FR 81195. The Department explained that in addition
to care provided by registered nurses and licensed practical nurses,
the types of tasks performed by certified nursing assistants and
sometimes personal care aides or home health aides were the sort of
medically related services typically provided by personnel with
specialized training. Id. The preamble listed examples of such
services, including medication management, the taking of vital signs
(pulse, respiration, blood sugar screening, and temperature), and
assistance with physical therapy. Id. In addition to providing this
explanation of its position, the Department sought comment on whether
the proposal appropriately reflected the medical care tasks performed
by home health aides and personal care aides that require training as
well as whether the regulation should include additional examples of
minor health-related actions that could be part of companionship
services, such as helping an elderly person take over-the-counter
medication. Id.
Comments from labor organizations, non-profit and civil rights
organizations, and worker advocacy groups generally supported the
proposal to exclude from the definition of companionship services
medical care that requires specialized training. See, e.g., AARP,
AFSCME, the Center, ACLU, Jobs with Justice, SEIU. Even the many
employers and employer representatives who were critical of proposed
Sec. 552.6(d) recognized that medical care is beyond the scope of the
companionship services exemption. See, e.g., Husch Blackwell (agreeing
with the Department that direct care workers who change feeding tubes,
perform injections, or provide ostomy care do not qualify for the
companionship services exemption but asserting that because current
Sec. 552.6 already excludes nurses from the exemption, there was no
need to revise the regulation), BrightStar franchisees
[[Page 60470]]
(same), Senior Helpers (stating that home health aides who perform
``medical tasks like checking vital signs, changing bandages, giving
injections or providing feeding tube or ostomy care'' are not providing
companionship services but asserting that the Department should
withdraw the NPRM).
Some commenters made suggestions regarding specific occupations.
One individual commenter suggested that the Department ``expand the
meaning of trained personnel to include Certified Nursing Assistants
and other health care providers who have State certification.'' PHI and
the AFL-CIO urged the Department to state that personal care aides and
home health aides are not companions. PHI reasoned that personal care
aides and home health aides are trained personnel rather than exempt
companions because they provide medically related and personal care
tasks that require specialized training, noting that home health aides
are required, if paid with federal funds, to receive at least 75 hours
of initial training, including at least 16 hours of supervised
practical training, and 12 hours per year of continuing training. NAMD,
on the other hand, wrote that unlicensed direct care workers such as
home health aides and personal care aides should not be treated in the
same manner as registered or licensed practical nurses.
The Department also received comments regarding specific medical
services. Some commenters wrote that particular tasks should fall
outside the definition of companionship services. For example, AFSCME
believed that ``treating bed sores and monitoring physical
manifestations of health conditions like diabetes or seizure
disorders'' are ``medical or quasi-medical services'' that should be
excluded from the definition of companionship services. Women's
Employment Rights Clinic urged the Department to add toileting and
bathing to the medically related tasks named in Sec. 552.6(d).
Other commenters wrote that certain tasks should fall within the
definition of companionship services. For example, BrightStar
franchisees wrote that because ``specialized medical training is not
necessary to take an individual's temperature with a regular home
thermometer, or to provide them with hand lotion for `routine skin
care,' or to go on walks or do exercises together as recommended by a
physical therapist,'' those tasks should not be excluded from
companionship services. See also ANCOR (suggesting that these tasks be
considered part of intimate personal care activities in proposed Sec.
552.6(b)). NASDDDS wrote that tasks including wound care, injections,
blood pressure testing, and turning and repositioning are routinely
performed by family members and friends and thus are not necessarily
associated with the type of professional caregiving that should be
covered by the FLSA. The Oregon Department of Human Services, without
providing specifics, recommended that the types of personal and medical
services that a direct care worker may perform while still qualifying
for the companionship services exemption be expanded.
The Department also received comments regarding the tasks it had
identified as intimate personal care services rather than medically
related services. For example, ANCOR and Pennsylvania Advocacy and
Resources for Autism and Intellectual Disabilities stated that
reminding the consumer of medical appointments or a predetermined
medicinal schedule should be part of fellowship and protection in
proposed Sec. 552.6(a) because these duties are not ``intimate
personal care services'' described in proposed Sec. 552.6(b). AFSCME
suggested that the Final Rule distinguish ``between infrequent
reminders provided by a person engaged in fellowship or protection and
those duties of a more medical nature required to serve the infirm and
provided by vocational home care workers.'' AARP and Connecticut
Association for Home Care & Hospice, among others, stated that applying
a bandage to a minor wound and assisting with taking over-the-counter
medication should be part of companionship services.
Finally, NRCPDS requested clarification regarding whether an agency
administering a consumer-directed program may require a companion to
undergo first aid or cardiopulmonary resuscitation (CPR) training
without jeopardizing the applicability of the exemption, urging the
Department to explain that training requirements that are limited and
generally non-medical in nature should not disqualify a worker from the
companionship services exemption.
The Department continues to believe it is crucial to exclude from
companionship services the provision of services that are medical in
nature because the individuals who perform those services are doing
work that is far beyond the scope of ``elder sitting.'' In light of the
comments received, however, the Department has not adopted the
regulatory text as proposed. Instead, Sec. 552.6(d) now states: ``The
term `companionship services' does not include the performance of
medically related services provided for the person. The determination
of whether services are medically related is based on whether the
services typically require and are performed by trained personnel, such
as registered nurses, licensed practical nurses, or certified nursing
assistants; the determination is not based on the actual training or
occupational title of the individual performing the services.'' The
Final Rule thus makes two substantive changes to the current rule's
treatment of trained personnel, which excludes from companionship
services those ``services relating to the care and protection of the
aged or infirm which require and are performed by trained personnel,
such as a registered or practical nurse.'' 29 CFR 552.6. First, the
Final Rule adds certified nursing assistants as an example of ``trained
personnel'' who perform medically related services. Second, the Final
Rule clarifies that whether the individual who performs medical tasks
received training is irrelevant to the determination of whether the
tasks are medically related.\8\
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\8\ The Final Rule also makes two non-substantive changes to the
current rule. First, it refers to ``licensed practical nurses''
instead of ``practical nurse[s].'' (The term ``registered nurses''
is identical to that used in the current rule.) This modification is
meant only to update the regulation to use the more commonly used
title for the occupation. Second, unlike the current and proposed
rules, the Final Rule does not include a sentence stating that
medical care performed in or about a private home, though not
companionship services, is nevertheless within the category of
domestic service employment. See 29 CFR 552.6; 76 FR 81244. Such
work plainly falls within the definition of domestic services
employment set out in Sec. 552.3, and nurses, home health aides,
and personal care aides are included in that provision's list of
employees whose work may constitute domestic service employment. The
Department has therefore determined that a sentence reiterating the
point was redundant and thus unnecessary. This deviation from the
current rule and proposed regulatory text is not meant to indicate
that the Department believes the statements were incorrect or that
the Department has changed its position on this point.
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The Department is revising Sec. 552.6(d) differently than proposed
in the NPRM because it believes an explanation of what constitutes
medically related services is simpler and easier for the regulated
community to understand when framed by occupation than when described
with a list of tasks. The comments received in response to the proposal
highlight that direct care workers perform numerous tasks that that
fall on both sides of the line between medical care and other services
that fall within the meaning of ``care'' as described in Sec.
552.6(b). The diversity of opinions commenters expressed regarding
which tasks should be part of companionship services and which
[[Page 60471]]
should not fall within the definition of that term revealed that an
illustrative list of medically related services would not provide
clarity to the regulated community. And as any list of such services
would necessarily be illustrative; it would be nearly impossible, as
well as beyond the scope of the Department's expertise, to name or
describe all medically related services.
The Department believes that the alternative approach of defining
medically related services outside the definition of companionship
services as those that should be and typically are performed by workers
who have completed specialized training offers better guidance to the
regulated community. Naming a small number of occupations to illustrate
the general sets of duties in question is simpler and more concise than
referring to various particular medical tasks. Furthermore, the
regulation that has been in place since 1974 used this approach, so the
regulated community is already familiar with it. The more significant
deviation from the existing text contained in the proposed rule was not
necessary to achieve the Department's goal of ensuring that all direct
care workers who perform medically related services that constitute
work other than companionship services are provided the protections of
the FLSA.
The decision to add certified nursing assistants (CNAs) to the list
of examples of ``trained personnel'' is based on the legislative
history of section 13(a)(15) of the Act as well as the training and
work of CNAs. The House and Senate Reports addressing the 1974
amendments state that ``it is not intended that trained personnel such
as nurses, whether registered or practical, shall be excluded'' from
the protections of the FLSA under the companionship services exemption.
House Report No. 93-913, p. 36; Senate Report No. 93-690, p. 20. The
Department's current regulations are modeled on this language and
reflect that without doubt, registered nurses and licensed practical
nurses working in private homes do not provide companionship services.
But Congress did not mean this list to be exclusive; the Reports say
that trained personnel ``such as'' nurses are not exempt from the FLSA.
Id. It is plain from these words and the surrounding language in the
House and Senate Reports that ``trained personnel'' are a category of
those ``employees whose vocation is domestic service'' and thus are not
exempt from the FLSA's protections. Id. Therefore, the Department's
expressly delegated authority to define companionship services includes
the ability to exclude from the term's meaning medically related
occupations or other medically related work beyond, to a reasonable
extent, those named in the Reports.
Based on the training and duties of CNAs, the Department believes
CNAs are properly considered outside the scope of the companionship
services exemption. In 1987, Congress established federal requirements
for certification of nursing assistants,\9\ and many states have
requirements that exceed these federal minimums.\10\ Specifically, by
federal law, CNAs (referred to in federal regulations as ``nurse
aide[s]'') must receive at least 75 hours of training, including a
minimum of 16 hours of clinical training, 42 CFR 483.152(a), and as of
2009, thirty states mandated between 80 to 180 hours of training.\11\
The training curriculum for CNAs must include, among other things,
``basic nursing skills'' (e.g., taking and recording vital signs),
``personal care skills'' (e.g., skin care, transfers, positioning, and
turning), and ``basic restorative skills'' (e.g., maintenance of range
of motion, care and use of prosthetic and orthotic devices). 42 CFR
483.152(b). In addition, all CNAs must pass a competency examination
that includes a written or oral examination and skills demonstration.
42 CFR 483.154. Each state must maintain a registry of CNAs that
contains the names of the individuals who have fulfilled these
requirements. 42 CFR 483.156. The standardization of the CNA training
curriculum, the competency exam requirement, and the existence of state
registries tracking and confirming certification are all evidence of
the professionalization of this category of workers. It is the
Department's view that CNAs are the sort of ``trained personnel'' who
provide direct care services as a vocation and thus are entitled to the
protections of the FLSA.\12\
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\9\ Nursing Home Reform Act, Subtitle C of Title IV of the
Omnibus Budget Reconciliation Act of 1987, Public Law 11-203, Sec.
4201-4214. http://assets.aarp.org/rgcenter/il/2006_08_cna.pdf.
\10\ http://phinational.org/sites/phinational.org/files/clearinghouse/state-nurse-aide-training-requirements-2009.pdf.
\11\ Id.
\12\ This change to the regulation makes obsolete but does not
conflict with a court opinion holding that CNAs were not
categorically excluded from the companionship services exemption
under the current regulation. Specifically, in McCune v. Oregon
Senior Services Division, 894 F.2d 1107 (9th Cir. 1990), the Ninth
Circuit held--based on its reading of the current regulation-- that
CNAs were not the type of ``trained personnel'' who provide services
that are not companionship services because the training for CNAs
was not comparable to that required for RNs or LPNs. Id. at 1110-11.
The Final Rule now makes clear, for the reasons explained, that the
amount and type of training CNAs must receive is sufficiently
significant to merit treatment as providing medically related,
rather than companionship, services.
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Furthermore, CNAs perform many tasks that are indisputably medical
services, which constitute the sort of professional, skilled duties
that are outside the scope of companionship services. Although the
particular duties of CNAs vary by state, CNAs' core duties include
administering medications or treatments, applying clean dressings,
observing patients to detect symptoms that may require medical
attention, and recording vital signs,\13\ and typical additional duties
include administering medications or treatments such as
catheterizations, enemas, suppositories, and massages as directed by a
physician or a registered nurse; turning and repositioning bedridden
patients; and helping patients who are paralyzed or have restricted
mobility perform exercises.\14\ Additionally, CNAs often use equipment
such as blood pressure units, medical thermometers, stethoscopes,
bladder ultrasounds, glucose monitors, and urinary catheterization
kits. It is the Department's view that these tasks constitute the sort
of work that falls appropriately within FLSA protection.
---------------------------------------------------------------------------
\13\ O'NET, SOC 31-1014.00 (2012), http://www.onetonline.org/link/summary/31-1014.00.
\14\ See, e.g., http://www.maine.gov/boardofnursing/OLD%20WEBSITE/CNA%20BAsic%20Curriculum%2010-2008.pdf; https://www.flrules.org/gateway/ruleno.asp?id=64B9-15.002; http://www.in.gov/isdh/files/rescare.pdf; http://www.dphhs.mt.gov/cna/SkillsChecklist.pdf; http://www.utahcna.com/forms/UTcandidatehandbook.pdf; http://www.oregon.gov/OSBN/pdfs/publications/cnabooklet.pdf.
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Many of the duties of today's CNAs are similar to, or even more
technical than, tasks LPNs performed in the 1970s, when Congress
created the companionship services exemption with the explicit notion
that LPNs were outside its scope. At that time, LPNs took and recorded
temperature and blood pressure, changed dressings, administered
prescribed medications, and helped with bathing or other personal
hygiene; in private homes, they often assisted with meal preparation
and facilitated comfort in addition to providing nursing care.\15\ In
contrast to today's CNAs, in the 1970s, ``nursing aides'' did not
receive pre-employment training and did not provide services that
required the technical training nurses received.\16\ This shift in the
field of nursing provides additional support for the Department's
conclusion that
[[Page 60472]]
Congress's original intent in creating the companionship services
exemption is best fulfilled by adding CNAs to the illustrative list of
trained personnel.
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\15\ U.S. Department of Labor, Bureau of Labor Statistics,
Occupational Outlook Handbook, 1974-75 Edition (1974).
\16\ Id.
---------------------------------------------------------------------------
The Department does not accept the suggestion of some commenters
that it add home health aides (HHAs) and personal care aides (PCAs) to
its illustrative list of trained personnel. The work of practitioners
of those occupations does not necessarily include medically related
services. Although Federal regulations require that HHAs complete a
minimum of 75 hours of training and must pass a competency evaluation,
these requirements are distinguishable from those for CNAs: the topics
the training must address are more limited than those CNAs must study,
the evaluation requirements are less stringent than for CNAs, and
states need not maintain registries of HHAs. Compare 42 CFR 484.36(a),
(b) with 42 CFR 483.152(a), (b); 42 CFR 483.156. PCAs are not subject
to any federal standards for training and certification, nor are there
state registries of PCAs. In addition, one of the core duties of an HHA
is to ``entertain, converse with, or read aloud to patients to keep
them mentally healthy and alert,'' \17\ and one of the core duties of a
personal care aide is to provide companionship.\18\ Other duties of
HHAs and PCAs often include grooming, dressing, and meal preparation.
Therefore, HHAs and PCAs typically do not have the medical training
CNAs receive, those titles are not associated with an official
licensing system that allows their clear identification as trained
personnel, and any particular HHA or PCA may perform only fellowship
and protection and assistance with ADLs and IADLs. If in the future the
same sort of professionalization that has occurred in the nursing
assistance field extends to HHAs or PCAs such that either or both of
those occupations require the training and perform the duties of CNAs
today, or if some future category of worker arises that performs such
skilled duties, however, it is the Department's intent that such fields
could properly be considered ``trained personnel.''
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\17\ O'NET, SOC 31-1011.00, http://www.onetonline.org/link/details/31-1011.00.
\18\ O'NET, SOC 39-9021.00, http://www.onetonline.org/link/details/39-9021.00.
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The Department wishes to note two important caveats regarding its
decision not to include HHAs or PCAs in its list of trained personnel.
First, the list of occupations in the regulatory text is not exclusive.
If a state or employer refers to a direct care worker by a title other
than RN, LPN, or CNA, but his or her training requirements and services
performed are roughly equivalent to or exceed those of any of these
occupations, that worker does not qualify for the companionship
services exemption. For example, according to PHI, twelve states
require HHAs to be trained and credentialed as CNAs. Where a worker is
a CNA and provides medically related services, regardless of any other
job title he or she may hold, he or she is excluded from the
companionship services exemption. See 29 CFR 541.2; FOH 22a04; Wage and
Hour Fact Sheet 17A: Exemption for Executive, Administrative,
Professional, Computer, and Outside Sales Employees Under the Fair
Labor Standards Act (all explaining that job titles do not determine
exempt status under the FLSA). Second, as explained below, any HHA or
PCA who performs medically related services does not qualify for the
companionship services exemption. Based on the Department's
understanding of the typical duties of these workers, the Department
believes that many HHAs will for this reason not be subject to the
exemption and therefore will be entitled to the protections of the
FLSA. Of course, in addition, any HHA or PCA who is engaged in the
provision of care during more than 20 percent of his or her hours
worked for a particular consumer in a given workweek also does not
qualify for the companionship services exemption. Furthermore, as
explained in the section of this Final Rule regarding Sec. 552.109,
any third party that employs an HHA or PCA who works in a private home
will not be permitted to claim the companionship services exemption.
Given these limitations on the companionship services exemption, and
the services HHAs and PCAs often provide, it is likely that almost all
HHAs and many PCAs will not be exempt under the Act. Because almost all
of these workers are providing home care as a vocation, the Department
believes this is the appropriate result under the statute.
The second difference between the current and newly adopted
regulatory text--that medically related services are those that
typically require training, not only those performed by a person who
actually has the training--is primarily based on the FLSA's fundamental
premise that the tasks performed rather than the job title or
credentials of the person performing them determines coverage under the
Act. As explained elsewhere in this Final Rule, in enacting the 1974
amendments, Congress intended to exclude from FLSA coverage the work of
individuals whose services did not constitute a vocation; it did not
exclude domestic service employees who happened not to have training.
The Department believes that any direct care worker who performs
medical tasks that nurses or nursing assistants are trained to perform
is the sort of employee whose work should be compensated pursuant to
the requirements of the FLSA.\19\
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\19\ The Department notes that the Final Rule's instruction not
to look to the actual training of the person providing services
calls for a shift in the way courts approach challenges to the
assertion of the companionship services exemption. Courts have read
the Department's current regulation to mean that direct care workers
without the extensive training RNs and LPNs receive are not excluded
from the exemption regardless of the services they provide. See,
e.g., Cox v. Acme Health Servs., 55 F.3d 1304, 1310 (7th Cir. 1995);
McCune v. Or. Senior Servs. Div., 894 F.2d 1107, 1110-11 (9th Cir.
1990). The Final Rule, which for the reasons explained reflects a
reasonable reading of the statutory provision the Department has
express authority to interpret, calls instead for a focus on the
tasks performed.
---------------------------------------------------------------------------
Medically related services are not within the scope of
companionship services whether the person performing them is
registered, licensed, or certified to do so or not. Procedures
performed may be invasive, sterile, or otherwise require the exercise
of medical judgment; examples include but are not limited to catheter
care, turning and repositioning, ostomy care, tube feeding, treating
bruising or bedsores, and physical therapy. Regardless of actual
training, these tasks require skill and effort far beyond what is
called for by the provision of fellowship and protection, such as
activities like reading, walks, and playing cards. They are also
outside the category of assistance with instrumental activities of
daily living (IADLs), which may fall under the provision of care
described in Sec. 522.6(b). The text of Sec. 552.6(b) notes that
IADLs include assisting a consumer with the physical taking of
medications or arranging a consumer's medical appointments; minor
health-related tasks such as helping a consumer put in eye drops,
applying a band-aid to a minor cut, or calling a doctor's office to
schedule an appointment are distinguishable from the medically related
services RNs, LPNs, and CNAs are trained to and do perform.
Furthermore, focusing on the tasks assigned to, rather than the actual
training or occupational title of, the direct care worker avoids
disincentivizing employers from hiring workers who are not adequately
prepared for the duties they are assigned in order to avoid minimum
wage and overtime requirements. This outcome, which becomes
increasingly significant as services shift from institutions to
[[Page 60473]]
homes, is not beneficial to workers or to consumers.
Finally, the Department notes that the purpose of Sec. 552.6(d) is
to exclude from the companionship services exemption those direct care
workers who perform medically related tasks on more than isolated,
emergency occasions. A direct care worker who provides companionship
services but reacts to an unanticipated, urgent situation by, for
example, performing cardiopulmonary resuscitation (CPR), performing the
Heimlich maneuver, or using an epinephrine auto-injector is not
excluded from the exemption. Furthermore, in response to NRCPDS's
question regarding first aid or CPR training, the Department notes that
such training is not equivalent to that which an RN, LPN, or CNA
receives, and therefore a worker who has been taught these skills would
not automatically be excluded from the companionship services
exemption.
C. Section 552.102 (Live-in Domestic Service Employees) and Section
552.110 (Recordkeeping Requirements)
Live-in Domestic Service Employees
Section 13(b)(21) of the FLSA exempts from the overtime provision
``any employee who is employed in domestic service in a household and
who resides in such household.'' 29 U.S.C. 213(b)(21). The Department's
current regulation at Sec. 552.102(a) provides that domestic service
employees who reside in the household where they are employed are not
entitled to overtime compensation. Section 552.102(a) also provides
that domestic service workers who reside in the household of their
employer are entitled to at least the minimum wage for all hours worked
(unless they meet the companionship services exemption). Domestic
service employees who reside in the household where they are employed
are referred to as ``live-in domestic service employees.''
Under Sec. 552.102(a), the Department allows the employer and
live-in domestic service employee to enter into a voluntary agreement
that excludes from hours worked the amount of the employee's sleeping
time, meal time and other periods of complete freedom from all duties
when the employee may either leave the premises or stay on the premises
for purely personal pursuits.\20\ In order for periods of free time
(other than those relating to meals and sleeping) to be excluded from
hours worked, the periods must be of sufficient duration to enable the
employee to make effective use of the time. Sec. 552.102(a). Section
552.102(a) makes clear that if the sleep time, meal time, or other
periods of free time are interrupted by a call to duty, the
interruption must be counted as hours worked.
---------------------------------------------------------------------------
\20\ This requirement is nearly identical to the requirement
found in Sec. 785.23.
---------------------------------------------------------------------------
The Department allows for such an agreement because it recognizes
that live-in employees are typically not working all of the time that
they are on the premises and that, ordinarily, the employees may engage
in normal private pursuits, such as sleeping, eating, and other periods
of time when they are completely relieved from duty. See also Sec.
785.23. However, current Sec. 552.102(a) makes clear that live-in
domestic service employees must be paid for all hours worked even when
an agreement excludes certain hours. As an example, assume an employer
and live-in domestic service employee enter into a voluntary agreement
that excludes from hours worked the time between 11:00 p.m. and 7:00
a.m. for the purposes of sleeping. If the employee is required to
perform any work during those hours, for example, the employee is
required to assist the individual with going to the bathroom, or is
required to periodically turn or reposition the individual, the
employer is then required to pay the employee for the time spent
performing work activities despite an agreement that typically
designates those hours as non-working time. The proposed rule did
nothing to change this obligation.
In the NPRM, the Department proposed changes to the recordkeeping
requirement for live-in domestic service employees. Under proposed
Sec. 552.102(b), the Department would no longer allow the employer of
a live-in domestic employee to use the agreement as the basis to
establish the actual hours of work in lieu of maintaining an actual
record of such hours. Proposed Sec. 552.102(b) would require the
parties to enter into a new agreement whenever there is a significant
deviation from the existing agreement. Additionally, in the proposed
changes to Sec. 552.110(b), the Department would no longer permit an
employer to maintain a copy of the agreement as a substitution for
recording actual hours worked by the live-in domestic service employee.
Instead, the Department would require the employer to maintain a copy
of the agreement as well as records showing the exact number of hours
worked by the live-in domestic service employees and pay employees for
all hours actually worked. As more fully explained in the Recordkeeping
Requirement section below, the Department is adopting the proposed
recordkeeping requirements with minor modifications, as discussed in
the preamble to Sec. Sec. 552.102, 552.110.
Live-in Situations
The Department received several comments requesting clarification
on the definition of a live-in domestic service employee. For example,
Women's Employment Rights Clinic stated that it is critical that the
regulations include a definition of a live-in domestic service employee
because live-in domestic service workers remain exempt from overtime,
and that the Department should provide clarification of the definition
of a ``live-in'' so households and workers clearly understand when
overtime must be paid. Women's Employment Rights Clinic suggested that
the Department adopt the following definition: ``A live-in employee is
one who (1) resides on the employer's premises on a permanent basis or
for extended periods of time and (2) for whom the employer makes
adequate lodging available seven days per week.'' Women's Employment
Rights Clinic stated that this definition will help draw a needed
distinction between workers on several consecutive 24-hour shifts and
live-in employees, as well as a distinction between short-term
assignments and assignments for extended periods of time that might
appropriately be deemed live-in situations. The Legal Aid Society of NY
also requested that the Department clarify the definition of live-in
domestic service employee and make clear that the definition does not
include a worker who spends only one night per week at a residence or
must pay any part of the rent or mortgage or other expenses for upkeep
of another residence.
In addition, the Department received comments questioning the
continued use and viability of the overtime exemption for live-in
domestic service employees. Students from the Georgetown University Law
Center stated that the Department should eliminate the live-in domestic
service employee exemption, suggesting that it is directly contrary to
the Department's stated goals in the NPRM. The students urged the
Department to provide overtime protections to live-in employees. On the
other hand, one individual who hires direct care workers to provide
services for his father requested that the Department not eliminate the
live-in domestic service employee exemption.
Because the live-in domestic service employee exemption is
statutorily created, the Department cannot eliminate the exemption as
suggested by Georgetown Law students. Only Congress could eliminate the
overtime
[[Page 60474]]
exemption for such workers. Moreover, the Department did not propose
any changes to the definition of live-in domestic service employee or
otherwise discuss the requirements for meeting the live-in domestic
service exemption in the NPRM. It is the Department's intention to
continue to apply its existing definition of live-in domestic service
employees. Under the Department's existing regulations and
interpretations, an employee will be considered to be a live-in
domestic service employee under Sec. 552.102 if the employee: (1)
Meets the definition of domestic service employment under Sec. 552.3
and provides services in a ``private home'' pursuant to Sec. 552.101;
and (2) resides on his or her employer's premises on a ``permanent
basis'' or for ``extended periods of time.'' See also Sec. 785.23; FOH
Sec. 31b20.
Employees who work and sleep on the employer's premises seven days
per week and therefore have no home of their own other than the one
provided by the employer under the employment agreement are considered
to ``permanently reside'' on the employer's premises. See Wage and Hour
Opinion Letter FLSA-2004-7 (July 27, 2004). Further, in accordance with
the Department's existing policy, employees who work and sleep on the
employer's premises for five days a week (120 hours or more) are
considered to reside on the employer's premises for ``extended periods
of time.'' See FOH Sec. 31b20. If less than 120 hours per week is
spent working and sleeping on the employer's premises, five consecutive
days or nights would also qualify as residing on the premises for
extended periods of time. Id. For example, employees who reside on the
employer's premises five consecutive days from 9:00 a.m. Monday until
5:00 p.m. Friday (sleeping four straight nights on the premises) would
be considered to reside on the employer's premises for an extended
period of time. Similarly, employees who reside on an employer's
premises five consecutive nights from 9:00 p.m. Monday until 9:00 a.m.
Saturday would also be considered to reside on their employer's
premises for an extended period of time. Id.
Employees who work only temporarily, for example, for only a short
period of time such as two weeks, for the given household are not
considered live-in domestic service workers, because residing on the
premises of such household implies more than temporary activity. In
addition, employees who work 24-hour shifts but are not residing on the
employer's premises ``permanently'' or for ``extended periods of time''
as defined above are not considered live-in domestic service workers
and, thus, the employers are not entitled to the overtime exemption.
The Department received many comments from employers and advocacy
groups that serve persons with disabilities that appeared to confuse
the issue of ``live-in'' care with 24-hour care. See, e.g., Bureau of
TennCare, NASDDDS, Cena Hampden, Scott Witt, and Gary Webb. For
example, one individual suggested that her mother received ``live-in''
care when the employee worked only a 16-hour shift. The Department
received several comments noting that the home care industry's use of
the term ``live-in'' is different than the Department's use.
Specifically, John Gilliland Law Firm stated that ``the term `live-in'
is used differently within the home care industry than how it is used
by the Wage and Hour Division.'' The law firm noted that the home care
industry uses the term ``live-in'' to refer to 24-hour assignments,
often several consecutive assignments, where the client's location is
not the employee's residence, and the Wage and Hour Division refers to
``live-in'' employees as those residing on the client's premises.
Similarly, Women's Employment Rights Clinic noted that, based on their
experience representing home care workers, employees who work several
consecutive 24-hour shifts are often confused with live-in employees.
The fact that an individual may need 24-hour care does not make
every employee who provides services to that individual a live-in
domestic service employee. Rather, only those employees who are
providing domestic services in a private home and are residing on the
employer's premises ``permanently'' or for ``extended periods of time''
are considered live-in domestic service employees exempt from the
overtime requirements of the FLSA. Employees who work 24-hour shifts
but are not live-in domestic service employees must be paid at least
minimum wage and overtime for all hours worked unless they are
otherwise exempt under the companionship services exemption. (See Hours
Worked section for a discussion of when sleep time is not hours
worked.)
The Department received a few comments that argued that allowing
employers to maintain an agreement under Sec. 552.102(a) conflicts
with the simultaneous requirement that an employer must maintain
precise records of hours worked under proposed Sec. 552.102(b). For
example, The Workplace Project stated that allowing an agreement of
hours worked will create confusion and will undermine the requirement
that employers track actual hours worked. As a result, The Workplace
Project recommended that the Department eliminate Sec. 552.102(a) that
allows employers of live-in domestic service workers to enter into an
agreement. On the other hand, one individual requested that the
Department continue to allow employers and employees to use agreements
for live-in domestic service employees. California Foundation for
Independent Living Centers (CFILC) also suggested that the Department
should allow employers and employees to ``enter into mutually agreeable
and non-coercive employment agreements to work compensated hours at a
set hourly wage or monthly salary without triggering overtime
compensation.'' CFILC stated that the agreements could guarantee the
live-in domestic service employee breaks, meal periods, and 8 hours of
uninterrupted sleep, and the agreements could be renegotiated to
account for any changes that might arise.
The Department disagrees with the comments that suggested that
continuing to allow employers and live-in domestic service employees to
enter into mutually agreeable agreements is inconsistent with the
recordkeeping requirements for live-in domestic service employees. The
Department's regulation allows the employer and live-in employee to
enter into a voluntary agreement that excludes from hours worked the
amount of the employee's sleeping time, meal time and other periods of
complete freedom from all duties when the employee may either leave the
premises or stay on the premises for purely personal pursuits. See
Sec. Sec. 552.102(a), 785.23. The Department's regulation also allows
employers and live-in employees to enter into such voluntary agreements
(see, infra, Hours Worked section) because the Department recognizes
that live-in employees are not necessarily working all the time that
they are on the employer's premises. When an employee resides on the
employer's premises it is in the employee's and the employer's interest
to reach an agreement on the employee's work schedule so each may
understand when the employee is expected to be working and when the
employee is not expected to be working and is completely relieved from
duty. The Department will accept any reasonable agreement of the
parties, taking into consideration all of the pertinent facts. Despite
allowing for voluntary agreements, however, the Department has always
required that employers pay live-in domestic service
[[Page 60475]]
employees at least the minimum wage for all hours worked and that when
sleep time, bona fide meal periods, and bona fide off-duty time are
interrupted then employees must be compensated for such time regardless
of whether an agreement typically designates those hours as non-working
time. Under the new recordkeeping requirements for live-in domestic
service employees (more fully addressed below), the Department simply
requires the employer to maintain a copy of the agreement as well as
records showing the exact number of hours worked by live-in domestic
service employees and pay live-in domestic service employees for all
hours actually worked. The requirement to record hours actually worked
is no different than that required for other employers under the FLSA.
The Department also received comments reflecting the belief that
the proposed rule required live-in employees to be paid for all 24
hours, or comments that were otherwise confused about the pay
requirements for live-in and 24-hour shift workers. For example, a
Senior Helper franchise owner believed that the Department's proposed
rule required that domestic service employees scheduled for 24-hour
shifts or deemed live-ins must be paid for the entire 24-hour period
even when the employee is not working. The owner suggested that such an
outcome would be unfair and that the rule should be redrafted and
modeled after New Jersey law, which, based upon his description,
requires that live-in employees be compensated for at least eight hours
each day when the hours worked are irregular and intermittent. Another
employer also believed that the Department's proposed rule required
that agencies pay live-in employees for all 24 hours that they are on
the clients' premises even if the employees receive six to eight hours
of uninterrupted sleep. This employer suggested that this would double
the cost to the clients. Several employers suggested that employees who
live in or work 24-hour shifts should not be paid overtime because they
are not working all the time. In addition, a few employers suggested
that live-in or sleep-over employees should not be paid based on an
hourly rate; rather, the employer should be allowed to pay the employee
based on a flat overnight rate.
The Department's existing regulations regarding when employees must
be compensated for sleep time, meal periods, or off-duty time are
discussed in the Hours Worked section of this Final Rule. The
definition of hours worked and the basis for taking any deductions
outlined in that section apply to live-in domestic service employees
and must be followed. Generally, where an employee resides on the
employer's premises permanently or for extended periods of time, all of
the time spent on the premises is not necessarily working time. The
Department recognizes that such an employee may engage in normal
private pursuits and thus have enough time for eating, sleeping,
entertaining, and other periods of complete freedom from work duties.
For a live-in domestic service employee, such as a live-in roommate,
the employer and employee may voluntarily agree to exclude sleep time
of not more than eight hours if (1) adequate sleeping facilities are
furnished by the employer, and (2) the employee's time spent sleeping
is uninterrupted. Sec. 785.22-.23. In addition, meal periods may be
excluded if the employee is completely relieved of duty for the purpose
of eating a meal, and off-duty periods may be excluded if the employee
is completely relieved from duty and is free to use the time
effectively for his or her own purposes. Sec. Sec. 785.16, 785.19.
However, an employee who is required to remain on call on the
employer's premises or so close thereto that he or she cannot use the
time effectively for his or her own purposes is considered to be
working while on call and must be compensated for such time. Sec.
785.17.
Concerning whether employers may pay an hourly rate or a flat
overnight or daily rate to a live-in employee, the Department notes
that the FLSA is flexible regarding the type of rate paid and only
requires that employers pay the live-in domestic service employee at
least the minimum wage for all hours worked, in accordance with our
longstanding rules. For example, an employer may have an agreement to
pay a live-in employee $125 per day, which exceeds the minimum wage
required for 16 hours of work (compensable time), if the employee
receives eight hours of uninterrupted sleep time off.
The Department also received several comments requesting
clarification on the application and impact of the companionship
services and live-in domestic service employee exemptions to shared
living or roommate arrangements. The Department received many comments
from advocacy groups that represent persons with disabilities, such as
the NASDDDS, and third party employers, such as Community Vision,
requesting that the Department clarify the wage and hour requirements
on live-in arrangements provided under Medicaid-funded Home and
Community-Based Services (HCBS) programs.
Specifically, NASDDDS described shared living services as ``an
arrangement in which an individual, a couple or a family in the
community share life's experiences with a person with a disability.''
Shared living arrangements may also be known as mentor, host family or
family home, foster care or family care, supported living, paid
roommate, housemate, and life sharing. Under a shared living program,
consumers typically live in the home of an individual, couple, or
family where they will receive care and support services based on their
individual needs. NASDDDS stated that shared living providers receive
compensation typically from a third party provider agency or directly
from the state's Medicaid program. NASDDDS requested that the
Department conclude that shared living providers meet the definition of
performing companionship services under the proposed rule and thus that
those providers are not entitled to minimum wage and overtime
compensation.
NASDDDS also discussed Medicaid services described as ``host
families.'' NASDDDS described a ``host family'' as a family that
accepts the responsibilities for caring for one to three individuals
with developmental disabilities. The host family helps the individual
participate in family and community activities, and ensures that the
individual's health and medical needs are met. Such services may
include assistance with basic personal care and grooming, including
bathing and toileting; assistance with administering medication or
performing other health care activities; assistance with housekeeping
and personal laundry; etc. NASDDDS noted that the provider typically
must comply with state licensure or certification regulations. NASDDDS
further noted that the provider is usually paid a flat monthly rate to
meet the individual's support needs and the payment will typically be
based on the intensity and difficulty of care. The provider may also be
paid for room and board. NASDDDS suggested that the Department work
with CMS and stakeholders to develop a greater understanding of the
programs and financial structures for Medicaid HCBS waiver programs.
One individual suggested that such living arrangements should fall
under the Department's foster care exemption or should be exempt from
the requirements under Sec. 785.23.
Moreover, Arkansas Department of Human Services noted that many
[[Page 60476]]
individuals who receive supported living services under HCBS waivers
rely on roommates or live-in scenarios where the individuals receive
services in their own home or in that of a family member. Community
Vision and other third party providers described live-in roommates as
``a major component of the support system of an individual with
significant disabilities who live independently in their own home.''
Home Care & Hospice stated that live-in roommate arrangements include
college students with Medicaid paid ``roommates'' who also attend
college or individuals who work and take a caregiver to work with them,
but who need an overnight live-in roommate to address intermittent
needs. Home Care & Hospice was concerned that the Department's proposed
regulations would put these programs at risk. Community Vision stated
that live-in roommates are available in the rare case of an emergency
or for infrequent support needs and that these individuals receive free
or reduced rent and utilities in exchange for being a roommate who on
occasion can provide support to the individual at night; the type of
services provided by live-in roommates was not discussed. Community
Vision requested that the exemptions from minimum wage and overtime
continue for live-in roommates. It asserted that minimum wage and
overtime pay would make the live-in roommates fiscally unsupportable
for agencies and their clients, resulting in increased
institutionalization of their clients with disabilities and a loss of
housing for their employees.
The Department also received several comments that discussed the
application of the companionship services and live-in domestic service
employee exemptions to paid family caregivers. See, e.g., Joni Fritz,
ANCOR, and NASDDDS. Paid family caregivers are described as family
members of an aging person or an individual with a disability who
provide care and receive some income to provide support for their
family member, and who--without pay--could not provide the needed
support. See Joni Fritz. Some states have established payment systems
under Medicaid that will pay a family member to provide intimate care
and medically related support.\21\ AARP noted that some HCBS waiver
programs allow the individual to hire family caregivers to provide
services and may permit them to provide more than 40 hours of
assistance per week, assistance that is vital to keeping their loved
one at home and out of an institution. AARP noted that family
caregivers frequently live with the person for whom he or she provides
services. AARP was concerned that requiring the payment of overtime in
these cases, merely because public authorities or fiscal intermediaries
are involved in making these programs possible, could prevent family
caregivers from providing more than 40 hours a week in paid care and
impact the ability of the individual to remain at home. In addition,
AARP noted that the situation of a family caregiver who lives with the
person for whom they provide services is analogous to the overtime
exemption for live-in domestic service workers. AARP suggested that the
Department not require the payment of overtime if: (1) The individual
is receiving HCBS under a publicly financed consumer-directed program;
(2) a third party such as a public authority or a fiscal intermediary
is involved; and (3) a family caregiver who lives with the consumer is
being paid under the consumer-directed program to provide services for
the individual.
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\21\ In some instances a family member may also be paid for time
spent performing some housekeeping services in addition to the
medical and personal care services provided.
---------------------------------------------------------------------------
It appears that under these varied shared living arrangements, the
live-in domestic service workers are living on the same premises with
the consumer and would easily be able to meet the ``permanently
reside'' or ``extended periods of time'' requirements and would
therefore be exempt from overtime requirements. There is a question,
however, whether the consumer is receiving services in a ``private
home.'' As the determination whether domestic services are provided in
a private home is fact-specific and is to be made on a case-by-case
basis, the Department cannot state categorically whether a particular
type of living arrangement involves work performed in a private home.
In evaluating whether a residence is a private home (see, supra,
private home discussion), the Department considers the six factors
identified by the Tenth Circuit in Welding as well as the other factors
identified in Johnston, Linn, and Lott. See Wage and Hour Opinion
Letter, FLSA 2006-13NA (June 23, 2006).
The Department cannot address all shared living arrangements raised
in the comments because the circumstances are different under countless
factual scenarios. However, the Department is providing, as an example,
the following guidance regarding how these established rules will
likely apply under the most commonly raised shared living arrangement--
live-in roommates. In the live-in roommate arrangement, the consumers
appear to be living in their own home and a roommate moved in to the
consumer's home in order to provide services on an as needed basis. It
also appears that the person receiving services owns the home or leases
the home from an independent third party. There is nothing in the
comments to suggest that the state or agency providing the services
maintains the residences or otherwise provides the essentials of daily
living, such as paying the mortgage or rent, utilities, food, and house
wares. Rather, either the service provider pays rent or the individual
receiving services provides free lodging as part of the remuneration
due the live-in roommate for providing services. The cost/value of the
services does not appear to be substantial based on the comments that
suggested that live-in roommates provide only intermittent or
infrequent care services. Thus, the costs of the services provided
appear to be a small portion of the total costs of maintaining the
living unit. In addition, there is nothing to suggest that the service
provider uses any part of the residence for its own business purposes.
It also appears that the consumer hires the roommate and determines who
will live in his or her home and is free to come and go as he or she
pleases. Therefore, live-in roommate arrangements appear to be
performed in a private home, and thus, the live-in domestic service
employee overtime exemption will likely be available to the individual,
family, or household using the worker's services. Any slight change in
the specific facts of this scenario, however, may lead to a different
result. However, as more fully discussed in the third party employment
section below, the live-in domestic service employee exemption will not
be available to a third party employer of the live-in roommate.
Moreover, to the extent the live-in roommate meets the duties test for
the companionship services exemption as outlined above (see, supra,
companionship services section), the companionship exemption will
likely also be available to the individual, family, or household using
the worker's services. The overtime exemption for a live-in domestic
service employee is a separate exemption available even when an
employee does not meet the Department's duties test in the
companionship services exemption. For example, an individual, household
or family member employing a live-in nurse or a live-in direct care
worker who provides cooking, driving, and cleaning services for more
than 20 percent of the weekly hours worked, may still claim the live-in
domestic
[[Page 60477]]
service employee exemption from overtime; if there is a third party
employer involved, however, then the third party employer would be
responsible for overtime compensation.
For many of the same reasons discussed above, the Department
believes that in most circumstances a paid family caregiver is
providing services in a private home. In the circumstances where the
paid family caregiver lives with the consumer, the overtime exemption
will be available to the individual, family, or household. If employed,
jointly or solely, by a third party, the paid family caregiver would be
entitled to overtime compensation for all hours worked over 40 from the
third party employer subject to the analysis described later in this
preamble discussing paid family and household caregivers. However, as
noted above, not all time spent on the premises is necessarily
considered hours worked and there may be circumstances where the third
party will not be considered a joint employer of the paid family
caregiver because the third party is not engaged in the factors that
indicate an employer-employee relationship exists (see, infra, joint
employment section).
The Department recognizes that people living with disabilities
continue to explore innovative ways of eliminating segregation and
promoting inclusion particularly through the provision of services and
supports in home- and community-based settings. The Department
appreciates that a number of commenters who care about the viability of
such arrangements raised questions and concerns about the impact of the
proposed rule on such arrangements, and the Department supports the
progress that has allowed elderly people and persons with disabilities
to remain in their homes and participate in their communities. As noted
above, in the most common scenario described by commenters, the live-in
roommate situation, depending on all of the facts of the arrangement,
the roommate may be exempt from the overtime compensation requirements
under the live-in domestic service employee exemption, and, depending
on the roommate's duties, could also qualify for the companionship
services exemption. In either case, the longstanding FLSA hours worked
principles would apply, and time that is not work time under those
principles would not have to be compensated.
The Department also recognizes that it is possible that certain
shared living arrangements may fall within the Department's exception
for foster care parents, provided specific criteria are met. See FOH
Sec. 10b29. In contrast to shared living arrangements that are not
foster care situations, individuals in foster care programs are
typically wards of the state; the state controls where the individuals
will live, with whom they will live, the care and services that will be
provided, and the length of the stays. For example, in Wage and Hour
Opinion Letter WH-298, the WHD concluded that where a husband and wife
agree to become foster parents on a voluntary basis and take a child
into their home to be raised as one of their own, the employer-employee
relationship would not exist between the parents and the state where
the payment is primarily a reimbursement of expenses for rearing the
child. See 1974 WL 38737 (Nov. 13, 1974). Of course, the Department
recognizes that there is a continuum of shared living arrangements and
a factual determination with respect to FLSA coverage must be made on a
case-by-case basis.
As stated throughout this rule, the Department believes that the
positions taken in the Final Rule are more consistent with the
legislative intent of the companionship services and live-in exemptions
and that protecting domestic service workers under the Act will help
ensure that the home care industry attracts and retains qualified,
professional workers that the sector will need in the future.
Recordkeeping Requirements
In the NPRM, the Department proposed to revise the recordkeeping
requirements applicable to live-in domestic service employees, in order
to ensure that employers maintain an accurate record of hours worked by
such workers and pay for all hours worked in accordance with the FLSA.
Section 13(b)(21) of the Act provides an overtime exemption for live-in
domestic service employees; however, such workers remain subject to the
FLSA minimum wage protections. Current Sec. 552.102 allows the
employer and employee to enter into an agreement that excludes from
hours worked sleeping time, meal time, and other periods of complete
freedom from duty when the employee may either leave the premises or
stay on the premises for purely personal pursuits, if the time is
sufficient to be used effectively. Paragraph 552.102(a) makes clear
that if the free time is interrupted by a call to duty, the
interruption must be counted as hours worked. Current Sec. 552.102(b)
allows an employer and employee who have such an agreement to rely on
it to establish the employee's hours of work in lieu of maintaining
precise records of the hours actually worked. The employer is to
maintain a copy of the agreement and indicate that the employee's work
time generally coincides with the agreement. If there is a significant
deviation from the agreement, a separate record should be kept or a new
agreement should be reached.
The Department expressed concern in the NPRM that not all hours
worked by a live-in domestic service employee are actually captured by
such an agreement, which may result in a minimum wage violation. The
Department stated that the current regulations do not provide a
sufficient basis to determine whether the employee has in fact received
at least the minimum wage for all hours worked. Therefore, the NPRM
proposed to revise Sec. 552.102(b) to no longer allow the employer of
a live-in domestic service employee to use the agreement as the basis
to establish the actual hours of work in lieu of maintaining an actual
record of such hours. Instead, the proposal required the employer to
keep a record of the actual hours worked. Consequently, the language
suggesting that a separate record of hours worked be kept when there is
a significant deviation from the agreement was proposed to be deleted,
and proposed Sec. 552.102(b) required entering into a new written
agreement whenever there is a significant deviation from the existing
agreement.
The Department also proposed to amend Sec. 552.110 with respect to
the records that must be kept for live-in domestic service employees.
Current Sec. 552.110(b) provides that records of actual hours worked
are not required for live-in domestic service employees; instead, the
employer may maintain a copy of the agreement referred to in Sec.
552.102. It also states, however, that this more limited recordkeeping
requirement does not apply to third party employers. No records are
required for casual babysitters. Current paragraph 552.110(c) permits,
when a domestic service employee works a fixed schedule, the employer
to use the schedule that the employee normally works and either provide
some notation that such hours were actually worked or, when more or
less hours are actually worked, show the exact number of hours worked.
Current Sec. 552.110(d) permits an employer to require the domestic
service employee to record the hours worked and submit the record to
the employer.
Because of the concern that all hours worked are not being fully
captured, the Department proposed in Sec. 552.110(b) to no longer
permit an employer to maintain a copy of the agreement as a
substitution for recording actual hours
[[Page 60478]]
worked by the live-in domestic service employee. Instead, the NPRM
proposed that the employer maintain a copy of the agreement and
maintain records showing the exact number of hours worked by the live-
in domestic service employee. Proposed Sec. 552.110(b) expressly
stated that the provisions of Sec. 516.2(c), pertaining to fixed-
schedule employees, do not apply to live-in domestic service employees,
which meant that employers would no longer be permitted to maintain a
simplified set of records for such employees. As a result, a conforming
change was proposed in Sec. 552.110(c), based on the Department's
belief that the frequency of schedule changes for live-in domestic
service employees simply makes reliance on a fixed schedule, with
exceptions noted, too unreliable to ensure an accurate record of hours
worked by these employees. In addition, because the proposed changes to
third party employment in Sec. 552.109 made moot the reference in
Sec. 552.110(b) to third party employers, it was removed from proposed
Sec. 552.110(b). The NPRM also proposed to revise Sec. 552.110(d) to
make clear that the employer of the live-in domestic service employee
could not require the live-in domestic service employee to record the
hours worked and submit the record to the employer, while employers of
other domestic service employees could continue to require the domestic
service employee to record and submit their record of hours worked. The
proposal required the employer to be responsible for making, keeping,
and preserving records of hours worked and ensuring their accuracy.
Finally, the Department proposed to move the sentence stating that
records are not required for casual babysitters, as defined by Sec.
552.5, to a stand-alone paragraph at Sec. 552.110(e).
The Department received a number of comments on the proposed
recordkeeping requirements, discussed below. Based on comments
indicating that the proposed change prohibiting employers from
requiring live-in domestic service employees to record and submit their
hours could create significant difficulties, particularly for those
employers who have Alzheimer's disease, dementia or developmental
disabilities, the Department modified the Final Rule to allow an
employer to require the live-in domestic service employee to record the
hours worked and submit the record to the employer. The Final Rule
adopts the other changes as proposed.
The Department also received a number of comments that stated that
the requirement for employers to keep a record of actual hours worked
would cause problems. For example, several employers and their
representatives, including CAHSAH, stated that it is unlikely that
individual employers would be aware of the requirement or be able to
comply with it, and that it would place an undue burden on an elderly
employer receiving services to have to comply with recordkeeping
requirements. AARP similarly stated that consumers who are ill or have
cognitive impairments and need live-in long-term services and supports
may not be able to monitor a worker's hours effectively or to keep
proper records. Therefore, while AARP stated its belief that third
party agencies could fulfill the requirement to record hours, it sought
an adjustment where the individual or family directly hires the
employee; AARP suggested allowing the agreement to control unless
deviations are noted and allowing the employer to require the employee
to record and submit hours. Other employers also expressed concern
about the ability of consumers with Alzheimer's disease, dementia, or
other disabilities to track hours, and they stated their preference for
continuing to use a predetermined schedule agreement or requiring the
employee to track hours. See, e.g., North Shore Senior Services, Gentle
Home Services, Harrison Enterprises, Inc., and Bright Star Healthcare
of Baltimore. Home care companies and their representatives expressed
concern about the additional paperwork burdens, stating that a
household employer with a live-in domestic service worker would need to
install a time clock, and that it would be difficult for employers to
track sleep time versus awake time, or to track time spent taking a
break versus helping the client. See, e.g., VNAA, Visiting Nurse
Service of New York (VNSNY), Angels Senior Home Solutions, Connecticut
Ass'n for Home Care & Hospice, Arizona Ass'n of Providers for People
with Disabilities, New York State Ass'n of Health Care Providers, and
Home Care Ass'n of NY State. They indicated that the requirement will
be burdensome to implement, particularly when consumers wake up
frequently during the night and need assistance, because care workers
will have to keep records of what time the person woke up, what help
was needed, and how long their assistance was provided. They expressed
concern that, because live-in domestic service workers are generally
unsupervised, their third party employers have little ability to
monitor or audit their records of meal and sleep periods versus work
hours to determine their accuracy. One company, Elder Bridge, believed
that using an electronic time management system was not feasible
because such systems cannot account for the unpredictable down time of
employees; therefore, the company suggested that caregivers should be
allowed to document their break time manually in their care notes. A
trade association, Home Care Alliance of Massachusetts, stated it had
no objection to recording the exact number of hours worked, but it
expressed confusion about how it would know that exact number if it
could not require live-in domestic service employees to record their
hours (see Harrison Enterprises, Inc.). An employee agreed, believing
that employee-based reports would be more accurate. A Georgetown
University Law Center student commented that recording deviations from
an agreement was no more difficult than recording every hour as it
happened and could be more accurate.
On the other hand, the Department received a number of comments
that emphasized the importance of the changes in the proposed
recordkeeping requirements for live-in domestic service workers. For
example, National Council of La Raza stated that some care workers work
more than 60 hours in a week, and that bolstering the recordkeeping
requirements ``is an excellent first step in ensuring that these
hardworking caregivers are accurately compensated for time on the
job.'' The ACLU supported the change, stating that ``[i]t is common
that live-in workers are required to work more than the hours they have
contracted to perform.'' Professor Valerie Francisco similarly stated
that her research shows that employers of live-in domestic workers do
not keep accurate records of hours worked. Numerous commenters,
including NELP, Workforce Solutions Cameron, COWS, and DCA, agreed,
stating that the current rule's tolerance for use of an agreement has
resulted in underpayments for time worked by live-in workers, who are
isolated and may fear retaliation if they complain. NELP noted that
``experts estimate that one-third of the victims of labor trafficking
are domestic workers.'' Other groups such as AFSCME, Women's Employment
Rights Clinic and the Center, noted that the revised regulations will
more effectively ensure that hours are properly recorded and that
workers receive at least the minimum wage for all hours worked. The
Center for Economic and Policy Research stated that the difficulties
that arise in capturing live-in hours worked ``are not qualitatively
different from monitoring issues that arise in other contexts.''
[[Page 60479]]
The Legal Aid Society, The Workplace Project, Care Group, Inc., the
Brazilian Immigrant Center and DAMAYAN, asserted that live-in domestic
workers are subject to exploitation and that requiring employers to
track hours will help to create a fair environment. However, several of
these advocacy groups viewed the requirement to track hours as
inconsistent with the ability to obtain an agreement with the worker to
exclude sleep time and other periods of complete freedom; they thought
that such agreements only create confusion and undermine the
requirement to track hours. Other individuals emphasized they wanted to
ensure that employers of live-in domestic service workers keep records
of the employees' rate of pay, total wages, and deductions, and they
noted that employers can keep such records using technology like
computers, smartphones, etc. Several consumers stated that they have
always kept records of hours worked and wages paid and that it is easy
to do. Finally, several commenters, including Care Group, Inc.,
National Domestic Workers Alliance, and The Workplace Project,
suggested that the regulatory requirement to have a record of the
employee's Social Security Number should also permit the use of an
Individual Taxpayer Identification Number (ITIN).
In light of the comments indicating that it would be very difficult
for many consumers of live-in services to monitor and record hours
worked accurately, especially those who have Alzheimer's disease,
dementia, or other conditions affecting memory, concentration, or
cognitive ability, the Department has modified Sec. 552.110(d) of the
Final Rule to remove the proposed rule's restriction on employers of
live-in domestic service employees being able to require such workers
to record their hours worked and submit that record to the employer,
thus, expanding the application of the current rule to all employers of
domestic service employees.\22\ Of course, even though employers may
require their employees to create and submit time records, employers
cannot delegate their responsibility for maintaining accurate records
of the employee's hours and for paying at least the minimum wage for
all hours worked. See Sec. 552.102(a). See, e.g., Kuebel v. Black &
Decker, Inc., 643 F3d 352, 363 (2nd Cir. 2011) (employer's duty to
maintain accurate records non-delegable); Caserta v. Home Lines Agency,
Inc., 273 F.2d 943, 946 (2nd Cir. 1959) (rejecting as inconsistent with
the FLSA an employer's contention that its employee was precluded from
claiming overtime not shown on his own timesheets, because an employer
cannot transfer its statutory burdens of accurate recordkeeping, and of
appropriate payment, to the employee). The Department modified the
Final Rule because it agrees that employees are, in many situations,
the individuals with the best knowledge of when they were working, and
they may have the best ability to track those hours.
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\22\ The Department also made minor edits to Sec. 552.110(b)
and (d) to improve clarity.
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With regard to the comments suggesting that the Department continue
to allow the use of a reasonable agreement reflecting the expected
schedule to establish a live-in domestic service employee's hours of
work, the Department does not agree that such a system is appropriate.
First, as stated in the NPRM, the Department is concerned that not all
hours actually worked are captured by such an agreement. Live-in
domestic service employees, including those employed to provide care
for the elderly or individuals with disabilities, have inherently
variable schedules due to the often unpredictable needs of their
employers. Therefore, reliance on the system in the current regulations
does not provide a sufficient basis to determine whether the employee
has in fact received at least the minimum wage for all hours worked. As
the comments from employee representatives emphasized, live-in domestic
service workers are in a vulnerable position due to their isolation,
and many fear retaliation if they complain. Further, numerous
commenters stated that live-in domestic service employees work more
hours than they have contracted to perform. While some employer
representatives expressed concern that tracking hours would be
burdensome, others--such as the Home Care Alliance of Massachusetts and
individuals who said they have tracked hours for their employees--
stated they had no objection to this requirement. AARP stated that
third party employers should be able to fulfill the requirement. The
Department notes that, under current Sec. 552.110(b), the simplified
recordkeeping system does not apply to third party employers.
The Department believes that the modification made in the Final
Rule allowing employers to require employees to record and submit their
hours will further simplify the process. The Department notes that
there is no need for an electronic time management system. See 29 CFR
516.1(a). Some employers might choose to develop their own
recordkeeping forms that, for example, might require the employee to
identify what tasks were performed and the hours spent in various
activities; some employers might simply require employees to keep notes
by hand of their hours worked; and some employers might decide to
record the hours themselves. But whatever method is used, the
Department believes that recording the actual hours worked will result
in more accuracy than the current system of simply relying upon an
agreement established months or years in the past. The recording of
actual hours therefore will be, as many commenters stated, an effective
tool to ensure that workers receive at least the minimum wage for all
hours worked.
Several employee representatives expressed the view that the
requirement to track actual hours worked was inconsistent with the
ability under Sec. 552.102(a) to have an employer-employee agreement
to exclude sleep time, meal time and other periods of complete freedom
from all duties. As discussed above, there is no inconsistency between
these two provisions. The Department recognizes that live-in domestic
service employees are not necessarily working all the hours that they
are on the employer's premises and the regulations require that to
exclude such time requires an agreement between the employer and
employee. Therefore, the parties may agree to exclude sleep, meal and
certain other relief periods from hours worked. See Sec. 552.102(a).
Nevertheless, all hours actually worked must be compensated, such as
where the normal sleeping period or the normal meal period is
interrupted by a call to duty. Id. The Final Rule simply clarifies
that, although the parties may have an agreement that sets forth the
parties' expectations regarding the normal schedule of work time, and
they may agree to exclude sleep, meal and other relief periods from
hours worked, that agreement does not control the compensation due each
week; rather, records must be kept of the actual hours worked in order
to ensure that the employee is properly compensated for all hours
worked.
Finally, several commenters stated that the reference to Social
Security Numbers in Sec. 552.102(a) should include, as an alternative,
an Individual Taxpayer Identification Number (ITIN); they also wanted
to ensure that employers of live-in domestic service workers also keep
records of rate of pay, total wages paid and deductions made. An ITIN
is a tax processing number issued by the Internal Revenue Service
(IRS). IRS issues ITINs to individuals who are required to have a U.S.
taxpayer identification number for tax reporting
[[Page 60480]]
or filing requirements but who do not have, and are not eligible to
obtain, a Social Security Number. ITINs are issued regardless of
immigration status, because both resident and nonresident aliens may
have a U.S. filing or reporting requirement under the Internal Revenue
Code. See http://www.irs.gov/individuals/article/0,,id=96287,00.html.
The Department did not propose any changes to Sec. 552.110(a), which
simply mentions Social Security Numbers in its summary of the
recordkeeping requirements in 29 CFR part 516 (see, e.g., Sec. 516.2,
which also only mentions Social Security Numbers). The Department
therefore does not think it is necessary to include this minor
suggested change in the Final Rule, as it does not believe the failure
to mention ITINs will cause any confusion. The recordkeeping
requirements in Sec. 516.2(a) and Sec. 552.110(a) already require
employers of nonexempt employees to maintain records such as hours
worked each workweek, total wages paid, total additions to or
deductions from wages and the basis therefore (such as board and/or
lodging), and the regular hourly rate of pay when overtime compensation
is due. Therefore, no further changes to the regulations in Sec.
552.110 are necessary or appropriate.
D. Section 552.109 (Third Party Employment)
Section 552.109 addresses whether a third party employer, the term
the Department uses to refer to an employer of a direct care worker
other than the individual receiving services or his or her family or
household, may claim the FLSA exemptions specific to the domestic
service employment context. Current Sec. 552.109(a) permits third
party employers to claim the companionship services exemption from
minimum wage and overtime pay established by Sec. 13(a)(15) of the
Act; current Sec. 552.109(c) permits third party employers to claim
the live-in domestic service employee exemption from overtime pay
established by Sec. 13(b)(21) of the Act. (Section 552.109(b)
addresses third party employment in the context of casual babysitting,
which is not a topic within the scope of this rulemaking.) In the NPRM,
the Department proposed to exercise its expressly delegated rulemaking
authority and bring the regulation in line with the legislative intent
and the realities of the home care industry by revising current
paragraphs (a) and (c) to prohibit third party employers from claiming
these exemptions. Under the proposed regulation, only an individual,
family, or household would be permitted to claim the exemptions in
Sec. Sec. 13(a)(15) and 13(b)(21) of the FLSA. In other words, where a
direct care worker is employed by a third party, the individual, family
or household using the worker's services could claim the exemptions,
but the third party employer would be required to pay the worker at
least the federal minimum wage for all hours worked and overtime pay at
one and one-half the employee's regular rate for all hours worked over
40 in a workweek. For the reasons explained below, the Department is
adopting Sec. 552.109 as proposed.
Many commenters, including employees, labor organizations, worker-
advocacy organizations, and consumer representatives, expressed strong
support for the proposed change to Sec. 552.109. See, e.g., the
Center; SEIU Healthcare Illinois Indiana; AFSCME; Legal Aid Society.
The National Consumer Voice for Quality Long-Term Care explained that
``[e]ven though some individuals who hire their own workers may end up
paying more under the proposed rules, consumers and advocates in our
network believe that providing minimum wage, overtime, and pay for
travel time for these crucial health care workers is the right thing to
do.'' AARP noted that it ``strongly agrees'' with denying the
exemptions to third party agencies and asserted that ``requiring all
home care and home health care agencies to pay minimum wage and
overtime to their employees is a centrally important component of the
NPRM.''
Numerous commenters agreed with the Department's assertion that the
proposed changes were consistent with Congressional intent. See, e.g.,
PHI, NELP, and EJC. A comment signed by Senator Harkin and 18 other
Senators stated that ``[a] close look at the legislative history of the
1974 changes establishes that Congress clearly intended to include
today's home care workforce within the FLSA's protections.'' PHI argued
that ``employment by a home care agency strongly suggests that the
worker is providing home care services as a vocation and is a regular
bread-winner responsible for the support of her family. Such a formal
employment arrangement is inconsistent with the teenage babysitters and
casual companions for the elderly that Congress intended to exclude.''
Additionally, many advocacy groups and others agreed with the
Department's statements in the NPRM concerning the increased
professionalization and standardization of the home care workforce.
See, e.g., DCA, Bruce Vladeck, NELP. The Westchester Consulting Group
noted that third party employers ``are in the trade and business of
providing services to the public and experience financial profit and
loss'' while household employers are purchasing companionship services
``for their personal use to address their specific support needs.''
Similarly, PHI argued that one of the companionship services
exemption's ``main goals'' was to ``limit application of [the] FLSA to
workers whose vocation is domestic service (that is, not occasional
babysitters and companions)'' and this concern is not ``relevant to
agency-employed home care workers.'' The Legal Aid Society explained
that ``the proposed regulations appropriately recognize that this work
is not the kind of casual neighborly assistance that Congress had in
mind when it created the companionship services exemption. Rather,
these workers are professional caregivers, who work long hours for
agencies that are businesses, whether for-profit or not-for-profit.''
Additionally, the ACLU and others observed that many members of this
workforce, such as home health aides and personal care assistants, are
now often subject to training requirements and competency evaluations.
Employers and employer associations, however, generally opposed the
proposed revision of Sec. 552.109. See, e.g., CAHSAH, 24Hr Home Care,
ResCare Home Care, NASDDDS, Texas Association for Home Care & Hospice,
Inc. Many of these commenters asserted the proposal is contrary to
Congress's intent as well as the Department's longstanding
interpretation of the companionship services exemption. BrightStar
franchisees, among others, argued that the use of the words ``any
employee'' in Sec. Sec. 13(a)(15) and 13(b)(21) of the Act
demonstrates that Congress intended for the exemptions to apply based
upon the activities of the employee rather than the identity of the
employer. BrightStar franchisees wrote that ``floor debate included
several statements related to concerns about the ability of working
families to afford companionship services for their loved ones and keep
them out of institutionalized nursing home care.'' A comment signed by
Senator Alexander and 13 other Senators stated that the ``statute and
history clearly demonstrate that Congress intended to provide a broad
exemption from the FLSA minimum wage and overtime requirements for all
domestic workers providing companionship services.'' Husch Blackwell
further commented that ``Congress is certainly well aware of the
exemption's application over these
[[Page 60481]]
last several decades, and has not taken action upon this issue during
that time. Its failure to do so is clear evidence that the regulations
as they currently stand appropriately state Congressional intent.'' See
also Chamber of Commerce. CAHSAH and the National Association of Home
Care & Hospice (NAHC), among others, questioned the propriety of the
Department's shift in position as to this issue, especially since it
defended the current regulation in Long Island Care at Home, Ltd. v.
Coke, 551 U.S. 158 (2007). Additionally, NRCPDS asserted that ``wages
should be determined based upon the value of the tasks performed'' and
that the ``idea that the same tasks are valued differently based solely
upon the identity of the employer seems unjustifiable.''
Employers and employer representatives also asserted that the
proposed revision to Sec. 552.109 would be harmful to direct care
workers because raising the cost of services provided through home care
agencies would incentivize employment through informal channels rather
than through such agencies. The Virginia Association for Home Care and
Hospice stated that the proposed change would ``encourage workers to
leave agencies and be hired directly by the client,'' and in this
``underground economy,'' taxes would not be withheld, Social Security
would not be paid, and workers' compensation insurance would not be
provided. See also CAHSAH. VNAA asserted that by discouraging joint
employment, the proposed change could undermine Medicaid's efforts to
expand the use of consumer-directed programs, which rely on agencies to
assist consumers who are not capable of being solely responsible for
managing a direct care worker's employment.
Numerous commenters sought clarification as to which employers
would be considered ``third party employers'' and how the proposed
revisions would affect various types of consumer-directed programs and
other arrangements that have developed to provide home care--including
registries, ``agency with choice'' programs, and ``employer of record''
or fiscal intermediary situations--in which third parties have roles
such as handling tax and insurance compliance. See, e.g., Private Care
Association; Jim Small; ANCOR. Comments from these various types of
entities requested guidance from the Department as to whether direct
care workers under their particular programs could qualify for either
exemption under the Final Rule. Additionally, several advocacy groups
expressed confusion regarding whether the Department's proposed
revision would hold consumers or their families jointly and severally
liable for wages owed pursuant to the FLSA. For example, AARP noted
that it ``strongly opposes the proposal to impose joint and several
liability for FLSA compliance on consumers when the worker is supplied
and employed by a third party employer such as an agency. When agencies
are involved, they should be considered the sole employer.'' See also
The National Consumer Voice for Long-Term Care.
The Department has carefully considered comments submitted
regarding the proposed revisions to Sec. 552.109(a) and (c) and has
decided to adopt the regulation as proposed. The rulemaking record
includes views from a broad and comprehensive array of interested
parties: Academics studying this issue, advocates for the individuals
who need home care services, home care agencies that currently claim
the companionship services exemption, labor unions, associations
representing direct care workers, and representatives of the disability
community. As explained in the NPRM and for the reasons discussed
below, the Department believes that the revised regulation is
consistent with Congress's intent when it created these exemptions and
reflects the dramatic transformation of the home care industry since
this regulation was first promulgated in 1975.
As an initial matter, the Department observes that it is exercising
its expressly delegated rulemaking authority in promulgating this rule.
In creating the companionship services exemption, Congress ``left a gap
for the agency to fill'' as to the meaning and scope of the exemption
at section 13(a)(15), explicitly giving the Secretary authority to
define and delimit the boundaries of the exemption. Chevron U.S.A.,
Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 843-44 (1984);
see Nat'l Cable & Telecomm Ass'n. v. Brand X Internet Servs., 545 U.S.
967, 980 (2005) (``Filling these gaps . . . involves difficult policy
choices that agencies are better equipped to make than courts.''). When
Congress expressly delegates authority to the agency ``to elucidate a
specific provision of the statute by regulation,'' any regulations
promulgated pursuant to that grant of power and after notice and
comment are to be given ``controlling weight unless they are arbitrary,
capricious, or manifestly contrary to the statute.'' Chevron, 467 U.S.
at 844; see Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158, 165-
68 (2007); Gonzales v. Oregon, 546 U.S. 243, 255-256 (2006) (Chevron
deference is warranted ``when it appears that Congress delegated
authority to the agency generally to make rules carrying the force of
law, and that the agency interpretation claiming deference was
promulgated in the exercise of that authority'' (internal quotation
marks omitted)).
Accordingly, the Department is now adopting a revised regulation
that is, as many commenters agreed, consistent with Congress's intent
to provide the protections of the FLSA to domestic workers while
providing narrow exemptions for workers performing companionship
services and live-in domestic service workers. Prior to 1974, domestic
service employees who worked for a placement agency that met the annual
earnings threshold for FLSA enterprise coverage, but were assigned to
work in someone's home, were covered by the FLSA. 39 FR 35385. However,
the Department's 1975 regulations, by allowing those covered
enterprises to claim the exemption denied those employees the Act's
minimum wage and overtime protections. This Final Rule reverses this
``roll back''.
The legislative history makes clear that in passing the 1974
amendments to the Act, Congress intended to extend FLSA coverage to all
employees whose ``vocation'' was domestic service, but to exempt from
coverage casual babysitters and companions who were not regular
breadwinners or responsible for their families' support. See House
Report No. 93-913, p. 36. Indeed, it is apparent from the legislative
history that the 1974 amendments were intended only to expand coverage
to include more workers, and were not intended to roll back coverage
for employees of third parties who already had FLSA protections (as
employees of covered enterprises). The focus of the floor debate
concerned the extension of coverage to categories of domestic workers
who were not already covered by the FLSA, specifically, those employed
by an individual or small company rather than by a covered enterprise.
See, e.g., 119 Cong. Rec. at S24800 (``coverage of domestic employees
is a vital step in the direction of insuring that all workers affecting
interstate commerce are protected by the Fair Labor Standards Act'');
see also Senate Report No. 93-690 at p. 20 (``The goal of the
Amendments embodied in the committee bill is to update the level of the
minimum wage and to continue the task initiated in 1961--and further
implemented in 1966 and 1972--to extend the basic protection of the
Fair Labor Standards Act to additional workers and to reduce to the
extent
[[Page 60482]]
practicable at this time the remaining exemptions.'' (emphasis
added)).\23\
---------------------------------------------------------------------------
\23\ Several comments focused on statements made during floor
debate concerning the cost of care and preventing nursing home
placement. See BrightStar Care of Tucson; Visiting Nurse Service of
New York. However, the Department notes that the floor debate cited
by these commenters took place in 1972 on earlier domestic service
legislation not containing the exemption that was considered by a
different Congress than the one enacting the 1974 amendments. See,
e.g., 118 Cong. Rec. 24715 (July 20, 1972).
---------------------------------------------------------------------------
Further, there is no indication that Congress considered limiting
enterprise coverage for third party employers providing domestic
services. The only expressions of concern by opponents of the amendment
related to the new recordkeeping burdens on private households. See,
e.g., 119 Cong. Rec. 18,155 (statement of Rep. Harrington); 119 Cong.
Rec. 24,797 (statement of Sen. Dominick). Recognizing this intended
expansion of the Act, the exemptions excluding employees from coverage
must therefore be defined narrowly in the regulations to achieve the
law's purpose of extending coverage broadly. This is consistent with
the general principle that coverage under the FLSA is broadly construed
so as to give effect to its remedial purposes, and exemptions are
narrowly interpreted and limited in application to those who clearly
are within the terms and spirit of the exemption. See, e.g., A.H.
Phillips, Inc. v. Walling, 324 U.S. 490, 493 (1945). The Department is
not persuaded by comments contending that because section 13(a)(15) has
never been amended, the prior regulations were therefore consistent
with Congressional intent. See, e.g., Husch Blackwell; U.S. Chamber of
Commerce. As the Supreme Court has observed, Congressional inaction
``is a notoriously poor indication of [C]ongressional intent.''
Schweiker v. Chilicky, 487 U.S. 412, 440 (1988); see also Minor v.
Bostwick Labs, Inc., 669 F.3d 428, 436 (4th Cir. 2012). Therefore, the
Department now acknowledges that the regulatory roll back of coverage
for workers employed in private homes by covered enterprises that
resulted from the 1975 version of Sec. 552.109 was not in accord with
Congress's purpose of expanding coverage.
By excluding direct care workers employed by third party covered
enterprises from FLSA coverage, the Department's 1975 regulations
created an inequity that has increased over time. As the home care
workforce has grown, the impact of the Department's roll back, which is
inconsistent with the 1974 amendments, has become even more magnified.
As noted by many commenters, today, few direct care workers are the
``elder sitters'' envisioned by Congress when enacting the exemption.
See 119 Cong. Rec. at S24801. Instead, direct care workers employed by
third parties are the sorts of domestic service employees Congress
specifically intended the FLSA to cover: Their work is a vocation. See
Senate Report No. 93-690, p. 20; House Report No. 93-913, pp. 36. For
example, a direct care worker who has sought out work through a private
home care agency is engaged in a formal, professional occupation and he
or she may well be the primary ``bread-winner'' for his or her family.
Thus, it is the Department's position that employees providing home
care services who are employed by third parties should have the same
minimum wage and overtime protections that other domestic service and
other workers enjoy.
Significantly, the Supreme Court explicitly affirmed the
Department's authority to address the issue of third party employment
in the domestic service context in Long Island Care at Home, Ltd. v.
Coke, 551 U.S. 158 (2007). The Supreme Court acknowledged that the
statutory text and legislative history do not provide an explicit
answer to the ``third party employment question.'' Id. at 168. Rather,
the Court explained that the FLSA leaves gaps as to the scope and
definition of statutory terms such as ``domestic service employment''
and ``companionship services,'' and it provides the Department with the
power to fill those gaps. Id. at 167. In particular, the Court stated
its belief that ``Congress intended its broad grant of definitional
authority to the Department to include the authority to answer''
questions including ``[s]hould the FLSA cover all companionship workers
paid by third parties? Or should the FLSA cover some such companionship
workers, perhaps those working for some (say, large but not small)
private agencies . . .? How should one weigh the need for a simple,
uniform application of the exemption against the fact that some (but
not all) third-party employees were previously covered?'' Id. at 167-
68. Further, when the Department fills statutory gaps with any
reasonable interpretation, and in accordance with other applicable
requirements, the courts accept the result as legally binding and
entitled to deference. Id. The Supreme Court explicitly recognized that
the Department may interpret its ``regulations differently at different
times in their history,'' and may make changes to its position,
provided that the change creates no unfair surprise. Id. at 170-71. The
Court also recognized that when the Department utilizes notice-and-
comment rulemaking in an attempt to codify a new regulation, as it has
done with this Final Rule, such rulemaking makes surprise unlikely. Id.
at 170.
Although the commenters who noted that the Department is changing
its position as to the proper treatment of third party employers in
Sec. 552.109 are correct, such a change is not only permissible, but
also reasonable. The Department did argue in Coke, as well as in Wage
and Hour Advisory Memorandum (``WHAM'') 2005-1 (Dec. 1, 2005) (found at
http://www.dol.gov/whd/FieldBulletins/index.htm), that the third party
regulation as written in 1975 was the Department's best reading of
these statutory exemptions. In the past, however, the Department
erroneously focused on the phrase ``any employee,'' instead of focusing
on the purpose and objective behind the 1974 amendments, which was to
expand minimum wage and overtime protections to workers employed in
private households that did not otherwise meet the FLSA coverage
requirements. The Supreme Court has ``stressed that in expounding a
statute, we must not be guided by a single sentence or member of a
sentence, but look to the provisions of the whole law, and to its
object and policy.'' U.S. Nat'l Bank of Oregon v. Indep. Ins. Agents of
Am., Inc., 508 U.S. 439, 455 (1993) (internal quotation marks omitted).
Moreover, in view of the Supreme Court's conclusion that the text of
the FLSA does not expressly answer the third party employment question,
the statutory phrase ``any employee'' cannot, standing alone, answer
the question definitively. Moreover, the WHAM failed to consider the
industry changes that have taken place over the decades since the
statutory amendment was enacted. After considering the purpose and
objectives of the amendments as a whole, reviewing the legislative
history, and evaluating the state of the home care industry, the
Department believes that the companionship services exemption was not
intended to apply to third party employers.
In addition, the Department does not believe commenters' concerns
about the harmful effect of the change to Sec. 552.109 are warranted
because the Department did not identify or receive any information
suggesting that such effects have occurred in the 15 states that
already provide minimum wage and overtime protections to all or most
third party-employed home care workers who may otherwise fall under the
federal companionship services exemption.
[[Page 60483]]
These states are Colorado, Hawaii, Illinois,\24\ Maryland,
Massachusetts, Michigan, Minnesota, Montana, Nevada, New Jersey, New
York, Pennsylvania, Washington, and Wisconsin. In addition, Maine
extends minimum wage and overtime protections to all companions
employed by for-profit agencies. Some, but not all, privately employed
home care workers in California are exempt from overtime requirements
as ``personal attendants;'' all receive at least the minimum wage. Five
more states (Arizona, Nebraska, North Dakota, Ohio, and South Dakota)
and the District of Columbia provide minimum wage coverage to home care
workers, including companions, employed by third parties.
Significantly, several of the states, such as Colorado and Michigan,
have instituted these protections in the last several years. The
existence of these state protections diminishes the force of objections
regarding the feasibility and expense of prohibiting third parties from
claiming the companionship services and live-in domestic service worker
exemptions. Indeed, the comments received did not point to any reliable
data indicating that state minimum wage or overtime laws had led to
increased institutionalization or stagnant growth in the home care
industry in any state. Rather, the Michigan Olmstead Coalition reported
``we have seen no evidence that access to or the quality of home care
services are diminished by the extension of minimum wage and overtime
protection to home care aides in this state almost six years ago.'' PHI
noted that the growth of home care establishments in Michigan ``is
actually higher in the period after implementing wage and hour
protections than before--41 percent compared to 32 percent.'' See PHI;
see also Workforce Solutions (``There is no data showing that states
with minimum wage and overtime protections for home care workers have
higher rates of institutionalization.''). Indeed, as summarized by
AARP, there is no strong correlation between states that have minimum
wage and overtime protections with expenditures on HCBS versus
institutionalized care.
---------------------------------------------------------------------------
\24\ In Illinois, 30,000 workers in the Home Services Program
under the Illinois Department of Human Services are considered
jointly employed by the state and the consumer and do not receive
overtime pay.
---------------------------------------------------------------------------
Moreover, the Department does not believe that this rule will
create or significantly expand an underground economy where workers
hired directly by a consumer or a third party are not treated as
employees and thus are not paid proper wages, income and FICA taxes are
not withheld, and unemployment and worker's compensation insurance are
not provided. Although difficult to predict, the Department anticipates
that rather than significantly expanding any underground economy, this
rule will bring more workers under the FLSA's protections, which in
turn will create a more stable workforce by equalizing wage protections
with other health care workers and reducing turnover. A more stable
home care workforce also dilutes arguments that continuity of care
would be negatively affected by the rule. This industry is currently
marked by high turnover, which can be very disruptive to consumers. The
Department believes that consumers would benefit from reduced turnover
among direct care workers and the accompanying improvement in quality
of care.
Joint Employment
The Department wishes to clarify how the third party regulation may
apply in evaluating instances of joint employment, what constitutes a
``third party employer,'' independent contractors, and joint and
several liability. Direct care workers and consumers explained that a
variety of care arrangements have been developed in order to provide
home care, many involving potential joint employment relationships. The
Department notes that this regulation does not change any of the
Department's regulations or guidance concerning the employment
relationship and joint employment. In evaluating what constitutes a
``third party employer,'' a ``third party'' will be considered any
entity that is not the individual, member of the family, or household
retaining the services. However, what entity constitutes an
``employer'' is governed by long-standing case law from the U.S.
Supreme Court and other federal appellate courts interpreting the
language of the FLSA and applying the ``economic realities'' test
discussed in greater detail below.
As the Department has previously explained, a single individual may
be considered an employee of more than one employer under the FLSA. See
29 CFR Part 791. Joint employment is employment by one employer that is
not completely disassociated from employment by other employers.
Whether joint employment exists is to be determined based upon all the
facts of the particular case. As an example, an individual who hires a
direct care worker or live-in domestic service worker to provide
services pursuant to a Medicaid-funded consumer directed program may be
a joint employer with the state agency that administers the program.
Generally, where a joint employment relationship exists, ``all joint
employers are responsible, both individually and jointly, for
compliance with all of the applicable provisions of the act.'' Sec.
791.2(a). However, under the revised regulation, in joint employment
situations the individual, member of the family or household employing
the direct care worker or live-in domestic service worker will be able
to claim an exemption provided that the employee meets the duties
requirements for the companionship services exemption or the residence
requirements for a ``live-in'' domestic service worker exemption. The
third party employer will not be able to claim that exemption.
Determinations about the existence of an employment or joint
employment relationship are made by examining all the facts in a
particular case and assessing the ``economic realities'' of the work
relationship. See, e.g., Goldberg v. Whitaker House Cooperative, Inc.,
366 U.S. 28, 33 (1961). Factors to consider may include whether an
employer has the power to direct, control, or supervise the worker(s)
or the work performed; whether an employer has the power to hire or
fire, modify the employment conditions or determine the pay rates or
the methods of wage payment for the worker(s); the degree of permanency
and duration of the relationship; where the work is performed and
whether the tasks performed require special skills; whether the work
performed is an integral part of the overall business operation;
whether an employer undertakes responsibilities in relation to the
worker(s) which are commonly performed by employers; whose equipment is
used; and who performs payroll and similar functions. An economic
realities test does not depend on ``isolated factors but rather upon
the circumstances of the whole activity.'' Rutherford Food Corp. v.
McComb, 331 U.S. 722, 730 (1947). In the past, the Department has
applied this economic realities principle when it promulgated
regulations to clarify the definition of ``joint employment'' under the
Migrant and Seasonal Agricultural Worker Protection Act, 29 CFR
500.20(h), and the Family and Medical Leave Act, 29 CFR 825.106, both
of which incorporate the FLSA definition of ``employ.''
To illustrate how a home care services scenario may be assessed
utilizing the economic realities test, consider the following example:
Example: Mary contacts her state government about receiving home
care services. The state has a ``self-direction program'' that
allows Mary to hire a direct
[[Page 60484]]
care worker through an entity that has contracted with the state to
serve as the ``fiscal/employer agent'' for program participants who
employ direct care workers. The ``fiscal/employer agent'' performs
tasks similar to those that commercial payroll agents perform for
businesses, such as maintaining records, issuing payments,
addressing tax withholdings, and ensuring that workers' compensation
insurance is maintained for the worker, but is not involved in any
way in the daily supervision, scheduling, or direction of the
employee. Mary has complete budget authority over how to allocate
the funds she receives under the Medicaid self-direction program,
negotiates the wage rate with the direct care worker, is wholly
responsible for day-to-day duty assignments, and has the sole power
to hire and fire her direct care worker.
In the above scenario, the fiscal/employer agent is likely not an
employer of the direct care worker, and the consumer is likely the sole
employer. The fiscal/employer agent has no power to hire or fire,
direct, control, or supervise the worker and cannot modify the pay rate
or modify the employment conditions. The work is not performed on the
fiscal/employer agent's premises, and the fiscal/employer agent has
provided no tools or materials required for the tasks performed.
However, any change in the specific facts of this scenario, such as if
direct care workers are required to obtain approval from the fiscal/
employer agent in order to arrive late or be absent from work or if the
fiscal/employer agent sets the direct care workers' specific hours
worked, may lead to a different conclusion regarding the employer
status of the fiscal/employer agent.
The decision on joint employment would likely be different under
the following scenario:
Example: Mary contacts her state government about receiving home
care services. The state has a ``public authority model'' under
which the state or county agency exercises control over the direct
care workers' conditions of employment by deciding the method of
payment, reviewing worker time sheets and determining what tasks
each worker may perform. The agency also exercises control over the
wage rate either by setting the wage rate.
In the above scenario, the state or county agency is likely an
employer of the direct care workers under the FLSA. See, e.g., Bonnette
v. California Health & Welfare Agency, 704 F.2d 1465, 1470 (9th Cir.
1983). The state or county agency directs, controls, and supervises the
workers, and can modify the pay rate and other employment conditions
such as the number of hours worked and the tasks performed. In
addition, the agency may be an employer of the direct care workers even
if a private third party agency is also found to be an employer; such
joint employment arrangements would result in the state or county
agency and the private third party agency being jointly and severally
liable for the direct care workers' wages.
It is critical to note that this fact-specific economic realities
test will be applied to all situations when assessing an employment
relationship or potential joint employment, regardless of the name used
by the third party (e.g., ``fiscal/employer agent,'' ``Agency with
Choice,'' ``fiscal intermediary,'' ``employer of record'') or worker
(e.g., ``registry worker,'' ``independent provider,'' ``independent
contractor''). As the Department has repeatedly noted, with respect to
exemption status, job titles are not determinative. See, e.g., Sec.
541.2; FOH 22a04; Wage and Hour Fact Sheet 17A: Executive,
Administrative, Professional, Computer and Outside Sales Employees
Under the Fair Labor Standards Act. This principle holds true for
determining employment status as well.
With regard to potential misclassification of employees as
independent contractors or other non-employees, the Department will
continue its efforts to combat such misclassification. As the
Department has explained, there is no single test for determining
whether an individual is an independent contractor or an employee for
purposes of the FLSA. Rather, a number of factors must be considered,
including the extent to which the services rendered are an integral
part of the principal's business; the permanency of the relationship;
the amount of the alleged contractor's investment in facilities and
equipment; the nature and degree of control exerted by the principal;
the alleged contractor's opportunities for profit and loss; the amount
of initiative or judgment required for the success of the contractor;
and the degree of independent business organization and operation. See,
e.g., Donovan v. Sureway Cleaners, 656 F.2d 1368, 1370 (9th Cir. 1981).
To further illustrate the economic realities test, consider this
example:
Example: ABC Company advertises as a ``registry'' that provides
potential direct care workers. The registry conducts a background
screening and verifies credentials of potential workers, and assists
clients by locating direct care workers who may be able to meet a
client's needs. ABC Company informs Ann, a direct care worker, of
the opportunity to work for a potential client. If Ann is interested
in the opportunity, she is responsible for contacting the client for
more information. Ann is not obligated to pursue this or any other
opportunity presented, and she is not prohibited from registering
with other referral services or from working directly with clients
independent of ABC Company. The registry does not provide any
equipment to Ann, and does not supervise or monitor any work Ann
performs. ABC Company has no power to terminate Ann's employment
with a client. ABC Company processes Ann's payroll checks according
to information provided by clients, but does not set the pay rate.
In this scenario, Ann is likely not an employee of ABC Company.
There is no permanency in the relationship between the registry and
Ann. The registry does not provide any equipment or facilities,
exercises no control over daily activities, and has no power to hire or
fire. Ann is able to accept as many or as few clients as she wishes.
The client sets the rate of pay and negotiates directly with Ann about
which services will be provided. However, this does not mean that every
``registry'' will not be an employer. Rather, a fact-specific
assessment must be conducted. Indeed, the Department has found
registries to be employers under different facts. See, e.g., Wage and
Hour Opinion Letter, 1975 WL 40973 (July 31, 1975) (finding a nursing
registry to be an employer when the registry maintained a log of
assignments showing the shifts worked, established the rate which would
be charged, and exercised control over the nurse's behavior and the
work schedule).
Some of the comments demonstrated confusion about when a family or
household employing a direct care worker may be jointly and severally
liable for wages owed. See, e.g., AARP; National Consumer Voice for
Long-Term Care. The NPRM stated that ``if the employee fails to qualify
as an exempt companion, such as if the employee performs incidental
duties that exceed the 20 percent tolerance allowed under the proposed
Sec. 552.6(b), or the employee provides medical care for which
training is a prerequisite, the individual, family or household member
cannot assert the exemption and is jointly and severally liable for the
violation.'' 76 FR 81198. There appeared to be a misperception that
joint and several liability would attach in any joint employment
relationship. However, as stated in the NPRM, an individual, family, or
household would be jointly and severally liable for a violation only in
instances when an employee fails to meet the ``duties'' requirement for
the companionship services exemption or the residence requirements for
the live-in domestic service worker exemption. This rulemaking is not
altering the state of the law under such circumstances; if a domestic
service employee is not providing companionship services or
[[Page 60485]]
does not meet the residence requirements for the live-in domestic
service worker exemption, then the family and any third party employer
are both responsible for complying with the FLSA's minimum wage,
overtime, and recordkeeping requirements.\25\ For example, under both
the current regulations and this Final Rule, if a family and an agency
jointly employ a home care worker, and that worker is required to spend
50 percent of her time cleaning the house, that worker is not exempt
under the companionship services exemption and the family and the third
party are jointly and severally liable for any back wages due. However,
under this Final Rule, in those situations where an employee satisfies
the duties test for the companionship services exemption, the
individual, family or household member may claim the exemption, but the
third party joint employer cannot. In those instances, the family or
household member would not be subject to joint and several liability.
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\25\ The Department notes that it is a good practice for
individuals, family members or household members to keep a record of
work performed in the household whether or not the individual,
family or household member is an employer of the person performing
the work.
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Similarly, under the Final Rule, if a family and an agency jointly
employ a live-in domestic service employee, the family would be able to
claim the overtime pay exemption under Sec. 13(b)(21), but the third
party employer could not. If there is overtime pay due,\26\ the third
party employer would be liable for overtime pay; however, the family
would not be subject to joint and several liability, provided the
worker satisfies the live-in worker requirements (namely, resides in
the home the requisite amount of time).
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\26\ When an employee resides on his or her employer's premises,
not all of the time spent on the premises is considered working
time. See the Hours Worked section of this preamble for guidance on
determining compensable hours worked.
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Finally, the revised regulation refers to ``the individual or
member of the family or household'' who employs the direct care worker
or live-in domestic worker. It is the Department's intent that the
phrase ``member of the family or household'' be construed broadly, and
no specific familial relationship is necessary. For example, a ``member
of the family or household'' may include an individual who is a child,
niece, guardian or authorized representative, housemate, or person
acting in loco parentis to the individual needing companionship or
live-in services.
The Department will work closely with stakeholders and the
Department of Health and Human Services to provide additional guidance
and technical assistance during the period before the rule becomes
effective, in order to ensure a transition that minimizes potential
disruption in services and supports the progress that has allowed
elderly people and persons with disabilities to remain in their homes
and participate in their communities.
E. Other Comments
As noted in various sections of this preamble, the Department
received a number of comments raising concerns about topics that are
related to this rulemaking but are not within the scope of the
revisions to the regulatory text. These issues are discussed below.
First, the Department addresses comments expressing concern that the
rulemaking will cause increased institutionalization. Second, the
Department addresses comments raising questions about paid family
caregivers. Finally, the Department responds to commenters' questions
regarding FLSA principles that are relevant in determining the hours
for which a non-exempt direct care worker must be paid but which are
not changed by this Final Rule.
Community Integration and Olmstead
The Department received several comments from groups that advocate
for persons with disabilities and employers that raised concerns that
requiring the payment of minimum wage and overtime to direct care
workers would increase the cost of home and community based services
(HCBS) funded under Medicaid, which in turn would result in a reduction
of services under those programs and increased institutionalization of
the elderly or persons with disabilities. See, e.g., ADAPT, National
Disability Leadership Alliance (NDLA), Toolworks, Inc., National
Council on Aging, and VNSNY. Specifically, ADAPT expressed concern that
Medicaid reimbursement rates under HCBS programs will not increase to
account for the additional costs for personal care services as a result
of the Department's proposed rule, resulting in individuals going
without essential assistance and eventually being forced into
facilities. As a result, ADAPT asserted that the Department's proposed
rule would promote institutionalization of such individuals.
These views were shared by NDLA, which stated that the Department's
proposal would promote institutionalization because it would increase
the cost of HCBS programs without a concurrent increase in Medicaid
reimbursement rates or the Medicaid caps for available funding. As a
result, NDLA expressed concern that persons with disabilities ``will be
left with the choice of forgoing needed assistance or subjecting
themselves to unwanted institutionalization and loss of community
connection.'' In addition, VNSNY, without providing specifics, stated
that the Department's proposed rule would be ``inconsistent with the
efforts undertaken around the country by public agencies to comply with
the Supreme Court's decision in Olmstead v. L.C. ex rel. Zimring, 527
U.S. 581 (1999).''
The Michigan Olmstead Coalition similarly stated that under the
Americans with Disabilities Act (ADA) and the U.S. Supreme Court's
decision in Olmstead, ``governmental policies must now support and
promote inclusion, not segregation, of people living with
disabilities'' and that ``[p]eople who need long-term supports and
services should not be forced to receive those services in institutions
rather than their own homes and apartments.'' However, the Michigan
Olmstead Coalition stated that many direct care workers do the same
work as workers in nursing homes and both should receive minimum wage
and overtime protections. ``Without similar workplace compensation
protections applied to institutions and home care, the home care
industry faces another governmental policy that creates a disadvantage
relative to nursing homes.'' In addition, the Michigan Olmstead
Coalition stated that without minimum wage and overtime protections for
direct care workers, ``nursing homes are better able to attract and
retain staff creating additional burdens or competitive challenges on
home care agencies.'' The Michigan Olmstead Coalition asserted that the
proposal ``will help end another `institutional bias' that favors
nursing homes.''
Citing Olmstead, the SEIU similarly stated that the Department's
proposed rule was unlikely to result in increased institutionalization
of individuals because ``there has been a decisive policy shift toward
home- and community-based long-term care in this country that is
extremely unlikely to be reversed.'' The SEIU noted that it is
``difficult to imagine'' that publicly funded programs would reverse
course from home and community based services to institutionalization
simply because ``labor standards are brought up to those prevailing
virtually everywhere else.'' The SEIU also noted that one of the
reasons for the shift to home and community based services is due to
the substantial cost savings associated with
[[Page 60486]]
non-institutional care. SEIU explained that these cost savings are not
``simply a difference in hourly labor costs, as is demonstrated by the
fact that many of the states that are leaders in `rebalancing' away
from institutions are also leaders in setting adequate homecare labor
standards.'' The advantages of home and community based services
include that the services can be tailored to each individual's level of
need and home and community based services do not include the overhead
costs of maintaining a care facility.
The Department in no way meant to convey in the proposal that some
increased levels of institutionalization would be considered
acceptable. The Department fully supports the ADA's and Olmstead's
requirement that government programs provide needed services and care
in the most integrated setting appropriate to an individual, and
recognizes the important role that home and community based services
have played in making that possible. The Department agrees with the
Michigan Olmstead Coalition's assertion that protecting direct care
workers under the FLSA will benefit home and community based services
by ensuring that the home care industry can attract and retain
qualified workers, which will improve overall quality of care. As
discussed in more detail below, in order to comply with the ADA and
Olmstead, public entities must have in place an individualized
process--available to any person whose service hours would be reduced
as a result of the Final Rule--to examine if the service reduction
would place the person at serious risk of institutionalization and, if
so, what additional or alternative services would allow the individual
to remain in the community.
Congress enacted the ADA in 1990 ``to provide a clear and
comprehensive national mandate for the elimination of discrimination
against individuals with disabilities.'' 42 U.S.C. 12101(b)(1).
Congress found that ``historically, society has tended to isolate and
segregate individuals with disabilities, and, despite some
improvements, such forms of discrimination against individuals with
disabilities continue to be a serious and pervasive social problem.''
42 U.S.C. 12101(a)(2). For those reasons, Congress prohibited
discrimination against individuals with disabilities by public entities
under Title II of the ADA:
[N]o qualified individual with a disability shall, by reason of
such disability, be excluded from participation in or be denied the
benefits of the services, programs, or activities of a public
entity, or be subjected to discrimination by any such entity.
42 U.S.C. 12132.
Pursuant to Congressional authority, the Attorney General issued
regulations implementing Title II of the ADA, which are based on
regulations issued under section 504 of the Rehabilitation Act of 1973.
See 42 U.S.C. 12134(a); 28 CFR 35.190(a); Executive Order 12250, 45 FR
72995 (1980), reprinted in 42 U.S.C. 2000d-1. The Title II regulations
require public entities to ``administer services, programs, and
activities in the most integrated setting appropriate to the needs of
qualified individuals with disabilities.'' 28 CFR 35.130(d). The
preamble discussion to Title II explains that ``the mos