Application of the Fair Labor Standards Act to Domestic Service, 60453-60557 [2013-22799]

Agencies

• Wage and Hour Division
• DEPARTMENT OF LABOR

[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).
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    \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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    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
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                                                                                  Average annualized value  ($
                                                              Future years ($               mil.) \a\
                 Impact                    Year 1  ($ mil.)        mil.)       ---------------------------------
                                                                                  3% Real rate     7% Real rate
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                                                 Total Transfers
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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)
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                                          Total Cost of Regulations \e\
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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\
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                                                  Net Benefits
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Overtime Scenario 2 \c\.................              $9.4        $20.5 $15.5            $17.1            $17.1
                                                                               ---------------------------------
    (Lower bound--upper bound)..........          ($-4-20)           ($3-$31)               ($4-$27)
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\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.
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    \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).
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    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\
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    \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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.''
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    \22\ The Department also made minor edits to Sec.  552.110(b) 
and (d) to improve clarity.
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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).
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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