Federal Circuit Upholds Department of Labor Regulation Excluding Home Care Workers Employed by Third-Party Agencies from Minimum Wage and Overtime Pay Exemptions under the Fair Labor Standards Act

In a case that highlights the ever-evolving landscape of home health services, the Court of Appeals for the District of Columbia Circuit has upheld a United States Department of Labor (“DOL”) regulation extending the minimum wage and overtime provisions of the Fair Labor Standards Act (“FLSA” or “Act”) to domestic service workers employed by third party agencies who provide companionship and live-in care services to the elderly and disabled.

In Home Care Association of America v. Weil, the court considered the scope of two exemptions from the FLSA’s minimum wage and overtime requirements targeted at such “home care” workers employed by third-party agencies. The DOL previously interpreted these exemptions to include these employees from FLSA protection, but revisions to the regulations in 2013, codified at 29 C.F.R. § 552.109(a) and (c), reversed this interpretation. In 2014, three home care agency associations brought suit against the DOL under the Administrative Procedure Act to challenge this new interpretation of the exemptions, which provided minimum wage and overtime protection to the workers. The federal district court for the District of Columbia granted partial summary judgment to the trade associations and the DOL appealed. The court of appeals has now reversed the district court’s judgment and upheld the DOL’s revised regulation.

Domestic Service Exemptions—A History

Sections 206 and 207 of the FLSA require employers subject to the Act’s provisions to pay their employees a minimum wage and overtime pay. In 1974, these provisions were amended to include employees in “domestic service,” with certain exemptions. Two of these exemptions formed the heart of the dispute in Weil: the “companionship” exemption, codified at 29 U.S.C. § 213(a)(15), and the “live-in” exemption, codified at 29 U.S.C. § 213(b)(21). These exemptions waived the FLSA’s minimum wage and overtime pay requirements for domestic service workers who provided companionship services to elderly or disabled individuals or who provided domestic services in a household in which they resided. DOL regulations promulgated in 1975 interpreted these exemptions to include individuals employed by third-party agencies facilitating the provision of domestic services.

In 2002, a third-party-employed home care worker brought suit against the DOL to challenge the “companionship” exemption and to seek minimum wage and overtime pay protection under the FLSA. In Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158 (2007), the Supreme Court ultimately rejected this challenge. The Court noted, however, that “the text of the FLSA does not expressly answer the third-party-employment question.” It further noted that in Section 29(b) of the 1974 Amendments, Congress had delegated authority to the DOL to resolve such questions of statutory interpretation. In 2013, the DOL abandoned its earlier interpretation and revised the regulation to exclude third-party-employed home care workers from the scope of both the companionship exemption, discussed in Coke, and the live-in services exemption. The DOL also narrowed its earlier definition of “companionship services.” The Weil challenge ensued.

The Weil Decision

The court of appeals reviewed the revised regulation under a two-step framework first articulated in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). Under the Chevron test, when reviewing a federal agency’s construction of a statute that it administers, courts first give effect to unambiguously-expressed, congressional statutory intent. If a statute is silent or ambiguous with respect to a particular issue, courts then analyze whether the agency’s interpretation is a “permissible construction.” Using this framework, the court of appeals upheld the DOL’s 2013 revision.

First, the court noted that interpretation of the exemptions had been vested in the DOL by Section 29(b) of the 1974 Amendments. The court cited the Coke Court’s determination that the FLSA’s statutory language did not explicitly answer the third-party agency question, and extended the Court’s reasoning about the scope of the DOL’s authority to both exemptions. Noting that this ambiguity triggered an inquiry into whether the DOL’s interpretation was permissible, the court then explained that the agency’s construction of the exemption was “entirely reasonable.” It upheld not only the DOL’s assessment of the increased sophistication and specialized training of home care professionals employed today and but also its ultimate determination that the exemptions should not apply to individuals for whom rendering home care services is a “vocation.”

Finally, the court concluded that the DOL’s reversal in its interpretation of these exemptions was neither arbitrary nor capricious. The court cited the agency’s conclusion that the exclusion for third-party-employed home care workers from the exemptions would stabilize the workforce, ensure that the home care profession was attracting qualified employees, and benefit consumers by promoting lower turnover and higher quality of care. The court also declined to consider the challenge to the definition of “companionship services,” citing the agency associations’ lack of standing where the companionship exemption was no longer in effect as applied to their constituent agencies.

Effective Date of the Regulations

The regulations at 29 C.F.R. § 552.109(a) and (c) were to take effect on January 1, 2015. The DOL had previously announced a time-limited non-enforcement policy for a one-year period from January 1, 2015 to December 31, 2015. Weil was decided on August 21, 2015. The DOL has published an update on its website stating that home care workers “now qualify” for minimum wage and overtime protections. Pending further appeal and the (unlikely) entry of an injunction, home care workers employed by third-party agencies are now entitled to minimum wage and overtime.

Employer Takeaways

The Weil decision recognizes federally what is already in practice in Massachusetts. Home care workers in the Commonwealth are not exempt from the minimum wage and overtime pay requirements under Chapter 151, Sections 1 and 1A of the Massachusetts General Laws. The Massachusetts Executive Office of Labor and Workforce Development reaffirmed these workers’ rights to overtime pay in the aftermath of the Coke decision in 2007. A local branch of the Service Employees International Union also recently negotiated an increase in the minimum wage for the home care workers that it represents; this wage will increase to $15 per hour by July 2018. It also should be noted that the Weil decision is limited to employees of third-party agencies. The court did not extend its rationale to home care workers employed directly by the family or household utilizing their services. It remains to be seen whether the expansion of FLSA protections to third-party-employed workers will result in more informal employment arrangements, as feared by some commenters to the proposed regulations.

KATHERINE KELTER

READ MORE

MARY E. (BETH) O’NEAL

READ MORE
2017-01-13T17:17:54+00:00 September 1st, 2015|Categories: DOL, FLSA, Katherine Kelter, Mary E. (Beth) O'Neal, Wage & Hour|0 Comments

Leave A Comment