Washington, D.C.

Summary

Overview:  The U.S. Court of Appeals for the D.C. Circuit ruled that the U.S. Department of Labor’s decision to extend the FLSA’s minimum wage and overtime protections to employees of third-party agencies who provide companionship services and live-in care within a home was a reasonable interpretation of the law.

Effective Dates: Currently in effect

Coverage: Clients employing domestic service workers.

Action Required: Unless there is a successful appeal to the U.S. Supreme Court, the DOL’s new companionship exemption rules are valid and enforceable. Accordingly, impacted clients should ensure compliance.   

The Details

The change rendering the FLSA’s so-called “companionship exemption” unavailable to companions and live-ins employed by third-party agencies was scheduled to take effect January 1, 2015 before several trade associations challenged it.  The challenge was initially successful as the district court both vacated the “third-party employment” regulation and rejected and vacated the DOL’s attempt to narrow the definition of “companionship services.”  Reversing the lower court, however, the D.C. Circuit found the DOL provided a reasoned explanation for its position that the existing regulation misapplied congressional intent, and justified its shift in policy based on what the DOL coined a “dramatic transformation” of the home care industry since the third-party employer regulation was promulgated in the 1970s when most private homecare workers were employed directly by a member of the household and not a third-party agency as is the mostly the case today.  

The decision stands to bring monumental changes to the business model in the industry.  Unless there is a successful appeal to the U.S. Supreme Court, the DOL’s new companionship exemption rules are valid and enforceable.

As always, please contact your HR Business Partner if you have any questions.