Direct-care workers get overtime and minimum wage protections

The long-waited ruling on changing the Fair Labor Standards Act’s companionship exemption has come. Yesterday, the Obama administration released its final rule, extending minimum wage and overtime protections to direct-care workers.

“This is a tremendous victory for home care aides, a workforce earning near-poverty wages while providing vital personal care and health-related services to America’s elders and people living with disabilities,” said Jodi M. Sturgeon, president of the Paraprofessional Healthcare Institute, in a statement. PHI has been a vocal supporter of getting the companionship exemption changed.

[See also: Direct-care workers apply pressure]

A change to the FLSA’s companionship exemption was proposed in December 2011 by the U.S. Department of Labor. The DOL argued that the companionship exemption originally meant to apply to those family and friends who care for the elderly in the same manner as a babysitter cares for children.

“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,” wrote the DOL in its final rule. “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.”

Working from this understanding, the DOL’s final rule clarifies and narrows the scope of duties falling under the companionship services umbrella. It also prohibits employers of direct-care worker (home care agencies, for example) – other than individuals – from being able to claim the companionship services or live-in domestic service employment exemptions.

Opponents to the rule change argued that a requirement to pay overtime would be financially burdensome and would mean that costs would be passed on to families.

In its final rule, the DOL estimated the potential costs to employers of direct-care workers because of the new regulations. The average annualized transfer of income from home care agencies (and payers) to direct-care workers is projected at $321.8 million under the medium-impact scenario. The cost of adjusting to the new regulations (direct costs) is estimated at an average of $6.8 million per year over a 10-year period. This represents about 0.007 percent of industry revenue, the DOL said.

On the plus side for employers of direct-care workers, said the DOL, because of the extension of protections, employers should see a reduction in turnover, resulting in a reduction in costs associated with the traditional high turnover rate in this field.

The rule goes into effect on Jan. 1, 2015, giving the affected parties time to adjust, said the DOL.