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August 25, 2015

DC Circuit Upholds DOL Regulations Narrowing
Exemption for Domestic Service Employees

On August 21, 2015, the United States Court of Appeals for the District of Columbia issued an important ruling concerning the scope of the “companionship services” and “live-in care” exemptions to the Fair Labor Standards Act (the “FLSA”). The Court of Appeals decision overturned a December 2014 ruling by the lower court and reinstated the United States Department of Labor’s (the “DOL”) regulations concerning these exemptions. A copy of our prior guidance concerning that decision is available here.

The FLSA exempts from its minimum wage and overtime requirements employees who provide companionship services for individuals who are unable to care for themselves. Similarly, the FLSA exempts from its overtime requirements any individual employed as a live-in domestic service worker. Historically, the DOL has applied both of these exemptions to employees regardless if they are employed directly by the household that they service or through a third-party provider. However, in 2014, the DOL issued regulations that excluded employees of third-party providers. As a result of this change, the employees of third-party providers would be entitled to overtime compensation at the rate of time and one-half their regular rate of pay after 40 hours of work in any week.

The Court of Appeals relied on the 2007 Supreme Court decision Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158 (2007), in which the Supreme Court upheld the DOL’s authority to declare that employees of third-party agencies were exempt from coverage under the FLSA. The Court of Appeals found that the DOL had the corresponding authority to declare that employees of third-party agencies no longer were exempt from coverage. The Court also rejected the argument that the DOL had acted in an arbitrary and capricious manner in promulgating these new regulations.

The regulations were scheduled to take effect on January 1, 2015, but were stayed as a result of the lower court decision. The Court of Appeals decision does not immediately reinstate the regulations. We understand that the plaintiffs intend to seek review by the United States Supreme Court which may result in a further stay of the regulations. The DOL has not yet announced whether it will delay enforcement of the regulations in light of the litigation.

Take Away for Employers

Absent any appeal or request for a rehearing, the regulations would take effect on October 13, 2015. Accordingly, home health care agencies and other third-party providers should begin preparing for these regulations to take effect at that time.

Please contact us if you have any questions regarding the exemptions, the regulations, or comparable state and local laws.