Home Health & Hospice Week

Nation's highest court sides with industry on the companionship exemption.

Home health agencies could be off the hook for major overtime and minimum wage burdens, thanks to a recent U.S. Supreme Court development.

The Court on Jan. 23 vacated a 2nd U.S. Circuit Court of Appeals judgment from July 2004 that shot down the companionship exemption for home care aides employed by third-party companies rather than the clients themselves.

The Court ordered the lower court to reconsider the decision, Evelyn Coke v. Long Island Care at Home, in light of new Department of Labor Wage and Hour Division instructions issued last month.

In other words, "the Court decided to hear the case and immediately issued its decision," explains William Dombi, vice president for law with the National Association for Home Care & Hospice's Center for Health Care Law.

The action is "a big win for home care agencies," cheers labor law attorney John Gilliland II with Gilliland Markette Milligan in Indianapolis. The development is especially welcome by private duty providers, who furnish lots of companionship services.

The companionship exemption to the federal Fair Labor Standards Act allows home care providers not to apply minimum wage and overtime requirements to workers who furnish personal, non-medical services for the elderly or infirm (for more exemption information, see related story later in this issue).

Case Tests Exemption

Home care attendant Evelyn Coke sued her employer, Long Island Care at Home Ltd. and its owner, for overtime and minimum wage pay and appealed an unfavorable district court decision.

Coke acknowledged the lawsuit was a "test case" to challenge the companionship exemption regulation on its face, and a labor union attorney represented her in the suit.

In a July 22, 2004 decision, the Appeals Court sided with Coke on the exemption for third-party employers and vacated and remanded that part of the lower court's decision. That meant for states in the Second Circuit--Connecticut, New York and Vermont--the exemption was invalid.

Long Island Care filed a Supreme Court appeal in March 2005 and a number of organizations including the Home Care Association of New York State and NAHC filed "friend of the court" briefs in the case. The U.S. Solicitor General, upon the Court's invitation, also filed a brief recommending reversal of the Appeals Court's ruling (see Eli's HCW, Vol. XV, No. 2).

Agencies nationwide have been eager to see the outcome of the case because they were worried they could lose the companionship exemption as well, notes attorney Claudia Schlosberg with Blank Rome in Washington, DC.

That could leave them having to pay minimum wage and overtime to home care attendants providing companion services. Even worse, they could be liable under major back pay lawsuits.

Future Looks Bright For Exemption

Now the Supreme Court has reviewed the case, vacated the Appeals Court's decision and sent it back to the lower court for "further consideration in light of the Department of Labor's Wage and Hour Advisory Memorandum No. 2005-1," which the DOL issued Dec. 1.

In the memo, the DOL justifies its regulatory interpretation that third-party employers such as home health agencies can apply the companionship exemption to aides.

That memo stated that DOL had created the rule using its legislative rulemaking power, Dombi points out. "Greater deference is given to a legislative rule than an interpretative rule," he notes. "The earlier Court of Appeals decision hinged on the court's use of a lower level of deference" to the existing interpretative rule.

There is a slight chance the Appeals Court could go against the Supreme Court and still rule in favor of Coke. But most likely the lower court will fall in line and rule for Long Island Care in the case, upholding the companionship exemption, Schlosberg and Gilliland agree.

"This is a victory," Dombi enthuses. "The DOL urged the court to take the action that it did."

The result is a best case scenario for home care providers, Schlosberg tells Eli. "Agencies that employ these workers ... clearly are worried about their bottom line." 

Note: For a copy of the DOL memo, email Executive Editor Rebecca Johnson with "DOL memo" in the subject line.