Home Health & Hospice Week

Continuity of care threatened, industry reps say.

What pay is due a home health aide who works more than 40 hours in a week? A federal appellate court's landmark stand on the question may mean that agencies will soon need to rethink staffing or take a huge financial hit.

Alert: On Sept. 1, the U.S. Court of Appeals for the Second Circuit reaffirmed its July 2004 decision holding that home health agencies cannot use what's known as the "companionship exemption" to the Fair Labor Standards Act (FLSA), which lays out requirements for minimum wage and overtime pay.

"The decision could be the most important to home health economics in 30 years," says Stephen Zweig, partner in the New York offices of Ford & Harrison.

Background: The FLSA is a federal law that establishes minimum wage, overtime pay, recordkeeping and child labor standards affecting full- and part-time workers in the private sector and in government jobs. Most home health agencies are required to comply with the federal statute, explains John Gilliland II of Gilliland Markette & Milligan in Indianapolis.

That means HHAs must pay their covered employees at least the minimum wage--and they must pay a rate of one-and-one-half times the employee's regular rate whenever an employee works more than 40 hours in a given week. Failing to do so leaves the agency at risk for having to pay not only back wages but also significant penalties and attorneys' fees.

A vital exception: But agencies have long employed a standard FLSA exemption known as the "companionship services exemption" to sidestep the wage requirements for certain employees, notes Zweig.

This exemption applies to "...any employee employed in domestic service employment to provide companionship services for individuals who (because of age or infirmity) are unable to care for themselves," as the terms are defined and delimited by the secretary of the U.S. Department of Labor (DOL).

Though the exemption was originally intended to keep care affordable for individuals and families hiring companions, the DOL has consistently held over the years that exemption applies equally to private duty agencies including home health agencies.

Advantage: As long as an HHA has been able to show that an employee meets the requirements of the companionship services exemption, the employee is exempt from the FLSA's minimum wage and overtime pay requirements.

Keep Court Cases On Your Radar Screen

The Second Circuit's ruling has the potential to change all of that. The court's ruling this month essentially restates its 2004 decision in the case of Long Island Care at Home v. Coke, saying again that the exemption should not apply to home health agencies and other "third-party" employers. The Second Circuit was charged with reconsidering its earlier decision by the U.S. Supreme Court, which on Jan. 23 vacated the Second Circuit's judgment and remanded the case back to the court "for further consideration" in light of a DOL advisory memorandum that said the exemption should stand (see Eli's HCW, Vol. XV, No. 4).

"In a way, we're back to where we were [in July 2004], says Mark Kissinger of the Home Care Association of New York State, which issued an amicus brief in the case.

If the Second Circuit's recent ruling is deemed final, it will carry the force of law for HHAs in New York, Connecticut and Vermont, the states in the court's jurisdiction.

A legal "stay," which some experts expect, could put the decision on hold, explains Kissinger, letting the agencies in those states off the hook--for the time being.

Next steps: The Long Island Care case could well bounce back to the Supreme Court, but agencies should keep an eye on other related cases as well.

Collective actions related to the companionship exemption are in the federal court system now in Florida and Georgia, and those cases could prove to be as important to the future of HHAs' use of the companionship exemption as the Second Circuit decision, Kissinger notes.

As for the Long Island Care case, the final outcome could rest on a legal matter unrelated to home health: a federal agency's authority to make regulations related to law. In its first decision, the Second Circuit essentially said that the DOL had overextended its bounds in "interpreting" the FLSA, explains Zweig.

If the Supreme Court does hear the case and counters that the DOL's Advisory Memorandum regarding the companionship exemption is a valid legislative rule, and is not simply "interpretative," the exemption would likely stand for HHAs.

Note: The DOL's Wage and Hour Advisory Memorandum No. 2005-1, issued on Dec. 1, is available online at www.dol.gov/esa/whd/FOH/AdvisoryMemoranda2005.pdf.

To see the Second Circuit's decision, go to www.ca2.uscourts.gov/ and click on "Decisions - Posted Last Month."