DOL's New Home Care Rule Vacated in Its Entirety: DC District Court | Practical Law

DOL's New Home Care Rule Vacated in Its Entirety: DC District Court | Practical Law

In Home Care Association of America v. Weil, the US District Court for the District of Columbia vacated the US Department of Labor's (DOL) new home care rule, scheduled to take effect January 15, 2015. The new rule would have prohibited third-party employers from claiming an exemption from the Fair Labor Standards Act's (FLSA) minimum wage and overtime pay requirements for companionship services employees and overtime pay requirements for domestic service employees and narrowed the exemption for companionship services employees.

DOL's New Home Care Rule Vacated in Its Entirety: DC District Court

Practical Law Legal Update 5-594-5925 (Approx. 5 pages)

DOL's New Home Care Rule Vacated in Its Entirety: DC District Court

by Practical Law Labor & Employment
Published on 27 Jan 2015 • USA (National/Federal)
In Home Care Association of America v. Weil, the US District Court for the District of Columbia vacated the US Department of Labor's (DOL) new home care rule, scheduled to take effect January 15, 2015. The new rule would have prohibited third-party employers from claiming an exemption from the Fair Labor Standards Act's (FLSA) minimum wage and overtime pay requirements for companionship services employees and overtime pay requirements for domestic service employees and narrowed the exemption for companionship services employees.
On December 22, 2014, in Home Care Association of America v. Weil, a group of trade associations representing home care service providers challenged the DOL's new regulation prohibiting third-party employers from relying on the FLSA's domestic and companionship services exemptions from minimum wage and overtime pay requirements. The US District Court for the District of Columbia granted summary judgment in favor of the trade associations, vacated the third-party employer regulation and stayed the effective date of the DOL's new definition of "companionship services." (No. 14-967, (D.D.C. Dec. 22, 2014).)
On January 14, 2015, the court vacated the DOL's revised companionship services regulation, which would have limited the scope of the FLSA exemption for companionship services employees (No. 14-967, (D.D.C. Jan. 14, 2015). Together with its December 22 decision, the court invalidated the DOL's new home care rule in its entirety.

Background

In 1974, Congress extended the FLSA's minimum wage and overtime pay requirements to include domestic service employees (29 U.S.C. §§ 206(f) and 207(l)). At the same time, Congress excluded a subset of those employees by creating exemptions from the FLSA's:
  • Minimum wage and overtime pay requirements for:
    • casual babysitters; and
    • companionship services employees.
  • Overtime pay (but not minimum wage) requirements for live-in domestic service employees.
In 1975, the DOL issued implementing regulations, including definitions of "domestic service employment" and "companionship services" (29 C.F.R. §§ 552.6 and 552.102).
In 2007, the US Supreme Court rejected a challenge to the application of the companionship services exemption to employees of third-party providers, such as home care staffing agencies. (Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158 (2007)).
In response to Long Island Home Care, several bills were introduced in Congress to eliminate the exemption of employees of third-party employers, but none passed.
In December 2011, the DOL published a Notice of Proposed Rulemaking, revising the FLSA regulations concerning domestic service. The final rule issued on October 1, 2013, and prohibits third-party employers from relying on the FLSA's domestic service and companionship services exemptions (the "third-party employer regulation"). Under the new regulation, third-party employers must comply with the FLSA's minimum wage and overtime pay requirements, effective January 1, 2015 (29 C.F.R. § 552.109).
In 2014, Home Care Association of America (HCAA) and other trade associations representing home care service providers challenged the new regulation in a complaint against David Weil, administrator of the DOL's Wage and Hour Division (No. 14-967, (D.D.C. Dec. 22, 2014)).

Outcome

The US District Court for the District of Columbia granted HCAA's motion for summary judgment and vacated the DOL's third-party employer regulation.
The district court noted that:
  • The implementing regulations drafted in 1975:
    • focused on the nature of the employees' services, not who was paying them; and
    • made the exemptions available to third-party employers because the regulations applied to "any employee" engaged in the specified services.
    (40 Fed. Reg. 7404-7405.)
  • The DOL had previously attempted to clarify the exemption in favor of third-party employers, but ultimately did not finalize the proposed regulations.
  • Based on Chevron's analytical framework for challenges to an agency's rule, if Congress has spoken directly on the issue, courts and the agency must give effect to Congress's intent (Chevron, USA, Inc. v. Natural Resources Defense Council, Inc., 467 US 837 (1984)).
The Court concluded that:
  • The DOL was given definitional authority in the FLSA's companionship services exemption, but the agency did not have authority to eliminate the exemption (29 U.S.C. § 213(a)(15)).
  • The DOL's regulations properly filled gaps left by Congress by defining "domestic service employment" and "companionship services," but the DOL did not have authority to differentiate employees based on the identity of their employers.
  • The DOL's position was not supported by the Supreme Court's Long Island Home Care decision, because the Court only considered the validity of the rule interpreting the definition of companionship services employees in Section 213(a)(15) of the FLSA, not the whether the DOL could create a rule prohibiting groups of employers from using the FLSA exemption.
  • Congress's distinctions regarding employers in other FLSA exemptions, amendments to other statutory exemptions and decision not to modify the language of the companionship services exemption, are evidence that the long-standing interpretation of the exemption as applicable to employees of third parties represents Congress's intent.
By order dated December 22, 2014, the Court granted HHCA's motion for summary judgment and vacated the DOL's third-party employer regulation, 29 C.F.R. § 552.109.
In addition, on December 31, 2014, the Court stayed the DOL's revised definition of "companionship services" until January 15, 2015, and scheduled a hearing on January 9, 2015 on HHCA's request for an injunction extending the stay (29 C.F.R. § 552.6).
On January 14, 2015, the court vacated the DOL's narrowed definition of “companionship services.” The court found that Congress intended the provision of care to be included in the definition. The court remarked that, yet again, the DOL was attempting to accomplish through regulation what instead should be done through legislation (Home Care Ass'n of Am. v. Weil, No. 14-967, (D.D.C. Jan. 14, 2015).)
The DOL has appealed both decisions.

Practical Implications

The district court entered its December 22 and January 14 orders just one week, and one day, respectively, before the DOL's new home care rule was to take effect. Home care providers should follow further developments because the decisions may be reversed on appeal.
In addition, employers should determine if applicable state wage and hour laws require minimum wage or overtime pay for domestic service and companionship services employees. If state law is more favorable to employees, state law controls.