DC Circuit Upholds DOL’s End to Companionship Exemption for Third-Party Agencies
The U.S. Court of Appeals for the D.C. Circuit today ruled that the U.S. Department of Labor’s decision to reverse its prior position and extend the FLSA’s minimum wage and overtime protections to employees of third-party agencies who provide companionship services and live-in care within a home was a reasonable interpretation of the law. The change rendering the FLSA’s so-called “companionship exemption” unavailable to companions and live-ins employed by third-party agencies was scheduled to take effect January 1, 2015 before several trade associations challenged it. The challenge was initially successful as the district court both vacated the “third-party employment” regulation and rejected and vacated the DOL’s attempt to narrow the definition of “companionship services.” Reversing the lower court, however, the D.C. Circuit found the DOL provided a reasoned explanation for its position that the existing regulation misapplied congressional intent, and justified its shift in policy based on what the DOL coined a “dramatic transformation” of the home care industry since the third-party employer regulation was promulgated in the 1970s when most private homecare workers were employed directly by a member of the household and not a third-party agency as is the mostly the case today. The decision stands to bring monumental changes to the business model in the industry. While further appeal to the U.S. Supreme Court is possible if not likely, industry employers again are urged to consult with counsel to develop their short and long-term compliance strategy.