Just Issued New Rule: Home Care Companies Must Pay Overtime

Stephen Tweed | September 18, 2013 | Newsroom
The US Department of Labor has issued it's ruling on the "companionship exemption" for overtime and minimum wage for home care workers.  We've been watching this discussion for several years now and we knew the ruling was coming. It's here! The US Department of Labor website shows that effective January 1, 2015, all home care…

The US Department of Labor has issued it’s ruling on the “companionship exemption” for overtime and minimum wage for home care workers.  We’ve been watching this discussion for several years now and we knew the ruling was coming.

It’s here!

The US Department of Labor website shows that effective January 1, 2015, all home care companies will need to pay overtime for personal care aides, home health aides, and certified nursing assistants who work more than 40 hours per week. Fact Sheet #25 issued by DOL specifically for Home Health Care gives details of the old rule which is in effect until January 1, 2015.  It then takes you to a Fact Sheet outlining the new Rule.

What are People Saying?

“Today’s home care workers are lumped into the same category as teenage baby sitters when it comes to how much they make.  This is wrong and unfair.  Receiving a fair wage will further stabilize and professionalize a critical line of work that is suffering from a shortage of workers.”
Tom Perez
Secretary of Labor

“Businesses will have trouble because customers won’t be able to afford the care.  In the end, the people who will be likely to suffer will be the workers who can’t get the work they had before.”
Marc Freedman
Executive Director for Labor Law Policy
U.S. Chamber of Commerce

While intended to help caregivers, this rule will have the opposite effect.  Home care companies will have little choice but to employ workers part-time rather than full-time as Medicaid payment rates and consumers with limited incomes cannot afford higher costs.  Caregivers in the end will receive less pay.”
Andrea Devoti
National Association for Home Care and Hospice

“The move will benefit the largely female, minority, and low-wage workers who provide these essential services.”
Richard Trumka

“The Obama administration has made good on its promise to extend wage and overtime benefits to home care workers.  It is important that agencies and states not make shortsighted changes to their programs that could reduce benefits or deprive consumers of the consistency of care they receive from their providers.”
Mary Kay Henry
Service Employees International Union

While we are just beginning to review the 350+ page final regulation (and supporting materials), our initial review indicates that the Labor Department was not responsive to the majority of concerns raised by HCAOA or others in the home care industry. For example, the final rule, like the proposed rule, states that the companion care exemption may not be used by third party employers.

The one bit of good news is that the rule’s effective date is January 1, 2015.  In addition, the delayed effective date gives us time to fully consider all of our public policy options and determine how we can best help our members understand the regulation and successfully navigate the new requirements.

While we may not be pleased with the new rule announced today, it is important to acknowledge that HCAOA, its members, and our partners, made an incredibly important contribution to the public policy debate around this rule.  We not only made this decision difficult for policymakers, but our efforts are likely at least partially responsible for the delayed effective date.  In addition, we have sensitized policymakers to our concerns and created relationships that could be helpful down the road.  We want to thank all of our members for their hard work in challenging the Labor Department’s proposal.
Peter Ross
President, and
Gale Bohling
Legislative Chair
Home Care Association of America
The Final Regulation – all 358 pages – may be downloaded from the Labor Department’s website.What Does this Mean to YOU?

Owners of home care companies will be hit with a double whammy on January 1, 2015.  First, you will need to pay overtime to your caregivers for more than 40 hours of work per week.  Second, you will need to either purchase health care insurance for your caregivers or pay a penalty to the government under the provisions of the Patient Protection and Affordable Care Act.

In our view, these two new laws will have the following effects:

  1. Caregivers will make less money because they will not be able to work more than 40 hours for one employer
  2. More caregivers will have to work two jobs so they can work more than 40 hours
  3. Clients and families will have to pay more for home care services
  4. Home care companies will see increased costs of doing business.  These include:
    • Paying overtime
    • Paying minimum wage and overtime for live-in caregivers
    • Paying for health insurance or paying the penalty
    • The increased cost of recruiting, selection, training, and retention of caregivers.

There are many unintended consequences from these two bills that the legislators and regulators have not considered.  The combination of these two laws will have negative financial impact on clients, caregivers, and home care company owners.

However, be assured that it’s not the end of the world.  A number of states already have laws which override the companionship exemption and Massachusetts has required health insurance for several years.  Home Care companies are resilient and have managed to survive and prosper in those states.  However, the hourly rates charged to clients are higher in those states than in other states.

We’ll watch these developments closely and keep you informed on the best practices in the industry as you adapt to change.

Stephen Tweed
Stephen Tweed, CSP, began his journey as a business strategist in home health care in 1982. Today, Stephen is among the top thought leaders in Home Care strategy and management. He has worked with top 5% companies from across the US. He is a sought after speaker at from national and state association events.

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