Home Care Industry Braces for DOL Wage Enforcement

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By Ben Penn

Nov. 10 — On the heels of the Labor Department's Nov. 12 enforcement of a controversial rule extending minimum wage and overtime protections to some 2 million home care workers, stakeholders say several ambiguities complicate implementation.

Among the questions raised by employer representatives and worker advocates in interviews with Bloomberg BNA Nov. 6-9 are how much leniency the DOL will show toward the fiscally constrained state Medicaid programs that fund the bulk of home care services for the elderly, injured and disabled; to what extent the department's Wage and Hour Division enforcement will be reinforced with private litigation; what strategic approach the agency will take in investigating noncompliance; and how the rule will affect company personnel decisions.

Looming over all the uncertainty surrounding this major reinterpretation of the Fair Labor Standards Act is what many view as an improbable chance the U.S. Supreme Court will agree to hear an industry challenge. The National Association of Home Care and Hospice, along with attorneys from Littler Mendelson P.C., are in the final stages of drafting a petition for review, which will attempt to reverse the DOL's new definition of companionship services that removed most home care employees from the FLSA exemption.

The petition will be filed any day now, ahead of the high court's Nov. 20 deadline, William Dombi, NAHC's vice president for law, told Bloomberg BNA Nov. 9.

In the meantime, when the DOL's 30-day non-enforcement period expires Nov. 12, the department can begin investigating state and private violations of the rule, albeit using prosecutorial discretion for the next seven weeks until the start of 2016 (206 DLR A-13, 10/26/15).

Finalized in 2013 (180 DLR AA-1, 9/17/13), the rule applies the federal minimum wage and time-and-a-half overtime pay—including time spent driving between consumers—to all home-care workers, including live-in workers, who are employed by a third party such as a home health-care agency, regardless of their job duties. Workers who are employed directly by the consumer or consumer's family primarily to perform medical duties or domestic duties that benefit other household members are also subject to the FLSA reinterpretation. An exemption remains for consumer-employed workers that provide no more than 20 percent of their work hours on necessary care, and at least 80 percent on fellowship, such as conversation, reading and games.

After the U.S. Court of Appeals upheld the rule in August (162 DLR AA-1, 8/21/15) and the U.S. Supreme Court denied the industry's application for a stay of that decision (194 DLR A-1, 10/7/15), the DOL rule took effect Oct. 13. This triggered a non-enforcement period that ends Nov. 12, at which point the DOL will exercise prosecutorial discretion until Jan. 1, 2016. The WHD said this means that for the remainder of 2015, it will give “particular consideration” to “the extent to which States and other entities have made good faith efforts to bring their home care programs into compliance with the FLSA since the promulgation of the Final Rule.”

Early Enforcement Approach

In a prepared statement provided to Bloomberg BNA Nov. 10, the DOL said, “[W]e have been and continue to be committed to promoting thoughtful implementation of the Home Care Final Rule in a manner that extends basic labor protections to home care workers, and ensures that Medicaid participants and their families continue to have access to the critical home and community-based services upon which they rely, particularly services delivered through innovative models of care.”

“Therefore, we continue to focus our efforts on helping our federal partners, states, and a wide variety of other stakeholders to implement the Rule in such a manner,” the agency said.

Now that WHD enforcement can begin this week, exactly how the balance shifts from education to investigating alleged violations, remains to be seen.

NAHC, which has led industry challenges that contributed to a four-year gap from the time the rule was first proposed (247 DLR A-14, 12/27/11) to the start of enforcement, is informing members that private employers are particularly exposed to investigations if they're not in compliance, although Dombi said it's still unclear exactly how the DOL will proceed.

“This is taking a health care delivery system that's been in operation under an exemption for 40 years and trying to change that overnight” into compliance, Dombi said. “We would hope the Department of Labor would be patient, and there are definite signs that if a business or Medicaid program is trying to get in compliance, they're going to be looked at more favorably.”

Dombi, along with Angelo Spinola, a shareholder at Littler Mendelson in Atlanta, both told Bloomberg BNA that they believe the DOL will be exercising the most prosecutorial discretion with the state programs, while private providers are more vulnerable in the initial rollout of enforcement.

Leniency toward Medicaid programs and the enormous role of private litigation in enforcement's early stages are expectations shared by the industry and the rule's proponents on the worker advocacy side. “I'd be surprised if their enforcement strategy is so harsh that it doesn't allow for the fact that there will be a ramp-up period for states to figure out how to pay for this and how to implement this properly,” Abby Marquand, director of policy research at the Paraprofessional Healthcare Institute, told Bloomberg BNA Nov. 6. PHI is a nonprofit that's been focused on ensuring the rule is implemented without harming workers or consumers.

Unions and employee advocacy groups favor DOL's new companionship definition as a mechanism for protecting an industry's workforce that they say has long been underpaid and mistreated. They argue that the DOL's revised FLSA interpretation is particularly necessary because the home care and personal care aide occupations are projected to grow faster than most others in the next decade, largely because members of America's rapidly retiring baby boomer generation will need their services.

Attorneys ‘Eager’ to Litigate

While only time will tell how the WHD will act, several developments in anticipation to the enforcement period are already beginning to take form, sources said.

First, Spinola told Bloomberg BNA Nov. 6 that considering that the home care market is “very tight,” agencies are already reporting noncompliant competitors to the DOL.

Second, previously unreported violations of state home care minimum wage and overtime laws, are now more likely to reach federal court. “There are a bunch of [plaintiff's] lawyers who have been following this pretty closely, who know of violations,” Sarah Leberstein, a senior staff attorney at the National Employment Law Project, told Bloomberg BNA Nov. 9. They are now “eagerly looking forward to being able to litigate home care workers' claims in federal court under federal law.”

Including Washington, D.C., 22 states already provide varying levels of overtime and/or minimum wage coverage to home care workers, meaning the DOL rule will require 29 states to extend FLSA wage and hour protections to these employees for the very first time.

Dombi agreed with Leberstein's assessment, saying “there are definitely law firms that are looking at potential class actions for those larger companies.” The industry trade group vice president raised the point that the DOL might be relying on private litigation. He said he's noticed that in the past, the agency looks to stretch the most out of limited resources by “target[ing] some companies where they could create a message to the rest of the world.” Therefore, “in going after anyone, the Department of Labor would probably go after the middle-to-smaller-sized companies to get some sort of ruling that favors” the DOL, while leaving enforcement of larger agencies to the private side, Dombi said.

Complaint Versus Proactive Enforcement

Regardless of company size, Marquand with PHI said her sense is that the WHD investigations will “be starting with companies that already have workplace violations. Strategically, that's probably the best use of their resources.”

The DOL's Nov. 10 statement to Bloomberg BNA specified that starting Jan. 1, “we will continue to provide employers technical assistance for coming into compliance with the Rule. As with all of our enforcement actions, employers and workers can expect that we will strategically use our enforcement resources, including complaint and agency initiated investigations, to achieve compliance with these new important protections.”

One former top WHD official told Bloomberg BNA Nov. 9 that while the agency will respond to complaints, it's more likely that early enforcement will entail a targeted initiative, perhaps testing whether third-party home care providers are compliant in a particular region. During the 2015-2016 fiscal year, “that would be where you might see it pop up first, as an initiative,” said Alfred Robinson, an acting WHD administrator under President George W. Bush and a current shareholder with Ogletree, Deakins, Nash, Smoak & Stewart, P.C., in Washington.

This approach would fall in line with this administration's favoring of strategic enforcement at worksites with a high likelihood to yield wage and hour violations, rather than investigations based purely on worker complaints. David Weil, administrator of the WHD, has prioritized such enforcement since his 2014 confirmation.

David Rolf, a vice president at Service Employees International Union, told Bloomberg BNA Nov. 6 that while he's not privy to exactly what strategy the WHD will take in the early stages of the rule, he has confidence that Weil will employ an effective enforcement regime. To Rolf, successful enforcement would include aggressive worker outreach, compliance education for employers, and the capacity to conduct both investigations and “proactive investigations” in “high violation industries and sectors.”

In his other role as president of SEIU Healthcare 775NW, which represents home care workers, Rolf has fought for the FLSA's application to aides' compensation since the Clinton administration.

Shorter Workweeks

Adding to the uncertainty, the business and worker rights groups have been disseminating conflicting accounts of how many structural changes to the industry the rule will require.

Spinola, whose firm represents many companies providing home care services, said most providers are already limiting caregivers' hours and using multiple aides to complete the job previously performed by one worker. “Unfortunately, what that means is caregivers are having to go out and find multiple jobs,” Spinola said.

Dombi added that when removing overtime availability, businesses must hire new aides, yet are struggling to find workers to fill the gap.

However, Marquand disputed this notion, pointing to a PHI survey showing more than half of the home care workforce is part time, and 41 percent of part-time aides want more hours.

Another repercussion Spinola sees is that the overtime obligation is too expensive for consumers to afford, forcing companies to “get out of that business altogether.” This will also push more people into assisted living facilities who would prefer to stay at home, but couldn't afford in-home care under the rule, Spinola said.

But Marquand cast doubt over whether the rule will upend the industry to nearly the degree that NAHC and others are predicting.

She pointed to those companies that are operating and thriving in states that already have minimum wage and overtime requirements for aides as evidence that, for many agencies, the response will not need to be dramatic.

Considering that the industry groups have already successfully delayed implementation through “fear mongering” about the rule's implications, “it's difficult to predict how much of this is based on reality and how much is strategic in terms of delaying this rule” further, Marquand added.

SCOTUS to Consider?

Finally, there is still no guarantee that even after enforcement begins, the rule won't wind up negated by a U.S. Supreme Court decision further down the road.

NELP's Leberstein said, “From a clearly legal perspective, it's hard to see the Supreme Court taking up this case and revisiting an issue which it seems had been” settled by Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158, 12 WH Cases 2d 1089 (2007). In that case, the high court ruled that the DOL has the authority to define FLSA exemptions as they relate to companionship services (112 DLR AA-1, 6/12/07).

Robinson, the Bush-era WHD chief, did not rule out the possibility that the U.S. Supreme Court would take up the case, but said “the challenge is definitely on the industry” to get a home care rule reversal.

As Dombi puts the final touches on his petition for certification to the Supreme Court, he said, “The odds of getting a Supreme Court review in any case are very long, so we're just trying to do the best job we can to improve our odds.”

Meanwhile, the worker advocates are continuing to educate the home care aides on their new wage and hour rights, but are mindful of the slim chance the high court could intervene.

“We are cautiously optimistic that the literally 17-year path for this rule to take effect is finally over,” Rolf said.

To contact the reporter on this story: Ben Penn in Washington at bpenn@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com