Court Weighs Labor's Authority to Limit Home-Care Exemption

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By Lisa Nagele-Piazza

A federal appeals court May 7 heard conflicting views on whether the Labor Department exceeded its authority in its home-care workers rule by redefining the Fair Labor Standards Act companionship exemption and by excluding third-party employers from taking advantage of that exclusion.

The Labor Department's final rule, which was scheduled to take effect Jan. 1, would have made most home-care workers eligible for the minimum wage and overtime pay by reinterpreting the FLSA's exemption for workers who provide companionship services to the elderly and people with illnesses or disabilities.

But in two opinions the U.S. District Court for the District of Columbia invalidated a part of the rule that excluded third-party employers from taking advantage of the companionship exemption and vacated the definition of companionship services.

Congress did not delegate to the department the authority to change the FLSA's statutory terms or the authority to redefine the companionship exemption, the district court said.

During oral argument, Justice Department attorney Alisa Klein asserted on behalf of the Labor Department that the district court's decision about third-party employers rests on a fundamental misunderstanding of the Supreme Court's ruling in Long Island Care at Home Ltd. v. Coke, 551 U.S. 158, 12 WH Cases2d 1089 (2007). The Supreme Court said in Coke that it was reasonable to infer that Congress delegated the authority to answer questions regarding the extent of FLSA coverage for companionship workers paid by third parties to the Labor Department through rule-making, Klein said.

Maurice Baskin of Littler Mendelson P.C. in Washington argued on behalf of Home Care Association of America and two other groups. The Coke court did not consider the same questions presented in this case, Baskin said. The district court correctly found that the Labor Department's method used to exclude third-party employers from the exemption contradicts the FLSA's plain language, he said. 

Judges Thomas B. Griffith, Cornelia T.L. Pillard and Sri Srinivasan heard the case.

Focus on Live-In Workers

According to the Labor Department's brief filed Feb. 20, the FLSA amendments of 1974 extended minimum-wage and overtime-pay requirements to domestic-service employees, but Congress exempted “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.”

The Labor Department's new regulations would have covered all home-care workers, including live-in workers, employed by a third party such as a home health-care agency, regardless of job duties.

During oral arguments, the judges asked questions about live-in workers. “One way to read Coke is that it deals solely with the companionship aspects of the statute and regulations,” Srinivasan said. “In Coke, did the court have before it any aspect of the live-in part of the statute?”

Klein said it did not, but “it’s always been understood that the Labor Department has general legislative rulemaking authority to fill any gaps left in those provisions,” she said.

Pillard said: “Why would the department treat live-in domestic service employees differently when they are hired by a third-party employer versus the person receiving the care?” What is the principal logic there?”

“Over the course of many decades there is now this huge industry in which businesses have workforces with professional employees assigned to particular homes,” Klein said. “It might be for a shift, it might be on a live-in basis, but this didn’t exist at the time.”

Congressional Intent

In its brief filed March 30, the Home Care Association said that the Labor Department's rule “dramatically departs from the plain language and congressional intent underlying statutory exemptions from the minimum wage and overtime requirements of the FLSA that have been in place since 1974.”

According to the brief, “Congress created the companionship services exemption in order to enable guardians of the elderly and disabled to financially afford to have their wards cared for in their own private homes as opposed to institutionalizing them.”

Congress did not intend to exclude third-party employers from the companionship exemption, Baskin asserted during oral argument. The Labor Department “would have you believe that Congress went through all this trouble to create this exemption in 1974 just so the department could come back 40 years later and eradicate it,” he said.

But it looks as if the Supreme Court in Coke “at least contemplated exactly that result,” Srinivasan said. The Supreme Court said “whether, or how, the definition should apply to workers paid by third parties raises a set of complex questions.” The Coke court said it could apply to some, none or all, Srinivasan said.

“The Coke court was considering a rule that exempted people, and it said that rule was valid and binding,” Baskin said.

To contact the editors responsible for this story: Christine Pulfrey at cpulfrey@bna.com and Michael Trimarchi at mtrimarchi@bna.com.