Application of the Fair Labor Standards Act to Domestic Service

DEPARTMENT OF LABOR

Wage and Hour Division

29 CFR Part 552

RIN 1235-AA05

Application of the Fair Labor Standards Act to Domestic Service

AGENCY:

Wage and Hour Division, Department of Labor.

ACTION:

Notice of proposed rulemaking.

SUMMARY:

The Department of Labor (the Department or DOL) proposes to revise the current Fair Labor Standards Act (FLSA or the Act) regulations pertaining to the exemption for companionship services and live-in domestic services. Section 13(a)(15) of the FLSA exempts from its minimum wage and overtime provisions domestic service employees employed “to provide companionship services for individuals who (because of age or infirmity) are unable to care for themselves (as such terms are defined and delimited by regulations of the Secretary).” Section 13(b)(21) of the FLSA exempts from the overtime provision any employee employed “in domestic service in a household and who resides in such household.”

These exemptions were enacted in 1974 at the same time that Congress amended the FLSA to extend coverage to domestic service employees employed by private households. The regulations governing these exemptions have been substantively unchanged since they were promulgated in 1975. Due to significant changes in the home health care industry over the last 35 years, workers who today provide in-home care to individuals are performing duties and working in circumstances that were not envisioned when the companionship services regulations were promulgated. The number of workers providing these services has also greatly increased, and a significant number of these workers are being excluded from the minimum wage and overtime protections of the FLSA under the companionship services exemption. The Department has re-examined the regulations and determined that the regulations, as currently written, have expanded the scope of the exemption beyond those employees whom Congress intended to exempt when it enacted §§ 13(a)(15) and 13(b)(21) of the FLSA. Therefore, the Department proposes to amend the regulations to revise the definitions of “domestic service employment” and “companionship services.” The Department also proposes to clarify the type of activities and duties that may be considered “incidental” to the provision of companionship services. In addition, the Department proposes to amend the record-keeping requirements for live-in domestic workers. Finally, the Department proposes to amend the regulation pertaining to employment by a third party of companions and live-in domestic workers. This change would continue to allow the individual, family, or household employing the worker's services to apply the companionship and live-in exemptions and would deny all third party employers the use of such exemptions.

DATES:

Comments must be received on or before February 27, 2012.

ADDRESSES:

You may submit comments identified by RIN 1235-AA05, by either one of the following methods: Electronic comments, through the Federal eRulemaking Portal:

http://www.regulations.gov.

Follow the instructions for submitting comments. Mail: Address all written submissions to Mary Ziegler, Director, Division of Regulations, Legislation, and Interpretation, Wage and Hour Division, U.S. Department of Labor, Room S-3502, 200 Constitution Avenue NW., Washington, DC 20210.

Instructions:

Please submit one copy of your comments by only one method. All submissions must include the agency name and Regulatory Information Number (RIN) 1235-AA05. Please be advised that comments received will be posted without change to

http://www.regulations.gov,

including any personal information provided. Because we continue to experience delays in receiving mail in the Washington, DC area, commenters are strongly encouraged to transmit their comments electronically via the Federal eRulemaking Portal at

http://www.regulations.gov

or to submit them by mail early. For additional information on submitting comments and the rulemaking process, see the “Public Participation” heading of the

SUPPLEMENTARY INFORMATION

section of this document.

Docket:

For access to the docket to read background documents or comments received, go to the Federal eRulemaking Portal at

http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT:

Mary Ziegler, Director, Division of Regulations, Legislation, and Interpretation, U.S. Department of Labor, Wage and Hour Division, 200 Constitution Avenue NW., Room S-3502, FP Building, Washington, DC 20210; telephone: (202) 693-0406 (this is not a toll-free number). Copies of this proposed rule may be obtained in alternative formats (Large Print, Braille, Audio Tape, or Disc), upon request, by calling (202) 693-0675 (not a toll-free number). TTY/TTD callers may dial toll-free (877) 889-5627 to obtain information or request materials in alternative formats.

Questions of interpretation and/or enforcement of the agency's current regulations may be directed to the nearest Wage and Hour Division (WHD) District Office. Locate the nearest office by calling the Wage and Hour Division's toll-free help line at (866) 4US-WAGE (866) 487-9243 between 8 a.m. and 5 p.m. in your local time zone, or log onto the Wage and Hour Division's Web site for a nationwide listing of Wage and Hour District and Area Offices at:

http://www.dol.gov/whd/america2.htm.

SUPPLEMENTARY INFORMATION:

I. Electronic Access and Filing Comments

Public Participation:

This notice of proposed rulemaking is available through the

Federal Register

and the

http://www.regulations.gov

Web site. You may also access this document via the Wage and Hour Division's home page at

http://www.wagehour.dol.gov.

To comment electronically on Federal rulemakings, go to the Federal eRulemaking Portal at

http://www.regulations.gov,

which will allow you to find, review and submit comments on documents that are open for comment and published in the

Federal Register

. Please identify all comments submitted in electronic form by the RIN docket number (1235-AA05). Because of delays in receiving mail in the Washington, DC area, commenters should transmit their comments electronically via the Federal eRulemaking Portal at

http://www.regulations.gov,

or submit them by mail early to ensure timely receipt prior to the close of the comment period. Submit one copy of your comments by one method only.

II. Background

Congress extended FLSA coverage to “domestic service” workers in 1974, amending the law to apply to employees performing services of a household nature in or about the private home of the person by whom they are employed.

See

29 U.S.C. 202(a), 206(f), 207(l). Domestic service workers were made subject to the FLSA even though they worked for a private household and not for a covered enterprise. Domestic service workers include, for example, employees employed as cooks, butlers, valets, maids, housekeepers, governesses, janitors, laundresses, caretakers, handymen, gardeners, and family chauffeurs. Senate Report No. 93-690, 93rd Cong., 2d Sess. p. 20

(1974). The 1974 Amendments also created an exemption from both the minimum wage and overtime pay requirements of the Act for casual babysitters and persons “employed in domestic service employment to provide companionship services for individuals who (because of age or infirmity) are unable to care for themselves (as such terms are defined and delimited by regulations of the Secretary).” 29 U.S.C. 213(a)(15). Congress also created a more limited exemption from the overtime pay requirement for domestic service employees who reside in the household where they work. 29 U.S.C. 213(b)(21).

Congressional committee reports describe the bases for extending the minimum wage protections to domestics as “so compelling and generally recognized as to make it hardly necessary to cite them.” Senate Report No. 93-690, at p. 18. Private household work had been one of the least attractive fields of employment. Wages were low, work hours were highly irregular, and non-wage benefits were few.

Id.

The U.S. House of Representatives Committee on Education and Labor stated its expectation “that extending minimum wage and overtime protection to domestic service workers will not only raise the wages of these workers but will improve the sorry image of household employment. * * * Including domestic workers under the protection of the Act should help to raise the status and dignity of this work.” House Report No. 93-913, 93rd Cong., 2d Sess., pp. 33-34 (1974). The legislative history explains that the 1974 Amendments were intended to include all employees whose vocation was domestic service, but to exempt from coverage babysitters and companions who were not regular bread-winners or responsible for their families' support. It was not intended to exclude trained personnel such as nurses, whether registered or practical, from the protections of the Act.

See

Senate Report No. 93-690, at p. 20. Senator Williams, Chairman of the Senate Subcommittee on Labor and the Senate floor manager of the 1974 Amendments to the FLSA, described companions as “elder sitters” whose main purpose is to watch over an elderly or infirm person in the same manner that a babysitter watches over children. 119 Cong. Rec. S24773, S24801 (daily ed. July 19, 1973). Senator Williams further noted that all other work, such as occasionally making a meal or washing clothes for the person, must be incidental to that primary purpose.

Id.

On February 20, 1975, the Department issued regulations and interpretations in 29 CFR part 552 implementing the domestic service employment provisions

See

40 FR 7404. Subpart A of the rule defined and delimited the terms “domestic service employee,” “employee employed on a casual basis in domestic service employment to provide babysitting services,” and “employment to provide companionship services to individuals who (because of age or infirmity) are unable to care for themselves.” Subpart B of the rule set out statements of general policy and interpretation concerning the application of the FLSA to domestic service employees. Section 552.109 contained the Department's position that the exemptions contained in § 13(a)(15) and § 13(b)(21) of the Act (exemptions for companions or live-in domestic service workers) were applicable to employees of a third party employer or agency.

On December 30, 1993, the Department published a notice of proposed rulemaking in the

Federal Register,

inviting public comments on a proposal to revise 29 CFR 552.109 to clarify that, in order for the exemptions under § 13(a)(15) and § 13(b)(21) of the FLSA to apply, employees engaged in companionship services and live-in domestic service who are employed by a third party employer or agency must be “jointly” employed by the family or household using their services. Other minor updating and technical corrections were included in the proposal.

See

58 FR 69310. On September 8, 1995, the Department published a final rule revising the regulations to incorporate changes required by the recently enacted changes to Title II of the Social Security Act and making other updating and technical revisions.

See

60 FR 46766. That same day, the Department published a proposed rule reopening and extending the comment period on the proposed changes to § 552.109 concerning third party employment.

See

60 FR 46797. The Department did not finalize this proposed change.

On January 19, 2001, the Department published a notice of proposed rulemaking to amend the regulations to revise the definition of “companionship services” to more closely mirror Congressional intent. The Department also sought to clarify the criteria used to determine whether employees qualify as trained personnel and to amend the regulations concerning third party employment. On April 23, 2001, the Department published a proposed rule reopening and extending the comment period on the January 2001 proposed rule.

See

66 FR 20411. This rulemaking was eventually withdrawn and terminated on April 8, 2002.

See

67 FR 16668.

III. Need for Rulemaking

The home care industry has undergone a dramatic transformation since the Department published the implementing regulations in 1975. There has been a growing demand for long-term in-home care for persons of all ages, in part because of the rising cost of traditional institutional care, and because of the availability of funding assistance for in-home care under Medicare and Medicaid. The growing demand for long-term in-home care for persons is also partly due to the significant increase in our aging population.

1

1

See

Shrestha, Laura,

The Changing Demographic Profile of the United States,

Congressional Research Service p. 13-14 (2006).

In response to the growing demand for long-term in-home care, the home health care services industry has grown. According to the National Association of Home Care (NAHC) publication,

Basic Statistics About Home Care

(March 2000), data from the Department of Health and Human Services' Health Care Financing Administration (HCFA) showed that the number of Medicare-certified home care agencies increased from 2,242 in 1975 to 7,747 in 1999. In the NAHC 2008 update, this number increased to 9,284 by the end of 2007. The number of for-profit agencies not associated with a hospital, rehabilitation facility, or skilled nursing facility,

i.e.,

freestanding agencies, increased more than any other category of agency from 47 in 1975 to 4,919 in 2006. These for-profit agencies grew from 2 percent of total Medicare-certified agencies in 1975 to 68 percent by 2006, and now represent the greatest percentage of certified agencies. Public health agencies, which constituted over one-half of the certified agencies in 1975, now represent only 15 percent.

Public funds pay the overwhelming majority of the cost for providing home care services. Medicaid payments represent nearly 40 percent of the industry's total revenues; other payment sources include Medicare, insurance plans, and direct pay. Based on data from the Centers for Medicare and Medicaid Services (CMS), Office of the Actuary, National Health Care Expenditures Historical and Projections: 1965-2016, Medicare and Medicaid together paid over one-half of the funds to freestanding agencies (37 and 19 percent, respectively). State and local governments account for 20 percent, while private health insurance accounts for 12 percent. Out-of-pocket funds

account for 10 percent of agency revenues.

There has been a similar increase in the employment of home health aides and personal care aides in the private homes of individuals in need of assistance with basic daily living or health maintenance activities. Bureau of Labor Statistics' (BLS) national occupational employment and wage estimates from the Occupational Employment Statistics (OES) survey show that the number of workers in these jobs tripled during the decade between 1988 and 1998, and by 1998 there were 430,440 workers employed as home health aides and 255,960 workers employed as personal care aides. The combined occupations of personal care and home health aides constitute a rapidly growing occupational group. BLS statistics demonstrate that between 1998 and 2008, this occupational group has more than doubled with home health aides increasing to 955,220 and personal care aides increasing to 630,740. (

http://www.bls.gov/oes/current/oes399021.htm

).

The growth in demand for in-home care and in the home health care services industry has not resulted in growth in earnings for workers providing in-home care. The earnings of employees in the home health aide and personal care aide categories remain among the lowest in the service industry. Studies have shown that the low income of direct care workers including home care workers continues to impede efforts to improve both jobs and care.

2

Protecting domestic service workers under the Act is an important step in ensuring that the home health care industry attracts and retains qualified workers that the sector will need in the future. Moreover, the workers that are employed by home care staffing agencies are not the workers that Congress envisioned when it enacted the companionship exemption

i.e.,

neighbors performing elder sitting, but are instead professional caregivers entitled to FLSA protection. In view of the dramatic changes in the home health care sector in the 36 years since these regulations were first promulgated and the growing concern about the proper application of the FLSA minimum wage and overtime protections to domestic service employees, the Department believes it is appropriate to reconsider whether the scope of the regulations are now too broad and not in harmony with Congressional intent.

2

See

Brannon, Diane,

et al.,

“Job Perceptions and Intent to Leave Among Direct Care Workers: Evidence From the Better Jobs Better Care Demonstrations”

The Gerontologist,

Vol. 47, No. 6, p. 820-829 (2007).

IV. Proposed Regulatory Revisions

A. Domestic Service Employment (29 CFR 552.3)

Current § 552.3 states that “As used in section 13(a)(15) of the Act, the term domestic service employment refers to services of a household nature performed by an employee in or about a private home (permanent or temporary) of the person by whom he or she is employed.” The current definition also lists various occupations which are considered “domestic service employment.” The Department proposes to update and clarify the § 552.3 definition of “domestic service employment” in order to reflect the changing workforce.

The Department proposes to remove the qualifying introductory language “[A]s used in section 13(a)(15) of the Act” because the definition of domestic service employment has broader context than simply those employed to provide babysitting services on a casual basis and those performing companionship services. The proposed definition also removes the language that the domestic service work be performed in or about the home “of the person by whom he or she is employed.” This language has been part of the regulations since first implemented in 1975; however, the Department believes the definition may be confusing and may be misread as impermissibly narrowing coverage of domestic service employees under the FLSA. The Senate Committee responsible for the 1974 Amendments looked at regulations issued under the Social Security Act for defining domestic service. The Department borrowed this language from the Social Security regulations without discussion or elaboration, and has consistently maintained that the phrase is extraneous vestige.

See Long Island Care at Home, Ltd.

v.

Coke,

551 U.S. 158, 169-70 (2007) (concluding that § 552.3 does not answer the question on third party employment and that the Department's third party regulation at § 552.109 controls). Moreover, the legislative history states that Congress intended to extend FLSA coverage to all employees whose “vocation” was domestic service, but to exempt from coverage casual babysitters and companions who were not regular breadwinners or responsible for their families' support.

See

House Report No. 93-913, p. 36. Removal of this extraneous language more accurately reflects Congressional intent and clarifies coverage of these workers.

Congress considered domestic service workers to include, for example, employees working as cooks, butlers, valets, maids, housekeepers, governesses, janitors, laundresses, caretakers, handymen, gardeners, and family chauffeurs.

See

Senate Report No. 93-690, p. 20. The Department included these occupations in § 552.3 as illustrative of domestic service workers. The Department proposes to delete the more outdated occupations in the list, such as governesses, footmen, and grooms, and to add additional modern day occupations such as nannies, home health aides, and personal care aides. The Department also proposes to include babysitters and companions to the list of domestic service workers, as workers in those occupations are domestic service workers, however, workers in those occupations may be exempt under FLSA § 13(a)(15) or § 13(b)(21). The list continues to be illustrative, not exhaustive.

B. Duties of a Companion (29 CFR 552.6)

The Department proposes to revise § 552.6, the regulation pertaining to companionship services for the aged and infirm. Current § 552.6 defines “companionship services” including “fellowship, care, and protection” provided to a person who, because of advanced age or physical or mental infirmity, can not care for his or her own needs. This regulation defines exempt services as including household work related to the person's care (such as meal preparation, bed making, washing of clothes, and other similar services). Under the current regulation, a companion may also perform additional general household work within the exemption if it is “incidental” and comprised of no more than 20 percent of the total weekly hours worked. This regulation further explains that the term “companionship services” does not include services relating to the care and protection of the aged or infirm which require and are performed by trained personnel, such as a registered or practical nurse.

1. Companionship Services

In 1974 Congress amended the FLSA specifically to include domestic service workers (such as maids, cooks, valets and laundresses) as among those to be covered by the Act. Congress simultaneously created a narrow exemption for casual babysitters and those providing companionship to the elderly or infirm. The Senate debate of the companionship services exemption provides insight into the type of work Congress sought to exempt:

Senator Burdick: I am not concerned about the professional domestic who does this as a daily living. But we have situations in which young people, a widow, a divorcee, or a family of low income, of necessity, must have someone sit with their children while they are at work.

We have another category of people who might have an aged father, an aged mother, an infirm father, an infirm mother, and a neighbor comes in and sits with them.

This, of course, entails some work, such as perhaps making lunch for the children, or making lunch for the infirm person, and may even require throwing some diapers in the automatic washing machine for the baby. This would be incidental to the main purpose of the employment.

The Senator has used the word “companion” in the exception. When the Senator uses the word “companion,” the Senator does not mean that in the ordinarily accepted sense, that they are there to make them feel good. They are there to take care of them, he means, when he uses the word “companion.” Is that correct?

Senator Williams: We use the situation in which people are in a household not to do household work but are there, first, as babysitters. I think we all have the full meaning in mind of what a babysitter is there for—to watch the youngsters.

“Companion,” as we mean it, is in the same role—to be there and to watch an older person, in a sense.

Senator Burdick: In other words, an elder sitter.

Senator Williams: Exactly.

119 Cong. Rec. at S24801.

The House Report offers further insight into Congressional intent with respect to those employees providing “companionship services” stating:

It is the intent of the committee to include within the coverage of the Act all employees whose vocation is domestic service. However, the exemption reflects the intent of the committee to exclude from coverage babysitters for whom domestic service is a casual form of employment and companions for individuals who are unable because of age or infirmity to care for themselves. But it is not intended that trained personnel such as nurses, whether registered or practical, shall be excluded. People who will be employed in the excluded categories are not regular bread-winners or responsible for their families support. The fact that persons performing casual services as babysitters or services as companions do some incidental household work does not keep them from being casual babysitters or companions for purposes of this exclusion.

House Report No. 93-913, p. 36.

This legislative history indicates that Congress intended to remove from minimum wage and overtime pay protection only those domestic service workers for whom domestic service was not their vocation and whose actual purpose was to provide casual babysitting or companionship services. Congress also intended that a limited amount of incidental work, such as making a meal or washing diapers for the person being cared for, would not remove the worker from the exemption.

In addition to the legislative history, the dictionary definition of “companionship” is instructive in understanding the scope of a companion as originally intended in the legislative history, that is, someone in the home primarily to watch over and care for the elderly or infirm person. The dictionary defines companionship as the “relationship of companions; fellowship,” and the term “companion” is defined as a “person who associates with or accompanies another or others; associate; comrade” and as a “person employed to live with or travel with another.”

See

Webster's New World Dictionary, p. 288 (2d College Ed. 1972). It further defines “fellowship” as including “a mutual sharing, as of experience, activity, interest,

etc.” Id.

at 514.

The Department is concerned that the current regulatory definition of “companionship services” allows for the denial of minimum wage and overtime pay protection to workers who work in private homes and routinely perform general household work or provide medical care, and who may also provide fellowship and protection as an incidental activity to the household work or medical care. The current regulatory language places inappropriate emphasis on the “household work related to the person's care,” such as meal preparation, bed making, washing of clothes, and other similar services. These activities, particularly when combined with the current 20 percent tolerance for general household work, exempt workers for whom providing “fellowship and protection” is incidental to their employment as cooks, waiters, butlers, valets, maids, housekeepers, nannies, nurses, janitors, laundresses, caretakers, handymen, gardeners, home health aides, personal care aides, and chauffeurs of automobiles for family use. Therefore, the Department proposes to revise § 552.6 to clarify the tasks an exempt companion may perform and to more closely align the regulation with Congressional intent.

The Department proposes to divide § 552.6 into four paragraphs. Proposed paragraphs (a), (b) and (c) will clarify what duties and activities may be considered “companionship services” and “incidental” to companionship services. Proposed paragraph (d) explains and clarifies that the companionship exemption is not applicable to medical care typically provided by personnel with specialized training.

Current § 552.6 defines the term “companionship services.” Proposed § 552.6(a) also defines “companionship services” as “the provision of fellowship and protection for a person who, because of advanced age or physical or mental infirmity, is unable to care for themselves” and adds language that defines the terms “fellowship” and “protection.” The legislative history describes a companion as someone who “sits with [an infirm parent];” provides “constant attendance;” and renders services similar to a babysitter,

i.e.,

“someone to be there and watch an older person,” an “elder sitter.” Such duties fall under the umbrella of fellowship and protection. Examples of activities that fall within fellowship and protection may include playing cards, watching television together, visiting with friends and neighbors, taking walks or engaging in hobbies. In addition, a companion may provide assistance with mobility and transfers. In the Department's view, “mobility” includes assistance with ambulation, including the use of a wheelchair or walker, and “transfers” include assisting the recipient in moving from one seating or reclining area to another. The Department believes that such tasks are consistent with what a babysitter or elder sitter would perform as contemplated by Senator Burdick in his explanation of the bill. The Department believes this expanded paragraph clarifies what is meant by “companionship services,” “fellowship,” and “protection.”

Proposed § 552.6(b) explains that “companionship services” may include the intimate personal care services that the Secretary considers “incidental” to the provision of fellowship and protection. The proposed regulation limits a companion's duties to fellowship and protection with some allowance for certain incidental work, provided the incidental duties are performed concurrent with fellowship and protection of the individual and exclusively for that individual. The discussion of companionship duties in the legislative history allows incidental work, such as “making lunch for the infirm person” and “some incidental household work.”

See

119 Cong. Rec. at S24801. However, such incidental services must be performed attendant to and in conjunction with the provision of fellowship and protection and in close physical proximity to the aged or infirm individual. Proposed paragraph (b) makes clear that such intimate personal care services that are incidental to the provision of fellowship and protection

must not exceed 20 percent of the total hours worked in the workweek. Should the provision of these incidental services exceed 20 percent of the total hours worked in any workweek, then the exemption may not be claimed for that week and workers must be paid minimum wage and overtime.

Proposed paragraph (b) also provides an illustrative list of permissible incidental services that may be provided by an exempt companion. In proposed § 552.6(b)(1), the Department proposes to include assistance with occasional dressing of the elderly or infirm person as an incidental activity. The Department believes that allowing assistance with dressing is consistent with Congressional intent, as assistance with dressing is something that would normally be contemplated by a babysitter or elder sitter. For example, a companion may assist an elderly or infirm person in laying down or arising from a nap which may either be preceded by shedding of some clothing or applying some clothing. Adjustments in weather may also require either the addition or subtraction of certain clothing or footwear, or the elderly or infirm person may, on occasion, need assistance in dressing after soiling their clothing by spilling food on their blouse or shirt during a meal, for example. This type of occasional dressing is permissible; however, the Department does not envision this task as being a regular and recurring part of the companion's duties. Further, the Department does not consider the application of special appliances or medical wraps (that require specialized training to apply) as part of assistance with dressing.

In proposed § 552.6(b)(2), the Department proposes that an exempt companion be allowed to assist with occasional grooming, including combing and brushing hair, assistance with brushing teeth, application of deodorant, or cleansing of the person's face and hands, such as following a meal. The Department recognizes that occasional grooming of the aged or infirm person is consistent with the Department's goal of providing incidental intimate personal care services attendant to and in conjunction with the provision of fellowship and protection for the aged or infirm person.

In proposed § 552.6(b)(3), the Department has included assistance with toileting, including assistance with transfers, mobility, positioning, use of toileting equipment and supplies (such as toilet paper, wipes, and elevated toilet seats or safety frames), diaper changing, and related personal cleansing. In the Department's view, assistance with toileting is carried out attendant to and in conjunction with the provision of fellowship and protection of the aged or infirm person. Because toileting is a basic human need and not a function that can be scheduled, the Department proposes to include it in the list of incidental tasks that may be performed by the exempt companion. The Department specifically invites comment on the inclusion of occasional toileting and diaper changing to the list of incidental activities performed by the exempt companion.

Proposed § 552.6(b)(4) suggests that an exempt companion may occasionally drive the aged or infirm individual to appointments, errands, and social events. The Department believes there is some justification for a companion who provides “fellowship and protection” to accompany an aged or infirm person to certain appointments. There is, however, some concern that providing transportation may be more akin to the duties of a chauffeur than to the duties of a companion. The Department is mindful that drivers and chauffeurs were expressly considered by Congress as among those they intended to be covered by the Act. The Department is also concerned about issues such as extra costs for the domestic worker and/or their employer with respect to insurance coverage levels, for example. The Department proposes that occasional driving can be a component of incidental duties; however, with the cap on incidental duties at 20 percent, the Department anticipates that only a limited amount of time will be spent driving the aged or infirm person to appointments, errands and social events. The Department notes that while it seeks to limit the time an exempt companion spends driving the aged or infirm individual, the Department considers time spent accompanying an aged or infirm individual to appointments, errands or social events (

e.g.,

traveling via a taxi cab or using public transportation) to be providing fellowship and protection. The Department explicitly invites comment on the proposal to include driving among the incidental activities an exempt companion may perform.

Proposed § 552.6(b)(5) provides that an exempt companion may provide occasional assistance with feeding the aged or infirm person, including food preparation and clean-up associated with feeding; however, the Department considers feeding through or assistance with a feeding tube to be medical care (that is typically provided by personnel with specialized training) that is excluded from the definition of “companionship services.” The Department notes that Senator Burdick stated in his floor speech that companionship was meant to include, “some work, such as perhaps making lunch for the children, or making lunch for the infirm person * * *.” 119 Cong. Rec. at S24801. The Department proposes to require that in order for food preparation to be considered as an incidental activity, the food prepared by the companion must be eaten by the aged or infirm person while the companion is present. The Department believes that this is consistent with the goal that incidental intimate personal care services be provided attendant to and in conjunction with the provision of fellowship and protection of the aged or infirm person. However, it is not the Department's intent that an exempt companion will be permitted to cook a week's worth of food while the aged or infirm individual is engaged in other activities, for example, because that would not be attendant to and in conjunction with providing fellowship and protection.

Proposed § 552.6(b)(6) provides that an exempt companion may occasionally place clothing worn by the person in the hamper, deposit the aged or infirm person's clothing into the washing machine or dryer, and assist with hanging, folding, and putting away the aged or infirm person's clothing. The Department's review of the legislative history indicates that occasional, light laundry was contemplated by Congress in consideration of the casual babysitter and companionship exemptions. In their exchange, Senators Williams and Burdick indicated that one “may even require throwing some diapers in the automatic washing machine for the baby. This would be incidental to the main purpose of the employment.” 119 Cong. Rec. at S24801.

Proposed § 552.6(b)(7), allows for occasional assistance with bathing the aged or infirm person. The Department does not consider bathing to be part of the regular duties of the exempt companion; however, the Department believes that in certain exigent circumstances, a companion may need to provide assistance with bathing to the elderly or infirm person. An example of exigent circumstances would be when the elderly or infirm person has an unexpected toileting accident requiring the need for bathing. Generally, the Department believes that bathing is something that can be scheduled to not coincide with the companion's duty hours, but proposes to allow reasonable but limited exceptions that more closely align to an imminent need to assist the elderly or infirm person with cleansing.

The Department specifically invites comments with respect to the 20 percent threshold for incidental care services, and whether this percentage is an appropriate figure. Further, the Department invites comments on the list of services, whether additional services should be included or certain services should be excluded, whether the list should be an exclusive list of permitted incidental services, and whether the requirement that such services must be performed attendant to and in conjunction with the provision of fellowship and protection to the elderly or infirm person should be adopted.

Proposed § 552.6(c), makes clear that work benefiting other members of the household, such as preparing meals for the household, performing housekeeping or laundry for the other members of the household does not fall within incidental duties for an exempt companion. Similarly, general household services not otherwise allowed in § 552.6(b) and (d), are not considered “companionship services.” The Department's proposal includes a change from the current regulation that allows the companionship services exemption to apply when the worker spends up to 20 percent of his or her time performing general household work which is unrelated to the care of the person. General household work that is not allowed under proposed § 552.6(b), such as vacuuming, washing windows, and dusting, is the sort of work that Congress sought to cover when it amended the Act in 1974 to reach domestic service workers such as maids and housekeepers, and therefore, companions are precluded from performing such tasks in order for the exemption to apply. The Department believes the proposed revisions to the definition strike a balance that implements Congress' twin goals of extending FLSA coverage to domestic service workers generally while exempting companions, by recognizing that the fellowship and protection provided by a companion are very different from the household chores performed by a maid or cook or laundress. Further, the proposed regulations also reflect that coverage under the FLSA is construed broadly and the exemptions are construed narrowly to effectuate the Act's remedial purposes.

Thus, the performance of duties that are not for fellowship and protection of the aged or infirm person, or incidental to the provision of fellowship and protection, are not “companionship duties,” and therefore, any performance of general household work would result in the loss of the exemption for the week. The Department believes that the combination of proposed § 552.6(b) and (c) results in the narrow slice of the workforce that Congress intended to exempt under the companionship exemption.

2. Medical Care

Proposed paragraph § 552.6(d) excludes from the definition of “companionship services” medical care that is typically provided by personnel with specialized training. The Department proposes in § 552.6(d) to continue to make clear that “companionship services” does not include care that is typically provided by personnel with specialized training and provides an illustrative and non-exhaustive list of examples of the type of care that is not considered “companionship services.”

The Department proposes to maintain the exclusion of medical care from the definition of “companionship services,” but proposes to clarify that companionship services do not include the performance of medically-related tasks for which training is typically a prerequisite. The Department's experience indicates that many workers for whom the companionship exemption is claimed are categorized as personal care aides or home health aides. The Department understands that these workers often visit a care recipient for the purpose of providing wound care such as changing bandages, taking the care recipients vital signs, evaluating the care recipient's health and performing other diagnostic or medically-related tasks. While some personal care or home health aides may be engaged to perform companionship services, the Department is concerned that many such workers are primarily performing medically-related or personal-care-related tasks rather than providing fellowship and protection, and are being denied minimum wage and overtime pay protections through misapplication of the companionship services exemption.

The Department proposes to exclude from the definition of companionship services medically-related duties such as medication management, the taking of vital signs (pulse, respiration, blood sugar screening, and temperature), routine foot, skin, and back care, and assistance with physical therapy. This list is illustrative, not exhaustive. Similarly, determining whether prescription medication needs to be taken would remove the domestic service worker from the companionship exemption.

However, the Department notes that reminders of medical appointments or a predetermined medicinal schedule would be encompassed within companionship duties. For example, where the companion is provided clear instructions to remind the aged or infirm person to take medication that has been provided in a daily pillbox at a prescribed time and the companion exercises no discretion as to the amount or when the care recipient takes the medication, such work generally would be intimate personal care activities considered by the Secretary to be incidental to the provision of fellowship and protection. The Department believes, however, that Congress did not intend the companionship services exemption to apply to employees who perform medically-related duties, such as registered or licensed nurses, certified nursing assistants, or certified nursing aides. Tasks being performed by these workers that typically require medical training and are beyond what Congress envisioned when it stated that persons providing companionship services are present in the home, as a neighbor might be, to watch over an elderly person the way a babysitter watches over a child.

The Department specifically seeks comment on whether the proposed rule appropriately reflects medical care tasks currently performed by home health aides or personal care aides which require training in order to perform. The Department also seeks comment on whether the rule should list additional examples of minor health-related actions that do not require training and could be included within companionship services, such as applying a band aid to a minor cut or helping an elderly person take over-the-counter medication.

It is important to note that workers providing healthcare in homes are already subject to minimum wage and overtime protections. However, the Department invites comment on the potential effects of the proposed changes as discussed above on the delivery of companionship services and whether unique circumstances exist that impact the provision of companionship services in the context of the broader healthcare system.

C. Third Party Employment (29 CFR 552.109)

The Department also proposes to revise § 552.109, the regulation pertaining to third party employment. Current § 552.109 provides that employees who are employed by an employer or agency other than the family or household using the companionship services may be subject to the FLSA exemption from minimum

wage and overtime pay for companions under § 13(a)(15). The current regulation also provides that live-in workers who are employed by a third party may be subject to an overtime exemption under § 13(b)(21) of the FLSA.

Upon further consideration and analysis, the Department believes that these two exemptions from the minimum wage and overtime protections of the FLSA should not be applicable to employees of third party employers. The Department proposes to revise § 552.109 to limit the application of these exemptions to the individual, family or household employing the companion or live-in domestic worker, regardless of whether the family member employing the companion or live-in domestic worker resides in the home where the services are performed. The Department believes this proposed change better reflects the understanding of Congress when it created these exemptions. In addition, the Department believes amending this regulation is necessary to address the changes that have taken place in the home health care industry since this regulation was first promulgated.

As noted by the Supreme Court, the Department has “struggled with the third party employment question.”

Long Island Care at Home, Ltd.

v.

Coke,

551 U.S. 158, 171 (2007). In 1974, the Department proposed a regulation that would have denied the exemptions in §§ 13(a)(15) and 13(b)(21) of the Act to employees who, although providing companionship or live-in domestic services, were employed by an employer or agency other than the family or household using their services.

See

39 FR 35383. However, in the final regulation, promulgated in 1975, the Department concluded that the exemption could be applicable to employees providing companionship or live-in domestic services employed by such third party employers.

See

40 FR 7404. In 1993, 1995, and 2001, the Department revisited this regulation specifically, proposing amendments that would have curtailed the applicability of these exemptions to the employees of third party employers.

In revisiting the legislative history of the 1974 Amendments, the Department believes that Congress contemplated that individual family members, and not third party employers that already were covered by the FLSA, would be impacted by the extension of coverage to domestic service workers. “I just cannot imagine the housewife struggling with the paper work which would be required.” 120 Cong. Rec. S5269 (daily ed. Mar. 5, 1974) (statement of Sen. Fannin). “The position of the committee in adding complete coverage for domestics and thus adding additional recordkeeping and other chores for the American housewife * * *” 120 Cong. Rec. S5275 (statement of Sen. Dominick). Because Congress believed that private households would be impacted by the expansion of FLSA coverage, it is reasonable to conclude that Congress intended only private households to be entitled to the exemptions from FLSA protections for domestic service workers. Professional caregivers, such as those individuals employed by third party employers, are simply not the type of employment arrangements that Congress sought to exempt. In view of the professionalization and standardization of this growth industry that has taken place over the last three decades, it is the Department's position that employees providing companionship services who are employed in the vocation of caregiver by third parties should have the same minimum wage and overtime protections that other workers enjoy.

Statements in the Congressional Record made by supporters of the amendment also demonstrate that Congress considered the impact that the expansion of FLSA coverage would have on poor women, many of them women of color, employed as domestics. Senator Williams noted that “the plain fact is that private household domestic workers are overwhelmingly female and members of minority groups,” and “[i]n failing to cover domestics under our basic wage and hour law we would be turning our backs on these people.” 119 Cong. Rec. S24799 (statement of Senator Williams). Senator Williams further emphasized that “[s]ince domestic employment is one of the prime sources of jobs for poor and unskilled workers, it is clear that there is an important national interest at stake in insuring that the wages received for such work do not fall below a minimal standard of decency.”

Id.

at 24800. Such statements indicate that Congress intended broad FLSA coverage for domestic workers. Poor, minority women, many of them immigrants, continue to comprise the great majority of the companion workforce today. The fact that 70 percent of home health care workers are employed by third party agencies—and fall outside of FLSA coverage under the current third party regulation—is an important indication that what Congress intended to accomplish in amending the FLSA in 1974 remains unfinished.

3

Moreover, under the 1974 Amendments, Congress explicitly extended FLSA coverage to domestic service employees who were not previously covered,

i.e.,

those who worked only for a private family or a small business and not for a covered enterprise. Prior to 1974, employees who had worked for a covered placement agency, but were assigned to work in someone's home were covered by the FLSA. 39 FR 35385. Congress did not intend for the 1974 Amendments, which sought to extend the reach of the FLSA, to exclude workers already covered by the Act. The focus of the floor debate concerned the extension of coverage to categories of domestic workers who were not already covered by the FLSA, specifically, those not employed by an enterprise-covered agency.

See, e.g.,

119 Cong. Rec. at S24800 (“coverage of domestic employees is a vital step in the direction of insuring that

all

workers affecting interstate commerce are protected by the Fair Labor Standards Act”);

see also

Senate Report No. 93-690 at p. 20 (“The goal of the Amendments embodied in the committee bill is to update the level of the minimum wage and to continue the task initiated in 1961—and further implemented in 1966 and 1972—to

extend

the basic protection of the Fair Labor Standards Act to additional workers and to reduce to the extent practicable at this time the remaining exemptions.”) (emphasis added). Further, there is no indication that Congress considered limiting enterprise coverage for third party employers providing domestic services. The only expressions of concern by opponents of the amendment related to the new recordkeeping burdens on private households. Recognizing this intended expansion of the Act, the exemptions excluding employees from coverage must therefore be defined narrowly in the regulations to achieve the law's purpose of extending coverage broadly. This is consistent with the general principle that coverage under the FLSA is broadly construed so as to effect its remedial purposes, and exemptions are narrowly interpreted and limited in application to those who clearly are within the terms and spirit of the exemption.

See, e.g.,

A.H. Phillips, Inc.

v.

Walling,

324 U.S. 490, 493 (1945). Upon further analysis, the Department acknowledges that the regulatory rollback of coverage for many workers that resulted from current § 552.109 was not in accord with Congress' purpose of expanding coverage.

3

University of California San Francisco, Center for California Health Workforce Studies,

An Aging U.S. Population and the Healthcare Workforce: Factors Affecting the Need for Geriatric Care Workers at 30

(Feb. 2006).

In addition, 14 states already have statutes providing minimum wage and overtime protections to all or most third-party-employed home care workers who may otherwise fall under the federal companion exemption. These states are Colorado, Hawaii, Illinois, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Jersey, New York, Pennsylvania, Washington, and Wisconsin. Maine and California extend minimum wage and overtime protections to all companions employed by for-profit agencies. Five more states (Arizona, Nebraska, North Dakota, Ohio, and South Dakota) and the District of Columbia provide only minimum wage coverage only to home care workers, including companions, employed by third parties.

Significantly, several of the states have instituted these protections in the last several years. For example, in January 2010 Colorado extended minimum wage and overtime protection to home care workers not employed by private households; in October 2003 Michigan extended minimum wage and overtime protection to home care workers employed by an employer with 2 or more employees and in July 2003 California extended minimum wage coverage to all companions employed by third parties and overtime coverage to companions employed by for-profit agencies. The fact that these state statutes exist negates many of the objections raised in the past regarding the feasibility and expense of prohibiting third parties from claiming the companionship and live-in worker exemptions.

Members of Congress have also recently urged the Department to narrow the scope of these exemptions. In 2009, over 50 Members of Congress wrote to Secretary Solis, urging the Department to revise the companionship regulation because it “interpreted a narrow exemption Congress provided for `companionship services' to exclude all workers, including those employed by a third party, who provide in-home care for elderly or disabled people from the FLSA's wage and overtime protections.”

See

Letter from Representative Sanchez

et al.

to Secretary Solis, May 18, 2009; Letter from Senator Harkin,

et al.,

to Secretary Solis, June 11, 2009. The Members also noted that most home care workers are women and often the sole bread winners for their families. The latter point is important because Congress stated that “[p]eople who will be employed in the excluded categories are not regular bread winners or responsible for their families' support.” Senate Report No. 93-690, at p. 20. The expanded coverage was needed to raise incomes for those workers who depended on domestic work as a “daily living,” which was the workforce that Rep. Shirley Chisholm described as the “thousands of ladies who have the sole responsibility for taking care of their families and will not be able to adequately support their families.” This situation continues today. One survey in New York City, for example, reported that 81 percent of home care workers served as the primary income earner for their family.

4

4

Gilbert, Lenora.

Home Care Workers: The New York City Experience,

Encyclopedia of Occupational Safety and Health, Vol. 3. (4th ed. International Labor Organization, 1998).

In 2007, the Department's third party employment regulation was addressed by the Supreme Court.

See Coke,

551 U.S. 158. In

Coke,

a home health care worker employed by a third party challenged the validity of the Department's regulation permitting employees of third parties to claim the companionship exemption. The Court acknowledged that the statutory text and legislative history do not provide an explicit answer to the third party employment question.

Id.

at 168. Rather, the FLSA leaves gaps as to the scope and definition of statutory terms such as “domestic service employment” and “companionship services,” and it provides the Department with the power to fill those gaps.

Id.

at 167. Further, when the Department fills statutory gaps with any reasonable interpretation, and in accordance with other applicable requirements, the courts accept the result as legally binding.

Id.

at 167-68. The Court noted that the 1974 Amendment “expressly instructs the agency to work out the details of those broad definitions” and explained that the regulation “concerns a matter in respect to which the agency is expert,” because whether the 1974 Amendment should extend protection to any third party companions turns “upon the kind of thorough knowledge of the subject matter and ability to consult at length with affected parties that an agency, such as the Department of Labor, possesses.”

Id.

at 167-68. The Court concluded that “whether to include workers paid by third parties within the scope of the definitions is one of those details” that Congress entrusted to the Department.

Id.

at 167.

In

Coke,

the Department argued that the third party regulation was an exercise of its expressly delegated legislative rulemaking authority, and as such, was legally binding and must be accorded the highest level of deference. The position taken by the Department in

Coke

concerning deference, as affirmed by a unanimous Supreme Court, remains relevant as the Department reconsiders the scope of these exemptions. By engaging in a new round of notice and comment rulemaking, the Department is again appropriately exercising its expressly delegated rulemaking authority. The Department's proposal to revise the third party regulation is in no way inconsistent with the Court's ruling. Rather, the Court recognized that the statutory text does not answer the question and affirmed the Department's broad authority to promulgate regulations that define the scope of the exemption. The Court explicitly recognized that the Department may interpret its “regulations differently at different times in their history,” and may make changes to its position, provided that the change creates no unfair surprise.

Id.

at 170-71. The Court also recognized that when the Department utilizes notice-and-comment rulemaking in an attempt to codify a new regulation, as it is doing now, such rulemaking makes surprise unlikely.

Id.

at 170.

It must be noted that the Department argued in

Coke,

as well as in Wage and Hour Advisory Memorandum (“WHAM”) 2005-1 (Dec. 1, 2005) (found at

http://www.dol.gov/whd/FieldBulletins/index.htm

), that the third party regulation, as currently written, was the Department's best reading of these statutory exemptions. However, upon further consideration of the purpose and objectives behind the 1974 Amendments, the Department is no longer convinced that our prior reading is the best one. The purpose behind the Amendments, confirmed by the legislative history, was to extend FLSA coverage to domestic workers who were not employed by covered enterprises. In recognition that it was expanding coverage to workers employed by private households, Congress created the narrow exemption for casual babysitters and companions whose vocation is not domestic service. In light of the purposes behind the amendment and the exemption, § 13(a)(15) of the FLSA cannot and should not necessarily be read to apply to third party employers, as we argued for in the WHAM. The Department erroneously focused on the phrase “any employee,” instead of focusing on the purpose and objective behind the 1974 Amendments, which was to expand minimum wage and overtime protections to workers employed by private households that did not otherwise meet the FLSA coverage requirements. The Supreme

Court has “stressed that in expounding a statute, we must not be guided by a single sentence or member of a sentence, but look to the provisions of the whole law, and to its object and policy.”

U.S. Nat'l Bank of Oregon

v.

Indep. Ins. Agents of Am., Inc.,

508 U.S. 439, 455 (1993) (internal quotation marks omitted). The Supreme Court concluded that “the text of the FLSA does not expressly answer the third party employment question.”

Coke,

551 at 168. Thus, the statutory phrase “any employee” cannot, standing alone, answer the question at hand, and after considering the purpose and objectives of the Amendments as a whole, the Department believes that the companionship exemption was not intended to apply to third party employers.

Moreover, upon further reflection, the Department is no longer convinced that Congress' failure to limit the companionship exemption to employees of a particular employer is evidence of Congressional intent on this issue. WHAM at 2. In 1974, Congress understood that enterprises that employed domestic service workers to perform services in private homes were already covered employers under the Act and thus, their employees already received the protections of the FLSA even when they performed companionship services. There is no indication that Congress intended to narrow coverage of those employed by third party employers when this would be contrary to the intent and purpose of expanding coverage and protecting low-wage workers. By focusing on the impact that the 1974 Amendments would have upon private households during the debates, Congress presumably did not think it necessary to explicitly limit the narrowly created statutory exemptions to families and households who employ companions, causal babysitters and live-in domestics. Rather, Congress provided the Department with the power to fill these kinds of statutory gaps.

The WHAM noted the ambiguity and lack of clarity in the companionship regulations, stating that “phrases in the [companionship regulations] could potentially be read to exclude third party employees from the definition of domestic service employment.” WHAM at 3. This admitted lack of clarity is one of the reasons the Department has revisited these regulations, and, upon further consideration, proposes amending this regulation to state that employees of third party employers may not use these exemptions. This proposed amendment, as explained above, is based upon a closer examination of the legislative history and legislative intent, the manner in which the home health care industry has evolved, an attempt to better harmonize the regulations pertaining to companionship, 36 years of enforcement experience, and additional information provided by stakeholders, Members of Congress, and individual states.

Based on the foregoing reasons, the Department proposes to revise § 552.109(a) and (c) to apply the exemptions in §§ 13(a)(15) and 13(b)(21) of the FLSA only to workers employed by the individual, family or household using the worker's services. Further, to address concerns expressed in the legislative history that FLSA compliance would be a burden to the individual, family, or household, the Department believes it is consistent with the statute to maintain the §§ 13(a)(15) and 13(b)(21) exemptions for the individual, family, or household even if they engage the services of a third party employer. Therefore, if the individual, family, or household and the third party agency are joint employers, only the individual, family, or household is still entitled to assert the exemptions. However, regardless of whether a joint employment relationship exists, the exemptions are not available to the third party employer. Thus, all workers employed by a third party, whether solely or jointly, are entitled to the minimum wage and overtime protections of the Act. The Department further notes that if the employee fails to qualify as an exempt companion, such as if the employee performs incidental duties that exceed the 20 percent tolerance allowed under the proposed § 552.6(b), or the employee provides medical care for which training is a prerequisite, the individual, family or household member cannot assert the exemption and is jointly and severally liable for the violation. The proposed revision appropriately limits these exemptions to the scope Congress intended.

Finally, the proposed regulation refers to “the individual or member of the family or household” who employs the companion or live-in domestic worker. It is the Department's intent that “member of the family or household” be construed broadly, and no specific familial relationship is necessary. For example, a “member of the family or household” may include an individual who is a child, niece, guardian or authorized representative, housemate, or person acting

in loco parentis

to the elderly or infirm individual needing companionship or live-in services.

The Department invites comments on the proposed changes to the third party employment regulation, and specifically seeks feedback from home health care workers, organizations, and employers.

D. Live-in Domestic Service Employees (29 CFR 552.102 and 552.110)

The Department proposes revisions to the recordkeeping requirements in 29 CFR part 552 applicable to live-in domestic employees, in order to ensure that employers maintain an accurate record of hours worked by such workers and pay for all hours worked in accordance with the FLSA. Section 13(b)(21) of the Act, provides an overtime exemption for live-in domestic employees; however, such workers remain subject to the FLSA minimum wage protections. Current § 552.102 allows the employer and employee to enter into an agreement that excludes the amount of sleeping time, meal time, and other periods of complete freedom from duty when the employee may either leave the premises or stay on the premises for purely personal pursuits. Paragraph 552.102(a) makes clear that if the free time is interrupted by a call to duty, the interruption must be counted as hours worked. Paragraph 552.102(b) allows an employer and employee who have such an agreement to establish the employee's hours of work in lieu of maintaining precise records of the hours actually worked. The employer is to maintain a copy of the agreement and indicate that the employee's work time generally coincides with the agreement. If there is a significant deviation from the agreement, a separate record should be kept or a new agreement should be reached.

The Department is concerned that not all hours worked are actually captured by such agreement and paid, which may result in a minimum wage violation. The current regulations do not provide a sufficient basis to determine whether the employee has in fact received at least the minimum wage for all hours worked.

Proposed § 552.102(b) would no longer allow the employer of a live-in domestic employee to use the agreement as the basis to establish the actual hours of work in lieu of maintaining an actual record of such hours. Instead, the employer will be required to keep a record of the actual hours worked. Consequently, the language suggesting that a separate record of hours worked be kept when there is a significant deviation from the agreement is deleted. Nonetheless, proposed § 551.102(b) requires entering into a new written agreement whenever there is a significant deviation from the existing agreement.

The Department also proposes to amend § 552.110 with respect to the records kept for live-in domestic employees. Current § 552.110 specifies the recordkeeping requirements for domestic service employees. Paragraph 552.110(b) provides that records of actual hours worked are not required for live-in domestic employees; instead, the employer may maintain a copy of the agreement referred to in § 552.102. It also states that the more limited recordkeeping requirement in this section does not apply to third-party employers and that no records are required for casual babysitters. Paragraph 552.110(c) permits, when a domestic service employee works a fixed schedule, the employer to use the schedule that the employee normally works and either provide some notation that such hours were actually worked or, when more or less hours are actually worked, show the exact number of hours worked. Paragraph 552.110(d) permits an employer to require the domestic service employee to record the hours worked and submit the record to the employer.

For the reasons outlined above, proposed § 552.110(b) will no longer permit an employer to maintain a copy of the agreement as a substitution for recording actual hours worked by the live-in domestic employee. Instead, it requires that the employer maintain a copy of the agreement and maintain records showing the exact number of hours worked by the live-in domestic employee. Proposed § 552.110(b) also makes clear that the provisions of 29 CFR 516.2(c) do not apply to live-in domestic employees, which means that employers of such employees may not maintain a simplified set of records for live-in domestic employees who work a fixed schedule. As a result, § 552.110(c) is revised to clearly state that the provision does not apply to live-in domestic workers. The Department believes that the frequency of schedule changes simply makes reliance on a fixed schedule and noting exceptions too unreliable to ensure an accurate record of hours worked by these employees. In addition, the proposed changes to § 552.109 makes the reference in § 552.110(b) to third-party employers not being able to rely on the simplified recordkeeping requirements moot; consequently, it is removed from proposed § 552.110(b). The proposed regulations also revise § 552.110(d), thus no longer allowing the employer to require the live-in domestic service employee to record the hours worked and submit the record to the employer. As with other employees, the employer is responsible for making, keeping, and preserving records of hours worked and ensuring their accuracy. As is the case now, the Department does not require records for casual babysitters as defined by § 552.5; however, that provision is in a stand-alone paragraph, proposed 29 CFR 552.110(e).

V. Paperwork Reduction Act

The Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501

et seq.,

and its attendant regulations, 5 CFR part 1320, requires that the Department consider the impact of paperwork and other information collection burdens imposed on the public. Under the PRA, an agency may not collect or sponsor the collection of information, nor may it impose an information collection requirement unless it displays a currently valid Office of Management and Budget (OMB) control number.

See

5 CFR 1320.8(b)(3)(vi).

This action contains the following proposed amendments to the existing information collection requirements previously approved under OMB Control Number 1235-0018. As required by the Paperwork Reduction Act of 1995 (44 U.S.C. 3507(d), the Department has submitted these proposed information collection amendments to OMB for its review.

Summary:

The Department seeks to minimize the paperwork burden for individuals, small businesses, educational and nonprofit institutions, Federal contractors, State, local, and tribal governments, and other persons resulting from the collection of information by or for the agency. The PRA typically requires an agency to provide notice and seek public comments on any proposed collection of information contained in a proposed rule.

See

44 U.S.C. 3506(c)(2)(B); 5 CFR 1320.8.

The PRA requires all Federal agencies to analyze proposed regulations for potential time burdens on the regulated community created by provisions within the proposed regulations that require the submission of information. These information collection (IC) requirements must be submitted to OMB for approval. Persons are not required to respond to the information collection requirements as contained in this proposal unless and until they are approved by the OMB under the PRA at the final rule stage. This “paperwork burden” analysis estimates the burdens for the proposed regulations as drafted. The Department proposes to amend 29 CFR part 552 with respect to the records kept for live-in domestic employees. Proposed 29 CFR 552.102(b) would no longer allow the employer of a live-in domestic employee to use an agreement as the basis to establish hours worked in lieu of maintaining actual record of such hours. Instead, the employer will be required to keep a record of the actual hours worked. Concurrently, proposed 29 CFR 552.110(b) will no longer permit an employer to maintain a copy of an agreement as a substitute for keeping records of hours worked by the live-in domestic employee. Finally, the Department's proposed amendments to 29 CFR part 552 results in fewer employees being exempt from the minimum wage and overtime law. Employers must maintain records of hours worked for employees who are not exempt from minimum wage and overtime pay requirements. Therefore, the number of employees for whom an employer must maintain records of hours worked will increase under the proposed rule. This will increase the burden under 29 CFR part 516, the general recordkeeping regulation under the FLSA.

Circumstances Necessitating Collection:

The Fair Labor Standards Act (FLSA), 29 U.S.C. 201

et seq.,

sets the Federal minimum wage, overtime pay, recordkeeping and youth employment standards of most general application. Section 11(c) of the FLSA requires all employers covered by the FLSA to make, keep, and preserve records or employees and of wages, hours, and other conditions and practices of employment. A FLSA covered employer must maintain the records for such period of time and make such reports as prescribed by regulations issued by the Secretary of Labor. The Department has promulgated regulations at 29 CFR part 516 to establish the basic FLSA recordkeeping requirements. The Department has also issued specific recordkeeping requirements in 29 CFR part 552 which is the subject of this collection. The Department proposes to amend recordkeeping requirements in § 552.102 and § 552.110 regarding agreements for live-in domestic workers. The Department also notes that the proposed amendments to the definition of companion results in fewer employees being exempt from the minimum wage and overtime requirements of the FLSA.

Purpose and Use:

The Wage and Hour Division (WHD) and employees use this information to determine whether covered employers have complied with various FLSA requirements. Employers use the records to document FLSA compliance, including showing qualification for various FLSA exemptions.

Technology:

The recordkeeping aspect of this collection makes clear that the regulations prescribe no particular order or form of records and employers may preserve records in such forms as microfilm, or automated word or data processing memory is acceptable provided facilities are available for inspection and transcription of the records.

Duplication:

This information is not available through any other source.

Minimizing Small Entity Burden:

Although this information collection does involve small businesses, including small State and Local government agencies, the Department minimizes respondent burden by requiring no specific order or form of records in responding to this information collection. Moreover, employers would normally maintain the records identified in this information collection under usual or customary business practices.

Agency Need:

The Department is assigned a statutory obligation to ensure employer compliance with the FLSA. The Department uses records covered by this information collection to determine compliance with the FLSA.

Special Circumstances:

There are no special circumstances associated with this collection.

Public Comments:

The Department seeks public comments regarding the burdens imposed by information collections contained in sections 552.102 and 552.110 of this proposed rule. In particular, the Department seeks comments that: Evaluate whether the proposed collection of information is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; evaluate the accuracy of the agency's estimate of the burden of the proposed collection of information, including the validity of the methodology and assumptions used; enhance the quality, utility and clarity of the information to be collected; and minimize the burden of the collection of information on those who are to respond, including through the use of appropriate automated, electronic, mechanical, or other technological collection techniques or other forms of information technology,

e.g.,

permitting electronic submissions of responses. Commenters may send their views about these information collections to the Department in the same way as all other comments (

e.g.,

through the regulations.gov Web site). All comments received will be made a matter of public record, and posted without change to

http://www.regulations.gov,

including any personal information provided.

An agency may not conduct an information collection unless it has a currently valid OMB approval, and the Department has submitted the identified information collection contained in the proposed rule to the OMB for review under the PRA under the Control Number 1235-0018.

See

44 U.S.C. 3507(d); 5 CFR 1320.11. Interested parties may obtain a copy of the full supporting statement by sending a written request to the mail address shown in the

ADDRESSES

section at the beginning of this preamble or by visiting the

http://www.reginfo.gov/public/do/PRAMain

Web site.

In addition to having an opportunity to file comments with the Department, comments about the paperwork implications of the proposed regulations may be addressed to the OMB. Comments to the OMB should be directed to: Office of Information and Regulatory Affairs, Attention OMB Desk Officer for the Wage and Hour Division, Office of Management and Budget, Room 10235, Washington, DC 20503, Telephone: (202) 395-7316/Fax: (202) 395-6974 (these are not toll-free numbers).

Confidentiality:

The Department makes no assurances of confidentiality to respondents. As a practical matter, the Department would only disclose agency investigation records of materials subject to this collection in accordance with the provisions of the Freedom of Information Act, 5 U.S.C. 552, and the attendant regulations, 29 CFR part 70, and the Privacy Act, 5 U.S.C. 552a, and its attendant regulations, 29 CFR part 71.

OMB Control Number:

1235-0018.

Affected Public:

Businesses or other for profit, not-for-profit institutions.

Total Respondents:

3,493,514.

Total Annual Responses:

43,478,185.

Estimated Burden Hours:

987,778.

Estimated Time per Response:

2 minutes.

Frequency:

24 times annually.

Total Burden Cost (capital/startup):

0.

Total Burden Costs (operation/maintenance):

$22,580,605.

VI. Executive Orders 12866 and 13563

Executive Orders 12866 and 13563 direct agencies to assess all costs and benefits of available regulatory alternatives and, if regulation is necessary, to select regulatory approaches that maximize net benefits (including potential economic, environmental, public health and safety effects, distributive impacts, and equity). Executive Order 13563 emphasizes the importance of quantifying both costs and benefits, of reducing costs, of harmonizing rules, and of promoting flexibility. This rule has been designated a “significant regulatory action” because it is economically significant, under section 3(f) of Executive Order 12866, based on the Preliminary Regulatory Impact Analysis (PRIA) presented below. As a result, the OMB has reviewed this proposed rule. The Department also has concluded that this proposed rule is a major rule under the Small Business Regulatory Enforcement Fairness Act of 1996 (5 U.S.C. 801

et seq.

).

Preliminary Regulatory Impact Analysis of the Proposed Revisions to the Companionship

Regulations Background

Under Executive Order 12866 (58 FR 51735, October 4, 1993), the Department must determine whether a regulatory action is “significant” and therefore subject to OMB review and the requirements of the Executive Order. Executive Order 12866 defines “significant regulatory action” as one that is likely to result in a rule that may have “an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or state, local, or tribal governments or communities; create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive Order.” This proposed rule meets the criteria for a significant regulatory action because it is anticipated to have an annual effect on the economy of $100 million or more. As a result, the rule is submitted to OMB for review.

The provisions of the FLSA apply to all enterprises that have employees engaged in commerce or in the production of goods for commerce and have an annual gross volume of sales made or business done of at least $500,000 (exclusive of excise taxes at the retail level that are separately stated); or, are engaged in the operation of a hospital, an institution primarily engaged in the care of the sick, the aged, or the mentally ill who reside on the premises; a school for mentally or physically disabled or gifted children; a preschool, elementary or secondary school, or an institution of higher education (regardless whether such hospital, institution or school is public or private, or operated for profit or not);

or, are engaged in an activity of a public agency.

There are two ways an employee may be covered by the provisions of the FLSA: (1) Any employee of an enterprise covered by the FLSA is covered by the provisions of the FLSA, and (2) even if the enterprise is not covered, individual employees whose work engages the employee in interstate commerce or in the production of goods for commerce or in domestic service is covered by the provisions of the FLSA. Covered employers are required by the provisions of the FLSA to: (1) Pay employees who are not exempt from the Act's requirements not less than the Federal minimum wage for all hours worked and overtime premium pay at a rate of not less than one and one-half times the employee's regular rate of pay for all hours worked over 40 in a workweek, and (2) make, keep, and preserve records of the persons employed by the employer and of the wages, hours, and other conditions and practices of employment.

In 1974, Congress expressly extended FLSA coverage to “domestic service” workers performing services of a household nature in private homes not previously subject to minimum wage and overtime requirements. While domestic service workers are covered by FLSA minimum wage and overtime requirements even though they work for a private household and not a covered enterprise, Congress created exemptions from these requirements for casual babysitters and persons employed in domestic service employment to provide companionship services for individuals who (because of age or infirmity) are unable to care for themselves.

5

5

29 U.S.C. 202(a), 206(f), 207(l), and 213(a)(15).

Need for Regulation and Why the Department Is Considering Action

In 1974, Congress extended coverage of the FLSA to many domestic service employees performing services of a household nature in private homes not previously subject to minimum wage and overtime pay requirements. Section 13(a)(15) of the Act exempts from its minimum wage and overtime pay provisions domestic service employees employed “to provide companionship services for individuals who (because of age or infirmity) are unable to care for themselves (as such terms are defined and delimited by regulations of the Secretary).” Section 13(b)(21) of the FLSA exempts from the overtime pay provision any employee employed “in domestic service in a household and who resides in such household.”

Since the 1975 regulations were implemented, the home health care industry has evolved and expanded in response to the increasing size of the population in need of such services, the growing demand for in-home care instead of institutional care for persons of all ages, and the availability of public funding assistance for such services under Medicare and Medicaid. As the industry has expanded, so has the range of tasks performed by workers providing companionship services. The range now includes assistance with activities of daily living (ADLs), instrumental activities of daily living (IADLs), and paramedical tasks (such as catheter hygiene or changing of aseptic dressings).

6

Public funding programs do not cover services such as social support, fellowship or protection.

7

According to the U.S. Department of Health and Human Services (HHS), “[s]imple companionship or custodial observation of an individual, absent hands-on or cueing assistance that is necessary and directly related to ADLs and IADLs, is not a Medicaid personal care service.”

8

6

PHI, 2010a. Background Report on the U.S. Home Care and Personal Assistance Workforce and Industry (Forthcoming). P. 22.

7

PHI, 2010a. p. 22.

8

“Understanding Medicaid Home and Community Services: A Primer,” Gary Smith, Janet O'Keefe, Letty Carpenter, Pamela Doty, Gavin Kennedy, Brian Burwell, Robert Mollica and Loretta Williams, George Washington University, Center for Health Policy Research, October 2000.

The Department of Labor believes that the current application of the companionship services exemption in the home health care industry is not consistent with the original Congressional intent. The Department proposes to modify the definition of companionship services to exclude personnel who perform functions that require training in the performance of medically-related duties, and to provide only a 20 percent tolerance for intimate personal care services and related household work. As a result, to qualify for the companionship services exemption, workers must spend at least 80 percent of their time in activities that provide fellowship or protection. Those workers who are providing home health care services that exceed the 20 percent tolerance for intimate personal care services and related household work must be paid in accordance with federal minimum wage and overtime requirements.

Objectives and Legal Basis for Rule

Section 13(a)(15) of the FLSA exempts from its minimum wage and overtime pay provisions domestic service employees employed “to provide companionship services for individuals who (because of age or infirmity) are unable to care for themselves (as such terms are defined and delimited by regulations of the Secretary).” Due to significant changes in the home health care industry over the last 36 years, workers who today provide in-home care to individuals are performing duties and working in circumstances that were not envisioned when the companionship services regulations were promulgated. Section 13(b)(21) provides an exemption from the Act's overtime pay requirements for live-in domestic workers. The current regulations allow an employer of a live-in domestic worker to maintain a copy of the agreement of hours to be worked and to indicate that the employee's work time generally coincides with that agreement, instead of requiring the employer to maintain an accurate record of hours actually worked by the live-in domestic worker. The Department is concerned that not all hours worked are actually captured by such agreement and paid, which may result in a minimum wage violation. The current regulations do not provide a sufficient basis to determine whether the employee has in fact received at least the minimum wage for all hours worked.

The Department has re-examined the regulations and determined that the regulations, as currently written, have expanded the scope of the companionship services exemption beyond those employees whom Congress intended to exempt when it enacted § 13(a)(15) of the Act, and do not provide a sufficient basis for determining whether live-in workers subject to § 13(b)(21) of the Act have been paid at least the minimum wage for all hours worked. Therefore, the Department proposes to amend the regulations to revise the definitions of “domestic service employment” and “companionship services,” and to require employers of live-in domestic workers to maintain an accurate record of hours worked by such employees. In addition, the proposed regulation would limit the scope of duties a companion may perform, and would prohibit employees of third-party employers from claiming the exemption.

Summary of Impacts

The Department projects that the average annualized cost of the rule will total about $4.7 million per year over 10 years. In addition to the direct cost to employers of the rule, there are also transfer effects resulting from the rule. The primary impacts of the rule are

income transfers to home health care workers in the form of: increased hourly wages to reach minimum wage (about $16.1 million in the first year, negligible thereafter); payment for time spent traveling between patients (average annualized value of $34.7 million per year); and payment of an overtime premium when hours worked exceed 40 hours per week. Because overtime payments depend on how employers adjust scheduling to eliminate or reduce overtime hours, the Department considered three adjustment scenarios resulting in payment of: 100 percent of current overtime hours worked (average annualized value of $180.7 million per year); 50 percent of current overtime hours worked (average annualized value of $90.4 million per year); or no payment of overtime. On the basis of previous evidence on the impact of overtime pay, the Department judges that overtime payments in the range of scenarios 2 and 3 are more likely than scenario 1.

Although the transfer of income to workers in the form of higher wages is not considered a cost of the rule from a societal perspective, higher wages do increase the cost of providing home health care services, resulting in the provision of fewer services. This reduction in the provision of services causes the market to function less efficiently, and this allocative inefficiency is a cost from a societal perspective. With a 3% real rate, the Department measures the range of average annualized deadweight loss attributable to this allocative inefficiency as $105,000 when no overtime pay adjustment is assumed, $36,000 when 50% of overtime pay is assumed to adjust and $3,000 when a 100% adjustment in overtime pay is assumed. The relatively small deadweight loss primarily occurs because both the demand for and supply of home health care services appear to be inelastic—that is, the equilibrium quantity of companionship services is not very responsive to changes in price, possibly due to the importance of these services and the coverage of many companionship services by Medicare and Medicaid. Table 1 summarizes the projected costs, transfer effects and impacts of the proposed revisions to the FLSA.

Table 1—Summary of Impact of Proposed Changes to FLSA

Average Annualized Value ($ mil.)

Year 1 ($ mil.)

Years 2-10 ($ mil.)

a

3% Real Rate

7% Real Rate

Costs

Regulatory Familiarization Agencies

$3.9

$0.3

$0.3

$0.7

$0.8

Families Hiring Self-employed

6.0

3.2

4.0

3.8

3.9

Total Costs

9.9

3.5

4.4

4.6

4.7

Transfers

Minimum Wages (MW)

To Agency-Employed Workers

13.0

0.0

b

0.0

b

1.5

1.7

To Self-Employed Workers

3.1

0.0

b

0.0

b

0.4

0.4

Travel Wages

26.7

27.8

45.8

35.4

34.7

Overtime Scenarios

OT 1

139.3

144.8

238.8

184.2

180.7

OT 2

69.7

72.4

119.4

92.1

90.4

OT 3

0.0

0.0

0.0

0.0

0.0

Total Costs and Transfers by Scenario

Reg Fam + MW + Travel + OT 1

192.1

176.2

289

226

222.2

Reg Fam + MW + Travel + OT 2

122.4

103.8

169.6

133.9

131.9

Reg Fam + MW + Travel + OT 3

52.7

31.4

50.2

41.8

41.5

Deadweight Loss

Reg Fam + MW + Travel + OT 1

0.103

0.080

0.132

0.105

0.103

Reg Fam + MW + Travel + OT 2

0.042

0.027

0.044

0.036

0.036

Reg Fam + MW + Travel + OT 3

0.008

0.002

0.004

0.003

0.003

Disemployment (number of workers)

Reg Fam + MW + Travel + OT 1

793

739

1,169

938

c

Reg Fam + MW + Travel + OT 2

505

435

686

544

c

Reg Fam + MW + Travel + OT 3

218

132

203

172

c

a

These costs are a range where the first number represents the estimate for Year 2; the second estimate for Year 10.

b

2010 statistics on PCA and HHA wages indicate that few workers, if any, are currently paid below minimum wage (

i.e.

in no state is the 10th percentile wage below $7.25 per hour). See the BLS Occupational Employment Statistics, 2010 state estimates, at URL:

http://stats.bls.gov/oes/.

c

Simple average over 10 years.

Columns may not sum to totals due to rounding.

State Law Requirements

In evaluating the economic impact of the proposed rule, it is important to consider the current wage requirements for home health care workers. There are numerous state laws pertaining to home health care workers. The State Medicaid Manual requires states to develop qualifications or requirements (such as background checks, training, age, supervision, health, literacy, or

education, or other requirements) for Medicaid-financed personal care attendants. These state programs can each have multiple delivery models, with care being agency-directed or consumer-directed with care given by agencies or independent providers. These delivery models are not necessarily mutually exclusive. In general, for the purposes of this analysis, we refer to independent providers as workers providing services through informal arrangements, and therefore they are not counted in the statistics on home health care providers used as the basis for this analysis.

A 2006 report by the HHS Office of the Inspector General (OIG) found that states have established multiple sets of worker requirements that often vary among the programs within a state and among the delivery models within programs, resulting in 301 sets of requirements nationwide.

9

Four of the consumer-directed programs in the OIG review had no attendant requirements.

9

U.S. Department of Health and Human Services (HHS) Office of the Inspector General (OIG). States' Requirements for Medicaid-Funded Personal Care Service Attendants, available at

http://oig.hhs.gov/oei/reports/oei-07-05-00250.pdf.

(2006).

Furthermore, states define these requirements differently, and specify different combinations of requirements in different programs. The most common requirements, and some characterization of how these might be defined by different programs, include:

•

Background Checks.

May include the following: criminal background checks; checks of abuse or neglect registries; and checks of Federal or State exclusion lists for previous fraudulent or abusive activities.

•

Training.

May include the following: First aid or cardiopulmonary resuscitation (CPR); basic health knowledge (

e.g.,

food and nutrition, blood-borne pathogens, hygiene, universal precautions); assistance with daily living activities (

e.g.,

patient transfer techniques, proper patient bathing and showering techniques, and grooming); program orientation (

e.g.,

beneficiary rights and responsibilities, safety, behavioral issues, patient confidentiality); training specific to an individual beneficiary's needs; or other training.

•

Supervision.

Might be performed by registered or licensed practical nurses (RN or LPN); home health or personal care service agency staff; case managers; other qualified staff or individuals; or the beneficiary.

•

Minimum Age.

Most commonly set at 18-years-old, but in some states might be 14-years-old, 19-years-old, or of “legal working age.”

•

Health.

May include the following: Test negative for tuberculosis; be able to perform the services in the plan of care; meet an established minimum level of physical ability (

e.g.,

able to lift a certain weight or stand for a certain time); be free of communicable disease; pass a physical examination; or drug test.

•

Education/Literacy.

Minimum requirements might include: An ability to read and write adequately to follow instructions or to keep records; a General Education Diploma (GED) or high school diploma; completed a certain grade; be a Certified Nursing Assistant (CNA) or a home health aide; have a Homemaker/Personal Care Service Provider certification issued by the state; be able to communicate with the beneficiary and/or supervisory staff; pass a competency test or have previous experience; have the skills, knowledge, and abilities necessary to perform the services needed; be able to meet the needs of the beneficiary; or be mature and sympathetic.

•

Other.

Might be required to: Have a Social Security number; have an identification card; be a U.S. citizen; or meet state motor vehicle requirements if providing transportation.

The number of states that included each requirement in at least one program and the number of state program sets that include each requirement are summarized in Table 1-1.

Table 1-1—Six Most Common Attendant Requirements

Requirement

Number of states that utilized

requirement in

at least one

program

Number of sets containing

requirement

(of 301 sets)

Background Checks

50

245

Training

46

227

Age

42

219

Supervision

43

198

Health

39

162

Education/Literacy

31

125

Source: DHSS OIG, 2006. p. 9.

States' laws also vary in whether they extend minimum wage and overtime provisions to home health care workers. In many states companions or home health care workers are not explicitly named in the regulations, but often fall under those regulations that apply to domestic service employees.

• 16 states extend both minimum wage and overtime coverage to most home health care workers who would otherwise be excluded under the current regulations: California, Colorado, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Jersey, New York, Pennsylvania, Washington, and Wisconsin. However, in some states certain types of these workers remain exempt, such as those employed directly by households or by non-profit organizations. Additionally, New York's overtime law provides that workers who are exempt from the FLSA and employed by a third-party agency need only be paid time and one-half the minimum wage (as opposed to time and one-half of the worker's regular wage). Minnesota's overtime provision applies only after 48 hours of work.

• Five states (Arizona, Nebraska, North Dakota, Ohio, and South Dakota) and the District of Columbia extend minimum wage, but not overtime coverage to home care workers. There are again some exemptions for those workers employed directly by households or who live in the household.

• 29 states do not include home health care workers in their minimum wage and overtime provisions: Alabama, Alaska, Arkansas, Connecticut,

Delaware, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, Louisiana, Mississippi, Missouri, New Hampshire, New Mexico, North Carolina, Oklahoma, Oregon, Rhode Island, South Carolina, Tennessee, Texas, Utah, Vermont, Virginia, West Virginia, and Wyoming.

10

10

National Employment Law Project (NELP). 2011. Fair Pay for Home Care Workers, available at

http://www.nelp.org/page/-/Justice/2011/FairPayforHomeCareWorkers.pdf?nocdn=1.

Of the 22 jurisdictions that extend minimum wage to at least some home health care workers, 12 have a state minimum wage that is higher than the current federal minimum wage of $7.25 an hour.

11

These state laws are summarized in Table 1-2.

11

U.S. Department of Labor (DOL). 2011. Minimum Wage, available at

http://www.dol.gov/dol/topic/wages/minimumwage.htm.

Table 1-2—State Minimum Wage and Overtime Coverage of Non-Publicly Employed Companions

State

State minimum wage [a]

MW

OT

Neither

Analysis and citations [b]

AL

x

AK

$7.75

x

AZ

7.35

x

Minimum wage but no overtime coverage for companions as defined in the FLSA. No state overtime law. See Ariz. Rev. Stat. Ann. §§ 23-362, 23-363; see also Office of the Attorney General of the State of Arizona, Opinion No. I07-002 (Feb. 7, 2007).

AR

6.25

x

CA

8.00

x

All companions as defined in the FLSA are entitled to minimum wage. California's overtime rules create in terms of overtime four categories of workers who provide home care. (1) Those who are employed by non-profits and do no additional work beyond feeding, dressing, and supervising the person do not receive overtime. (2) Those who are employed by non-profits but do additional work beyond feeding, dressing, and supervising do receive overtime. (3) All for-profit workers receive overtime regardless of their job description. (4) County-employed home care worker, of whom there are approximately 367,000, receive up to $11.50 an hour straight time per their union contracts and may also receive overtime under those contracts.

Industrial Welfare Commission Order No. 5-2001, “Judge Orders State to Halt Wage Cut for California Home Care Workers,

http://www.seiu.org/2009/06/judge-orders-state-to-halt-wage-cut-for-california-home-care-workers.php

(last visited Jun. 28, 2011); PHI, 2010a. p. 14.

CO

7.36

x

x

Minimum wage and overtime coverage for third-party-employed home care workers who do work beyond Colorado's definition of “companion.” Colorado's definition of “companion” is much narrower than the FLSA definition. Companions may not help to bathe and dress the person, do any amount of housekeeping, or remind the person to take medication. People who do those tasks are more than just “companions” they are “personal care” attendants. Personal care attendants are entitled to minimum wage and overtime. However, PCAs employed directly by private households are exempt from minimum wage and overtime. Colorado Minimum Wage Order No. 26 § 5; 7 Colo. Code Regs. § 1103-1:5.

CT

8.25

x

DE

7.25

x

DC

8.25

x

Minimum wage for companions as defined in the FLSA. D.C. Mun. Regs. tit. 7, § 902.1, 902.3, 902.4 (West 2011).

FL

7.25

x

GA

5.15

x

HI

7.25

x

x

Minimum wage and overtime coverage for companions as defined in the FLSA, but exemption for those employed directly by private households. Haw. Rev. Stat. § 387-1.

ID

7.25

x

IL

$8.25

x

x

Minimum wage and overtime coverage for any person whose primary duty is to be a companion for individual(s) who are aged or infirm or workers whose primary duty is to perform health care services in or about a private home. There may be an exemption for those employed solely by private households as a result of a general exemption for employers with fewer than four employees. 820 Ill.Comp. Stat. § 105/3(d); Ill. Adm. Code § 210.110.

IN

7.25

x

IA

7.25

x

KS

7.25

x

KY

7.25

x

LA

x

ME

7.50

x

x

Minimum wage and overtime coverage for all companions as defined in the FLSA. No relevant exemptions. Me. Rev. Stat. Ann. tit. 26, §§ 663, 664.

MD

7.25

x

x

Minimum wage coverage for all companions as defined in the FLSA. Overtime coverage for most home care workers but exemption for workers employed by non-profit agencies that provide “temporary at-home care services”. Md. Code Ann., Lab. & Empl. § 3-415.

MA

8.00

x

x

Minimum wage and overtime coverage for all companions as defined in the FLSA. No relevant exemptions. Mass. Gen. Laws Ch. 151, § 1.

MI

7.40

x

x

Minimum wage and overtime coverage for companions as defined in the FLSA, but exemption for live-in workers. Mich. Comp. Laws § 408.394(2)(a). Exemption for workers employed solely by private household as a result of exemption for employer with fewer than two employees. Mich. Comp. Laws § 408.382(c).

MN

6.15 or 5.25 for employers grossing under $625,000 per year

x

x

Minimum wage and overtime coverage after 48 hours for all companions as defined in the FLSA, but nighttime hours where companion is available to provide services but does not actually do so need not be compensated. Minn. Stat. § 177.23(11).

MS

x

MO

7.25

x

MT

7.35

x

x

Minimum wage and overtime coverage for companions as defined in the FLSA, but exemption for those employed directly by private households. Mont. Code. Ann. § 39-3-406(p).

NE

7.25

x

Minimum wage but no overtime coverage for companions as defined in the FLSA. No state overtime law. De facto exemption for most households as a result of general exemption for employers with fewer than four employees. Neb. Rev. Stat. §§ 48-1202, 48-1203.

NV

8.25

x

x

Minimum wage and overtime coverage for companions as defined in the FLSA, but exemption for live-in workers. Also, business enterprises with less than $250,000 annually in gross sales volume need not pay overtime. Nev. Rev. Stat. § 608.250(2)(b).

NH

7.25

x

NJ

7.25

x

x

Minimum wage and overtime coverage for all companions as defined in the FLSA. No relevant exemptions. N.J. Stat. Ann.§ 34:11-56a

et seq.

NM

7.50

x

NY

7.25

x

x

Minimum wage coverage for all companions as defined in the FLSA. N.Y. Labor Law § 651(5). There is overtime coverage for all companions but those employed by third party agencies receive overtime at a reduced rate of 150% of the minimum wage (rather than the usual 150% of their regular rate of pay). N.Y. Labor Law §§ 2(16), 170; N.Y. Comp. Codes R. & Regs. tit. 12, § 142-2.2. Overtime coverage for live-in workers after 44 hours/week (rather than the usual 40 hours) at the same rates detailed above.

Id.

NC

7.25

x

ND

7.25

x

Minimum wage but no overtime coverage for companions as defined in the FLSA. However, companions who are certain first or send-degree relatives of the person receiving care do not receive minimum wage. Additionally, nighttime hours where companion is available to provide services but does not actually do so need not be compensated. N.D. Cent. Code § 34-06-03.1.

OH

7.40

x

Minimum wage but not overtime coverage for companions as defined in the FLSA. Ohio Rev. Code Ann. § 4111.03 (A) § 4111.14 (West 2011). Additional overtime exemptions for live-in workers.

Id.

§ 4111.03(D)(3)(d).

OK

7.25

x

OR

8.50

x

PA

7.25

x

x

Minimum wage and overtime coverage for companions as defined in the FLSA, but exemption for those employed solely by private households. Pa. Stat. Ann. tit. 43, § 333.105(a)(2).

Bayada Nurses

v.

Commonwealth of Pennsylvania,

8 A.3d 866 (Pa. 2010).

RI

7.40

x

SC

x

SD

7.25

x

Minimum wage but no overtime coverage for companions as defined in the FLSA. No state overtime law. S.D. Codified Laws §§ 60-11-3, 60-11-5.

TN

x

TX

7.25

x

UT

7.25

x

VT

8.15

x

VA

7.25

x

WA

8.67

x

x

Washington minimum wage and overtime coverage for most companions as defined in the FLSA, but exemption for live-in workers. Wash. Rev. Code § 49.46.010(5)(j).

WV

7.25

x

WI

7.25

x

x

Minimum wage and overtime coverage for most companions as defined in the FLSA, but overtime exemption for those employed directly by private households, Wis. Admin. Code § 274.015, and those employed by non-profit organizations. Wis. Admin. Code §§ 274.015, 274.01. Companions who spend less than 15 hours a week on general household work and reside in the home of the employer are also exempt from minimum wage. Wis. Admin. Code § 272.06(2).

WY

5.15

x

Abbreviations: MW = Minimum Wage, OT = Overtime, FLSA = Fair Labor Standards Act.

Sources: [a] DOL, 2011; [b] NELP, 2011.

Data Sources

The primary data services used by the Department to estimate the number of workers, establishments, and customers likely to be impacted by the proposed rule include:

• Bureau of Labor Statistics (BLS) 2009 Occupational Employment Survey, employment and wages by state for SOC codes 39-9021 (Personal Care Aides) and 31-1011 (Home Health Aides);

• BLS Quarterly Census of Employment and Wages, 2009 for NAICS 6216 and 62412;

• BLS National Employment Matrix, 2008;

• 2007 Statistics of U.S. Businesses, for NAICS 6216 and 62412; and

• 2007 Economic Census, by state for NAICS 6216 and 62412.

The key limitation of this set of data sources is that it results in an inconsistency between the Department's best estimate of agency-employed caregivers (from the 2009 BLS Occupational Employment Survey), and its best estimate of independent providers directly employed by families (from the 2008 BLS National Employment Matrix). The Occupational Employment Survey (OES) is employer based, and does not collect data from the self-employed. The National Employment Matrix (NEM) obtains estimates on the self-employed from the Current Population Survey. However, it is not possible to match the OES estimates by subtracting the estimated number of self-employed workers from the NEM. Because these two estimates cannot be completely reconciled, the Department uses each source as the best estimate for one segment of the labor market and acknowledges there is some inconsistency between the two.

Care Recipients and Demand for Services

Demand for home health care services is anticipated to continue to grow in the

next few decades with the aging of the “baby boomer generation.” According to PHI:

Nearly one out of four U.S. households provides care to a relative or friend aged 50 or older and about 15 percent of adults care for a seriously ill or disabled family member. Over the next two decades the population over age 65 will grow to more than 70 million people [the U.S. population 65 years and older was estimated at 40 million in 2009

12

]. Additionally, with significant increases in life expectancy and medical advances that allow individuals with chronic conditions to live longer, the demand for caregiving is expected to grow exponentially. The growth in the demand for in-home services is further amplified by an increasing preference for receiving supports and services in the home as opposed to institutional settings. This emphasis has been supported by the increased availability of publicly funded in-home services under Medicaid and Medicare as an alternative to traditional and increasingly costly institutional care.

13

12

2011 Statistical Abstract, U.S. Census Bureau.

13

National Alliance for Caregiving and the American Association of Retired Persons. 1997. Family caregiving in the U.S.: Findings from a national study. Available from

http://www.caregiving.org.

While many recipients of home health care services are elderly, about two-fifths of those in need of these services are under 65 and include those with varying degrees of mental or developmental disabilities. This group of home health care recipients is also anticipated to grow rapidly as more individuals opt for home-based care over institutional settings.

14

It is estimated that the demand for home health care workers will grow to approximately 5.7 to 6.6 million workers in 2050, an increase in the current demand for workers of between 3.8 and 4.6 million (200 percent and 242 percent respectively).

15

The home health care industry has grown significantly over the past decade and is projected to continue growing rapidly; for example:

14

PHI, 2003. The Personal Assistance Services and Direct-Support Workforce: A Literature Review, available at

http://www.directcareclearinghouse.org/download/CMS_Lit_Rev_FINAL_6.12.03.pdf.

15

HHS, 2001. Pgs. 4, 5, and 7.

• The number of establishments in Home Health Care Services (HHCS) grew by 70 percent between 2001 and 2009; during that same period, the number of establishments in Services for the Elderly and Persons with Disabilities (SEPD) grew by 355 percent.

16

16

U.S. Bureau of Labor Statistics (BLS). 2008. National Employment Matrix—Search by Occupation, available at

http://data.bls.gov/oep/nioem?Action=empios&Type=Occupation.

• Between 2008 and 2018 the number of home health aides is projected to increase by 50 percent and the number of personal care aides by 46 percent.

Employers and Funding Sources

This section focuses on the employers of workers who are currently classified as companions and common sources of funding for the services they provide; the next section describes the workers and the work they do. Services in the home health care industry are provided through two general delivery models: Agencies and consumer-directed (which often use independent providers and family caregivers).

Figure 2 provides a visual overview of the home care and personal assistance industry and the two primary models for service provision, which are discussed in more detail in the sections that follow.

Figure 2. Overview of the Home Health Care Industry and Funding Sources

EP27DE11.001

Agency Model

Under the agency model a third-party provider of home care and personal assistance services (usually a home health care company) employs the home care workers and is responsible for ensuring that services authorized by a public program or contracted for by a private party are in fact delivered.

17

There are currently about 73,000 establishments providing these services. The services are paid for through public programs such as Medicaid, Medicare, and other state programs, and through private sources such as private health

insurance or out-of-pocket payments. In 2009, public programs (Medicare, Medicaid, and other government spending) accounted for about 75 percent ($63.1 billion) of the $84.1 billion in annual revenue dispersed to these agencies.

18

17

Seavey and Marquand, 2011, pg. 26. Available at:

http://www.directcareclearinghouse.org/download/caringinamerica-20111212.pdf.

18

Seavey and Marquand, 2011, pgs 22, 23. Available at:

http://www.directcareclearinghouse.org/download/caringinamerica-20111212.pdf.

Agencies providing home care and personal assistance services are covered by two primary industries: Home Health Care Services (HHCS, NAICS 6216), and Services for Elderly and Persons with Disabilities (SEPD, NAICS 62412).

19

HHCS is dominated by for-profit agencies that are Medicare-certified and depends on public programs for three-quarters of its revenue.

20

SEPD is a rapidly growing industry that is dominated by small non-profit enterprises. Table 2-1 provides an overview of these two industries in terms of number of employees, establishments, payroll and wages, and estimated revenues.

19

These two industries are the primary employers of workers currently classified as companions; however, based on data reported by BLS in the National Employment Matrix there are approximately 25 other industries that also employ these workers. Since these other industries employ so few of the workers under consideration here they will be minimally affected by this proposed rule.

20

Seavey and Marquand, 2011, pgs 20-22. Available at:

http://www.directcareclearinghouse.org/download/caringinamerica-20111212.pdf.

Table 2-1—Summary of HHCS and SEPD, 2009

Industry

Employees

[a]

Establishments

Total wages

($ mil.)

Avg weekly

wage

Est. revenue

($ mil.)

SEPD + HHCS

1,714,000

73,200

$413,181

$464

$80,307

SEPD

679,600

49,100

133,247

377

28,645

HHCS

1,034,400

24,100

279,934

520

51,662

[a] Employees include HHA, PCA, and other occupations.

Sources: BLS QCEW 2009; BLS National Employment Matrix, 2008.

These two industries primarily employ workers as home health aides (HHA) and personal care aides (PCA) in addition to other occupations. However, not all of the HHA and PCA employed by these agencies work as companions under the companionship exemption; these agencies provide a variety of health-related services that may be delivered in private homes (and potentially companionship services) or in public or private facilities (and not defined as companionship services). Simply put, only a fraction of the 1.7 million employees listed in the table above are currently working as exempt companions who may see changes in their wages and/or work schedules as a result of the proposed rule.

Within these two industries there are three broad employer types: Home health care companies, for-profit franchise chains, and private-duty home care companies. The latter two types are smaller, emerging types of employers that focus on the provision of non-medical care for clients. Home health care companies focus on providing medically-oriented home health care services and non-medical home care or personal assistance services. Many of these agencies are Medicare-certified; those that avoid obtaining certification do so because they do not provide the skilled nursing care required by Medicare. These companies also derive a significant portion of their revenue from the provision of medical devices to customers.

21

21

PHI, 2010a. p.2.

Consumer-Directed Models

Under the consumer-directed model, the consumer or his/her representative has more control than in the agency-directed model over the services received, and when, how, and by whom the services are provided. The approaches to delivering services under this model range from the more formal state-organized systems to informal arrangements coordinated through word-of-mouth between care recipients. In the public version of this model, the care is funded either by Medicaid, directly by states, or through programs or grants administered by the HHS Centers for Medicare & Medicaid Services (CMS).

Other recipients arrange for and pay for care privately through informal negotiations with individual service providers. In this model, the customer may act as the sole or a joint employer and has varying degrees of responsibility for interviewing, hiring, training, managing, and firing the provider. Due to the sometimes informal nature of the consumer-directed employment arrangements, there are no data on the total number of customers under this model, and there is limited information on the total number of providers. BLS National Employment Matrix data show that 127,000 Personal Care Aides (about 16 percent) are employed in private households and 61,500 (about 8 percent) are self-employed, for a total of 188,500 workers (about 23 percent) that may provide services as independent contractors.

22

Fewer Home Health Aides are employed in this manner, with 1,700 (less than one percent) working for private households and 16,400 (about two percent) who are self-employed. Combining the data for Personal and Home Health Aides suggests that 206,600 of these workers (about twelve percent) may be either self-employed or employed in private households. The Department believes that these workers can reasonably be described as independent providers that directly provide caregiver services to families, perhaps through informal arrangements.

22

BLS, 2008.

However, consumer-directed employment is sometimes referred to as a “grey market;” that contains an element of “over-the-back-fence network of women [who are] usually untrained, unscreened, and unsupervised, but more affordable without an agency's fee, less constrained by regulations and hired through personal recommendation.”

23

The term “grey market” is sometimes used to suggest that at least some of these private arrangements are designed to avoid applicable labor laws; the extent to which care recipients use private arrangements for this purpose is unclear; there is very little information available about this segment of the market for home health services. It is also possible, and likely, that care providers who are employed by an agency or who provide services through a state registry also occasionally provide services through informal arrangements. The Department's best estimate of consumer-directed employment is

summarized in the previous paragraph, and we are unable to estimate the extent to which the group of providers described above participates in the informal market. We are also unable to characterize the extent to which other providers not included in this estimate participate in the “grey market.”

23

Gross, J.,

New Options (and Risks) in Home Care for Elderly.

New York Times available at

http://nytimes.com/2007/03/01/us/01aides.html.

(March 1, 2007).

There is no consolidated source of data on state consumer-directed programs; however, PHI offers an overview of what programs are offered: Seven states have no publicly-funded consumer-directed program, 38 states offer options under one or more Medicaid Waivers, seven states offer options under Medicaid Home Health programs, and 12 states offer consumer/participant-directed options under Medicaid Personal Care Option.

24

24

Seavey and Marquand, 2011, pg 28. Available at:

http://www.directcareclearinghouse.org/download/caringinamerica-20111212.pdf.

Of those states that do offer a consumer-directed program, some have implemented a “public authority” model. In this model, a public authority or some other governmental or quasi-governmental entity plays a role in setting compensation and other employment terms for the service provider, who is compensated through public funds, acts as the “employer-of-record,” and may provide training, and create and maintain registries of providers.

25

Service providers in this system have the option to select representatives for collective bargaining with the state. Six states (California, Massachusetts, Michigan, Oregon, Washington, and Wisconsin) have fully implemented a public authority, and Missouri is in the process of doing so. Several states have implemented a consumer-directed program without creating a public authority, they include: Illinois, Iowa, Maryland, and Ohio.

25

PHI, 2010a. p. 14.

California's policies are of particular note because it has one of the largest home care caseloads. This is due to a combination of demographic factors and a robust social movement of the disabled community that created Centers for Independent Living in the 1970s.

26

California's In-Home Supportive Services (IHSS) program was created in 1973. IHSS is the largest personal care program in the nation and is funded through a combination of state, county, and federal Medicaid funds.

27

A 2000 study of independent home care workers found that IHSS employed more than 200,000 independent personal care workers through IHSS, 72,000 in Los Angeles County alone.

26

Boris, E. & Klein, J. 2006. Organizing home care: Low-waged workers in the welfare state, available at

http://escholarship.org/uc/item/21x6q48g;jsessionid=197876DF1E12B3D17476457ED5FE5E24#page-6.

27

PHI, 2010b. California's Direct-Care Workforce. Available at

http://www.directcareclearinghouse.org/download/CA%20Fact%20Sheet-%2011-04-10.pdf.

IHSS initially allowed counties to organize the service in different ways, and each had a different approach to employing the worker. Under the individual provider model, the consumer hired the worker and the worker was considered an independent contractor, with the state paying for the service and social workers allocating hours. Under the county model, the worker was a government employee. Under the contract model, the county contracted with an agency which became the employer.

28

Ambiguity about who was really employing IHSS workers continued in the following decades. In 1985, California's attorney general determined that IHSS attendants came under state workers' compensation and other labor laws, and were county employees for purposes of collective bargaining. However in

Service Employees International Union, Local 434

v.

County of Los Angeles,

the court found IHSS workers to be independent contractors because the counties did not control their activities directly.

29

In 1992, California began to establish county-based public authorities. Under the public authority model, workers are no longer self-employed, and the employer responsibilities are split between the public authority (which serves as the employer in collective bargaining with the union) and the consumer (who is responsible for the selecting, hiring, and supervising of workers).

30

Today there are approximately 367,000 home care workers employed by the California public authority.

31

28

Boris & Klein, 2006.

29

Boris & Klein, 2006.

30

PHI, 2011b. California Direct Care Workforce Initiatives,. available at

http://www.directcareclearinghouse.org/s_state_det1.jsp?res_id=5&action=null.

31

PHI, 2010a.

In an effort to connect participants in consumer-directed programs with care providers, some states and public authorities have created matching registries; these systems provide some insight into how consumers identify care providers to meet their needs. Depending on the registry, consumers can either search the worker database online, or speak to trained staff who conduct the search and report the results to the consumer. Some registries may also offer worker screening and orientation, access to consumer and worker training, and recruitment and outreach to potential workers.

32

Others stipulate that providers in the database have not been pre-screened in any way and such responsibilities lie with the consumer. The PHI Matching Services Project

33

has identified 16 state-based matching services and six states with regional matching services. Of the 16 state-based matching services, five (California, Massachusetts, Michigan, Oregon, and Washington) operate under a public authority. Wisconsin's registry, which also operates under a public authority, is currently regional but scheduled to become state-wide in 2011. These registries are listed in Table A-1 in APPENDIX A. PHI notes that these public matching registries are not to be confused with the registries that exist in all states to perform criminal background checks on potential care providers or verify nursing training.

32

PHI, 2011a. The PHI Matching Services Project, available at

http://phinational.org/policy/the-phi-matching-services-project/.

33

PHI, 2011a.

The Department also located registries operated by not-for-profit organizations, such as the Meals on Wheels of Contra Costa County Home Care Registry,

34

where the registry recruits, screens, and checks the references of local care providers, but the care providers are self-employed and work as independent contractors. Various private sector entities that refer to themselves as registries,

35 36 37 38

however, appear to be operating under an agency or quasi-agency model, with the care recipient paying the company a weekly or bi-weekly registry fee in addition to paying the caregiver, or with the company receiving some portion of the caregiver's hourly rate.

34

Meals on Wheels of Contra Costa County. 2011. Home Care Registry, available at

http://www.mowsos.org/pages/page.php?pageid=48.

35

Experienced Home Care Registry. 2011. About Us, available at

http://www.experiencedhomecare.com/pgs/about_us.php.

36

Angelic Nursing & Home Care Registry, Inc. 2011. Home Care Services for Seniors in Tolland and Hartford Counties in Connecticut, available at

http://angelicregistry.com/.

37

Golden Care Co. Inc. 2011. Billing Policy, available at

http://www.goldencareco.com/billing.asp.

38

American HealthCare Capital. 2011. $1.5 Million Oregon Private Pay Homecare Registry for Sale, available at

http://www.americanhealthcarecapital.com/Listings/Current/orpd1a.html.

When consumers are allowed to hire any worker they choose, many choose friends or family members. For instance, the Cash and Counseling demonstration program provides a monthly allowance to Medicaid beneficiaries that beneficiaries can use to hire their choice of worker. In this program, 58 percent

of directly hired workers in Florida, 71 percent in New Jersey, and 78 percent in Arkansas were related to the consumer, and about 80 percent of those directly hired workers had provided unpaid care to the consumer before the demonstration began.

Since the passage of the National Family Caregiver Support Program enacted under the Older Americans Act Amendments of 2000, Medicaid waivers and state-funded programs have provided the bulk of public financing to support family caregiving.

39

A survey of state consumer direction and family caregiving programs found that:

39

Feinberg, L. & Newman, S. 2005. Consumer Direction and Family Caregiving: Results from a National Survey, State Policy in Practice, available at

http://www.hcbs.org/files/79/3926/ConsumerDirection&FamilyCaregivingNWEB.pdf

Feinberg, L.

et al.

2004. The State of the States in Family Caregiver Support: A 50-State Study. San Francisco, CA: Family Caregiver Alliance; available at

http://www.caregiver.org/caregiver/jsp/content_node.jsp?nodeid=1276.

Over one-half (86 out of 150, or 57 percent) of the programs in 44 states and the District of Columbia say family members can be paid to provide care. Viewed another way, the vast majority of programs that offer some component of consumer direction, allow payment to relatives to provide care (86 out of 106 programs, or 81 percent). Only six states (Alaska, Delaware, Mississippi, Nevada, Pennsylvania, and Tennessee) did not allow payments to family members in any of their programs at the time of the study.

40

40

Feinberg & Newman, 2005. p. 8.

Of the 86 programs that allow relatives to be paid providers, 73 percent allow family members to provide personal care, 70 percent allow family members to provide respite care, 20 percent allow family members to act as homemakers or do chores, and 6 percent allowed family members to provide any service needed.

41

Some programs place restrictions on what type of family members are allowed to be paid providers as well. Among these 86 programs, 61 percent do not permit spouses to be paid providers, while others do not permit parents/guardians (37 percent), primary caregivers (18 percent), legal guardians (8 percent), children 18 and under (6 percent), or other relatives (4 percent).

42

These programs and their stipulations about payment to family caregivers are summarized in Table B-1 in APPENDIX B.

41

Feinberg & Newman, 2005. p. 8.

42

Feinberg & Newman, 2005. p. 9.

Funding Sources

There are a variety of different funding sources for provision of home health services. Table 2-3 provides an overview of these funding sources, care recipient eligibility requirements, and types of home health services covered. Public funding sources such as Medicare and Medicaid provide a majority of the reimbursement for services. In 2008, Medicare and Medicaid accounted for nearly 75 percent of home health care services revenue, followed by 15 percent from private insurance coverage, five percent from patients paying out-of-pocket, and the remaining five percent contributed by a mix of other government programs.

43

43

PHI, 2010a, p.6.

In 2009, HHS outlays for Medicare programs totaled $424 billion, and outlays in support of Medicaid totaled $251 billion.

44

Under Medicare, an estimated $18.3 billion went to home health programs.

45

In 2006, Medicaid programs accounted for approximately $38.1 billion (about $40 billion inflated to 2009 dollars) through Medicaid Home Health ($4.6 billion), State-Plan Personal Care Services benefit ($8.5 billion), and Medicaid Home and Community-based Services (HCBS) benefits ($25 billion).

46

Thus, payments for home health care programs composed approximately 4 percent of Medicare spending, and about 15 percent of Medicaid spending.

44

U.S. Department of Health & Human Services (HHS). 2011. FY 2011 Budget, available at

http://dhhs.gov/asfr/ob/docbudget/2011budgetinbrief.pdf.

p. 13.

45

Medpac. 2010. A Data Book: Healthcare Spending and the Medicare Program, p. 139, available at

http://www.medpac.gov/documents/jun10databookentirereport.pdf.

46

PHI, 2010a, p. 18. Note, not all of the HCBS goes to personal care services; a more detailed breakdown of this spending is not available. For additional data, see Kaiser Family Foundation, State Health Facts:

http://statehealthfacts.org/comparetable.jsp?ind=242&cat=4.

Both Medicaid and Medicare pay the service provider directly. The Medicare program uses a prospective payment system (PPS) to reimburse home health agencies a pre-determined base payment for an episode of care; this base payment is adjusted for the condition and needs of the beneficiary as well as geographic variation in wages.

47

Under Medicaid, the state agency implementing the program pays the service provider directly except under certain consumer-directed programs.

47

For additional detail see Center for Medicare & Medicaid Services (CMS). 2011a. Home Health PPS, available at

http://www.cms.gov/HomeHealthPPS/.

The Medicare and Medicaid programs also work together to provide services for a group of care recipients referred to as “dual eligibles,” that is, care recipients that are eligible for both Medicare and Medicaid coverage. Studies have found that individuals covered by both Medicare and Medicaid are among the most expensive groups to cover and are more likely to use more Medicare-covered home health services than Medicare home health care patients not also covered by Medicaid. Also, states with low Medicaid spending appear to shift costs to the Medicare home health program spending.

48

Most of the public matching registries listed in Appendix A are funded by the state, with a few receiving federal dollars through reimbursement for Medicaid administrative costs or receiving initial funding through federal Medicaid Systems Transformation grants.

49

48

Center for Medicare & Medicaid Services (CMS). 2011b. Home Health Study Report: Literature Review, available at

http://www.cms.gov/HomeHealthPPS/Downloads/HHPPS_LiteratureReview.pdf. p.16.

49

Seavey & Marquard, 2011.

Table 2-2—Summary of Home Health Care Service Payers and Service Coverage

Payer

Description

Eligibility

Home health service coverage

Public

Medicare

Federal government program to provide health insurance coverage, including home health care, to eligible individuals who are disabled or over age 65

The program pays a certified home health agency for a 60 day episode of care during which the agency provides services to the beneficiary based on the physician approved plan of care

Individual is under the care of a doctor and receiving services under plan of care; has a certified need for intermittent skilled nursing care, physical therapy, speech-language pathology services, continued occupational therapy; and must be homebound

HHA providing services is Medicare-certified; services needed are part-time or intermittent, and are required <7 days per week or <8 hours per day over 21 day period

Intermittent skilled nursing care, physical therapy, speech-language pathology services, continued occupational therapy.

Does not cover 24hr/day care at home; meals delivered to home; homemaker services when it is only service needed or when not related to plan of care; personal care given by home health aides when it is only care needed.

Medicaid

A joint federal-state medical assistance program administered by each state to provide coverage for low income individuals

The program pays home health agencies and certified independent providers

Eligibility and benefits vary by state. In general, states must cover individuals who receive federally assisted income maintenance payments such as Social Security, individuals who are eligible for Temporary Assistance for Needy Families and to other individuals defined as “categorically needy.”

Coverage of home health services must include part-time nursing, home care aide services, medical supplies and equipment. Optional state coverage may include audiology; physical, occupational, and speech therapies; and medical social services.

Coverage is provided under: Medicaid Home Health, State Plan Personal Care Services benefit, and Home and Community-Based state plan services and waivers.

Older Americans Act

Provides federal funding for state and local social service programs that provide services so that frail, disabled, older individuals may remain independent in their communities

Must be 60 yrs of age or older

Home care aides, personal care, chore, escort, meal delivery, and shopping services.

Veterans Administration

Home health care services provided through the VA's network of hospital-based home care units

Veterans who are at least 50% disabled due to service-related conditions

Home health care. Does not include nonmedical services provided by HCAs.

Social Services Block Grant

Federal block grants to states for state-identified service needs

Varies by state

Often includes program providing home care aide, homemaker, or chore worker services.

Community organizations

Some community organizations provide funds for home health and supportive care

Varies by program

Covers all or a portion of needed services. Vary by program.

Private

Commercial Health Insurance Companies

Many policies cover home care services for acute, and less often, long-term needs

Varies by policy

Varies by insurance policy

Medigap Insurance

Covers some personal care services when a Medicare beneficiary is receiving covered home health services

Varies by policy

Focused on short-term personal care services in support of Medicare covered home health care skilled nursing services.

Self-Pay

The individual receiving the services pays “out of pocket.”

Individuals who are not eligible for covered services under third-party public or private payers

Services that do not meet the eligibility criteria of other payers.

Sources: National Association for Home Care. 1996. Who Pays for Home Care Services? Available at URL:

www.nahc.org/consumer/wpfhcs.html;

Centers for Medicare and Medicaid Services (CMS). Medicare and Home Health Care. Available at URL:

http://www.medicare.gov/publications/pubs/pdf/10969.pdf.

Home Health Care Workers

This section provides an estimate of the total number of home health care workers who may be impacted by the proposed rule as well as the characteristics of these workers, the services they provide, and the wages they receive for their work.

Number of Affected Workers

The workers who will be directly affected by the change to the companionship exemption are concentrated in two occupations: Home Health Aides (SOC 31-1011) and Personal Care Aides (39-9021). These workers are concentrated in two industries: Home Health Care Services (NAICS 6216) and Services for the Elderly and Disabled Persons (NAICS 62412).

These workers are predominantly women in their mid-forties, minorities, with a high school diploma or less education but this varies highly by

region. A similar percentage of PCAs are Black and Hispanic (20% and 19%, respectively), but a much higher percentage of HHAs are Black (35%) than Hispanic (8%). One in four (25%) PCAs are foreign-born, with higher percentages (over 50%) in certain regions of the country,

e.g.,

California and New York. California also has a high percentage of caregivers who are paid family members.

50

50

PHI, 2010a. p. 9.

Home health care workers are called by a variety of titles, including: home health aides, home care aides, personal care aides, personal assistants, home attendants, homemakers, companions, personal care staff, resident care aides, and direct support professionals. They are tracked by the following occupational titles.

51

51

U.S. Bureau of Labor Statistics (BLS). 2011. Standard Occupational Classification, available at

http://www.bls.gov/soc/home.htm.

Personal Care Aide (SOC 39-9021): “Assist the elderly, convalescents, or persons with disabilities with daily living activities at the person's home or in a care facility. Duties performed at a place of residence may include keeping house (making beds, doing laundry, washing dishes) and preparing meals. May provide assistance at non-residential care facilities. May advise families, the elderly, convalescents, and persons with disabilities regarding such things as nutrition, cleanliness, and household activities.”

Home Health Aide (SOC 31-1011): “Provide routine individualized healthcare such as changing bandages and dressing wounds, and applying topical medications to the elderly, convalescents, or persons with disabilities at the patient's home or in a care facility. Monitor or report changes in health status. May also provide personal care such as bathing, dressing, and grooming of patient.”

Note that the companionship services of fellowship and protection are not included in either the definition of personal care aide or home health aide. Companionship services as defined in this NPRM are separate from the services provided by home health care workers as defined officially above and outlined in detail below.

The Department uses BLS' employer-based OES estimate of the number of workers in the PCA and HHA occupational categories as its best estimate of the number of caregivers employed by agencies that might be affected by the proposed rule. There were approximately 1.59 million caregivers employed by agencies in 2009, composed of

• 631,000 PCAs, and

• 955,000 HHAs.

52

52

2009 BLS Occupational Employment Survey, employment and wages for SOC codes 39-9021 and 31-1011.

These data do not include workers providing these services as independent providers who may be affected by the proposed rule. As described above, the Department determined from the NEM that an estimated additional

• 188,500 PCAs, and

• 18,100 HHAs

53

53

BLS, 2008.

can be considered independent providers directly employed by families. Thus, we estimate

• 819,500 PCAs, and

• 973,100 HHAs,

for a total of 1.79 million caregivers, might be affected by the proposed rule.

However, not all 1.79 million of these PCAs and HHAs are employed as FLSA-exempt companions. Many of these workers are employed at agencies that provide a variety of health-related services that may or may not be provided in the home; HHA and PCA employed in facilities, such as nursing homes and hospitals, are not classified as providing companionship services. Furthermore, many of these workers who are classified as companions are employed in states which currently provide minimum wage and overtime coverage. Only a subset of the 1.79 million workers, those who provide services in the home and are not eligible for minimum wage or overtime pay under state law, will be directly impacted by the proposed rule. The Department will define the number of workers directly affected by both the minimum wage and overtime pay provisions of the proposed rule.

While many agency-employed caregivers might work in various facilities that make them ineligible for the FLSA companionship exemption, there is little information available concerning independent providers. The Department assumes that all PCAs and HHAs classified in the NEM as self-employed or employed by households are independent providers directly employed by the family, and are thus by assumption currently exempt from the FLSA.

Tasks, Wages, Hours

Traditionally, companionship tasks have been defined to include fellowship, care, protection, and a limited amount of assistance with general household tasks.

54

54

Federal Register

, 2001. p. 5481.

• Fellowship: Defined in the proposed regulation as meaning “to engage the person in social, physical, and mental activities, including conversation, reading, games, crafts, walks, errands, appointments, and social events”.

55

Fellowship services are generally not covered by public programs.

55

Proposed § 552.6.

• Protection: Defined in the proposal as “being present with the person in their home or to accompany the person when outside of the home to monitor the person's safety and well-being.”

56

Some states reimburse specific types of participants (

i.e.,

those living with mental disabilities) for protection services.

56

Proposed § 552.6.

• Social support: Services that enable the consumer to take an active part in his or her family and community, includes accompanying the consumer to regular social activities and ensuring that the consumer's cognitive state does not deteriorate due to social isolation.

The spectrum of tasks performed by modern workers classified as companions has expanded beyond traditional companionship to include: activities of daily living (ADLs), instrumental activities of daily living (IADLs), and paramedical (“medicalized”) tasks.

• ADLs: Assistance with the following activities: personal hygiene, dressing and changing clothes, transferring, toileting, eating and drinking, maintaining continence, and ambulation.

• IADLs: Includes tasks such as light housework, preparation of meals, assistance with physical taking of medications, shopping for groceries or clothes, using the telephone, escorting, assistance with the management of money, and other tasks that allow the consumer to live independently in the community.

• Paramedical tasks: May include tasks such as changing of aseptic dressings, administration of non-injectible medications (

e.g.,

blood pressure medication in tablet form);

57

and ostomy, catheter and bowel hygiene.

57

Administration of an injectible medication is a medical task generally performed by workers with additional training in medical tasks, such as Certified Nurse Assistants (CNAs).

While PCAs and HHAs overlap to some extent in the type of services they provide—both generally provide assistance with ADLs and IADLs—it is primarily HHAs who are employed by Medicare-certified agencies who may be asked to perform paramedical tasks. Those workers are required by Medicare to be trained and certified to perform these types of tasks.

Generally speaking, a home health aide or agency is authorized to provide a specific number of hours of service to care recipients depending on their needs. Agencies work to schedule home health aides to cover the number of hours needed for the portfolio of cases they have, often taking into account continuity of service to each recipient, total number of hours each aide is scheduled per week, frequency of weekend services needed, and the distance between the aide's home residence and the care recipient's. In the home care industry, agencies typically strive to provide services seven days a week and 24 hours a day.

The greatest scheduling challenges to the agencies come from 12-hour and 24-hour (or sleep-in) cases; these cases are also of particular concern with respect to overtime. A 12-hour case is a care recipient who requires services to be provided by a home health aide for a 12-hour block of time; a 24-hour case is a care recipient who requires a home health aide to be present to provide services around the clock. The key scheduling concerns that agencies contend exist with these cases are that:

• Because workers are scheduled to work in lengthy shifts (up to 12 hours), it is difficult to redistribute overtime hours to workers with fewer hours;

• Aides are paid an hourly rate, plus an hourly overtime premium where applicable; however, agencies are often reimbursed for these cases on a flat rate that does not account for overtime premiums or other costs;

• Sleep-in cases usually include an eight-hour period to allow the worker to sleep while on site; however, the aide is not necessarily off-duty because s/he would be expected to assist the client if an urgent need arose. If the agency is required to count sleep hours toward the total number of hours worked per week then it may become costly to provide 24-hour care.

Some agencies take a proactive approach to scheduling these cases in order to manage the total number of hours on duty required from each worker. For example, an agency may split a 12-hour case between two aides by having one aide provide services Sunday through half of the Wednesday shift when the second aide would take over and work through Saturday.

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This reduces the total number of hours each aide must work, limits the work to one weekend day, and avoids overwhelming the care recipient with too many different care providers. A similar approach may be applied to cases that require 24-hour care.

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58

Elsas, M. & Powell, A. 2011. Interview of Michael Elsas, President, and Adria Powell, Executive Vice President of Cooperative Health Care Associates by Calvin Franz and Lauren Jankovic of ERG. April, 2011.

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Some agencies have experimented with breaking a 24 hour case into two 12 hour cases that are staffed by four home care aides; this reduces total number of hours worked and eliminates the need for the 8 hour rest period but also increases the number of aides that the client must become comfortable with.

The workers themselves report working an average of 31 to 35 hours per week and available data suggest that very few work overtime.

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Based on an analysis of the 2007 National Home Health Aide Survey and the 2009 Annual Social and Economic Supplement of the Current Population Survey, PHI reports that 92 percent of HHAs and 85 percent of PCAs work less than 40 hours per week for an average of 31 hours and 35 hours per week, respectively. By extension, only eight percent of HHAs and 15 percent of PCAs reported working greater than 40 hours per week.

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Seavey and Marquand, 2011, pgs. 61-64. Available at:

http://www.directcareclearinghouse.org/download/caringinamerica-20111212.pdf;

HHS, 2011. p. 26.

However, this information may not fully capture the total number of hours worked by these individuals because some aides work for multiple employers, many aides work part-time, and some employers do not compensate workers for travel time between clients (because they are not reimbursed for this time). Furthermore, there is very limited information on hours worked by independent providers or those working as live-in, on-call, or night shift aides. The Department assumes that in general independent providers directly employed by families work similar hours as caregivers employed by agencies.

The wages for these workers vary widely by occupation and geographic location. Based on detailed wage data from the BLS Occupational Employment Statistics Survey, the hourly wages of PCAs and HHAs range from about $6.79 to $20.61 (approximately 0.5% earn less than $6.79 and 0.5% earn more than $20.61) with the average wage being approximately $10.14.

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As discussed above, wages for PCAs tend to be slightly lower on average than those for HHAs. The Department assumes that in general independent providers directly employed by families receive similar hourly wages as caregivers employed by agencies. In 70 percent of states (36 states), average hourly wages for PCAs were below 200 percent of the federal poverty level wage ($10.42) for individuals in one-person households working full-time. Current research suggests that these workers find it difficult to support their households on these wages; approximately 44 percent of PCAs have to rely on public benefits and fewer than 20 percent report having health insurance.

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61

BLS, 2009.

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PHI, 2010a., p. 30, 32.

Costs and Transfers

This section describes the costs and transfers associated with the proposed rule and the Department's approach to estimating their magnitude. The primary costs of this rule are expected to be regulatory familiarization. The Department estimates the first-year cost of the rule will total $9.9 million. In following years, regulatory familiarization costs are projected to increase from $3.5 million in year 2, to $4.4 million in year 10 as new firms enter the market and new families hire home health care workers.

Transfers result from the wage increases to comply with minimum wage and overtime pay requirements. Total estimated transfers depend in part on the response of employers to the regulatory changes; in other words, will employers respond by paying overtime to current workers, changing scheduling practices to avoid paying overtime, hiring additional workers, or some combination of these approaches. Based on the methods described below, the Department estimates that first-year transfers from the rule will range from $42.8 to $182.1 million. In years 2 through 10, the lower end of the range is projected to increase from $27.8 million to $45.8 million while the upper end of the range is projected to increase from $172.6 million to $284.6 million.

Total costs and transfers from the rule will range from $52.7 to $192.1 million in the first year. In subsequent years, the lower end of the range is projected to increase from $31.4 million to $50.2 million in total costs and transfers. The upper range of total costs and transfers is projected to increase from $176.2 million to $289.0 million.

Regulatory Familiarization

When a new rule is promulgated, all the establishments affected by the rule will need to invest time to read and understand the components of the new rule; this is commonly referred to as regulatory familiarization. Each establishment will spend resources to familiarize itself with the requirements of the rule and ensure it is in compliance.

Each home health care establishment will require about two hours of an HR staff person's time to read and review the new regulation, update employee

handbooks and make any needed changes to the payroll systems. Based on our analysis of the industry and occupational data, the Department judges that each employer in HHCS and SEPD likely employs workers who could be classified as companions and therefore will need to review the proposed rule. There are about 73,000 establishments in SEPD and HHCS; assuming a mid-level HR wage of $26.79 per hour over two hours equals about $4 million for regulatory familiarization in the first year following promulgation of the rule.

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63

Mid-level HR loaded hourly rate from BLS.

For independent providers, the employer is considered to be the family that hires them. Therefore, families that directly employ these caregivers will also have to review the regulatory revisions. Because the employer-employee relationship is less complex than for an agency that employs multiple workers caring for multiple clients, the Department expects the burden of regulatory familiarization will be smaller. The Department therefore assumes that each family that directly hires a caregiver will spend one hour on regulatory familiarization. The Department uses the national average hourly wage of $29.07 (loaded) to represent the opportunity cost of reviewing the regulatory revisions.

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BLS National Compensation Survey, July 2009, Hourly mean wage for full-time Civilian Worker is $22.36; the Department estimates the fully loaded wage at the hourly wage × 1.3. URL:

http://www.bls.gov/eci/.

The Department has found no data to support an estimate of the number of families that directly hire independent providers. The Department assumes each independent provider is hired by a single family, and therefore, because it estimates there are 206,600 independent providers, 206,600 families will incur the cost of one hour to review the revised regulations. These families incur one hour of time at an opportunity cost of $29.07 per hour for a total of about $6 million for regulatory familiarization in the first year following promulgation of the rule. The Department acknowledges this estimate is based on an assumed value and requests from commenters information or data that would allow it to better estimate the number of families that directly hire independent providers.

Wages and Overtime

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These costs to employers are also transfer payments that will benefit employees. See Benefits, below.

Many home care workers are already covered by minimum wage and overtime provisions at the state level and will not drive additional costs related to the proposed rule. Sixteen states require minimum wage for all hours worked for most home health care workers and guarantee some type of overtime pay for home health care workers who would otherwise be excluded under the FLSA.

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Five states and the District of Columbia require minimum wage for all hours worked but do not guarantee overtime.

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Twenty-nine states do not require minimum wage or overtime. Table 3-1 summarizes the wages for PCA and HHA occupations based on state level minimum wage and overtime coverage.

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California, Colorado, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Jersey, New York, Pennsylvania, Washington, and Wisconsin. NELP, 2011 and SOL internal analysis.

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Arizona, Nebraska, North Dakota, Ohio and South Dakota. NELP, 2011.

Table 3-1—Summary of Wages by State Minimum Wage and Overtime Coverage for HHAs and PCAs

Area name

Employment

Hourly wages

Minimum 10th

percentile wage

Weighted average median wage

Maximum 90th

percentile wage

All States

1,585,990

$6.79

$9.71

$20.61

States with MW and OT:

Total

780,480

7.32

10.39

20.61

PCA

320,010

10.38

HHA

460,470

10.41

States with MW but no OT:

Total

120,610

7.20

9.85

16.40

PCA

30,700

9.95

HHA

89,910

9.75

States without MW or OT:

Total

684,900

6.79

8.90

18.76

PCA

280,060

8.49

HHA

404,840

9.30

Source: BLS OES, 2009; Note: based on the hourly wage percentiles, the minimum wage paid to workers is below the Federal minimum wage in some states with minimum wage laws.

In order to define the subset of workers from the table that will be directly

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