Federal Court Strikes Down DOL’s New Companionship Services Exemption Regulations

The Department of Labor (DOL) promulgated a Final Rule which made a number of changes to the regulations concerning the companionship services exemption from the minimum wage and overtime requirements of the Fair Labor Standards Act (FLSA). These changes were scheduled to take effect on January 1, 2015. The Final Rule would have drastically reduced the number of domestic employees who would be entitled to an exemption from minimum wage and overtime. There are two major components in the Final Rule:  (i) the companionship exemption would only be available to individuals and families who employ workers in the home directly (rather than companies or agencies); and (ii) the definition of companionship services would be significantly narrowed. For example, under the new definition, if an employee provides “care” (i.e., dressing, feeding, bathing, meal preparation, driving, etc.) for more than 20% of the workweek, he or she loses the exemption for that workweek.

On December 22, 2014, the home health care industry celebrated its first victory when a federal court struck down the first component of the Final Rule. The court ruled that prohibiting third party employers from taking advantage of the companionship exemption was inconsistent with the FLSA. On December 31, 2014, the court issued an order staying enforcement of the second component of the revised regulations until January 15, 2015. On January 14, 2015, the home health care industry celebrated its second victory when a federal court struck down the second component of the revised regulations because it ruled that Congress did not delegate to the DOL the authority to re-define the companionship exemption. In fact, the court noted that the DOL’s definition of companionship was so restrictive that, for all practical purposes, it would have written the companionship exemption out of existence.

These court decisions are significant victories for third party employers of workers who provide services in private homes because they can continue to take advantage of the minimum wage and overtime exemptions for companionship services (at least for now).

However, it is likely that the DOL will appeal the court rulings and even seek an emergency order from the court to allow the revised regulations to go into and remain in effect until its appeal is decided, so stay tuned.

For further information regarding the companionship exemption or other wage and hour issues, please contact Lindsey Coley (540.983.9376 or or any other member of the Employment & Labor group at Gentry Locke.

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