A federal court has invalidated the U.S. Department of Labor’s (“DOL”) amended rule that would have extended minimum wage and overtime protections to nearly two million home health care workers and affected the cost and availability of those services to the millions of patients under their care. The ruling represents a significant victory for the home health care industry, though it remains to be seen if the court’s ruling will be appealed.

As background, since 1974 the Fair Labor Standards Act (“FLSA”) has covered workers who perform a “domestic service” – i.e., services of a household nature performed by a worker in a private home. This term includes services performed by babysitters, housekeepers, nannies, nurses, handymen, gardeners, home health aides, and family chauffeurs, among others.  However, the FLSA also provides for a “companionship services” exemption, exempting from minimum wage and overtime protection certain domestic service workers employed to provide “companionship services” for an elderly person or a person with an illness, injury, or disability.

On September 17, 2013, the DOL announced an amended rule that narrowed the companionship services exemption in two ways. First, it narrowed the definition of “companionship services.” Second, it provided that the exemption could only be claimed by the individual, family, or household using the services, not by a third party such as a home health care agency.

The new rule was to take effect January 1, 2015. However, health care industry groups challenged the amended rule in court, and thus far their challenge has been successful.

On December 22, 2014, the court in Home Care Association of America v. Weil, et al., invalidated the third-party agency portion of the new rule. The court ruled that the DOL had no authority to narrow the exemption to apply only to those caregivers who are employed by the individuals for whom the caregivers provide their services.  Under the new rule, most home health care agencies would not have been able to claim the exemption, even if the work performed would otherwise be exempt. However, the court found that it was Congress’ intent that the companionship services exemption apply to any employee, regardless of who “writes the check” for the employee’s compensation.

The new rule also narrowed the definition of the word “care” as it related to “companionship services,” such that much of the work performed by home health aides (such as feeding, dressing, bathing, etc.) would no longer qualify for the exemption. On January 14, 2015, the court invalidated that portion of the new rule as well. The court held that the DOL exceeded its authority to redefine, after more than 40 years, what constitutes the provision of “companionship services.” The court found that the DOL’s regulation impermissibly conflicted with the plain language of the FLSA.

Had the new rule taken effect, all those who either provided or received companionship services would have been significantly impacted. Since payment for companionship services is mostly self-funded by elderly patients and their families, they would either have had to pay more for services (assuming they could afford the additional cost) or limit the amount of care they received. In turn, home health aides currently providing care in excess of 40 hours per week, would likely have had their work hours reduced so that patients and their families could avoid the additional cost.

Because the third-party employer exemption had already been vacated on December 22, 2014, the entire regulation has now been invalidated, and the DOL is without authority to enforce the new rule. The DOL has not yet indicated whether it intends to appeal the court’s ruling.