By Roni Glaser rglaser@mlg.com

Recently, the home health industry has been the target of lawsuits challenging the application of the companionship services exemption to the Fair Labor Standards Act of 1938 (FLSA) to home health aides. Section 213(a)(15) of title 29 of the United States Code provides that:

[t]he provisions of section 206 (except subsection (d) in the case of paragraph (1) of this subsection) and section 207 of this title shall not apply with respect to . . . any employee employed on a casual basis in domestic service employment to provide babysitting services or any employee employed in domestic service employment to provide companionship services for individuals who (because of age or infirmity) are unable to care for themselves (as such terms are defined and delimited by regulations of the Secretary).

This so-called "companionship services exemption" discharges employers from having to pay minimum wage and overtime compensation in accordance with the FLSA to domestic service employees. Generally, home health aides are considered domestic service employees and therefore fall under the companionship services exemption.

This article will explore the companionship services exemption, its interpretation, and the policy reasons behind the exemption. Then, it will consider three recent challenges in New York by home health aides to the application of the companionship services exemption.

The History of the Companionship Exemption

The FLSA was enacted in 1938 to regulate minimum wages, maximum working hours, and child labor in industries within interstate commerce.1 While the FLSA initially was extremely limited in the types of employees it covered, since 1938, the coverage of the FLSA has expanded.2 In 1974, domestic service employees were added to the categories of employees covered by the minimum wage and maximum hours provisions through amendments to the FLSA. However, these amendments also created the companionship services exemption, excluding from the FLSA's minimum wage and overtime requirements those domestic service employees who provide companionship services to the elderly in their homes.3 The creation of a companionship services exemption was supported by important public policy considerations. Caregivers who are exempt from the FLSA can provide lower cost services, and thus, the companionship services exemption enables more elderly and disabled people to receive needed services that might otherwise be unaffordable.4 If the cost of services increases, private individuals not receiving federal and state assistance may not be able to obtain the necessary services provided by these caregivers.5 Furthermore, caregivers such as home health aides who are included in the companionship services exemption, provide services that allow individuals to remain in their homes when they are elderly or disabled. One purpose of the companionship services exemption was to enable guardians of elderly or disabled individuals to have their dependents cared for in their private homes instead of in institutions. 6 For some of these individuals, the only alternative to home care and the receipt of companionship services would be institutionalization.7

There have been enormous changes in the home care industry since 1975, when the regulations implementing the companionship services exemption were published. As a result of these changes, the Secretary of Labor sought, on January 19, 2001, to amend the regulations to narrow the circumstances under which the exemption could be claimed.8 The proposed amendments included a change in the definition of companionship services which would deny the application of the exemption if the employee was employed by someone other than a member of the family in whose home he or she works. The amendments also proposed to revise the duties which would qualify for the exemption, and to clarify the criteria to be used to determine whether employees qualify as "trained personnel" who are not exempt under the companionship services exemption. However, after receiving and considering numerous public comments, including those from municipalities which expressed concern about the fiscal impact of narrowing the companionship services exemption, the Secretary withdrew the proposed amendments on April 18, 2002.9 Thus, as the law currently stands, and particularly in view of the Secretary's withdrawal of his proposal to limit the exemption, the companionship exemption continues to apply to home health aides unless an exception to the exemption applies.10

Challenge One: Home Health Aides Exempt from the FLSA Minimum Wage and Overtime Compensation Requirements

In a recent case brought in the Eastern District of New York, Coke v. Long Island Care at Home, Ltd.,11 a live-in personal care aide employed by a licensed home care services agency sued her employer, claiming she worked greater than forty hours per week but was not paid a rate of one and one-half times her regular rate of pay.12 She claimed that the Secretary's regulations defining companionship services as including services rendered by employees of a private agency were overbroad and invalid and that Congress did not intend to limit its coverage of domestic service employees by such an expansive interpretation of the FLSA.13

Courts have generally upheld the companionship services exemption to the FLSA's overtime and minimum wage provision as applied to services provided by home health aides.14 For example, in a New York State case, Ballard v. Community Home Care Referral Service, Inc., an employee was not entitled to receive one and one-half times her regular hourly wage as overtime compensation because she was a home health aide and therefore was covered by the companionship services exemption.15 The court noted that home health aides and other people employed in similar capacities are covered by the companionship services exemption since their work involves the day-to-day care of elderly or infirm individuals.16

Exempt companionship services have also been held to include the services of a certified nursing assistant and home health aide employed by a private agency whose tasks included caring for patients under a nurse's supervision, assisting patients with personal care, assisting with rehabilitative activities, helping the patients take their medications, and performing specific procedures with nurses;17 a home health care aide who provided day-to-day care for elderly or disabled individuals including tasks such as meal preparation, bedmaking, washing clothing, and other related domestic services;18 employees who assisted their clients with dressing, grooming, and administering medication, performed household chores, and who provided household management training to aide their clients in becoming more independent;19 and an in-home certified nursing assistant for a quadriplegic patient, whose tasks included dispensing medication, changing catheters, exercising, bathing, and dressing the patient, running errands, and helping with the patient's finances.20

Harris v. Dorothy L. Sims Registry,21 however, relying principally on the Department of Labor's commentary in its proposal to amend its regulations,22 found the companionship exemption to be inapplicable to home health care workers employed by private agencies, determining that the Secretary's existing definitions (sought to be revised in its Notice of Proposed Rulemaking, or NPRM) were too broad and therefore invalid. However, since the Secretary's NPRM was withdrawn, the Harris reasoning could not be applied in Coke, and that Court upheld the companionship services exemption as it continues to be defined under the Secretary's interpretative regulations promulgated pursuant to the authority explicitly granted to him under the FLSA. The Coke case is currently on appeal to the Second Circuit.

Challenge Two: Home Health Aides Who Perform General Housework That Is Incidental, i.e., Does Not Exceed Twenty Percent of the Total Weekly Hours Worked, Are Covered by the Companionship Exemption

According to the Secretary's regulations, exempt companionship services may include any amount of "household work related to the care of the aged or infirm person such as meal preparation, bed making, washing of clothes or other similar services."23 They may also include "the performance of general housework: Provided however, that such work is incidental, i.e., does not exceed 20 percent of the total weekly hours worked."24 If plaintiffs do not present specific evidence that they spent more than twenty percent of their time doing general household work, they are not entitled to overtime compensation or minimum wage.25 Further, when the court finds that most of an employee's household work is related to the care of the client, the work is not included in the twenty percent "general housework" limitation, and the employee is covered by the companionship services exemption.26

In determining what is "general household work," one court determined that the test should be whether particular tasks are necessary for the care or habilitation training of a particular client.27 If so, then they are not general household work counting toward the twenty percent maximum in the exemption.28 Other service that have been held not to be subject to the twenty percent figure have included companionship services performed by the wife of a disabled husband when she gave her husband medication, helped him dress, bathe and walk, and cleaned the house,29 and therapy and nursing services, personal care, ambulation, exercise, household services and the provision of medicine.30 On the other hand, general maintenance services including cleaning laundry areas, general household cleaning, washing cars, cleaning the garage, and maintaining the yards and grounds at a facility housing mentally and physically handicapped adults were considered general household work and were thus subject to the twenty percent figure set forth in the regulation.31

In a case currently before the court in the Southern District, a home health aide alleges that she rendered services that included general housework for greater than twenty percent of her working hours. The aide was assigned by a home care agency to render services to patients pursuant to "plans of care" required by the state to be developed by the agency's supervising nurses in consultation with patients' physicians. All services performed by the aide pursuant to these plans of care would have been related to the care of a particular patient. General housework not related to the care of a patient would have been outside the scope of the instructions provided to the aide by the agency, as communicated to the aide in company policies, in the aide's job description and in patients' plans of care. It remains to be learned during discovery exactly what services are alleged by the aide to have been rendered for greater than twenty percent of the aide's working hours that were not related to the care of the patient but were within the scope of the aide's assignment by the agency. As the above-cited cases suggest, the burden will be on the plaintiff employee to present specific evidence that her assigned work responsibilities included spending more than twenty percent of her time doing general household work not related to the care of a patient.32

Challenge Three: The Determination Whether a Home Health Aide Working for a Client Living in a Non-Traditional Home Environment Such As an Adult Home or Assisted Living Facility Is Considered to Be Working in the Client's "Private Home" Is Extremely Fact-Specific

A recent suit brought in the Eastern District of New York by a personal care aide employed by a home health agency challenges whether a New York State-licensed (but privately operated) adult home should be considered the private home of an individual so that the companionship services rendered to him while living in the adult home would fall within the companionship services exemption

Under the companionship services exemption, 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."33 Unless the companionship services are rendered in a private home, the exemption does not apply. This issue arises when the companionship services are rendered in homes other than traditional single-family dwellings, e.g., group homes for the mentally or physically disabled, youth detention homes, or assisted living facilities. In many of these cases, the residence is the individual's permanent and only home, and may be owned or rented by the individual who receives companionship services there.

The legislative history of the companionship services exemption suggests that a private home is "a fixed place of abode of the individual or family . . . [that is] maintained by the individual or family in an apartment, house, or hotel. . . ."34 A house used primarily as a boarding or lodging house that is a business enterprise used mainly to provide these services to the public is not considered a private home.35 Of course, the distinction between an "apartment, house or hotel" and a "boarding or lodging house" is not clear. Thus, most courts have evaluated whether a home is a "private home" within the definition of domestic service employment on a case-by-case basis, with no single factor being dispositive.36

In Bowler v. Deseret Village Ass'n Inc.,37 the Utah Supreme Court created a four-prong test to use when determining whether a residence is most similar to a private home, an institution, or a business enterprise. The factors included (1) the source of funding, (2) access to the facility by the general public, (3) whether the residence is organized as a for-profit or nonprofit, and (4) the size of the organization.38 The court noted that private homes are defined along a continuum and therefore, no one factor in the test could be considered determinative. In Bowler, the facility housing disabled adults was held to be a private home because it was originally funded and created by family members of the disabled individuals residing there; it received no municipal, county, state or federal aid; the facility was not open to the public; it was a non-profit Utah corporation organized to care solely for the children of the families that financed the facility; and it only housed fourteen disabled residents.39 The factors the court in Bowler used to determine whether the residence was a private home are generally part of the fact-specific analyses done by other courts to determine whether a residence is a private home.

In Linn v. Developmental Services of Tulsa, Inc.,40 the employees provided services which looked like companionship services, including helping the individuals with personal care services such as feeding, bathroom needs, making beds, washing clothes, bathing, brushing teeth, and preparing meals. However, the employer acquired the residences for the clients, obtained furniture for the residents, kept keys to the residences, decided the number of people that could live in the homes, was responsible for the maintenance of the residences, and received approximately 95% of its funding to operate each home from the state. In addition, when clients chose the employer defendant to provide them services, they knew it would make decisions about where, how and with whom they were going to live. The residences in question were considered more similar to "state-maintained facilities" and institutions than to private homes, and consequently, the companionship services exemption was held not to apply and the employees were entitled to overtime and minimum wage under the FLSA

Community-living residences were held to be "institutional" rather than "private" where clients did not have a possessory interest in their residences; clients who terminated their relationship with the non-profit defendant corporation employer could not remain in the housing; the defendant employer ran the homes as part of a care program and the residents were clients in that program; the defendant retained control over the residences; the defendant held the keys to the homes of all clients in the programs; and clients had to abide by rules incompatible with private homes.41Similarly, a facility managed by a for-profit corporation, which was designed to accommodate 96 people with the residences broken into four three-bedroom suites with individual kitchenettes and private bathrooms was also determined not to be a "private home" within the meaning of the regulation.42 In that case, the employees of the defendant employer prepared all of the residents' meals in the communal sunroom, the defendant hired maintenance people to care for the property, and the residents did not have primary or complete control over their residences.43

State-funded institutional group residences for mentally retarded individuals were held not to be private homes for the purposes of the companionship services exemption in Lott v. Rigby, even though the residents lived exclusively in those homes and contributed to the maintenance of the homes.44 The facility was a publicly funded institution and was a unit of the North Georgia Mental Health/Mental Retardation/Substance Abuse Center. The court noted that Congress intended private homes to be differentiated from state-maintained facilities, and that in order for a home to be considered "private," an individual or family should be the employer of the domestic service employee rather than the state or county. Additionally, the residence was not "maintained" by the clients even though they participated in its upkeep. Similarly, in Adams v. Department of Juvenile Justice, adult homes were not considered to fall within the companionship services exemption where the workers in question were houseparents employed by the City Department of Juvenile Justice.45

On the other hand, residences for developmentally disabled individuals were classified as private homes for the purpose of the companionship exemption in Terwilliger v. Home of Hope, Inc.46 Factors suggesting that the residences were private homes and that the companionship services exemption should apply included: many of the clients had a possessory interest in their homes, had sole control over their keys except in emergency situations, and the clients themselves determined whether or not they wanted housemates.47

The courts are far from uniform in their treatment of non-traditional living arrangements as "private homes" under the companionship exemption. Issues of control, maintenance of premises, source of funding, the size of the home, accessibility by the public, and other factors have all been considered by the courts in making this fact-specific determination. The cases that have been reported thus far have all involved residence owners/operators whose employees provide companionship as part of the package of services offered by the program. The courts have not addressed the circumstance in which one person or entity owns and operates the residence, but another person or entity, such as a home health care agency which exercises no control over and performs no maintenance of the residence, privately contracts to provide the companionship services to persons living in their home. It remains to be seen whether factors which satisfy a court that a residence is not a "private home" will be imputed to the companion (or the agency that employs her) when the companion does not control the factors that have been considered by courts in making this determination.

Conclusion

Only recently have federal courts in the Second Circuit begun to consider the thorny issues relating to the companionship services exemption that have previously been considered in other jurisdictions. Several challenges are now before these courts

Since many of the challenges presented in recent cases boil down to questions of fact, thorough records including the number of hours worked and the nature of the tasks performed should be maintained by employers of home health aides who wish to avail themselves of the companionship services exemption. The location of the work performed and the specific features of the living arrangements should be evaluated carefully before determining that the exemption may be taken. Moreover, employers should explain their compensation practices to their employees so that the employees understand the amount of overtime compensation to which they are entitled.

We should soon see how the Second Circuit will evaluate the many fact-specific issues in ruling on the validity and applicability of the companionship services exemption in the home care arena.

Endnotes

1. Coke v. Long Island Care at Home, Ltd., 267 F. Supp. 2d 332(E.D.N.Y. 2003). 2. Id. 3. By regulations promulgated by the Secretary of Labor under the authority delegated to him in the FLSA, domestic service employment was defined as household services performed by an employee "in or around the permanent or temporary private home of the person by whom he or she is employed," 29 C.F.R. § 552.3, and companionship services were defined to include "household work related to the care of the . . . infirm person such as meal preparation, bed making, washing of clothes, and other similar services." 29 C.F.R. § 552.6. General household services exceeding twenty percent of the total weekly hours worked and services performed by trained personnel were carved out of the companionship services exemption. 29 C.F.R. §552.6. These are known as the "general household work" and "trained personnel" exceptions to the companionship services exemption. 4. McCune v. Oregon Senior Services Division, 894 F.2d 1107, 110 (9th Cir. 1989). 5. Id. 6. Linn v. Developmental Services of Tulsa, Inc., 891 F. Supp. 574, 577 (N.D. Okla. 1995) citing Lott v. Rigby, 746 F. Supp. 1084, 1087 (N.D. Ga. 1990). 7. Id. 8. 66 Fed. Reg. no. 13, 5481-5489. 9. 67 Fed. Reg. no. 67, 16668. 10. See note 3. 11. Coke v. Long Island Care at Home, Ltd., 267 F. Supp. 2d 332 (E.D.N.Y. 2003). 12. The plaintiff claimed that as a live-in employee, she worked during all or substantially all of the 24 hours that she was present in the patient's home. However, the issue of how many hours per day she could be deemed to have worked while required to remain on the patient's premises was not reached in this case. 13. 2001 U.S. Dist. Lexis 23263 (N.D. Ill. 2001). 14. See, e.g. Sandt v. Holden, 698 F. Supp. 64 (M.D. Pa. 1988); Ballard v.Community Home Care Referral Service, Inc., 264 A.D.2d 747, 748 (2d Cir. 1999). 15. 264 A.D.2d 747, 748 (2d Cir. 1999). A New York State Miscellaneous Wage Order provides that if an employee is exempt from the FLSA under the companionship services exemption, the premium required to be paid for overtime hours worked is one and one-half the State minimum wage (at present, $5.15), or $7.73 per hour. 12 N.Y.C.R.R. § 142- 2.2. 16. Id. at 748. 17. Cox v. Acme Health Services, Inc., 55 F.3d 1304 (7th Cir. 1995). 18. Ballard, 264 A.D.2d. at 748. 19. Terwilliger v. Home of Hope, Inc., 21 F. Supp. 2d 1294 (N.D. Okla. 1998). 20. Armani v. Maxim Healthcare Services, Inc. 53 F. Supp. 2d 1120 (D. Colo. 1999). 21. 2001 U.S. Dist. LEXIS 23263 (N.D. Ill. 2001). 22. See note 8. 23. 29 C.F.R. § 552.6. Emphasis added. 24. Id. See, e.g., McCune v. Oregon Senior Servs. Div., 894 F.2d 1107 (9th Cir. 1990). 25. Toth v. Green River Regional Mental Health/Mental Retardation Bd., 753 F. Supp. 216 (W.D. Ky. 1989). 26. Id. 27. Terwilliger v. Home of Hope, Inc. 42 F. Supp. 2d 1231 (N.D. Okla. 1999). 28. Id. 29. Salyer v. Ohio Board of Workers' Compensation, 83 F.3d 784, 787 (6th Cir. 1996). 30. Cox v. Acme Health Servs., Inc. 55 F.3d 1304 (7th Cir. 1995). 31. Bowler v. Deseret Village Ass'n Inc., 922 P.2d 8 (Utah 1996). 32. See, e.g., McCune v. Oregon Sr. Services Div., 894 F.2d 1107 (9th Cir. 1990); Toth v. Green River Regional Mental Health/Mental Retardation Bd., 753 F. Supp. 216 (W.D. Ky. 1989). 33. 29 C.F.R. § 552.3. 34. H.R. Rep. No. 913, 93rd Cong., 2d Sess. quoted in Linn v. Developmental Services of Tulsa, Inc., 891 F. Supp. 574, 578 (1995). 35. Id. 36. See, e.g. Johnston v. Volunteers of America, Inc., 213 F.3d 559, 565 (10th Cir. 2000). 37. 922 P.2d 8 (Utah 1996). 38. Id. 39. Id. 40. 891 F. Supp. 574 (N.D. Okla. 1995). 41. Madison v. Resources for Human Development, Inc. 39 F. Supp. 2d 542 (E.D. Pa. 1999); pertinent part affirmed, Madison v. Resources for Human Development, 233 F.3d 175, 183-184 (3d Cir. 2000). 42. Gay v. Extended Family Concepts, 102 F. Supp. 2d 449 (N.D. Ohio, 2000). 43. Id. 44. 746 F. Supp. 1084 (N.D. Ga. 1990). 45. 143 F.3d 61 (2d Cir. 1988). 46. 21 F. Supp. 2d 1294 (N.D. Okla. 1998). 47. Id.

Roni E. Glaser is a partner in the Health Law Practice of Meltzer, Lippe, Goldstein & Breitstone, LLP, located in Mineola, New York. Ms. Glaser represents health care providers in connection with business transactions, regulatory compliance, survey and enforcement actions, licensing, Medicaid audit, overpayment and fraud and abuse issues, provider contracting, HIPAA privacy, medical education accreditation, and employment matters. Ms. Glaser's practice focuses on issues affecting licensed and certified home health agencies, in New York State and nationally. The author gratefully acknowledges the assistance of summer associate Leah B. Mendelsohn in the preparation of this article.