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Court Decisions Apply Minimum Wage and Overtime Rules to Caregivers

by Miriam Davidson.

If you are hiring a home health aid for an elderly parent or are a guardian hiring an aid through a home care agency for a ward living in the community, the cost of those services is likely to go up following two recent decision by the United States Court of Appeals for the Second Circuit and the New York Supreme Court. The issue in Coke v. Long Island Care at Home, 376 F3d 118 (2d Cir. 2004), was whether the "companionship services" exemption under the federal Fair Labor Standards Act ("FLSA"), which provides an exception to the normal minimum wage and overtime rules, can be used by a third party home health agency to avoid paying the agency's home care attendants minimum wage and overtime pay.

Ms. Coke, a home health aid working for a Long Island agency, brought this test case with the support of the Service Employee International Union ("SEIU") and prevailed. Under FLSA, she was entitled to a minimum wage per hour and overtime at a rate of one and a half her regular hourly rate for hours worked in excess of forty hours a week. Although FLSA covers "domestic workers," it provides a complete exemption from minimum wage and overtime pay requirements for "any employees employed in domestic service employment to provide companionship services for individuals who (because of age and infirmity) are unable to care for themselves." 29 U.S.C. 213(a)(15).

Before the Coke decision, all Circuit Courts that addressed this issue found that home health agencies were entitled to the companionship services exception. What are "companionship services?" The regulations define companionship services as "those services which provide fellowship, care and protection for a person who because of advanced age or physical or mental infirmity, cannot care for his or her own needs." Such services may include household work related to the care of the aged or infirm person, such as meal preparation, bed making, or washing of clothes, provided that general housework does not exceed 20% of the total weekly hours worked by the employee. The services must also be provided in the home of the incapacitated individual, since the companionship services exemption does not apply if the client is residing in a hospital, nursing home, assisted living facility or other institutional facility.

In Coke, the Second Circuit concluded that the companionship exception was intended only to be used by families who directly hire home health aids, and did not extend to home health aids employed by third parties, such as home care agencies. Arguably, a guardian could exert supervision and control over the employee providing the services sufficient to create a joint employee relationship with the client and the home health agency, so as not to lose the companionship services exemption. However, a home health agency operating in the Second Circuit (New York, Vermont and Connecticut) may make a business decision to avoid any risk and stop relying on the companionship services exemption. As a result, the cost of home health aids retained through agencies will increase and/or agencies will try to avoid the FLSA overtime requirements by hiring additional aids and ensuring that none of them work more than 8 hours in a day or 40 hours in a week.

To protect the companionship services exemption, a guardian privately hiring a home health aid should ensure that the companion does not provide general housework in excess of twenty percent of the aid's total weekly hours. Although the companionship services exception excludes housework related to personal care (preparing meals, making beds, washing clothes, washing dishes, sweeping the floor after meals, scrubbing the bath tub after a bath), other housekeeping activities not related to the individual's personal care, such as vacuuming, washing floors or windows, or cleaning refrigerators, must be considered non-exempt "general household work" that is subject to the 20% time limitation. If the aid exceeds the 20% limitation, you may subject your ward to costly overtime and penalties, which could have been avoided.

A related cautionary tale appeared in a recent decision in Bauin v. Feinberg, New York Law Journal, March 24, 2005, p. 18, col. 1 (Civil Court, NY Co.) (Gesmer, J.). An elderly woman employed a domestic worker on a part-time basis to do laundry, grocery shopping, errands and cleaning for herself and her husband. During a six-week period following the woman's illness, the domestic worker worked six or seven days a week and often ten or more hours a day. A dispute arose over the domestic worker's final wages, leading to the litigation. After trial, the Court concluded that since the worker provided general housework that exceeded 20% of her weekly hours, the employer was not entitled to the companionship services exception. The Court awarded the worker overtime pay, attorney's fees, and an extra hour's wages for each day when the employee's "spread of hours" exceeded 10 hours as required under New York law. 12 NYCRR 142-2.4.

Although not raised in Bauin, the employer could also have been held responsible for (a) Social Security and Medicare (since the worker's wages exceeded $1,400.00 during a 52-week period), (b) obtaining worker's compensation and disability insurance, and (c) fulfilling other obligations as an employer of a household worker. See IRS Publication 926 ("Household Employer's Tax Guide") and IRS memo entitled "Topic 756 - Employment Taxes for Household Employees" (both available at www.irs.gov).

Whether you are a family member hiring a home health aid for an elderly relative or a guardian or securing such services for a ward, the companionship services exception is the best cost-saving method for ensuring that the elderly receive home care services in the community. To avoid costly litigation, be sure to structure the position so that less than twenty percent of the aid's work involves household chores, and make sure that the arrangement complies with all applicable wage, withholding and reporting requirements.

Miriam Davidson, Esq. is the Co-Chair of the NYWBA Elder Law Committee. She is a member of the Elder Law and Trusts and Estates Sections of the New York State Bar Association, a Panel Member of the City Bar's Legal Referral Service, and a member of the National Academy of Elder Law Attorneys.