Wage and Hour Defense Blog

Wage and Hour Defense Blog

District Court Judge Vacates DOL’s Modified Definition of “Companionship Services”

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Just over three weeks after vacating a regulation barring third party employers from claiming the companionship exemption for minimum wage and overtime, in a January 14, 2015 decision in Home Care Association of America v. Weil, U.S. District Court Judge Richard Leon has also vacated the Department of Labor’s attempt to drastically narrow the definition of “companionship services” (29 CFR Sec. 552.6,). Judge Leon had previously stayed the changes in the new definition, originally scheduled to go into effect on January 1, 2015.

The new definition of “companionship services” would have drastically limited the provision of “care” – assistance with “activities of daily living” and “instrumental activities of daily living” –  to less than 20% of an employee’s total weekly hours worked. For the past forty years, there had been no limitation on the amount of such care, although there was a 20% limitation on the performance of general household work.  As a result, the vast majority of employees currently providing companionship services would no longer have qualified for the exemption.

In vacating the definition, Judge Leon found the DOL’s narrowed definition of “care” contrary to the statute and both arbitrary and illogical. Noting that the statutory exemption by its terms applies to services for individuals who “are unable to care for themselves,” he held that the new regulations’ drastic limitation in the quantity of the very “care” the elderly and disabled need directly contradicted the statute:  “Indeed, what services could possibly be required more by those ‘unable to care for themselves’ than care itself?” That the DOL was attempting to limit the very thing essential to the daily survival of the elderly and disabled was nonsensical.

Judge Leon also sharply criticized the DOL’s blatant disregard of Congressional intent geared towards preserving the companionship exemption for the benefit of the “millions of American families [struggling each day to financially] care for their loved ones.” Bearing in mind the ever-increasing number of families that will share in the struggle of caring for the elderly and disabled, Judge Leon reiterated that the DOL cannot circumvent the electorate.  As Judge Leon noted, even when the FLSA was otherwise amended, or when attempts were made to remove the exemption from third party employers, there was no attempt to change the definition of companionship services.  If Congress has not redefined the 40-year-old exemption, then the DOL should not be able to do it now, he reasoned.

The DOL has not yet indicated whether it will appeal, but an appeal is highly likely.

As we have previously noted, even though the long-standing FLSA minimum wage and overtime companionship services exemption definitions now will remain in effect for at least the near future , employers must still remember to comply with applicable state and local laws that may require minimum or higher wages and/or overtime for companionship services.

The ABC Test Determines Independent Contractor Status Under the New Jersey Wage Payment and Wage Hour Laws

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Michael D. ThompsonOn January 14, 2015, in Hargrove v. Sleepy’s LLC, the New Jersey Supreme Court answered a certified question from the Third Circuit and held that the “ABC” test governs whether a plaintiff is an employee or an independent contractor under the New Jersey Wage Payment Law and the New Jersey Wage and Hour Law.

Therefore, companies defending their independent contractor classifications in either litigation or government investigations under these statutes will be required to show that an individual providing services:

(A)       is free from the company’s control in performing the services;

(B)       performs work outside the usual course of the company’s business or outside the company’s place of business; and

(C)       is engaged in an independently established business.

The plaintiffs in Hargrove v. Sleepy’s delivered mattresses for Sleepy’s, and filed suit under the New Jersey Wage Payment law (and several other statutes) alleging that Sleepy’s misclassified them as independent contractors.  The case was litigated before the U.S. District Court for the District of New Jersey.

Sleepy’s argued that plaintiffs’ status as employees should be decided under the “right to control” test applied by to ERISA claims by the United States Supreme Court in Nationwide Mutual Ins. Co. v. Darden.

The District Court applied the “right to control” test and concluded that the plaintiffs were, in fact, independent contractors.  The plaintiffs appealed to the Third Circuit Court of Appeals.

In May 2013, the Third Circuit petitioned the New Jersey Supreme Court to answer the following question:

Under New Jersey law, which test should a court apply to determine a plaintiff’s employment status for purposes of the New Jersey Wage Payment Law, N.J.S.A. § 34:11-4.1, et seq., and the New Jersey Wage and Hour Law, N.J.S.A. § 34:11-56a, et seq.?

Seal of the Supreme Court of New JerseyThe New Jersey Supreme Court granted the petition by the Third Circuit.

The New Jersey Supreme Court noted that neither the Wage Payment Law nor its regulations provide criteria for distinguishing between an employee and an independent contractor.  However, the New Jersey Department of Labor and Workforce Development’s regulations implementing the Wage Hour Law expressly provide that the distinction between an employee and an independent contractor should be resolved by reference to the ‘ABC’ test.”

The Supreme Court of New Jersey stated that the “express purpose” of both statutes is to foster “the provision of greater income security for workers.”  The Court asserted that the “ABC” test “operates to provide more predictability” than other tests of independent contractor status, and that there was no good reason “to depart from the standard adopted by the DOL to guide employment status determinations or to disregard the long-standing practice of treating both statutory schemes in tandem.”

For those reasons, the New Jersey Supreme court held that any dispute regarding independent contractor status arising under the Wage Payment Law and the Wage and Hour Law should be resolved by utilizing the “ABC” test.

The decision in Hargrove v. Sleepy’s is important in large part because the “ABC” test is significantly different from other independent contractor tests.  In particular, employers should scrutinize the New Jersey Supreme Court’s description of part C of the test as (requiring an independently-established business):

Therefore, part C of the “ABC” test is satisfied when an individual has a profession that will plainly persist despite the termination of the challenged relationship… When the relationship ends and the individual joins the ranks of the unemployed, this element of the test is not satisfied.

Accordingly, New Jersey employers should further examine their independent contractor relationships against the criteria of the “ABC” test.

California Supreme Court Holds That Sleep Time May Not Be Excluded from Hours Worked in Certain Industries

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On January 12, 2015, the California Supreme Court issued its decision in Mendiola v. CPS Security Solutions, Inc. While it will have no impact upon most employers, it is a decision that will have significant impact on some. It may well lead to the filings of class action lawsuits against some employers alleging that they did not pay employees for sleep time – lawsuits those employers now may have great difficulty defending.

To the surprise of some, the Court concluded that security guards who are assigned 24-hour shifts, but sleep 8 of those hours, must be compensated for the entire 24 hours. The Court reached this conclusion despite the fact that the employees agreed in advance that such sleep time should be excluded from their hours worked – and despite the fact that a prior Court of Appeal decision had approved such agreements several years ago.

The case involves interpretation of California Industrial Welfare Commission (“IWC”) Wage Order 4, which governs employees in professional, technical, clerical, mechanical, and similar occupations. (The IWC has issued different Wage Orders for different industries.)

Guards working 24-hour shifts for CPS had agreed that their 8 hours of sleep time would not be compensated. The issue was then raised in two putative class action lawsuits. Reversing the appellate decision on this issue, the California Supreme Court has held that the guards’ “on-call hours constituted compensable hours worked and, further, that CPS could not exclude ‘sleep time’ from plaintiffs’ 24-hour shifts . . . .”

Addressing whether “on-call” time is compensable, the Court reiterated the factors to which other courts have looked : “(1) whether there was an on-premises living requirement; (2) whether there were excessive geographical restrictions on employee’s movements; (3) whether the frequency of calls was unduly restrictive; (4) whether a fixed time limit for response was unduly restrictive; (5) whether the on-call employee could easily trade on-call responsibilities; (6) whether use of a pager could ease restrictions; and (7) whether the employee had actually engaged in personal activities during call-in time.” Additionally, the courts have also considered whether the time “is spent primarily for the benefit of the employer and its business.” Applying these factors, the Court determined that the guards should have been compensated for their on-call time.

The Court then concluded that sleep time could not be excluded from hours worked – even by agreement. Such agreements had generally been permitted since at least April 2011 when the Court of Appeal issued its decision in Seymore v. Metson Marine, Inc. The Seymore Court held that “California law authorizes employers to enter into an agreement with their 24-hour employees to exclude from compensation eight hours of sleep time in each 24-hour period,” following applicable federal regulations and a prior California appellate opinion in Monzon v. Schaefer Ambulance Service, Inc. Importantly, the Monzon Court found that such an exclusion was permissible under Wage Order 9, governing ambulance drivers and attendants. It did not address Wage Order 4, the one at issue in Mendiola.

The Mendiola Court disapproved of Seymore “as an improper extension of Monzon.” Moreover, noting the differences in the various Wage Orders, the Court explained, “Unlike Monzon, which at least could point to some evidence of the IWC’s intent concerning ambulance drivers and attendants, Seymore identified no such indication, much less convincing evidence, that the IWC intended to permit the exclusion of sleep time from compensable hours worked for all employees working 24-hour shifts.” The Court looked at Wage Order 4, finding that it contained no signal that the IWC intended to adopt a sleep time exclusion, while other wage orders – specifically, Wage Orders 5 and 9 – had done so. And because there was no evidence that the IWC intended to incorporate the federal sleep time exclusion into Wage Order 4, the employer was not permitted to exclude sleep time from the guards’ compensable hours worked in 24-hour shifts.

Significantly, the California Supreme Court declined to make its holding apply only prospectively, meaning that employers who believe they had been complying with the law under Seymore may well find themselves subject to wage claims for unpaid sleep time. That would include class action lawsuits, which may be difficult for some employers to defend in light of the Mendiola decision.

Employers who deduct employees’ hours worked for “on-call” time and/or agreed-upon sleep time should reevaluate their practices with counsel to determine how those employees must be paid, if at all, for such time.

Sixth Circuit Concludes That Ambulance Company Does Not Need To Compensate EMTs for “On-Call” Meal Periods

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In Jones-Turner v. Yellow Enterprise Systems, LLC, the Sixth Circuit recently upheld summary judgment in favor of an ambulance company in a collective action filed by three EMTs, finding that the plaintiffs’ meal and rest breaks were not compensable under the Fair Labor Standards Act (“FLSA”) and Kentucky law.  The Court analyzed whether the ambulance company’s policy of having “on-call” lunch periods required EMTs to be compensated for that time.

According to the “on-call” lunch period policy, EMTs in the field were not allotted a specific time period for lunch but were instructed to take advantage of down time between ambulance runs to eat a meal.  The EMT crews  were required to radio the dispatcher to request a lunch break.  During their lunch break, the crews were subject to various restrictions.  For instance, the crews had to eat within one mile of an assigned stand-by location.  If the crews were out of their unit, they had to maintain radio contact, they were expected to answer the radio after the first call and they were subject to any available run.  If an employee was unable to take a lunch break due to call volume, the company required the employee to submit a missed lunch form.

The Court noted that there did not appear to be any evidence that employees were frequently interrupted by radio contact.  Likewise, there was no evidence that crews could only eat in their ambulances.  To the contrary, the evidence showed that they could leave the ambulance so long as they maintained radio contact.   The Court explained that it may have reached a different conclusion if EMTs were required to stay in their ambulances or if they had to drive or perform other duties.

The decision is helpful to employers as it clarifies that merely carrying a radio or monitoring a radio during lunch does not result in the meal period being compensable under the FLSA.  Although employers must be careful that they do not require employees to perform work during their meal periods, being subject to an emergency call does not transform meal periods into compensable time under the FLSA.

The Sixth Circuit Holds That Meal Periods Spent “Doing Exactly What One Might Expect An Off-Duty Employee To Be Doing” Are Not Compensable.

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In Ruffin v. MotorCity Casino, the Sixth Circuit Court of Appeals considered whether casino security guards were entitled to be paid for meal periods during which they were required to remain on casino property, monitor two-way radios and respond to emergencies if called to do so.

The District Court for the Eastern District of Michigan had granted summary judgment to the employer based on the conclusion that no reasonable jury could have found the meal periods to be compensable work time.

In affirming the ruling of the District Court, the Sixth Circuit relied on its earlier decision in Hill v. United States, which in turn relied on 29 CFR §785.19.  That regulation provides that bona fide meal periods are not work time.  To qualify as bona fide meal period, an “employee must be completely relieved from duty for the purposes of eating regular meals.”

However, the Sixth Circuit further noted that so long as (i) the employee can “pursue his or her mealtime adequately and comfortably,” (ii) the employee does not perform any substantial duties during the period, and (iii) the mealtime is not predominantly for the employer’s benefit, the employee is “relieved of duty” and is not entitled to compensation under the FLSA.

The plaintiffs in Ruffin contended that monitoring their two-way radios, which exposed them to a steady stream of work-related radio chatter during meal periods, was a substantial job duty.

The Sixth Circuit disagreed and cited to caselaw holding that monitoring a radio and being available to respond if called, generally was a de minimis activity rather than a substantial job duty.

Furthermore, the plaintiffs in Ruffin spent their meal periods eating, reading, socializing and conducting personal business on their phones.   Their mealtimes were not interrupted with such regularity that they were spending the time primarily for the employer’s benefit.

While the plaintiffs were required to remain on the premises, the evidence showed that this restriction was not an indirect way of extracting unpaid work from the employee.  Rather, the plaintiffs “spent their meal periods doing exactly what one might expect an off-duty employee to be doing on a meal break.”

Based on the totality of the circumstances, the Sixth Circuit affirmed the District Court’s summary judgment in favor of the employer.

Therefore, in deciding whether or not to compensate employees for their meal breaks, employers should be mindful of Ruffin, 29 CFR §785.19 and the related caselaw.  Under those circumstances, employers should consider whether (i) the employees are performing any substantial duties during the meal period; (ii) the employees are regularly interrupted during the meal periods to perform work for the employer; and (iii) the employees are unable to leave the employer’s property or spend the meal periods predominantly for their own benefit.

District Court Judge Issues Temporary Stay of DOL’s Modified Definition of “Companionship Services”

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On December 23, 2014, Brian Steinbach posted regarding U.S. District Court Judge Richard Leon’s December 22nd decision in Home Care Association of America v. Weil, vacating the portion of the new Department of  Labor regulation (proposed 29 CFR Sec. 552.109, scheduled to go into effect on January 1, 2015) barring third party employers from claiming the companionship services (minimum wage and overtime) or live-in domestic service (overtime) exemptions. The post noted that the decision did not address DOL’s separate changes to the definition of “companionship services” (proposed new 29 CFR Sec. 552.6).  Those changes included:  narrowing to 20% the amount of time that can be spent assisting with “activities of daily living” (such as dressing, grooming, feeding, bathing, toileting and transferring) and “instrumental activities of daily living” (such as meal preparation, driving, light housework, managing finances, assistance with the physical taking of medication, and arranging medical care) that enable a person to live independently at home; and eliminating prior language that allowed the performance of general household work for up to 20 percent of the total weekly hours worked.

However, on December 24, 2014, just two days after Judge Leon’s decision issued, the Plaintiffs in Home Care Association moved to stay the changes in the definition of “companionship services.” In particular, Plaintiffs contended that, as a practical matter, the new rule effectively repealed the statutory exemption by removing the provision of “care” for more than 20 percent of working time from the regulatory definition, despite a forty year history to the contrary. Following a December 31, 2014 hearing, Judge Leon granted a temporary restraining order staying the new “companionship services” definition from going into effect until January 15, 2015. He also set an accelerated briefing schedule for a preliminary injunction, and scheduled a hearing for January 9, 2015.  A ruling is likely by January 15, 2015.

Notwithstanding these proceedings, home care agencies must continue to comply with state labor laws in effect. In New York, for example, notwithstanding the temporary stay of the “companionship services” definition, the home care industry must continue to pay minimum wage (now $8.75 per hour) and overtime (at a rate of one and a half times the minimum wage). Should the DOL prevail, the home care industry will be required to increase overtime pay from one and a half times the minimum wage to one and a half times the employee’s regular rate of pay. Though a seemingly minor increase, the home care industry, especially those agencies receiving state and federal funding, are already operating on thin margins and must continue to identify methods of remaining in business without sacrificing the quality of patient care.

The DOL’s revisions to sections 552.102 and 552.110, relating to keeping of actual records of the hours worked by such employees, have not been addressed at this time.

 

New York: No Wage Theft Prevention Act Annual Notice Requirement in 2015

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Our colleagues at Epstein Becker Green have released an advisory that will be of interest, particularly to New York employers: “New York Wage Theft Prevention Act Update: Annual Notice Requirement Is Removed for 2015,” by Susan Gross Sholinsky, William J. Milani, Jeffrey M. Landes, Dean L. Silverberg, Nancy L. Gunzenhauser, and Kate B. Rhodes.

Following is an excerpt:

On December 29, 2014, Governor Andrew Cuomo signed the long-awaited amendment (“Amendment”) to the Wage Theft Prevention Act (“WTPA” or “Act”) and a chapter memorandum. Notably, the Amendment and the chapter memorandum abolish the annual notice requirement for 2015. The text of the Amendment states that the law is not effective until 60 days following enactment; however, Governor Cuomo’s chapter memorandum states that it “accelerate[s] the effective date of the notification rules in section 1 of the bill to remove the notice requirement on employers for the 2015 calendar year.” This means that for 2015, employers do not need to provide annual notices of pay rates/pay dates to New York employees.

Further, the governor noted in the chapter memorandum that there were some other issues with the Amendment, which the New York Legislature agreed to address in the next legislative session. He did not address which provisions would require revision.

As a reminder, the WTPA is designed to prevent employers from failing to pay workers’ wages, in two ways. First, it requires written statements setting forth employees’ pay rates and pay dates. Second, the Act provides a civil cause of action against employers that fail to properly disclose or pay wages.

Read the full advisory here.

A Simple Proposal to Amend the FLSA to Benefit Everyone – Yes, Everyone

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Michael S. KunSeveral years ago, I received a kind note around the holidays from my opposing counsel in a wage-hour class action, thanking me and my firm for being their “partners” in addressing employment issues.

Maybe the word he used wasn’t “partners,” but it was something close to it.

At first, I must admit that I thought he was joking.

Then I realized that this attorney, for whom I have great respect, got it.

He got that employers are not looking to violate employment laws, and that the attorneys who represent them are not trying to help them violate the laws.

He got that the opposite is true – employers are trying to comply with the laws, and their attorneys are trying to help them do so.  No employer is hoping to get sued.  Not one.  And lawyers advising employers on how to violate the laws will soon be looking for new clients.  Or a malpractice attorney.

The general public may not understand this notion, and, unfortunately, many employees and plaintiffs’ lawyers may not, either.

The desire of employers and their counsel to comply with the law plays out thousands of times every day, to the great benefit not just of employers, but of employees.  All management-side employment lawyers worth their salt have stories about how they worked with their clients to prevent a manager from terminating an employee’s employment, or cutting an employee’s pay, by explaining the law and the potential repercussions.  Some lawyers have hundreds of these stories.

“You should give the employee another chance,” is an expression that may as well be on a tape recording, it’s used that often.  “Document the problem, sit down with the employee to explain how they need to do things differently, and give the employee another chance.”

Often – usually – employers will understand and take that approach once distanced from the heat of the moment.

They’re looking to do the right thing, to treat their employees fairly.  And, yes, to comply with the law.

It’s an approach that works in virtually every context except one – the Fair Labor Standards Act.

The FLSA works to dissuade employers from correcting wage issues.

Why is that?

Because, unlike other employment laws, the FLSA generally doesn’t permit employers and employees to resolve wage disputes, short of the very litigation or agency complaint that neither employers nor employees really want.

The FLSA forbids the very amicable resolutions that would benefit both employers and employees.

And it’s time to change that.

In a perfect workplace, if employees have issues, whatever they might be, they would speak with their managers or with human resources and resolve their disputes amicably.

And, for the most part, the law not only permits them to do so, but encourages them to do so.

If employees believe they have been harassed, they can take their concerns to their employer and let their employer investigate and take corrective action, if appropriate.

If employees believe they have been discriminated against, they can share their concerns with their employer and resolve their disputes.

And if part of the resolution is a payment of some sum that the employer and employee agree to be fair, they can enter into a settlement agreement whereby those claims are resolved.  That is, the employee can accept some agreed-upon sum of money and sign a release.  And the employee can review the settlement agreement with his or her attorney beforehand in deciding whether the terms are fair.  If not, the employee won’t sign it.

But these very same employees who are able to amicably resolve virtually any dispute with their employers are not allowed to do so with FLSA claims.

If employees believe they were not paid for all time they worked, they cannot simply speak with their managers or human resources personnel to resolve the issue, get the problem fixed, and move on.  No, the only way they can resolve the issue is to file a lawsuit or a complaint with the Department of Labor.

If employees believe their overtime pay was miscalcuated, the only way they can resolve the claim is by suing or going to the DOL.

If employees believe that they have been misclassified as exempt, they can’t resolve the issue with their manager or human resources personnel.  No, they have to sue or file a DOL complaint.

And if employers identify an issue – an error on someone’s paycheck, or a concern that an employee might have been misclassified – the best they can do is to correct the issue and pay the employee, then sit back and hope that the employee doesn’t turn around and sue on the very issue the employer wanted to resolve, but couldn’t.

It’s a system that is built to increase litigation, often unnecessarily, at the expense of amicable resolutions of issues that may arise.

There is no good reason that employees can be trusted to resolve other employment disputes without litigation or an agency complaint, but can’t be trusted to do so with regard to wage claims.

None.

There is no good reason why an employee can be allowed to amicably resolve a race or sex discrimination concern, for instance, but the same employee can’t be allowed to resolve a wage claim – not even as part of the resolution of the race or sex discrimination concern.

None.

The argument that an employee wouldn’t understand the nuances of the FLSA flies about as far as a turkey.  The FLSA is no more nuanced than Title VII or the Americans with Disabilities Act, and employees are allowed to resolve those claims outside of litigation or an agency complaint.

And don’t forget that an employee could always have an attorney review a proposed FLSA settlement before he or she ever entered into it.  If it wasn’t fair, the attorney would surely tell the employee that and try to negotiate better terms, right?

Ultimately, it’s the employees’ decision.  If they don’t like the terms of a proposed resolution of FLSA claims, they can always file suit or a DOL claim then.

If you assume that employers and employees would like to have the opportunity to try to resolve their FLSA disputes prior to litigation or a DOL claim, then it is time to amend the FLSA to give them to right to do so.

And the blueprint for what legislation should look like is easy to find – it’s right in the Age Discrimination in Employment Act.  Or, more specifically, it’s right in the Older Workers Benefits Protection Act amendments to the ADEA.

For reasons that remain somewhat mystifying, releases of age discrimination claims under the ADEA require specific terms that releases of other types of discrimination claims do not.  Among other things, such releases must specifically reference the ADEA, they must advise employees that they have the right to consult with an attorney, they must provide the employee with 21 days to consider the release (or 45 days under some circumstances), and they must provide the employees with 7 days to revoke an agreement after signing.

There is no reason that the FLSA couldn’t be amended to permit private settlements along the same lines – with a requirement that the release specifically reference the FLSA, that it advise employees that they have the right to consult with an attorney (or the DOL), that they have 21 days to consider the release, and that they may revoke the release within 7 days.

Don’t like the settlement proposed by your employer?  Don’t sign it.

Don’t understand it?  Talk with a lawyer or the DOL.

Need time to think about it?  You’ve got plenty of time.

Have second thoughts after signing the agreement?  Revoke it.

If such bells and whistles are sufficient to protect older workers who wish to settle age discrimination claims, they should be sufficient to protect all employees who wish to resolve FLSA claims.

Employees would benefit from a system that would encourage employers to address wage issues – and, not incidentally, by which they might not have to share 30-40% of their settlement with lawyers.

Employers would benefit from a system that would help them address those issues while avoiding litigation – saving on paying attorney’s fees to attorneys like me.

The courts and the DOL wouldn’t be clogged with claims that are often small and cry out for resolution.

The only people who wouldn’t benefit from this proposed amendment would be the lawyers.

And if you’re worried about us lawyers, you should call a doctor.

District Court Decision Vacates DOL Regulation Barring Third Party Employers from Claiming Exemptions for Companionship and Live-In Domestic Service Workers

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On December 22, 2014, the District of Columbia federal district court vacated a new U.S. Department of Labor regulation, scheduled to go into effect January 1, 2015, barring third-party employers from claiming minimum wage and overtime exemptions for “companionship” domestic service workers, as well as a statutory overtime exemption for live-in domestic service employees.

In his scathing opinion in Home Care Association of America v. Weil, Judge Richard J. Leon pointed out that the United States Supreme Court has already rejected “a challenge to the validity of the long-standing inclusion of employees paid by third parties within the companionship services exemption.”   Moreover, bills introduced by “the majority party in both the House and Senate in three consecutive Congresses (110th, 111th, and 112th)” never “generated sufficient support to get out of committee and to the floor of either house of Congress.”

Judge Leon chastised the DOL for attempting to do through regulation what could not be achieved through legislation, and for disregarding clear statutory language that applied these forty-year old statutory exemptions to “any employee” who is employed to provide the covered services.

Judge Leon held that although the DOL had the authority to define what companionship services are and what domestic service employment is, it had no authority to limit application of the exemption to employees who otherwise fell within these definitions based on the nature of their employer: “Congress surely did not delegate to the Department of Labor here the authority to issue a regulation that transforms defining statutory terms into drawing policy lines based on who cuts a check rather than what work is being performed.”

The decision, although likely to be appealed, is an important victory for home health care providers, which employ 90% of home health aides and personal care aides, including those providing companionship services. While some companionship services are paid for directly by the consumers (who still would have had the exemption under the now-vacated regulation), in most cases payment comes from Medicare, Medicaid or other government programs that pay only a flat hourly rate that does not contemplate any overtime pay (and often does not reflect recent increases in state and local minimum wages).

Had the now vacated regulations gone into effect, home health providers, who already work on narrow margins, would have had to absorb the costs of any overtime pay.  Many providers had already begun planning to reduce the hours of existing employees to avoid overtime. Now they at least will have some flexibility, at least in states where the exemption is also available under state law.

Home health providers should proceed with caution, however, as state laws may still require payment of the state or local minimum wage as well as overtime, and it is possible that Judge Leon’s decision could be reversed on appeal. In addition, the decision did not address DOL’s separate changes in the definition of companionship services, which included narrowing to 20% the amount of time that can be spent assisting with activities of daily living and instrumental activities of daily living that enable a person to live independently at home, and eliminating prior language that allowed the performance of general household work for up to 20 percent of the total weekly hours worked. These changes are under challenge in the same case but were not addressed in the partial summary judgment motion addressed in the decision. As a result, these changes will still take effect on January 1, 2015.

NLRB Alleges McDonald’s and Franchisees Are Joint-Employers

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By Steven M. Swirsky

On our Management Memo blog, my colleagues Adam Abrahms, Martin Stanberry, and I posted “NLRB Issues 13 Complaints Alleging McDonald’s and Franchisees Are Joint-Employers.”

The National Labor Relations Board continues to focus on the changes in the nature of the employer-employee relationship, and the question of what entity or entities are responsible to a company’s employees for compliance with the range of federal, state, and local employment laws, including wage payment and overtime laws.

The Board’s General Counsel has now taken another big step in his effort to broaden the definition of “employer,” issuing a series of 13 complaints alleging that McDonald’s shares responsibility for franchisees’ employees. At the same time, the Board is poised to answer the question of whether the long standing test that the NLRB has relied on for more than 30 years to determine joint employer status should be replaced with a broader definition, and if so what it should be.

Read our full post here.

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