PUBLICATIONS

Third party home care providers breathed a collective sigh of relief yesterday when the United States Supreme Court reversed a ruling out of the Second Circuit Court of Appeals which held that the companionship exemption from the Fair Labor Standard Act's (FLSA) overtime requirements was not valid and binding as it related to third party providers of temporary home care services.

Third party home care providers breathed a collective sigh of relief yesterday when the United States Supreme Court reversed a ruling out of the Second Circuit Court of Appeals which held that the companionship exemption from the Fair Labor Standard Act's (FLSA) overtime requirements was not valid and binding as it related to third party providers of temporary home care services. See Long Island Care at Home v. Coke.

Under the FLSA, persons employed in domestic service employment to provide companionship care services for individuals who are unable to care for themselves are exempt from the Act's overtime and minimum wage requirements. In the Coke case, the plaintiff sued her employer under the FLSA for minimum and overtime wages for companionship care-related services she performed in a patient's home. A Department of Labor regulation directed that the exemption applied regardless of whether the service provider was hired directly by the patient or was placed in the home by a third-party home care services provider. The plaintiff argued that the DOL regulation overreached its authority and was unenforceable because the DOL regulation was merely an "interpretation" and not intended to fill what the courts referred to as a "statutory gap."

The Supreme Court noted that whether or how the FLSA should apply to workers paid by a third party raises a set of complex questions and that "[s]atisfactory answers to such questions may well turn upon the kind of thorough knowledge of the subject matter and ability to consult at length with affected parties that an agency, such as the Department of Labor, possesses." Thus, the Court found it reasonable to infer that Congress intended its broad grant of authority to the DOL to include the authority to answer these types of questions.

Accordingly, the Supreme Court held that the regulation was "valid and binding," and did not exceed the DOL's authority: "Whether to include workers paid by third parties is one of the details [of filling statutory gaps] left to the DOL to work out." The Court further held that "[w]here an agency rule sets forth important individual rights and duties, where the agency focuses fully and directly upon the issue, where the agency uses full notice-and-comment procedures to promulgate a rule, where the resulting rule falls within the statutory grant of authority, and where the rule itself is reasonable, then a court ordinarily assumes that Congress intended it to defer to the agency's determination."

In the Coke case, the Second Circuit diverged from other circuits that had already addressed the issue and held that the companionship exemption applied to third party providers of home care services. The case had already been reviewed by the Supreme Court once, which vacated the original Second Circuit decision and remanded the case so that the Second Circuit could consider a DOL-issued memorandum describing the application of the regulation at issue. The Second Circuit remained unconvinced on remand and again held the regulation unenforceable, which led to the second appeal to the Supreme Court.

Employers' Bottom Line:

This case should put to rest the conflict between the Second Circuit and her sister circuits with regard to application of the companionship services exemption for large and small employers of temporary home care services. Employers should be cautioned, however, that such service providers' employees must still meet the duties test to qualify for protection under the exemption.