[Federal Register Volume 66, Number 13 (Friday, January 19, 2001)]
[Rules and Regulations]
[Pages 5481-5489]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-1590]
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DEPARTMENT OF LABOR
Employment Standards Administration, Wage and Hour Division
29 CFR Part 552
RIN 1215-AA82
Application of the Fair Labor Standards Act to Domestic Service
AGENCY: Wage and Hour Division, Employment Standards Administration,
Labor.
ACTION: Notice of proposed rulemaking and request for comments.
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SUMMARY: The Department of Labor is proposing to amend several of the
existing regulations under the Fair Labor Standards Act (FLSA)
pertaining to the exemption for companionship
[[Page 5482]]
services. Section 13(a)(15) exempts from the minimum wage and overtime
provisions of the FLSA domestic service employees employed ``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 exemption was
enacted in 1974 at the same time that Congress amended the FLSA to
cover domestic service employees generally. The pertinent regulations
governing this exemption have been unchanged since they were
promulgated in 1975. Due to significant changes in the home care
industry over the last 25 years, workers who today provide in-home care
to individuals needing assistance with activities of daily living are
performing types of duties and working in situations that were not
envisioned when the companionship services regulations were
promulgated. The number of workers providing these services has also
greatly increased, and most of these workers are being excluded from
the FLSA under the companionship services exemption. The Department has
reevaluated the regulations and determined that--as currently written--
they exempt types of employees far beyond those whom Congress intended
to exempt when it enacted section 13(a)(15). Therefore, the Department
proposes to amend the regulations to revise the definition of
``companionship services,'' which sets out the duties that a companion
must be employed to perform in order to qualify for the exemption, to
more closely mirror Congressional intent. The Department also proposes
to amend the regulations to clarify the criteria used to judge whether
employees qualify as trained personnel, who are not recognized as
exempt companions. Finally, the Department proposes to amend the
regulations pertaining to employment by a third party. This change
would deny the companionship services exemption if the worker is
employed by someone other than a member of the family in whose home he
or she works. It would similarly deny the exemption for live-in
domestics, who are exempt from the FLSA's overtime requirements
pursuant to section 13(b)(21), if they are employed by someone other
than a member of the family in whose home they reside and work.
DATES: Comments are due on or before March 20, 2001.
ADDRESSES: Submit written comments to T. Michael Kerr, Administrator,
Wage and Hour Division, Employment Standards Administration, U.S.
Department of Labor, Attention: Fair Labor Standards Team, Room S-3516,
200 Constitution Avenue NW., Washington, DC 20210. Commenters who wish
to receive notification of receipt of comments are requested to include
a self-addressed, stamped postcard, or to submit comments by certified
mail, return receipt requested. As a convenience, commenters may
transmit comments by facsimile (``FAX'') machine to (202) 693-1432.
This is not a toll free number. If comments are transmitted by FAX and
a hard copy is also submitted by mail, please indicate on the hard copy
that it is a duplicate copy of the FAX transmission.
FOR FURTHER INFORMATION CONTACT: Richard M. Brennan, Deputy Director,
Office of Enforcement Policy, Wage and Hour Division, Employment
Standards Administration, U.S. Department of Labor, Room S-3510, 200
Constitution Avenue, NW., Washington, DC 20210; telephone: (202) 693-
0745. This is not a toll free number. Copies of this proposed
rulemaking may be obtained in alternative formats by calling (202) 693-
0745 or (202) 693-1461 (TTY). The alternative formats available are
large print electronic file on computer disk (Word Perfect, ASCII,
Mates with Duxbury Braille System) and audiotape.
SUPPLEMENTARY INFORMATION
I. Background
Congress expressly extended coverage to ``domestic service''
workers under the FLSA in 1974, amending the law to apply to employees
performing services of a household nature in or about the private home
of the person by whom they are employed. 29 U.S.C. 202(a), 206(f),
207(l). Domestic service workers were made subject to the FLSA even
though they worked for a private household and not for a covered
enterprise. Domestic service workers include, for example, employees
working as cooks, butlers, valets, maids, housekeepers, governesses,
janitors, laundresses, caretakers, handymen, gardeners, and family
chauffeurs. Senate Report No. 93-690, 93d Cong., 2d Sess. (1974), p.
20. Simultaneously with extending coverage under the FLSA to domestic
service workers, Congress created a complete exemption from both the
minimum wage and overtime requirements for casual babysitters and
persons ``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 [of Labor]).'' 29 U.S.C.
213(a)(15). Congress also created a more limited exemption from the
overtime requirements for domestic service employees in a household who
reside in that household. 29 U.S.C. 213(b)(21).
Congressional committee reports describe the reasons for extending
the minimum wage protections to domestics as ``so compelling and
generally recognized as to make it hardly necessary to cite them.''
Senate Report No. 93-690, p. 18. Private household work had been one of
the least attractive fields of employment. Wages were low, work hours
were highly irregular, and non-wage benefits were few. Senate Report
No. 93-690, p. 18.
The U.S. House of Representatives, Committee on Education and Labor
stated its expectation ``that extending minimum wage and overtime
protection to domestic workers will not only raise the wages of these
workers but will improve the sorry image of household employment. * * *
Including domestic workers under the protection of the Act should help
to raise the status and dignity of this work.'' House Report No. 93-
913, 93d Cong., 2d Sess., (1974), pp. 33-34. The legislative history
states that the 1974 Amendments were intended to include all employees
whose vocation was domestic service, but to exempt from coverage
babysitters and companions who were not regular bread-winners or
responsible for their families' support. It was not intended that the
statute exclude trained personnel such as nurses, whether registered or
practical, from the protections of the Act. Senate Report No. 93-690,
p. 20. Senator Williams, Chairman of the Senate Subcommittee on Labor
and the Senate floor manager of the 1974 FLSA Amendments, described
companions as ``elder sitters'' whose main purpose of employment is to
watch over an elderly or infirm person in the same manner that a
babysitter watches over children. All other work (such as occasionally
making a meal or washing clothes for the person) must be incidental to
that main purpose. 119 Cong. Rec. 24773, 24801 (1973).
The Department promulgated implementing regulations in 1975 that
define ``companionship services'' as including ``fellowship, care, and
protection'' provided to a person who, because of advanced age or
physical or mental infirmity, could not care for his or her own needs.
The regulation defined such exempt services as including household work
related to the person's care (such as meal preparation, bed making,
washing of clothes, and other similar services). A companion could also
perform additional general
[[Page 5483]]
household work without losing the exemption if it was incidental and
comprised not more than 20 percent of the total weekly hours worked.
Finally, a companion could be exempt even if employed solely by a
third-party employer or agency, rather than by an individual or family
directly. 29 CFR 552.6; 552.109(a). Similarly, live-in domestic service
workers could be exempt even if employed solely by a third-party
employer or agency, rather than by the individual or family in whose
home they resided and worked. 29 CFR 552.109(c).
The home care industry has changed dramatically since the
Department published the 1975 regulations implementing the exemption
for companionship services. There has been a growing demand for long-
term in-home care for persons of all ages, in part because of the
rising cost of and increasing dissatisfaction with traditional
institutional care, and because of the availability of public funding
assistance for in-home care under Medicare and Medicaid. According to
the National Association of Home Care (NAHC) publication, Basic
Statistics About Home Care (March 2000), data from the Department of
Health and Human Services' Health Care Financing Administration (HCFA)
show that the number of Medicare-certified home care agencies increased
over three-fold from 2,242 in 1975 to 7,747 in 1999. The number of for-
profit agencies not associated with a hospital, rehabilitation
facility, or skilled nursing facility, i.e., freestanding agencies,
increased more than any other category of agency from 47 in 1975 to
3,129 in 1999. These for-profit agencies grew from 2 percent of total
Medicare-certified agencies to over 40 percent by 1999, and now
represent the greatest percentage of certified agencies. Public health
agencies, which constituted over half of the certified agencies in
1975, now represent only 12 percent.
The Federal Government pays for much of the cost of providing home
care services to care recipients. Medicare provides a notable portion
of the industry's total revenues; other payment sources include
Medicaid, insurance plans, and direct pay. Based on data from ``A
Profile of Medicare Home Health''--a HCFA publication--Medicare and
Medicaid together account for more than half of the revenues paid to
freestanding agencies (40 and 15 percent, respectively). Other private
funds (philanthropy) account for 12 percent, while private health
insurance accounts for 11 percent. Out-of-pocket funds account for 22
percent of agency revenues.
There has been a similarly dramatic increase in the employment of
home health aides and personal and home care aides in the private homes
of individuals who need assistance with basic daily living or health
maintenance activities. Bureau of Labor Statistics' (BLS) national
occupational employment and wage estimates from the Occupational
Employment Statistics (OES) survey show that the number of workers in
these jobs tripled during the decade between 1988 and 1998, and by 1998
there were 430,440 people working as home health aides and 255,960
people working as personal and home care aides. The combined
occupations of personal care and home health aides constitute the
seventh most rapidly growing occupational group, and BLS estimates that
their number will increase by another 150 percent from 1998 to 2008.
The earnings of both categories of employees remain among the lowest in
the service industry--a 1998 mean annual wage of $16,250 for home
health aides and $14,920 for personal and home care aides according to
the OES data. Based on the same data source, ten percent of home health
aides and personal and home care aides earn below $12,300 a year--lower
than the 1999 poverty threshold level of $13,880 for a family of three.
Home health aides generally received more than personal and home
care aides--$7.51 per hour (mean hourly wage) for personal and home
care aides, and $8.17 per hour for home health aides. However, 10
percent of home health aides were paid less than $5.87 an hour, while
10 percent of personal and home care aides received less than $5.60 per
hour. Although 90 percent of home health aides and personal and home
care aides received hourly wages at or above $5.87 or $5.60, nearly
70,000 of these workers received hourly wages at or below such rates,
and possibly below the minimum wage.
According to the BLS National Industry-Occupation Employment Matrix
(1998), the largest percentage (38 percent) of personal care and home
health care aides are employed in the home health care services
industry. Others are employed by miscellaneous social service agencies,
residential care facilities, personnel supply service agencies, nursing
homes and hospitals. Only about two percent were self-employed and
another two percent were employed in private households.
Current data suggest that many workers in the home care industry
are now employed in their primary occupation. BLS National Current
Employment Statistics for 1999 show an average weekly number of hours
worked among non-supervisory employees in the home health care services
industry (SIC 808) of 29.1 hours. Workers in the individual and family
social services industry (SIC 832) averaged 31.2 hours per week. In the
residential care industry (SIC 836), workers averaged 32.4 weekly hours
worked. To the extent that time spent traveling from one client to the
next has not been considered hours worked and thus captured in the
above data, home care workers may actually be working longer than
revealed by the BLS statistics. As indicated earlier, it clearly was
Congress' intent under the 1974 FLSA Amendments to cover all workers
who performed domestic services as a vocation, excluding casual
babysitters and providers of companionship services who were not
regular bread winners or responsible for their families' support.
These workers perform a variety of housekeeping, personal care, and
medical duties for individuals who need assistance with activities of
daily living to enable them to remain in their homes. Home health aides
perform duties such as preparing meals, dressing patients,
administering medication and performing medical procedures under a
doctor's or nurse's direction. Personal and home care aides perform a
variety of tasks in the home, including household work and assistance
with nutrition and cleanliness. Employers have generally treated
workers employed as home health aides and personal and home care aides
as exempt companions, based upon the Department's current regulations.
To the extent that the current regulations allow for the exemption of
an employee who provides very little fellowship, and whose duties
involve almost exclusively the performance of household chores or
medical services, they do not appropriately implement Congress' limited
exemption for employees who provide companionship services. As a
result, the Department believes it is necessary to amend the
regulations to focus them on the fellowship and protection duties that
Congress originally intended the companion exemption to cover.
II. Proposed Regulatory Revisions
A. Duties of a Companion (29 CFR 552.6)
The Department proposes to amend the definition of ``companionship
services'' in section 552.6 to clarify the focus on the element of
fellowship, to align the regulation more closely with Congressional
intent. The dictionary definition of ``companionship'' is
[[Page 5484]]
instructive in revising the regulation to conform to the concept of a
companion as originally intended in the legislative history: someone in
the home primarily to watch over and care for the elderly or infirm
person, much as a neighbor or babysitter would. The dictionary defines
companionship as the ``relationship of companions; fellowship.'' And
the term ``companion'' is defined as a ``person who accompanies or
associates with another; comrade'' and as a person ``employed to
assist, live with, or travel with another.'' It further defines
``fellowship'' as including ``the condition of being together,''
``friendship'' and coming together ``in a congenial atmosphere.'' The
American Heritage Dictionary of the English Language, 1976 Edition.
Thus, we propose a revision of the regulation that requires that
fellowship be a significant, important and fundamental aspect of the
job under the companionship services exemption. Only where the worker
and the person being served or assisted interact on a close personal
basis, for a significant percentage of the time, would the
companionship services exemption be applicable. Of course, the precise
nature of what activities constitute fellowship will vary, depending
upon the needs, capabilities, and interests of the care recipient. For
example, fellowship might involve reading a book or a newspaper to the
person, chatting with him or her about family or other events, playing
cards, watching television, or going for a walk. Whatever the specific
activity, it must involve personal interaction between the in-home care
provider and the care recipient in order for the proposed companionship
services exemption to apply.
The regulatory definition of companionship services cannot be so
broad as to include someone who essentially is serving as a maid or
household worker. In 1974, Congress amended the FLSA specifically to
include domestic service workers (such as maids, cooks, valets and
laundresses) among those intended to be covered by the Act. Congress
simultaneously created a narrowly-tailored exemption for casual
babysitters and those providing companionship services to the elderly
and infirm. The regulations implementing the exemption should strike a
balance that implements Congress' twin goals by recognizing that the
fellowship and protection provided by a companion are very different
from the household chores performed by a maid or cook or laundress.
Furthermore, the regulations should also reflect that coverage under
the FLSA is construed broadly and exemptions narrowly to effectuate the
Act's remedial purposes.
The Department recognizes that it is possible to define
companionship services in several different ways, with the options
arrayed along a spectrum. The definitions may vary in the degree to
which they require the provision of fellowship only, or allow the
provision of fellowship in conjunction with hands-on care. The
percentage of time that must be spent in fellowship as compared to
other care duties also may vary. The Department proposes three
alternatives for defining companionship services and seeks comments on
all three alternatives. The three possible definitions involve
variations in the specific types of duties the employee may perform and
the amount of time the employee may spend in performing such duties.
All of the alternatives increase the emphasis on fellowship as a
critical component of a companion's duties, and narrow or eliminate the
type of care that may comprise a companion's duties. In all three
alternatives, we also propose to eliminate the current regulatory
provision that allows the exemption to apply when the worker spends up
to 20 percent of his or her time performing general household work
which is unrelated to the care of the person, such as general vacuuming
and dusting. Such general household work is precisely the sort of work
that Congress sought to cover when it amended the Act in 1974 to reach
domestic service workers, and therefore would be precluded.
The first proposal requires that fellowship be a significant part
of the person's duties for the companionship services exemption to
apply, but does not require fellowship duties to occupy a set
percentage of the worker's time. This proposal anticipates that
fellowship would occur in conjunction with the performance of other
intimate personal care chores, such as bathing, grooming, and dressing,
which also would constitute exempt duties. The first proposal also
would allow the exemption if the worker performs a limited amount (up
to 20 percent of the hours worked per week) of work of a household
nature that is directly related to the client's personal care, such as
cooking the person's meal, making the person's bed, or washing the
dishes for that person.
The second proposal focuses on fellowship and protection as the
primary duties in order for the companionship services exemption to
apply. Thus, an employee must spend more than 50 percent of his or her
time engaging in fellowship or protection duties to be exempt. Such
fellowship and protection duties would include activities providing
only fellowship or protection as well as activities in which fellowship
or protection is provided concurrently with the performance of other
intimate personal care chores, such as bathing, grooming, and
toileting. However, only one-half the time spent providing fellowship
or protection simultaneously with such other intimate personal care
chores would count when determining if the employee's primary duty was
providing fellowship or protection. The second proposal also would
allow the exemption if the worker performs a limited amount (up to 20
percent of the weekly hours) of work of a household nature that is
directly related to the person's care.
The third proposal would require that fellowship and protection be
the sole core duties in order for the exemption to apply. To qualify
for the exemption, the individual would have to spend at least 80
percent of his or her time in activities that provide fellowship or
protection, not in conjunction with other personal care duties. The 20
percent tolerance for other types of work would apply to other intimate
care and related chores. Thus, under this proposal, time spent on
intimate personal care chores (such as grooming, toileting, and
feeding) and on directly related work for the person (such as cooking
the person's meal) may not exceed 20 percent of the weekly hours worked
for the companionship services exemption to apply.
B. Trained Personnel (29 CFR 552.6)
There has also been a dramatic change since the enactment of the
1974 FLSA Amendments in the nature of the duties performed by many
employees classified as exempt under the companionship services
exemption. Because many individuals who were formerly institutionalized
or moved to nursing homes are able, with assistance, to stay in their
homes, home care providers have taken on a broader range of medically-
related duties. For example, individuals treated as exempt in providing
companionship services may now perform duties such as medication
management, taking vital signs (pulse, temperature, respiration),
routine skin and back care, and assistance with exercise and the
performance of simple procedures as an extension of physical therapy
service.
The training necessary for an employee to perform such duties,
while less than the training of a physician or nurse, means that such
individuals are not acting simply as elder sitters or as babysitters
watching over their charge.
[[Page 5485]]
Some courts, interpreting the current regulations, have allowed
employees to qualify for exemption under the present regulatory
definition of companionship services despite the fact that they had
extensive training, on the theory that they did not have the two or
more years of training generally required for LPNs and RNs. For
example, in McCune v. Oregon Senior Services Division, 894 F.2d 1107
(9th Cir. 1990), the court found that certified nursing assistants who
had to pass a 60-hour training class were exempt despite their
extensive medical training. Similarly, in Cox v. Acme Health Services,
Inc., 55 F.3d 1304 (7th Cir. 1995), the court held that certified home
health aides with 75 hours of state-required training were exempt. The
court in Terwilliger v. Home of Hope, Inc., 21 F. Supp. 2d 1294 (N.D.
Okla. 1998), also found that employees with 160 hours of training, who
had to obtain 40 additional hours of training each year, were exempt.
The Department believes that Congress did not intend for the
companionship services exemption to apply to employees with the level
of training necessary to perform medically-related duties such as
medication management and assistance with physical therapy. Duties
being performed that require such extensive training are beyond what
Congress envisioned when it stated that persons providing companionship
services are present in the home, as a neighbor might be, to watch over
an elderly person the way a babysitter watches over a child. Thus, the
Department proposes to clarify the regulatory definition of
companionship services in section 552.6 to exclude personnel trained in
the performance of such medically related duties from the companion
exemption.
C. Third Party Employment (29 CFR 552.109)
The Department also proposes to amend section 552.109, the
regulation pertaining to employment by a third party. People providing
in-home care and assistance to individuals with activities of daily
living may be employed, or jointly employed, by various parties such as
the family or household using the companionship services, State or
local governments, private for-profit agencies, and hospital-related
and not-for-profit agencies.
Under the existing regulation, employees who are employed by an
employer or agency other than the family or household using the
companionship services may still qualify for the exemption. Similarly,
under the current regulation live-in workers who are employed by a
third party, rather than by the family in whose household they work and
reside, nevertheless may qualify for an overtime exemption under
section 13(b)(21) of the FLSA.
The Department believes that employment by a party other than the
family or household using the companionship services is inconsistent
with the status of a companion, because the exemption for companionship
services in section 13(a)(15) of the FLSA is limited to employees who
are domestic service employees. The overtime exemption in section
13(b)(21) for live-in employees who reside in the household is
similarly limited to domestic service employees. While domestic service
was not defined by Congress in the Act, the Senate report reflects
Congress' view that ``the generally accepted meaning of domestic
service relates to service of a household nature performed by an
employee in or about a private home of the person by whom he or she is
employed.'' Senate Report No. 93-690, p. 20 (emphasis added). The
regulations mirror Congressional intent in defining domestic service
employment as 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.'' 29 CFR 552.3. Thus, the current
regulations contain an internal inconsistency, because they allow the
companion and live-in domestic exemptions to be applied to an employee
employed by someone other than the person in whose private home the
work is being performed.
In 1993, the Department published a proposal to amend this
regulation in light of the statutory requirement that the exemptions
for companionship services and live-ins only applied to domestic
service employees. The proposal provided that the companionship
services exemption would not apply unless the person receiving the
companionship services acted, alone or jointly, as an employer. 58 FR
69310, December 30, 1993. The subsection pertaining to live-in
employees was similarly proposed for amendment. In 1995 the rule was
reproposed, suggesting that the exemption might apply if either the
person receiving the services or a family member or state agency acted
as an employer of the person providing companionship services, if the
care recipient was unable to act on his or her own behalf. 60 FR 46797,
September 8, 1995. The Department received very few comments on either
of those proposals, and many of the comments indicated that there was
confusion about the impact and effect of the proposals.
The Department continues to believe that the current regulation
impermissibly extends the exemption for companionship services and for
live-in workers to employees who do not qualify as domestic service
employees, because they are not working in the home of their employer,
i.e., the third party employer. In addition, as discussed above,
changes in the industry and in the nature of the duties being performed
in peoples' homes by this segment of the work force have resulted in
increasing numbers of employees working for third-party employers.
Under the 1974 Amendments, Congress extended coverage of the FLSA to
domestic service employees who were not previously covered, i.e., those
who worked only for a private family and not for a covered enterprise.
Anyone who prior to 1974 had worked for a covered placement agency, for
example, but who was assigned to work in someone's home, would have
been covered previously by the FLSA. The Department believes that
Congress did not intend the 1974 amendments to change the status of
workers already covered by the FLSA, but only intended to exclude
casual babysitters and companions from those newly covered by the law,
that is, those exclusively employed by the homeowner or family member.
Accordingly, we propose to amend section 552.109 (a) and (c) to
make the exemptions in sections 13(a)(15) and 13(b)(21) of the FLSA
applicable only with respect to the family or household using the
worker's services. For employees who are employed, whether solely or
jointly, by an employer other than the family or household, such
workers would not be engaged in ``domestic service employment'' with
respect to those third party employers, and those third party
employers, therefore, would not be able to avail themselves of the
exemptions. A corresponding revision is made to the definition of
domestic service employment in section 552.103.
III. Paperwork Reduction Act
This proposed regulation does not contain any information
collection requirements that require the approval of the Office of
Management and Budget under the Paperwork Reduction Act.
IV. Executive Order 12866
The proposed rule is not an ``economically significant'' regulatory
action within the meaning of section 3(f)(1) of Executive Order 12866
on
[[Page 5486]]
``Regulatory Planning and Review.'' The rule is not likely to: (1) Have
an annual effect on the economy of $100 million or more or adversely
affect in a material way the economy, a sector of the economy,
productivity, competition, jobs, the environment, public health or
safety, or State, local, or tribal governments or communities; (2)
create a serious inconsistency or otherwise interfere with an action
taken or planned by another agency; or (3) materially alter the
budgetary impact of entitlements, grants, user fees, or loan programs
or the rights and obligations of recipients thereof. As a result, the
Department concluded that a full economic impact and cost/benefit
analysis was not required for the rule under Section 6(a)(3) of the
Order. However, because of its importance to the public and to the
Administration's priorities, the rule was treated as a significant
regulatory action and it was, therefore, reviewed by the Office of
Management and Budget.
Based on our preliminary analysis of the data, it is our conclusion
that the proposals to change how the companionship services exemption
is applied under the FLSA will not produce a significant economic or
budgetary impact on affected entities. The data indicate that more than
90 percent of the workers employed in the potentially affected
occupational categories already receive the current federal minimum
wage of $5.15 an hour or higher, and changing their status under the
FLSA from exempt to non-exempt would not impose any new wage costs to
meet minimum wage requirements. Similarly, because it appears that most
of the workers in these occupational categories do not regularly work
overtime (i.e., more than 40 hours per week), there would be little
impact from overtime wage costs if their status were changed from
exempt to non-exempt. Our analysis suggests that most of the likely
impact, although small, will be limited to the less than 10 percent of
workers who do not receive at least $5.15 an hour and to those workers
who may be entitled to additional compensation (minimum wage or
overtime) for time spent traveling between multiple client work sites
during the day. Some employers may not now pay for such travel time.
For those few workers who may be paid at or near the $5.15 minimum wage
or who work overtime hours once the travel time is included, some
employers could incur minor additional wage costs to meet FLSA's
minimum wage or overtime requirements. However, there are many
scheduling options available to employers to enable them in that event
to limit the total hours worked by an employee to 40 or fewer hours per
week to ensure that overtime costs are not incurred if paying overtime
wages is not in their own economic self-interests.
The Department of Health and Human Services' Health Care Finance
Administration informally estimates that the proposal will have a
negligible effect on Medicare costs as the types of services at issue
are not a significant component of the Medicare program. Annual
Medicaid program expenditures may increase somewhere within a $30 to
$40 million range, of which 57 percent would be the Federal share. An
equivalent percent increase in private expenditures for home health
services would suggest the possibility of a maximum additional increase
of $35 million in total private expenditures. The combined private and
public total would likely be no greater than $75 million.
Accordingly, it is our conclusion that this rulemaking is not an
economically significant regulatory action for purposes of Executive
Order 12866.
V. Small Business Regulatory Enforcement Fairness Act
For similar reasons as noted above, the Department has concluded
that this proposed rule is not a ``major'' rule requiring approval by
the Congress under the Small Business Regulatory Enforcement Fairness
Act of 1996 (5 U.S.C. 801 et seq.). It will not likely result in (1) an
annual effect on the economy of $100 million or more; (2) a major
increase in costs or prices for consumers, individual industries,
Federal, State or local government agencies, or geographic regions; or
(3) significant adverse effects on competition, employment, investment,
productivity, innovation, or on the ability of United States-based
enterprises to compete with foreign-based enterprises in domestic or
export markets.
VI. Unfunded Mandates Reform Act
For similar reasons for purposes of the Unfunded Mandates Reform
Act of 1995, this rule does not include a Federal mandate that may
result in increased expenditures by State, local, and tribal
governments in the aggregate of more than $100 million, or increased
expenditures by the private sector of more than $100 million.
VII. Executive Order 13132 (Federalism)
The Department has reviewed this rule under the terms of Executive
Order 13132 regarding federalism and has determined that it does not
have federalism implications. Because the economic effects under the
rule will not be substantial for the reasons noted above, the rule does
not have ``substantial direct effects on the States, on the
relationship between the national government and the States, or on the
distribution of power and responsibilities among the various levels of
government.''
VIII. Effects on Families
The Department has assessed this rule under section 654 of the
Treasury and General Government Appropriations Act, 1999, for its
effect on family well-being and hereby certifies that it will not
adversely affect the well-being of families.
IX. Regulatory Flexibility Act
The Department has determined for similar reasons that this
proposed regulation will not have a significant economic impact on a
substantial number of small entities within the meaning of the
Regulatory Flexibility Act, and the Department has so certified to the
Chief Counsel for Advocacy of the Small Business Administration. As
discussed above in the analysis under Executive Order 12866, more than
90 percent of the workers employed in occupational categories addressed
by this rulemaking already receive wages at rates above the current
federal minimum wage, and they typically work fewer than 40 hours per
week. Furthermore, employers are reimbursed by the Federal government
or insurance companies for most of the cost of providing these
benefits. Thus, even assuming that the alternative covering the most
additional (and therefore exempting the fewest) workers is adopted, the
rule will not have a significant economic impact. The following
regulatory flexibility analysis supports this determination.
(1) Reasons Why Action is Being Considered
Section 13(a)(15) of the Fair Labor Standards Act (29 U.S.C.
213(a)(15)) contains an exemption from both the minimum wage and
overtime pay requirements for ``3 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)''
(emphasis added). Due to considerable growth in home care and the home
health care industry since the implementing regulations were
promulgated in 1975, the Department's
[[Page 5487]]
more recent experience indicates that the ``companionship services''
exemption is being asserted in an expansive way for many more workers
than we believe the Congress originally intended based on a careful
analysis of the background and legislative history to the exemption.
Vast numbers of workers employed in regular vocations to provide
domestic services and care for individuals in their private homes are
being excluded from FLSA coverage as a result of this misapplication of
this exemption, which we believe is contrary to the intent and specific
purposes of the 1974 FLSA Amendments. The Department is therefore
issuing this proposal to invite public comments on possible
clarifications to the definitional terms describing the companionship
services exemption to bring it more in line with original Congressional
intent.
(2) Objectives of and Legal Basis for Rule
This proposed rule is issued under the authority provided by
section 13(a)(15) of the FLSA (29 U.S.C. 213(a)(15)), which grants the
Secretary of Labor legislative rulemaking authority to define and
delimit the terms ``employee employed in domestic service employment to
provide companionship services'' for purposes of exempting such workers
from the minimum wage and overtime pay requirements of the FLSA.
(3) Number of Small Entities Covered Under the Rule
A small business profile obtained from the U.S. Small Business
Administration's Office of Advocacy web site indicates that the health
services industry is among the top small business industries in the
United States according to employment figures. The SBA small business
size standard for Home Health Care Services, NAICS 6216, applies a $10
million threshold in annual receipts for defining a small business.
Based on data from the U.S. Census Bureau's 1997 Economic Census, there
were 16,895 home health care establishments (both exempt from and
subject to federal income tax) in 1997 that operated for the entire
year. Of that number, 16,486 (or 98%) had revenues (in the case of tax
exempt firms) or receipts (in the case of non-exempt firms) of less
than $10,000,000. For purposes of this analysis, we have assumed that
most of the entities potentially affected by this proposal would likely
meet the applicable criteria defining a small business in the home
health care industry.
(4) Reporting, Recordkeeping, and Other Compliance Requirements of the
Rule
The rule contains no reporting, recordkeeping or other compliance
requirements. All employers covered by the FLSA must comply with its
minimum wage, overtime pay, child labor, and generally applicable
recordkeeping requirements with respect to each employee who is not
otherwise exempt from the FLSA's requirements.
(5) Relevant Federal Rules Duplicating, Overlapping, or Conflicting
With the Rule
There are no Federal rules that duplicate, overlap, or conflict
with this rule governing the scope of the companionship services
exemption under the FLSA. Regulations issued under the Medicare and
Medicaid programs govern qualifying reimbursements for eligible
expenses under those programs.
(6) Differing Compliance or Reporting Requirements for Small Entities
This proposed rule contains no reporting, recordkeeping, or other
compliance requirements specifically applicable to small entities or
that differ from FLSA requirements generally applicable to all
employers subject to the FLSA. Furthermore, since this is a question of
application of the basic minimum wage and overtime requirements of the
Act, and most affected employers would be small, no special treatment
would be appropriate for small entities. However, the Department has
prepared three alternative definitions of the scope of exempt duties
and requested comments on all three.
(7) Clarification, Consolidation, and Simplification of Compliance and
Reporting Requirements
There is continuing confusion, among both employees and employers,
over the scope of the companionship services exemption as it relates to
the home health care industry. This proposal is intended to delimit how
the exemption applies in a manner that conforms more fully with
Congressional intent. Compliance requirements--i.e., payment of not
less than the minimum wage for all hours worked and overtime pay,
computed at time-and-one-half the regular rate for hours worked over 40
per week to all covered employees--are imposed by statute but are also
relatively simple and easy to comply with. Under the recordkeeping
requirements generally applicable to all FLSA-covered employers, no
particular order or form of records is prescribed by regulation and
employers are free to use any format that assures the essential records
are kept that meets compliance needs.
(8) Use of Other Standards
This proposed regulation addresses only statutory coverage and
definitional terms used in applying the ``companionship services''
exemption. Different standards for a statutory exemption are not
appropriate for small businesses. It should be noted, however, that the
proposed modification to the exemption to exclude from the exemption
those workers who are employed by an employer or agency other than the
family or household using their services would have the effect of
excluding all large employers (as well as small employers other than
the family or household).
(9) Exemption of Small Entities From Coverage of the Rule
An exemption based on the size of the entity/employer would not be
permitted by the terms of the statute. Coverage and applicability of
the wage and hours provisions of the FLSA are based on engagement in
interstate commerce, production of goods for interstate commerce,
employment in domestic service employment in private households (per
se), and employment by certain enterprises named in the statute as
subject to its provisions.
X. Document Preparation
This document was prepared under the direction and control of
Thomas M. Markey, Deputy Administrator for Operations, Wage and Hour
Division, Employment Standards Administration, U.S. Department of
Labor.
List of Subjects in 29 CFR Part 552
Domestic service workers, Employment, Labor, Minimum wages,
Overtime pay, Wages.
Signed at Washington, DC on this 12th day of January, 2001.
T. Michael Kerr,
Administrator, Wage and Hour Division.
For the reasons set forth above, part 552 of title 29 of the Code
of Federal Regulations is proposed to be amended as follows:
PART 552--APPLICATION OF THE FAIR LABOR STANDARDS ACT TO DOMESTIC
SERVICE
1. The authority citation for part 552 continues to read as
follows:
Authority: Secs. 13(a)(15) and 13(b)(21) of the Fair Labor
Standards Act, as amended (29 U.S.C. 213(a)(15), (b)(21)), 88 Stat.
62; Sec. 29(b) of the Fair Labor Standards
[[Page 5488]]
Amendments of 1974 (Pub. L. 93-259, 88 Stat. 76), unless otherwise
noted.
2. Sec. 552.3 is proposed to be revised by adding a sentence to the
end of the section to read as follows:
Sec. 552.3 Domestic service employment.
* * * Employees who are employed, whether solely or jointly, by an
employer or agency other than the family or household using their
services are not engaged in domestic service employment within the
meaning of this part with respect to such third-party employer.
3. Sec. 552.6 is proposed to be revised to read as follows:
Alternative 1 for Sec. 552.6
Sec. 552.6 Companionship services for the aged or infirm.
As used in section 13(a)(15) of the Act, the term companionship
services shall mean 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. Although no
specific percentage of time must be devoted exclusively to fellowship,
fellowship must be a significant component of a companion's duties.
Protection generally involves being present in the home of the
individual to ensure the safety and well being of that individual. Care
generally involves providing intimate personal care services to that
individual, such as feeding the person or assisting the person with
bathing, dressing, grooming, or toileting. A companion may also perform
household work but only insofar as it is directly related to the care
of the individual, such as preparing the individual's meal, making the
individual's bed, washing the individual's clothes and other similar
services for the person, provided, however, that such work is
incidental, i.e., does not exceed 20 percent of the total weekly hours
worked. The term ``companionship services'' does not include services
relating to the care and protection of the individual which require and
are performed by personnel with training in medical procedures,
including, but not limited to, catheter and ostomy care, injections,
and tube feeding, regardless of whether the caregiver is a registered
or practical nurse. While such trained personnel do not qualify as
companions, this fact does not remove them from the category of covered
domestic service employees when employed in or about a private
household.
Alternative 2 for Sec. 552.6
Sec. 552.6 Companionship services for the aged or infirm.
As used in section 13(a)(15) of the Act, the term companionship
services shall mean 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. Fellowship and
protection must be a companion's primary duties and the companion must
spend at least 50% of his or her weekly hours worked providing
fellowship or protection. A companion's time may be devoted exclusively
to fellowship or protection, or fellowship and protection may be
provided in conjunction with and concurrently with intimate personal
care activities; however, only one-half of the time spent providing
fellowship or protection in the context of and concurrently with
intimate personal care activities may count towards the 50 percent
requirement. Protection generally involves being present in the home of
the individual to ensure the safety and well being of that individual.
Care generally involves providing intimate personal care services to
that individual, such as feeding the person or assisting the person
with bathing, dressing, grooming, or toileting. A companion may also
perform household work but only insofar as it is directly related to
the care of the individual, such as preparing the individual's meal,
making the individual's bed, washing the individual's clothes and other
similar services for the person, provided, however, that such work is
incidental, i.e., does not exceed 20 percent of the total weekly hours
worked. The term ``companionship services'' does not include services
relating to the care and protection of the individual which require and
are performed by personnel with training in medical procedures,
including, but not limited to, catheter and ostomy care, injections,
and tube feeding, regardless of whether the caregiver is a registered
or practical nurse. While such trained personnel do not qualify as
companions, this fact does not remove them from the category of covered
domestic service employees when employed in or about a private
household.
Alternative 3 for Sec. 552.6
Sec. 552.6 Companionship services for the aged or infirm.
As used in section 13(a)(15) of the Act, the term companionship
services shall mean those services which provide fellowship and
protection for a person who, because of advanced age or physical or
mental infirmity, cannot care for his or her own needs. Fellowship and
protection are a companion's sole core duties and a companion must
spend at least 80% or his or her weekly hours worked exclusively
providing fellowship or protection. Protection generally involves being
present in the home of the individual to ensure the safety and well
being of that individual. A companion may also perform duties that
provide care, which generally involves providing intimate personal care
services to the individual, such as feeding the person or assisting the
person with bathing, dressing, grooming, or toileting. A companion also
may perform household work but only insofar as it is directly related
to the care of the individual, such as preparing the individual's meal,
making the individual's bed, washing the individual's clothes and other
similar services for the person. However, all intimate personal care
services and household work directly related to the individual must be
incidental, i.e., may not exceed 20 percent of the total weekly hours
worked. The term ``companionship services'' does not include services
relating to the care and protection of the individual which require and
are performed by personnel with training in medical procedures,
including, but not limited to, catheter and ostomy care, injections,
and tube feeding, regardless of whether the caregiver is a registered
or practical nurse. While such trained personnel do not qualify as
companions, this fact does not remove them from the category of covered
domestic service employees when employed in or about a private
household.
4. In Sec. 552.109, paragraphs (a) and (c) are proposed to be
revised to read as follows:
Sec. 552.109 Third party employment.
(a) Employees who are employed, whether solely or jointly, by an
employer or agency other than the family or household using their
services are not engaged in ``domestic service employment'' within the
meaning of these regulations with respect to such third party employer.
Consequently, such a third party employer may not avail itself of the
minimum wage and overtime pay exemption provided by section 13(a)(15)
of the Act for employees employed in domestic service employment to
provide companionship services.
(b) * * *
(c) Household workers who are employed, whether solely or jointly,
by an employer or agency other than the
[[Page 5489]]
family or household using their services are not engaged ``in domestic
service employment'' within the meaning of these regulations with
respect to such third party employer. Consequently, such a third party
employer may not avail itself of the overtime pay exemption provided by
section 13(b)(21) of the Act for employees employed in domestic service
who reside in the household.
[FR Doc. 01-1590 Filed 1-18-01; 8:45 am]
BILLING CODE 4510-27-P