New Ruling on Companionship Exemption Possible, HEALTH CARE PROVIDERS CONTINUE TO BE TARGETED BY DOL, PRIVATE SETTLEMENTS OF WAGE AND HOUR DISPUTES PERMITTED, AND NEW RIGHT OF APPEAL AVAILABLE IN WAGE CLAIMS
By Dana Stripling, JD, Of Counsel
Garlo Ward, P.C. www.garloward.com
Posted Monday, August 16, 2005
Wage & Hour Alert: U.S. Supreme Court Considering Review of FLSA “Companionship Exemption”
The U.S. Supreme Court has recently requested the U.S. Solicitor General’s opinion in a case concerning whether certain home health care employees are exempt from minimum wage and overtime requirements of the Fair Labor Standards Act (FLSA). The move indicates that the Supreme Court is considering a review of a case that may dramatically impact the costs of in-home services by home health agencies.
The Department of Labor’s (DOL) rules currently provide that a home health worker need not be employed directly by the consumer family or household to be exempt; rather “third party” home health agencies who assign aides and other in-home workers are currently entitled to the “companionship” exemption. See 29 CFR �552.109 (workers who are employed by agency rather than consumer and are engaged in providing companionship services 1 are exempt from FLSA’s minimum wage and overtime pay requirements).
Should the High Court decide to hear the dispute, employers would gain long-awaited clarification on the issue of whether third-party providers of companionship services, such as home health providers, may qualify for exemption under the FLSA. The solicitor’s opinion will help the High Court determine whether the dispute is important enough to add to its 2005-2006 docket.
The Second Circuit Court decided in July 2004 that Congress never intended to exempt from the FLSA’s overtime and minimum wage requirements “companionship” workers employed by home health agencies and other third party employers. See Long Island Care at Home v. Coke, 376 F.3d 118 (2d Cir. 2004). The appellate decision overturned the trial court and made Evelyn Coke, a “home health care attendant” employed by Long Island Care (and arguably other similar workers in the states covered by the 2nd Circuit, including those in New York, Connecticut and Vermont) “eligible for the federally mandated minimum wage and time and one-half overtime pay from her employer.” The DOL’s regulations currently exempt third-party companionship services employees, but the department has contemplated changing this provision several times.
Background: “Companionship” Workers — The FLSA provides an exemption (29 U.S.C. � 213(a)(15)) from both minimum wage and overtime requirements for any person engaged in domestic service employment to provide companionship services for individuals who, because of age or infirmity, are unable to care for themselves.2
Specifically, the FLSA defines the term “companionship services” to mean those services that 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. See 29 CFR �552.6. Such services may include incidental housekeeping work related to the care of an elderly or impaired person, such as meal preparation, bed-making, washing of clothes and other similar services. To be exempt, an employee must not spend more than 20 percent of his or her total working hours on nonexempt tasks, such as general household work. See 29 C.F.R. � 552.6 (work related to care of consumer is not counted toward 20 percent threshold).
Finally, workers qualify for the companionship exemption only if consumer services are provided in private homes and not in group homes. See 29 C.F.R. � 552.3. For example, a federal appellate court ruled that workers for a provider servicing mentally disabled adults in a group home were entitled to overtime because they did not work in private homes where the consumers did not own their own homes and they could only remain in their homes as long as they continued to use the company’s services. See Madison v. Resources for Human Dev. Inc., 233 F.3d 175 (3d Cir. 2000); see also Johnston v. Volunteers of America Inc., 213 F.3d 559 (10th Cir. 2000) (aides who provided services to home for developmentally disabled clients were eligible for overtime pay because consumers did not live in private home where they were not living with their families, workers controlled daily activities and diets of consumers and workers had office in home).3
We’ll keep an eye on this one and alert you to whether or not the United States Supreme Court might tinker with the “companionship” exemption.
DOL’s Continuing Focus on Healthcare Providers Nets Payment by Hospital of $1.3 Million for FLSA, FMLA Violations
A Wilmington, N.C., hospital recently paid more than $1.3 million in back wages to 3,427 current and former non-exempt hourly employees. The settlement highlights the importance of keeping accurate time records, particularly when automated time clocks are used. New Hanover Regional Medical Center made the payments after a DOL investigation determined that the hospital did not pay hourly employees for time worked before and after scheduled hours and for lunch breaks that lasted less than 30 minutes.
Additionally, the DOL investigators concluded that at least one employee had been illegally terminated for taking Family and Medical Leave Act (FMLA) leave. The FMLA, of course, provides qualifying employees with job-protected unpaid leave for certain family and health care reasons.
Advice: The FLSA generally requires non-exempt workers be compensated for breaks shorter than 30 minutes. While some minimal, insignificant periods of work time during breaks may be excluded from payable working time, employers are generally required to pay employees for all work performed for the employer’s benefit. This is true even though the work may be unauthorized but performed nevertheless. So, what is an employer’s recourse? Pay the employee for work performed, but counsel and discipline a worker to ensure that unauthorized work does not continue to be tolerated. Also enact and enforce a written policy requiring uninterrupted lunch breaks absent emergencies and requiring employees to timely notify management of all hours worked or adjustments to payroll errors.
Texas Court Allows Private Parties to Settle FLSA Dispute Without DOL Intervention: Worker Who Accepted Private Settlement Could Not Sue for Overtime Pay
The U.S. District Court for Western Texas recently ruled that a warehouse worker who accepted $1,000 in exchange for signing a release agreement concerning his overtime claim could not later sue for additional overtime pay. The Court reasoned that the settlement was valid because the employer and worker had a genuine dispute as to the amount of compensation owed and devised their own settlement.
Background — After the employee threatened to sue, the company offered the worker $1,000 to compensate him for disputed Saturday overtime work. The employee signed a notarized memorandum stating that he accepted $1,000 “in full payment for all overtime accumulated and unpaid during the period” and agreed that he “consider[ed] this amount as full settlement for all overtime in question and reported.” The employee signed the memo and accepted money even though he later complained he thought he was really entitled to nearly $3,500. The employee filed a wage claim with the Texas Workforce Commission alleging that he was still due overtime wages. After the TWC denied the worker’s wage claim based on the settlement, the employee sued in federal district court for violations of the FLSA.
Private Settlements Under the FLSA — When originally enacted, the FLSA addressed court or DOL supervised settlements but omitted any reference to an employer and employee entering a “private” settlement. Later, the FLSA was amended in the 1940s to allow certain private settlements of wage claims where a “bona fide” (or, good faith) dispute as to the wages owed existed, but only as to FLSA claims already existing at the time the amendment passed. Later amendments also addressed the Secretary of Labor’s authority to oversee settlements, but there has never been any express statutory authority for private settlements.
Many courts have concluded that there are only two ways in which back wage claims under the FLSA can be settled or compromised by employees: (1) payment supervised by the DOL or (2) a settlement supervised by the courts once a lawsuit has been filed. By contrast, the Texas court concluded that it was unclear whether Congress actually intended the above provisions to be the sole manner by which wage and overtime claims could be settled. Recognizing a recent trend in the courts recognizing the validity of settlements and releases of rights under numerous other employment laws, including Title VII of the Civil Rights Act of 1964 (prohibiting certain class-based discrimination) and the Age Discrimination in Employment Act and extending this reasoning to cases involving the FLSA, the Texas federal court concluded the FLSA settlement was enforceable. The Texas judges explained that the courts and DOL “likely would be swamped with unnecessary disputes, many dubious and with little evidence, that could not be finally settled without approval from either a court or the Secretary of Labor.”
“Bona Fide” Disputes as to Wages or Hours — Based on the above analysis, the court held that “parties may reach private compromises as to FLSA claims where there is a bona fide dispute as to the amount of hours worked or compensation due.” The court concluded that such a “bona fide” dispute existed in this case because: (1) the settlement was signed after the worker began complaining he had not been paid for overtime worked; (2) neither party could conclusively establish whether the employee indeed had been paid; (3) there was no written evidence to establish the employee’s agreed rate of pay, and (4) no evidence
In a last effort to void the release, the employee argued that the agreement was invalid because it was signed “under duress” (that is, unfair coercion or force). Specifically, the worker claimed the employer induced him to sign the release at a time that he needed money to fix his truck and that his wife was terminally ill. The court rejected this argument, stating, “[t]hat plaintiff needed money at the time he signed the document does not rise to the level of economic duress” under Texas law. Thus, the private parties’ settlement was upheld, and the worker was denied any additional recovery on his overtime claim. (Martinez v. Bohls Bearing Equip. Co., W.D. Tex., No. Civ.A.SA-04-CA-0120, 2005 WL 459654, Feb. 28, 2005)
Coming This September — New Right to Appeal Texas Payday Claims
If you’ve ever lost a Texas Payday Act wage claim, you might have been frustrated to learn that your only appeal from the hearing officer’s determination was to file a lawsuit in State court. By contrast, unemployment claims may be further appealed to the three-member panel of the Texas Workforce Commission. That disparity was changed during the last legislature when S.B. 1408 passed. Effective for payday act claims filed after September 1, 2005, there is now a right of appeal to the Texas Workforce Commission. This may prove quite beneficial to employers given the increasing number of wage claims, especially commissions and unpaid benefits, being filed today.
All information in this article is informational only and is not legal advice. Should you have any questions or a situation requiring advice, please contact an attorney.
Copyright 2005 by Garlo Ward, P.C., all rights reserved.
2 Trained personnel, such as registered or practical nurses, are not exempt under section 13(a)(15) as companions.
3 The DOL has indicated that a group home might constitute a “private home” where the consumer actually owned their residential unit, controlled their own affairs and had the option of retaining different home health providers’ services might constitute a “private home” for purposes of the companionship exemption.
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