Wednesday, September 25, 2013

FLSA Questions Answered By HomeWork Solutions Tax Expert, Kathleen Webb

The US Department of Labor undertook a nearly two year review of the Fair Labor Standards Acts’ (FLSA) “companionship exemption” and issued revised rules on September 17, 2013. The rule revision touches on a number of areas that directly impact employers of senior caregivers. Carelinx consulted with household employment expert Kathleen Webb of HomeWork Solutions to better understand how these new rules impact families employing senior caregivers.

What is the FLSA and why do private household employers need to know about it?
The FLSA established standards for the basic minimum wage and overtime pay protections that almost all US workers enjoy. The FLSA applies to domestic services workers – nannies, housekeepers, and other caregivers. The FLSA includes, however, a specific exemption that excludes companions for the elderly and disabled from these minimum wage and overtime protections.
Today there are more than 2 million senior caregivers employed by both families and third party agencies who are not entitled to minimum wage or overtime under Federal law.  The revised rules, which go into effect January 1, 2015, will now give most senior caregivers minimum wage and overtime protections.

What is the “companionship exemption”?
Domestic service workers who provide companionship services to the elderly and disabled need not be paid at the minimum wage or be paid overtime. These employees can be paid on a daily or weekly basis, at any wage that is mutually agreeable to the employee and employer. The exemption to the FLSA recognized that companions often work multiple 24 hour shifts, and that their primary functions were care and fellowship to help the elderly or disabled individual to live as independently as possible in their private home.

What are the key changes to the FLSA’s application to domestic service workers?
The revised rules:
    •  More clearly and narrowly define the tasks that comprise “companionship services,”
    •  Limit the exemption for companionship services only to private household employers, and
    • Revise employer record keeping obligations for employers of live-in caregivers.

What are the tasks of a companion caregiver?
The revised rules clearly articulate that the companion is primarily to provide fellowship and protection, and that duties involving personal care services may not exceed 20% of the companion’s working hours. A companionship exemption cannot be claimed for a domestic worker who performs any general household and housekeeping services. HomeWork Solutions prepared the following chart to illustrate the rules change.


What does limiting this companionship services exemption to private household employers mean?
By definition the companionship exemption only applied to caregivers working in a private home. However, these caregivers-  until now - did not have to be the employee of the family; in fact, the large majority of these companion caregivers are employed by third-party agencies.
Effective January 2015 all caregivers employed by third-party agencies must be paid at no less than the minimum wage and are entitled to overtime for hours worked over 40 in a seven-day work week. These protections will apply to all home care workers, including live-in workers, who are employed by a third party such as a home health care agency, regardless of their job duties. 

This may create significant financial incentive for families to independently hire companion caregivers through staffing platforms such as Carelinx.
It is important to note that several states extend minimum wage and overtime protections to companions – when in conflict the rule (Federal or state) that is more beneficial to the worker must always be applied.

Lastly, what are the changes household employers need to make to their payroll record keeping?
Families who employ live-in domestic service workers, such as live-in nannies or live-in senior caregivers until now have been able to rely on a mutually agreed upon written work schedule as sufficient ‘timekeeping’ for their live-in. After January 2015, these household employers must keep detailed timekeeping on all live-in domestics except those covered by the ‘companionship services exemption.’ The written agreement specifying on and off duty time will no longer be considered sufficient documentation.
The FLSA does not specify an exact timekeeping method. The record must include:
  1. The date worked.
  2. Time in and time out, and
  3. Total time worked in the work week.

Employers must maintain pay records for a minimum of three years, and time cards for no less than two years.

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