Employers Must Tread Lightly

Employers Must Tread Lightly Over FLSA and Caregiver Classification

By Chandra Davis — The Employment Law Solution: McFadden Davis, LLC, Atlanta, Georgia | Submitted by the Labor & Employment PAC

The Fair Labor Standards Act (FLSA) establishes minimum wage, overtime pay, recordkeeping, and youth employment standards affecting employees in the private sector and in federal, state and local governments.[1] The FLSA requires employers to pay overtime to employees who work more than 40 hours per week at a rate of one-and-one-a-half times those workers hourly rates.[2] Some employees are exempt from the overtime provisions of the FLSA, thus not requiring the employer to pay those employees overtime pay.[3]

To determine if an employee falls under an exemption, workers must be properly classified either as an “independent contractor” or an “employee.” Misclassification of a worker can result in problems for both the worker and the employer. Misclassifying employees as independent contractors can result in employees not receiving workplace protections like minimum wage, overtime compensation, unemployment insurance, and workers’ compensation.[4] Some employers intentionally misclassify workers to cut costs and evade compliance with labor laws.[5]

Courts use the multi-factorial “economic realities” test to determine if a worker is an employee or independent contractor.[6] The economic realities test focuses on whether the worker is economically dependent on the employer or in business for him or herself. The economic realities test include the following factors: (1) the extent to which the work performed is an integral part of the employer’s business; (2) the worker’s opportunity for profit or loss depending on his or her managerial skill; (3) the extent of the relative investments of the employer and the worker; (4) whether the work performed requires special skills and initiative; (5) the permanency of the relationship; and (6) the degree of control exercised or retained by the employer.[7] These factors are to be considered in totality.[8] If the worker is economically dependent on the employer, then the worker is an employee; if the worker is in business for him or herself, i.e., economically independent from the employer, then the worker is an independent contractor.[9]

Home Health Care and Companionship Services, i.e., caregivers (those who provide domestic companionship services to seniors and individuals with disabilities), are a specific category of employees that have been exempt from the minimum wage and overtime pay protections of the FLSA. [10] In October 2013, the Department of Labor (“the Department”) issued a new regulation narrowing the Home Health Care and Companionship Services exemption of the FLSA.[11] This included prohibiting third-party employers of companionship-services and live-in employees from classifying these individuals as exempt. [12] Therefore, allowing the FLSA’s wage and overtime provisions to cover them. [13]

Under the new regulations if an individual engaged in companionship services and live-in care spends more than 20 percent of their working time performing job duties such as dressing, grooming, feeding, bathing, toileting, transferring, meal preparation, driving, light housework, managing finances, assistance with the physical taking of medications, and arranging medical care, then the companionship exemption is not applicable and the employee is entitled to both minimum wage and overtime pay.[14]

In Home Care Ass’n of Am. v. Weil, three associations of home care agencies filed suit against the Department challenging the Department’s ability to extend FLSA protections to companion-services and live-in workers engaged with third party agencies.[15] The agencies argued that the new rule was an arbitrary and capricious exercise of authority.[16] In its decision on August 21, 2015, the U.S. Appeals Court of the District of Columbia disagreed with the associations and ruled that the FLSA vests the Department with discretion to create a rule that requires employment agencies, including home care agencies, to pay minimum wage and overtime to domestic workers providing in-home care for the elderly, sick, and disabled.[17] Therefore, with the Court of Appeals ruling, the FLSA’s minimum wage and overtime provisions will protect more domestic service workers and the Department has clarified and narrowed the duties and definition of “companionship services.”[18]

Georgia has also amended legislation dealing with companionship services.[19] Under the Home Care Patient Protection Act, companion sitters and personal care assistants must be employees rather than independent contractors.[20] This brings these employees under the FLSA’s minimum wage and overtime pay protections also.[21]

Employers’ best practices include: performing internal audits of policies and procedures and employee classifications; implementing training programs for supervisors/leads and in-depth training for owners; and consulting with an employment attorney on any and all employment and labor issues.

Chandra Davis is a partner in The Employment Law Solution: McFadden Davis, LLC, a boutique employment law firm. Ms. Davis is an effective labor and employment law advisor, litigator, and mediator. She is registered with the Georgia Commission on Dispute Resolution and has mediated a variety of employment matters at the Agency and litigation stages.