Executive Summary: On July 13, 2018, the United States Department of Labor (“DOL”) issued a Field Assistance Bulletin (“FAB”) aimed at clarifying the standard utilized to determine if home care workers qualify as employees or joint employees under the Fair Labor Standards Act (“FLSA”). Over the past few years, the DOL has issued and then withdrawn guidance regarding the proper standard and evaluation of home worker classification, leaving uncertainty for the industry. The new guidance provides clarity on the subject and provides home care registries a road map for proper classification.
Background: More than 2 million home care workers across the United States provide in-home support to seniors and the disabled. Dating back to 1974, such caregivers were exempt from the FLSA’s minimum wage and overtime compensation requirements pursuant to the companionship exemption. Effective January 1, 2015, the DOL revised the regulations defining companionship services so that many direct care workers became subject to the overtime pay provisions of the FLSA. Over the next two years, the DOL also ramped up its efforts to address alleged misclassification of home care workers as independent contractors. Reinforcing this initiative, the DOL issued a pair of administrator interpretations (“AIs”), in 2015 and 2016, expansively defining employment and joint employment. The Trump Administration withdrew these two Obama-era guidance documents on June 7, 2017. Nevertheless, according to a letter from Senator Marc Rubio (R-Fla.) to Labor Secretary Acosta, dated February 5, 2018, DOL employees were still using the 2015 guidance when analyzing the classification of home health registry workers. In his February 5th letter, Senator Rubio requested that the Labor Secretary provide clear direction to the DOL staff related to interpreting joint employment and independent contractor relationships and ensure that the withdrawn 2015 and 2016 guidance documents were no longer used.
Ostensibly in response to Senator Rubio’s concerns, Acting Administrator Bryan Jarrett issued a FAB on July 13, 2018, to help DOL staff determine whether certain home care organizations are employers under the FLSA. The FAB is specifically aimed at home care registries. Similar to Uber and other crowdsourcing apps that match requests for services with independent contractors on demand, home care registries, as the FAB explains, “typically match people who need caregiving services with caregivers who provide the services.” Thus, while the scope of the FAB is narrow, the FAB arguably forecasts how the DOL administration may approach the classification of gig workers as employees v. independent contractors in other industries.
At the outset, the bulletin reaffirms the DOL’s longstanding position that home care matchmaking and referral agencies (i.e., registries) are not employers under the FLSA. According to the bulletin, this remains true even if the registry:
- Engages in quality control measures (e.g., confirms caregiver credentials, conducts background checks, contacts professional references)
- Gathers detailed information from caregivers (i.e., the type of work the caregivers are willing to perform, target compensation, and availability) and clients (i.e., needs, budget)
- Provides multiple referrals to the prospective client, who has no obligation to accept the referral(s)
- Acts as a liaison between the caregiver and client
- Provides other administrative services (e.g., payroll services)
Importantly, however, for the registry to avoid FLSA coverage for the caregiver, the client must retain control of the financial terms and conditions of the home care relationship, including managing the type of care provided, the rate of pay, and adjusting the terms and conditions of the relationship as needed. The FAB emphasizes that the DOL will “consider the totality of the circumstances” to evaluate whether an employment relationship exists between a registry and a caregiver. Such “circumstances” addressed in the bulletin include:
The bulletin highlights that the following activities by the registry may be indicative of a traditional employment relationship:
- Pre-selecting caregivers for a client, as opposed to pre-screening caregivers by performing basic quality control and verification checks and allowing the caregiver and client to independently determine work assignments and schedules
- Playing an active role in the hiring and firing decisions, as opposed to leaving that decision-making and execution responsibility to the client
- Applying policies and other requirements that control the caregiver’s behavior and/or earning capacity (i.e., establishing policies that require caregivers to provide care in a certain manner, setting policies regarding time off or calling out, disciplining the caregiver or restricting a caregiver from registering with her referral services or taking on other clients)
- Setting a wage range or determining the wage rate irrespective of the caregiver’s ultimate determination
- Charging fees based on caregiver’s hours worked, which, according to the DOL, suggests that the registry’s revenue is based on activity other than its matchmaking (and/or related administrative) services
- Verifying or adjusting timekeeping for accuracy
- Paying for the caregiver’s training, licensure and insurance, equipment and/or supplies, or other tools necessary for the caregiver to perform his or her services
In sum, this bulletin provides helpful guidance to the home care registry industry as it attempts to navigate whether its business model complies with federal employment laws. Beyond that, the bulletin demonstrates that the DOL – much like its decision to reinstate the use of opinion letters – will continue to provide general guidance on wage and hour issues. Finally, although narrowly focused on the home care industry, this bulletin may also be beneficial for app-based matching and referral companies given the similarities in business models.
Employers’ Bottom Line: Companies operating in the home care industry are strongly encouraged to review the new guidance and ensure proper classification of home care workers.