The Red Flags of FLSA

Since October 1, 2015, approximately 350 wage and hour lawsuits involving homecare have been filed nationwide in federal court.

While not separately tracked, state court filings are typically more than double the number of federal court actions. This means likely over 1,000 wage and hour lawsuits have been filed against homecare companies in less than two years.

The homecare industry has also faced increased scrutiny from the Department of Labor (DOL). In addition to disseminating a number of fact sheets specifically addressed to health care workers, which has led to more investigations and lawsuits, the DOL has also targeted homecare companies’ incorrect calculations of the overtime rate, failure to pay in-home caregivers for travel time and misclassification of employees as independent contractors.

With the increased risk of litigation and DOL investigations, homecare companies should be cognizant of recurrent wage-hour litigation issues.

Litigation Risks for Homecare Companies

Homecare Rule Effective Date 

One of the most important litigation issues currently facing the homecare industry is the effective date of the Homecare Rule, which affects the industry’s exemptions to minimum wage and overtime. The Homecare Rule eliminated the availability of the companionship and live-in domestic service exemptions to third parties and severely narrowed the definition of companionship services—thus extending minimum wage and overtime requirements to the vast majority of homecare workers.

The Homecare Rule had an original anticipated effective date of January 1, 2015, but the Rule was vacated by the D.C. District Court as a result of a challenge brought on behalf of the industry. On appeal, the D.C. Circuit Court of Appeals reversed the vacatur effective October 13, 2015, and the district court thereafter granted summary judgment to the DOL, thus clearing the Homecare Rule to proceed. The U.S. Supreme Court left the Homecare Rule intact when it declined review.

The DOL and courts have differed on the date they consider the Homecare Rule to be effective. Some courts have concluded the D.C. Circuit’s reversal retroactively made the Homecare Rule effective January 1, 2015, the original effective date. However, other courts have concluded the Homecare Rule was effective later, on October 13, 2015, the date of the D.C. Circuit’s reversal, or on November 12, 2015, the date the DOL began enforcement. While this may appear to be a seemingly mundane issue at first glance, an effective date of January 1, 2015 could potentially result in a homecare company paying thousands of dollars more in back wages. Homecare companies should pay close attention to this issue because it impacts whether they had an obligation to pay minimum wage and overtime between January 1, 2015 and either October 13 or November 23, 2015.1

Meal Periods 

Meal periods present significant litigation risk for homecare companies. While the Fair Labor Standards Act (FLSA) does not require employers to provide non-exempt workers with meal periods, many state laws require companies to provide unpaid meal periods of a certain length within a defined number of working hours. If a meal period is provided, it should be at least 30 minutes to qualify as a bona fide meal period under the FLSA, and the worker should be ‘‘completely relieved from duty,” (i.e., the meal should be predominantly for the benefit of the worker).

Automatic pay deductions for meal periods have sparked extensive litigation against health care systems, including homecare companies. Although automatic deductions are not unlawful, they invite litigation to such a degree that companies would do better to avoid them entirely and have workers record actual time spent on meal breaks. If companies continue to use such automatic deductions, they should minimize litigation risks by using time sheet certifications and a reporting mechanism for missed and interrupted meal periods, or consider using systems that log off workers automatically during meal periods, or prompt workers to confirm electronically whether they have taken a meal period and whether they worked during the meal period.

Travel Time 

As a general rule, homecare companies must pay non-exempt caregivers for all time spent traveling within the day as part of their normal duties, aside from the typical commute between home and the first and last work site of the day. Therefore, a caregiver typically must be paid for travel within a day from one client to another client or from a client’s home to the office. The failure to include travel time in hours worked can result in overtime and minimum wage liability.

To reduce the risk of travel time litigation and minimize liability, homecare companies should establish and enforce policies that define the workday and prohibit working from home. If a company permits working from home, the company should state in its policy that work should not occur prior to the first work site of the day or after arriving home from the last site of the day. Provide a mechanism for recording all time worked and reinforce a no off-the-clock work policy (e.g., when workers log in, electronically prompt them to record time).

On-Call Time 

Compensating caregivers for time spent working while on-call can be challenging for homecare companies. If employees’ time is spent predominantly for the employer’s benefit, such that the restrictions placed on non-exempt caregivers render them effectively “engaged to wait,” the employer must compensate them for all time spent being on-call.

Compensating for time spent “waiting to be engaged” while on-call, however, is treated differently. If the non-exempt caregiver is relatively free from work responsibilities while on-call, meaning that the caregiver can remain in his or her own home and need not immediately respond to calls, merely being on-call without actively working is not considered working time. Rather, non-exempt workers must be paid at least minimum wage for all time actually worked while on-call and should not use an “on-call premium” as a substitute for payment of all hours worked.

If any of the on-call working time is in excess of 40 hours per week, it must be paid as overtime to non-exempt employees. Further, any premium amounts paid for the on-call time worked must be included in the regular rate for purposes of calculating overtime. Because the premiums are generally paid by the employer to incentivize the employee to agree to be on-call, the premium is separate from wages and homecare companies cannot offset premiums paid against any wages due. Therefore, the time actually worked while on-call must be tracked and recorded separately, in the same manner as regular working time would be tracked and recorded.

Although these requirements seem complex, it helps to think of time worked while on-call as regular working time, with the same compensable time and wage treatment. To reduce the administrative complexity and also the confusion for caregivers, agencies may choose to reduce or eliminate the on-call premium and simply pay non-exempt workers hourly pay (including overtime if in excess of 40) for actual working time completed while on-call.

Conclusion

Given the increased risk of both litigation and the DOL’s increased scrutiny of the industry, it is now more important than ever for homecare companies to remain vigilant in their efforts to comply with the FLSA. Homecare companies should consider implementing the practices described above to avoid such claims, or position themselves in the best possible light if forced to defend a lawsuit or DOL investigation.

1 Littler Mendelson has prepared a comprehensive article analyzing litigation involving the Homecare Rule effective date. The Homecare Rule effective date article discusses arguments against the January 1, 2015 effective date and case law in support of those arguments. Please contact the authors of this article if you would like to obtain the comprehensive Homecare Rule effective date article.