[House Hearing, 113 Congress]
[From the U.S. Government Printing Office]



 
                       REDEFINING COMPANION CARE:
               JEOPARDIZING ACCESS TO AFFORDABLE CARE FOR
               SENIORS AND INDIVIDUALS WITH DISABILITIES

=======================================================================

                                HEARING

                               before the

                 SUBCOMMITTEE ON WORKFORCE PROTECTIONS

                         COMMITTEE ON EDUCATION
                           AND THE WORKFORCE

                     U.S. House of Representatives

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

           HEARING HELD IN WASHINGTON, DC, NOVEMBER 20, 2013

                               __________

                           Serial No. 113-39

                               __________

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                COMMITTEE ON EDUCATION AND THE WORKFORCE

                    JOHN KLINE, Minnesota, Chairman

Thomas E. Petri, Wisconsin           George Miller, California,
Howard P. ``Buck'' McKeon,             Senior Democratic Member
    California                       Robert E. Andrews, New Jersey
Joe Wilson, South Carolina           Robert C. ``Bobby'' Scott, 
Virginia Foxx, North Carolina            Virginia
Tom Price, Georgia                   Ruben Hinojosa, Texas
Kenny Marchant, Texas                Carolyn McCarthy, New York
Duncan Hunter, California            John F. Tierney, Massachusetts
David P. Roe, Tennessee              Rush Holt, New Jersey
Glenn Thompson, Pennsylvania         Susan A. Davis, California
Tim Walberg, Michigan                Raul M. Grijalva, Arizona
Matt Salmon, Arizona                 Timothy H. Bishop, New York
Brett Guthrie, Kentucky              David Loebsack, Iowa
Scott DesJarlais, Tennessee          Joe Courtney, Connecticut
Todd Rokita, Indiana                 Marcia L. Fudge, Ohio
Larry Bucshon, Indiana               Jared Polis, Colorado
Trey Gowdy, South Carolina           Gregorio Kilili Camacho Sablan,
Lou Barletta, Pennsylvania             Northern Mariana Islands
Martha Roby, Alabama                 Frederica S. Wilson, Florida
Joseph J. Heck, Nevada               Suzanne Bonamici, Oregon
Susan W. Brooks, Indiana             Mark Pocan, Wisconsin
Richard Hudson, North Carolina
Luke Messer, Indiana

                    Juliane Sullivan, Staff Director
                 Jody Calemine, Minority Staff Director
                                 ------                                

                 SUBCOMMITTEE ON WORKFORCE PROTECTIONS

                    TIM WALBERG, Michigan, Chairman

John Kline, Minnesota                Joe Courtney, Connecticut,
Tom Price, Georgia                     Ranking Member
Duncan Hunter, California            Robert E. Andrews, New Jersey
Scott DesJarlais, Tennessee          Timothy H. Bishop, New York
Todd Rokita, Indiana                 Marcia L. Fudge, Ohio
Larry Bucshon, Indiana               Gregorio Kilili Camacho Sablan,
Richard Hudson, North Carolina         Northern Mariana Islands
                                     Mark Pocan, Wisconsin


                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on November 20, 2013................................     1

Statement of Members:
    Courtney, Hon. Joe, ranking member, Subcommittee on Workforce 
      Protections................................................     4
        Prepared statement of....................................     5
    Walberg, Hon. Tim, Chairman, Subcommittee on Workforce 
      Protections................................................     1
        Prepared statement of....................................     3

Statement of Witnesses:
    Andrews, Lucy, vice chair, National Association for Home Care 
      & Hospice..................................................     7
        Prepared statement of....................................     8
    Bensmihen, Joseph, president and CEO, United Elder Care 
      Services, Inc..............................................    10
        Prepared statement of....................................    12
    Kulp, Karen, president and CEO, Home Care Associates.........    15
        Prepared statement of....................................    17
    Passantino, Alexander J., senior counsel, Seyfarth Shaw LLP..    22
        Prepared statement of....................................    24

Additional Submissions:
    Ms. Kulp:
        ``Value the Care'' updates, nos. 5-8, Internet addresses 
          to.....................................................    20
        Jan. 2013 data brief, Internet address to................    20
        Mar. 2013 data brief, Internet address to................    20
        AFSCME letter, dated Nov. 19, 2013, on DOL's 
          companionship rule.....................................    21
    Pocan, Hon. Mark, a Representative in Congress from the State 
      of Wisconsin:
        Brown, Venus, homecare provider, Milwaukee, WI, prepared 
          statement of...........................................    49
    Chairman Walberg:
        Mark, James, president, Private Care Association, Inc., 
          prepared statement of..................................    45
        Terry, Hon. Lee, a Representative in Congress from the 
          State of Nebraska, prepared statement of...............    47


                       REDEFINING COMPANION CARE:
                         JEOPARDIZING ACCESS TO
                      AFFORDABLE CARE FOR SENIORS
                  AND INDIVIDUALS WITH DISABILITIES

                              ----------                              


                      Wednesday, November 20, 2013

                     U.S. House of Representatives

                 Subcommittee on Workforce Protections

                Committee on Education and the Workforce

                             Washington, DC

                              ----------                              

    The subcommittee met, pursuant to call, at 10:03 a.m., in 
room 2175, Rayburn House Office Building, Hon. Tim Walberg 
[chairman of the subcommittee] presiding.
    Present: Representatives Walberg, Kline, Rokita, Courtney, 
Andrews, and Pocan.
    Staff present: Ed Gilroy, Director of Workforce Policy; 
Benjamin Hoog, Senior Legislative Assistant; Marvin Kaplan, 
Workforce Policy Counsel; Nancy Locke, Chief Clerk; Daniel 
Murner, Press Assistant; Brian Newell, Deputy Communications 
Director; Krisann Pearce, General Counsel; Molly McLaughlin 
Salmi, Deputy Director of Workforce Policy; Alissa Strawcutter, 
Deputy Clerk; Loren Sweatt, Senior Policy Advisor; Alexa 
Turner, Legislative Assistant; Joseph Wheeler, Professional 
Staff Member; Tylease Alli, Minority Clerk/Intern and Fellow 
Coordinator; Melissa Greenberg, Minority Staff Assistant; 
Leticia Mederos, Minority Senior Policy Advisor; Richard 
Miller, Minority Senior Labor Policy Advisor; Megan O'Reilly, 
Minority General Counsel; Michele Varnhagen, Minority Chief 
Policy Advisor/Labor Policy Director; Michael Zola, Minority 
Deputy Staff Director; and Mark Zuckerman, Minority Senior 
Economic Advisor.
    Chairman Walberg. A quorum being present, the subcommittee 
will come to order. Good morning to each of you, and welcome to 
our guests. We have assembled a distinguished panel of 
witnesses and thank you all for joining us this morning.
    America's families are hurting. More than 11 million 
workers are searching for a job. Wages are stagnant. Pain is 
felt every day at the gas pump. Health care costs are rising, 
and now millions are losing the health care plan they like 
thanks to the President's government-run health care scheme.
    We should be working together to revive our struggling 
economy. We should be working across the aisle on solutions 
that will lift the middle class and spur job growth. We should 
set aside our differences and advance bold reforms that will 
raise the wages of all working Americans and create opportunity 
for all who seek it.
    I wish we were here today to discuss a proposal by the 
President that would help us achieve these goals. 
Unfortunately, no such proposal exists. Instead, we are here to 
examine something that is all too common under this 
administration; a new regulation that will create more hardship 
for some of our nation's most vulnerable citizens.
    Congress has a responsibility to conduct oversight of the 
rules put forth by the administration, especially those that do 
more harm than good. Today's hearing is part of that effort.
    For nearly 40 years Congress has recognized the invaluable 
service delivered by in-home companion care workers. In 1974, 
the Fair Labor Standards Act was extended to workers providing 
domestic services, but Congress deliberately exempted in-home 
companion care workers.
    This wasn't because lawmakers valued these workers less 
than other domestic workers; quite the opposite. Policymakers 
realized many Americans rely upon the support of companion-care 
workers in order to maintain a safe, healthy, and productive 
lifestyle in their own homes.
    The need for in-home companionship care is tremendous, 
especially among elderly and disabled individuals. Roughly 57 
percent of people receiving these services are age 65 or older 
and approximately 73 percent have functional limitations. The 
intent of Congress was to protect a vulnerable group of 
Americans, yet that protection is being discarded by the Obama 
administration.
    A regulation finalized by the Department of Labor 
eliminates the exemption for companion care workers employed by 
a third-party, as well as the exemption for workers jointly 
employed by a third-party and the individual receiving care.
    Only caregivers hired directly by the person in need or a 
family member are eligible to receive the exemption. While that 
may sound like a simple rule, it is not. Under these 
circumstances, caregivers still have to follow a rigid set of 
arbitrary standards in order to receive the exemption Congress 
has created.
    For example, the caregiver can only spend 20 percent of a 
workweek performing personal care duties, which the department 
says includes dressing, grooming, feeding, and light housework.
    The delivery of care can only be offered in conjunction 
with fellowship and protection, which the rule defines--again 
arbitrarily--to include conversation, reading, games, errands, 
and walks, as well as monitoring safety and well-being. The 
department even goes so far as to define what is acceptable and 
unacceptable household work.
    This is a highly prescriptive, intrusive standard imposed 
on vulnerable Americans. How are they supposed to track and 
maintain records on the services their caregivers provide?
    Will they be subject to audit and punishment by federal 
authorities if they fail to follow every dictate prescribed in 
the regulation? Why does the administration believe it has the 
authority to micromanage the care an individual receives in the 
comfort of his or her own home?
    Last year I urged the administration to offer a clear and 
compelling reason why this regulation was necessary, especially 
at a time when so many Americans are struggling to get by.
    To date they have failed to do so. Platitudes about 
babysitters and other political rhetoric don't justify this 
significant departure from long-standing companion care 
policies. The consequences will be far reaching.
    Those who directly employ caregivers will simply terminate 
those relationships; the costs and uncertainty of complying 
with the new mandates will be too great. Others will have less 
access to affordable in-home companion care.
    The daily routine and personalized care seniors and 
individuals with disabilities rely upon will be disrupted. Some 
will have no choice but to leave their homes and enter 
institutional living situations, and let us not forget that 
workers themselves will also be hurt as their employers 
restrict hours to help manage costs.
    Companion caregivers often work long hours and under 
difficult circumstances that we ought to be grateful, extremely 
grateful for. The services they provide are critical. They, 
like all Americans, deserve responsible solutions that will 
help grow our economy and promote the income security of their 
families.
    Regrettably, the administration's effort to redefine 
companion care moves our country in the opposite direction. In 
fact, I am afraid it will make the challenges facing these 
workers and vulnerable Americans worse. They deserve better. 
They deserve our support.
    With that, I will now recognize the senior democrat member 
of the subcommittee, my friend, Representative Joe Courtney, 
for his opening remarks.
    [The statement of Mr. Walberg follows:]

           Prepared Statement of Hon. Tim Walberg, Chairman,
                 Subcommittee on Workforce Protections

    Good morning and welcome to our guests. We have assembled an 
excellent panel of witnesses; thank you all for joining us.
    America's families are hurting. More than 11 million workers are 
searching for a job. Wages are stagnant. Pain is felt every day at the 
gas pump. Health care costs are rising. And now millions are losing the 
health care plan they like thanks to the president's government-run 
health care scheme.
    We should be working together to revive our struggling economy. We 
should be working across the aisle on solutions that will lift the 
middle class and spur job growth. We should set aside our differences 
and advance bold reforms that will raise the wages of all working 
Americans and create opportunity for all who seek it.
    I wish we were here today to discuss a proposal by the president 
that would help us achieve these goals. Unfortunately, no such proposal 
exists. Instead, we are here to examine something that is all too 
common under this administration: A new regulation that will create 
more hardship for some of our nation's most vulnerable citizens. 
Congress has a responsibility to conduct oversight of the rules put 
forth by the administration, especially those that do more harm than 
good. Today's hearing is part of that effort.
    For nearly 40 years Congress has recognized the invaluable service 
delivered by in-home companion care workers. In 1974 the Fair Labor 
Standards Act was extended to workers providing domestic services, but 
Congress deliberately exempted in-home companion care workers. This 
wasn't because lawmakers valued these workers less than other domestic 
workers. Quite the opposite: policymakers realized many Americans rely 
upon the support of companion care workers in order to maintain a safe, 
healthy, and productive lifestyle in their own homes.
    The need for in-home companionship care is tremendous, especially 
among elderly and disabled individuals. Roughly 57 percent of people 
receiving these services are age 65 or older and approximately 73 
percent have functional limitations. The intent of Congress was to 
protect a vulnerable group of Americans, yet that protection is being 
discarded by the Obama administration.
    A regulation finalized by the Department of Labor eliminates the 
exemption for companion care workers employed by a third-party, as well 
as the exemption for workers jointly employed by a third-party and the 
individual receiving care. Only caregivers hired directly by the person 
in need or a family member are eligible to receive the exemption. While 
that may sound like a simple rule, it is not. Under these 
circumstances, caregivers still have to follow a rigid set of arbitrary 
standards in order to receive the exemption Congress created.
    For example, the caregiver can only spend 20 percent of a workweek 
performing personal care duties, which the department says includes 
dressing, grooming, feeding, and light housework. The delivery of care 
can only be offered in conjunction with fellowship and protection, 
which the rule defines--again arbitrarily--to include conversation, 
reading, games, errands, and walks, as well as monitoring safety and 
well being. The department even goes so far as to define what is 
acceptable and unacceptable household work.
    This is a highly prescriptive, intrusive standard imposed on 
vulnerable Americans. How are they supposed to track and maintain 
records on the services their caregivers provide? Will they be subject 
to audit and punishment by federal authorities if they fail to follow 
every dictate prescribed in the regulation? Why does the administration 
believe it has the authority to micromanage the care an individual 
receives in the comfort of his or her own home?
    Last year I urged the administration to offer a clear and 
compelling reason why this regulation was necessary, especially at a 
time when so many Americans are struggling to get by. To date they have 
failed to do so. Platitudes about babysitters and other political 
rhetoric don't justify this significant departure from long-standing 
companion care policies. The consequences will be far reaching.
    Those who directly employ caregivers will simply terminate those 
relationships; the costs and uncertainty of complying with the new 
mandates will be too great. Others will have less access to affordable 
in-home companion care. The daily routine and personalized care seniors 
and individuals with disabilities rely upon will be disrupted. Some 
will have no choice but to leave their homes and enter institutional 
living. And let us not forget that workers will also be hurt as their 
employers restrict hours to help manage costs.
    Companion caregivers often work long hours and under difficult 
circumstances. The services they provide are critical. They--like all 
Americans--deserve responsible solutions that will help grow our 
economy and promote the income security of their families. Regrettably, 
the administration's effort to redefine companion care moves our 
country in the opposite direction. In fact, I'm afraid it will make the 
challenges facing these workers and vulnerable Americans worse. They 
deserve better. They deserve our support.
    With that, I will now recognize the senior Democratic member of the 
subcommittee, Representative Joe Courtney, for his opening remarks.
                                 ______
                                 
    Mr. Courtney. Thank you, Mr. Chairman.
    I want to welcome and thank all the witnesses that are here 
today for your testimony.
    We are here to discuss a final rule issued by the 
Department of Labor to ensure that our nation's 2 million 
professional hard-working home healthcare workers get paid the 
minimum wage and overtime compensation they deserve just like 
other hourly workers all throughout the U.S. economy.
    As you know, the Department of Labor's final rule 
modernizes the current exemption to the Fair Labor Standards 
Act by ensuring that home healthcare providers who help the 
elderly or disabled with tasks such as dressing, feeding, 
bathing, meal preparation, and other important daily functions 
receive the benefit of today's bedrock wage protections that 
have been on the books since the 1930s.
    This rule is particularly important to women who make up 
almost 90 percent of the in-home care workforce. With an 
average pay of just over $20,000, these in-home health workers 
have earnings so low that there are many states where they are 
eligible for some form of public assistance, including food 
stamps.
    It is clear that people performing these often backbreaking 
tasks, day in and day out, deserve a fair week's wages. The way 
we take care of our elderly has changed dramatically since 1974 
when the exemption was put into law.
    It was originally meant to exempt casual babysitting and 
informal companions for the elderly. Today, those taking care 
of the elderly, sick, and disabled are often professional home-
care workers not just companions.
    The rule makes clear that these workers employed by third 
parties, such as staffing agencies, will be entitled to minimum 
wage and overtime protections. This rule will also help 
stabilize and encourage employment in the field, which is 
necessary to meet the growing workforce demands for in-home 
care services.
    As we all know, the baby boomers are aging and demand for 
in-home care in the past decade has skyrocketed. As a result, 
the in-home care services industry is projected to exceed $100 
billion annually in the near future.
    The rule also makes clear that home healthcare workers 
hired directly by families to perform fellowship and 
protection-related tasks are still considered companions and 
will continue to be exempt even if they engage in some direct 
care activities, such as dressing and feeding for less than 20 
percent of their work week.
    Some opponents of the rule claim that paying these hard-
working home care workers will lead to higher rates of 
institutional care. However, independent studies of the 15 
states, 15 states that already have these worker protections in 
place--and I want to salute the chairman's State of Michigan, 
which has had these protections in place for a number of years 
and has not capsized the delivery of services as some of the 
opponents claim, have shown no higher rates of 
institutionalization.
    In finalizing this rule the Department of Labor took into 
account the many constructive comments made during the 
rulemaking process in order to make the final rule more 
flexible and clearer than the rule that was originally a 
proposed.
    The department also delayed the effective date of this rule 
until January 1, 2015 so that all parties would have adequate 
time to understand and prepare for the new rule.
    In closing, I want to thank again all of the witnesses for 
coming today to discuss the Department of Labor's finalized 
rule. I look forward to hearing your testimony, and I yield 
back.
    [The statement of Mr. Courtney follows:]

 Prepared Statement of Hon. Joe Courtney, Ranking Member, Subcommittee 
                        on Workforce Protections

    Mr. Chairman: I want to welcome and thank today's witnesses. We are 
here today to discuss a final rule issued by the Department of Labor to 
ensure that our nation's 2 million professional, hardworking home 
health care workers get paid the minimum wage and overtime compensation 
they deserve, just like other hourly workers.
    As you know, the Department of Labor's Final Rule modernizes the 
current exemption to the Fair Labor Standards Act by ensuring that home 
health care providers who help the elderly or disabled with tasks such 
as dressing, feeding, bathing, meal preparation, and other important 
daily functions receive the benefit of the law's bedrock wage 
protections.
    This rule is particularly important to women, who make up almost 90 
percent of the in-home care workforce.
    With an average pay of just over $20,000, these in-home health 
workers have earnings so low that there are many states where they are 
eligible for some form of public assistance. It is clear that the 
people performing these often backbreaking tasks day-in-and-day-out, 
deserve a fair week's wages.
    The way we take care of our elderly has changed dramatically since 
1974, when the exemption was put into law. It was originally meant to 
exempt casual babysitting and informal companions for the elderly. 
Today, those taking care of the elderly, sick and disabled are often 
professional home care workers, not just companions. The rule makes 
clear that these workers employed by third parties, such a staffing 
agencies, will be entitled to minimum wage and overtime protections.
    This rule will also help stabilize and encourage employment in this 
field, which is necessary meet the growing workforce demands for in-
home care services. As we all know, the baby boomers are aging, and 
demand for in-home care in the past decade has skyrocketed. As a 
result, the in-home care services industry is projected to exceed $100 
billion annually in the near future.
    The rule also makes clear that home healthcare workers hired 
directly by families--who perform fellowship and protection related 
tasks--are still considered companions and will continue to be exempt, 
even if they engage in some direct care activities, such as dressing 
and feeding, for less than 20% of their workweek.
    Some opponents of this rule claim that paying these hard working 
home care workers will lead to higher rates of institutional care. 
However, independent studies of the states that already have these 
worker protections in place have shown no higher rates of 
institutionalization.
    In finalizing this rule, the Department of Labor took into account 
the many constructive comments made during the rulemaking process in 
order to make the final rule more flexible and clearer than the rule 
which was originally proposed. The Department also delayed the 
effective date of this rule until January 1, 2015 so all parties would 
have adequate time to understand and prepare for the new rule.
    In closing, I want to again thank all the witnesses for coming 
today to discuss the Department of Labor's finalized rule. I look 
forward to hearing their testimony.
    Thank you, Mr. Chairman.
                                 ______
                                 
    Chairman Walberg. I thank the gentleman.
    Pursuant to Committee Rule 7(c), all members will be 
permitted to submit written statements to be included in the 
permanent hearing record.
    Without objection, the hearing record will remain open for 
14 days to allow statements, questions for the record, and 
other extraneous material referenced during the hearing to be 
submitted in the official record.
    It is now my pleasure to introduce our distinguished panel 
of witnesses. First Ms. Lucy Andrews is vice chair of the 
National Association for Home Care and Hospice in Washington, 
D.C.
    Welcome.
    Mr. Joseph Bensmihen--did I get that right--is the 
president and chief executive officer of United Elder Care 
Services in Boca Raton, Florida, and probably missing some of 
the warmth today.
    We are delighted to have two of his children with him today 
as well.
    Thanks for helping your dad making sure that he was here 
for us.
    Our fourth witness, Ms. Karen Kulp is president of Home 
Care Associates in Philadelphia, Pennsylvania.
    Welcome.
    And then Mr. Alexander Passantino--did I get that right--I 
try my best--is a senior counsel at the law firm of Seyfarth 
Shaw in Washington, D.C.
    Before I recognize each of you to provide your testimony, 
let me briefly explain our lighting system. It is simple. It is 
like the traffic lights. As long as it is green during the 5-
minute period of time, those 4 minutes, it will be green. When 
it turns yellow, you have 1 minute to get through before you go 
through some type of orange light at the end.
    We won't be extremely strict with the 5 minutes, but try to 
wrap up as soon as possible when you see that red light.
    After that, each of our committee members will have an 
opportunity to ask you a 5-minute question period, and we will 
try to keep ourselves to a 5-minute schedule on that.
    Having said that, I now recognize Ms. Andrews for your 
testimony.

             STATEMENT OF LUCY ANDREWS, VICE CHAIR,
          NATIONAL ASSOCIATION FOR HOME CARE & HOSPICE

    Ms. Andrews. Good morning, Chairman Walberg, Ranking Member 
Courtney, and members of the subcommittee on worker 
protections.
    My name is Lucy Andrews. I am the vice chair of the 
National Association for Home Care and Hospice Board of 
Directors.
    I am a registered nurse and the owner of a small home care 
company in California that has been providing care to the 
elderly and disabled for over 10 years.
    My company provides care on a private pay basis, as well as 
under the state Medicaid program and through the Veteran's 
Administration. Thank you for the opportunity to testify here 
today.
    The subject of this hearing today is of crucial importance 
to the provision of home care for our nation's elderly and 
people with disabilities. U.S. Department of Labor has issued a 
final rule that dramatically changes longstanding overtime 
compensation exemptions that would effectively eliminate the 
application of the exemption for home care services.
    Based on the experience in states already requiring 
overtime compensation, we believe the rule will trigger 
moderate to significant increases in care costs, restriction in 
overtime hours to the detriment of the workers' overall 
compensation, loss of service quality and continuity, and 
finally increased costs passed on to the patient and the public 
programs such as Medicaid that would decrease service 
utilization, increase unregulated grey market care purchases, 
and increase institutional care utilization.
    So what does this mean for the workers and the seniors and 
disabled we care for? Most personal care services to the 
elderly and disabled are financed out of pocket by the client 
or their families along with various government programs such 
as Medicaid. Our clients are not wealthy, many live on incomes 
that are fixed and limited.
    They purchase care as a way of staying out of costly 
nursing homes and to maintain the greatest degree of 
independence. The government programs also are not an endless 
source of financing. Medicaid spending is taxing all state 
budgets. More often than not, provider payment rates are going 
down rather than increasing as costs rise.
    In my own company, this new rule will force me to make some 
very hard decisions in order to continue providing care. My 
employees are currently paid between $12 and $14 an hour. We 
have never paid just minimum wage.
    With the requirement for overtime compensation, I will 
either need to restrict their working hours or increase the 
charges to my clients. If I restrict the employees' working 
hours, they will be paid less than what they get paid today.
    For example, a client who has 10 hours of care a day will 
either have to pay the overtime or have two caregivers divide 
that 10 hour shift. This decreases the hours each employee 
works and decreases the continuity of care which is so 
important to the clients.
    Our industry is already struggling with high turnover 
rates, and a cut in pay would put us at the bottom of the list 
of desirable work. Ultimately it impacts access to care that 
the increasing number of baby boomers and disabled community 
rely on to stay at home.
    A recent study by Aaron Marcum of Home Care Pulse shows 
that 54 percent of agencies surveyed already feel the effects 
of caregiver shortages, resulting in an inability to meet the 
growing demand for service. As this new rule forces the company 
to use more staff per client, hiring and training qualified 
caregivers becomes an even larger issue.
    The predictable adverse consequence of the new overtime 
rules are bad enough. However, coupled with the upcoming ACA 
employer mandates in 2015, we will be in the middle of the 
perfect storm.
    The Department of Labor's new rule while likely well-
intentioned was issued without real appreciation or 
understanding of the homecare industry. We may be a business 
that is growing with increased populations of seniors, but we 
are not a normal business. Our clients are the most vulnerable 
citizens we have in the country, many supported through frail 
entitlement programs.
    So what should be done? The best thing would be to rescind 
the new rule and start over with an approach that respects the 
people and the workers. Ultimately, the administration and 
Congress must find a way to fund this mandate.
    Programs such as Medicaid must respond with payment 
changes. For private pay clients, we recommend a tax credit 
that reflects the fact that individuals with limited income use 
their own resources to stay at home rather than moving into 
nursing homes that will eventually be paid for by Medicaid.
    Thank you again for the opportunity to testify.
    [The statement of Ms. Andrews follows:]

            Prepared Statement of Lucy Andrews, Vice Chair,
              National Association for Home Care & Hospice

    Good morning Chairman Walberg, Ranking Member Courtney, and members 
of the Subcommittee on Worker Protections. My name is Lucy Andrews, 
Vice Chair of the Board of Directors of the National Association for 
Home Care & Hospice. I am a Registered Nurse and the owner of a small 
home care business in California that has been providing care to the 
elderly and disabled for over ten years. My company provides care on a 
private pay basis as well as under the state Medicaid program and 
through the Veteran's Administration. Thank you for the opportunity to 
testify at today's hearing.
    The subject of today's hearing is of crucial importance to the 
provision of home care to our nation's elderly and people with 
disabilities. The U.S. Department of Labor has issued a Final Rule that 
dramatically changes longstanding overtime compensation exemptions that 
would effectively eliminate the application of the exemptions for home 
care services. Specifically, the rule redefines ``companionship 
services'' to limit the application of the exemption to primarily 
``fellowship.'' ``Fellowship'' is not care and does little or nothing 
to keep people out of nursing homes or higher acuity facilities.
    Also, the rule eliminates any application of the companionship 
services and live-in exemptions where the worker is employed by a third 
party. There has been no change in the law mandating these revisions. 
Further, these new rules change standards that have been in effect for 
nearly 40 years.
    Based on our experiences in states that previously have required 
overtime compensation to personal care workers, we believe that the 
rule will trigger the following:
    1. Moderate to significant increases in care costs
    2. Restrictions in overtime hours to the detriment of the workers' 
overall compensation
    3. Loss of service quality and continuity
    4. Increased costs passed on to the patients and public programs 
such as Medicaid that would decrease service utilization, increase 
unregulated ``grey market'' care purchases, and increase institutional 
care utilization rather than absorbing and covering the higher cost of 
care.
    So what does this mean for the workers and the seniors and disabled 
we care for?
    Most personal care services to the elderly and infirm are financed 
out of pocket by the clients or their families along with various 
government programs such as Medicaid. Our clients are not wealthy, many 
living on limited, fixed incomes. They are purchasing care as a way of 
staying out of costly nursing homes and to maintain the greatest degree 
of independence that they can. The government programs are also not an 
endless source of financing. Medicaid spending is taxing all state 
budgets. More often than not, provider payment rates are going down 
rather than increasing as costs rise.
    In my own company, this new rule will force me to make some very 
hard decisions in order to continue care. My employees that provide the 
care currently are paid between $12 and $14 per hour. With the 
requirement for overtime compensation, I will either need to restrict 
their working hours or increase my charges to my clients.
    If I raise the charges to my clients, I know that most will then 
limit the amount of care they purchase even if it is to a level less 
than needed. For clients on fixed incomes, the cost of increasing care 
will be too much for them to carry and they will look to other options, 
going with less care or using the underground market that, at best, 
leaves them with a stranger caring for them without the protections a 
third party employer offers. By default, the consumer will become the 
employer of record with all of the employer responsibilities and risks.
    If I restrict the employees' working hours, they will be paid less 
than they get today. For example, a client who has 10 hours of care a 
day will either have to pay the overtime or have two caregivers 
dividing the 10 hours into two shifts. This decreases the hours each 
employee works and decreases the continuity of care clients are used to 
when paying privately for care services.
    Another option is that I reduce the employees' base hourly wage to 
accommodate overtime costs. Either approach will likely lead to higher 
turnover in my caregiving staff, increasing my costs of recruitment and 
training of new employees. Our industry is already struggling with high 
turnover rates and a cut in pay puts us at the bottom of the list of 
desirable work. Ultimately, it impacts access to the care that the 
increasing numbers of Baby Boomers and the disabled community rely on 
to stay at home.
    These problems that are triggered by the new rules speaks to the 
caregivers I already employee. Across the country, the demand for 
caregivers increases every day. A recent study by Aaron Marcum of Home 
Care Pulse shows that 54% of agency's surveyed already feel the effects 
of caregiver shortages (600 providers participated in the study 
completed in 2012)resulting the inability to meet a growing demand for 
services. As this new rule forces companies to use more staff per 
client, hiring and training qualified caregivers becomes an even larger 
issue. Compounding the existing worker shortages is the study's finding 
that one of the biggest threats to losing a caregiver employee was a 
decrease in their work hours.
    The predictable, adverse consequences of the new overtime rule are 
bad enough. However, when coupled with upcoming ACA employer mandates 
in 2015, we will be in the middle of the ``perfect storm.''
    With respect to live-in services, the new rule effectively closes 
that as a business. If my business must pay overtime to live-in 
workers, but a consumer does not as under the new rule, consumers will 
go the Craig's List or classified ads to hire someone who has not been 
trained and is not subject to the supervision we offer. Daily we see 
the effects of this grey market--the increases in abuses, lack of 
supervision and lost revenues to the state and federal government in 
unreported wages and taxes.
    We are aware of allegations that home care companies have high 
profits and can afford to pay higher wages and overtime compensation. 
There is simply no truth to that claim. My annual margins range between 
zero and 9%. That is the bare minimum for working capital in order to 
meet payroll on a timely basis, address new regulatory costs that 
surface frequently, and to modernize with technologies that help bring 
higher quality care and efficiency.
    The Department of Labor new rule, while likely well intentioned, 
was issued without any real appreciation or understanding of home care. 
We may be a business that is growing with the increasing population of 
seniors, but we are not a normal business as our clients are the most 
vulnerable citizens we have in this country, many supported through 
fragile entitlement programs.
    What should be done?
    The best thing that would be to rescind the new rules and start all 
over with an approach that respects the people under our care and 
recognizes that public-financed health care programs pay for most of 
the services they receive. Alternatively, the Administration and the 
Congress must find a way to fund this new mandate. Programs such as 
Medicaid must respond with payment rate changes that cover the cost of 
overtime. For private pay clients, we recommend a subsidy or tax credit 
that reflects the fact that individuals with limited income are using 
their own resources to stay at home rather than moving into a nursing 
home that may eventually be paid for by Medicaid. Without these 
changes, access to care it at risk along with the higher costs of 
institutional care.
    Thank you again for the opportunity to testify at this important 
hearing.
                                 ______
                                 
    Chairman Walberg. Ms. Andrews, I appreciate that. I 
appreciate your attention to time as well.
    Mr. Bensmihen?

 STATEMENT OF JOSEPH BENSMIHEN, PRESIDENT AND CHIEF EXECUTIVE 
           OFFICER, UNITED ELDER CARE SERVICES, INC.

    Mr. Bensmihen. Chairman Walberg, Ranking Member Courtney, 
and members of the subcommittee----
    Chairman Walberg. You might want to pull your mic down a 
little closer. Pull it down a bit, yes.
    Mr. Bensmihen. There we go. How is that? Okay.
    Chairman Walberg. That is great.
    Mr. Bensmihen. Chairman Walberg, Ranking Member Courtney, 
and Members of the Subcommittee, thank you for the opportunity 
to testify today on the far-reaching and adverse consequences 
that will result from the implementation of final regulations 
the U.S. Department of Labor recently issued that modify the 
companionship exemption under the Fair Labor Standards Act.
    My name is Joseph Bensmihen, and I have been President and 
CEO of United Elder Care Services, Inc., a licensed nurse 
registry operating in the State of Florida since the year 2000.
    I am somewhat unique in this regard in that I not only 
operate a referral service that facilitates the delivery of in-
home care services, I personally, personally need assistance 
with activities of daily living commonly referred to in our 
industry as ADLs. Thus, every day I personally experience what 
it is like to need this type of assistance.
    I am not alone in this regard, however. There are also 
current and former members of Congress who need personal care 
workers to be able to be productive members of society each and 
every day.
    The final regulations do not take into consideration the 
impact these rules will have on those of us who actually rely 
on caregivers to be able to function day-to-day as productive 
citizens.
    Inherent in these arrangements is a need for more than 40 
hours of care per week. The final regulations will cause these 
individuals to either start paying substantially more for the 
care they need, or learn to live with multiple caregivers to 
avoid an overtime liability that few can afford.
    These are not attractive options. A principal justification 
for the final regulation is that caregivers deserve overtime. 
The problem is that this change will not result in caregivers 
receiving overtime. I say this because currently my clients 
tell me they can't--they have a hard time paying for the 
current costs of home care.
    The most likely alternative for most of my clients aside 
from moving into a facility will be to rotate caregivers to 
ensure that no caregiver works more than 40 hours in any given 
week.
    This means that one of the most cherished benefits of home 
care among the elderly, disabled, and infirm, namely continuity 
of care, will be lost. The final regulations will create a new 
aspect of life that defines--that differentiates between the 
very wealthy and everybody else.
    The vulnerable individuals who happen not to be very 
wealthy will be subject to never ending trauma as caregivers 
constantly rotate in and out of their homes.
    This is not a very attractive outcome for caregivers 
either. The caregivers who are registered with my business tell 
me that they would prefer to remain with only one client during 
the week. The prospect of having to move from client to client 
in order for their clients to avoid having to pay overtime is 
not attractive to them either.
    Chairman Walberg, the irony is that the current law 
protects caregivers and caregivers are entitled to overtime. 
They are entitled to overtime in every setting with the 
exception of a person's personal home. That makes sense because 
in the new regulation there is no government program that will 
pay for the overtime.
    The caregivers who ostensibly are the intended 
beneficiaries under the final regulations will be worse off. 
Not only will they not receive the overtime that they might be 
expecting, they will find their lives thrown into turmoil by 
having to pack up and move from client to client during the 
week.
    Some might argue that the new rules do not completely 
eliminate the companionship exemption for the families because 
the new rules only eliminate the exemption relative to third-
party employers. This viewpoint is mistaken.
    The definition of companionship services under the final 
regulation is best counterintuitive. As was mentioned by the 
chairman, only 20 percent can go to actual care.
    That would be like saying to someone I am going to give you 
a program for the delivery of food for people who can't afford 
to pay for food, but you are really going to do a program for 
tablecloths, spoons, and only 20 percent of it can actually be 
food.
    Since 1974, the companionship exemption has operated to 
enable those of us who need many hours of assistance each week 
in order to be productive members of society to afford that 
assistance.
    The final regulations effectively repeal that protection. 
As I understand the separation of powers under the United 
States Constitution, the decision to repeal the companionship 
exemption is a decision to be made by the United States 
Congress.
    I strongly urge this Congress to consider legislation that 
will restore the companionship exemption it enacted in 1974 but 
this time with the explicit statutory language that will better 
protect the exemption against an administrative repeal.
    Once again, thank you very much for the privilege to 
testify this morning, and I would be pleased to answer any 
questions you may have.
    [The statement of Mr. Bensmihen follows:]

       Prepared Statement of Joseph Bensmihen, President and CEO,
                    United Elder Care Services, Inc.

    Chairman Walberg, Ranking Member Courtney and Members of the 
Subcommittee, thank you for the opportunity to testify today on the 
far-reaching--and adverse--consequences that will result from the 
implementation of final regulations (``the ``Final Regulations'') the 
U.S. Department of Labor recently issued that modify the companionship 
exemption \1\ under the Fair Labor Standards Act (``FLSA'').\2\ My name 
is Joseph Bensmihen and I am President and CEO of United Elder Care, 
Inc. a licensed nurse registry \3\ operating in the State of Florida.
---------------------------------------------------------------------------
    \1\ 29 U.S.C. Sec. 213(a)(15).
    \2\ Application of the Fair Labor Standards Act to Domestic 
Service, 78 Fed. Reg. 60454 (Oct. 1, 2013) (to be codified at 29 CFR 
Part 552).
    \3\ Chapter 400 of the Florida Statutes Annotated (``FSA''), 
section 400.462(15), defines a nurse registry as:
    Any person that procures, offers, promises, or attempts to secure 
health-care-related contracts for registered nurses, licensed practical 
nurses, certified nursing assistants, home health aides, companions, or 
homemakers, who are compensated by fees as independent contractors, 
including, but not limited to, contracts for the provision of services 
to patients and contracts to provide private duty or staffing services 
to health care facilities licensed under chapter 395 or this chapter or 
other business entities. (Emphasis added).
---------------------------------------------------------------------------
    I have been the President and CEO of a caregiver referral service 
since 2000. I am somewhat unique in this regard in that I not only 
operate a referral service that facilitates the delivery of home-care 
services, I personally need assistance with Activities of Daily Living, 
commonly referred to in the industry as ADL's. Thus, every day, I 
personally experience what it is like to need this type of assistance.
    I am not alone in this regard, however. There also are current and 
former Members of Congress who need personal care workers to be able to 
work and be productive members of society.
    The Final Regulations do not take into consideration the impact 
these rules will have on those of us who actually rely on caregivers to 
be able to function day-to-day as productive citizens. Inherent in 
these arrangements is a need for more than 40 hours of care per week. 
The Final Regulations will cause these individuals to either start 
paying substantially more for the care they need, or learn to live with 
multiple caregivers to avoid an overtime liability that few can afford. 
These are not attractive options.
I. The DOL's Final Regulations Will Not Result in Home-Care Providers 
        Receiving Overtime
    A principal justification for the Final Regulations is that 
caregivers deserve overtime. The problem is that this change will not 
result in caregivers receiving overtime. I say this because my clients 
tell me they cannot afford to pay overtime.
    Furthermore, based on my personal experience and my experience in 
the home-care industry, I have found that the individuals who require 
help at home to maximize their independence--whether disabled or 
elderly--most often live on a fixed income. Example: Mrs. Jones is 
being discharged from the hospital and she is warned by her physician, 
``Mrs. Jones, this is your third fall, one more fall and you will need 
to go into an ALF \4\ or a nursing home unless you get additional home 
care.'' The doctor doesn't say, ``I'm going to pay for it.'' And, in 
most cases, Medicare doesn't cover the cost of this type of care. The 
cost of the care will be an out-of-pocket expense for Mrs. Jones. For 
most of my clients, this is a very large expense for the family. To 
expect these individuals to start paying time and a half for hours 
worked in excess of 40 each week is not realistic.
---------------------------------------------------------------------------
    \4\ Assisted Living Facility.
---------------------------------------------------------------------------
    Similarly, when a loved one is receiving care at home and 
experiences a change in condition, which requires the consumer to be 
hospitalized--where the companionship exemption does not apply--family 
members currently say ``No'' to paying time and a half in facilities. 
In this context, the need for caregivers to work more than 40 hours per 
week is entirely discretionary, because the family knows that their 
loved one will be having their needs met by the facility's own staff. 
That situation cannot be compared to when a patient is at home. The 
only help a consumer has while at home is the help that the consumer 
hires. If consumers do not have the help they need, they will fall and 
they're going to get hurt. And, they will return to the hospital.
    In our business, approximately 60% of clients pay for their home 
care with long-term insurance; approximately 40% pay with their own 
private funds; and less than one percent pay for their home care with 
Medicaid funding or some other government program.
    Long-term insurance benefits generally consist of a capped payment 
per day or week. This benefit will not automatically increase to 
accommodate the new overtime requirement. These clients will have 
difficult decisions to make when the new rules go into effect.
    Those who pay with private funds are in a similar situation. Many 
of these clients are struggling to pay for their home care under 
current law. When the overtime requirement becomes effective, they, 
too, will need to make tough choices.
    Finally, those who receive government-funded benefits might be most 
severely affected, because those benefits already pay at a below-market 
rate. These reimbursement rates include no cushion to absorb overtime.
    Under all of these payment sources, the prospects of a caregiver 
being paid overtime for hours worked in excess of 40 per week are very 
low. The fact is that there is no money to pay the overtime.

II. The Final Regulations Will Make Continuity of Care a Luxury only 
        Few Can Afford
    The most likely alternative for most of my clients, aside from 
moving into a facility, will be to rotate caregivers, to ensure that no 
caregiver works more than 40 hours in any given week. This means that 
one of the most cherished benefits of home care among the elderly and 
the disabled--namely, continuity of care--will be lost. Under the Final 
Regulations, continuity of care will become a luxury item that only the 
very wealthy can afford.
    In this regard, consumers with Alzheimer's or dementia will be 
especially harmed. In a typical case, the patient is resistant to 
having someone new in the house to care for him or her. Ultimately, the 
family members will be able to convince the individual to accept help. 
We have multiple clients like this. We have been able to match these 
individuals with the perfect caregiver and they have bonded and 
established a relationship that the individual can accept. Under the 
Final Regulations, this relationship will be destroyed. Once the Final 
Regulations go into effect, every three days the patient will need to 
work with a different caregiver, in order for the family to avoid 
paying time and a half. For the patient, this will be traumatic. The 
introduction of new caregivers to these individuals is extremely 
difficult--for both the individual and the caregiver.
    The companionship exemption in its current form eliminates this 
dilemma by enabling individuals of all income levels to enjoy 
continuity of care, by permitting the same caregiver to remain for an 
entire week without triggering an overtime liability. The Final 
Regulations will create a new aspect of life that differentiates 
between the very wealthy and everyone else. The vulnerable individuals 
who do not happen to be very wealthy will be subjected to never-ending 
trauma, as caregivers constantly rotate in and out of their lives.

III. Home-Care Providers Will be Adversely Affected by the Final 
        Regulations
    This is not a very good outcome for caregivers, either. The 
caregivers who are registered with my business tell me that they would 
prefer to remain with only one client during a week. The prospect of 
having to move from client to client, in order for their clients to 
avoid having to pay overtime, is not very attractive to them.
    The caregivers who ostensibly are the intended beneficiaries under 
the Final Regulations will be worse off. Not only will they not receive 
the overtime they are expecting, they will find their lives thrown into 
turmoil, by having to pack up and move from client to client during the 
week.
    Furthermore, because third-party employers will also try to avoid 
their overtime exposure, caregivers will need to obtain relationships 
with multiple third-party employers if they want to work more than 40 
hours per week. And, caregivers might well find it difficult to obtain 
work opportunities that are available at the specific hours that they 
are available to work. For example, if a caregiver whose twelve-hour 
shifts for a client are cut in half, so the caregiver works for the 
client six hours per day Monday through Friday, the caregiver will need 
to find another client that needs weekend hours only; or that needs 
six-hour shifts Monday through Friday that do not conflict with the 
six-hour shifts the caregiver is currently working.
    Based on my experience, I believe this will be a significant 
challenge to caregivers. I believe the more likely outcome is that 
caregivers will work fewer hours delivering home care than they 
currently work. The net impact on caregivers will be lower overall 
earnings from home care. We might see caregivers picking up the 
additional hours they need by working at jobs outside of home care.

IV. The New Definition of Companionship Services Conflicts with the 
        Statutory Definition
    Some might argue that the new rules do not completely eliminate the 
companionship exemption for the family, because the new rules only 
eliminate the exemption relative to third-party employers. The details 
of the Final Regulations make clear that this viewpoint is mistaken.
    The new definition of companionship services restricts the amount 
of ``care'' an individual can receive to no more than 20 percent of the 
total hours worked per person and per workweek. This is tragic. To my 
knowledge, none of my clients currently receive a type of home care 
that would meet this new definition.
    The new definition of companionship services under the Final 
Regulations is at best counterintuitive. The FLSA defines the class of 
individuals who are eligible for the exemption as those ``individuals 
who (because of age or infirmity) are unable to care for themselves.'' 
The principal delimiting characteristic of this class of covered 
individuals is that they are unable to ``care'' for themselves. It 
seems incomprehensible that the Final Regulations would treat ``care'' 
as something that a caregiver cannot provide, except for a de minimis 
percentage. This is analogous to a program designed to feed the hungry, 
which defines the covered class as those who are unable to obtain food 
for their family, and then defines the benefit provided to these 
families as dishes, silverware and tablecloths, but no more than 20% 
food!
    The practical implication of this revised definition is to deny the 
companionship exemption in virtually all cases, regardless of whether a 
third-party employer is involved.

V. Final Regulations Create Unique Problem for Caregiver Registries
    Finally, because I operate a caregiver registry, I need to explain 
how the new rules create a unique problem for the type of business I 
operate. As previously noted, I operate a licensed nurse registry in 
the State of Florida. My business refers self-employed caregivers to 
families that seek home care. This type of business facilitates what is 
known in the industry as ``consumer-directed care,'' where the consumer 
self-manages the consumer's own home-care arrangement.\5\
---------------------------------------------------------------------------
    \5\ This model of home care, as well as the other home-care model, 
called the ``agency directed care'' model is described in detail in the 
following article written by university professors. Benjamin, Mathias 
and Franke, Comparing Consumer-directed and Agency Models for Providing 
Supportive Services at Home, Vol. 35 Part II, Health Services Research 
No. 1 Selected Papers From the Association for Health Services Research 
Annual Meeting (April 2000) at 351, et seq.
---------------------------------------------------------------------------
    As a registry, my business conducts a rigorous background screen 
and credential verification for each caregiver, before adding the 
caregiver to our registry. We then inform the caregivers who pass our 
vetting process about client opportunities--which they can accept or 
decline at their discretion. The clients determine the number of hours 
a caregiver will work for the client and the amount the client will pay 
the caregiver for that work.
    The unique problem the Final Regulations create for my segment of 
the home-care industry is that a caregiver registry could be determined 
to be an employer or a joint employer, for purposes of the FLSA, of the 
caregivers it refers to clients. Because a registry has no ability to 
control the number of hours a caregiver works for a client--or for 
multiple clients--or the amount that is paid to a caregiver, a registry 
faces an existential financial risk under the FLSA with no meaningful 
ability to manage the risk. This is because a caregiver registry cannot 
limit the number of hours a caregiver will work or require the payment 
of overtime.
    While the Preamble to the Final Regulations \6\ contains an example 
that appears intended to clarify the circumstances in which a caregiver 
registry would not be considered a ``third-party employer'' of a 
caregiver, the conclusion given by the example is that under the stated 
facts the registry is ``likely not'' the employer of the caregiver. The 
example is helpful, but it does not provide the degree of certainty 
that my industry needs.
---------------------------------------------------------------------------
    \6\ Id. at pp. 60484--485.
---------------------------------------------------------------------------
    What my industry needs is clear guidance on how a registry can 
operate with confidence that it is not an employer or joint employer of 
a caregiver it refers.

VI. Caregivers Have Access to Overtime Under Current Law
    A little-discussed fact under current law is that caregivers are 
already entitled to overtime, at time and a half, for hours worked in 
excess of 40 during a week. They can obtain this entitlement by working 
anywhere other than in a care recipient's home. Examples include 
working in a hospital, nursing home or any other type of facility. This 
is because the companionship exemption only applies to caregivers who 
provide their home-care services in the care recipient's home. Under 
current law, caregivers have a clear choice. If the caregiver wants 
overtime, the caregiver need only work at a location other than the 
care recipient's home.
    The effect of the Final Regulations is to dramatically change a 
delicate balance that the U.S. Congress struck when it enacted the 
companionship exemption. When balancing the needs of the vulnerable 
care-recipient population, consisting of those who because of advanced 
age or disability are unable to care for themselves, against the needs 
of able-bodied caregivers to earn overtime, the Congress protected the 
vulnerable individuals. But the Congress also granted caregivers the 
right to overtime pay in all other contexts. The Final Regulations 
effectively repeal the companionship exemption and strip away the 
overtime and minimum-wage protections that the Congress enacted for 
these vulnerable individuals.

VII. Conclusion
    I am fortunate I was born with a disability. I am not an individual 
who was born able bodied and then became disabled. When people who have 
been able bodied their entire lives begin to decline due to age, 
infirmity or disability, they tend to hold on to their pride and the 
notion that ``I can do it myself.'' In aging, the attitude becomes more 
so because aging is viewed by some as a ``sign of weakness.'' Another 
scenario is you are a healthy husband and father in your early 30's who 
becomes disabled due to a car accident. Everyday able bodied 
individuals join the disabled club. Successful actor, Michael J. Fox, 
pointedly admits in his book ``Always Looking Up'' he never gave it a 
second thought how hard it is for those of us who have a debilitating 
illness to get dressed in the morning or have the use of limited motor 
skills. Without human help we cannot maximize our independence.
    Since 1974, the companionship exemption has operated to enable 
those of us who need many hours of assistance each week, in order to be 
productive members of society, to afford that assistance. The Final 
Regulations effectively repeal that protection. As I understand the 
separation of powers under the U.S. Constitution, the decision to 
repeal the companionship exemption is a decision to be made by the U.S. 
Congress. I urge the Congress to consider legislation that will restore 
the companionship exemption it enacted in 1974--but this time with 
explicit statutory language that will better protect the exemption 
against an administrative repeal.
                                 ______
                                 
    Chairman Walberg. Thank you, Mr. Bensmihen.
    Ms. Kulp, welcome.

              STATEMENT OF KAREN KULP, PRESIDENT,
                      HOME CARE ASSOCIATES

    Ms. Kulp. Thank you. Good morning. Is this good?
    Chairman Walberg. That is great.
    Ms. Kulp. Good morning, Chairman Walberg, Ranking Member 
Courtney, and members of the subcommittee. Thank you for the 
opportunity to testify today in support of the new rule to 
extend minimum wage and overtime protection to home care 
workers. I am happy to be here with my colleagues because all 
of us do similar work, which is extremely important.
    My name is Karen Kulp. I am president and CEO of Home Care 
Associates based in Philadelphia, Pennsylvania. Our company 
celebrated our 20th anniversary this year. We employ 206 home 
care workers, 90 percent of whom work full-time.
    We care for about 250 consumers per day. About 90 percent 
of our revenue is from Medicaid, and about 70 percent of our 
consumers are younger people who are disabled and under 65.
    Nationwide, an estimated 27 million Americans will depend 
on our system of long-term care by 2050. Increasingly, these 
individuals prefer to receive care in their homes and 
communities.
    To ensure quality care in home-based settings, federal 
policies must support the development of a stable, skilled home 
care workforce. Implementation of minimum wage and overtime 
protections for homecare workers is an essential step toward 
reaching the goal.
    Home care is skilled work. It is hard and messy and 
physically challenging. At HCA, we call it ``heart work'' 
because we believe that the capacity to excel in this work 
starts with a big heart but also includes a set of skills that 
require training and practice.
    The workforce, which is 90 percent female, assists elders 
and people with disabilities with personal care needs like 
dressing, bathing, going to the bathroom, eating, and mobility; 
services which are far more crucial and require far more skill 
than providing simple companionship.
    The work is vital to our communities and families, but poor 
wages averaging less than $10 an hour make recruitment and 
retention for these positions difficult.
    Inadequate compensation contributes to high turnover rates, 
undermining quality of care, and jeopardizing access to needed 
services in the face of growing demand. That demand has made 
home health aides and personal care aides our nation's fastest 
growing jobs.
    At Home Care Associates, we have chosen a little bit of a 
different approach. We invest in quality jobs in order to 
provide quality care. We meet our state's mandated minimum wage 
and overtime protections, provide quality training, and offer 
full-time employment which is highly unusual in our industry 
where more than half of health aides work part-time.
    Our investments have paid off. We have a workforce whose 
average length of employment is nearly 3 years in an industry 
where three-quarters of the workers have been employed less 
than 12 months.
    Our consumers appreciate the quality and continuity of the 
care we provide as a result of this stability, and we are 
profitable even with the majority of our revenue coming from 
Medicaid.
    Industrywide, rates of overtime for homecare workers are 
relatively low; less than 10 percent report working more than 
40 hours. At HCA, about 14 percent of our consumers receive 
over 50 hours of care per week, and 10 percent receive over 60 
hours.
    We manage our overtime costs by establishing a care team 
for these high need consumers. We begin by identifying two or 
three aides with whom the consumer is comfortable that way we 
can ensure that the consumer always has assistance from someone 
she knows. In the event of the absence of one worker, the 
consumer will always be covered.
    Moreover, a team approach guarantees that workers are not 
overtired and stressed out, reducing burnout and rates of 
injury for consumers and workers. It is a win-win-win. Workers 
and consumers are better served, overtime costs are low, and 
HCA has a healthier and more stable workforce.
    Revenue for the homecare industry, which reached $93 
billion last year, grew at an average rate of 8 percent per 
year from 2001 to 2011 despite the recession. This thriving 
industry can afford to pay homecare workers minimum wage and 
overtime as demonstrated by the 15 states that already provide 
these basic labor protections.
    Michigan is a case in point. A similar state regulation was 
implemented in 2006. Notably, Michigan's healthcare sector grew 
more quickly in the 5 years following the change than in the 5 
years before.
    In our business, rising worker compensation costs, higher 
gas prices, and reimbursement rates that have not kept up with 
the cost of living are a far greater threat to profitability 
than paying minimum wage and overtime.
    The new rule recognizes professionalization of this 
workforce and the skills these jobs now require. After many 
decades the rule will at long last give homecare workers the 
same rights as other American workers.
    It is an important first step toward assuring that the 
American people get what they need and want; a stable, 
competent workforce to allow elders and people of people living 
with disabilities to remain at home and to live independently 
and with dignity.
    Thank you.
    [The statement of Ms. Kulp follows:]

          Prepared Statement of Karen Kulp, President and CEO,
                          Home Care Associates

    Chairman Wahlberg, Ranking Member Courtney, and Members of the 
Subcommittee: Thank you for the opportunity to testify today in support 
of the new rule to extend minimum wage and overtime protection to home 
care workers nationwide. My name is Karen Kulp. I am President and CEO 
of Home Care Associates based in Philadelphia. Our company celebrated 
our 20th anniversary this year. HCA employees 206 home care workers 90% 
of whom work full time. Our company cares for about 250 consumers each 
day. About 90% our revenue is from Medicaid, about 70% of our consumers 
are people with disabilities under age 65.
    As the CEO of a small home care agency, I believe implementation of 
minimum wage and overtime protections for home care workers is 
essential for quality home care. First, as a nation, we must improve 
working conditions for home care workers in order to meet our nation's 
increasing home care needs and avoid a caregiving crisis. The new rule 
is an important step in improving conditions and stabilizing this 
workforce. Home care workers provide the vital care that allows older 
adults and persons with disabilities needing care to remain in their 
own homes. An estimated 27 million Americans will depend on our system 
of long-term services and supports by 2050. Many working Americans rely 
on home care workers' assistance in order to continue pursuing our 
careers and supporting our own families.
The Workforce
    Almost ninety percent of home care workers are women, and because 
of poverty-level wages and few benefits, nearly half have to rely on 
public assistance such as Medicaid and food stamps to make ends 
meet.\i\ Inadequate compensation makes recruitment for these positions 
difficult and contributes to high rates of turnover, undermining 
quality of care and jeopardizing access to needed services in the face 
of growing demand.\ii\ Meanwhile, growing demand has made home care one 
of the top five fastest-growing jobs in the country. Reports show that 
the direct-care workforce is projected to be the nation's largest 
occupational grouping by 2020--that's less than seven years away.\iii\ 
The urgency is real.
    Home care is skilled work. It is hard, messy and often physical 
work. Home care workers assist elders and people with disabilities with 
personal care needs like dressing, bathing, going to the bathroom, 
eating, and mobility--services which are far more crucial and require 
far more skill than providing simple companionship.
    The new rule recognizes the professionalization of this workforce 
and the skills these jobs now require and that employers and customers 
demand. After many decades of discussion and deliberation, the rule 
will, at long last, give home care workers the same rights as other 
American workers. It is an important first step toward ensuring that 
the American people get what they need and want--a stable competent 
workforce to allow elders and people living with disabilities to remain 
at home and to live independently and with dignity.

The Industry
    The home care industry, made up of over 80,000 agencies and 
franchises, is no longer a cottage industry made up of small mom-and-
pop agencies. It is increasingly dominated by large national franchise 
chains. Though state budgets have tightened since 2008, home care 
industry revenues have continued to show solid growth.
    Revenue for the home care industry grew at an average rate of 8 
percent per year from 2001 to 2011. In 2011, the combined revenues of 
the two key industries providing home care and personal assistance 
totaled nearly $93 billion! \iv\
    Since Pennsylvania is one of 15 states that already mandates 
minimum-wage and overtime protections for home-care workers, I know 
firsthand that a successful home-care business can pay workers above 
minimum wage and comply with overtime protections and be profitable. I 
am keenly aware of the costs involved in running a successful home care 
business. In our business, rising worker compensation costs, higher gas 
prices and reimbursement rates that have not kept up with the cost of 
living are a far greater threat to profitability that paying minimum 
wage and overtime. HCA is proof that this thriving industry can afford 
to pay home care workers minimum wage and overtime. It's a matter of 
simple fairness.
    In Michigan, where minimum wage and overtime protections have been 
offered to home care aides since 2006, the home care sector has grown 
at a faster rate since extending these protections than in the same 
time period before. An analysis of the number of home care 
establishments within Michigan shows the dramatic growth of the 
industry following the state's implementation of the new minimum wage 
and overtime rules. In fact, growth in Michigan's home care business 
establishments was actually higher in the period after implementing 
wage and hour protections than before--41 percent compared to 32 
percent.\v\ Furthermore, because 15 states, like Michigan and my state 
of Pennsylvania, already offer minimum wage and overtime compensation 
to home care workers, we know that the rule can be implemented without 
disruption to care.\vi\ Paying overtime can improve the quality of care 
for the consumer and the quality of the job for the worker.
    If an employer is not required to pay overtime, there is no 
incentive to give a home care worker a schedule that allows for time 
off. Working 60 to 80 hours per week is not a good practice for the 
consumer or the aide. The stress of working that many hours can affect 
the health of the worker leading to injuries, which the company 
ultimately pays for in increased worker's compensation costs and high 
turnover which means more costs for training and recruitment. It is 
also not a smart practice to have only one person who is able to take 
care of a consumer. Suppose that person gets sick or has an emergency? 
Does that mean that the consumer goes without care that day?
    At HCA about 14% of our consumers receive over 50 hours of care per 
week, and 10% receive over 60 hours a week. Before starting these cases 
we identifying two or three aides with whom the consumer is 
comfortable. That way we can assure that the consumer always has 
coverage by someone she knows. In the event of an emergency by one 
worker, the consumer always will be covered.
    Excessive overtime is not good for the consumer either. An aide who 
is tired and stressed can make mistakes and jeopardize the well-being 
of the consumer. Recently at HCA, we embarked on a new line of 
business. We have hired home care workers who, prior to being employed 
by our company, worked directly for the consumer. In order to 
participate, consumers and their attendants agreed that each attendant 
could work only a maximum of 45 hours. Consumers and aides are 
overwhelmingly positive about the program. Workers feel more supported 
and consumers are happy to have aides who are fresher and able to be 
more attentive to their needs.
    Like Home Care Associates, many of the country's largest home care 
employers already pay minimum wage and overtime. Furthermore, 
nationwide, the incidence of overtime in this workforce is very low, 
with less than 10 percent of home care workers reporting working any 
overtime.\vii,viii\

The Cost
    The Department of Labor estimates an average annual cost of $321.8 
million of implementing the rule, mostly due to payment of overtime 
costs.\ix\ I'd like to make three points about this figure. First, it 
is manageable. It is a small fraction of the industry's $93 billion in 
annual revenue. Furthermore, as I noted above, overtime can be managed. 
Finally, let's remember that this modest cost is hardly money down the 
drain, it's a sorely needed investment of the hardworking women and men 
of the home care workforce who are caring for our elders and 
individuals with disabilities.
    Many of the arguments being made by those who oppose the revised 
companionship rule are not based on the facts. For example, opponents 
claim that the revised rule will result in increased 
institutionalization. But evidence from the 15 states that already 
provide minimum wage and overtime protections to their workers solidly 
demonstrates that there is no correlation between guaranteed wage and 
hour protections for home care workers and rates of 
institutionalization.\x\ In fact, strengthening the home care workforce 
is crucial to keeping individuals out of nursing homes. An underpaid, 
unsupported workforce cannot provide the quality services we need in 
millions of homes all across our nation.
    It takes a special kind of person to do this work day in and out. 
Workers stay on the job when their work is respected and adequately 
rewarded. At Home Care Associates, we have a workforce whose average 
length of employment is nearly three years in an industry in which 
three-quarters of the workers have been employed less than 12 months. 
This employment continuity improves the quality of care we provide by 
allowing aides to develop long-lasting relationships with clients and 
helps our bottom line by sparing us the costs of recruiting and 
training new workers.
    Extending minimum wage and overtime protection to home care workers 
today helps meet the underlying policy goals of the Fair Labor 
Standards Act: improving job quality for low wage workers, promoting 
greater employment opportunities across the labor force, and 
stabilizing our nation's economy.

                                ENDNOTES

    \i\ PHI State Data Center. http://www.phinational.org/policy/states
    \ii\ Caring in America: A Comprehensive Analysis of the Nation's 
Fastest-Growing Jobs--Home Health and Personal Care Aides, Section 9, 
http://phinational.org/sites/phinational.org/files/clearinghouse/
caringinamerica-20111212.pdf
    \iii\ Ibid, Section 2
    \iv\ Value the Care #5: Growing Home Care Industry Can Afford Basic 
Labor Protections for Workers. http://phinational.org/sites/
phinational.org/files/phi-value-the-care-05.pdf
    \v\ Data Brief: MI Home Care Industry Before and After Extending 
Labor Protections to Home Care Workers. http://phinational.org/sites/
phinational.org/files/michigan-labor-protections-and-home-care-
industry.pdf
    \vi\ Value the Care #8: Extending FLSA to Home Care Aides: Impact 
on Medicaid-funded Long-Term Services and Supports. http://
phinational.org/sites/phinational.org/files/phi-value-the-care-08.pdf
    \vii\ Value the Care #6: Home Care Jobs: The Straight Facts on 
Hours Worked. http://phinational.org/sites/phinational.org/files/
policy/wp-content/uploads/phi-value-the-care-06.pdf
    \viii\ Value the Care #7: High Hour Consumers in the California 
IHSS Program: Impact of Compensating Overtime Hours. http://
phinational.org/sites/phinational.org/files/phi-value-the-care-07--
0.pdf
    \ix\ U.S. Department of Labor, Final Rule: ``Application of the 
Fair Labor Standards Act to Domestic Service,'' http://webapps.dol.gov/
FederalRegister/PdfDisplay.aspx?DocId=27104
    \x\ Data Brief: Institutionalization Rates in States that Extend 
Minimum Wage and Overtime Protection to Home Care Workers. http://
phinational.org/sites/phinational.org/files/research-report/
institutionalization-data-brief.pdf
                                 ______
                                 
    [Additional submissions of Ms. Kulp follow:]
    [Ms. Kulp's submissions of various ``Value the Care'' 
updates, nos. 5-8, may be accessed at the following Internet 
addresses:]

 http://phinational.org/sites/phinational.org/files/phi-value-the-care-
                                 05.pdf

 http://phinational.org/sites/phinational.org/files/phi-value-the-care-
                                 06.pdf

 http://phinational.org/sites/phinational.org/files/phi-value-the-care-
                                 07.pdf

 http://phinational.org/sites/phinational.org/files/phi-value-the-care-
                                 08.pdf

                                 ______
                                 
    [Ms. Kulp's submission of the Jan. 2013 data brief may be 
accessed at the following Internet address:]

  http://phinational.org/sites/phinational.org/files/research-report/
                  institutionalization-data-brief.pdf

                                 ______
                                 
    [Ms. Kulp's submission of the Mar. 2013 data brief may be 
accessed at the following Internet address:]

   http://phinational.org/sites/phinational.org/files/michigan-labor-
                 protections-and-home-care-industry.pdf

                                 ______
                                 
    [Ms. Kulp's submission of an AFSCME letter, dated Nov. 19, 
2013, on DOL's companionship rule follows:]





                                ------                                

    Chairman Walberg. Thank you, Ms. Kulp. I appreciate that 
and the references to Michigan. Let me say--I experienced it 
very closely with my mother for over a year. And yes, the 
healthcare is going up, the numbers of us in the aged community 
are going up as well. The challenges that healthcare workers 
faced are not--don't share the same positive feelings of people 
looking in from the outside.
    Mr. Passantino, thank you for being here. We look forward 
to your comments.

             STATEMENT OF ALEXANDER J. PASSANTINO,
               SENIOR COUNSEL, SEYFARTH SHAW, LLP

    Mr. Passantino. Thank you.
    Chairman Walberg, Ranking Member Courtney, members of the 
subcommittee, thank you for the opportunity to participate in 
today's hearing. I am honored to appear before you today.
    My name is Alex Passantino. I am an attorney with the 
Washington, D.C. office of Seyfarth Shaw. My testimony today is 
solely my own, and I don't represent my firm, its clients, or 
any other person or organization.
    In my practice I spend about 95 percent of the time on wage 
and hour issues. I have been working on these issues since I 
entered private practice in the fall of 1997.
    From 2005 to 2009 I served on the leadership team of the 
Wage and Hour Division and ultimately served as the acting 
administrator. In 2009, I left Wage and Hour and returned to 
private practice.
    In my testimony today, I will be discussing some of the 
compliance difficulties likely to face employers--particularly 
individuals and families--under Department of Labor's newly-
issued regulations regarding the application of the FLSA to 
domestic service employment.
    In particular, my testimony will focus on the challenges 
that American families will face as a result of the 
Department's recent final rule regarding the companionship 
services exemption.
    As the subcommittee is aware, the FLSA generally requires 
covered employers to pay nonexempt employees the minimum wage 
for all hours worked and overtime compensation at a premium 
rate for hours worked in excess of 40.
    In 1974, Congress extended the FLSA's minimum wage and 
overtime requirements to domestic service employees and at the 
same time exempted any employee employed in domestic service 
employment to provide companionship services for individuals 
who because of age or infirmity are unable to care for 
themselves.
    Jumping straight to the question of domestic service 
employee coverage and the companionship services exemption 
however, puts the cart before the horse. The threshold 
question, as it is in all FLSA matters, is whether the 
individual performing the work is an employee under the FLSA.
    If the worker is not an employee, then neither the minimum 
wage nor the overtime requirements of the FLSA apply. In other 
words, only if the individual is an employee does the exemption 
even need to be considered.
    Somewhat curiously for an agency that has been focused on 
employment relationship neither the rule nor the Wage and Hour 
Division's guidance documents address this critical issue.
    They provide no meaningful assistance to American families 
on how to determine whether a particular individual is an 
employee under the FLSA. This is critically important because 
the department's analysis related to what tasks a companion may 
or may not perform is premised on a statement in the 
Congressional record.
    It says, ``We have another category of people who might 
have an aged father, an aged mother, an infirm father, and an 
infirm mother, and a neighbor comes in and sits with them.''
    The American people already have a name for a neighbor who 
sits with an aged or infirm parent, that is friend. Yet this is 
the concept upon which the department's proposal and analysis 
was premised, that a neighbor who sits with a sick parent 
ceases to be a friend and has become a regulated entity.
    The examples of permissible activities identified by the 
department in its final rule make clear that friendship is 
covered by its rulemaking. Watching television, visiting with 
friends and neighbors, taking walks, playing cards, and 
engaging in hobbies.
    If these are the activities that the department has 
determined to be exempt then they also believe that that is 
employment because you only need an exemption if there is 
employment.
    Every day across America these activities are shared 
between friends none of whom for a moment consider that someone 
is entitled to compensation. The DOL doesn't address this 
critical issue. It simply provides no guidance to American 
families.
    Indeed the self-assessment tool on Wage and Hours Web site 
jumps right into the application of the exemption and never 
addresses the employment issue. The American families will need 
to keep track with precision of the activities performed by 
these people.
    Examples of activities that can result in the loss of 
exemption include assistance in putting on a coat, assistance 
in brushing hair, assistance with using the restroom, driving 
to the recreation center, making a peanut butter and jelly 
sandwich to be eaten later in the day, and folding a T-shirt. 
If the aggregate of amount of this time exceeds 1.5 hours out 
of an 8-hour day, the family loses the exemption.
    It is incumbent upon the department to provide more 
comprehensive guidance to American families who will be 
struggling to make these decisions. In addition, because the 
department effectively converts friendship into employment, it 
likewise should provide guidance on other areas of domestic 
service such as when people become chauffeurs when they carry 
their friends' kids around in the car and what types of 
payments might be considered in determining whether there is an 
employment relationship.
    The burden on American families is further compounded by 
the department's elimination of the companionship services 
exemption with respect to third-party employers. Although it 
maintains the exemption for individuals and families after 40 
years or nearly 40 years the department reverses its position 
and applies it to third-party employers.
    Absent a dramatic restructuring of the industry, by January 
1, 2015, the overwhelming majority of American families that 
use these services have to decide whether they are going to 
continue to use the third-party or whether they are going to 
directly employ companions.
    I am well over my time. I am happy to take your questions.
    [The statement of Mr. Passantino follows:]

             Prepared Statement of Alexander J. Passantino,
                   Senior Counsel, Seyfarth Shaw LLP

    Chairman Walberg, Ranking Member Courtney, and Members of the 
Subcommittee: Thank you for the opportunity to participate in today's 
hearing. I am honored to appear before you today.
    By way of background, I am an attorney in the Washington, DC office 
of Seyfarth Shaw LLP. My testimony today is solely my own and I do not 
represent my firm, its clients, or any other person or organization.
    In my practice, I spend approximately 95% of my time on wage and 
hour issues. The majority of that time is spent counseling employers 
with respect to issues arising under the Fair Labor Standards Act, the 
Service Contract Act, the Davis-Bacon and Related Acts, and state laws 
related to the payment of minimum or prevailing wages and overtime. I 
have been working on wage and hour issues since entering private 
practice in the Fall of 1997.
    In 2005, I joined the leadership team of the U.S. Department of 
Labor's Wage & Hour Division (WHD). In 2006, I was appointed Deputy 
Administrator of WHD and, in 2007, I became the Acting Administrator. 
President George W. Bush nominated me to serve as the
    Administrator in March 2008, but the U.S. Senate never voted on my 
nomination. I left WHD in 2009 and returned to private practice.
    In my testimony today, I will be discussing some of the compliance 
difficulties likely to face employers--particularly individuals and 
families--under the Department of Labor's (DOL's or Department's) 
newly-issued regulations regarding the application of the Fair Labor 
Standards Act (FLSA) to domestic service employment. In particular, my 
testimony will focus on the challenges that American families will face 
as a result of the Department's recent final rule regarding the 
companionship services exemption.
    As the subcommittee is aware, the FLSA generally requires covered 
employers to pay nonexempt employees a minimum wage for all hours 
worked and an overtime premium of one and one-half times an employee's 
regular rate of pay for all hours worked in excess of 40 hours in a 
workweek. In most circumstances, the determination of whether an 
employee is subject to the FLSA involves consideration of whether the 
employee is ``engaged in commerce or in the production of goods for 
commerce'' or whether the employee is ``employed in an enterprise 
engaged in commerce or in the production of goods for commerce.''
    In 1974, Congress included ``domestic services'' within the scope 
of the FLSA's coverage, finding that ``the employment of persons in 
domestic service in households affects commerce,'' and extending the 
FLSA's minimum wage and overtime requirements to ``domestic service'' 
employees. At the same time, Congress exempted employees providing 
``companionship services'' to the elderly or infirm. The exemption 
applies to ``any employee employed in domestic service employment to 
provide companionship services for individuals who (because of age or 
infirmity) are unable to care for themselves * * *.'' 29 U.S.C. 
213(a)(15).
    Jumping straight to the question of domestic service employee 
coverage and the companionship services exemption, however, puts the 
cart before the horse. The threshold question--as it is in all FLSA 
matters--is whether the individual performing the work is an 
``employee'' under the FLSA. If the worker is not an ``employee,'' then 
neither the minimum wage nor overtime requirements of the FLSA would 
apply. Only if the individual is an employee does an exemption need to 
be considered.
    Somewhat curiously for an agency that has been focused on the issue 
of employment relationship, neither the rule nor WHD's guidance 
documents address the critical issue of employment status in this 
context.\1\ WHD provides no meaningful assistance to American families 
on how to determine whether a particular individual is an ``employee'' 
under the FLSA. The determination of whether an individual is an 
``employee'' is critically important because the Department's analysis 
related to what tasks a ``companion'' may or may not perform is 
premised on a statement by Senator Burdick as set forth in the 
Congressional record and quoted in the preamble to the proposed rule: 
``We have another category of people who might have an aged father, an 
aged mother, an infirm father, an infirm mother, and a neighbor comes 
in and sits with them.''
---------------------------------------------------------------------------
    \1\ The Department does include a discussion on whether family 
members or members of the household are employees under the FLSA if 
they are paid for their services (they are).
---------------------------------------------------------------------------
    Applying the companionship services exemption in these cases would 
be extraordinary. The American people already have a name for a 
neighbor who sits with an aged or infirm parent: ``friend.'' Yet, this 
is the concept upon which the Department's proposal and analysis was 
premised: a neighbor who sits with a sick parent ceases to be a friend 
and has become a regulated entity. The examples of ``permissible'' 
activities identified by the Department in its final rule make clear 
that friendship is covered by its rulemaking: ``Examples of activities 
that fall within fellowship and protection may include: watching 
television together; visiting with friends and neighbors; taking walks; 
playing cards, or engaging in hobbies.''
    These are the activities that the Department has determined to be 
``exempt''; as I noted previously, however, the exemption is only 
necessary once there has been a finding of employment. Every day across 
America the activities described by the Department are shared between 
friends, none of whom consider for a moment that they may be entitled 
to compensation as domestic service employees. Yet, notwithstanding the 
Department's recent focus on attempting to find the existence of an 
employment relationship in a wide variety of unpaid contexts--including 
volunteers and interns--DOL does not address this critical, threshold 
issue. It simply provides no guidance to American families; indeed, the 
self-assessment tool on WHD's website (``Am I required to pay minimum 
wage and overtime pay?'', found at http://www.dol.gov/whd/homecare/
checklist.htm) jumps right into the application of the exemption, 
without a single question designed to assess employment.
    It is easy to dismiss this concern with some variation of the 
statement ``Of course the law does not require friends to be paid 
minimum wage and overtime.'' DOL, however, provides no guidance at all 
on how to distinguish when ``fellowship and protection'' activities are 
performed by a non-employee and when they are performed by an employee 
subject to the FLSA.
    Similarly, it is easy to dismiss the concern with a statement that 
these ``fellowship and protection'' activities are exempt activities. 
DOL's rule, however, requires that families pay attention to whether a 
friend has somehow ``become'' a domestic services employee. Once the 
individual has crossed that barrier, families will need to track with 
incredible precision the amount of time their neighbor spends helping 
with laundry, assisting with dressing, driving to appointments, or 
cooking meals that may be eaten outside of their presence. This is due 
to the fact that the exemption is lost when the employee spends more 
than 20% of his or her time providing ``care.''
    Examples of activities that can result in loss of the exemption 
include:
     assistance in putting on a coat;
     assistance in brushing hair;
     assistance with using the restroom;
     driving to the recreation center;
     making a peanut-butter-and-jelly sandwich to be eaten 
later in the day; and
     folding a t-shirt.
    The Department limits these tasks (and many, many others) to an 
aggregate amount of 20% of the employee's time--which is just over 1.5 
hours of an eight-hour day. It certainly is not difficult to imagine 
someone spending more than that amount of time on these tasks.
    Moreover, in one of its Fact Sheets on these issues, the Department 
notes that ``[h]ousehold work that primarily benefits other members of 
the household, such as making dinner for the entire family or doing 
laundry for another member of the household, results in a loss of the 
exemption, and the employee is entitled to minimum wage and overtime 
for that workweek.''
    Given the increased importance of the threshold question of whether 
someone is an ``employee,'' it is incumbent upon the Department to 
provide comprehensive guidance to American families who will be 
struggling to make these decisions. In addition, because the Department 
is now converting friendship into employment, it likewise should 
provide guidance on other areas of ``domestic service.'' For example:
     Does the Department believe that a neighbor who sits with 
someone's family member is an ``employee'' for the purposes of the 
FLSA? What factors go into the determination of whether someone is an 
employee?
     Is remuneration a factor? In which cases should 
remuneration be considered in the employment analysis? If a companion 
is included in someone's will as ``compensation'' for their 
companionship, is that sufficient ``remuneration'' to trigger an 
employment relationship? What if there is simply a promise to be 
included in a will that was unfulfilled? Or what if the intention of 
providing the companionship was based on an expectation of some future 
consideration?
     If a neighbor sitting with a family member is a 
``companion'' subject to the FLSA, does the same analysis apply to a 
neighbor who drives someone's children to school? Is that person a 
``chauffer'' for FLSA purposes? What factors would go into a 
determination that your friend has become your chauffer, and thus, a 
domestic services employee under the FLSA?
     If a neighbor sitting with a family member is a 
``companion'' subject to the FLSA, if colleagues assist someone with an 
overhaul of the yard, does that make them ``gardeners'' for the 
purposes of the FLSA?
     In each of these assessments, what evidence will the 
Department rely upon to determine an individual's employment status? 
Should families begin providing their neighbors with stipulations that 
the friendship they provide is charitable in nature to protect the 
family from a future claim under the FLSA and/or investigation by the 
Department into whether someone's companionship was grounded in 
friendship or whether it was part of employment?
    The examples above logically follow the Department's foundational 
reliance upon the statement by Sen. Burdick to support its reading of 
the exemption. If the Department's position is that a neighbor sitting 
with a sick family member is an employee, then the Department must 
provide families sufficient regulatory guidance to address the critical 
issue of employment status. This position will undoubtedly take most--
if not all--families considering it by surprise.\2\
---------------------------------------------------------------------------
    \2\ The only guidance that remotely addresses the issue is section 
6(f) of the FLSA, which limits application of the minimum wage 
requirements to someone who is employed for more than eight hours in 
domestic services employment. See 29 USC 206(f). It is not difficult to 
exceed the eight-hour mark with a dinner and some carpooling (for 
example, in the weeks in which a mother to a newborn infant gets 
assistance from her friends); moreover, no ordinary person would ever 
keep records of the activities of friends to determine whether they in 
fact exceeded the eight-hour threshold.
---------------------------------------------------------------------------
    The burden on American families is further compounded by the 
Department's elimination of the companionship services exemption for 
third-party employers, although it has been retained for individuals 
and families . After nearly 40 years, the Department reversed its 
position on this issue in its final rule. According to the Department, 
under the existing regulations, 98% of employees covered by the 
companionship exemption were employed by third-party employers. As 
noted in the government's brief in the U.S. Supreme Court case of Long 
Island Care At Home Ltd. v. Coke, ``[i]f the companionship services 
exemption to the FLSA was narrowed to only those employees hired 
directly by a family member or the head of household, then the 
exemption would encompass only 2% of employees providing companionship 
services in private homes. ``
    Absent a dramatic restructuring of the industry, with the 
regulation scheduled to take effect in January 2015, 98% of the 
employees performing companionship services in private homes will be 
entitled to overtime compensation. In other words, the overwhelming 
majority of families who use companionship services must decide, before 
January 1, 2015, whether to continue using third-party providers (and 
incurring additional costs due to the overtime premiums that must be 
paid) or directly employing companions in an effort to eliminate the 
overtime payment requirements.
    The elimination of the third-party exemption is a dramatic change. 
It had been unchanged for 38 years despite review by the U.S. Supreme 
Court and numerous amendments to the FLSA by Congress. Although the 
Department claims that there have been changes in the home care 
industry in the last 38 years, it identifies no real changes that have 
taken place since 2007. This is significant because the key reasons for 
leaving the regulation unchanged were articulated by the Department in 
connection with the U.S. Supreme Court's review. In 2007, the 
Department believed that eliminating the companionship services 
exemption for third-party employers would cause catastrophic results 
for the industry and for the American care system. It believed that 
placing the primary FLSA compliance burden directly on the person 
receiving care was not in the best interests of employers or employees. 
Yet, in 2013, its rule does precisely that, creating a financial 
incentive that will drive companionship services employees to 
employment directly by American families, who will be largely 
unfamiliar with the requirements of the FLSA, or any of the many other 
laws that govern the employment relationship.
    Alternatively, cost-conscious citizens may find themselves reliant 
upon unscrupulous agencies who disregard these laws. Honest third-party 
employers--with the most capability for ensuring employment standards--
may simply be priced out of the market.
    It is ironic that at a time when the Department is focused on 
enterprise-wide enforcement and is spending significant resources 
attempting to determine how best to defeat ``fissured'' industries, it 
has also issued a regulation that potentially fissures the 
companionship services industry and may inhibit any effort by the 
Department to conduct enterprise-wide enforcement. If the increased 
costs associated with third-party employment do, in fact, drive 
employment of companions to American families directly, the Department 
will be responsible for creating its own enforcement nightmare: 
individual-by-individual, family-by-family investigations that 
necessarily require a detailed analysis of ``what happened, when'' in 
the family home.
    The Department's apparent effort to calm the fears of American 
families by stating that individuals, families, and households may 
assert the exemption even when they jointly employ the employee with a 
third-party (which, of course, may not assert the exemption) will have 
little impact in practical application. In fact, it may actually result 
in families finding themselves worse off.
    The exemption is not available to the third-party employer 
agencies, and, as a result, they have little incentive to limit the 
tasks that defeat the exemption; regardless of whether the employee 
performs the tasks, the third-party agency must meet the minimum wage 
and overtime requirements. The individual, family, or household, 
however, will lose their ability to claim the exemption if the 
prohibited tasks go above 20% of the employee's time, a condition about 
which they may not even be aware if they have decided to use a third-
party employer agency. Thus, if the primary employer is not keeping 
track of such information, the family may find itself without 
protection from overtime liability. This would be especially true--and 
particularly consequential--if the reason the family was being 
investigated by the Department (or sued by a plaintiff's attorney) is 
because the primary third-party employer ceased to operate.
    As a result of these changes--in particular, the elimination of the 
exemption for employees of third parties--the cost of employing a 
companion employed by a third-party will increase. At a time where 
controlling the costs of care is critical to American families, this 
rule will push those families away from third-party employers, and 
towards direct employment. As a result, American families will now have 
to navigate a complex web of regulations to determine whether they are 
in compliance with their minimum wage, overtime, federal and state tax, 
workers compensation, and unemployment insurance obligations.
                                 ______
                                 
    Chairman Walberg. I appreciate that. I am sure you will get 
questions that cover your remaining statements. I just hope 
that some of your comments will not be taken as directives to 
the Department to add more regulations and restrictions.
    I now turn to the chairman of the full Education and 
Workforce Committee, Chairman Kline for opening questions.
    Mr. Kline. Thank you, Mr. Chairman for turning to me for 
questions. I appreciate the courtesy very much. Thanks for the 
hearing.
    I am going to pick up, Mr. Passantino, on where you were 
going because I am trying to understand how if you are an 
individual or family who is privately hiring a care provider, 
this is not a third-party, not a company, how would DOLs 
inspectors go about investigating and enforcing these rules?
    Here is the family, got someone who needs assistance, 
companionship, you hire somebody. How does DOL come to the 
house and say--how does that work?
    You have got to keep track of an hour-and-a-half in an 8-
hour day, how would that even work?
    Mr. Passantino. There is some guidance in the regulation 
that talks about checking boxes as to how many hours somebody 
works in a particular schedule, but I think that that is 
intended to cover how many hours does somebody work in the 
course of the day.
    What you are really needing to track is how much time the 
worker spends on a specific task and the specific tasks that 
would eliminate the ability of the family to use the exemption.
    The only way that the Wage and Hour Division would be able 
to do that is to talk to the worker and the only opportunity 
that the Wage and Hour Division would have to understand the 
employer and that circumstance's side of the case is to talk to 
the family.
    Whether that investigation takes place inside someone's 
home I suppose is a different question, but the only way that 
you can get to the key question of what percentage of time does 
this worker spend on which task is to talk to the worker and 
the family members responsible for watching over that person.
    Mr. Kline. I see. Thank you.
    Mr. Bensmihen, can you elaborate for us a little bit on 
what you believe is the Department of Labor's fundamental 
misunderstanding of the companionship industry?
    Mr. Bensmihen. My legal--department's fundamental mistake 
is that again, caregivers currently have a choice as to whether 
or not they want to work in someone's home. If they work for an 
adult day care facility, if they work for a nursing home, if 
they work for hospital, they know they are entitled to time and 
a half.
    The individual who lives at home--like the doctor doesn't 
say when Mrs. Jones falls in the hospital and it is her third 
fall, the doctor says ``Mrs. Jones, this is your third fall. 
One more fall and you are going to have to go into 
institutionalized care,'' and Mrs. Jones finally says, ``Okay, 
I will get some help. I will get live in care.''
    The doctor doesn't say, ``I am going to pay for it.'' When 
someone is in their own home, I think the department is not 
looking at that issue and it hurts the 43 million disabled 
Americans.
    Mr. Kline. Okay, thank you very much.
    Ms. Andrews, you are in competition, I am sure, in business 
like everybody.
    What industries do you compete with for workers, and do you 
believe as the Department of Labor has stated that the 
consequences of its regulations will be to reduce turnover in 
your industry, which is according to the department currently 
about 50 percent?
    Ms. Andrews. I don't think that the workers--this will 
increase our retention and access to workers. I think in fact 
just the opposite will happen.
    When we have workers who are--if their hours are changed to 
stay within a 40-hour workweek, they may go to additional 
competitors. They may go to work privately. They make go to 
work at Starbucks. That actually decreases the access to 
qualified caregivers.
    So I think that our staff and employees that work in this 
industry do so because they feel that calling, but they have to 
make a living, so I think that that access to workers if their 
hours are changed or decreased will inadvertently cause a 
ripple effect that not only will we have less access to 
qualified workers, the workers that we have will become less 
available to us.
    Mr. Kline. Okay, thank you. I see my time is about to 
expire. Thank you very much to all of the witnesses for being 
here.
    Mr. Chairman, I yield back.
    Chairman Walberg. I thank the gentleman. Now I turn to my 
ranking member, Mr. Courtney.
    Mr. Courtney. Thank you, Mr. Chairman.
    I want to thank the witnesses for their testimony today. 
Obviously there is a difference in point of view that is on 
full display. One common area though which between certainly 
Ms. Andrews' testimony and Ms. Kulp's is the high dependence on 
Medicaid that is in this industry.
    I would just note that last spring the house Republican 
budget proposed to block-grant Medicaid and cut it by one-
third. So when we talk about the threats to this sector of the 
healthcare industry, I would just note that, that is a far 
greater existential threat to the future viability of agencies 
such as your own if governors and state legislatures were left 
with that.
    Again, like many of the people in this room, my dad had a 
home health aide at the end of his life, and certainly, I am 
deeply--I remember to this day the guy who stayed with him for 
hours at a very difficult time.
    I also set budgets for Medicaid in the State of Connecticut 
and worked with agencies and recognized that the Ryan Budget 
that was passed last spring poses a far greater threat to the 
future viability of your industry than anything we are talking 
about here today.
    Ms. Kulp, obviously you are somebody who is living with the 
reality of minimum wage rules that are again in line with the 
U.S, Department of Labor. One area, which in your written 
testimony you mentioned, but didn't get a chance to in your 
oral testimony was talking about the impact of excessive 
overtime in terms of the performance of your workers.
    Again, when you look at the Fair Labor Standards Act, one 
of the things that it was trying to do back in the 1930s was to 
control out-of-control overtime because of the impact it was 
having on both the individual worker and also performance. 
Maybe you can speak to that for a moment.
    Ms. Kulp. Sure. I believe that 40 hours is actually a great 
workweek for a home health aide.
    It is a very hard work, so when you have to work 60 or 80 
hours, you can't be as fresh or as careful, and I think that it 
really impacts both the worker but also the consumer. We have 
had experience with this. We actually have a new program where 
we let consumers hire their own attendants and then they're our 
employees.
    As part of that, we have said, look, we have to limit the 
number of hours that your aide works to 45. So if you have 120 
hours, then you have to get three attendants to help you and 
people have said, ``Okay, we will try that.''
    What we have found is that consumers really appreciate it 
because they get fresher people to take care of them, and the 
workers feel so much less stressed because they don't have to 
be available 40 or 80 or 100 hours a week, and they just have 
some time to take care of their personal business.
    And if somebody gets sick, there is always a backup person 
to take care of them. So I think it just makes sense in the new 
world of home care where many people are getting many, many 
hours of home care, and it is saving us money by letting them 
stay at home, and we should really appreciate, and I think JB 
said it really well, that if you go in an institution or you go 
in a different kind of setting, you will get overtime. Well, 
the work is the same. So why should folks be paid differently?
    Mr. Courtney. And that is a good point. One of the things 
that I think a number of us are trying to do is recognize 
parity between in-home care and institutional care, whether it 
is the observation bill challenged in terms of trying to 
protect Medicare coverage for people coming out of hospital 
after 3 days and is being threatened right now with some new 
trends in the classification of coding for inpatient hospitals, 
as well as again, long-term care insurance policies recognizing 
home healthcare services on par with institutional care.
    This rule in my opinion is just totally consistent with 
really sort of raising the stature of your industry as opposed 
to sort of treating it as a poor cousin. And retention, again 
we have heard concern about retention here this morning. What 
is your real life experience in terms of retention?
    Ms. Kulp. Well again, our real-life experience is that our 
aides, where the retention rate is I think 20 percent, 30 
percent, ours is more like 60 or 70 percent, so we know that 
when people have decent full-time jobs where they get benefits, 
and they get time-off they tend to stay in the work.
    Mr. Courtney. And the stress level issue, there is not 
excessive overtime.
    Ms. Kulp. Right, exactly.
    Mr. Courtney. And that burns people out.
    Ms. Kulp. It certainly does, and they make mistakes. They 
do things that aren't right and that is a real liability to our 
business if somebody is doing something incorrectly and 
something bad happens.
    Mr. Courtney. Again, I want to thank you for being here 
today. I think people should take a deep breath here and 
recognize that folks like you and in the other states that have 
this situation, this structure before have functioned and grown 
and that is really what the goal should it be for all of us.
    I yield back.
    Ms. Kulp. Right. Thank you.
    Chairman Walberg. I thank the gentleman.
    I now turn and recognize the gentleman from Indiana, Mr. 
Rokita.
    Mr. Rokita. Well, thank you, Chairman. Good morning.
    Good morning to the witnesses. I appreciate each of you 
being here.
    Continue on this kind of line of thought, I would like to 
first turn my attention to Ms. Andrews and Mr. Bensmihen.
    Picking up on liability, has liability concerns overwhelmed 
your business model? Do you have insurance?
    Ms. Andrews. Absolutely we do have insurance. We have 
professional, general, liability. We have workers comp 
insurance.
    Mr. Rokita. Has liability been a problem with your business 
model as you have executed it? The claim here is that there is 
a concern about liability, that people who are overworked are 
going to make mistakes and injure your clients. Is that a 
problem?
    Ms. Andrews. That has not been a problem. We don't----
    Mr. Rokita. Mr. Bensmihen?
    Mr. Bensmihen. It is not a problem. Again the example that 
was recently used by Ms. Kulp is that if someone breaks their 
hip and needs help, it is a very different person than someone 
who was resistant to getting care at home and now has dementia 
and finally has accepted to create this friend relationship 
with a live-in caregiver.
    Those relationships tend to last 4 and 5 and 6 years, which 
now the companionship exemption if it goes into effect the way 
the President wants, would be eliminated.
    So we have to look at the individual who is getting the 
care. In terms of liability, there is no liability because 
individuals who believe that their parents need different 
shifts request it. Children know their parents best. They come 
to us when they are really sick. We facilitate it.
    Mr. Rokita. Is your testimony that the Department of Labor 
activists don't know----
    Mr. Bensmihen. It is my testimony that----
    Mr. Rokita [continuing]. Don't know their families and the 
clients as well as their----
    Mr. Bensmihen. They don't know this industry.
    Mr. Rokita. Right.
    Mr. Bensmihen. They do not know this industry.
    Mr. Rokita. Turning to the turnover, Ms. Kulp makes mention 
in her testimony both written and verbally that her business 
model is superior to each of yours the way she set it up and 
reduces the turnover. Can you speak to turnover in your 
companies and industry? Is it a problem?
    Ms. Andrews first.
    Ms. Andrews. Turnover certainly across the country is an 
issue in this industry, but I don't believe that it is related 
specifically to----
    Mr. Rokita. Hours worked?
    Ms. Andrews [continuing]. Hours worked. I think often times 
we use employee populations that are professional caregivers, 
but we also use nursing students. Where I live, we have four 
nursing schools that we draw on for our employees, and so there 
is an innate turnover with that population as they continue on 
in a different level of professional care, but our core 
caregiver groups are very consistent and stay with us. Many 
have been with me as long as I have owned to the agency----
    Mr. Rokita. Thank you.
    Ms. Andrews [continuing]. Over 10 years.
    Mr. Rokita. Thank you.
    Mr. Bensmihen? Same question.
    Mr. Bensmihen. I deliver a consumer directed model, which 
means that the caregiver and the client decide how much they 
want to pay and whom they want to hire. Our job as a licensed 
entity is to make sure that their credential is verified and 
screened.
    I have to say the turnover, the way it is set up now, is 
minimal. It is nonexistent because they have chosen their 
caregiver. They have figured it out. They don't worry about the 
issue of overtime because they have made the choice.
    I will tell you as a person with a disability, people who 
are disabled for the most part find it offensive when an 
employee-based agency that is normally run by a nurse--I am a 
social worker by training--that is normally run by a nurse tell 
you how many hours of care you need and how you have to govern 
your life. I have been disabled a lot longer than a lot of 
these individuals have been nurses.
    Mr. Rokita. Thank you very much.
    Turning now to the idea of why the Department of Labor has 
chosen to go down this road, I am wondering if either of you, 
Ms. Andrews or Mr. Bensmihen, have heard complaints from 
employees about the hours worked or the wages or are there 
shortages? I think this goes to Mr. Kline's, Chairman Kline's 
question, in your industry. Why isn't the free market working? 
Why isn't free enterprise working here? Why isn't there supply 
meeting demand as the Department of Labor would have you 
believe?
    Mr. Bensmihen. Our caregivers are very happy with working 
their 50 and 60 hours with the same exact individual. Our 
caregivers are very happy to work in the live-in pool if you 
will. It is a different caregiver.
    You have to understand as someone who runs a licensed state 
professional business, I have a pool of caregivers who are 
live-in, and that is how they are distinguished. That is what 
they want to do.
    That is how they want to deliver their services, and I have 
a pool of caregivers that want to work hourly. They are 
different individuals. In the case that Ms. Kulp mentioned 
earlier, that is an individual who chooses to work hourly, and 
yes, we figure out a way to have different caregivers----
    Mr. Rokita. Do you believe your employers are smart enough 
to make their own employment decisions?
    Mr. Bensmihen. I believe employees are smart and consumers 
are smart enough to make their own choices.
    Mr. Rokita. My time is expired. I yield to the chairman. 
Thank you.
    Chairman Walberg. I thank the gentleman.
    Now I recognize my friend from New Jersey, Mr. Andrews.
    Mr. Andrews. Thank you, Mr. Chairman, for your courtesy.
    I thank the witnesses for their preparation and their 
testimony today.
    Mr. Passantino, if I ask my neighbor to come over and help 
me rake leaves this weekend, I hope he is watching, is he my 
employee?
    Mr. Passantino. Do I believe he is your employee?
    Mr. Andrews. Yes.
    Mr. Passantino. I do not.
    Mr. Andrews. I agree. If I understand your testimony 
correctly, if my daughter would go next door and watch the four 
boys that my neighbor has, for a period of time, just because 
the parents were called out unexpectedly, and she is doing it 
as a neighbor, your concern is that this new rule somehow might 
categorize my daughter as an employee. Is that right?
    Mr. Passantino. Well, the regulations provide an exemption 
for casual babysitting and the only reason why you need----
    Mr. Andrews. But as you say in your testimony, before we 
get to the exemption, we have to get to the issue of who is an 
employee and who is not.
    Mr. Passantino. That is exactly right.
    Mr. Andrews. So are you concerned under that example that 
these regulations would classify my daughter as an employee?
    Mr. Passantino. Under the domestic services regs, the 
employment triggers at 8 hours in a workweek. So if she is 
doing it for more than 8 hours a week, then yes.
    Mr. Andrews. Where in the regulation does the regulation 
alter the definition of an employee?
    Mr. Passantino. I don't believe that it does.
    Mr. Andrews. It does not, as a matter of fact. So what is 
the basis of your claim then that the regulation is quote--
``converting friendship into employment?''
    If you just said, which I agree with you, that the 
regulation does not change the definition of employee, then how 
do you draw your conclusion that it is converting friendship 
into employment?
    Mr. Passantino. The fundamental basis of the regulation if 
you look in the preamble talks about this statement in the 
Congressional record about why the exemption is needed, and the 
exemption is needed because of a neighbor who comes to sit with 
a sick parent and if that is the need--is the reason----
    Mr. Andrews. Where does the regulation say that? And by the 
way, I read Senator Burdick's speech. I don't think that is 
what he says either, but I think we can resolve this dispute 
about a preamble--I don't know that we have ever had a U.S. 
Supreme Court case by the way decide on the preamble of the 
Constitution.
    Usually it is the therefore enacted clause that matters, 
but I looked at the FAQs that are available through the 
department's Web site and it says the following, ``What FLSA 
policies were not changed by the regulation?''
    Here is the answer, quote--``The final rule makes no 
changes to the department's long-standing regulations 
concerning whether an employment relationship exists.''
    Mr. Passantino. But what it does is has made it 
consequential. They have changed----
    Mr. Andrews. If I may, if I may. You just, I think, agreed 
with me that my daughter going next door to babysit because we 
are doing it as friends for our neighbors, she is not an 
employee. You agree with that, right?
    Mr. Passantino. I would agree with that.
    Mr. Andrews. Well then I don't understand this whole point 
about converting friendship. Give me an example where someone 
who is presently in a friendship relationship would now be 
treated as an employee under this rule. Give me an example.
    Mr. Passantino. So if your neighbor came to watch your sick 
parent and did so for 8 hours in that week, sat with them for a 
day, the regulations say that that person is a domestic 
services employee.
    Mr. Andrews. Where does the regulation say that?
    Mr. Passantino. In the definition of domestic services 
employee.
    Mr. Andrews. No, no, and that definition--right--is one 
that holds that within the FLSA, but let--I am stipulating here 
there is no expectation of compensation.
    My neighbor did this because we are good, good friends and 
neighbors. There has never been a discussion of me paying him 
anything. He has no expectation of that. You think he is my 
employee under these regulations?
    Mr. Passantino. I don't, but the Department of Labor in the 
past several years has focused on volunteers and interns 
neither of which have the expectation of compensation either.
    Mr. Andrews. No, no. You are a very good lawyer. You are a 
very good lawyer. ``In the past several years,'' really is not 
a very valid point. I just read you what the department said is 
guidance interpreting their own regulation that nothing changes 
in the long-standing definition under the FLSA of an employee, 
and you just agreed with me that it doesn't change.
    Mr. Passantino. In my opinion, it doesn't--that person is 
not an employee, but my opinion is not what matters when the 
Department of Labor comes knocking on the door.
    Mr. Andrews. No, what matters is what the Department of 
Labor says, and the Department of Labor says, and I am quoting, 
this is not from a preamble or someone's imagination. This is 
what is on their Web site. ``The final rule makes no changes to 
the Department's long-standing regulations concerning whether 
an employment relationship exists.''
    I think that settles this, and I think that your claims, 
that this converts friendship into employment, are completely 
specious and false.
    I yield back.
    Chairman Walberg. I am always amazed at two lawyers going 
after each other especially in the labor realm, so it is a 
show. [Laughter.]
    Appreciate that. Let me ask Ms. Andrews, your testimony 
highlighted a population that unfortunately has been often 
overlooked during the debates on this regulation.
    You referred to your business' service to disabled 
veterans, a unique and sadly growing area of service need. Can 
you speak to the kinds of needs and services your caregivers 
provide to these clients? And then secondarily, what changes do 
you anticipate in light of the Department of Labor's new 
regulations?
    Ms. Andrews. Thank you for that question. We are honored to 
care for our veterans through the Veterans Administration 
program in California.
    Many of the services are unique for our veterans because of 
the types of illness and issues that they have notwithstanding 
PTSD is one of the significant ones.
    For them, having a different caregiver in at a different 
time is not just an inconvenience, it is a often times a 
psychological trauma. We don't even go to do our supervisory 
visits without having them understand and know that we are 
coming because of some of the disease processes that goes on.
    So having a consistent, unique caregiver for a veteran is a 
very important component of their care. We actually hire a lot 
of our veterans, younger veterans to work in caregiver 
capacities, so it makes for a great mix because they understand 
the issues that are unique to veterans.
    Under the new rule, I have been working with our Veterans 
Administration so that we make sure that the time constraints 
will meet the new standard because they do not have the ability 
to pay the overtime or authorize it for their care.
    Chairman Walberg. Unique needs----
    Ms. Andrews. Yes.
    Chairman Walberg [continuing]. Demanding unique situations 
and considerations.
    Mr. Bensmihen, in your prepared statement, you refer to 
clients use of long-term insurance benefits to help them pay 
for services. You refer to some plans that will not 
automatically increase their weekly caps to accommodate the 
Department of Labor's new overtime requirements.
    Could these additional costs cause increases in the price 
of long-term insurance overall, and what is the potential that 
these clients will be dropped from this sort of coverage?
    Mr. Bensmihen. Thank you for the question. It is twofold. 
Number one, the people who bought the insurance bought it when 
they were healthy, so they bought it 10, 15 years before they 
were actually going to use it, and they bought it with the 
understanding of the companionship exemption that if you have a 
live-in--if you have a daily benefit of $200 a day, $200 a day 
was looked upon as an excellent benefit from one of these 
policies.
    The new regulations right now basically say that if you are 
going to pay someone--and I am making up a number just to keep 
the number simple--$10 an hour, after 40 hours of care, you are 
going to $15 an hour--just a regular time, $10 times 24 is 
$240. Right there, the policy that they paid for out of pocket 
is now null and void.
    I predict that the insurance industry will be at a big risk 
and there might be lawsuits. I don't know what will happen in 
the future because it wasn't intended. It was sold with good 
faith, but I don't know what is going to happen.
    Chairman Walberg. Unintended consequence that diminishes 
the ability for people to care for themselves, let alone care 
for their family----
    Mr. Bensmihen. Correct.
    Chairman Walberg [continuing]. Through no fault of their 
own, doing responsible planning, lost that.
    Mr. Passantino, in your testimony you raised a number of 
difficulties facing individuals who privately hire care 
providers for themselves, for themselves not third-party, but 
for themselves or for their loved ones.
    As these arrangements differ from those hired through third 
parties in that there is less of a traditional business like 
paper trail, how would the Department of Labor inspectors go 
about investigating and enforcing these regulations?
    Mr. Passantino. I think that----
    Chairman Walberg. Give us a good guess.
    Mr. Passantino. Given that 98 percent of the folks 
performing this work now are employed by third parties, I guess 
there is a limited sample on how we can know for sure, but a 
typical investigation involves either a complaint by an 
employee or a Department of Labor investigator deciding or 
manager deciding that they are going to conduct a particular 
investigation.
    They would talk to the employee and then they would talk to 
the employer, in this case the family. They would need to speak 
with family members and to speak to the employee to ascertain 
whether there was an exemption that would apply and what hours 
someone worked and what rates were applied as well.
    Chairman Walberg. Extremely difficult for an individual. 
Would you characterize it as that?
    Mr. Passantino. A family that was unaware of their 
recordkeeping obligations and specifically the fact that they 
had to keep track of what tasks were performed when, it would 
be very difficult for that family to prove.
    Chairman Walberg. Especially if they are not on-site the 
entire time.
    Mr. Passantino. Correct.
    Chairman Walberg. Thank you.
    My time is expired. I recognize Mr. Pocan for your 5 
minutes of questioning. Thank you.
    Mr. Pocan. Thank you, Mr. Chairman, and thank you for 
having this hearing.
    I appreciate the witnesses coming, especially in this 
industry. I really appreciate the work that you are doing. I, 
20-some years ago, I served on a Dane County Board of 
Supervisors. I served on the human services board and in my 
county board district I had a large population of people with 
disabilities who had caregivers and it was really important, 
and I will never forget--and this is with 2 decades of public 
service--talking to folks, and one of the biggest issues they 
had was that their caregivers would turn over two or three 
times in a year, and they didn't have that quality of life that 
they so needed, and it was a really big issue, and it really 
stood out, and so I have always remembered that.
    So when I was in the legislature, one of the things that I 
was able to do was help create a quality healthcare commission 
working with people who were some of the disability advocates 
as well as some of the other folks to see that one, we could 
try to help on overall wages so that people could stay in the 
industry longer, but also on things like helping people have a 
good registry for people in case someone wasn't available.
    Really that continuity of care just was reinforced 
throughout those 2 decades, so I was really glad to see 
everyone agreeing how important it is that we have people who 
can still stay in their homes. It is more cost-effective. It is 
far better for the person overall, and I love the term heart 
work, how you referred to the work because I think most people 
I know in this area really, that would definitely be the 
definition of what they are doing.
    I did notice though, Ms. Kulp, your body language during a 
question you really wanted to answer, and I would like to give 
you a chance because I saw how you were chomping at the bit to 
do it.
    The question specifically on turnover not specifically 
related to hours worked. Can you just address that a little bit 
more because I know you really want to answer that?
    Ms. Kulp. I think that we see--and I just want to--I think 
somebody said that our model is superior to other models, and I 
don't believe that. I just think it is a little bit different, 
and my point being that you can actually pay people overtime 
and still make a profit. I am as interested in making a profit 
as everybody here is, so I think there is great turnover.
    I think part of it has to do with yes, people are burned 
out because they are working too much, but there is also a 
part-time workforce that could be utilized. If they got 
fulltime hours then you might actually decrease overtime that 
way, so it is a balancing act. This is a very, very intensive, 
hard business.
    My colleagues know that you always are balancing the needs 
of the consumer, the worker, the family, and trying to do the 
best you can, so I think this just gives us an opportunity to 
pay workers what they are worth.
    Most workers really appreciate that. I have had workers 
say, ``I am happy to have overtime, but I want my colleague to 
have a job also, so give them my time so that everybody has 40 
hours.'' That is the kind of people I work with.
    Mr. Pocan. Yes, and definitely I can tell you all care very 
much about what you are doing. The problem is in the industry 
we do know about 40 percent of the people in these professions 
are receiving public benefits like food stamps and Medicaid and 
however we can help lift that tide.
    I have been an employer for 25 years. Both of my parents 
were small business owners, so I know much of what you are 
doing on a regular basis, you are a jack of all trades in doing 
things.
    Let me ask the question though too, if I could, Ms. Kulp, 
in Pennsylvania I believe your state you already has some of 
these provisions in place. How has it affected the industry? 
Have you had problems for the companies or for turnover? Has it 
had any negative impact?
    Ms. Kulp. No, I think it has actually--our revenue is 
growing. We now have about $21 billion of revenue from home 
care. We predict that it will go up to $25 billion or $26 
billion by 2020.
    We have seen many, many homecare companies open up, so it 
hasn't affected our business at all. In fact, our business is 
growing just like it is across the country because the need is 
so great.
    Mr. Pocan. Sure. And when you talked about that 60 to 70 
percent retention rate, I was really interested to hear that 
because the industry does have potentially a high turnover. 
What do you attribute that to, that 60 to 70 percent?
    Ms. Kulp. That we keep people?
    Mr. Pocan. Yes.
    Ms. Kulp. Well I think again it is having decent wages. We 
actually give people health benefits, which we have done since 
the beginning of when we started, and giving people adequate 
supervision, training, really valuing the work that they do, 
continuing to talk about how you can be professional, how you 
can do this work better, so really elevate the job.
    I think that any of us who need, who want, who have a 
homecare person taking care of ourselves or somebody in our 
family wants that kind of dedication and professionalism in the 
person that does it.
    We want that person to be trained. We want that person to 
be really good at what they do and really like their work 
because if they don't, it is not so great for the person on the 
other end.
    Mr. Pocan. Sure. And I appreciate that because I have a 
similar business model. We pay over double the minimum wage to 
our lowest paid employee, but I have the luxury of having 
people stay around and that makes my life a lot easier.
    I didn't lose my hair over stress from that. I lost that 
way, way long ago, but I do like the fact that, just to wrap up 
with it, that you mentioned that gas, healthcare costs, and 
some of the reduced payments are some of your major drivers, 
and we appreciate that.
    Chairman Walberg. I thank the gentleman.
    I probably kept a little bit of the remaining hair that I 
have as a result of people like those in our witness panel 
taking care of my mother and releasing some of the stress and 
the needs that I had, so what little bit I have left, I am glad 
it still there.
    I am going to suggest that--no, I am going to do more than 
suggest, we are going to do this--have a second round. A little 
bit flexible--more of a discussion. Feel free to jump in and 
seek recognition, but we won't do it as a normal 5-minute, 5-
minute, 5-minute.
    As well as the panel, we will offer that opportunity as 
well to more of a discussion to just maybe get a few additional 
questions and issues brought forward. Let me start as my 
colleagues are thinking a bit here.
    I wanted to ask Mr. Passantino, specifically we talked 
about the individual purchaser of home companionship care, but 
going back to the third party, I am interested on your thoughts 
on how much time, additional time homecare employers will need 
to spend to comply with the new regulations because time is 
money and regulations add generally more challenges to making 
sure that you cover all the bases.
    Any guesstimates?
    Mr. Passantino. Surely they are going to have to read the 
regulations and the facts sheets and familiarize themselves 
with the requirements under the rule and that is going to take 
a couple of hours I am sure.
    Tracking the hours that someone works obviously requires 
additional staff and additional mechanisms in place to 
understand how much time a particular employee is spending on 
the jobsite doing the work that they do.
    I would say that in order to--once the third-party employer 
is involved the exemption is gone, so the issue about tracking 
the percentage of time that one of these workers performs in a 
particular task goes by the wayside unless it is a third-party 
employer who wants to preserve the exemption for the 
individual.
    In the rule, the department maintains the exemption for an 
individual user even in those circumstances where there is a 
third-party employer, but the only way that the individual can 
establish that they are entitled to the exemption is if they 
have the records to prove that, as we talked about earlier.
    Once you have given that opportunity, once you have given 
that responsibility over to the third-party, the individual is 
not necessarily going to pay attention to that, so in a case 
where there is a third-party employer, if they are going to do 
right by the individual, they will also need to track the hours 
that the worker spends on those particular tasks, which again 
is another, an entirely different level of hours reporting and 
understanding what the workforce is doing at a particular time, 
so it is a significant amount of time spent to do that.
    Chairman Walberg. Ms. Kulp, I see----
    Ms. Kulp. Yes, my understanding is that it actually exempts 
the individual employer so that if somebody wants to go ahead 
and hire their neighbor to take care of them, they are not part 
of this.
    Mr. Passantino. Right, so the exemption continues to exist 
for the individual employer provided that they still--the 
worker still meets the duties obligations.
    Chairman Walberg. And the 20 percent issue, right?
    Mr. Passantino. And the 20 percent issue. In the context of 
where there is a third-party employer, there likely is going to 
be what is called joint employment between the person, the 
individual using the services and the third-party employer.
    The Department's position in the regulation is that the 
third-party employer can't use the exemption but that doesn't 
eliminate the ability of the individual to use the exemption, 
but the individual still has to prove that the worker spent 
less than 20 percent of his or her time on the tasks that are 
identified as exemption defeating on the care services.
    Chairman Walberg. So my mother with dementia would somehow 
have to keep records to make sure that 20 percent wasn't 
crossed? Is that what I am hearing?
    Mr. Passantino. Someone would.
    Chairman Walberg. Someone would. My wife who is outside of 
the home for a good portion while a home companion care 
provider was there would have to figure that out.
    Mr. Passantino. Correct.
    Chairman Walberg. So again, a challenge.
    Mr. Passantino. A significant challenge.
    Chairman Walberg. Mr. Rokita? You had----
    Mr. Rokita. I thank the chairman. Just a couple of follow-
up points, and I appreciate the chairman going a second round.
    Mr. Passantino, witness to your exchange with another 
member of the committee who practiced law in the past but 
doesn't currently, I thought it was needlessly rude the way 
that exchange ended. Not that I am not for being rude when 
rudeness is required, but I don't think it was required here, 
calling your claim specious.
    Do you want to address that on the record?
    Mr. Passantino. I believe that when you look at the 
totality of the department's regulation and the activities that 
they have identified as falling within the scope of the 
exemption, the only conclusion you can draw is that the 
department believes those activities to be employment, and then 
the question of whether compensation and how compensation 
factors into that determination is open.
    The department has spent a lot of time focusing on 
investigations and guidance with respect to volunteers and 
interns and has largely eliminated the ability of for-profit 
entities to use either one of those.
    So you are looking at a situation where the department is 
attacking employment relationships that lack compensation. 
There is no pay in those circumstances, and that is what they 
would be doing here.
    You would be looking at a circumstance where maybe there is 
pay, maybe there isn't pay, but there is no guidance at all on 
when the department is going to determine someone becomes an 
employee for the purposes of this rule.
    Mr. Rokita. Okay, thank you.
    I want to focus on your employees for a second, Ms. Andrews 
and Mr. Bensmihen. Do you have employees who ask you for more 
hours?
    Ms. Andrews. We do often.
    Mr. Rokita. And Mr. Bensmihen?
    Mr. Bensmihen. Yes.
    Mr. Rokita. How often do your employees say, ``No, I don't 
want those hours. I want you to higher more employees so that 
we all can be treated equally.''
    Ms. Andrews. I can honestly say I have not heard them say 
that.
    Mr. Rokita. How long have you been in business?
    Ms. Andrews. I have had my own business for over 10 years.
    Mr. Rokita. Mr. Bensmihen, same set of questions.
    Mr. Bensmihen. Yes, they have never said that. I want to 
make something very clear. Everyone, at least for myself, I 
believe that caregivers should make more money and if they are 
able to make more money, they should get over time.
    The way the exemption is currently in effect, it gives 
everybody that opportunity. In other words, we have clients, we 
have children who say, ``My mother's caregiver is so fantastic, 
I want her to get overtime even though there is an exemption.''
    They can pay for it, but I want to bring everyone's 
attention to Justice Breyer in the Coke v. Long Island case. He 
made a very funny comment that still rests with me. He said, he 
said, ``I would pay for a caregiver for my mother. I am not 
sure Justice Scalia would, but I would pay for a caregiver for 
my mother, but I can't imagine,'' said Justice Breyer, ``I 
can't imagine the law was written for nine Supreme Court 
justices who can afford to pay for it. It would have to affect 
everyone who needs home care.''
    So again, the exemption the way that it is now, if someone 
has the ability to pay for it, it can, but also for those who 
can't afford to pay for it, it protects them to maximize their 
independence currently at home.
    Mr. Rokita. Great. Thank you for your testimony.
    Ms. Kulp, I didn't get to ask you any questions in the 
first round. I appreciate your--I don't know if it was 
clarification, I don't want to put words in your mouth--but you 
said no, I don't think that my business model is superior 
necessarily to your two colleagues, it is just that it is 
different, and then you went on to say, well I have employees 
that want to make sure their fellow employees have the same 
opportunity for the same kind of hours.
    Do you think that is the mission of the Department of Labor 
in your personal opinion?
    Ms. Kulp. No I don't think it is the mission of the 
Department of labor, but I do think that if you are going to 
have a successful company--our company happens to be a worker-
owned company so that the workers actually----
    Mr. Rokita. An ESOP?
    Ms. Kulp. No, it is not an ESOP.
    Mr. Rokita. Okay. Well
    Ms. Kulp. It is a co-operative.
    Mr. Rokita. Okay.
    Ms. Kulp. So what it does in this world is really put 
another incentive for workers----
    Mr. Rokita. So that is your choice--and I appreciate you 
saying you don't think it is superior, but I just want you to 
understand in my opinion, and I think in fact this is the case, 
your testimony here today in favor of this Department of Labor 
rule, which will have an effect across the country, will be the 
law of the land, so to speak, at least administratively, is in 
effect saying that your business model is superior to your 
colleagues'.
    Ms. Kulp. Actually what it is saying is that I think that 
direct care workers deserve overtime protection. That is what I 
am saying.
    Mr. Rokita. And I appreciate your opinion. And let's let 
the free market decide if the rest of the country should adopt 
it or not or maybe you should expand your business into your 
competitor states. I don't know, but I don't think we need the 
Department of Labor, Mr. Chairman, to decide that.
    I yield back.
    Chairman Walberg. Thank the gentleman.
    Mr. Pocan?
    Mr. Pocan. Thank you, Mr. Chairman. I just want to follow 
up on that. I think actually your presence here is just saying 
there are various business models, and in a state that has 
already had some of this in place, things have gone well.
    You haven't gone out of business. Your other friendly and 
maybe not so friendly competitors haven't necessarily gone out 
of business, that it is a model that does work, so the fact 
that the model does work in these other states, it will work 
nationally.
    So I think it makes perfect sense that people from 
California, Florida, and Pennsylvania here to talk about their 
various experiences, because wages probably are a little more 
in California maybe than some other states and you are bringing 
that experience, Ms. Andrews.
    But, Ms. Kulp, I think that, that probably was not entirely 
fair. I am glad you are on the panel. I am glad all of you are 
on the panel offering your unique perspectives, and I really 
appreciate the work again you are doing. I just wanted to add 
that thank you.
    Ms. Kulp. Thank you.
    Chairman Walberg. I thank the gentleman, and I thank the 
panel for the responses and it has been very helpful to us.
    I now turn and recognize my friend, the ranking member, Mr. 
Courtney, for closing statements.
    Mr. Courtney. Great. Thank you, Mr. Chairman.
    I want to again thank the panel for your really outstanding 
testimony here today. I also would be remiss if I didn't 
recognize Ms. Andrews as ably assisted today by Bill Dombi in 
the back who was a law school classmate of mine at the 
University of Connecticut many, many years ago. And even though 
maybe I don't totally line up with the testimony that you two 
have worked on here today, again, he is an outstanding lawyer 
and a good guy.
    But back in those days when we again had constitutional law 
classes I can remember again as long as we are quoting Supreme 
Court justices, Louis Brandeis once observed in our federal 
system. States can act as laboratories for democracy.
    In other words, if you look at the great progress this 
country has made over the years in terms of workers 
compensation, basic protections for working people, it didn't 
happen from Washington first.
    It happened in states first, and over time, that experience 
kind of bubbled up to the point where we again moved forward 
with the national standard to recognize and protect people who 
are injured on the job or again needed basic protections, and 
by the way the minimum wage and overtime started as state 
initiatives.
    So here we are today with a sector of the U.S. economy that 
has been excluded from the protections of the Fair Labor 
Standards Act up until now. Again, initially we had domestic 
workers like cooks and gardeners who were excluded from the 
Fair Labor Standards Act, but over time as a nation, we moved 
forward to include them into those and recognize them as again 
on par with the rest of society, and I think that is what the 
Department of Labor is attempting to do.
    The good news is we live in a country where there is no 
final word, where things are absolutely forever engraved on 
it--on all of us as citizens that we still have the opportunity 
like we are today to point out issues.
    And I talked to Secretary Perez after these standards were 
adopted and again, that department welcomes input. In fact, 
that was one of the reasons why there was a 1-year hiatus to 
again continue the dialogue, but the notion that we are going 
to repeal it or we are just going to go back to the status quo, 
that is not happening.
    Okay? So we have got to recognize that the people who do 
this amazing work every single day for families are going to be 
included just like other sectors of our country in terms of 
these basic standards and protections.
    And again, what I would just to say to Ms. Andrews and Mr. 
Bensmihen, when the time comes to protect the funding for your 
agencies in terms of Medicaid, you will have no stronger allies 
than my colleagues here on this side of the rostrum.
    The Ryan budget, which will block-grant Medicaid and cut it 
by a third poses a far greater existential threat to the 
delivery of these services for low income Americans than 
anything we are talking about here today, and I say that as 
again someone who did those budgets at the state level for 
many, many years.
    So again, I welcome the hearing here today to talk, really 
put the spotlight on the value of what you do because frankly 
during the health care reform debate, long-term care was by and 
large omitted by both sides and frankly, when we look at the 
demographics of this country we had better get moving fast in 
terms of trying to upgrade our systems because we are going to 
need it desperately.
    And again, the projection of growth that you mentioned here 
today and that is based on, I am sure, the structure of 
Medicaid staying reasonably in place, which again we have a 
budget on the table right now which would just obliterate that 
structure and that is something that we need to stay focused on 
when we talk about the challenges of your industry.
    So again, I would just pass along to you my dialogue with 
the secretary that he does not view this as a completely 
immovable set of rules, that they are still willing to continue 
that dialogue, and I would encourage you to work with our 
offices and the department to continue that process.
    And with that, I yield back, Mr. Chairman.
    Chairman Walberg. I thank the gentleman. And certainly it 
is very clear that on whatever side of this dais we sit, we 
agree that the work that you do is unbelievably important and a 
service that many people wouldn't do.
    Ms. Andrews, Mr. Bensmihen, Ms. Kulp, the fact that you are 
in the industry and providing the services and doing it out of 
a heart of care for individuals is huge and the people that you 
are employing, from my own experience with my mother watching 
people who did this day in and day out for a period of a couple 
of years are exceptional people with unique abilities, things 
that I wouldn't do frankly.
    I don't say that to my shame. I just say that I am not 
plumbed that way. For my mother is one thing, but to do it for 
others and with such care, it is amazing.
    Mr. Passantino, I appreciate your involvement in the whole 
issue and the insights that you bring to the table here.
    Mr. Bensmihen, I will selectively select you out for unique 
praise. One who also receives the care and lives it, your 
unique ability, not disability, but the unique ability to 
understand and present the case from one who has experienced it 
and who has not been held back, but has pressed forward is, I 
think I can say for all of my colleagues, is inspiring. Thank 
you for being here.
    We have asked the administration by letter to provide us 
with information, basically to say define the problem. Tell us 
why this regulation is needed. Not to establish the remedy 
before you define for us the problem. To date, we have not 
received that information, and I hope that will be forthcoming 
now that the rule has been put out.
    I see 15 states including my own of Michigan that have 
taken this approach, and I would concur with my colleague, the 
ranking member, that states are laboratories of reality in what 
can work, what is needed, but they are also sometimes 
laboratories that put things together that really ultimately 
are not necessary but they are states and they are doing that, 
and I would uphold their rights to do that.
    For the federal government to come in and make a sweeping 
policy change following the pattern of 15 states versus the 
rest of the nation that have had the opportunity to do that as 
well I think is suspect, and I think ought to be questioned, 
because indeed in the time we live right now with an economy 
that is sluggish at best, in an economy that is producing less 
middle-class as opposed to more, it is taking more people out 
of it.
    And while my wife and I as a result of the goodness of the 
taxpayer have had the ability to assist my mother in her final 
years with this type of care, plenty of my neighbors 
surrounding me would not have that same benefit or that same 
choice.
    The cost would have been prohibitive for them to do it. My 
mother had the benefit of having the same caregivers day in and 
day out when they were brought into the home to the point that 
it was no frustration to her to see anyone different there 
because they weren't different.
    The only one different was my wife that came in, and that 
was normal too, and me, if she recognized me, was not a concern 
to her.
    Those are issues that are real life, and I think that just 
simply making a sweeping plan that will ultimately cut people 
out, I believe, from the ability to have that type of care, the 
ability to be able to provide for themselves, the ability to be 
able to pay for it, and equally importantly for home health 
caregivers to have jobs that meet their needs, provide the 
level of income that they have to have to pay for their own 
health care or their mortgage or you name it, I think will be 
severely stressed by this.
    This isn't the final action that we will take, but this is 
certainly a great first step this term, subsequent to the rule 
being put out, that we can address, and we will continue to do 
that and work together as a subcommittee and as people 
interested in the issue to come to a suitable conclusion.
    There being no further business, the committee stands 
adjourned.
    [Additional submissions of Mr. Walberg follow:]

              Prepared Statement of James Mark, President,
                     Private Care Association, Inc.

    The Private Care Association (``PCA''), since 1977, has been the 
voice of private duty home care. PCA's membership is made up of home 
care registries that refer self-employed caregivers to provide 
assistance with activities of daily living such as bathing, dressing, 
lifting/transferring, continence care, feeding/meal preparation, 
companion care, homemaker services and nursing services in the client's 
home. The consumer-directed model of care is based on the idea of 
consumer choice in home care options and gives consumers the right to 
make decisions and direct the care needed. The principal advantages of 
consumer-directed care are that it costs less to the consumer, the 
caregivers typically earn more, it allows consumers to individually 
select caregivers, it provides greater continuity in caregiver 
relationships, and it supports caregiver entrepreneurship.
    The final regulations (``the ``Final Regulations'') the U.S. 
Department of Labor (``DOL'') recently issued that modify the 
companionship exemption \1\ under the Fair Labor Standards Act 
(``FLSA'') \2\ will have far-reaching effects on the consumers who need 
home care to remain independent as well as on the caregivers who 
provide the care.
---------------------------------------------------------------------------
    \1\ 29 U.S.C. Sec. 213(a)(15).
    \2\ Application of the Fair Labor Standards Act to Domestic 
Service, 78 Fed. Reg. 60454 (Oct. 1, 2013) (to be codified at 29 CFR 
Part 552).
---------------------------------------------------------------------------
    Absent some type of change, the ultimate impact on consumers and 
caregivers resulting from the collateral damage the Final Regulations 
will inflict on home-care registries will be fewer home-care options 
for consumers; and a less efficient marketplace for freelance 
caregivers and those consumers who wish to self-manage their own home 
care. PCA believes the problems caused by the Final Regulations could 
be addressed (i) by the Congress enacting legislation that reinstates 
the companionship exemption; but this time using language that protects 
against a subsequent administrative repeal of the exemption; or (ii) by 
the Congress or the DOL providing clarification that will enable 
caregiver registries to continue operating their respective businesses 
without fear of being held to be a ``third-party employer'' for 
purposes of the FLSA of the caregivers they refer to clients.

I. The Role of Caregiver Registries in the Home-Care Marketplace
    PCA members occupy a unique position in the marketplace for home 
care. Home care registries, by definition, are not ``providers'' of 
home care. Instead, a caregiver registry is a caregiver referral 
source. Its role is to facilitate the marketplace for self-employed 
providers of home care and those consumers who seek to self-manage 
their own home-care arrangement. A registry accomplishes this by 
providing two principal services, namely, (i) conducting rigorous 
background screening and credential verification of caregivers, as a 
condition of admission to the registry; and (ii) matching caregivers 
with consumers on a ``just-in-time'' basis.
    The caregiver vetting procedure provides a critical consumer 
protection for the vulnerable population that utilizes home-care 
services. Because the typical recipient of home care is an elderly or 
disabled individual, and the caregiver will be alone with the care 
recipient in the care recipient's home, care recipients and their 
respective families highly value the third-party vetting process that a 
caregiver registry provides.
    The matching service that a caregiver registry provides is vital 
for this marketplace to flourish. This is because both sets of a 
registry's clients, namely, the freelance caregivers and the consumers, 
are highly disaggregated populations; neither is easily identifiable.
    Caregivers commonly operate out of their own homes and advertise 
their services through informal channels or through caregiver 
registries. Consumers who seek caregivers reside in their home or a 
retirement facility. The disaggregation of these ``buyers'' (consumers) 
and ``sellers'' (freelance caregivers) of home-care services presents a 
complex marketing challenge to caregivers seeking to find consumers who 
are seeking a caregiver. A caregiver registry offers a solution to this 
marketing challenge. It enables a caregiver to identify consumers who 
are seeking caregivers, and enables a consumer to identify caregivers 
who meet the consumer's home-care needs and who already have passed a 
rigorous third-party vetting process.
    If caregiver registries did not exist, the marketplace for 
freelance caregivers would continue to function; but it would function 
with less efficiency and with greater risk to the consumer. Internet-
based options already exist, which enable freelance caregivers and 
consumers to find each other. The principal distinctions between a 
registry and the internet options available at this time is that the 
internet options do not offer the rigorous caregiver vetting process 
that registries offer, and they lack the human interface that 
registries offer, which many elderly and infirm clients prefer.

II. The Final Regulations Create Unmanageable Legal Risks for Caregiver 
        Registries
    In theory, caregiver registries could be viewed as bystanders to 
the changes effected by the Final Regulations. This is because a 
caregiver registry, by virtue of being a referral source, but not a 
provider of any home care, would not be a ``third party employer,'' as 
contemplated by the Final Regulations. In practice, this is less clear. 
The ambiguity facing caregiver registries is illustrated by the 
Preamble to the Final Regulations, which includes an example of a 
caregiver registry that is ``likely not'' a third-party employer of a 
caregiver.\3\ The fact that the conclusion is hedged, by the ``likely 
not'' language, suggests that there is no clear line at this time that 
can differentiate between a caregiver registry and a third-party 
employer.
---------------------------------------------------------------------------
    \3\ 78 Fed. Reg. 60454, 60484.
---------------------------------------------------------------------------
    The consequences of this ambiguity can be existential to a 
caregiver registry. The prospects of double damages \4\ for failures to 
pay overtime and/or minimum wage to caregivers for the past two 
years,\5\ plus attorneys' fees,\6\ is a financial risk that few 
caregiver registries are sufficiently large and profitable to 
withstand. The cost of litigating one of these cases is outside the 
reach of many registries.
---------------------------------------------------------------------------
    \4\ 29 U.S.C. Sec. 213(a)(1)(b).
    \5\ 29 U.S.C. Sec. 255(a). In the case of a willful violation, the 
statute of limitations extends to three years after the cause of action 
accrued.
    \6\ 29 U.S.C. Sec. 213(a)(1)(b).
---------------------------------------------------------------------------
    By virtue of its role as a referral source, a caregiver registry 
does not set the hours worked by a caregiver or the rate of pay a 
caregiver receives for his or her services. Instead, these matters are 
controlled exclusively by the client and the caregiver--who are the 
only decision makers in a home-care relationship created by a caregiver 
referral. Once a caregiver registry refers a caregiver to a consumer, 
the consumer and the caregiver determine whether they will work 
together, and, if so, the number of hours the caregiver will work for 
the consumer and the rate of pay that the consumer will pay the 
caregiver. If those parties determine that the caregiver will work 50 
hours per week, the consumer may, or may not, pay overtime rates for 
the ten hours worked in excess of 40 for the week. In that case, the 
caregiver registry could be liable for the unpaid overtime if it were 
determined to be a third-party employer.
    What makes this dilemma especially acute to a caregiver registry is 
that if it were to exert control over the matters that expose it to 
potential FLSA liabilities, e.g., by requiring a client to pay overtime 
when required, or by prohibiting a caregiver from working more than 40 
hours per week, these actions would compromise the registry's 
independent-contractor relationship with the caregiver for purposes 
outside the FLSA, e.g., federal employment taxes, tort law and state 
unemployment taxes. It follows that the ultimate effect of the Final 
Regulations on caregiver registries is to create for them a prodigious 
financial risk with no meaningful way to manage the risk.

III. The Damage the Final Regulations Will Inflict on Caregiver 
        Registries Will Not be Contained, but Will Also Harm Care 
        Recipients and their Caregivers
    Commencing January 1, 2015, when the Final Regulations become 
effective, a caregiver registry will be in a regulatory environment in 
which it will operate day-to-day not knowing whether it will be sued by 
private plaintiffs or investigated by the DOL, and required to pay a 
sum that could put it out of business and potentially require its owner 
to file personal bankruptcy, if held personally liable. Obviously, this 
is not a pleasant prospect.
    PCA believes a registry could react to this environment by either 
converting to an employee-based agency, which will enable it to control 
the new FLSA risks; or by continuing to operate as a registry, albeit 
with the new FLSA risks. Of course, some caregiver registries might 
choose to simply close the business, based on an assessment that the 
new legal risks are intolerable.
    Registries that choose the first option and convert to an employee 
based agency will move into an entirely different type of business 
model that already is very crowded with many long-established agencies. 
Such a conversion would involve learning how to operate a completely 
different type of business that generally will require a different type 
of license at the state level.
    To the extent that caregiver registries were to choose this option, 
consumers would be left with fewer options for meeting their home-care 
needs. As noted, a caregiver registry facilitates the consumer-directed 
home-care model where the consumer self-manages his or her own home-
care arrangement. An employee-based agency offers a fundamentally 
different type of home-care solution, commonly referred to as agency 
directed. These agencies are ``providers'' of home care. This option is 
more expensive to the consumer, but it involves an agency being 
actively involved in the home-care delivery process. This is a 
principal distinction from a registry, which, as noted, is not a 
``provider'' of home care but is instead a referral source. It follows 
that in markets where caregiver registries convert to employee-based 
agencies, consumers will be left with fewer choices available for 
meeting their home-care needs. Instead of being able to choose between 
the agency directed and the consumer-directed home-care options, as 
they currently can, they will be left only with the more expensive 
agency directed option. Of course, a degraded version of the consumer-
directed home-care market would continue to exist, but without the 
human interface and third-party caregiver vetting process that 
registries offer. The consumers who continue to self-manage their own 
home care, by engaging caregivers on their own, would be exposed to a 
higher risk of exploitation or abuse.
    Registries that choose the second option and continue operating as 
registries will need to have a high tolerance for risk. As noted, 
caregiver registries are predominantly small family owned businesses. 
But even the larger registries are not safe, as the larger the 
registry, the larger the potential FLSA damages. Because of the 
relatively thin referral fees that caregiver registries commonly charge 
for their services, a decision holding a registry liable for overtime 
and/or minimum-wages owed to caregivers for the past two years could 
jeopardize virtually any registry's status as a ``going concern.''
    The preferred solution to this dilemma is for the companionship 
exemption to be reinstated. If that is not viable, it is critical that 
clarification be provided on how a registry can avoid ``third-party 
employer'' status. Because of a registry's inability to control a 
caregiver's hours of work or rate of pay, it has no ability to manage 
this new FLSA risk. Since it cannot manage the risk, its only viable 
strategy forward is to avoid the risk. To avoid the risk, a registry 
needs clarification on how it can operate its business and avoid 
``third-party employer'' status.
    PCA submits that to subject caregiver registries to this type of 
dilemma, namely, an existential financial risk with no ability to 
manage it, is highly inequitable to the registries; and is contrary to 
the best interests of home-care consumers and caregivers. Caregivers 
rely on registries to identify client opportunities; and consumers rely 
on registries to obtain immediate access to professionally vetted 
caregivers.

IV. The Adverse Impact of the Final Regulations on Caregiver Registries 
        Can Be Addressed
    PCA respectfully offers two possible options for addressing the new 
FLSA risks to caregiver registries that the Final Regulations create, 
namely, (i) the Congress enacting legislation that reinstates the 
companionship exemption; but this time using language that protects 
against a subsequent administrative repeal of the exemption; or (ii) 
the Congress or the DOL providing clarification that will enable 
caregiver registries to continue operating their business without fear 
of being held to be a third-party employer for purposes of the FLSA of 
the caregivers they refer to clients.
    The PCA would appreciate the opportunity to work with the 
Subcommittee on these important issues.
                                 ______
                                 

       Prepared Statement of Hon. Lee Terry, a Representative in
                  Congress From the State of Nebraska

    Thank you, Mr. Chairman, for allowing me to give a statement on 
this incredibly important issue. We are here today to examine a rule 
that has been a long time coming and which I have fought every step of 
the way. I have opposed this rule because it will render in-home care 
for many seniors and individuals with disabilities unaffordable.
    My constituents are especially concerned about the Department of 
Labor's final rule. Two major companionship services providers are 
headquartered in my district. These two companies have provided 
essential services to disabled and elderly individuals who want to live 
at home for years and employ thousands of companionship care workers 
around the nation. When this rule goes into effect, there is no 
question that these employers will find it more difficult to employ 
companion workers.
    Fighting against proposals to repeal companionship care's exemption 
from the Fair Labor Standards Act (FLSA) has been an uphill battle. 
Last Congress, my legislation, H.R. 3166, would have statutorily 
exempted companionship care services from the FLSA. This would have 
taken away the Department of Labor's discretion in exempting 
companionship services from FLSA requirements.
    Proponents of the Department of Labor's new rule argue strenuously 
that workers in companion care settings ought to have the right to 
minimum wage and overtime pay. I believe that companion care workers 
deserve a great deal of respect and I have a deep admiration for the 
job they do.
    In the 111th Congress, I introduced H. Con. Res. 59, which 
recognized caregiving as a profession and encouraged the Department of 
Health and Human Services to educate those in need on the different 
options available for care settings. That legislation passed the House 
387-0 and the Senate by Unanimous Consent. I think Congress agrees with 
me that the profession is incredibly important, especially in light of 
the fact that about 10,000 people turn 65 every day.
    But the admiration we have for those who provide companionship 
services cannot allow us to leave seniors and the disabled behind. I 
cannot support a redefinition of the companion care labor market on the 
backs of the very clients these workers are helping. The rights of 
employees have to be balanced with the civil rights of the elderly and 
individuals with disabilities.
    Under the Americans with Disabilities Act, individuals with 
disabilities have the right to be cared for in a setting of their 
choosing. The new rule puts this right in serious jeopardy for the most 
economically disadvantaged members of the disabled community.
    The state officials charged with distributing federal funding for 
care to a setting of an individual's choosing are going to have a 
tougher job when this rule goes into effect. By redefining 
companionship care, the employer-employee relationship becomes a 
problem in a number of care settings. A person caring for a relative 
may be considered an employee subject to minimum wage and overtime 
rules.
    Suddenly, the Medicaid stipend that person received for caring for 
a relative balloons and puts serious pressure on a state Medicaid 
budget that is likely already in critical condition. This in turn 
pushes those who otherwise would be able to receive affordable care in 
the home to an institution. I believe this tramples on the notion that 
individuals with disabilities should have a choice in where they live 
and receive care.
    Companion workers are typically paid above minimum wage, so the 
problem really arises when an employer is required to pay overtime. 
Overtime becomes a problem because if a worker spends the night at the 
client's home, he or she is on the clock around the clock. If in-home 
care is too expensive, individuals with disabilities in economic need 
lack a meaningful choice and in many cases will no longer be able to 
live at home.
    Third-party companionship care providers are put in a particularly 
difficult spot. If their employees' hours are not reduced, these 
employers must pay time-and-a-half for a large number of hours every 
week. Rather than charging the client more and paying time-and-a-half, 
the employer is more likely to bring in another employee to care for 
the client. Where the client was used to dealing only with one or two 
caregivers, employers unable to pay time-and-a-half are now forced to 
impose another caregiver on the client. This may not sound like a big 
deal to some people, but it is a huge deal for disabled and elderly 
individuals who have developed relationships of trust with their 
caretakers.
    These are the reasons I have fought so hard over the years to keep 
this well-intentioned but misguided rule from becoming a reality. The 
labor market is exactly what it sounds like: a market. We need to 
exercise some humility and recognize that federal rulemaking may be 
aimed at a great result while failing to account for the laws of supply 
and demand.
    Unfortunately, this is what the Department of Labor's final rule 
does. The rule does not adequately account for the potential costs to 
Medicaid, when Medicaid is the primary payer of long-term services and 
supports. The Department of Labor ignored several calls from me, a 
bipartisan coalition of my colleagues in Congress, and several other 
groups to study the impacts on Medicaid.
    It is folly to implement a regulation without accounting for the 
market you're regulating or the costs of the regulation itself. A rule 
that ignores supply and demand, as the Department of Labor's new 
companion care rule does, can incur great costs--in this case, on 
particularly vulnerable populations: the disabled and the elderly.
    That is why it is wrong. That is why we need to stand up for our 
seniors.
    That is why we need to stand up for the individuals with 
disabilities in our communities and repeal this rule.
                                 ______
                                 
    [Additional submission of Hon. Mark Pocan, a Representative 
in Congress from the State of Wisconsin, follows:]

  Prepared Statement of Venus Brown, Homecare Provider, Milwaukee, WI

    My name is Venus Brown and I am a homecare provider in Milwaukee, 
Wisconsin.
    I have always been passionate about caring for others, but did not 
put that passion into practice until I became a homecare provider over 
five years ago. I saw firsthand how important in-home care could be 
when my own daughter was diagnosed with cerebral palsy. As a mother 
with a child of special needs, I understand what a difference providing 
skilled in-home care can make.
    As a homecare provider, I am able to allow individuals, both 
disabled and elderly, to remain in their homes with dignity. For all of 
my patients, without daily visits from skilled homecare workers, many 
would have to be institutionalized. Homecare providers are the 
lifeblood of Wisconsin's home and community based health system. We are 
the means for serving the public's health care needs in the least 
restrictive and most humane setting at the right cost.
    Unlike a nursing home or institutional setting, while on the job, I 
am solely responsible for my client's care. There is no call button or 
coworker to call for help. While it varies from client to client, I 
provide vital services they are unable to perform themselves. In most 
cases, that includes bathing, personal care, meal preparation, daily 
exercise, and medication reminders. Given the complexities of the 
client's medical conditions, this is not an easy task. As a homecare 
provider, I underwent numerous trainings to deal with the complicated 
medical issues that may arise on the job. We learned how to properly 
balance meals, safely lift a disabled patient, turn bedridden patients 
to prevent sores, deal with a stroke victim with limited mobility, and 
develop motor skills through physical therapy.
    Due to the demands of each client, I easily work double or triple 
the amount I'm assigned each week, all without pay. Not only am I not 
being paid for the hours I work, but the pay is not enough to support 
my family. My meager paychecks are not enough to buy my daughter the 
supplies and clothes she needs. I have had to send her to school with 
torn and ratty clothing and shoes. Her attire has led to her being 
bullied at school. The bullying at school has affected her so much, the 
school placed in therapy to deal with the ramifications.
    I do this work because I love it. The passion is what gets me going 
each morning--knowing that I am helping someone directly rather than 
working in a nursing home. Personal relationships are formed and you 
can't help but get attached. Each and every one of my clients is 
special, and I feel honored to help them. But the low pay and hours 
make this profession very difficult to support my only family.
                                 ______
                                 
    [Whereupon, at 11:30 a.m., the subcommittee was adjourned.]