[Federal Register Volume 76, Number 248 (Tuesday, December 27, 2011)]
[Proposed Rules]
[Pages 81189-81245]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-32657]



[[Page 81189]]

Vol. 76

Tuesday,

No. 248

December 27, 2011

Part V





Department of Labor





-----------------------------------------------------------------------





Wage and Hour Division





-----------------------------------------------------------------------





29 CFR Part 552





Application of the Fair Labor Standards Act to Domestic Service; 
Proposed Rule

Federal Register / Vol. 76 , No. 248 / Tuesday, December 27, 2011 / 
Proposed Rules

[[Page 81190]]


-----------------------------------------------------------------------

DEPARTMENT OF LABOR

Wage and Hour Division

29 CFR Part 552

RIN 1235-AA05


Application of the Fair Labor Standards Act to Domestic Service

AGENCY: Wage and Hour Division, Department of Labor.

ACTION: Notice of proposed rulemaking.

-----------------------------------------------------------------------

SUMMARY: The Department of Labor (the Department or DOL) proposes to 
revise the current Fair Labor Standards Act (FLSA or the Act) 
regulations pertaining to the exemption for companionship services and 
live-in domestic services. Section 13(a)(15) of the FLSA exempts from 
its minimum wage and overtime provisions domestic service employees 
employed ``to provide companionship services for individuals who 
(because of age or infirmity) are unable to care for themselves (as 
such terms are defined and delimited by regulations of the 
Secretary).'' Section 13(b)(21) of the FLSA exempts from the overtime 
provision any employee employed ``in domestic service in a household 
and who resides in such household.''
    These exemptions were enacted in 1974 at the same time that 
Congress amended the FLSA to extend coverage to domestic service 
employees employed by private households. The regulations governing 
these exemptions have been substantively unchanged since they were 
promulgated in 1975. Due to significant changes in the home health care 
industry over the last 35 years, workers who today provide in-home care 
to individuals are performing duties and working in circumstances that 
were not envisioned when the companionship services regulations were 
promulgated. The number of workers providing these services has also 
greatly increased, and a significant number of these workers are being 
excluded from the minimum wage and overtime protections of the FLSA 
under the companionship services exemption. The Department has re-
examined the regulations and determined that the regulations, as 
currently written, have expanded the scope of the exemption beyond 
those employees whom Congress intended to exempt when it enacted 
Sec. Sec.  13(a)(15) and 13(b)(21) of the FLSA. Therefore, the 
Department proposes to amend the regulations to revise the definitions 
of ``domestic service employment'' and ``companionship services.'' The 
Department also proposes to clarify the type of activities and duties 
that may be considered ``incidental'' to the provision of companionship 
services. In addition, the Department proposes to amend the record-
keeping requirements for live-in domestic workers. Finally, the 
Department proposes to amend the regulation pertaining to employment by 
a third party of companions and live-in domestic workers. This change 
would continue to allow the individual, family, or household employing 
the worker's services to apply the companionship and live-in exemptions 
and would deny all third party employers the use of such exemptions.

DATES: Comments must be received on or before February 27, 2012.

ADDRESSES: You may submit comments identified by RIN 1235-AA05, by 
either one of the following methods: Electronic comments, through the 
Federal eRulemaking Portal: http://www.regulations.gov. Follow the 
instructions for submitting comments. Mail: Address all written 
submissions to Mary Ziegler, Director, Division of Regulations, 
Legislation, and Interpretation, Wage and Hour Division, U.S. 
Department of Labor, Room S-3502, 200 Constitution Avenue NW., 
Washington, DC 20210.
    Instructions: Please submit one copy of your comments by only one 
method. All submissions must include the agency name and Regulatory 
Information Number (RIN) 1235-AA05. Please be advised that comments 
received will be posted without change to http://www.regulations.gov, 
including any personal information provided. Because we continue to 
experience delays in receiving mail in the Washington, DC area, 
commenters are strongly encouraged to transmit their comments 
electronically via the Federal eRulemaking Portal at http://www.regulations.gov or to submit them by mail early. For additional 
information on submitting comments and the rulemaking process, see the 
``Public Participation'' heading of the SUPPLEMENTARY INFORMATION 
section of this document.
    Docket: For access to the docket to read background documents or 
comments received, go to the Federal eRulemaking Portal at http://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT: Mary Ziegler, Director, Division of 
Regulations, Legislation, and Interpretation, U.S. Department of Labor, 
Wage and Hour Division, 200 Constitution Avenue NW., Room S-3502, FP 
Building, Washington, DC 20210; telephone: (202) 693-0406 (this is not 
a toll-free number). Copies of this proposed rule may be obtained in 
alternative formats (Large Print, Braille, Audio Tape, or Disc), upon 
request, by calling (202) 693-0675 (not a toll-free number). TTY/TTD 
callers may dial toll-free (877) 889-5627 to obtain information or 
request materials in alternative formats.
    Questions of interpretation and/or enforcement of the agency's 
current regulations may be directed to the nearest Wage and Hour 
Division (WHD) District Office. Locate the nearest office by calling 
the Wage and Hour Division's toll-free help line at (866) 4US-WAGE 
(866) 487-9243 between 8 a.m. and 5 p.m. in your local time zone, or 
log onto the Wage and Hour Division's Web site for a nationwide listing 
of Wage and Hour District and Area Offices at: http://www.dol.gov/whd/america2.htm.

SUPPLEMENTARY INFORMATION:

I. Electronic Access and Filing Comments

    Public Participation: This notice of proposed rulemaking is 
available through the Federal Register and the http://www.regulations.gov Web site. You may also access this document via the 
Wage and Hour Division's home page at http://www.wagehour.dol.gov. To 
comment electronically on Federal rulemakings, go to the Federal 
eRulemaking Portal at http://www.regulations.gov, which will allow you 
to find, review and submit comments on documents that are open for 
comment and published in the Federal Register. Please identify all 
comments submitted in electronic form by the RIN docket number (1235-
AA05). Because of delays in receiving mail in the Washington, DC area, 
commenters should transmit their comments electronically via the 
Federal eRulemaking Portal at http://www.regulations.gov, or submit 
them by mail early to ensure timely receipt prior to the close of the 
comment period. Submit one copy of your comments by one method only.

II. Background

    Congress extended FLSA coverage to ``domestic service'' workers in 
1974, amending the law to apply to employees performing services of a 
household nature in or about the private home of the person by whom 
they are employed. See 29 U.S.C. 202(a), 206(f), 207(l). Domestic 
service workers were made subject to the FLSA even though they worked 
for a private household and not for a covered enterprise. Domestic 
service workers include, for example, employees employed as cooks, 
butlers, valets, maids, housekeepers, governesses, janitors, 
laundresses, caretakers, handymen, gardeners, and family chauffeurs. 
Senate Report No. 93-690, 93rd Cong., 2d Sess. p. 20

[[Page 81191]]

(1974). The 1974 Amendments also created an exemption from both the 
minimum wage and overtime pay requirements of the Act for casual 
babysitters and persons ``employed in domestic service employment to 
provide companionship services for individuals who (because of age or 
infirmity) are unable to care for themselves (as such terms are defined 
and delimited by regulations of the Secretary).'' 29 U.S.C. 213(a)(15). 
Congress also created a more limited exemption from the overtime pay 
requirement for domestic service employees who reside in the household 
where they work. 29 U.S.C. 213(b)(21).
    Congressional committee reports describe the bases for extending 
the minimum wage protections to domestics as ``so compelling and 
generally recognized as to make it hardly necessary to cite them.'' 
Senate Report No. 93-690, at p. 18. Private household work had been one 
of the least attractive fields of employment. Wages were low, work 
hours were highly irregular, and non-wage benefits were few. Id.
    The U.S. House of Representatives Committee on Education and Labor 
stated its expectation ``that extending minimum wage and overtime 
protection to domestic service workers will not only raise the wages of 
these workers but will improve the sorry image of household employment. 
* * * Including domestic workers under the protection of the Act should 
help to raise the status and dignity of this work.'' House Report No. 
93-913, 93rd Cong., 2d Sess., pp. 33-34 (1974). The legislative history 
explains that the 1974 Amendments were intended to include all 
employees whose vocation was domestic service, but to exempt from 
coverage babysitters and companions who were not regular bread-winners 
or responsible for their families' support. It was not intended to 
exclude trained personnel such as nurses, whether registered or 
practical, from the protections of the Act. See Senate Report No. 93-
690, at p. 20. Senator Williams, Chairman of the Senate Subcommittee on 
Labor and the Senate floor manager of the 1974 Amendments to the FLSA, 
described companions as ``elder sitters'' whose main purpose is to 
watch over an elderly or infirm person in the same manner that a 
babysitter watches over children. 119 Cong. Rec. S24773, S24801 (daily 
ed. July 19, 1973). Senator Williams further noted that all other work, 
such as occasionally making a meal or washing clothes for the person, 
must be incidental to that primary purpose. Id.
    On February 20, 1975, the Department issued regulations and 
interpretations in 29 CFR part 552 implementing the domestic service 
employment provisions See 40 FR 7404. Subpart A of the rule defined and 
delimited the terms ``domestic service employee,'' ``employee employed 
on a casual basis in domestic service employment to provide babysitting 
services,'' and ``employment to provide companionship services to 
individuals who (because of age or infirmity) are unable to care for 
themselves.'' Subpart B of the rule set out statements of general 
policy and interpretation concerning the application of the FLSA to 
domestic service employees. Section 552.109 contained the Department's 
position that the exemptions contained in Sec.  13(a)(15) and Sec.  
13(b)(21) of the Act (exemptions for companions or live-in domestic 
service workers) were applicable to employees of a third party employer 
or agency.
    On December 30, 1993, the Department published a notice of proposed 
rulemaking in the Federal Register, inviting public comments on a 
proposal to revise 29 CFR 552.109 to clarify that, in order for the 
exemptions under Sec.  13(a)(15) and Sec.  13(b)(21) of the FLSA to 
apply, employees engaged in companionship services and live-in domestic 
service who are employed by a third party employer or agency must be 
``jointly'' employed by the family or household using their services. 
Other minor updating and technical corrections were included in the 
proposal. See 58 FR 69310. On September 8, 1995, the Department 
published a final rule revising the regulations to incorporate changes 
required by the recently enacted changes to Title II of the Social 
Security Act and making other updating and technical revisions. See 60 
FR 46766. That same day, the Department published a proposed rule 
reopening and extending the comment period on the proposed changes to 
Sec.  552.109 concerning third party employment. See 60 FR 46797. The 
Department did not finalize this proposed change.
    On January 19, 2001, the Department published a notice of proposed 
rulemaking to amend the regulations to revise the definition of 
``companionship services'' to more closely mirror Congressional intent. 
The Department also sought to clarify the criteria used to determine 
whether employees qualify as trained personnel and to amend the 
regulations concerning third party employment. On April 23, 2001, the 
Department published a proposed rule reopening and extending the 
comment period on the January 2001 proposed rule. See 66 FR 20411. This 
rulemaking was eventually withdrawn and terminated on April 8, 2002. 
See 67 FR 16668.

III. Need for Rulemaking

    The home care industry has undergone a dramatic transformation 
since the Department published the implementing regulations in 1975. 
There has been a growing demand for long-term in-home care for persons 
of all ages, in part because of the rising cost of traditional 
institutional care, and because of the availability of funding 
assistance for in-home care under Medicare and Medicaid. The growing 
demand for long-term in-home care for persons is also partly due to the 
significant increase in our aging population.\1\
---------------------------------------------------------------------------

    \1\ See Shrestha, Laura, The Changing Demographic Profile of the 
United States, Congressional Research Service p. 13-14 (2006).
---------------------------------------------------------------------------

    In response to the growing demand for long-term in-home care, the 
home health care services industry has grown. According to the National 
Association of Home Care (NAHC) publication, Basic Statistics About 
Home Care (March 2000), data from the Department of Health and Human 
Services' Health Care Financing Administration (HCFA) showed that the 
number of Medicare-certified home care agencies increased from 2,242 in 
1975 to 7,747 in 1999. In the NAHC 2008 update, this number increased 
to 9,284 by the end of 2007. The number of for-profit agencies not 
associated with a hospital, rehabilitation facility, or skilled nursing 
facility, i.e., freestanding agencies, increased more than any other 
category of agency from 47 in 1975 to 4,919 in 2006. These for-profit 
agencies grew from 2 percent of total Medicare-certified agencies in 
1975 to 68 percent by 2006, and now represent the greatest percentage 
of certified agencies. Public health agencies, which constituted over 
one-half of the certified agencies in 1975, now represent only 15 
percent.
    Public funds pay the overwhelming majority of the cost for 
providing home care services. Medicaid payments represent nearly 40 
percent of the industry's total revenues; other payment sources include 
Medicare, insurance plans, and direct pay. Based on data from the 
Centers for Medicare and Medicaid Services (CMS), Office of the 
Actuary, National Health Care Expenditures Historical and Projections: 
1965-2016, Medicare and Medicaid together paid over one-half of the 
funds to freestanding agencies (37 and 19 percent, respectively). State 
and local governments account for 20 percent, while private health 
insurance accounts for 12 percent. Out-of-pocket funds

[[Page 81192]]

account for 10 percent of agency revenues.
    There has been a similar increase in the employment of home health 
aides and personal care aides in the private homes of individuals in 
need of assistance with basic daily living or health maintenance 
activities. Bureau of Labor Statistics' (BLS) national occupational 
employment and wage estimates from the Occupational Employment 
Statistics (OES) survey show that the number of workers in these jobs 
tripled during the decade between 1988 and 1998, and by 1998 there were 
430,440 workers employed as home health aides and 255,960 workers 
employed as personal care aides. The combined occupations of personal 
care and home health aides constitute a rapidly growing occupational 
group. BLS statistics demonstrate that between 1998 and 2008, this 
occupational group has more than doubled with home health aides 
increasing to 955,220 and personal care aides increasing to 630,740. 
(http://www.bls.gov/oes/current/oes399021.htm).
    The growth in demand for in-home care and in the home health care 
services industry has not resulted in growth in earnings for workers 
providing in-home care. The earnings of employees in the home health 
aide and personal care aide categories remain among the lowest in the 
service industry. Studies have shown that the low income of direct care 
workers including home care workers continues to impede efforts to 
improve both jobs and care.\2\ Protecting domestic service workers 
under the Act is an important step in ensuring that the home health 
care industry attracts and retains qualified workers that the sector 
will need in the future. Moreover, the workers that are employed by 
home care staffing agencies are not the workers that Congress 
envisioned when it enacted the companionship exemption i.e., neighbors 
performing elder sitting, but are instead professional caregivers 
entitled to FLSA protection. In view of the dramatic changes in the 
home health care sector in the 36 years since these regulations were 
first promulgated and the growing concern about the proper application 
of the FLSA minimum wage and overtime protections to domestic service 
employees, the Department believes it is appropriate to reconsider 
whether the scope of the regulations are now too broad and not in 
harmony with Congressional intent.
---------------------------------------------------------------------------

    \2\ See Brannon, Diane, et al., ``Job Perceptions and Intent to 
Leave Among Direct Care Workers: Evidence From the Better Jobs 
Better Care Demonstrations'' The Gerontologist, Vol. 47, No. 6, p. 
820-829 (2007).
---------------------------------------------------------------------------

IV. Proposed Regulatory Revisions

A. Domestic Service Employment (29 CFR 552.3)

    Current Sec.  552.3 states that ``As used in section 13(a)(15) of 
the Act, the term domestic service employment refers to services of a 
household nature performed by an employee in or about a private home 
(permanent or temporary) of the person by whom he or she is employed.'' 
The current definition also lists various occupations which are 
considered ``domestic service employment.'' The Department proposes to 
update and clarify the Sec.  552.3 definition of ``domestic service 
employment'' in order to reflect the changing workforce.
    The Department proposes to remove the qualifying introductory 
language ``[A]s used in section 13(a)(15) of the Act'' because the 
definition of domestic service employment has broader context than 
simply those employed to provide babysitting services on a casual basis 
and those performing companionship services. The proposed definition 
also removes the language that the domestic service work be performed 
in or about the home ``of the person by whom he or she is employed.'' 
This language has been part of the regulations since first implemented 
in 1975; however, the Department believes the definition may be 
confusing and may be misread as impermissibly narrowing coverage of 
domestic service employees under the FLSA. The Senate Committee 
responsible for the 1974 Amendments looked at regulations issued under 
the Social Security Act for defining domestic service. The Department 
borrowed this language from the Social Security regulations without 
discussion or elaboration, and has consistently maintained that the 
phrase is extraneous vestige. See Long Island Care at Home, Ltd. v. 
Coke, 551 U.S. 158, 169-70 (2007) (concluding that Sec.  552.3 does not 
answer the question on third party employment and that the Department's 
third party regulation at Sec.  552.109 controls). Moreover, the 
legislative history states that Congress intended to extend FLSA 
coverage to all employees whose ``vocation'' was domestic service, but 
to exempt from coverage casual babysitters and companions who were not 
regular breadwinners or responsible for their families' support. See 
House Report No. 93-913, p. 36. Removal of this extraneous language 
more accurately reflects Congressional intent and clarifies coverage of 
these workers.
    Congress considered domestic service workers to include, for 
example, employees working as cooks, butlers, valets, maids, 
housekeepers, governesses, janitors, laundresses, caretakers, handymen, 
gardeners, and family chauffeurs. See Senate Report No. 93-690, p. 20. 
The Department included these occupations in Sec.  552.3 as 
illustrative of domestic service workers. The Department proposes to 
delete the more outdated occupations in the list, such as governesses, 
footmen, and grooms, and to add additional modern day occupations such 
as nannies, home health aides, and personal care aides. The Department 
also proposes to include babysitters and companions to the list of 
domestic service workers, as workers in those occupations are domestic 
service workers, however, workers in those occupations may be exempt 
under FLSA Sec.  13(a)(15) or Sec.  13(b)(21). The list continues to be 
illustrative, not exhaustive.

B. Duties of a Companion (29 CFR 552.6)

    The Department proposes to revise Sec.  552.6, the regulation 
pertaining to companionship services for the aged and infirm. Current 
Sec.  552.6 defines ``companionship services'' including ``fellowship, 
care, and protection'' provided to a person who, because of advanced 
age or physical or mental infirmity, can not care for his or her own 
needs. This regulation defines exempt services as including household 
work related to the person's care (such as meal preparation, bed 
making, washing of clothes, and other similar services). Under the 
current regulation, a companion may also perform additional general 
household work within the exemption if it is ``incidental'' and 
comprised of no more than 20 percent of the total weekly hours worked. 
This regulation further explains that the term ``companionship 
services'' does not include services relating to the care and 
protection of the aged or infirm which require and are performed by 
trained personnel, such as a registered or practical nurse.
1. Companionship Services
    In 1974 Congress amended the FLSA specifically to include domestic 
service workers (such as maids, cooks, valets and laundresses) as among 
those to be covered by the Act. Congress simultaneously created a 
narrow exemption for casual babysitters and those providing 
companionship to the elderly or infirm. The Senate debate of the 
companionship services exemption provides insight into the type of work 
Congress sought to exempt:


[[Page 81193]]


    Senator Burdick: I am not concerned about the professional 
domestic who does this as a daily living. But we have situations in 
which young people, a widow, a divorcee, or a family of low income, 
of necessity, must have someone sit with their children while they 
are at work.
    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.
    This, of course, entails some work, such as perhaps making lunch 
for the children, or making lunch for the infirm person, and may 
even require throwing some diapers in the automatic washing machine 
for the baby. This would be incidental to the main purpose of the 
employment.
    The Senator has used the word ``companion'' in the exception. 
When the Senator uses the word ``companion,'' the Senator does not 
mean that in the ordinarily accepted sense, that they are there to 
make them feel good. They are there to take care of them, he means, 
when he uses the word ``companion.'' Is that correct?
    Senator Williams: We use the situation in which people are in a 
household not to do household work but are there, first, as 
babysitters. I think we all have the full meaning in mind of what a 
babysitter is there for--to watch the youngsters.
    ``Companion,'' as we mean it, is in the same role--to be there 
and to watch an older person, in a sense.
    Senator Burdick: In other words, an elder sitter.
    Senator Williams: Exactly.

119 Cong. Rec. at S24801.

    The House Report offers further insight into Congressional intent 
with respect to those employees providing ``companionship services'' 
stating:

    It is the intent of the committee to include within the coverage 
of the Act all employees whose vocation is domestic service. 
However, the exemption reflects the intent of the committee to 
exclude from coverage babysitters for whom domestic service is a 
casual form of employment and companions for individuals who are 
unable because of age or infirmity to care for themselves. But it is 
not intended that trained personnel such as nurses, whether 
registered or practical, shall be excluded. People who will be 
employed in the excluded categories are not regular bread-winners or 
responsible for their families support. The fact that persons 
performing casual services as babysitters or services as companions 
do some incidental household work does not keep them from being 
casual babysitters or companions for purposes of this exclusion.

House Report No. 93-913, p. 36.

    This legislative history indicates that Congress intended to remove 
from minimum wage and overtime pay protection only those domestic 
service workers for whom domestic service was not their vocation and 
whose actual purpose was to provide casual babysitting or companionship 
services. Congress also intended that a limited amount of incidental 
work, such as making a meal or washing diapers for the person being 
cared for, would not remove the worker from the exemption.
    In addition to the legislative history, the dictionary definition 
of ``companionship'' is instructive in understanding the scope of a 
companion as originally intended in the legislative history, that is, 
someone in the home primarily to watch over and care for the elderly or 
infirm person. The dictionary defines companionship as the 
``relationship of companions; fellowship,'' and the term ``companion'' 
is defined as a ``person who associates with or accompanies another or 
others; associate; comrade'' and as a ``person employed to live with or 
travel with another.'' See Webster's New World Dictionary, p. 288 (2d 
College Ed. 1972). It further defines ``fellowship'' as including ``a 
mutual sharing, as of experience, activity, interest, etc.'' Id. at 
514.
    The Department is concerned that the current regulatory definition 
of ``companionship services'' allows for the denial of minimum wage and 
overtime pay protection to workers who work in private homes and 
routinely perform general household work or provide medical care, and 
who may also provide fellowship and protection as an incidental 
activity to the household work or medical care. The current regulatory 
language places inappropriate emphasis on the ``household work related 
to the person's care,'' such as meal preparation, bed making, washing 
of clothes, and other similar services. These activities, particularly 
when combined with the current 20 percent tolerance for general 
household work, exempt workers for whom providing ``fellowship and 
protection'' is incidental to their employment as cooks, waiters, 
butlers, valets, maids, housekeepers, nannies, nurses, janitors, 
laundresses, caretakers, handymen, gardeners, home health aides, 
personal care aides, and chauffeurs of automobiles for family use. 
Therefore, the Department proposes to revise Sec.  552.6 to clarify the 
tasks an exempt companion may perform and to more closely align the 
regulation with Congressional intent.
    The Department proposes to divide Sec.  552.6 into four paragraphs. 
Proposed paragraphs (a), (b) and (c) will clarify what duties and 
activities may be considered ``companionship services'' and 
``incidental'' to companionship services. Proposed paragraph (d) 
explains and clarifies that the companionship exemption is not 
applicable to medical care typically provided by personnel with 
specialized training.
    Current Sec.  552.6 defines the term ``companionship services.'' 
Proposed Sec.  552.6(a) also defines ``companionship services'' as 
``the provision of fellowship and protection for a person who, because 
of advanced age or physical or mental infirmity, is unable to care for 
themselves'' and adds language that defines the terms ``fellowship'' 
and ``protection.'' The legislative history describes a companion as 
someone who ``sits with [an infirm parent];'' provides ``constant 
attendance;'' and renders services similar to a babysitter, i.e., 
``someone to be there and watch an older person,'' an ``elder sitter.'' 
Such duties fall under the umbrella of fellowship and protection. 
Examples of activities that fall within fellowship and protection may 
include playing cards, watching television together, visiting with 
friends and neighbors, taking walks or engaging in hobbies. In 
addition, a companion may provide assistance with mobility and 
transfers. In the Department's view, ``mobility'' includes assistance 
with ambulation, including the use of a wheelchair or walker, and 
``transfers'' include assisting the recipient in moving from one 
seating or reclining area to another. The Department believes that such 
tasks are consistent with what a babysitter or elder sitter would 
perform as contemplated by Senator Burdick in his explanation of the 
bill. The Department believes this expanded paragraph clarifies what is 
meant by ``companionship services,'' ``fellowship,'' and 
``protection.''
    Proposed Sec.  552.6(b) explains that ``companionship services'' 
may include the intimate personal care services that the Secretary 
considers ``incidental'' to the provision of fellowship and protection. 
The proposed regulation limits a companion's duties to fellowship and 
protection with some allowance for certain incidental work, provided 
the incidental duties are performed concurrent with fellowship and 
protection of the individual and exclusively for that individual. The 
discussion of companionship duties in the legislative history allows 
incidental work, such as ``making lunch for the infirm person'' and 
``some incidental household work.'' See 119 Cong. Rec. at S24801. 
However, such incidental services must be performed attendant to and in 
conjunction with the provision of fellowship and protection and in 
close physical proximity to the aged or infirm individual. Proposed 
paragraph (b) makes clear that such intimate personal care services 
that are incidental to the provision of fellowship and protection

[[Page 81194]]

must not exceed 20 percent of the total hours worked in the workweek. 
Should the provision of these incidental services exceed 20 percent of 
the total hours worked in any workweek, then the exemption may not be 
claimed for that week and workers must be paid minimum wage and 
overtime.
    Proposed paragraph (b) also provides an illustrative list of 
permissible incidental services that may be provided by an exempt 
companion. In proposed Sec.  552.6(b)(1), the Department proposes to 
include assistance with occasional dressing of the elderly or infirm 
person as an incidental activity. The Department believes that allowing 
assistance with dressing is consistent with Congressional intent, as 
assistance with dressing is something that would normally be 
contemplated by a babysitter or elder sitter. For example, a companion 
may assist an elderly or infirm person in laying down or arising from a 
nap which may either be preceded by shedding of some clothing or 
applying some clothing. Adjustments in weather may also require either 
the addition or subtraction of certain clothing or footwear, or the 
elderly or infirm person may, on occasion, need assistance in dressing 
after soiling their clothing by spilling food on their blouse or shirt 
during a meal, for example. This type of occasional dressing is 
permissible; however, the Department does not envision this task as 
being a regular and recurring part of the companion's duties. Further, 
the Department does not consider the application of special appliances 
or medical wraps (that require specialized training to apply) as part 
of assistance with dressing.
    In proposed Sec.  552.6(b)(2), the Department proposes that an 
exempt companion be allowed to assist with occasional grooming, 
including combing and brushing hair, assistance with brushing teeth, 
application of deodorant, or cleansing of the person's face and hands, 
such as following a meal. The Department recognizes that occasional 
grooming of the aged or infirm person is consistent with the 
Department's goal of providing incidental intimate personal care 
services attendant to and in conjunction with the provision of 
fellowship and protection for the aged or infirm person.
    In proposed Sec.  552.6(b)(3), the Department has included 
assistance with toileting, including assistance with transfers, 
mobility, positioning, use of toileting equipment and supplies (such as 
toilet paper, wipes, and elevated toilet seats or safety frames), 
diaper changing, and related personal cleansing. In the Department's 
view, assistance with toileting is carried out attendant to and in 
conjunction with the provision of fellowship and protection of the aged 
or infirm person. Because toileting is a basic human need and not a 
function that can be scheduled, the Department proposes to include it 
in the list of incidental tasks that may be performed by the exempt 
companion. The Department specifically invites comment on the inclusion 
of occasional toileting and diaper changing to the list of incidental 
activities performed by the exempt companion.
    Proposed Sec.  552.6(b)(4) suggests that an exempt companion may 
occasionally drive the aged or infirm individual to appointments, 
errands, and social events. The Department believes there is some 
justification for a companion who provides ``fellowship and 
protection'' to accompany an aged or infirm person to certain 
appointments. There is, however, some concern that providing 
transportation may be more akin to the duties of a chauffeur than to 
the duties of a companion. The Department is mindful that drivers and 
chauffeurs were expressly considered by Congress as among those they 
intended to be covered by the Act. The Department is also concerned 
about issues such as extra costs for the domestic worker and/or their 
employer with respect to insurance coverage levels, for example. The 
Department proposes that occasional driving can be a component of 
incidental duties; however, with the cap on incidental duties at 20 
percent, the Department anticipates that only a limited amount of time 
will be spent driving the aged or infirm person to appointments, 
errands and social events. The Department notes that while it seeks to 
limit the time an exempt companion spends driving the aged or infirm 
individual, the Department considers time spent accompanying an aged or 
infirm individual to appointments, errands or social events (e.g., 
traveling via a taxi cab or using public transportation) to be 
providing fellowship and protection. The Department explicitly invites 
comment on the proposal to include driving among the incidental 
activities an exempt companion may perform.
    Proposed Sec.  552.6(b)(5) provides that an exempt companion may 
provide occasional assistance with feeding the aged or infirm person, 
including food preparation and clean-up associated with feeding; 
however, the Department considers feeding through or assistance with a 
feeding tube to be medical care (that is typically provided by 
personnel with specialized training) that is excluded from the 
definition of ``companionship services.'' The Department notes that 
Senator Burdick stated in his floor speech that companionship was meant 
to include, ``some work, such as perhaps making lunch for the children, 
or making lunch for the infirm person * * *.'' 119 Cong. Rec. at 
S24801. The Department proposes to require that in order for food 
preparation to be considered as an incidental activity, the food 
prepared by the companion must be eaten by the aged or infirm person 
while the companion is present. The Department believes that this is 
consistent with the goal that incidental intimate personal care 
services be provided attendant to and in conjunction with the provision 
of fellowship and protection of the aged or infirm person. However, it 
is not the Department's intent that an exempt companion will be 
permitted to cook a week's worth of food while the aged or infirm 
individual is engaged in other activities, for example, because that 
would not be attendant to and in conjunction with providing fellowship 
and protection.
    Proposed Sec.  552.6(b)(6) provides that an exempt companion may 
occasionally place clothing worn by the person in the hamper, deposit 
the aged or infirm person's clothing into the washing machine or dryer, 
and assist with hanging, folding, and putting away the aged or infirm 
person's clothing. The Department's review of the legislative history 
indicates that occasional, light laundry was contemplated by Congress 
in consideration of the casual babysitter and companionship exemptions. 
In their exchange, Senators Williams and Burdick indicated that one 
``may even require throwing some diapers in the automatic washing 
machine for the baby. This would be incidental to the main purpose of 
the employment.'' 119 Cong. Rec. at S24801.
    Proposed Sec.  552.6(b)(7), allows for occasional assistance with 
bathing the aged or infirm person. The Department does not consider 
bathing to be part of the regular duties of the exempt companion; 
however, the Department believes that in certain exigent circumstances, 
a companion may need to provide assistance with bathing to the elderly 
or infirm person. An example of exigent circumstances would be when the 
elderly or infirm person has an unexpected toileting accident requiring 
the need for bathing. Generally, the Department believes that bathing 
is something that can be scheduled to not coincide with the companion's 
duty hours, but proposes to allow reasonable but limited exceptions 
that more closely align to an imminent need to assist the elderly or 
infirm person with cleansing.

[[Page 81195]]

    The Department specifically invites comments with respect to the 20 
percent threshold for incidental care services, and whether this 
percentage is an appropriate figure. Further, the Department invites 
comments on the list of services, whether additional services should be 
included or certain services should be excluded, whether the list 
should be an exclusive list of permitted incidental services, and 
whether the requirement that such services must be performed attendant 
to and in conjunction with the provision of fellowship and protection 
to the elderly or infirm person should be adopted.
    Proposed Sec.  552.6(c), makes clear that work benefiting other 
members of the household, such as preparing meals for the household, 
performing housekeeping or laundry for the other members of the 
household does not fall within incidental duties for an exempt 
companion. Similarly, general household services not otherwise allowed 
in Sec.  552.6(b) and (d), are not considered ``companionship 
services.'' The Department's proposal includes a change from the 
current regulation that allows the companionship services exemption to 
apply when the worker spends up to 20 percent of his or her time 
performing general household work which is unrelated to the care of the 
person. General household work that is not allowed under proposed Sec.  
552.6(b), such as vacuuming, washing windows, and dusting, is the sort 
of work that Congress sought to cover when it amended the Act in 1974 
to reach domestic service workers such as maids and housekeepers, and 
therefore, companions are precluded from performing such tasks in order 
for the exemption to apply. The Department believes the proposed 
revisions to the definition strike a balance that implements Congress' 
twin goals of extending FLSA coverage to domestic service workers 
generally while exempting companions, by recognizing that the 
fellowship and protection provided by a companion are very different 
from the household chores performed by a maid or cook or laundress. 
Further, the proposed regulations also reflect that coverage under the 
FLSA is construed broadly and the exemptions are construed narrowly to 
effectuate the Act's remedial purposes.
    Thus, the performance of duties that are not for fellowship and 
protection of the aged or infirm person, or incidental to the provision 
of fellowship and protection, are not ``companionship duties,'' and 
therefore, any performance of general household work would result in 
the loss of the exemption for the week. The Department believes that 
the combination of proposed Sec.  552.6(b) and (c) results in the 
narrow slice of the workforce that Congress intended to exempt under 
the companionship exemption.
2. Medical Care
    Proposed paragraph Sec.  552.6(d) excludes from the definition of 
``companionship services'' medical care that is typically provided by 
personnel with specialized training. The Department proposes in Sec.  
552.6(d) to continue to make clear that ``companionship services'' does 
not include care that is typically provided by personnel with 
specialized training and provides an illustrative and non-exhaustive 
list of examples of the type of care that is not considered 
``companionship services.''
    The Department proposes to maintain the exclusion of medical care 
from the definition of ``companionship services,'' but proposes to 
clarify that companionship services do not include the performance of 
medically-related tasks for which training is typically a prerequisite. 
The Department's experience indicates that many workers for whom the 
companionship exemption is claimed are categorized as personal care 
aides or home health aides. The Department understands that these 
workers often visit a care recipient for the purpose of providing wound 
care such as changing bandages, taking the care recipients vital signs, 
evaluating the care recipient's health and performing other diagnostic 
or medically-related tasks. While some personal care or home health 
aides may be engaged to perform companionship services, the Department 
is concerned that many such workers are primarily performing medically-
related or personal-care-related tasks rather than providing fellowship 
and protection, and are being denied minimum wage and overtime pay 
protections through misapplication of the companionship services 
exemption.
    The Department proposes to exclude from the definition of 
companionship services medically-related duties such as medication 
management, the taking of vital signs (pulse, respiration, blood sugar 
screening, and temperature), routine foot, skin, and back care, and 
assistance with physical therapy. This list is illustrative, not 
exhaustive. Similarly, determining whether prescription medication 
needs to be taken would remove the domestic service worker from the 
companionship exemption.
    However, the Department notes that reminders of medical 
appointments or a predetermined medicinal schedule would be encompassed 
within companionship duties. For example, where the companion is 
provided clear instructions to remind the aged or infirm person to take 
medication that has been provided in a daily pillbox at a prescribed 
time and the companion exercises no discretion as to the amount or when 
the care recipient takes the medication, such work generally would be 
intimate personal care activities considered by the Secretary to be 
incidental to the provision of fellowship and protection. The 
Department believes, however, that Congress did not intend the 
companionship services exemption to apply to employees who perform 
medically-related duties, such as registered or licensed nurses, 
certified nursing assistants, or certified nursing aides. Tasks being 
performed by these workers that typically require medical training and 
are beyond what Congress envisioned when it stated that persons 
providing companionship services are present in the home, as a neighbor 
might be, to watch over an elderly person the way a babysitter watches 
over a child.
    The Department specifically seeks comment on whether the proposed 
rule appropriately reflects medical care tasks currently performed by 
home health aides or personal care aides which require training in 
order to perform. The Department also seeks comment on whether the rule 
should list additional examples of minor health-related actions that do 
not require training and could be included within companionship 
services, such as applying a band aid to a minor cut or helping an 
elderly person take over-the-counter medication.
    It is important to note that workers providing healthcare in homes 
are already subject to minimum wage and overtime protections. However, 
the Department invites comment on the potential effects of the proposed 
changes as discussed above on the delivery of companionship services 
and whether unique circumstances exist that impact the provision of 
companionship services in the context of the broader healthcare system.

C. Third Party Employment (29 CFR 552.109)

    The Department also proposes to revise Sec.  552.109, the 
regulation pertaining to third party employment. Current Sec.  552.109 
provides that employees who are employed by an employer or agency other 
than the family or household using the companionship services may be 
subject to the FLSA exemption from minimum

[[Page 81196]]

wage and overtime pay for companions under Sec.  13(a)(15). The current 
regulation also provides that live-in workers who are employed by a 
third party may be subject to an overtime exemption under Sec.  
13(b)(21) of the FLSA.
    Upon further consideration and analysis, the Department believes 
that these two exemptions from the minimum wage and overtime 
protections of the FLSA should not be applicable to employees of third 
party employers. The Department proposes to revise Sec.  552.109 to 
limit the application of these exemptions to the individual, family or 
household employing the companion or live-in domestic worker, 
regardless of whether the family member employing the companion or 
live-in domestic worker resides in the home where the services are 
performed. The Department believes this proposed change better reflects 
the understanding of Congress when it created these exemptions. In 
addition, the Department believes amending this regulation is necessary 
to address the changes that have taken place in the home health care 
industry since this regulation was first promulgated.
    As noted by the Supreme Court, the Department has ``struggled with 
the third party employment question.'' Long Island Care at Home, Ltd. 
v. Coke, 551 U.S. 158, 171 (2007). In 1974, the Department proposed a 
regulation that would have denied the exemptions in Sec. Sec.  
13(a)(15) and 13(b)(21) of the Act to employees who, although providing 
companionship or live-in domestic services, were employed by an 
employer or agency other than the family or household using their 
services. See 39 FR 35383. However, in the final regulation, 
promulgated in 1975, the Department concluded that the exemption could 
be applicable to employees providing companionship or live-in domestic 
services employed by such third party employers. See 40 FR 7404. In 
1993, 1995, and 2001, the Department revisited this regulation 
specifically, proposing amendments that would have curtailed the 
applicability of these exemptions to the employees of third party 
employers.
    In revisiting the legislative history of the 1974 Amendments, the 
Department believes that Congress contemplated that individual family 
members, and not third party employers that already were covered by the 
FLSA, would be impacted by the extension of coverage to domestic 
service workers. ``I just cannot imagine the housewife struggling with 
the paper work which would be required.'' 120 Cong. Rec. S5269 (daily 
ed. Mar. 5, 1974) (statement of Sen. Fannin). ``The position of the 
committee in adding complete coverage for domestics and thus adding 
additional recordkeeping and other chores for the American housewife * 
* *'' 120 Cong. Rec. S5275 (statement of Sen. Dominick). Because 
Congress believed that private households would be impacted by the 
expansion of FLSA coverage, it is reasonable to conclude that Congress 
intended only private households to be entitled to the exemptions from 
FLSA protections for domestic service workers. Professional caregivers, 
such as those individuals employed by third party employers, are simply 
not the type of employment arrangements that Congress sought to exempt. 
In view of the professionalization and standardization of this growth 
industry that has taken place over the last three decades, it is the 
Department's position that employees providing companionship services 
who are employed in the vocation of caregiver by third parties should 
have the same minimum wage and overtime protections that other workers 
enjoy.
    Statements in the Congressional Record made by supporters of the 
amendment also demonstrate that Congress considered the impact that the 
expansion of FLSA coverage would have on poor women, many of them women 
of color, employed as domestics. Senator Williams noted that ``the 
plain fact is that private household domestic workers are 
overwhelmingly female and members of minority groups,'' and ``[i]n 
failing to cover domestics under our basic wage and hour law we would 
be turning our backs on these people.'' 119 Cong. Rec. S24799 
(statement of Senator Williams). Senator Williams further emphasized 
that ``[s]ince domestic employment is one of the prime sources of jobs 
for poor and unskilled workers, it is clear that there is an important 
national interest at stake in insuring that the wages received for such 
work do not fall below a minimal standard of decency.'' Id. at 24800. 
Such statements indicate that Congress intended broad FLSA coverage for 
domestic workers. Poor, minority women, many of them immigrants, 
continue to comprise the great majority of the companion workforce 
today. The fact that 70 percent of home health care workers are 
employed by third party agencies--and fall outside of FLSA coverage 
under the current third party regulation--is an important indication 
that what Congress intended to accomplish in amending the FLSA in 1974 
remains unfinished.\3\ Moreover, under the 1974 Amendments, Congress 
explicitly extended FLSA coverage to domestic service employees who 
were not previously covered, i.e., those who worked only for a private 
family or a small business and not for a covered enterprise. Prior to 
1974, employees who had worked for a covered placement agency, but were 
assigned to work in someone's home were covered by the FLSA. 39 FR 
35385. Congress did not intend for the 1974 Amendments, which sought to 
extend the reach of the FLSA, to exclude workers already covered by the 
Act. The focus of the floor debate concerned the extension of coverage 
to categories of domestic workers who were not already covered by the 
FLSA, specifically, those not employed by an enterprise-covered agency. 
See, e.g., 119 Cong. Rec. at S24800 (``coverage of domestic employees 
is a vital step in the direction of insuring that all workers affecting 
interstate commerce are protected by the Fair Labor Standards Act''); 
see also Senate Report No. 93-690 at p. 20 (``The goal of the 
Amendments embodied in the committee bill is to update the level of the 
minimum wage and to continue the task initiated in 1961--and further 
implemented in 1966 and 1972--to extend the basic protection of the 
Fair Labor Standards Act to additional workers and to reduce to the 
extent practicable at this time the remaining exemptions.'') (emphasis 
added). Further, there is no indication that Congress considered 
limiting enterprise coverage for third party employers providing 
domestic services. The only expressions of concern by opponents of the 
amendment related to the new recordkeeping burdens on private 
households. Recognizing this intended expansion of the Act, the 
exemptions excluding employees from coverage must therefore be defined 
narrowly in the regulations to achieve the law's purpose of extending 
coverage broadly. This is consistent with the general principle that 
coverage under the FLSA is broadly construed so as to effect its 
remedial purposes, and exemptions are narrowly interpreted and limited 
in application to those who clearly are within the terms and spirit of 
the exemption. See, e.g., A.H. Phillips, Inc. v. Walling, 324 U.S. 490, 
493 (1945). Upon further analysis, the Department acknowledges that the 
regulatory rollback of coverage for many workers that resulted from 
current Sec.  552.109 was not in accord with Congress' purpose of 
expanding coverage.
---------------------------------------------------------------------------

    \3\ University of California San Francisco, Center for 
California Health Workforce Studies, An Aging U.S. Population and 
the Healthcare Workforce: Factors Affecting the Need for Geriatric 
Care Workers at 30 (Feb. 2006).

---------------------------------------------------------------------------

[[Page 81197]]

    In addition, 14 states already have statutes providing minimum wage 
and overtime protections to all or most third-party-employed home care 
workers who may otherwise fall under the federal companion exemption. 
These states are Colorado, Hawaii, Illinois, Maryland, Massachusetts, 
Michigan, Minnesota, Montana, Nevada, New Jersey, New York, 
Pennsylvania, Washington, and Wisconsin. Maine and California extend 
minimum wage and overtime protections to all companions employed by 
for-profit agencies. Five more states (Arizona, Nebraska, North Dakota, 
Ohio, and South Dakota) and the District of Columbia provide only 
minimum wage coverage only to home care workers, including companions, 
employed by third parties.
    Significantly, several of the states have instituted these 
protections in the last several years. For example, in January 2010 
Colorado extended minimum wage and overtime protection to home care 
workers not employed by private households; in October 2003 Michigan 
extended minimum wage and overtime protection to home care workers 
employed by an employer with 2 or more employees and in July 2003 
California extended minimum wage coverage to all companions employed by 
third parties and overtime coverage to companions employed by for-
profit agencies. The fact that these state statutes exist negates many 
of the objections raised in the past regarding the feasibility and 
expense of prohibiting third parties from claiming the companionship 
and live-in worker exemptions.
    Members of Congress have also recently urged the Department to 
narrow the scope of these exemptions. In 2009, over 50 Members of 
Congress wrote to Secretary Solis, urging the Department to revise the 
companionship regulation because it ``interpreted a narrow exemption 
Congress provided for `companionship services' to exclude all workers, 
including those employed by a third party, who provide in-home care for 
elderly or disabled people from the FLSA's wage and overtime 
protections.'' See Letter from Representative Sanchez et al. to 
Secretary Solis, May 18, 2009; Letter from Senator Harkin, et al., to 
Secretary Solis, June 11, 2009. The Members also noted that most home 
care workers are women and often the sole bread winners for their 
families. The latter point is important because Congress stated that 
``[p]eople who will be employed in the excluded categories are not 
regular bread winners or responsible for their families' support.'' 
Senate Report No. 93-690, at p. 20. The expanded coverage was needed to 
raise incomes for those workers who depended on domestic work as a 
``daily living,'' which was the workforce that Rep. Shirley Chisholm 
described as the ``thousands of ladies who have the sole responsibility 
for taking care of their families and will not be able to adequately 
support their families.'' This situation continues today. One survey in 
New York City, for example, reported that 81 percent of home care 
workers served as the primary income earner for their family.\4\
---------------------------------------------------------------------------

    \4\ Gilbert, Lenora. Home Care Workers: The New York City 
Experience, Encyclopedia of Occupational Safety and Health, Vol. 3. 
(4th ed. International Labor Organization, 1998).
---------------------------------------------------------------------------

    In 2007, the Department's third party employment regulation was 
addressed by the Supreme Court. See Coke, 551 U.S. 158. In Coke, a home 
health care worker employed by a third party challenged the validity of 
the Department's regulation permitting employees of third parties to 
claim the companionship exemption. The Court acknowledged that the 
statutory text and legislative history do not provide an explicit 
answer to the third party employment question. Id. at 168. Rather, the 
FLSA leaves gaps as to the scope and definition of statutory terms such 
as ``domestic service employment'' and ``companionship services,'' and 
it provides the Department with the power to fill those gaps. Id. at 
167. Further, when the Department fills statutory gaps with any 
reasonable interpretation, and in accordance with other applicable 
requirements, the courts accept the result as legally binding. Id. at 
167-68. The Court noted that the 1974 Amendment ``expressly instructs 
the agency to work out the details of those broad definitions'' and 
explained that the regulation ``concerns a matter in respect to which 
the agency is expert,'' because whether the 1974 Amendment should 
extend protection to any third party companions turns ``upon the kind 
of thorough knowledge of the subject matter and ability to consult at 
length with affected parties that an agency, such as the Department of 
Labor, possesses.'' Id. at 167-68. The Court concluded that ``whether 
to include workers paid by third parties within the scope of the 
definitions is one of those details'' that Congress entrusted to the 
Department. Id. at 167.
    In Coke, the Department argued that the third party regulation was 
an exercise of its expressly delegated legislative rulemaking 
authority, and as such, was legally binding and must be accorded the 
highest level of deference. The position taken by the Department in 
Coke concerning deference, as affirmed by a unanimous Supreme Court, 
remains relevant as the Department reconsiders the scope of these 
exemptions. By engaging in a new round of notice and comment 
rulemaking, the Department is again appropriately exercising its 
expressly delegated rulemaking authority. The Department's proposal to 
revise the third party regulation is in no way inconsistent with the 
Court's ruling. Rather, the Court recognized that the statutory text 
does not answer the question and affirmed the Department's broad 
authority to promulgate regulations that define the scope of the 
exemption. The Court explicitly recognized that the Department may 
interpret its ``regulations differently at different times in their 
history,'' and may make changes to its position, provided that the 
change creates no unfair surprise. Id. at 170-71. The Court also 
recognized that when the Department utilizes notice-and-comment 
rulemaking in an attempt to codify a new regulation, as it is doing 
now, such rulemaking makes surprise unlikely. Id. at 170.
    It must be noted that the Department argued in Coke, as well as in 
Wage and Hour Advisory Memorandum (``WHAM'') 2005-1 (Dec. 1, 2005) 
(found at http://www.dol.gov/whd/FieldBulletins/index.htm), that the 
third party regulation, as currently written, was the Department's best 
reading of these statutory exemptions. However, upon further 
consideration of the purpose and objectives behind the 1974 Amendments, 
the Department is no longer convinced that our prior reading is the 
best one. The purpose behind the Amendments, confirmed by the 
legislative history, was to extend FLSA coverage to domestic workers 
who were not employed by covered enterprises. In recognition that it 
was expanding coverage to workers employed by private households, 
Congress created the narrow exemption for casual babysitters and 
companions whose vocation is not domestic service. In light of the 
purposes behind the amendment and the exemption, Sec.  13(a)(15) of the 
FLSA cannot and should not necessarily be read to apply to third party 
employers, as we argued for in the WHAM. The Department erroneously 
focused on the phrase ``any employee,'' instead of focusing on the 
purpose and objective behind the 1974 Amendments, which was to expand 
minimum wage and overtime protections to workers employed by private 
households that did not otherwise meet the FLSA coverage requirements. 
The Supreme

[[Page 81198]]

Court has ``stressed that in expounding a statute, we must not be 
guided by a single sentence or member of a sentence, but look to the 
provisions of the whole law, and to its object and policy.'' U.S. Nat'l 
Bank of Oregon v. Indep. Ins. Agents of Am., Inc., 508 U.S. 439, 455 
(1993) (internal quotation marks omitted). The Supreme Court concluded 
that ``the text of the FLSA does not expressly answer the third party 
employment question.'' Coke, 551 at 168. Thus, the statutory phrase 
``any employee'' cannot, standing alone, answer the question at hand, 
and after considering the purpose and objectives of the Amendments as a 
whole, the Department believes that the companionship exemption was not 
intended to apply to third party employers.
    Moreover, upon further reflection, the Department is no longer 
convinced that Congress' failure to limit the companionship exemption 
to employees of a particular employer is evidence of Congressional 
intent on this issue. WHAM at 2. In 1974, Congress understood that 
enterprises that employed domestic service workers to perform services 
in private homes were already covered employers under the Act and thus, 
their employees already received the protections of the FLSA even when 
they performed companionship services. There is no indication that 
Congress intended to narrow coverage of those employed by third party 
employers when this would be contrary to the intent and purpose of 
expanding coverage and protecting low-wage workers. By focusing on the 
impact that the 1974 Amendments would have upon private households 
during the debates, Congress presumably did not think it necessary to 
explicitly limit the narrowly created statutory exemptions to families 
and households who employ companions, causal babysitters and live-in 
domestics. Rather, Congress provided the Department with the power to 
fill these kinds of statutory gaps.
    The WHAM noted the ambiguity and lack of clarity in the 
companionship regulations, stating that ``phrases in the [companionship 
regulations] could potentially be read to exclude third party employees 
from the definition of domestic service employment.'' WHAM at 3. This 
admitted lack of clarity is one of the reasons the Department has 
revisited these regulations, and, upon further consideration, proposes 
amending this regulation to state that employees of third party 
employers may not use these exemptions. This proposed amendment, as 
explained above, is based upon a closer examination of the legislative 
history and legislative intent, the manner in which the home health 
care industry has evolved, an attempt to better harmonize the 
regulations pertaining to companionship, 36 years of enforcement 
experience, and additional information provided by stakeholders, 
Members of Congress, and individual states.
    Based on the foregoing reasons, the Department proposes to revise 
Sec.  552.109(a) and (c) to apply the exemptions in Sec. Sec.  
13(a)(15) and 13(b)(21) of the FLSA only to workers employed by the 
individual, family or household using the worker's services. Further, 
to address concerns expressed in the legislative history that FLSA 
compliance would be a burden to the individual, family, or household, 
the Department believes it is consistent with the statute to maintain 
the Sec. Sec.  13(a)(15) and 13(b)(21) exemptions for the individual, 
family, or household even if they engage the services of a third party 
employer. Therefore, if the individual, family, or household and the 
third party agency are joint employers, only the individual, family, or 
household is still entitled to assert the exemptions. However, 
regardless of whether a joint employment relationship exists, the 
exemptions are not available to the third party employer. Thus, all 
workers employed by a third party, whether solely or jointly, are 
entitled to the minimum wage and overtime protections of the Act. The 
Department further notes that if the employee fails to qualify as an 
exempt companion, such as if the employee performs incidental duties 
that exceed the 20 percent tolerance allowed under the proposed Sec.  
552.6(b), or the employee provides medical care for which training is a 
prerequisite, the individual, family or household member cannot assert 
the exemption and is jointly and severally liable for the violation. 
The proposed revision appropriately limits these exemptions to the 
scope Congress intended.
    Finally, the proposed regulation refers to ``the individual or 
member of the family or household'' who employs the companion or live-
in domestic worker. It is the Department's intent that ``member of the 
family or household'' be construed broadly, and no specific familial 
relationship is necessary. For example, a ``member of the family or 
household'' may include an individual who is a child, niece, guardian 
or authorized representative, housemate, or person acting in loco 
parentis to the elderly or infirm individual needing companionship or 
live-in services.
    The Department invites comments on the proposed changes to the 
third party employment regulation, and specifically seeks feedback from 
home health care workers, organizations, and employers.

D. Live-in Domestic Service Employees (29 CFR 552.102 and 552.110)

    The Department proposes revisions to the recordkeeping requirements 
in 29 CFR part 552 applicable to live-in domestic employees, in order 
to ensure that employers maintain an accurate record of hours worked by 
such workers and pay for all hours worked in accordance with the FLSA. 
Section 13(b)(21) of the Act, provides an overtime exemption for live-
in domestic employees; however, such workers remain subject to the FLSA 
minimum wage protections. Current Sec.  552.102 allows the employer and 
employee to enter into an agreement that excludes the amount of 
sleeping time, meal time, and other periods of complete freedom from 
duty when the employee may either leave the premises or stay on the 
premises for purely personal pursuits. Paragraph 552.102(a) makes clear 
that if the free time is interrupted by a call to duty, the 
interruption must be counted as hours worked. Paragraph 552.102(b) 
allows an employer and employee who have such an agreement to establish 
the employee's hours of work in lieu of maintaining precise records of 
the hours actually worked. The employer is to maintain a copy of the 
agreement and indicate that the employee's work time generally 
coincides with the agreement. If there is a significant deviation from 
the agreement, a separate record should be kept or a new agreement 
should be reached.
    The Department is concerned that not all hours worked are actually 
captured by such agreement and paid, which may result in a minimum wage 
violation. The current regulations do not provide a sufficient basis to 
determine whether the employee has in fact received at least the 
minimum wage for all hours worked.
    Proposed Sec.  552.102(b) would no longer allow the employer of a 
live-in domestic employee to use the agreement as the basis to 
establish the actual hours of work in lieu of maintaining an actual 
record of such hours. Instead, the employer will be required to keep a 
record of the actual hours worked. Consequently, the language 
suggesting that a separate record of hours worked be kept when there is 
a significant deviation from the agreement is deleted. Nonetheless, 
proposed Sec.  551.102(b) requires entering into a new written 
agreement whenever there is a significant deviation from the existing 
agreement.

[[Page 81199]]

    The Department also proposes to amend Sec.  552.110 with respect to 
the records kept for live-in domestic employees. Current Sec.  552.110 
specifies the recordkeeping requirements for domestic service 
employees. Paragraph 552.110(b) provides that records of actual hours 
worked are not required for live-in domestic employees; instead, the 
employer may maintain a copy of the agreement referred to in Sec.  
552.102. It also states that the more limited recordkeeping requirement 
in this section does not apply to third-party employers and that no 
records are required for casual babysitters. Paragraph 552.110(c) 
permits, when a domestic service employee works a fixed schedule, the 
employer to use the schedule that the employee normally works and 
either provide some notation that such hours were actually worked or, 
when more or less hours are actually worked, show the exact number of 
hours worked. Paragraph 552.110(d) permits an employer to require the 
domestic service employee to record the hours worked and submit the 
record to the employer.
    For the reasons outlined above, proposed Sec.  552.110(b) will no 
longer permit an employer to maintain a copy of the agreement as a 
substitution for recording actual hours worked by the live-in domestic 
employee. Instead, it requires that the employer maintain a copy of the 
agreement and maintain records showing the exact number of hours worked 
by the live-in domestic employee. Proposed Sec.  552.110(b) also makes 
clear that the provisions of 29 CFR 516.2(c) do not apply to live-in 
domestic employees, which means that employers of such employees may 
not maintain a simplified set of records for live-in domestic employees 
who work a fixed schedule. As a result, Sec.  552.110(c) is revised to 
clearly state that the provision does not apply to live-in domestic 
workers. The Department believes that the frequency of schedule changes 
simply makes reliance on a fixed schedule and noting exceptions too 
unreliable to ensure an accurate record of hours worked by these 
employees. In addition, the proposed changes to Sec.  552.109 makes the 
reference in Sec.  552.110(b) to third-party employers not being able 
to rely on the simplified recordkeeping requirements moot; 
consequently, it is removed from proposed Sec.  552.110(b). The 
proposed regulations also revise Sec.  552.110(d), thus no longer 
allowing the employer to require the live-in domestic service employee 
to record the hours worked and submit the record to the employer. As 
with other employees, the employer is responsible for making, keeping, 
and preserving records of hours worked and ensuring their accuracy. As 
is the case now, the Department does not require records for casual 
babysitters as defined by Sec.  552.5; however, that provision is in a 
stand-alone paragraph, proposed 29 CFR 552.110(e).

V. Paperwork Reduction Act

    The Paperwork Reduction Act of 1995 (PRA), 44 U.S.C. 3501 et seq., 
and its attendant regulations, 5 CFR part 1320, requires that the 
Department consider the impact of paperwork and other information 
collection burdens imposed on the public. Under the PRA, an agency may 
not collect or sponsor the collection of information, nor may it impose 
an information collection requirement unless it displays a currently 
valid Office of Management and Budget (OMB) control number. See 5 CFR 
1320.8(b)(3)(vi).
    This action contains the following proposed amendments to the 
existing information collection requirements previously approved under 
OMB Control Number 1235-0018. As required by the Paperwork Reduction 
Act of 1995 (44 U.S.C. 3507(d), the Department has submitted these 
proposed information collection amendments to OMB for its review.
    Summary: The Department seeks to minimize the paperwork burden for 
individuals, small businesses, educational and nonprofit institutions, 
Federal contractors, State, local, and tribal governments, and other 
persons resulting from the collection of information by or for the 
agency. The PRA typically requires an agency to provide notice and seek 
public comments on any proposed collection of information contained in 
a proposed rule. See 44 U.S.C. 3506(c)(2)(B); 5 CFR 1320.8.
    The PRA requires all Federal agencies to analyze proposed 
regulations for potential time burdens on the regulated community 
created by provisions within the proposed regulations that require the 
submission of information. These information collection (IC) 
requirements must be submitted to OMB for approval. Persons are not 
required to respond to the information collection requirements as 
contained in this proposal unless and until they are approved by the 
OMB under the PRA at the final rule stage. This ``paperwork burden'' 
analysis estimates the burdens for the proposed regulations as drafted. 
The Department proposes to amend 29 CFR part 552 with respect to the 
records kept for live-in domestic employees. Proposed 29 CFR 552.102(b) 
would no longer allow the employer of a live-in domestic employee to 
use an agreement as the basis to establish hours worked in lieu of 
maintaining actual record of such hours. Instead, the employer will be 
required to keep a record of the actual hours worked. Concurrently, 
proposed 29 CFR 552.110(b) will no longer permit an employer to 
maintain a copy of an agreement as a substitute for keeping records of 
hours worked by the live-in domestic employee. Finally, the 
Department's proposed amendments to 29 CFR part 552 results in fewer 
employees being exempt from the minimum wage and overtime law. 
Employers must maintain records of hours worked for employees who are 
not exempt from minimum wage and overtime pay requirements. Therefore, 
the number of employees for whom an employer must maintain records of 
hours worked will increase under the proposed rule. This will increase 
the burden under 29 CFR part 516, the general recordkeeping regulation 
under the FLSA.
    Circumstances Necessitating Collection: The Fair Labor Standards 
Act (FLSA), 29 U.S.C. 201 et seq., sets the Federal minimum wage, 
overtime pay, recordkeeping and youth employment standards of most 
general application. Section 11(c) of the FLSA requires all employers 
covered by the FLSA to make, keep, and preserve records or employees 
and of wages, hours, and other conditions and practices of employment. 
A FLSA covered employer must maintain the records for such period of 
time and make such reports as prescribed by regulations issued by the 
Secretary of Labor. The Department has promulgated regulations at 29 
CFR part 516 to establish the basic FLSA recordkeeping requirements. 
The Department has also issued specific recordkeeping requirements in 
29 CFR part 552 which is the subject of this collection. The Department 
proposes to amend recordkeeping requirements in Sec.  552.102 and Sec.  
552.110 regarding agreements for live-in domestic workers. The 
Department also notes that the proposed amendments to the definition of 
companion results in fewer employees being exempt from the minimum wage 
and overtime requirements of the FLSA.
    Purpose and Use: The Wage and Hour Division (WHD) and employees use 
this information to determine whether covered employers have complied 
with various FLSA requirements. Employers use the records to document 
FLSA compliance, including showing qualification for various FLSA 
exemptions.

[[Page 81200]]

    Technology: The recordkeeping aspect of this collection makes clear 
that the regulations prescribe no particular order or form of records 
and employers may preserve records in such forms as microfilm, or 
automated word or data processing memory is acceptable provided 
facilities are available for inspection and transcription of the 
records.
    Duplication: This information is not available through any other 
source.
    Minimizing Small Entity Burden: Although this information 
collection does involve small businesses, including small State and 
Local government agencies, the Department minimizes respondent burden 
by requiring no specific order or form of records in responding to this 
information collection. Moreover, employers would normally maintain the 
records identified in this information collection under usual or 
customary business practices.
    Agency Need: The Department is assigned a statutory obligation to 
ensure employer compliance with the FLSA. The Department uses records 
covered by this information collection to determine compliance with the 
FLSA.
    Special Circumstances: There are no special circumstances 
associated with this collection.
    Public Comments: The Department seeks public comments regarding the 
burdens imposed by information collections contained in sections 
552.102 and 552.110 of this proposed rule. In particular, the 
Department seeks comments that: Evaluate whether the proposed 
collection of information is necessary for the proper performance of 
the functions of the agency, including whether the information will 
have practical utility; evaluate the accuracy of the agency's estimate 
of the burden of the proposed collection of information, including the 
validity of the methodology and assumptions used; enhance the quality, 
utility and clarity of the information to be collected; and minimize 
the burden of the collection of information on those who are to 
respond, including through the use of appropriate automated, 
electronic, mechanical, or other technological collection techniques or 
other forms of information technology, e.g., permitting electronic 
submissions of responses. Commenters may send their views about these 
information collections to the Department in the same way as all other 
comments (e.g., through the regulations.gov Web site). All comments 
received will be made a matter of public record, and posted without 
change to http://www.regulations.gov, including any personal 
information provided.
    An agency may not conduct an information collection unless it has a 
currently valid OMB approval, and the Department has submitted the 
identified information collection contained in the proposed rule to the 
OMB for review under the PRA under the Control Number 1235-0018. See 44 
U.S.C. 3507(d); 5 CFR 1320.11. Interested parties may obtain a copy of 
the full supporting statement by sending a written request to the mail 
address shown in the ADDRESSES section at the beginning of this 
preamble or by visiting the http://www.reginfo.gov/public/do/PRAMain 
Web site.
    In addition to having an opportunity to file comments with the 
Department, comments about the paperwork implications of the proposed 
regulations may be addressed to the OMB. Comments to the OMB should be 
directed to: Office of Information and Regulatory Affairs, Attention 
OMB Desk Officer for the Wage and Hour Division, Office of Management 
and Budget, Room 10235, Washington, DC 20503, Telephone: (202) 395-
7316/Fax: (202) 395-6974 (these are not toll-free numbers).
    Confidentiality: The Department makes no assurances of 
confidentiality to respondents. As a practical matter, the Department 
would only disclose agency investigation records of materials subject 
to this collection in accordance with the provisions of the Freedom of 
Information Act, 5 U.S.C. 552, and the attendant regulations, 29 CFR 
part 70, and the Privacy Act, 5 U.S.C. 552a, and its attendant 
regulations, 29 CFR part 71.
    OMB Control Number: 1235-0018.
    Affected Public: Businesses or other for profit, not-for-profit 
institutions.
    Total Respondents: 3,493,514.
    Total Annual Responses: 43,478,185.
    Estimated Burden Hours: 987,778.
    Estimated Time per Response: 2 minutes.
    Frequency: 24 times annually.
    Total Burden Cost (capital/startup): 0.
    Total Burden Costs (operation/maintenance): $22,580,605.

VI. Executive Orders 12866 and 13563

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). Executive 
Order 13563 emphasizes the importance of quantifying both costs and 
benefits, of reducing costs, of harmonizing rules, and of promoting 
flexibility. This rule has been designated a ``significant regulatory 
action'' because it is economically significant, under section 3(f) of 
Executive Order 12866, based on the Preliminary Regulatory Impact 
Analysis (PRIA) presented below. As a result, the OMB has reviewed this 
proposed rule. The Department also has concluded that this proposed 
rule is a major rule under the Small Business Regulatory Enforcement 
Fairness Act of 1996 (5 U.S.C. 801 et seq.).
    Preliminary Regulatory Impact Analysis of the Proposed Revisions to 
the Companionship
    Regulations Background
    Under Executive Order 12866 (58 FR 51735, October 4, 1993), the 
Department must determine whether a regulatory action is 
``significant'' and therefore subject to OMB review and the 
requirements of the Executive Order. Executive Order 12866 defines 
``significant regulatory action'' as one that is likely to result in a 
rule that may have ``an annual effect on the economy of $100 million or 
more or adversely affect in a material way the economy, a sector of the 
economy, productivity, competition, jobs, the environment, public 
health or safety, or state, local, or tribal governments or 
communities; create a serious inconsistency or otherwise interfere with 
an action taken or planned by another agency; materially alter the 
budgetary impact of entitlements, grants, user fees, or loan programs 
or the rights and obligations of recipients thereof; or raise novel 
legal or policy issues arising out of legal mandates, the President's 
priorities, or the principles set forth in the Executive Order.'' This 
proposed rule meets the criteria for a significant regulatory action 
because it is anticipated to have an annual effect on the economy of 
$100 million or more. As a result, the rule is submitted to OMB for 
review.
    The provisions of the FLSA apply to all enterprises that have 
employees engaged in commerce or in the production of goods for 
commerce and have an annual gross volume of sales made or business done 
of at least $500,000 (exclusive of excise taxes at the retail level 
that are separately stated); or, are engaged in the operation of a 
hospital, an institution primarily engaged in the care of the sick, the 
aged, or the mentally ill who reside on the premises; a school for 
mentally or physically disabled or gifted children; a preschool, 
elementary or secondary school, or an institution of higher education 
(regardless whether such hospital, institution or school is public or 
private, or operated for profit or not);

[[Page 81201]]

or, are engaged in an activity of a public agency.
    There are two ways an employee may be covered by the provisions of 
the FLSA: (1) Any employee of an enterprise covered by the FLSA is 
covered by the provisions of the FLSA, and (2) even if the enterprise 
is not covered, individual employees whose work engages the employee in 
interstate commerce or in the production of goods for commerce or in 
domestic service is covered by the provisions of the FLSA. Covered 
employers are required by the provisions of the FLSA to: (1) Pay 
employees who are not exempt from the Act's requirements not less than 
the Federal minimum wage for all hours worked and overtime premium pay 
at a rate of not less than one and one-half times the employee's 
regular rate of pay for all hours worked over 40 in a workweek, and (2) 
make, keep, and preserve records of the persons employed by the 
employer and of the wages, hours, and other conditions and practices of 
employment.
    In 1974, Congress expressly extended FLSA coverage to ``domestic 
service'' workers performing services of a household nature in private 
homes not previously subject to minimum wage and overtime requirements. 
While domestic service workers are covered by FLSA minimum wage and 
overtime requirements even though they work for a private household and 
not a covered enterprise, Congress created exemptions from these 
requirements for casual babysitters and persons employed in domestic 
service employment to provide companionship services for individuals 
who (because of age or infirmity) are unable to care for themselves.\5\
---------------------------------------------------------------------------

    \5\ 29 U.S.C. 202(a), 206(f), 207(l), and 213(a)(15).
---------------------------------------------------------------------------

Need for Regulation and Why the Department Is Considering Action

    In 1974, Congress extended coverage of the FLSA to many domestic 
service employees performing services of a household nature in private 
homes not previously subject to minimum wage and overtime pay 
requirements. Section 13(a)(15) of the Act exempts from its minimum 
wage and overtime pay provisions domestic service employees employed 
``to provide companionship services for individuals who (because of age 
or infirmity) are unable to care for themselves (as such terms are 
defined and delimited by regulations of the Secretary).'' Section 
13(b)(21) of the FLSA exempts from the overtime pay provision any 
employee employed ``in domestic service in a household and who resides 
in such household.''
    Since the 1975 regulations were implemented, the home health care 
industry has evolved and expanded in response to the increasing size of 
the population in need of such services, the growing demand for in-home 
care instead of institutional care for persons of all ages, and the 
availability of public funding assistance for such services under 
Medicare and Medicaid. As the industry has expanded, so has the range 
of tasks performed by workers providing companionship services. The 
range now includes assistance with activities of daily living (ADLs), 
instrumental activities of daily living (IADLs), and paramedical tasks 
(such as catheter hygiene or changing of aseptic dressings).\6\ Public 
funding programs do not cover services such as social support, 
fellowship or protection.\7\ According to the U.S. Department of Health 
and Human Services (HHS), ``[s]imple companionship or custodial 
observation of an individual, absent hands-on or cueing assistance that 
is necessary and directly related to ADLs and IADLs, is not a Medicaid 
personal care service.'' \8\
---------------------------------------------------------------------------

    \6\ PHI, 2010a. Background Report on the U.S. Home Care and 
Personal Assistance Workforce and Industry (Forthcoming). P. 22.
    \7\ PHI, 2010a. p. 22.
    \8\ ``Understanding Medicaid Home and Community Services: A 
Primer,'' Gary Smith, Janet O'Keefe, Letty Carpenter, Pamela Doty, 
Gavin Kennedy, Brian Burwell, Robert Mollica and Loretta Williams, 
George Washington University, Center for Health Policy Research, 
October 2000.
---------------------------------------------------------------------------

    The Department of Labor believes that the current application of 
the companionship services exemption in the home health care industry 
is not consistent with the original Congressional intent. The 
Department proposes to modify the definition of companionship services 
to exclude personnel who perform functions that require training in the 
performance of medically-related duties, and to provide only a 20 
percent tolerance for intimate personal care services and related 
household work. As a result, to qualify for the companionship services 
exemption, workers must spend at least 80 percent of their time in 
activities that provide fellowship or protection. Those workers who are 
providing home health care services that exceed the 20 percent 
tolerance for intimate personal care services and related household 
work must be paid in accordance with federal minimum wage and overtime 
requirements.
Objectives and Legal Basis for Rule
    Section 13(a)(15) of the FLSA exempts from its minimum wage and 
overtime pay provisions domestic service employees employed ``to 
provide companionship services for individuals who (because of age or 
infirmity) are unable to care for themselves (as such terms are defined 
and delimited by regulations of the Secretary).'' Due to significant 
changes in the home health care industry over the last 36 years, 
workers who today provide in-home care to individuals are performing 
duties and working in circumstances that were not envisioned when the 
companionship services regulations were promulgated. Section 13(b)(21) 
provides an exemption from the Act's overtime pay requirements for 
live-in domestic workers. The current regulations allow an employer of 
a live-in domestic worker to maintain a copy of the agreement of hours 
to be worked and to indicate that the employee's work time generally 
coincides with that agreement, instead of requiring the employer to 
maintain an accurate record of hours actually worked by the live-in 
domestic worker. The Department is concerned that not all hours worked 
are actually captured by such agreement and paid, which may result in a 
minimum wage violation. The current regulations do not provide a 
sufficient basis to determine whether the employee has in fact received 
at least the minimum wage for all hours worked.
    The Department has re-examined the regulations and determined that 
the regulations, as currently written, have expanded the scope of the 
companionship services exemption beyond those employees whom Congress 
intended to exempt when it enacted Sec.  13(a)(15) of the Act, and do 
not provide a sufficient basis for determining whether live-in workers 
subject to Sec.  13(b)(21) of the Act have been paid at least the 
minimum wage for all hours worked. Therefore, the Department proposes 
to amend the regulations to revise the definitions of ``domestic 
service employment'' and ``companionship services,'' and to require 
employers of live-in domestic workers to maintain an accurate record of 
hours worked by such employees. In addition, the proposed regulation 
would limit the scope of duties a companion may perform, and would 
prohibit employees of third-party employers from claiming the 
exemption.
Summary of Impacts
    The Department projects that the average annualized cost of the 
rule will total about $4.7 million per year over 10 years. In addition 
to the direct cost to employers of the rule, there are also transfer 
effects resulting from the rule. The primary impacts of the rule are

[[Page 81202]]

income transfers to home health care workers in the form of: increased 
hourly wages to reach minimum wage (about $16.1 million in the first 
year, negligible thereafter); payment for time spent traveling between 
patients (average annualized value of $34.7 million per year); and 
payment of an overtime premium when hours worked exceed 40 hours per 
week. Because overtime payments depend on how employers adjust 
scheduling to eliminate or reduce overtime hours, the Department 
considered three adjustment scenarios resulting in payment of: 100 
percent of current overtime hours worked (average annualized value of 
$180.7 million per year); 50 percent of current overtime hours worked 
(average annualized value of $90.4 million per year); or no payment of 
overtime. On the basis of previous evidence on the impact of overtime 
pay, the Department judges that overtime payments in the range of 
scenarios 2 and 3 are more likely than scenario 1.
    Although the transfer of income to workers in the form of higher 
wages is not considered a cost of the rule from a societal perspective, 
higher wages do increase the cost of providing home health care 
services, resulting in the provision of fewer services. This reduction 
in the provision of services causes the market to function less 
efficiently, and this allocative inefficiency is a cost from a societal 
perspective. With a 3% real rate, the Department measures the range of 
average annualized deadweight loss attributable to this allocative 
inefficiency as $105,000 when no overtime pay adjustment is assumed, 
$36,000 when 50% of overtime pay is assumed to adjust and $3,000 when a 
100% adjustment in overtime pay is assumed. The relatively small 
deadweight loss primarily occurs because both the demand for and supply 
of home health care services appear to be inelastic--that is, the 
equilibrium quantity of companionship services is not very responsive 
to changes in price, possibly due to the importance of these services 
and the coverage of many companionship services by Medicare and 
Medicaid. Table 1 summarizes the projected costs, transfer effects and 
impacts of the proposed revisions to the FLSA.

                             Table 1--Summary of Impact of Proposed Changes to FLSA
----------------------------------------------------------------------------------------------------------------
 
----------------------------------------------------------------------------------------------------------------
 
                                      Average Annualized Value ($
                                                 mil.)
                                                                               ---------------------------------
                                           Year 1 ($                               3% Real Rate     7% Real Rate
                                               mil.)   Years 2-10 ($ mil.)\a\
----------------------------------------------------------------------------------------------------------------
                                                      Costs
----------------------------------------------------------------------------------------------------------------
Regulatory Familiarization Agencies             $3.9         $0.3         $0.3             $0.7             $0.8
    Families Hiring Self-employed...             6.0          3.2          4.0              3.8              3.9
                                     ---------------------------------------------------------------------------
        Total Costs.................             9.9          3.5          4.4              4.6              4.7
----------------------------------------------------------------------------------------------------------------
                                                    Transfers
----------------------------------------------------------------------------------------------------------------
Minimum Wages (MW)
    To Agency-Employed Workers......            13.0      0.0 \b\      0.0 \b\              1.5              1.7
    To Self-Employed Workers........             3.1      0.0 \b\      0.0 \b\              0.4              0.4
Travel Wages........................            26.7         27.8         45.8             35.4             34.7
----------------------------------------------------------------------------------------------------------------
                                               Overtime Scenarios
----------------------------------------------------------------------------------------------------------------
    OT 1............................           139.3        144.8        238.8            184.2            180.7
    OT 2............................            69.7         72.4        119.4             92.1             90.4
    OT 3............................             0.0          0.0          0.0              0.0              0.0
Total Costs and Transfers by
 Scenario
    Reg Fam + MW + Travel + OT 1....           192.1        176.2          289              226            222.2
    Reg Fam + MW + Travel + OT 2....           122.4        103.8        169.6            133.9            131.9
    Reg Fam + MW + Travel + OT 3....            52.7         31.4         50.2             41.8             41.5
----------------------------------------------------------------------------------------------------------------
                                                 Deadweight Loss
----------------------------------------------------------------------------------------------------------------
    Reg Fam + MW + Travel + OT 1....           0.103        0.080        0.132            0.105            0.103
    Reg Fam + MW + Travel + OT 2....           0.042        0.027        0.044            0.036            0.036
    Reg Fam + MW + Travel + OT 3....           0.008        0.002        0.004            0.003            0.003
----------------------------------------------------------------------------------------------------------------
                                        Disemployment (number of workers)
----------------------------------------------------------------------------------------------------------------
    Reg Fam + MW + Travel + OT 1....             793          739        1,169               938 \c\
    Reg Fam + MW + Travel + OT 2....             505          435          686               544 \c\
    Reg Fam + MW + Travel + OT 3....             218          132          203               172 \c\
----------------------------------------------------------------------------------------------------------------
\a\ These costs are a range where the first number represents the estimate for Year 2; the second estimate for
  Year 10.
\b\ 2010 statistics on PCA and HHA wages indicate that few workers, if any, are currently paid below minimum
  wage (i.e. in no state is the 10th percentile wage below $7.25 per hour). See the BLS Occupational Employment
  Statistics, 2010 state estimates, at URL: http://stats.bls.gov/oes/.
\c\ Simple average over 10 years.
Columns may not sum to totals due to rounding.

State Law Requirements
    In evaluating the economic impact of the proposed rule, it is 
important to consider the current wage requirements for home health 
care workers. There are numerous state laws pertaining to home health 
care workers. The State Medicaid Manual requires states to develop 
qualifications or requirements (such as background checks, training, 
age, supervision, health, literacy, or

[[Page 81203]]

education, or other requirements) for Medicaid-financed personal care 
attendants. These state programs can each have multiple delivery 
models, with care being agency-directed or consumer-directed with care 
given by agencies or independent providers. These delivery models are 
not necessarily mutually exclusive. In general, for the purposes of 
this analysis, we refer to independent providers as workers providing 
services through informal arrangements, and therefore they are not 
counted in the statistics on home health care providers used as the 
basis for this analysis.
    A 2006 report by the HHS Office of the Inspector General (OIG) 
found that states have established multiple sets of worker requirements 
that often vary among the programs within a state and among the 
delivery models within programs, resulting in 301 sets of requirements 
nationwide.\9\ Four of the consumer-directed programs in the OIG review 
had no attendant requirements.
---------------------------------------------------------------------------

    \9\ U.S. Department of Health and Human Services (HHS) Office of 
the Inspector General (OIG). States' Requirements for Medicaid-
Funded Personal Care Service Attendants, available at http://oig.hhs.gov/oei/reports/oei-07-05-00250.pdf. (2006).
---------------------------------------------------------------------------

    Furthermore, states define these requirements differently, and 
specify different combinations of requirements in different programs. 
The most common requirements, and some characterization of how these 
might be defined by different programs, include:
     Background Checks. May include the following: criminal 
background checks; checks of abuse or neglect registries; and checks of 
Federal or State exclusion lists for previous fraudulent or abusive 
activities.
     Training. May include the following: First aid or 
cardiopulmonary resuscitation (CPR); basic health knowledge (e.g., food 
and nutrition, blood-borne pathogens, hygiene, universal precautions); 
assistance with daily living activities (e.g., patient transfer 
techniques, proper patient bathing and showering techniques, and 
grooming); program orientation (e.g., beneficiary rights and 
responsibilities, safety, behavioral issues, patient confidentiality); 
training specific to an individual beneficiary's needs; or other 
training.
     Supervision. Might be performed by registered or licensed 
practical nurses (RN or LPN); home health or personal care service 
agency staff; case managers; other qualified staff or individuals; or 
the beneficiary.
     Minimum Age. Most commonly set at 18-years-old, but in 
some states might be 14-years-old, 19-years-old, or of ``legal working 
age.''
     Health. May include the following: Test negative for 
tuberculosis; be able to perform the services in the plan of care; meet 
an established minimum level of physical ability (e.g., able to lift a 
certain weight or stand for a certain time); be free of communicable 
disease; pass a physical examination; or drug test.
     Education/Literacy. Minimum requirements might include: An 
ability to read and write adequately to follow instructions or to keep 
records; a General Education Diploma (GED) or high school diploma; 
completed a certain grade; be a Certified Nursing Assistant (CNA) or a 
home health aide; have a Homemaker/Personal Care Service Provider 
certification issued by the state; be able to communicate with the 
beneficiary and/or supervisory staff; pass a competency test or have 
previous experience; have the skills, knowledge, and abilities 
necessary to perform the services needed; be able to meet the needs of 
the beneficiary; or be mature and sympathetic.
     Other. Might be required to: Have a Social Security 
number; have an identification card; be a U.S. citizen; or meet state 
motor vehicle requirements if providing transportation.
    The number of states that included each requirement in at least one 
program and the number of state program sets that include each 
requirement are summarized in Table 1-1.

            Table 1-1--Six Most Common Attendant Requirements
------------------------------------------------------------------------
                                      Number of states
                                        that utilized    Number of sets
             Requirement               requirement in      containing
                                        at least one     requirement (of
                                           program          301 sets)
------------------------------------------------------------------------
Background Checks...................                50               245
Training............................                46               227
Age.................................                42               219
Supervision.........................                43               198
Health..............................                39               162
Education/Literacy..................                31               125
------------------------------------------------------------------------
Source: DHSS OIG, 2006. p. 9.

    States' laws also vary in whether they extend minimum wage and 
overtime provisions to home health care workers. In many states 
companions or home health care workers are not explicitly named in the 
regulations, but often fall under those regulations that apply to 
domestic service employees.
     16 states extend both minimum wage and overtime coverage 
to most home health care workers who would otherwise be excluded under 
the current regulations: California, Colorado, Hawaii, Illinois, Maine, 
Maryland, Massachusetts, Michigan, Minnesota, Montana, Nevada, New 
Jersey, New York, Pennsylvania, Washington, and Wisconsin. However, in 
some states certain types of these workers remain exempt, such as those 
employed directly by households or by non-profit organizations. 
Additionally, New York's overtime law provides that workers who are 
exempt from the FLSA and employed by a third-party agency need only be 
paid time and one-half the minimum wage (as opposed to time and one-
half of the worker's regular wage). Minnesota's overtime provision 
applies only after 48 hours of work.
     Five states (Arizona, Nebraska, North Dakota, Ohio, and 
South Dakota) and the District of Columbia extend minimum wage, but not 
overtime coverage to home care workers. There are again some exemptions 
for those workers employed directly by households or who live in the 
household.
     29 states do not include home health care workers in their 
minimum wage and overtime provisions: Alabama, Alaska, Arkansas, 
Connecticut,

[[Page 81204]]

Delaware, Florida, Georgia, Idaho, Indiana, Iowa, Kansas, Kentucky, 
Louisiana, Mississippi, Missouri, New Hampshire, New Mexico, North 
Carolina, Oklahoma, Oregon, Rhode Island, South Carolina, Tennessee, 
Texas, Utah, Vermont, Virginia, West Virginia, and Wyoming.\10\
---------------------------------------------------------------------------

    \10\ National Employment Law Project (NELP). 2011. Fair Pay for 
Home Care Workers, available at http://www.nelp.org/page/-/Justice/2011/FairPayforHomeCareWorkers.pdf?nocdn=1.
---------------------------------------------------------------------------

    Of the 22 jurisdictions that extend minimum wage to at least some 
home health care workers, 12 have a state minimum wage that is higher 
than the current federal minimum wage of $7.25 an hour.\11\ These state 
laws are summarized in Table 1-2.
---------------------------------------------------------------------------

    \11\ U.S. Department of Labor (DOL). 2011. Minimum Wage, 
available at http://www.dol.gov/dol/topic/wages/minimumwage.htm.

             Table 1-2--State Minimum Wage and Overtime Coverage of Non-Publicly Employed Companions
----------------------------------------------------------------------------------------------------------------
                                 State minimum                                                  Analysis and
            State                  wage [a]           MW            OT          Neither        citations [b]
----------------------------------------------------------------------------------------------------------------
AL...........................  ................  ............  ............            x   .....................
AK...........................  $7.75...........  ............  ............            x   .....................
AZ...........................  7.35............            x   ............  ............  Minimum wage but no
                                                                                            overtime coverage
                                                                                            for companions as
                                                                                            defined in the FLSA.
                                                                                            No state overtime
                                                                                            law. See Ariz. Rev.
                                                                                            Stat. Ann. Sec.
                                                                                            Sec.   23-362, 23-
                                                                                            363; see also Office
                                                                                            of the Attorney
                                                                                            General of the State
                                                                                            of Arizona, Opinion
                                                                                            No. I07-002 (Feb. 7,
                                                                                            2007).
AR...........................  6.25............  ............  ............            x   .....................
CA...........................  8.00............            x   ............  ............  All companions as
                                                                                            defined in the FLSA
                                                                                            are entitled to
                                                                                            minimum wage.
                                                                                            California's
                                                                                            overtime rules
                                                                                            create in terms of
                                                                                            overtime four
                                                                                            categories of
                                                                                            workers who provide
                                                                                            home care. (1) Those
                                                                                            who are employed by
                                                                                            non-profits and do
                                                                                            no additional work
                                                                                            beyond feeding,
                                                                                            dressing, and
                                                                                            supervising the
                                                                                            person do not
                                                                                            receive overtime.
                                                                                            (2) Those who are
                                                                                            employed by non-
                                                                                            profits but do
                                                                                            additional work
                                                                                            beyond feeding,
                                                                                            dressing, and
                                                                                            supervising do
                                                                                            receive overtime.
                                                                                            (3) All for-profit
                                                                                            workers receive
                                                                                            overtime regardless
                                                                                            of their job
                                                                                            description. (4)
                                                                                            County-employed home
                                                                                            care worker, of whom
                                                                                            there are
                                                                                            approximately
                                                                                            367,000, receive up
                                                                                            to $11.50 an hour
                                                                                            straight time per
                                                                                            their union
                                                                                            contracts and may
                                                                                            also receive
                                                                                            overtime under those
                                                                                            contracts.
                                                                                           Industrial Welfare
                                                                                            Commission Order No.
                                                                                            5-2001, ``Judge
                                                                                            Orders State to Halt
                                                                                            Wage Cut for
                                                                                            California Home Care
                                                                                            Workers, http://www.seiu.org/2009/06/judge-orders-state-to-halt-wage-cut-for-california-home-care-workers.php (last
                                                                                            visited Jun. 28,
                                                                                            2011); PHI, 2010a.
                                                                                            p. 14.
CO...........................  7.36............            x             x   ............  Minimum wage and
                                                                                            overtime coverage
                                                                                            for third-party-
                                                                                            employed home care
                                                                                            workers who do work
                                                                                            beyond Colorado's
                                                                                            definition of
                                                                                            ``companion.''
                                                                                            Colorado's
                                                                                            definition of
                                                                                            ``companion'' is
                                                                                            much narrower than
                                                                                            the FLSA definition.
                                                                                            Companions may not
                                                                                            help to bathe and
                                                                                            dress the person, do
                                                                                            any amount of
                                                                                            housekeeping, or
                                                                                            remind the person to
                                                                                            take medication.
                                                                                            People who do those
                                                                                            tasks are more than
                                                                                            just ``companions''
                                                                                            they are ``personal
                                                                                            care'' attendants.
                                                                                            Personal care
                                                                                            attendants are
                                                                                            entitled to minimum
                                                                                            wage and overtime.
                                                                                            However, PCAs
                                                                                            employed directly by
                                                                                            private households
                                                                                            are exempt from
                                                                                            minimum wage and
                                                                                            overtime. Colorado
                                                                                            Minimum Wage Order
                                                                                            No. 26 Sec.   5; 7
                                                                                            Colo. Code Regs.
                                                                                            Sec.   1103-1:5.
CT...........................  8.25............  ............  ............            x   .....................
DE...........................  7.25............  ............  ............            x   .....................
DC...........................  8.25............            x   ............  ............  Minimum wage for
                                                                                            companions as
                                                                                            defined in the FLSA.
                                                                                            D.C. Mun. Regs. tit.
                                                                                            7, Sec.   902.1,
                                                                                            902.3, 902.4 (West
                                                                                            2011).
FL...........................  7.25............  ............  ............            x   .....................
GA...........................  5.15............  ............  ............            x   .....................
HI...........................  7.25............            x             x   ............  Minimum wage and
                                                                                            overtime coverage
                                                                                            for companions as
                                                                                            defined in the FLSA,
                                                                                            but exemption for
                                                                                            those employed
                                                                                            directly by private
                                                                                            households. Haw.
                                                                                            Rev. Stat. Sec.
                                                                                            387-1.
ID...........................  7.25............  ............  ............            x   .....................

[[Page 81205]]

 
IL...........................  $8.25...........            x             x   ............  Minimum wage and
                                                                                            overtime coverage
                                                                                            for any person whose
                                                                                            primary duty is to
                                                                                            be a companion for
                                                                                            individual(s) who
                                                                                            are aged or infirm
                                                                                            or workers whose
                                                                                            primary duty is to
                                                                                            perform health care
                                                                                            services in or about
                                                                                            a private home.
                                                                                            There may be an
                                                                                            exemption for those
                                                                                            employed solely by
                                                                                            private households
                                                                                            as a result of a
                                                                                            general exemption
                                                                                            for employers with
                                                                                            fewer than four
                                                                                            employees. 820
                                                                                            Ill.Comp. Stat. Sec.
                                                                                              105/3(d); Ill.
                                                                                            Adm. Code Sec.
                                                                                            210.110.
IN...........................  7.25............  ............  ............            x   .....................
IA...........................  7.25............  ............  ............            x   .....................
KS...........................  7.25............  ............  ............            x   .....................
KY...........................  7.25............  ............  ............            x   .....................
LA...........................  ................  ............  ............            x   .....................
ME...........................  7.50............            x             x   ............  Minimum wage and
                                                                                            overtime coverage
                                                                                            for all companions
                                                                                            as defined in the
                                                                                            FLSA. No relevant
                                                                                            exemptions. Me. Rev.
                                                                                            Stat. Ann. tit. 26,
                                                                                            Sec.  Sec.   663,
                                                                                            664.
MD...........................  7.25............            x             x   ............  Minimum wage coverage
                                                                                            for all companions
                                                                                            as defined in the
                                                                                            FLSA. Overtime
                                                                                            coverage for most
                                                                                            home care workers
                                                                                            but exemption for
                                                                                            workers employed by
                                                                                            non-profit agencies
                                                                                            that provide
                                                                                            ``temporary at-home
                                                                                            care services''. Md.
                                                                                            Code Ann., Lab. &
                                                                                            Empl. Sec.   3-415.
MA...........................  8.00............            x             x   ............  Minimum wage and
                                                                                            overtime coverage
                                                                                            for all companions
                                                                                            as defined in the
                                                                                            FLSA. No relevant
                                                                                            exemptions. Mass.
                                                                                            Gen. Laws Ch. 151,
                                                                                            Sec.   1.
MI...........................  7.40............            x             x   ............  Minimum wage and
                                                                                            overtime coverage
                                                                                            for companions as
                                                                                            defined in the FLSA,
                                                                                            but exemption for
                                                                                            live-in workers.
                                                                                            Mich. Comp. Laws
                                                                                            Sec.
                                                                                            408.394(2)(a).
                                                                                            Exemption for
                                                                                            workers employed
                                                                                            solely by private
                                                                                            household as a
                                                                                            result of exemption
                                                                                            for employer with
                                                                                            fewer than two
                                                                                            employees. Mich.
                                                                                            Comp. Laws Sec.
                                                                                            408.382(c).
MN...........................  6.15 or 5.25 for            x             x   ............  Minimum wage and
                                employers                                                   overtime coverage
                                grossing under                                              after 48 hours for
                                $625,000 per                                                all companions as
                                year.                                                       defined in the FLSA,
                                                                                            but nighttime hours
                                                                                            where companion is
                                                                                            available to provide
                                                                                            services but does
                                                                                            not actually do so
                                                                                            need not be
                                                                                            compensated. Minn.
                                                                                            Stat. Sec.
                                                                                            177.23(11).
MS...........................  ................  ............  ............            x   .....................
MO...........................  7.25............  ............  ............            x   .....................
MT...........................  7.35............            x             x   ............  Minimum wage and
                                                                                            overtime coverage
                                                                                            for companions as
                                                                                            defined in the FLSA,
                                                                                            but exemption for
                                                                                            those employed
                                                                                            directly by private
                                                                                            households. Mont.
                                                                                            Code. Ann. Sec.   39-
                                                                                            3-406(p).
NE...........................  7.25............            x   ............  ............  Minimum wage but no
                                                                                            overtime coverage
                                                                                            for companions as
                                                                                            defined in the FLSA.
                                                                                            No state overtime
                                                                                            law. De facto
                                                                                            exemption for most
                                                                                            households as a
                                                                                            result of general
                                                                                            exemption for
                                                                                            employers with fewer
                                                                                            than four employees.
                                                                                            Neb. Rev. Stat. Sec.
                                                                                             Sec.   48-1202, 48-
                                                                                            1203.
NV...........................  8.25............            x             x   ............  Minimum wage and
                                                                                            overtime coverage
                                                                                            for companions as
                                                                                            defined in the FLSA,
                                                                                            but exemption for
                                                                                            live-in workers.
                                                                                            Also, business
                                                                                            enterprises with
                                                                                            less than $250,000
                                                                                            annually in gross
                                                                                            sales volume need
                                                                                            not pay overtime.
                                                                                            Nev. Rev. Stat. Sec.
                                                                                              608.250(2)(b).
NH...........................  7.25............  ............  ............            x   .....................
NJ...........................  7.25............            x             x   ............  Minimum wage and
                                                                                            overtime coverage
                                                                                            for all companions
                                                                                            as defined in the
                                                                                            FLSA. No relevant
                                                                                            exemptions. N.J.
                                                                                            Stat. Ann.Sec.
                                                                                            34:11-56a et seq.
NM...........................  7.50............  ............  ............            x   .....................
NY...........................  7.25............            x             x   ............  Minimum wage coverage
                                                                                            for all companions
                                                                                            as defined in the
                                                                                            FLSA. N.Y. Labor Law
                                                                                            Sec.   651(5). There
                                                                                            is overtime coverage
                                                                                            for all companions
                                                                                            but those employed
                                                                                            by third party
                                                                                            agencies receive
                                                                                            overtime at a
                                                                                            reduced rate of 150%
                                                                                            of the minimum wage
                                                                                            (rather than the
                                                                                            usual 150% of their
                                                                                            regular rate of
                                                                                            pay). N.Y. Labor Law
                                                                                            Sec.  Sec.   2(16),
                                                                                            170; N.Y. Comp.
                                                                                            Codes R. & Regs.
                                                                                            tit. 12, Sec.   142-
                                                                                            2.2. Overtime
                                                                                            coverage for live-in
                                                                                            workers after 44
                                                                                            hours/week (rather
                                                                                            than the usual 40
                                                                                            hours) at the same
                                                                                            rates detailed
                                                                                            above. Id.

[[Page 81206]]

 
NC...........................  7.25............  ............  ............            x   .....................
ND...........................  7.25............            x   ............  ............  Minimum wage but no
                                                                                            overtime coverage
                                                                                            for companions as
                                                                                            defined in the FLSA.
                                                                                            However, companions
                                                                                            who are certain
                                                                                            first or send-degree
                                                                                            relatives of the
                                                                                            person receiving
                                                                                            care do not receive
                                                                                            minimum wage.
                                                                                            Additionally,
                                                                                            nighttime hours
                                                                                            where companion is
                                                                                            available to provide
                                                                                            services but does
                                                                                            not actually do so
                                                                                            need not be
                                                                                            compensated. N.D.
                                                                                            Cent. Code Sec.   34-
                                                                                            06-03.1.
OH...........................  7.40............  ............  ............            x   Minimum wage but not
                                                                                            overtime coverage
                                                                                            for companions as
                                                                                            defined in the FLSA.
                                                                                            Ohio Rev. Code Ann.
                                                                                            Sec.   4111.03 (A)
                                                                                            Sec.   4111.14 (West
                                                                                            2011). Additional
                                                                                            overtime exemptions
                                                                                            for live-in workers.
                                                                                            Id. Sec.
                                                                                            4111.03(D)(3)(d).
OK...........................  7.25............  ............  ............            x   .....................
OR...........................  8.50............  ............  ............            x   .....................
PA...........................  7.25............            x             x   ............  Minimum wage and
                                                                                            overtime coverage
                                                                                            for companions as
                                                                                            defined in the FLSA,
                                                                                            but exemption for
                                                                                            those employed
                                                                                            solely by private
                                                                                            households. Pa.
                                                                                            Stat. Ann. tit. 43,
                                                                                            Sec.
                                                                                            333.105(a)(2).
                                                                                            Bayada Nurses v.
                                                                                            Commonwealth of
                                                                                            Pennsylvania, 8 A.3d
                                                                                            866 (Pa. 2010).
RI...........................  7.40............  ............  ............            x   .....................
SC...........................  ................  ............  ............            x   .....................
SD...........................  7.25............            x   ............  ............  Minimum wage but no
                                                                                            overtime coverage
                                                                                            for companions as
                                                                                            defined in the FLSA.
                                                                                            No state overtime
                                                                                            law. S.D. Codified
                                                                                            Laws Sec.  Sec.   60-
                                                                                            11-3, 60-11-5.
TN...........................  ................  ............  ............            x   .....................
TX...........................  7.25............  ............  ............            x   .....................
UT...........................  7.25............  ............  ............            x   .....................
VT...........................  8.15............  ............  ............            x   .....................
VA...........................  7.25............  ............  ............            x   .....................
WA...........................  8.67............            x             x   ............  Washington minimum
                                                                                            wage and overtime
                                                                                            coverage for most
                                                                                            companions as
                                                                                            defined in the FLSA,
                                                                                            but exemption for
                                                                                            live-in workers.
                                                                                            Wash. Rev. Code Sec.
                                                                                              49.46.010(5)(j).
WV...........................  7.25............  ............  ............            x   .....................
WI...........................  7.25............            x             x   ............  Minimum wage and
                                                                                            overtime coverage
                                                                                            for most companions
                                                                                            as defined in the
                                                                                            FLSA, but overtime
                                                                                            exemption for those
                                                                                            employed directly by
                                                                                            private households,
                                                                                            Wis. Admin. Code
                                                                                            Sec.   274.015, and
                                                                                            those employed by
                                                                                            non-profit
                                                                                            organizations. Wis.
                                                                                            Admin. Code Sec.
                                                                                            Sec.   274.015,
                                                                                            274.01. Companions
                                                                                            who spend less than
                                                                                            15 hours a week on
                                                                                            general household
                                                                                            work and reside in
                                                                                            the home of the
                                                                                            employer are also
                                                                                            exempt from minimum
                                                                                            wage. Wis. Admin.
                                                                                            Code Sec.
                                                                                            272.06(2).
WY...........................  5.15............  ............  ............            x   .....................
----------------------------------------------------------------------------------------------------------------
Abbreviations: MW = Minimum Wage, OT = Overtime, FLSA = Fair Labor Standards Act.
Sources: [a] DOL, 2011; [b] NELP, 2011.

Data Sources
    The primary data services used by the Department to estimate the 
number of workers, establishments, and customers likely to be impacted 
by the proposed rule include:
     Bureau of Labor Statistics (BLS) 2009 Occupational 
Employment Survey, employment and wages by state for SOC codes 39-9021 
(Personal Care Aides) and 31-1011 (Home Health Aides);
     BLS Quarterly Census of Employment and Wages, 2009 for 
NAICS 6216 and 62412;
     BLS National Employment Matrix, 2008;
     2007 Statistics of U.S. Businesses, for NAICS 6216 and 
62412; and
     2007 Economic Census, by state for NAICS 6216 and 62412.
    The key limitation of this set of data sources is that it results 
in an inconsistency between the Department's best estimate of agency-
employed caregivers (from the 2009 BLS Occupational Employment Survey), 
and its best estimate of independent providers directly employed by 
families (from the 2008 BLS National Employment Matrix). The 
Occupational Employment Survey (OES) is employer based, and does not 
collect data from the self-employed. The National Employment Matrix 
(NEM) obtains estimates on the self-employed from the Current 
Population Survey. However, it is not possible to match the OES 
estimates by subtracting the estimated number of self-employed workers 
from the NEM. Because these two estimates cannot be completely 
reconciled, the Department uses each source as the best estimate for 
one segment of the labor market and acknowledges there is some 
inconsistency between the two.
Care Recipients and Demand for Services
    Demand for home health care services is anticipated to continue to 
grow in the

[[Page 81207]]

next few decades with the aging of the ``baby boomer generation.'' 
According to PHI:

    Nearly one out of four U.S. households provides care to a 
relative or friend aged 50 or older and about 15 percent of adults 
care for a seriously ill or disabled family member. Over the next 
two decades the population over age 65 will grow to more than 70 
million people [the U.S. population 65 years and older was estimated 
at 40 million in 2009 \12\]. Additionally, with significant 
increases in life expectancy and medical advances that allow 
individuals with chronic conditions to live longer, the demand for 
caregiving is expected to grow exponentially. The growth in the 
demand for in-home services is further amplified by an increasing 
preference for receiving supports and services in the home as 
opposed to institutional settings. This emphasis has been supported 
by the increased availability of publicly funded in-home services 
under Medicaid and Medicare as an alternative to traditional and 
increasingly costly institutional care.\13\
---------------------------------------------------------------------------

    \12\ 2011 Statistical Abstract, U.S. Census Bureau.
    \13\ National Alliance for Caregiving and the American 
Association of Retired Persons. 1997. Family caregiving in the U.S.: 
Findings from a national study. Available from http://www.caregiving.org.

    While many recipients of home health care services are elderly, 
about two-fifths of those in need of these services are under 65 and 
include those with varying degrees of mental or developmental 
disabilities. This group of home health care recipients is also 
anticipated to grow rapidly as more individuals opt for home-based care 
over institutional settings.\14\ It is estimated that the demand for 
home health care workers will grow to approximately 5.7 to 6.6 million 
workers in 2050, an increase in the current demand for workers of 
between 3.8 and 4.6 million (200 percent and 242 percent 
respectively).\15\ The home health care industry has grown 
significantly over the past decade and is projected to continue growing 
rapidly; for example:
---------------------------------------------------------------------------

    \14\ PHI, 2003. The Personal Assistance Services and Direct-
Support Workforce: A Literature Review, available at http://www.directcareclearinghouse.org/download/CMS_Lit_Rev_FINAL_6.12.03.pdf.
    \15\ HHS, 2001. Pgs. 4, 5, and 7.
---------------------------------------------------------------------------

     The number of establishments in Home Health Care Services 
(HHCS) grew by 70 percent between 2001 and 2009; during that same 
period, the number of establishments in Services for the Elderly and 
Persons with Disabilities (SEPD) grew by 355 percent.\16\
---------------------------------------------------------------------------

    \16\ U.S. Bureau of Labor Statistics (BLS). 2008. National 
Employment Matrix--Search by Occupation, available at http://data.bls.gov/oep/nioem?Action=empios&Type=Occupation.
---------------------------------------------------------------------------

     Between 2008 and 2018 the number of home health aides is 
projected to increase by 50 percent and the number of personal care 
aides by 46 percent.
Employers and Funding Sources
    This section focuses on the employers of workers who are currently 
classified as companions and common sources of funding for the services 
they provide; the next section describes the workers and the work they 
do. Services in the home health care industry are provided through two 
general delivery models: Agencies and consumer-directed (which often 
use independent providers and family caregivers).
    Figure 2 provides a visual overview of the home care and personal 
assistance industry and the two primary models for service provision, 
which are discussed in more detail in the sections that follow.

Figure 2. Overview of the Home Health Care Industry and Funding Sources
[GRAPHIC] [TIFF OMITTED] TP27DE11.001

Agency Model
    Under the agency model a third-party provider of home care and 
personal assistance services (usually a home health care company) 
employs the home care workers and is responsible for ensuring that 
services authorized by a public program or contracted for by a private 
party are in fact delivered.\17\ There are currently about 73,000 
establishments providing these services. The services are paid for 
through public programs such as Medicaid, Medicare, and other state 
programs, and through private sources such as private health

[[Page 81208]]

insurance or out-of-pocket payments. In 2009, public programs 
(Medicare, Medicaid, and other government spending) accounted for about 
75 percent ($63.1 billion) of the $84.1 billion in annual revenue 
dispersed to these agencies.\18\
---------------------------------------------------------------------------

    \17\ Seavey and Marquand, 2011, pg. 26. Available at: http://www.directcareclearinghouse.org/download/caringinamerica-20111212.pdf.
    \18\ Seavey and Marquand, 2011, pgs 22, 23. Available at: http://www.directcareclearinghouse.org/download/caringinamerica-20111212.pdf.
---------------------------------------------------------------------------

    Agencies providing home care and personal assistance services are 
covered by two primary industries: Home Health Care Services (HHCS, 
NAICS 6216), and Services for Elderly and Persons with Disabilities 
(SEPD, NAICS 62412).\19\ HHCS is dominated by for-profit agencies that 
are Medicare-certified and depends on public programs for three-
quarters of its revenue.\20\ SEPD is a rapidly growing industry that is 
dominated by small non-profit enterprises. Table 2-1 provides an 
overview of these two industries in terms of number of employees, 
establishments, payroll and wages, and estimated revenues.
---------------------------------------------------------------------------

    \19\ These two industries are the primary employers of workers 
currently classified as companions; however, based on data reported 
by BLS in the National Employment Matrix there are approximately 25 
other industries that also employ these workers. Since these other 
industries employ so few of the workers under consideration here 
they will be minimally affected by this proposed rule.
    \20\ Seavey and Marquand, 2011, pgs 20-22. Available at: http://www.directcareclearinghouse.org/download/caringinamerica-20111212.pdf.

                                                        Table 2-1--Summary of HHCS and SEPD, 2009
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                     Total wages ($                      Est. revenue ($
                           Industry                               Employees [a]    Establishments         mil.)        Avg weekly wage        mil.)
--------------------------------------------------------------------------------------------------------------------------------------------------------
SEPD + HHCS...................................................         1,714,000            73,200          $413,181              $464           $80,307
SEPD..........................................................           679,600            49,100           133,247               377            28,645
HHCS..........................................................         1,034,400            24,100           279,934               520            51,662
--------------------------------------------------------------------------------------------------------------------------------------------------------
[a] Employees include HHA, PCA, and other occupations.
Sources: BLS QCEW 2009; BLS National Employment Matrix, 2008.

    These two industries primarily employ workers as home health aides 
(HHA) and personal care aides (PCA) in addition to other occupations. 
However, not all of the HHA and PCA employed by these agencies work as 
companions under the companionship exemption; these agencies provide a 
variety of health-related services that may be delivered in private 
homes (and potentially companionship services) or in public or private 
facilities (and not defined as companionship services). Simply put, 
only a fraction of the 1.7 million employees listed in the table above 
are currently working as exempt companions who may see changes in their 
wages and/or work schedules as a result of the proposed rule.
    Within these two industries there are three broad employer types: 
Home health care companies, for-profit franchise chains, and private-
duty home care companies. The latter two types are smaller, emerging 
types of employers that focus on the provision of non-medical care for 
clients. Home health care companies focus on providing medically-
oriented home health care services and non-medical home care or 
personal assistance services. Many of these agencies are Medicare-
certified; those that avoid obtaining certification do so because they 
do not provide the skilled nursing care required by Medicare. These 
companies also derive a significant portion of their revenue from the 
provision of medical devices to customers.\21\
---------------------------------------------------------------------------

    \21\ PHI, 2010a. p.2.
---------------------------------------------------------------------------

Consumer-Directed Models

    Under the consumer-directed model, the consumer or his/her 
representative has more control than in the agency-directed model over 
the services received, and when, how, and by whom the services are 
provided. The approaches to delivering services under this model range 
from the more formal state-organized systems to informal arrangements 
coordinated through word-of-mouth between care recipients. In the 
public version of this model, the care is funded either by Medicaid, 
directly by states, or through programs or grants administered by the 
HHS Centers for Medicare & Medicaid Services (CMS).
    Other recipients arrange for and pay for care privately through 
informal negotiations with individual service providers. In this model, 
the customer may act as the sole or a joint employer and has varying 
degrees of responsibility for interviewing, hiring, training, managing, 
and firing the provider. Due to the sometimes informal nature of the 
consumer-directed employment arrangements, there are no data on the 
total number of customers under this model, and there is limited 
information on the total number of providers. BLS National Employment 
Matrix data show that 127,000 Personal Care Aides (about 16 percent) 
are employed in private households and 61,500 (about 8 percent) are 
self-employed, for a total of 188,500 workers (about 23 percent) that 
may provide services as independent contractors.\22\ Fewer Home Health 
Aides are employed in this manner, with 1,700 (less than one percent) 
working for private households and 16,400 (about two percent) who are 
self-employed. Combining the data for Personal and Home Health Aides 
suggests that 206,600 of these workers (about twelve percent) may be 
either self-employed or employed in private households. The Department 
believes that these workers can reasonably be described as independent 
providers that directly provide caregiver services to families, perhaps 
through informal arrangements.
---------------------------------------------------------------------------

    \22\ BLS, 2008.
---------------------------------------------------------------------------

    However, consumer-directed employment is sometimes referred to as a 
``grey market;'' that contains an element of ``over-the-back-fence 
network of women [who are] usually untrained, unscreened, and 
unsupervised, but more affordable without an agency's fee, less 
constrained by regulations and hired through personal recommendation.'' 
\23\ The term ``grey market'' is sometimes used to suggest that at 
least some of these private arrangements are designed to avoid 
applicable labor laws; the extent to which care recipients use private 
arrangements for this purpose is unclear; there is very little 
information available about this segment of the market for home health 
services. It is also possible, and likely, that care providers who are 
employed by an agency or who provide services through a state registry 
also occasionally provide services through informal arrangements. The 
Department's best estimate of consumer-directed employment is

[[Page 81209]]

summarized in the previous paragraph, and we are unable to estimate the 
extent to which the group of providers described above participates in 
the informal market. We are also unable to characterize the extent to 
which other providers not included in this estimate participate in the 
``grey market.''
---------------------------------------------------------------------------

    \23\ Gross, J., New Options (and Risks) in Home Care for 
Elderly. New York Times available at http://nytimes.com/2007/03/01/us/01aides.html. (March 1, 2007).
---------------------------------------------------------------------------

    There is no consolidated source of data on state consumer-directed 
programs; however, PHI offers an overview of what programs are offered: 
Seven states have no publicly-funded consumer-directed program, 38 
states offer options under one or more Medicaid Waivers, seven states 
offer options under Medicaid Home Health programs, and 12 states offer 
consumer/participant-directed options under Medicaid Personal Care 
Option.\24\
---------------------------------------------------------------------------

    \24\ Seavey and Marquand, 2011, pg 28. Available at: http://www.directcareclearinghouse.org/download/caringinamerica-20111212.pdf.
---------------------------------------------------------------------------

    Of those states that do offer a consumer-directed program, some 
have implemented a ``public authority'' model. In this model, a public 
authority or some other governmental or quasi-governmental entity plays 
a role in setting compensation and other employment terms for the 
service provider, who is compensated through public funds, acts as the 
``employer-of-record,'' and may provide training, and create and 
maintain registries of providers.\25\ Service providers in this system 
have the option to select representatives for collective bargaining 
with the state. Six states (California, Massachusetts, Michigan, 
Oregon, Washington, and Wisconsin) have fully implemented a public 
authority, and Missouri is in the process of doing so. Several states 
have implemented a consumer-directed program without creating a public 
authority, they include: Illinois, Iowa, Maryland, and Ohio.
---------------------------------------------------------------------------

    \25\ PHI, 2010a. p. 14.
---------------------------------------------------------------------------

    California's policies are of particular note because it has one of 
the largest home care caseloads. This is due to a combination of 
demographic factors and a robust social movement of the disabled 
community that created Centers for Independent Living in the 1970s.\26\ 
California's In-Home Supportive Services (IHSS) program was created in 
1973. IHSS is the largest personal care program in the nation and is 
funded through a combination of state, county, and federal Medicaid 
funds.\27\ A 2000 study of independent home care workers found that 
IHSS employed more than 200,000 independent personal care workers 
through IHSS, 72,000 in Los Angeles County alone.
---------------------------------------------------------------------------

    \26\ Boris, E. & Klein, J. 2006. Organizing home care: Low-waged 
workers in the welfare state, available at http://escholarship.org/uc/item/21x6q48g;jsessionid=197876DF1E12B3D17476457ED5FE5E24#page-6.
    \27\ PHI, 2010b. California's Direct-Care Workforce. Available 
at http://www.directcareclearinghouse.org/download/CA%20Fact%20Sheet-%2011-04-10.pdf.
---------------------------------------------------------------------------

    IHSS initially allowed counties to organize the service in 
different ways, and each had a different approach to employing the 
worker. Under the individual provider model, the consumer hired the 
worker and the worker was considered an independent contractor, with 
the state paying for the service and social workers allocating hours. 
Under the county model, the worker was a government employee. Under the 
contract model, the county contracted with an agency which became the 
employer.\28\ Ambiguity about who was really employing IHSS workers 
continued in the following decades. In 1985, California's attorney 
general determined that IHSS attendants came under state workers' 
compensation and other labor laws, and were county employees for 
purposes of collective bargaining. However in Service Employees 
International Union, Local 434 v. County of Los Angeles, the court 
found IHSS workers to be independent contractors because the counties 
did not control their activities directly.\29\ In 1992, California 
began to establish county-based public authorities. Under the public 
authority model, workers are no longer self-employed, and the employer 
responsibilities are split between the public authority (which serves 
as the employer in collective bargaining with the union) and the 
consumer (who is responsible for the selecting, hiring, and supervising 
of workers).\30\ Today there are approximately 367,000 home care 
workers employed by the California public authority.\31\
---------------------------------------------------------------------------

    \28\ Boris & Klein, 2006.
    \29\ Boris & Klein, 2006.
    \30\ PHI, 2011b. California Direct Care Workforce Initiatives,. 
available at http://www.directcareclearinghouse.org/s_state_det1.jsp?res_id=5&action=null.
    \31\ PHI, 2010a.
---------------------------------------------------------------------------

    In an effort to connect participants in consumer-directed programs 
with care providers, some states and public authorities have created 
matching registries; these systems provide some insight into how 
consumers identify care providers to meet their needs. Depending on the 
registry, consumers can either search the worker database online, or 
speak to trained staff who conduct the search and report the results to 
the consumer. Some registries may also offer worker screening and 
orientation, access to consumer and worker training, and recruitment 
and outreach to potential workers.\32\ Others stipulate that providers 
in the database have not been pre-screened in any way and such 
responsibilities lie with the consumer. The PHI Matching Services 
Project \33\ has identified 16 state-based matching services and six 
states with regional matching services. Of the 16 state-based matching 
services, five (California, Massachusetts, Michigan, Oregon, and 
Washington) operate under a public authority. Wisconsin's registry, 
which also operates under a public authority, is currently regional but 
scheduled to become state-wide in 2011. These registries are listed in 
Table A-1 in APPENDIX A. PHI notes that these public matching 
registries are not to be confused with the registries that exist in all 
states to perform criminal background checks on potential care 
providers or verify nursing training.
---------------------------------------------------------------------------

    \32\ PHI, 2011a. The PHI Matching Services Project, available at 
http://phinational.org/policy/the-phi-matching-services-project/.
    \33\ PHI, 2011a.
---------------------------------------------------------------------------

    The Department also located registries operated by not-for-profit 
organizations, such as the Meals on Wheels of Contra Costa County Home 
Care Registry,\34\ where the registry recruits, screens, and checks the 
references of local care providers, but the care providers are self-
employed and work as independent contractors. Various private sector 
entities that refer to themselves as registries, 35 36 37 38 
however, appear to be operating under an agency or quasi-agency model, 
with the care recipient paying the company a weekly or bi-weekly 
registry fee in addition to paying the caregiver, or with the company 
receiving some portion of the caregiver's hourly rate.
---------------------------------------------------------------------------

    \34\ Meals on Wheels of Contra Costa County. 2011. Home Care 
Registry, available at http://www.mowsos.org/pages/page.php?pageid=48.
    \35\ Experienced Home Care Registry. 2011. About Us, available 
at http://www.experiencedhomecare.com/pgs/about_us.php.
    \36\ Angelic Nursing & Home Care Registry, Inc. 2011. Home Care 
Services for Seniors in Tolland and Hartford Counties in 
Connecticut, available at http://angelicregistry.com/.
    \37\ Golden Care Co. Inc. 2011. Billing Policy, available at 
http://www.goldencareco.com/billing.asp.
    \38\ American HealthCare Capital. 2011. $1.5 Million Oregon 
Private Pay Homecare Registry for Sale, available at http://www.americanhealthcarecapital.com/Listings/Current/orpd1a.html.
---------------------------------------------------------------------------

    When consumers are allowed to hire any worker they choose, many 
choose friends or family members. For instance, the Cash and Counseling 
demonstration program provides a monthly allowance to Medicaid 
beneficiaries that beneficiaries can use to hire their choice of 
worker. In this program, 58 percent

[[Page 81210]]

of directly hired workers in Florida, 71 percent in New Jersey, and 78 
percent in Arkansas were related to the consumer, and about 80 percent 
of those directly hired workers had provided unpaid care to the 
consumer before the demonstration began.
    Since the passage of the National Family Caregiver Support Program 
enacted under the Older Americans Act Amendments of 2000, Medicaid 
waivers and state-funded programs have provided the bulk of public 
financing to support family caregiving.\39\ A survey of state consumer 
direction and family caregiving programs found that:
---------------------------------------------------------------------------

    \39\ Feinberg, L. & Newman, S. 2005. Consumer Direction and 
Family Caregiving: Results from a National Survey, State Policy in 
Practice, available at http://www.hcbs.org/files/79/3926/ConsumerDirection&FamilyCaregivingNWEB.pdf Feinberg, L. et al. 2004. 
The State of the States in Family Caregiver Support: A 50-State 
Study. San Francisco, CA: Family Caregiver Alliance; available at 
http://www.caregiver.org/caregiver/jsp/content_node.jsp?nodeid=1276.
---------------------------------------------------------------------------

    Over one-half (86 out of 150, or 57 percent) of the programs in 44 
states and the District of Columbia say family members can be paid to 
provide care. Viewed another way, the vast majority of programs that 
offer some component of consumer direction, allow payment to relatives 
to provide care (86 out of 106 programs, or 81 percent). Only six 
states (Alaska, Delaware, Mississippi, Nevada, Pennsylvania, and 
Tennessee) did not allow payments to family members in any of their 
programs at the time of the study.\40\
---------------------------------------------------------------------------

    \40\ Feinberg & Newman, 2005. p. 8.
---------------------------------------------------------------------------

    Of the 86 programs that allow relatives to be paid providers, 73 
percent allow family members to provide personal care, 70 percent allow 
family members to provide respite care, 20 percent allow family members 
to act as homemakers or do chores, and 6 percent allowed family members 
to provide any service needed.\41\ Some programs place restrictions on 
what type of family members are allowed to be paid providers as well. 
Among these 86 programs, 61 percent do not permit spouses to be paid 
providers, while others do not permit parents/guardians (37 percent), 
primary caregivers (18 percent), legal guardians (8 percent), children 
18 and under (6 percent), or other relatives (4 percent).\42\ These 
programs and their stipulations about payment to family caregivers are 
summarized in Table B-1 in APPENDIX B.
---------------------------------------------------------------------------

    \41\ Feinberg & Newman, 2005. p. 8.
    \42\ Feinberg & Newman, 2005. p. 9.
---------------------------------------------------------------------------

Funding Sources
    There are a variety of different funding sources for provision of 
home health services. Table 2-3 provides an overview of these funding 
sources, care recipient eligibility requirements, and types of home 
health services covered. Public funding sources such as Medicare and 
Medicaid provide a majority of the reimbursement for services. In 2008, 
Medicare and Medicaid accounted for nearly 75 percent of home health 
care services revenue, followed by 15 percent from private insurance 
coverage, five percent from patients paying out-of-pocket, and the 
remaining five percent contributed by a mix of other government 
programs.\43\
---------------------------------------------------------------------------

    \43\ PHI, 2010a, p.6.
---------------------------------------------------------------------------

    In 2009, HHS outlays for Medicare programs totaled $424 billion, 
and outlays in support of Medicaid totaled $251 billion.\44\ Under 
Medicare, an estimated $18.3 billion went to home health programs.\45\ 
In 2006, Medicaid programs accounted for approximately $38.1 billion 
(about $40 billion inflated to 2009 dollars) through Medicaid Home 
Health ($4.6 billion), State-Plan Personal Care Services benefit ($8.5 
billion), and Medicaid Home and Community-based Services (HCBS) 
benefits ($25 billion).\46\ Thus, payments for home health care 
programs composed approximately 4 percent of Medicare spending, and 
about 15 percent of Medicaid spending.
---------------------------------------------------------------------------

    \44\ U.S. Department of Health & Human Services (HHS). 2011. FY 
2011 Budget, available at http://dhhs.gov/asfr/ob/docbudget/2011budgetinbrief.pdf. p. 13.
    \45\ Medpac. 2010. A Data Book: Healthcare Spending and the 
Medicare Program, p. 139, available at http://www.medpac.gov/documents/jun10databookentirereport.pdf.
    \46\ PHI, 2010a, p. 18. Note, not all of the HCBS goes to 
personal care services; a more detailed breakdown of this spending 
is not available. For additional data, see Kaiser Family Foundation, 
State Health Facts: http://statehealthfacts.org/comparetable.jsp?ind=242&cat=4.
---------------------------------------------------------------------------

    Both Medicaid and Medicare pay the service provider directly. The 
Medicare program uses a prospective payment system (PPS) to reimburse 
home health agencies a pre-determined base payment for an episode of 
care; this base payment is adjusted for the condition and needs of the 
beneficiary as well as geographic variation in wages.\47\ Under 
Medicaid, the state agency implementing the program pays the service 
provider directly except under certain consumer-directed programs.
---------------------------------------------------------------------------

    \47\ For additional detail see Center for Medicare & Medicaid 
Services (CMS). 2011a. Home Health PPS, available at http://www.cms.gov/HomeHealthPPS/.
---------------------------------------------------------------------------

    The Medicare and Medicaid programs also work together to provide 
services for a group of care recipients referred to as ``dual 
eligibles,'' that is, care recipients that are eligible for both 
Medicare and Medicaid coverage. Studies have found that individuals 
covered by both Medicare and Medicaid are among the most expensive 
groups to cover and are more likely to use more Medicare-covered home 
health services than Medicare home health care patients not also 
covered by Medicaid. Also, states with low Medicaid spending appear to 
shift costs to the Medicare home health program spending.\48\ Most of 
the public matching registries listed in Appendix A are funded by the 
state, with a few receiving federal dollars through reimbursement for 
Medicaid administrative costs or receiving initial funding through 
federal Medicaid Systems Transformation grants.\49\
---------------------------------------------------------------------------

    \48\ Center for Medicare & Medicaid Services (CMS). 2011b. Home 
Health Study Report: Literature Review, available at http://www.cms.gov/HomeHealthPPS/Downloads/HHPPS_LiteratureReview.pdf. 
p.16.
    \49\ Seavey & Marquard, 2011.

[[Page 81211]]



                   Table 2-2--Summary of Home Health Care Service Payers and Service Coverage
----------------------------------------------------------------------------------------------------------------
                                                                                           Home health service
              Payer                       Description                Eligibility                coverage
----------------------------------------------------------------------------------------------------------------
                                                     Public
----------------------------------------------------------------------------------------------------------------
Medicare.........................  Federal government         Individual is under the   Intermittent skilled
                                    program to provide         care of a doctor and      nursing care, physical
                                    health insurance           receiving services        therapy, speech-
                                    coverage, including home   under plan of care; has   language pathology
                                    health care, to eligible   a certified need for      services, continued
                                    individuals who are        intermittent skilled      occupational therapy.
                                    disabled or over age 65.   nursing care, physical   Does not cover 24hr/day
                                   The program pays a          therapy, speech-          care at home; meals
                                    certified home health      language pathology        delivered to home;
                                    agency for a 60 day        services, continued       homemaker services when
                                    episode of care during     occupational therapy;     it is only service
                                    which the agency           and must be homebound.    needed or when not
                                    provides services to the  HHA providing services     related to plan of
                                    beneficiary based on the   is Medicare-certified;    care; personal care
                                    physician approved plan    services needed are       given by home health
                                    of care.                   part-time or              aides when it is only
                                                               intermittent, and are     care needed.
                                                               required <7 days per
                                                               week or <8 hours per
                                                               day over 21 day period.
Medicaid.........................  A joint federal-state      Eligibility and benefits  Coverage of home health
                                    medical assistance         vary by state. In         services must include
                                    program administered by    general, states must      part-time nursing, home
                                    each state to provide      cover individuals who     care aide services,
                                    coverage for low income    receive federally         medical supplies and
                                    individuals.               assisted income           equipment. Optional
                                   The program pays home       maintenance payments      state coverage may
                                    health agencies and        such as Social            include audiology;
                                    certified independent      Security, individuals     physical, occupational,
                                    providers.                 who are eligible for      and speech therapies;
                                                               Temporary Assistance      and medical social
                                                               for Needy Families and    services.
                                                               to other individuals     Coverage is provided
                                                               defined as                under: Medicaid Home
                                                               ``categorically           Health, State Plan
                                                               needy.''                  Personal Care Services
                                                                                         benefit, and Home and
                                                                                         Community-Based state
                                                                                         plan services and
                                                                                         waivers.
Older Americans Act..............  Provides federal funding   Must be 60 yrs of age or  Home care aides,
                                    for state and local        older.                    personal care, chore,
                                    social service programs                              escort, meal delivery,
                                    that provide services so                             and shopping services.
                                    that frail, disabled,
                                    older individuals may
                                    remain independent in
                                    their communities.
Veterans Administration..........  Home health care services  Veterans who are at       Home health care. Does
                                    provided through the       least 50% disabled due    not include nonmedical
                                    VA's network of hospital-  to service-related        services provided by
                                    based home care units.     conditions.               HCAs.
Social Services Block Grant......  Federal block grants to    Varies by state.........  Often includes program
                                    states for state-                                    providing home care
                                    identified service needs.                            aide, homemaker, or
                                                                                         chore worker services.
Community organizations..........  Some community             Varies by program.......  Covers all or a portion
                                    organizations provide                                of needed services.
                                    funds for home health                                Vary by program.
                                    and supportive care.
----------------------------------------------------------------------------------------------------------------
                                                     Private
----------------------------------------------------------------------------------------------------------------
Commercial Health Insurance        Many policies cover home   Varies by policy........  Varies by insurance
 Companies.                         care services for acute,                             policy
                                    and less often, long-
                                    term needs.
Medigap Insurance................  Covers some personal care  Varies by policy........  Focused on short-term
                                    services when a Medicare                             personal care services
                                    beneficiary is receiving                             in support of Medicare
                                    covered home health                                  covered home health
                                    services.                                            care skilled nursing
                                                                                         services.
Self-Pay.........................  The individual receiving   Individuals who are not   Services that do not
                                    the services pays ``out    eligible for covered      meet the eligibility
                                    of pocket.''               services under third-     criteria of other
                                                               party public or private   payers.
                                                               payers.
----------------------------------------------------------------------------------------------------------------
Sources: National Association for Home Care. 1996. Who Pays for Home Care Services? Available at URL:
  www.nahc.org/consumer/wpfhcs.html; Centers for Medicare and Medicaid Services (CMS). Medicare and Home Health
  Care. Available at URL: http://www.medicare.gov/publications/pubs/pdf/10969.pdf.

Home Health Care Workers
    This section provides an estimate of the total number of home 
health care workers who may be impacted by the proposed rule as well as 
the characteristics of these workers, the services they provide, and 
the wages they receive for their work.
Number of Affected Workers
    The workers who will be directly affected by the change to the 
companionship exemption are concentrated in two occupations: Home 
Health Aides (SOC 31-1011) and Personal Care Aides (39-9021). These 
workers are concentrated in two industries: Home Health Care Services 
(NAICS 6216) and Services for the Elderly and Disabled Persons (NAICS 
62412).
    These workers are predominantly women in their mid-forties, 
minorities, with a high school diploma or less education but this 
varies highly by

[[Page 81212]]

region. A similar percentage of PCAs are Black and Hispanic (20% and 
19%, respectively), but a much higher percentage of HHAs are Black 
(35%) than Hispanic (8%). One in four (25%) PCAs are foreign-born, with 
higher percentages (over 50%) in certain regions of the country, e.g., 
California and New York. California also has a high percentage of 
caregivers who are paid family members.\50\
---------------------------------------------------------------------------

    \50\ PHI, 2010a. p. 9.
---------------------------------------------------------------------------

    Home health care workers are called by a variety of titles, 
including: home health aides, home care aides, personal care aides, 
personal assistants, home attendants, homemakers, companions, personal 
care staff, resident care aides, and direct support professionals. They 
are tracked by the following occupational titles.\51\
---------------------------------------------------------------------------

    \51\ U.S. Bureau of Labor Statistics (BLS). 2011. Standard 
Occupational Classification, available at http://www.bls.gov/soc/home.htm.
---------------------------------------------------------------------------

    Personal Care Aide (SOC 39-9021): ``Assist the elderly, 
convalescents, or persons with disabilities with daily living 
activities at the person's home or in a care facility. Duties performed 
at a place of residence may include keeping house (making beds, doing 
laundry, washing dishes) and preparing meals. May provide assistance at 
non-residential care facilities. May advise families, the elderly, 
convalescents, and persons with disabilities regarding such things as 
nutrition, cleanliness, and household activities.''
    Home Health Aide (SOC 31-1011): ``Provide routine individualized 
healthcare such as changing bandages and dressing wounds, and applying 
topical medications to the elderly, convalescents, or persons with 
disabilities at the patient's home or in a care facility. Monitor or 
report changes in health status. May also provide personal care such as 
bathing, dressing, and grooming of patient.''
    Note that the companionship services of fellowship and protection 
are not included in either the definition of personal care aide or home 
health aide. Companionship services as defined in this NPRM are 
separate from the services provided by home health care workers as 
defined officially above and outlined in detail below.
    The Department uses BLS' employer-based OES estimate of the number 
of workers in the PCA and HHA occupational categories as its best 
estimate of the number of caregivers employed by agencies that might be 
affected by the proposed rule. There were approximately 1.59 million 
caregivers employed by agencies in 2009, composed of
     631,000 PCAs, and
     955,000 HHAs.\52\
---------------------------------------------------------------------------

    \52\ 2009 BLS Occupational Employment Survey, employment and 
wages for SOC codes 39-9021 and 31-1011.
---------------------------------------------------------------------------

    These data do not include workers providing these services as 
independent providers who may be affected by the proposed rule. As 
described above, the Department determined from the NEM that an 
estimated additional

     188,500 PCAs, and
     18,100 HHAs \53\

    \53\ BLS, 2008.
---------------------------------------------------------------------------

can be considered independent providers directly employed by families. 
Thus, we estimate

     819,500 PCAs, and
     973,100 HHAs,

for a total of 1.79 million caregivers, might be affected by the 
proposed rule.
    However, not all 1.79 million of these PCAs and HHAs are employed 
as FLSA-exempt companions. Many of these workers are employed at 
agencies that provide a variety of health-related services that may or 
may not be provided in the home; HHA and PCA employed in facilities, 
such as nursing homes and hospitals, are not classified as providing 
companionship services. Furthermore, many of these workers who are 
classified as companions are employed in states which currently provide 
minimum wage and overtime coverage. Only a subset of the 1.79 million 
workers, those who provide services in the home and are not eligible 
for minimum wage or overtime pay under state law, will be directly 
impacted by the proposed rule. The Department will define the number of 
workers directly affected by both the minimum wage and overtime pay 
provisions of the proposed rule.
    While many agency-employed caregivers might work in various 
facilities that make them ineligible for the FLSA companionship 
exemption, there is little information available concerning independent 
providers. The Department assumes that all PCAs and HHAs classified in 
the NEM as self-employed or employed by households are independent 
providers directly employed by the family, and are thus by assumption 
currently exempt from the FLSA.
Tasks, Wages, Hours
    Traditionally, companionship tasks have been defined to include 
fellowship, care, protection, and a limited amount of assistance with 
general household tasks.\54\
---------------------------------------------------------------------------

    \54\ Federal Register, 2001. p. 5481.
---------------------------------------------------------------------------

     Fellowship: Defined in the proposed regulation as meaning 
``to engage the person in social, physical, and mental activities, 
including conversation, reading, games, crafts, walks, errands, 
appointments, and social events''.\55\ Fellowship services are 
generally not covered by public programs.

    \55\ Proposed Sec.  552.6.
---------------------------------------------------------------------------

     Protection: Defined in the proposal as ``being present 
with the person in their home or to accompany the person when outside 
of the home to monitor the person's safety and well-being.'' \56\ Some 
states reimburse specific types of participants (i.e., those living 
with mental disabilities) for protection services.
---------------------------------------------------------------------------

    \56\ Proposed Sec.  552.6.
---------------------------------------------------------------------------

     Social support: Services that enable the consumer to take 
an active part in his or her family and community, includes 
accompanying the consumer to regular social activities and ensuring 
that the consumer's cognitive state does not deteriorate due to social 
isolation.
    The spectrum of tasks performed by modern workers classified as 
companions has expanded beyond traditional companionship to include: 
activities of daily living (ADLs), instrumental activities of daily 
living (IADLs), and paramedical (``medicalized'') tasks.
     ADLs: Assistance with the following activities: personal 
hygiene, dressing and changing clothes, transferring, toileting, eating 
and drinking, maintaining continence, and ambulation.
     IADLs: Includes tasks such as light housework, preparation 
of meals, assistance with physical taking of medications, shopping for 
groceries or clothes, using the telephone, escorting, assistance with 
the management of money, and other tasks that allow the consumer to 
live independently in the community.
     Paramedical tasks: May include tasks such as changing of 
aseptic dressings, administration of non-injectible medications (e.g., 
blood pressure medication in tablet form); \57\ and ostomy, catheter 
and bowel hygiene.
---------------------------------------------------------------------------

    \57\ Administration of an injectible medication is a medical 
task generally performed by workers with additional training in 
medical tasks, such as Certified Nurse Assistants (CNAs).
---------------------------------------------------------------------------

    While PCAs and HHAs overlap to some extent in the type of services 
they provide--both generally provide assistance with ADLs and IADLs--it 
is primarily HHAs who are employed by Medicare-certified agencies who 
may be asked to perform paramedical tasks. Those workers are required 
by Medicare to be trained and certified to perform these types of 
tasks.

[[Page 81213]]

    Generally speaking, a home health aide or agency is authorized to 
provide a specific number of hours of service to care recipients 
depending on their needs. Agencies work to schedule home health aides 
to cover the number of hours needed for the portfolio of cases they 
have, often taking into account continuity of service to each 
recipient, total number of hours each aide is scheduled per week, 
frequency of weekend services needed, and the distance between the 
aide's home residence and the care recipient's. In the home care 
industry, agencies typically strive to provide services seven days a 
week and 24 hours a day.
    The greatest scheduling challenges to the agencies come from 12-
hour and 24-hour (or sleep-in) cases; these cases are also of 
particular concern with respect to overtime. A 12-hour case is a care 
recipient who requires services to be provided by a home health aide 
for a 12-hour block of time; a 24-hour case is a care recipient who 
requires a home health aide to be present to provide services around 
the clock. The key scheduling concerns that agencies contend exist with 
these cases are that:
     Because workers are scheduled to work in lengthy shifts 
(up to 12 hours), it is difficult to redistribute overtime hours to 
workers with fewer hours;
     Aides are paid an hourly rate, plus an hourly overtime 
premium where applicable; however, agencies are often reimbursed for 
these cases on a flat rate that does not account for overtime premiums 
or other costs;
     Sleep-in cases usually include an eight-hour period to 
allow the worker to sleep while on site; however, the aide is not 
necessarily off-duty because s/he would be expected to assist the 
client if an urgent need arose. If the agency is required to count 
sleep hours toward the total number of hours worked per week then it 
may become costly to provide 24-hour care.
    Some agencies take a proactive approach to scheduling these cases 
in order to manage the total number of hours on duty required from each 
worker. For example, an agency may split a 12-hour case between two 
aides by having one aide provide services Sunday through half of the 
Wednesday shift when the second aide would take over and work through 
Saturday.\58\ This reduces the total number of hours each aide must 
work, limits the work to one weekend day, and avoids overwhelming the 
care recipient with too many different care providers. A similar 
approach may be applied to cases that require 24-hour care.\59\
---------------------------------------------------------------------------

    \58\ Elsas, M. & Powell, A. 2011. Interview of Michael Elsas, 
President, and Adria Powell, Executive Vice President of Cooperative 
Health Care Associates by Calvin Franz and Lauren Jankovic of ERG. 
April, 2011.
    \59\ Some agencies have experimented with breaking a 24 hour 
case into two 12 hour cases that are staffed by four home care 
aides; this reduces total number of hours worked and eliminates the 
need for the 8 hour rest period but also increases the number of 
aides that the client must become comfortable with.
---------------------------------------------------------------------------

    The workers themselves report working an average of 31 to 35 hours 
per week and available data suggest that very few work overtime.\60\ 
Based on an analysis of the 2007 National Home Health Aide Survey and 
the 2009 Annual Social and Economic Supplement of the Current 
Population Survey, PHI reports that 92 percent of HHAs and 85 percent 
of PCAs work less than 40 hours per week for an average of 31 hours and 
35 hours per week, respectively. By extension, only eight percent of 
HHAs and 15 percent of PCAs reported working greater than 40 hours per 
week.
---------------------------------------------------------------------------

    \60\ Seavey and Marquand, 2011, pgs. 61-64. Available at: http://www.directcareclearinghouse.org/download/caringinamerica-20111212.pdf; HHS, 2011. p. 26.
---------------------------------------------------------------------------

    However, this information may not fully capture the total number of 
hours worked by these individuals because some aides work for multiple 
employers, many aides work part-time, and some employers do not 
compensate workers for travel time between clients (because they are 
not reimbursed for this time). Furthermore, there is very limited 
information on hours worked by independent providers or those working 
as live-in, on-call, or night shift aides. The Department assumes that 
in general independent providers directly employed by families work 
similar hours as caregivers employed by agencies.
    The wages for these workers vary widely by occupation and 
geographic location. Based on detailed wage data from the BLS 
Occupational Employment Statistics Survey, the hourly wages of PCAs and 
HHAs range from about $6.79 to $20.61 (approximately 0.5% earn less 
than $6.79 and 0.5% earn more than $20.61) with the average wage being 
approximately $10.14.\61\ As discussed above, wages for PCAs tend to be 
slightly lower on average than those for HHAs. The Department assumes 
that in general independent providers directly employed by families 
receive similar hourly wages as caregivers employed by agencies. In 70 
percent of states (36 states), average hourly wages for PCAs were below 
200 percent of the federal poverty level wage ($10.42) for individuals 
in one-person households working full-time. Current research suggests 
that these workers find it difficult to support their households on 
these wages; approximately 44 percent of PCAs have to rely on public 
benefits and fewer than 20 percent report having health insurance.\62\
---------------------------------------------------------------------------

    \61\ BLS, 2009.
    \62\ PHI, 2010a., p. 30, 32.
---------------------------------------------------------------------------

Costs and Transfers
    This section describes the costs and transfers associated with the 
proposed rule and the Department's approach to estimating their 
magnitude. The primary costs of this rule are expected to be regulatory 
familiarization. The Department estimates the first-year cost of the 
rule will total $9.9 million. In following years, regulatory 
familiarization costs are projected to increase from $3.5 million in 
year 2, to $4.4 million in year 10 as new firms enter the market and 
new families hire home health care workers.
    Transfers result from the wage increases to comply with minimum 
wage and overtime pay requirements. Total estimated transfers depend in 
part on the response of employers to the regulatory changes; in other 
words, will employers respond by paying overtime to current workers, 
changing scheduling practices to avoid paying overtime, hiring 
additional workers, or some combination of these approaches. Based on 
the methods described below, the Department estimates that first-year 
transfers from the rule will range from $42.8 to $182.1 million. In 
years 2 through 10, the lower end of the range is projected to increase 
from $27.8 million to $45.8 million while the upper end of the range is 
projected to increase from $172.6 million to $284.6 million.
    Total costs and transfers from the rule will range from $52.7 to 
$192.1 million in the first year. In subsequent years, the lower end of 
the range is projected to increase from $31.4 million to $50.2 million 
in total costs and transfers. The upper range of total costs and 
transfers is projected to increase from $176.2 million to $289.0 
million.
Regulatory Familiarization
    When a new rule is promulgated, all the establishments affected by 
the rule will need to invest time to read and understand the components 
of the new rule; this is commonly referred to as regulatory 
familiarization. Each establishment will spend resources to familiarize 
itself with the requirements of the rule and ensure it is in 
compliance.
    Each home health care establishment will require about two hours of 
an HR staff person's time to read and review the new regulation, update 
employee

[[Page 81214]]

handbooks and make any needed changes to the payroll systems. Based on 
our analysis of the industry and occupational data, the Department 
judges that each employer in HHCS and SEPD likely employs workers who 
could be classified as companions and therefore will need to review the 
proposed rule. There are about 73,000 establishments in SEPD and HHCS; 
assuming a mid-level HR wage of $26.79 per hour over two hours equals 
about $4 million for regulatory familiarization in the first year 
following promulgation of the rule.\63\
---------------------------------------------------------------------------

    \63\ Mid-level HR loaded hourly rate from BLS.
---------------------------------------------------------------------------

    For independent providers, the employer is considered to be the 
family that hires them. Therefore, families that directly employ these 
caregivers will also have to review the regulatory revisions. Because 
the employer-employee relationship is less complex than for an agency 
that employs multiple workers caring for multiple clients, the 
Department expects the burden of regulatory familiarization will be 
smaller. The Department therefore assumes that each family that 
directly hires a caregiver will spend one hour on regulatory 
familiarization. The Department uses the national average hourly wage 
of $29.07 (loaded) to represent the opportunity cost of reviewing the 
regulatory revisions.\64\
---------------------------------------------------------------------------

    \64\ BLS National Compensation Survey, July 2009, Hourly mean 
wage for full-time Civilian Worker is $22.36; the Department 
estimates the fully loaded wage at the hourly wage x 1.3. URL: 
http://www.bls.gov/eci/.
---------------------------------------------------------------------------

    The Department has found no data to support an estimate of the 
number of families that directly hire independent providers. The 
Department assumes each independent provider is hired by a single 
family, and therefore, because it estimates there are 206,600 
independent providers, 206,600 families will incur the cost of one hour 
to review the revised regulations. These families incur one hour of 
time at an opportunity cost of $29.07 per hour for a total of about $6 
million for regulatory familiarization in the first year following 
promulgation of the rule. The Department acknowledges this estimate is 
based on an assumed value and requests from commenters information or 
data that would allow it to better estimate the number of families that 
directly hire independent providers.
Wages and Overtime \65\
---------------------------------------------------------------------------

    \65\ These costs to employers are also transfer payments that 
will benefit employees. See Benefits, below.
---------------------------------------------------------------------------

    Many home care workers are already covered by minimum wage and 
overtime provisions at the state level and will not drive additional 
costs related to the proposed rule. Sixteen states require minimum wage 
for all hours worked for most home health care workers and guarantee 
some type of overtime pay for home health care workers who would 
otherwise be excluded under the FLSA.\66\ Five states and the District 
of Columbia require minimum wage for all hours worked but do not 
guarantee overtime. \67\ Twenty-nine states do not require minimum wage 
or overtime. Table 3-1 summarizes the wages for PCA and HHA occupations 
based on state level minimum wage and overtime coverage.
---------------------------------------------------------------------------

    \66\ California, Colorado, Hawaii, Illinois, Maine, Maryland, 
Massachusetts, Michigan, Minnesota, Montana, Nevada, New Jersey, New 
York, Pennsylvania, Washington, and Wisconsin. NELP, 2011 and SOL 
internal analysis.
    \67\ Arizona, Nebraska, North Dakota, Ohio and South Dakota. 
NELP, 2011.

            Table 3-1--Summary of Wages by State Minimum Wage and Overtime Coverage for HHAs and PCAs
----------------------------------------------------------------------------------------------------------------
                                                                                        Hourly wages
                                                                          --------------------------------------
                                                                             Minimum                   Maximum
                        Area name                            Employment        10th       Weighted       90th
                                                                            percentile    average     percentile
                                                                               wage     median wage      wage
----------------------------------------------------------------------------------------------------------------
All States...............................................       1,585,990        $6.79        $9.71       $20.61
States with MW and OT:
    Total................................................         780,480         7.32        10.39        20.61
    PCA..................................................         320,010  ...........        10.38  ...........
    HHA..................................................         460,470  ...........        10.41  ...........
 States with MW but no OT:
    Total................................................         120,610         7.20         9.85        16.40
    PCA..................................................          30,700  ...........         9.95  ...........
    HHA..................................................          89,910  ...........         9.75  ...........
States without MW or OT:
    Total................................................         684,900         6.79         8.90        18.76
    PCA..................................................         280,060  ...........         8.49  ...........
    HHA..................................................         404,840  ...........         9.30  ...........
----------------------------------------------------------------------------------------------------------------
Source: BLS OES, 2009; Note: based on the hourly wage percentiles, the minimum wage paid to workers is below the
  Federal minimum wage in some states with minimum wage laws.

    In order to define the subset of workers from the table that will 
be directly affected by the minimum wage and overtime components of the 
proposed rule, the Department made three primary calculations: (1) 
Removed from the data set those workers not currently employed as 
exempt companions (those providing services in facilities rather than 
homes); (2) added employees of tax exempt organizations in states with 
overtime coverage to the set of workers without state-level overtime 
coverage (as they are sometimes exempt from the state overtime laws); 
and (3) identified the number of workers currently receiving less than 
the federal minimum wage ($7.25 per hour).
    The data presented in Table 3-1 do not differentiate the workers 
who provide services in the homes of clients (eligible for 
companionship services exemption) and those that provide services 
primarily in facility settings (not eligible for companionship services 
exemption). To identify agency-employed HHAs and PCAs likely to be 
providing services in facilities and exclude them from the estimation 
of costs, the Department examined the BLS National Employment Matrix of 
industries for each occupation. Based on the description of the 
industry employing the HHA or PCA, the Department made a judgment of

[[Page 81215]]

whether the actual services were being provided in a facility or in a 
private home; then, the number of workers likely to be providing 
services in the home were summed and compared to the total number of 
workers in the occupation to estimate the percent of that occupation 
providing services in the home. Table 3-2 summarizes the data as well 
as the determination of whether the industry would be home or facility-
based. This percentage, approximately 80 percent of PCAs and 45 percent 
of HHAs, is used to adjust the number of workers below minimum wage and 
the number of workers without overtime pay used in the more detailed 
calculations described below. By definition, the Department assumes 
that 100 percent of PCAs and HHAs working as independent providers work 
in the home setting.

Table 3-2--Summary of Industries Employing HHAs and PCAs in 2008 and Likelihood of the Aide Working in a Home or
                                                    Facility
----------------------------------------------------------------------------------------------------------------
                                                     HHA                                    PCA
                                   -----------------------------------------------------------------------------
             Industry                 Employment                             Employment
                                        (1000)         Facility or home        (1000)         Facility or home
----------------------------------------------------------------------------------------------------------------
Total, All workers \a\............               1  100%.................               1  100%
    Home..........................     0.449172577  45%..................     0.801039861  80%
    Facility......................     0.550827423  55%..................     0.198960139  20%
Total, All workers................             100  Home.................             100  Home.
Accounting, tax preparation,                  0.06  Facility.............            0.15  Facility.
 bookkeeping, and payroll.
Activities related to real estate.              NA  NA...................            0.06  Facility.
Child day care services...........            0.07  Facility.............            0.41  Facility.
Civic and social organizations....              NA  NA...................            0.11  Facility.
Community care facilities for the            15.34  Facility.............              NA  NA.
 elderly.
Community food and housing, and                0.1  Facility.............            0.28  Facility.
 emergency and other relief
 services.
Educational services, public and              0.25  Facility.............            0.18  Facility.
 private.
Employment services...............            2.16  Facility.............            1.84  Facility.
Fitness and recreational sports                 NA  NA...................            0.01  Facility.
 centers.
Grant making and giving services..              NA  NA...................            0.28  Facility.
HHCS..............................           30.94  Home.................            27.9  Home.
Hospitals, public and private.....               2  Facility.............            0.61  Facility.
Hotels, motels and other traveler               NA  NA...................            0.03  Facility.
 accommodations.
Lessors of real estate............            0.04  Facility.............             0.2  Facility.
Local government, excluding                   1.33  Facility.............              NA  NA.
 education and hospitals.
Management of companies and                   0.14  Facility.............            0.54  Facility.
 enterprises.
Management, scientific, and                     NA  NA...................            0.04  Facility.
 technical consulting.
Nursing care facilities...........            5.73  Facility.............            0.39  Facility.
Offices of all other health                   0.06  Facility.............            0.06  Facility.
 practitioners.
Offices of mental health                      0.04  Facility.............            0.01  Facility.
 practitioners (except physicians).
Offices of physical, occupational,            0.11  Facility.............            0.05  Facility.
 and speech therapists, and
 audiologists.
Offices of physicians.............            0.24  Facility.............            0.07  Facility.
Other ambulatory health care                  0.05  Home.................              NA  NA.
 services.
Other financial investment                      NA  NA...................            0.03  Facility.
 activities.
Other investment pools and funds..              NA  NA...................            0.02  Facility.
Other personal services...........              NA  NA...................            0.41  Home.
Other residential care facilities.            2.18  Facility.............             0.4  Facility.
Outpatient mental health and                  0.27  Facility.............            0.22  Facility.
 substance abuse centers.
Personal care services............              NA  NA...................            0.07  Home.
Residential mental health and                 2.16  Facility.............            0.24  Facility.
 substance abuse facilities.
Residential mental retardation                16.9  Facility.............            3.04  Facility.
 facilities.
SEPD..............................            12.3  Home.................           28.12  Home.
Social advocacy organizations.....            0.05  Facility.............            0.97  Facility.
State government, excluding                   1.91  Facility.............              NA  NA.
 education and hospitals.
Unpaid family workers.............              NA  NA...................            0.05  Home.
Vocational Rehabilitation.........            1.92  Facility.............            3.78  Facility.
----------------------------------------------------------------------------------------------------------------
Source: BLS 2008 National Employment Matrix; note that employment does not sum to the total provided by BLS, the
  percent of the occupation employed in the home versus a facility is calculated based on the actual sum of the
  number appearing in the table.
\a\ Note: this excludes self-employed workers and those employed in private households because they will be
  added to the population of affected workers separately.


[[Page 81216]]

    It is important to note that the determination of whether the 
industry is home- or facility-based is an estimate; some industries 
that appear to provide services primarily in a nursing facility, for 
example, may employ a few aides who provide services in the homes of 
clients to assist with transitioning of the client from the facility 
back to their home. Also, some industries that appear to provide 
services primarily in the home, HHCS for example, may also employ aides 
that work primarily in facilities.
    Next, the workers in the states with minimum wage and overtime pay 
are, in general, already receiving at least the minimum wage and some 
form of overtime premium for hours worked beyond 40 hours and do not 
need to be included when calculating the costs associated with 
additional wages resulting from the application of the federal minimum 
wage or payment of an overtime premium. The exception is for workers 
employed by public agencies, non-profit organizations, and other tax 
exempt entities who are exempt from many of the applicable state laws. 
To account for these workers, the Department used the 2007 Economic 
Census to estimate the proportion of workers in those states who are 
employed in establishments exempt from Federal income tax; this 
proportion was multiplied by the number of workers in each state to 
estimate the number of workers likely to be employed by an employer not 
covered by the state level laws related to minimum wage and 
overtime.\68\ These workers were added to the total number of workers 
without overtime coverage in order to estimate the costs of providing 
overtime pay to workers under the proposed rule. States vary widely in 
terms of exemptions from minimum wage and overtime rules and not all 
states have these types of exemptions; as a result, this approach 
results in an overestimate of the number of workers who will receive 
additional overtime wages as a result of the proposed rule. The 
Department judges that this is the best available method to estimate 
these additional workers given available data.
---------------------------------------------------------------------------

    \68\ The Department used a proportion of 100 percent for workers 
in New York to account for the fact that New York law establishes an 
overtime premium for these workers of one and one-half times the 
minimum wage (rather than the workers' regular rate). This produces 
an overestimate of the number of workers who will receive additional 
overtime pay as a result of the proposed rule.
---------------------------------------------------------------------------

    The Department then analyzed the 2009 BLS OES data on PCA and HHA 
wages by percentile to identify those workers receiving less than the 
federal minimum wage (usually those in the 10th and 25th percentiles in 
states without minimum wage coverage).
    Finally, due to lack of data, the Department selected the 
assumptions it would use to analyze independent providers directly 
employed by families. The Department assumes that independent 
providers: (1) Generally will not be eligible for overtime wage 
premiums, and (2) earn less than the current federal minimum wage in 
the same proportion as agency-employed caregivers.
    To be eligible for the overtime wage premium, an independent 
provider would have to work more than 40 hours per week for the same 
employer (i.e., family); an agency-employed caregiver is eligible if he 
or she works more than 40 hours for the agency regardless of the number 
of families visited. Thus, the Department believes that independent 
providers are much less likely to be eligible for the overtime premium 
than agency-employed workers; those independent providers who work more 
than 40 hours per week are likely to be employed by more than one 
family.
    By assuming that the proportion of independent providers earning 
less than the federal minimum wage is identical to that for agency-
employed caregivers, the Department implicitly assumes independent 
providers work in similar patterns as agency-employed caregivers. That 
is, independent providers are distributed across states in the same 
proportion as agency-employed caregivers, and are as likely to earn 
less than minimum wage as those employed by agencies.
    Table 3-3 summarizes the number of workers estimated to be directly 
impacted by the minimum wage and overtime provisions of the proposed 
rule. These numbers reflect the adjustments discussed above that 
account for employees of tax-exempt organizations not covered by their 
state's overtime requirements and for the percent of workers likely to 
be employed in a home versus a facility. These estimates are described 
in more detail in the following sections.
    From the initial total of 1.59 million agency-employed workers, the 
Department estimates 934,000 are employed in homes as exempt 
companions. Of all agency-employed PCAs and HHAs, the Department 
estimates that 738,000, almost 47 percent are unlikely to be covered by 
current overtime provisions \69\ and 31,000 (1.9%) are paid less than 
the federal minimum wage.
---------------------------------------------------------------------------

    \69\ The total number of workers without overtime coverage does 
not include the 367,000 providers in California because they are 
currently covered by an overtime provision under a collective 
bargaining agreement. If the terms of that agreement change, then 
costs will be impacted.
---------------------------------------------------------------------------

    Since 3.9 percent of agency-employed PCAs earn less than minimum 
wage, the Department assumes 3.9 percent of the 188,500 PCA independent 
providers also earn less than minimum wage, about 7,350 caregivers. 
Similarly, because 0.7 percent of agency-employed HHAs earn less than 
minimum wage, 0.7 percent of the 18,100 HHA independent providers, 
about 120 workers, also earn less than minimum wage.

  Table 3-3--Summary of Workers That Are Directly Impacted by Proposed
                                  Rule
------------------------------------------------------------------------
                                    Number of
         Affected workers            workers             Source
------------------------------------------------------------------------
Agency-employed PCA and HHA......    1,585,990  BLS 2009 OES; State-
                                                 level occupational
                                                 employment and wages
                                                 for SOC 39-9021 and 31-
                                                 1011.
PCA..............................      630,770
HHA..............................      955,220
Percent PCA and HHA working in
 homes:
    PCA..........................        80.1%  BLS 2008 National
                                                 Employment Matrix for
                                                 SOC 39-9021 and 31-
                                                 1011.
     HHA.........................        44.9%
Number of PCA and HHA working in
 homes:
    PCA..........................      505,272  Total Workers multiplied
                                                 by percent working in
                                                 homes; BLS 2009 OES and
                                                 2008 National
                                                 Employment Matrix.
    HHA..........................      429,059

[[Page 81217]]

 
        Total....................      934,331
Workers without OT Coverage:
    Number of PCA and HHA in           290,089  Sum of employees working
     States without OT Coverage.                 in homes in selected
                                                 states; BLS 2009 OES.
    Number of PCA and HHA in NY..      227,100  Employees working in
                                                 homes in NY; BLS 2009
                                                 OES.
    Number of PCA and HHA in           220,589  Total workers in states
     public agencies and                         with OT laws multiplied
     nonprofits in states with OT.               by proportion of
                                                 workers in state
                                                 employed by tax-exempt
                                                 organizations; BLS 2009
                                                 OES and 2007 Economic
                                                 Census.
        Total workers without OT       737,779
         coverage.
Workers below Minimum Wage.......  ...........  Number of workers with
                                                 wage below $7.25; BLS
                                                 2009 OES. 3.9% of PCA,
                                                 0.7% HHA.
    Number of PCA and HHA worker        30,955
     below minimum wage.
Independent Providers employed by      206,600  BLS 2008 National
 families.                                       Employment Matrix for
                                                 SOC 39-9021 and 31-
                                                 1011.
PCA..............................      188,500
HHA..............................       18,100
Independent Providers below MW...  ...........  Total number of workers
                                                 multiplied by percent
                                                 of agency-employed PCA
                                                 and HHA that are paid
                                                 below minimum wage.
    PCA..........................        7,345
    HHA..........................          121
------------------------------------------------------------------------

Minimum Wage
    Based on BLS data describing the wages of PCAs and HHAs by 
percentile, there are 14,200 HHAs and 30,700 PCAs in 13 states where 
the minimum wage is below the federal minimum wage of $7.25. 
Approximately 32,600 of those workers are providing services in homes 
rather than facilities (85 percent multiplied by 30,700, plus, 46 
percent multiplied by 14,200), and therefore are receiving only their 
states' minimum wage. The average wage of these workers is $7.02 per 
hour. As a result of the proposed changes to the companionship 
exemption, these workers will receive an additional $0.23 per hour. 
Based on available data on the number of hours worked by PCAs and HHAs, 
drawn from several nationally representative surveys, the Department 
judges that 35 hours per week is a reasonable upper-bound assumption of 
the average number of hours worked per week. Assuming that each of 
these workers is employed for 52 weeks per year, and works an average 
of 35 hours per week \70\ then the additional cost of wages paid to 
these workers will be approximately $13.0 million in the first year. 
Review of BLS data suggests that the number of workers earning less 
than minimum wage should be negligible in subsequent years.\71\
---------------------------------------------------------------------------

    \70\ Seavey and Marquand, 2011, pgs. 61-64. Available at: http://www.directcareclearinghouse.org/download/caringinamerica-20111212.pdf.
    \71\ BLS, Occupational Employment Statistics Survey, by state, 
2000-2010. Available at URL: http://stats.bls.gov/oes/.
---------------------------------------------------------------------------

    Since the Department assumes all independent providers are employed 
by families, then all of the estimated 7,350 PCAs and 120 HHAs earning 
less than the minimum wage provide service in homes, and no further 
adjustment to these numbers is necessary. If these 7,470 caregivers 
also receive an additional $0.23 per hour to raise their wage to the 
federal minimum, and work an average of 35 hours per week, then the 
additional cost of wages paid to these workers will be approximately 
$3.1 million in the first year. With no evidence to the contrary, we 
maintain our working assumption that wages for self-employed caregivers 
track those of agency-employed caregivers.
Overtime
    Limited data exist on the amount of overtime worked by this 
population. A PHI analysis of the U.S. Census Bureau's Current 
Population Survey, Annual Social and Economic Supplement (ASEC) on home 
health care workers found 8 to 15 percent of PCAs and HHAs may work 
overtime. Among home health aides, 8 percent worked more than 40 hours 
per week, and 2 percent worked more than 50 hours per week; 15 percent 
of personal care attendants appeared to work more than 40 hours per 
week, although PHI believes this may be an overestimate based on the 
2010 ASEC supplement that suggests that approximately 42 percent of 
aides in HHCS report working full-time year round. \72\
---------------------------------------------------------------------------

    \72\ Seavey and Marquand, 2011, pgs. 61-64. Available at: http://www.directcareclearinghouse.org/download/caringinamerica-20111212.pdf.
---------------------------------------------------------------------------

    A significant overtime pay issue in this industry is associated 
with overtime pay for the care of patients requiring 24-hour services. 
Attending staff may be eligible for pay up to 16 of every 24 hours or 
even more (if the staff is not provided a bona fide sleep period). The 
City of New York and New York State Association of Counties filed an 
amicus brief with the U.S. Supreme Court in Long Island Care at Home, 
Inc. v. Coke.\73\ The brief asserted that changing the FLSA 
companionship services exemption would significantly increase the cost 
to the City and State for providing home healthcare services. The brief 
included an estimate of the increased costs. The additional costs for 
home health care workers in New York City attending patients requiring 
24-hour attendance is by far the largest component of these costs, 
exceeding the Department's estimate of nationwide overtime for all 
workers in all states not currently covered by overtime.
---------------------------------------------------------------------------

    \73\ 551 U.S. 158 (2007). Brief of Amici Curiae City of New York 
and New York State Association of Counties in Support of 
Petitioners.
---------------------------------------------------------------------------

    Unfortunately the brief does not adequately describe how the cost 
estimates were arrived at, nor does it provide estimates of the number 
of patients requiring 24-hour care or the workers caring for them. The 
numbers presented in the brief suggest over 33.6 million hours of 
annual overtime are worked just to care for patients requiring 24-hour 
care plus an additional 14.6 million hours of overtime hours are worked 
to care for other patients.\74\ This exceeds by 37

[[Page 81218]]

percent the total amount of overtime the Department estimated for the 
34 states and Washington, DC that do not currently require overtime 
pay, based on estimates of hours worked derived from a nationwide, 
statistically representative sample.\75\ Furthermore, this sample, from 
the Current Population Survey Annual Social and Economic Supplement, 
should reflect all hours worked, including that of home health care 
workers caring for patients requiring 24-hour care. In addition, the 
need to provide a patient with 24-hour care does not necessarily result 
in 72 hours of overtime per week. Maintaining continuity of care does 
not require a single care giver in attendance for the entire week; 
service can be provided with adequate continuity of care by two or four 
workers.\76\ Therefore, because the brief does not explain the basis 
for the numbers, the Department has not relied upon those estimates, 
but rather has generally relied upon nation-wide data from BLS in 
developing this economic impact analysis.
---------------------------------------------------------------------------

    \74\ The incremental cost of requiring overtime pay under this 
regulation is the difference between the current hourly rate paid 
for home health care workers, and the rate that would be paid if 
this regulation is promulgated (i.e., the overtime differential) 
applied to hours worked in excess of 40 hours per week. If straight 
time pay is currently about $10 per hour, the incremental cost will 
be $5 per hour. New York City projects the rule will cost $168 
million per year for care of patients requiring 24 hour care; $168 
million divided by $5 suggests that roughly 33.6 million overtime 
hours per year are worked in New York City alone to care for these 
patients.
    \75\ The PHI analysis is based on the U.S. Census Bureau, 
Current Population Survey, 2009 Annual Social and Economic (ASEC) 
Supplement.
    \76\ Elsas & Powell, 2011.
---------------------------------------------------------------------------

    BLS data show there are about 492,000 total home health care 
workers in facilities and private homes in states without state-
mandated overtime coverage, plus 143,000 workers employed in New York, 
and an additional 136,000 workers employed by tax-exempt organizations 
in states with overtime coverage who are not eligible for coverage. In 
total, the Department estimates that there are 770,445 workers without 
overtime coverage that will be eligible for it as a result of the 
proposed rule.
    Based on the PHI analysis of ASEC data on overtime worked in this 
industry, the Department calculates that if 10 percent of these 770,445 
home health care workers are employed 45 hours per week (5 hours of 
overtime), and an additional 2 percent are employed 52.5 hours per week 
(12.5 hours of overtime), then about 30 million hours of overtime are 
worked per year. Using the weighted median wage of $9.51 per hour, 
these workers would earn an overtime premium of $4.75 per hour. Under 
these assumptions the additional cost of overtime pay would be 
approximately $143 million per year absent changes to employment 
practices that could reduce or even eliminate overtime for these 
employees.\77\
---------------------------------------------------------------------------

    \77\ If the 367,000 providers in CA that currently receive 
overtime coverage under the terms of a collective bargaining 
agreement lose that coverage due to a change in the terms, the 
additional costs of overtime would be approximately $75 million 
under the same assumptions.
---------------------------------------------------------------------------

    As described above, the Department does not expect independent 
providers to be affected by overtime provisions. It expects few, if 
any, of these caregivers work more than 40 hours per week for the same 
family.
Market Response to Overtime Requirement
    It is highly unlikely that agencies will simply accept overtime 
costs without changing operating and staffing policies. Currently, 
agencies have little incentive to manage overtime because hours worked 
in excess of 40 per week are paid at the same rate as hours less than 
40 per week. Because overtime hours will now cost agencies more, they 
will have an incentive to manage those hours better to reduce costs.
    At least three possible agency responses to overtime pay 
requirements can be identified. First, the agency might manage existing 
staff to reduce overtime hours while maintaining the same caseload and 
staffing levels. However, there is little evidence on which to predict 
how agencies might reorganize staff time to support the same caseload. 
It seems doubtful that many agencies can support their caseload without 
at least some overtime payments, but it is unclear how much overtime 
might be reduced. In addition, the time spent reorganizing staffing 
plans is not costless. In this scenario agencies will incur opportunity 
costs for managerial time in addition to overtime pay, even if 
management pay is unchanged.
    Second, as suggested in the City of New York's amicus brief, 
agencies might choose not to allow staff to exceed 40 work hours per 
week.\78\ After the Court of Appeals for the Second Circuit concluded 
in Coke that home health care workers were entitled to overtime pay, 
the experience of New York City indicates this might be a common 
response in some regions. Such an approach will require increased 
staffing to cover the existing caseload. The New York City experience 
suggests it became common for staff that worked more than 40 hours per 
week at a single agency to continue to work more than 40 hours per 
week, but for multiple agencies.\79\ For example, a home health care 
worker might work perhaps 25 hours per week at two different agencies, 
thus not becoming eligible for overtime pay despite working 50 hours 
per week. Once again, agencies will incur additional managerial costs 
as they hire and manage additional staff. Employees that begin to work 
for more than one agency will also incur opportunity costs as they 
coordinate their schedules with multiple agencies. Finally, agencies 
might increase staffing by hiring new workers; depending on the 
tightness of the labor market, this might necessitate increasing hourly 
wages to attract new workers.
---------------------------------------------------------------------------

    \78\ Brief of Amici Curiae City of New York, 2007.
    \79\ Elsas & Powell, 2011.
---------------------------------------------------------------------------

    The third scenario comprises a mix of the first and second 
approach. Neither of those approaches is costless to agencies, 
therefore, agencies will weigh the cost of hiring additional workers 
with the cost of paying overtime to existing workers to determine the 
optimal mix of overtime and new hires appropriate to their 
circumstances. Agency caseload, current staffing patterns, the cost of 
hiring new workers, and managerial preferences for staffing mix will 
affect the final decision.
    One factor that may help determine how many employees currently 
exceeding 40 hours of work per week would receive overtime pay compared 
to having their hours reduced below 40 per week is the potential for 
existing workers to absorb additional hours without exceeding 40 hours 
per week. Available data suggest many employees are working 
significantly less than 40 hours per week and at least some of those 
workers are interested in working additional hours. As has been 
mentioned, studies show that HHAs and PCAs work, on average, 35 hours 
per week at most, and approximately 45 percent of workers in HHCS work 
part-time.\80\ In addition, the 2010 CPS ASEC asked part-time workers 
why they did not work full-time; 22 percent of aides indicated they 
could only find part-time work and 18 percent stated they worked part-
time due to business conditions. Thus potentially 40 percent of part-
time aides might be interested in increasing their hours worked if more 
hours were available.
---------------------------------------------------------------------------

    \80\ PHI, 2010a. p. 35. HHS, 2011. P. 26.
---------------------------------------------------------------------------

    This suggests that of 1.59 million PCAs and HHAs, approximately 
720,000 are part-time, and 288,000 might be interested in increasing 
their hours worked. Employees in this industry currently average at 
most 35 hours worked per week; if each of the 288,000 part-timers that 
might like to work

[[Page 81219]]

additional hours increased their average hours worked by 1.8 per week, 
they could absorb the estimated 26.8 million hours of overtime 
currently worked without exceeding 40 hours per week themselves. Not 
all employers will be able to redistribute hours to interested part-
time workers in this way, and it may be difficult for agencies to 
adjust worker schedules to come close to, but not exceed, 40 hours due 
to the nature of the work; the types of services they provide do not 
necessarily fit into one-hour increments. However, those employers who 
can adjust schedules and redistribute hours can be expected to decrease 
overtime costs significantly.
Travel Time
    The FLSA requires that employees who, in the normal course of work, 
travel to more than one worksite during the workday be paid for travel 
time between each worksite. (If the home health care worker travels to 
the first client directly from home, and returns directly home from the 
final client, travel time for the first trip and last trip generally 
are not eligible for pay.) It is clear that at least some home health 
care workers travel between clients and are thus eligible to be paid 
for that time. However, the Department has been unable to find evidence 
concerning how many workers routinely travel as part of the job, the 
number of hours spent on travel, or what percentage of that travel time 
currently is compensated.
    New York City's amicus brief does suggest, however, that projected 
travel costs would be about 19.2 percent of the size of overtime 
costs.\81\ With no other data available, this ratio seems reasonable to 
estimate potential travel costs. A number of qualifications apply to 
the use of this ratio. First, there is anecdotal evidence that agencies 
that operate in the city make little effort to minimize travel on the 
part of their workers; since travel is ``free'' to the agency, there is 
little incentive to manage travel time. Second, because there is no 
explanation of how either overtime or travel time estimates were 
generated, a closer examination of the data might change either or both 
estimates.\82\ Third, it is unclear how work and travel patterns in New 
York City apply to the rest of the country. For example, anecdotal 
evidence suggests that home health care workers in rural areas might 
have to travel further between clients, but their typical caseload 
patterns and total travel time are unknown. A survey of 131 home health 
care workers in Maine found companions traveled between 0 to 438 miles 
per week for an average unreimbursed mileage of 45 miles per week. One 
survey participant's comment was compelling: ``I had to give up my 
other clients because the price of gas and low wages I wasn't making 
ends meet.\83\
---------------------------------------------------------------------------

    \81\ Brief of Amici Curiae City of New York, 2007.
    \82\ Thus, it is plausible that a modification in the 
assumptions used to generate one estimate might also affect the 
second estimate. The ratio of travel time to overtime might remain 
relatively stable even if the absolute values of the estimates 
change.
    \83\ Ashley, A., Butler, S., Fishwick, N. Home care aide's 
voices from the field: Job experiences of personal support 
specialists. The Maine home care worker retention study. Home 
Healthcare Nurse, July/August 2010, 28(7), 399-405.
---------------------------------------------------------------------------

    The Department expects no independent providers will be affected by 
the travel time provision. Although the FLSA requires that employees 
who travel to more than one worksite during the workday be paid for 
travel time between each worksite, in the case of independent 
providers, any travel between work sites most likely represents travel 
from one employer to another, not travel between sites for the same 
employer. Therefore the Department anticipates independent providers 
will not be eligible for travel costs.
    Subject to the qualifications described above, using New York 
City's 19.2 percent of overtime figure, the Department estimates that 
the requirement to pay travel time under the FLSA might add 
approximately $26.7 million per year to home health care agency 
costs.\84\ Because the Department has assumed that travel costs will 
maintain a constant proportion to overtime pay (as calculated under 
Scenario 1), we project that travel pay will increase from $27.8 
million to $45.8 million from year 2 through year 10.
---------------------------------------------------------------------------

    \84\ It is unknown whether travel hours will be paid at straight 
time or overtime rates; this will vary according to the 
circumstances of the individual worker. If we assume all travel 
hours are overtime hours, and are paid at approximately $15 per 
hour, then the $31 million in incremental travel costs suggests 
about 2.1 million hours per year are spent in travel. If we assume 
all travel hours are straight time hours, and are paid at 
approximately $10 per hour, then the $31 million in incremental 
travel costs suggests about 3.1 million hours per year are spent in 
travel.
---------------------------------------------------------------------------

Market Response to Travel Time Requirement
    As a result of this provision, agencies should have significant 
incentive to reduce travel between clients for their employees, and 
therefore costs. It is difficult, however, to predict the potential 
magnitude of the cost reduction. It might be difficult to reduce travel 
due to client preferences for specific caregivers, or the geographical 
dispersion of clients (especially in rural areas).
    Agencies might also find alternative methods to reduce the travel 
costs it pays to employees without reducing actual travel time. For 
example, an agency might be able to reduce its employees' hourly wage, 
but increase hours paid by including travel time in such a way that 
employees' take-home pay is left unchanged. There are, however, some 
constraints that might limit agencies' ability to utilize such a 
strategy. First, employees must earn at least the federal minimum wage 
for all hours worked, including travel time, after this policy is 
implemented. Second, agencies will expend managerial resources 
implementing such a policy, which may at least partially offset the 
savings from reduced wages. Third, management frequently has multiple 
goals, some of which might conflict with such a policy. If, for 
example, newer employees are paid a wage closer to the federal minimum, 
then their hourly wages might be reduced a lesser amount than more 
senior staff. This might conflict with the agencies' desired pay scale, 
as well as other goals such as employee retention.
    Therefore, although the Department anticipates travel will be 
reduced as a result of the proposed rule, it cannot predict the 
magnitude of this reduction. First, there may be some minimum level of 
necessary travel that is irreducible. Second, although agencies have 
incentive to more carefully manage costs associated with employee 
travel, they might be able to do so in such a way that agencies avoid 
increased costs, but results in little reduction in travel by their 
employees.
Live-in Domestic Staff
    The proposed rule would limit the application of the overtime 
exemption contained in Sec.  13(b)(21) of the Act to the individual, 
family or household employing the live-in domestic worker. Third-party 
employers would no longer be entitled to claim the exemption. In 
addition, the proposed rule would require employers of live-in domestic 
workers to maintain an accurate record of hours worked, rather than 
simply keeping a copy of the agreement made by the employer and 
employee covering hours of work. The cost to employers of the proposed 
recordkeeping requirement, discussed more fully in the Paperwork 
Reduction Act section of this preamble, is estimated to be $22,580,605 
(which reflects the amount for the entire information collection-
approximately $3,059,650 of which stems from this NPRM). The Department 
has been unable to identify current data to

[[Page 81220]]

estimate the number of live-in domestic workers employed by third-party 
agencies, but based on historical data, we do not expect the impact of 
the proposed change concerning third-party employment to be 
substantial. Although the Department has estimated the number of live-
in domestics for purposes of the Paperwork Reduction Act (PRA), we have 
not included such data in the economic analysis as the Department 
relied upon aged data for the PRA section. The Department utilized a 
1979 study of Domestic Service Employees which incorporated 1974 data 
and assumed for purposes of the PRA that a similar percentage of the 
current domestic worker population is employed in live-in domestic work 
today. The Department specifically invites comments and data on the 
number of live-in domestic workers and their employers who may be 
subject to this rule.
Total Transfers
    Due to the continuum of different responses to the proposed 
regulation, the Department analyzed three possible scenarios with 
respect to overtime. One approach assumes the agency pays employees the 
overtime premium for all overtime hours worked. Conversely, the 
employer might change scheduling practices to avoid overtime costs and 
hire additional workers as necessary to work the extra hours. The final 
approach is modeled as a combination of the first two, half of 
employers pay overtime as in the first scenario and half of employers 
hire more workers, as in the second scenario. As described above, 
additional managerial costs to agencies might occur as a result of 
changes in staffing; the Department has no basis for estimating these 
costs, but believes they are relatively small. Therefore, they are not 
included in the three scenarios.
    The three scenarios in rank order from highest to lowest amount 
are:
     OT Scenario 1: The Department assumes agencies make no 
adjustments to staffing and pay employees the overtime premium for all 
hours worked in excess of 40 per week.
     OT Scenario 2: The Department assumes agencies make a 
partial adjustment to staffing; overtime pay is reduced, but not 
eliminated, by hiring some additional staff or increasing hours to 
part-time workers. For the purposes of this estimate, the Department 
assumes agencies evenly split the current overtime hours between 
current workers (who will thus work 50 percent of the overtime hours 
they currently work), and new workers (who will not work any overtime 
hours).
     OT Scenario 3: The Department assumes agencies ban 
overtime and increase staffing to ensure no employee works more than 40 
hours per week. In addition, it is assumed that additional staff can be 
hired at the current going wage rate.
    Table 3-4 presents an overview of the total estimated transfers of 
this rule where the scenarios represent a range of potential outcomes 
and actual transfers will depend on the response of employers to the 
proposed rule.

                     Table 3-4--Summary of Transfers
------------------------------------------------------------------------
                                      Total
       Transfer components          transfers           Comments
                                     ($ mil.)
------------------------------------------------------------------------
Minimum Wages to Agency-employed         $13.0
 Workers.
Minimum Wages to Independent               3.1
 Providers.
Travel Wages.....................         26.7
Overtime Scenarios:
    OT1..........................        139.3
    OT2..........................         69.7
    OT3..........................          0.0
------------------------------------------------------------------------
                       Total Transfers by Scenario
------------------------------------------------------------------------
Minimum Wage + Travel + Overtime           182  Employers in states with
 Scenario 1.                                     no coverage begin
                                                 paying minimum wage and
                                                 overtime.
Minimum Wage + Travel + Overtime           112  Employers in states with
 Scenario 2.                                     no coverage begin
                                                 paying minimum wage and
                                                 adopt a 50:50 mix of OT
                                                 pay and new hires in
                                                 response to overtime
                                                 requirements.
Minimum Wage + Travel + Overtime            43  Employers in states with
 Scenario 3.                                     no coverage begin
                                                 paying minimum wage and
                                                 hire new workers to
                                                 cover overtime.
------------------------------------------------------------------------

    The Department examined three scenarios representing varying 
agencies' potential responses to the overtime pay requirement. There is 
little hard evidence concerning the likelihood that each scenario might 
occur. However, the Department expects: Scenario 1 is the least likely; 
there is no reason to believe agencies will simply continue current 
staffing patterns and pay workers overtime for any hours exceeding 40 
per week. Scenario 1 represents an upper bound estimate that projected 
transfer effects should not exceed.
    Scenarios 2 and 3 are more likely to occur.\85\ Agencies have 
alternatives to paying the overtime premium: Spreading existing 
overtime hours to other workers, either new employees or current 
employees who want more hours. Thus, the Department believes the true 
transfer effects resulting from the overtime requirement:
---------------------------------------------------------------------------

    \85\ National level quantitative analyses have produced results 
consistent with the Department's qualitative analysis for this labor 
market:
    Barkume, Anthony. 2010. ``The Structure of Labor Costs with 
Overtime Work in U.S. Jobs,'' Industrial and Labor Relations Review, 
64(1): 128-142.
    Trejo, Stephen. 1991. ``The Effects of Overtime Pay Regulation 
on Worker Compensation,'' American Economic Review, 81(4): 719-40.
    Trejo, Stephen. 1993. ``Does the Statutory Overtime Premium 
Discourage Long Workweeks?'' Industrial and Labor Relations Review, 
56(3): 530-551.
---------------------------------------------------------------------------

     Will exceed the estimate presented as Scenario 3; agencies 
are unlikely to be able to perfectly spread all overtime hours. This 
may result from specific rigidities associated with individual 
agencies: An inability to divide certain cases among workers so that 
none exceed 40 hours; insufficient part-time staff willing to take on 
additional hours, or a local labor pool with workers unwilling to work 
at the current wage level. Scenario 3 thus represents a lower

[[Page 81221]]

bound estimate below which projected transfers are unlikely to fall.
    The degree to which actual transfer effects will be greater than or 
less than Scenario 2 is uncertain. However, the Department expects the 
lower scenario is more likely; there are multiple channels through 
which hours can be spread to additional workers without significantly 
increasing non-overtime wages. The extent to which current employees 
work more than 40 hours per week provides little evidence of a 
potential labor shortage in this industry; because most agencies are 
not covered by overtime requirements, they have had no incentive to 
manage workers in a way to avoid overtime.
Projected Future Costs and Transfer Effects Due to Industry Growth
    As documented above in this analysis, the demand for home health 
care workers has grown significantly over the past decade and is 
projected to continue growing rapidly. One researcher has projected at 
least a 200 percent increase in demand for home health care workers 
over the next 40 years.\86\ Therefore, the Department examined how the 
provisions in the proposed rule might impact a rapidly growing 
industry.
---------------------------------------------------------------------------

    \86\ PHI, 2010a. p. 8. HHS, 2001. Pgs. 4, 5, and 7.
---------------------------------------------------------------------------

    To estimate projected regulatory familiarization costs, the 
Department first estimated both the number of agencies and the number 
of independent providers likely to enter the market. The Department 
used U.S. Census' Business Dynamics Statistics to estimate an average 
annual firm ``birth'' rate of 8.6 percent of existing firms.\87\ With 
73,175 affected agencies in the baseline, this projects to 6,314 new 
agencies per year that will incur incremental regulatory 
familiarization costs.
---------------------------------------------------------------------------

    \87\ U.S. Census Bureau, Center for Economic Studies. Business 
Dynamics Statistics: Firm Age by Firm Size. Available at: http://www.ces.census.gov/index.php/bds/bds_database_list. Accessed June 
17, 2010.
---------------------------------------------------------------------------

    The projected number of families expected to hire independent 
providers was calculated using U.S. Census population projections by 
age. Census projected that the number of individuals age 65 and older 
will increase from 40.2 million in 2010 to 50.8 million in 2020 (36 
percent), while those age 85 and older will increase from 5.8 million 
to 6.6 million (15 percent) over the same time period.\88\ The 
Department selected the midpoint of these two age groups to estimate 
the growth rate of the population most likely requiring assistance; 
including all those in their mid 60s and early 70s was judged to be too 
inclusive and would overestimate the growth of the relevant population, 
while many requiring assistance might have died before the age of 85, 
and thus that age group would underestimate growth. This growth rate 
over 10 years (34 percent) was applied to the number of independent 
home care providers in the baseline year (206,600) to estimate that 
285,900 independent providers would be supplying services by 2020, an 
average of 7,208 new workers per year from 2010 to 2020.
---------------------------------------------------------------------------

    \88\ U.S. Census Bureau. 2008 National Population Projections. 
Table 2: Projections of the Population by Selected Age Groups and 
Sex for the United States: 2010 to 2050. Available at: http://www.census.gov/population/www/projections/summarytables.html. 
Accessed November 3, 2011.
---------------------------------------------------------------------------

    However, this estimate does not account for turnover among families 
hiring independent home care providers; the Department accounted for 
this by assuming that 50 percent of the previous year's independent 
home health care providers would gain a new client, and that client's 
family would require regulatory familiarization. Thus, on average, 
regulatory familiarization costs among families hiring independent 
providers each year was calculated at 50 percent of the previous year's 
providers plus 7,208.
    Consistent with the baseline estimate, new agencies projected to 
incur regulatory familiarization costs are assumed to require two 
incremental hours at a rate $26.79 per hour. Families hiring 
independent providers are assumed to require one hour of regulatory 
familiarization at a rate of $29.07. Table 3-5 summarizes the 
estimation of projected regulatory familiarization costs.

                                                  Table 3-5--Projected Regulatory Familiarization Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                  Agencies requiring        Families requiring regulatory familiarization
                                                                      regulatory        ----------------------------------------------------
                                                                    familiarization                                                            Costs ($
                             Year                             --------------------------                                          Costs ($      mil.)
                                                                              Costs ($    Total IPs     New IPs      Turnover      mil.)
                                                                  Number       mil.)
--------------------------------------------------------------------------------------------------------------------------------------------------------
2009.........................................................       73,175        $3.92      206,600  ...........  ...........        $6.01        $9.93
2010.........................................................        6,314         0.34      213,529        6,929      103,300         3.20         3.54
2011.........................................................        6,314         0.34      214,529        1,000      106,765         3.13         3.47
2012.........................................................        6,314         0.34      222,457        7,929      107,264         3.35         3.69
2013.........................................................        6,314         0.34      230,386        7,929      111,229         3.46         3.80
2014.........................................................        6,314         0.34      238,314        7,929      115,193         3.58         3.92
2015.........................................................        6,314         0.34      246,243        7,929      119,157         3.69         4.03
2016.........................................................        6,314         0.34      254,172        7,929      123,122         3.81         4.15
2017.........................................................        6,314         0.34      262,100        7,929      127,086         3.92         4.26
2018.........................................................        6,314         0.34      270,029        7,929      131,050         4.04         4.38
2019.........................................................        6,314         0.34      277,957        7,929      135,014         4.16         4.50
2020.........................................................        6,314         0.34      285,886        7,929      138,979         4.27         4.61
--------------------------------------------------------------------------------------------------------------------------------------------------------

    To estimate the number of incremental home healthcare providers 
that might earn an overtime wage premium or travel pay under the 
proposed revisions, the Department utilized BLS Occupational Outlook 
employment projections for 2018.\89\ The Department interpolated 
employment data for 2011 through 2017, and extrapolated the time series 
through 2020 using a constant rate of growth assumption. Wage data were 
directly extrapolated using the time trend from 2000 through 2010. 
Based on these time series:
---------------------------------------------------------------------------

    \89\ Bureau of Labor Statistics, U.S. Department of Labor, 
Occupational Outlook Handbook, 2010-11 Edition, Home Health Aides 
and Personal and Home Care Aides, on the Internet at http://www.bls.gov/oco/ocos326.htm (visited September 20, 2011).
---------------------------------------------------------------------------

     Home Health Aide employment will increase by an average of 
4.08 percent per year.\90\ Median nominal wage will increase by an 
average of 1.66 percent per year while median real wage

[[Page 81222]]

will increase by an average of 0.11 percent per year.\91\
---------------------------------------------------------------------------

    \90\ Total hours worked and overtime hours worked will increase 
at the same rate in this model.
    \91\ The Department adjusted nominal wages for inflation using 
the average increase in the PPI for Home Health Services over the 
last 10 years (1.55 percent).
---------------------------------------------------------------------------

     Personal Care Aide employment will increase by an average 
of 6.95 percent per year. Median nominal wage will increase by an 
average of 1.88 percent per year, and the median real wage will 
increase by an average of 0.33 percent per year.
    Table 3-6 summarizes the projections of HHA and PCA employment and 
wages developed for this analysis.

                   Table 3-6--Projected Employment and Hourly Wage, HHAs and PCAs, 2009-2020 a
----------------------------------------------------------------------------------------------------------------
                                              Home health aides                     Personal care aides
                                   -----------------------------------------------------------------------------
                                                        Median wage                            Median wage
               Year                    Total    --------------------------    Total    -------------------------
                                     employment                Inflation    employment                Inflation
                                     (millions)    Nominal     adjusted b   (millions)    Nominal     adjusted b
----------------------------------------------------------------------------------------------------------------
2009..............................         0.96        $9.85        $9.85         0.63        $9.46        $9.46
2010..............................         0.98         9.89         9.74         0.69         9.44         9.29
2011..............................         1.03        10.21         9.90         0.75         9.71         9.42
2012..............................         1.08        10.38         9.92         0.81         9.92         9.48
2013..............................         1.13        10.56         9.93         0.88        10.13         9.53
2014..............................         1.18        10.74         9.95         0.94        10.34         9.58
2015..............................         1.23        10.91         9.96         1.00        10.55         9.63
2016..............................         1.28        11.09         9.96         1.07        10.76         9.67
2017..............................         1.33        11.27         9.97         1.13        10.97         9.71
2018..............................         1.38        11.45         9.97         1.19        11.18         9.75
2019..............................         1.43        11.62         9.97         1.26        11.39         9.78
2020..............................         1.48        11.80         9.97         1.32        11.61         9.81
----------------------------------------------------------------------------------------------------------------
\a\ Derived from BLS Occupational Outlook.
\b\ Estimate based on 10 year average change in PPI for Home Health Services.

    The Department did not project transfer effects associated with 
minimum wage provisions of the FLSA on these occupations. BLS 
Occupational Employment Statistics on PCA and HHA wages for 2010 
indicate that few, if any, workers are currently paid below minimum 
wage. BLS found no state in which the tenth percentile wage was below 
$7.25 per hour.\92\
---------------------------------------------------------------------------

    \92\ BLS Occupational Employment Statistics, 2010 state 
estimates, at http://stats.bls.gov/oes/.
---------------------------------------------------------------------------

Projected Cost Impacts
    This section draws on the estimates of costs to determine the 
anticipated impact of the proposed regulations in terms of total cost 
across all industries as well as estimated cost per firm and per 
employee. Table 4-1 summarizes the first year costs, transfer effects 
and impacts of the proposed rule.

       Table 4-1--Summary of First Year Impact of Proposed Changes
------------------------------------------------------------------------
                        Impact                               Amount
------------------------------------------------------------------------
                      Transfers                          Total ($ mil.)
------------------------------------------------------------------------
 Minimum Wages.......................................              $13.0
 Minimum Wages to Self-Employed Workers..............                3.1
 Travel Wages........................................               26.7
Overtime Scenarios                                     .................
    OT1..............................................              139.3
     OT2.............................................               69.7
     OT3.............................................                0.0
Total Transfers by Scenario
    Minimum Wage + Travel + Overtime Scenario 1......              182.1
    Minimum Wage + Travel + Overtime Scenario 2......              112.5
    Minimum Wage + Travel + Overtime Scenario 3......               42.8
------------------------------------------------------------------------
                   Deadweight Loss                           Total
------------------------------------------------------------------------
 Disemployment Effect (number of workers)............                505
 Amount ($)..........................................             42,000
------------------------------------------------------------------------


 
                                                                                                   Annualized at
                                                                     Year 1 ($     Years 2-10 ($      7% real
                              Costs                                    mil.)           mil.)       discount rate
                                                                                                     ($ mil.)
----------------------------------------------------------------------------------------------------------------
Regulatory Familiarization......................................            $3.9  ..............  ..............
 Self-employed Regulatory Familiarization.......................            $6.0  ..............  ..............
----------------------------------------------------------------------------------------------------------------


[[Page 81223]]

    Table 4-2 presents the impact of regulatory familiarization costs 
on existing agencies and families in the first year. First year 
regulatory familiarization costs total $9.9 million; when annualized at 
a 7 percent discount rate over 10 years, total annualized costs are 
$1.3 million per year. Cost per agency is $54, while families employing 
independent providers will incur costs of $29 per family.

                                                  Table 4-2--Impact of Regulatory Familiarization Costs
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                      Total projected compliance costs ($ mil.)                Cost to employers
                                                               -----------------------------------------------------------------------------------------
             Regulatory familiarization costs to:                                                                         Cost per
                                                                   Year 1 [a]      Years 2-10 [b]   Annualized at 7%    establishment    Cost as percent
                                                                                                                             [a]           of revenue
--------------------------------------------------------------------------------------------------------------------------------------------------------
Home Healthcare Agencies......................................              $3.9        $0.30-$0.3             $0.85               $54            0.0049
Families Employing Independent Providers......................               6.0          3.20-4.0             03.98                29             [b,c]
--------------------------------------------------------------------------------------------------------------------------------------------------------
[a] Regulatory familiarization applies to 73,175 establishments; self-employment regulatory familiarization will impact 77,900 entities.
[b] Average revenue not calculated because for the purpose of this analysis the ``employer'' is the family employing the self-employed worker;
  therefore, there is no revenue available.
[c] Average revenue not calculated because for the purpose of this analysis the ``employer'' is the family employing the self-employed worker;
  therefore, there is no revenue data available.

    Regulatory familiarization costs are only incurred once by an 
affected entity; additional regulatory familiarization costs are not 
incurred by these agencies and therefore do not affect their ability to 
bear regulatory familiarization costs. The approach to estimate 
regulatory familiarization costs to new entrants is discussed above in 
Projected Future Costs.
Market Impacts
    The Department anticipates that the proposed rule will have 
relatively little effect on the provision of companionship services. 
There are almost no data, such as price elasticities of supply or 
demand, that can directly be used to model the market for companionship 
services. Furthermore, because approximately 75 percent of expenditures 
on home health services are reimbursed by Medicare and Medicaid, the 
effect of the rule depends vitally on how Medicare and Medicaid respond 
to the increase in the cost of providing home health services. However, 
despite these limitations, the Department used available data combined 
with best professional judgment to appropriately adjust parameter 
values, to project deadweight loss and disemployment effects of the 
proposed rule.
    In this section, the Department first presents estimated costs and 
transfer effects for each provision of the proposed rule, along with 
qualitative discussion of potential market adjustments and impacts of 
that provision. The Department then presents the projected deadweight 
loss and disemployment effects of the proposed rule using a market 
model framework.
    The Department estimates:
     Regulatory familiarization and adjustments to managing 
travel and overtime are projected to cost less than $4 million in the 
first year, or about $54 per establishment, which is perhaps 0.005 
percent of average annual establishment revenue. As noted previously in 
this analysis, between 8 and 15 percent of PCAs and HHAs may work 
overtime, and employers currently manage these issues for other 
occupational categories. Furthermore, while employers of PCAs and HHAs 
who work overtime may require more time spent in managing travel and 
overtime, the Department believes, on average, there should be little 
impact on employment attributable to regulatory familiarization costs.
     Minimum wage provisions total $13.0 million (Table 3-4), a 
3.3 percent increase in wage for 31,000 affected workers employed by 
agencies. In addition, the Department estimates that 7,500 independent 
providers directly employed by families might also receive a 3.3 
percent wage increase attributable to the minimum wage provisions. If 
the price elasticity of demand for these workers is similar to the 
national average price elasticity of demand for all workers (-0.3), 
\93\ about 310 agency-employed and 74 independent providers might lose 
their positions because of this provision. However, because many of 
these services are paid by Medicare and Medicaid, demand for them might 
be less elastic than the overall national average; this would reduce 
the disemployment effect; this will be discussed in greater detail 
below. Furthermore, it is likely these workers will be able to find new 
positions due to the overtime pay provisions and because the demand for 
these workers is projected to grow by 200 percent by 2050.\94\
---------------------------------------------------------------------------

    \93\ Hamermesh, D.S., Labor Demand. Princeton, N.J.: Princeton 
University Press. 1993.
    \94\ HHS 2003, p. v.
---------------------------------------------------------------------------

     Projected travel costs represent a transfer of $27 million 
per year from agencies to employees (Table 3-4, although this might 
decline as agencies will now have incentive to more closely manage 
travel time). If these payments are spread equally over all agencies in 
this industry, they represent about a 0.06 percent increase in wages to 
employees. It is more likely that these payments will be distributed 
less uniformly; employees of some agencies might receive significant 
travel transfer effects, while others receive less.
     Transfer effects associated with overtime are most 
difficult to project. If Scenario 2 represents the best point estimate 
of overtime payments, then the $69.7 million in additional wages 
compose about 0.17 percent of annual wages if overtime is spread over 
all workers, or about 0.09 percent of average industry annual revenues 
if spread over all establishments. Again, it is likely that overtime 
payments will be distributed less uniformly in a way that is difficult 
to predict.
    However, changes in wages are not the only determinant of how the 
market might tend to respond to the proposed rule; the demand for home 
health services, and therefore the demand for workers in this industry, 
also affects the market response. Conceptually, the demand for 
companionship services probably has two distinct components: Patients 
covered by Medicare and Medicaid, and out-of-pocket payers. According 
to the Medicare Payment Advisory Commission (MEDPAC), Medicare and 
Medicaid accounted for 35 and 41 percent, respectively, of total 
spending on home health in 2008.\95\ Of the remaining 24 percent, out-
of-pocket payers (including private insurance) are 20 percent (the 
remaining 4 percent is a mix of other governmental sources).\96\
---------------------------------------------------------------------------

    \95\ Home Health Care Services Payment System. The Medicare 
Payment Advisory Commission (MedPAC). October 2010, available at: 
http://www.medpac.gov/documents/MedPAC_Payment_Basics_08_HHA.pdf.
    \96\ U.S. Census Bureau: Health Care and Social Assistance, 
Estimated Year-to-Year Change in Revenue for Employer Firms by 
Source, Table 8.9. Available at: http://www.census.gov/services/sas_data.html.

---------------------------------------------------------------------------

[[Page 81224]]

    Currently, Medicare will cover, without a copayment requirement, 
all--or almost all--of allowed payment rate for home health care 
services for patients eligible for Medicare payments. Thus, the demand 
for services by these patients is likely to be highly inelastic, and 
the purchase of these services is dependent primarily on need and 
eligibility rather than price.\97\ In addition, Medicare has 
historically determined the payment rate to providers of these services 
based in part on regional market prices of inputs, which in home health 
care services labor constitutes 77 percent of the cost of services.\98\ 
Because minimum wage and travel are unavoidable costs of providing 
these services, it seems reasonable to assume that these costs will 
eventually be reflected in payment rates. The impact of overtime pay on 
reimbursement rates is more uncertain.
---------------------------------------------------------------------------

    \97\ Home Health Care Services Payment System. The Medicare 
Payment Advisory Commission (MedPAC). October 2010, available at: 
http://www.medpac.gov/documents/MedPAC_Payment_Basics_08_HHA.pdf. Medicare, for example, does not require copayment for 
eligible patients.
    \98\ Section 1895 of the Social Security Act required that that 
the home health prospective payment system (HH PPS) make payment for 
all costs of home health services. As such, under the HH PPS, 
Medicare covers and pays for all home health services, including 
medical supplies, that are reasonable and necessary, for 
beneficiaries that are eligible for the Medicare home health 
benefit. The law requires that the HH PPS rates be updated, on an 
annual basis, by the home health market basket update (plus or minus 
any percentage legislated by Congress). CMS uses the home health 
market basket index, which measures (and tracks) inflation in the 
prices of an appropriate mix of goods and services that HHAs 
purchase in furnishing home health care. Medicare cost report data 
are used to construct the cost weights for the blended wage and 
benefit index. See also Home Health Care Services Payment System. 
MedPAC. 2010.
---------------------------------------------------------------------------

    Patients that pay all, or a significant share, of costs out-of-
pocket might have a significantly different price elasticity of demand 
for home health care services. Little information is known about this 
market segment, including the percent of home health care patients 
paying out-of-pocket, or the extent to which some have private 
insurance to cover costs. Because Medicare and Medicaid account for 
about 75 percent of total payments for home health care services, it is 
likely that the self-pay market segment is significantly smaller. To 
the extent that these patients are not covered by private insurance and 
pay out-of-pocket, they are likely to have a more elastic demand for 
services; if the prices for home health services increases, these 
patients are more likely to search for lower cost alternatives, 
including relying on family members to provide care, institutionalizing 
the patient (but see discussion of Medicare and Medicaid, infra, 
indicating that this may not occur), or accessing the grey market. 
However, the size of such an effect is difficult to predict on the 
basis of extant information.
    Because incremental transfers are projected to be small relative to 
industry wages and revenues, and because the market for these services 
is dominated by government payers, the Department expects the impact of 
the proposed rule on the market for home health care services to be 
relatively small. However, to the extent that some transfers are not 
reimbursed by government payers, and that agencies might therefore 
increase price to patients, they might result in some patients seeking 
alternatives to the organized market for home health care services.
Deadweight Loss
    Deadweight loss from a regulation results from a wedge driven 
between the price consumers pay for a product or service, and the price 
received by the suppliers of those services. In this case, the transfer 
of income from agency owners to agency employees through minimum wage 
and overtime provisions reduces agencies' willingness to provide 
companionship services at the current market price. Because patients 
and their families must now pay more to receive the same hours of 
service, they reduce the number of hours of services they purchase; it 
is this reduction in services that causes the allocative inefficiency 
(deadweight loss) of the rule.
    To estimate deadweight loss, the Department must estimate the 
reduction in services agencies are willing to provide at the current 
market price, the resulting increase in market price paid by patients 
and families, and their reduced purchases of companion services. To do 
this, the Department will use: (1) The current market wage and hours 
purchased of companion services; (2) the estimated regulatory costs and 
income transfers resulting from the rule; and (3) the price elasticity 
of demand for and supply of companion services.
    As described above, the Department has estimated approximately 
353,000 HHAs and 423,000 PCAs work in states without current overtime 
and/or minimum wage provisions or are directly employed by the home; of 
these, 339,000 HHAs and 399,000 PCAs are employed in agencies and are 
potentially affected by the overtime provisions of the proposed rule. 
These caregivers each provide about 35 hours per week of companion 
services in the home. The average hourly wage in these states is $9.85 
for HHAs and $9.45 for PCAs. The Department used the number of 
employees affected by overtime provisions in its calculation of 
deadweight loss because: (1) The populations of affected workers in 
states without minimum wage and overtime provisions are largely 
overlapping and thus create potential double-counting; (2) under 
Scenario 2, overtime premiums are four times larger than projected 
minimum wage payments, and (3) spreading costs and transfers over a 
smaller worker population results in a more conservative estimate of 
deadweight loss (that is, the Department is more likely to 
overestimate, than underestimate deadweight loss).
    The Department estimated a range of regulatory costs and income 
transfers depending on the assumptions made concerning business 
response to the regulation. As discussed above, the most probable of 
the three scenarios considered (Scenario 2) assumes an equal split of 
overtime costs between agencies, who pay at least some limited amount 
of overtime, and caregivers, who reduce hours worked at that agency 
(although they might seek additional hours to work at other agencies). 
Combining projected costs under Scenario 2, with the amounts due based 
upon the minimum wage and travel pay provisions, the Department 
estimated the deadweight loss of the rule based on first year 
compliance costs of $122.4 million. Thus, the rule might cost $166 per 
potentially affected worker, or approximately $0.0912 per hour assuming 
workers average 35 hours per week, about 0.93 percent of current hourly 
wage for HHAs and 0.96 percent for PCAs.
    There are no econometric estimates of the price elasticity of 
demand or supply for companionship services. The price elasticity of 
demand for labor services has been estimated as -0.3 (a 1 percent 
increase in wages will cause a 0.3 percent reduction in hours 
purchased). However, it is reasonable to expect that the demand for 
companionship services is less elastic than the demand for general 
labor services because much of the cost is paid by Medicare and 
Medicaid. As a result, patients and family members are largely 
cushioned from the direct effects of changes in price for these 
services and are thus less likely to change their demand for them. 
Therefore, the Department assumes the demand for home companionship 
services is one-half the price elasticity of demand for general labor 
services, or -0.15.
    The price elasticity of supply for hourly labor has been estimated 
at 0.1 (a 1 percent increase in wages will cause

[[Page 81225]]

a 0.1 percent increase in hours supplied). However, among married 
women, that price elasticity of supply is estimated to be about 0.14; 
because hours worked in this labor market are primarily supplied by 
married women, the Department selected a value of 0.14 to use as the 
price elasticity of supply of home healthcare services in this 
analysis.
    Based on these price elasticities of supply and demand, the 
estimated cost per caregiver hour, and baseline employment and wages, 
the Department projects that for:
     HHAs, hourly wage will increase by $0.044 to $9.89, and 
employment will decrease by about 227, or about 413,000 hours of 
companionship services annually; deadweight loss will be $18,800 
annually.
     PCAs, hourly wage will increase by $0.044 to $9.50, and 
employment will decrease by 278, or about 507,000 hours of 
companionship services annually; deadweight loss will be $23,100 
annually.
    In addition, transfers to home caregivers will be borne by the 
patients and their families in the form of higher prices, and by 
agencies and their owners in the form of reduced income. The 
determination of who pays these transfers is a function of the relative 
price elasticities of supply and demand; with inelastic demand and 
labor supply, these transfers are approximately equally shared between 
purchasers (about 48.3 percent borne by patients, their families, and 
Medicare and Medicaid) and agencies (about 51.7 percent). For:
     HHAs, about $27.1 million is estimated to be paid by 
patients, their families, and Medicare and Medicaid; while $29.1 
million is estimated to be paid by agencies and their owners in the 
form of reduced income.
     PCAs, patients, their families, and Medicare and Medicaid 
are estimated to pay about $31.9 million, and $34.2 million is 
estimated to be paid by agencies and their owners in the form of 
reduced income.
    Table 4-3 summarizes both the values of the parameters used in the 
deadweight loss analysis and the results of the analysis.

                                Table 4-3--Summary of Deadweight Loss Estimation
----------------------------------------------------------------------------------------------------------------
                                                 HHA                      PCA                     Total
----------------------------------------------------------------------------------------------------------------
                                     Values Used in Deadweight Loss Analysis
----------------------------------------------------------------------------------------------------------------
Price Elasticity of Demand...........                    -0.15                    -0.15  .......................
Price Elasticity of Supply...........                      .14                      .14
Baseline Hourly Wage.................                    $9.85                    $9.46
Baseline Employment\a\...............                  338,801                  398,960                  737,761
Compliance Costs ($ mil.)\b\.........  .......................  .......................                   $122.4
Compliance Costs per Hour\c\.........  .......................  .......................                  $0.0912
----------------------------------------------------------------------------------------------------------------
                                       Results of Deadweight Loss Analysis
----------------------------------------------------------------------------------------------------------------
Post-Rule Hourly Wage................                    $9.89                    $9.50  .......................
Post-Rule Hourly Employment..........                  338,574                  398,682                  737,255
Change in Hourly Wage................                   $0.044                   $0.044  .......................
Change in Employment.................                     -227                     -278                     -505
Deadweight Loss......................                  $18,837                  $23,096                  $41,933
Percent of Costs and Transfers Paid                      48.3%                    48.3%                    48.3%
 by Purchasers\d\....................
Costs and Transfers Paid by                              $27.1                    $31.9                    $51.9
 Purchasers ($ mil.).................
Percent of Costs and Transfers Paid                      51.7%                    51.7%                    51.7%
 by Employers\e\.....................
Costs and Transfers Paid by Employers                    $29.1                    $34.2                    $63.3
 ($ mil.)............................
----------------------------------------------------------------------------------------------------------------
\a\ Agency employment in states without minimum wage and/or overtime laws plus independent providers in states
  without minimum wage laws.
\b\ Estimated sum of transfers and costs from overtime scenario 2, travel, minimum wage, and regulatory
  familiarization costs.
\c\ Assumes each caregiver works 35 hours per week 52 weeks per year.
\d\ Costs and transfers paid by purchasers in the form of higher prices; includes direct purchase of home health
  care services and services purchased through Medicare/Medicaid.
\e\ Costs and transfers paid by employers in the form of lower profits.
Individual components may not sum to totals due to rounding.
Impact to Medicare and Medicaid Budgets.

    In 2009, HHS outlays for Medicare programs totaled $424 billion, 
and outlays in support of Medicaid totaled $251 billion.\99\ Under 
Medicare, an estimated $18.3 billion went to home health programs, 
while Medicaid programs accounted for approximately another $38.1 
billion (approximately $40 billion inflated to 2009 dollars) through 
various programs.\100\ In 2008, Medicare and Medicaid accounted for 
nearly 75 percent of home health care services revenue; thus, the 
impact of the proposed rule on home health care will depend vitally on 
how Medicare and Medicaid respond to increased labor costs.
---------------------------------------------------------------------------

    \99\ U.S. Department of Health and Human Services (HHS). 2011. 
FY 2011 Budget, available at http://dhhs.gov/asfr/ob/docbudget/2011budgetinbrief.pdf. p. 13.
    \100\ Id.
---------------------------------------------------------------------------

    Although increased payments to workers associated with minimum 
wage, travel, and overtime provisions of the proposed rule are 
considered transfer effects from a societal perspective, the Department 
expects agencies will try to pass these transfers through to Medicare 
and Medicaid. Under the three overtime scenarios examined, average 
annualized payments range from $41.5 to $226.0 million depending on how 
home health care agencies respond to overtime requirements. If Medicare 
and Medicaid continue to pay 75 percent of home health care costs, 
roughly $31.1 million to $169.5 million in costs might be incurred by 
these government programs. These costs compose 0.06 to 0.29 percent of 
total HHS and state outlays for home health care programs ($58.1 
billion).
    We invite comment on the impact of the rule of on Medicaid, 
Medicare, and the private market, including the impact on the 
affordability of home health and home and community-based services.

[[Page 81226]]

Projected Future Transfer Effects Due to Industry Growth
    This section projects costs, and impacts over 10 years. The 
Department used several key assumptions to develop these projections. 
First, the Department assumed that the number of home healthcare 
workers directly employed in the homes or employed in states without 
current overtime premium requirements will remain a constant percentage 
of total employment in those occupations between 2010 and 2020 (about 
35.5 percent of HHAs and 63.3 percent of HHAs).
    Second, we also maintained the assumptions that 12 percent of 
workers exceed 40 hours worked per week and that 10 percent of these 
caregivers work 45 hours per week while 2 percent work 12.5 hours of 
overtime per week. These overtime assumptions are identical to those 
used to estimate costs and transfers for 2009, while the percentages 
used to estimate the number of workers potentially affected in each 
year were calculated from the 2009 analysis.
    Third, consistent with the 2009 analysis, we project two three 
overtime scenarios: And one for travel costs:
     Scenario 1: Employers make no adjustment to hours worked 
and pay all workers the overtime premium for all hours worked in excess 
of 40 per week.
     Scenario 2: Employers adjust schedules and/or hire 
additional workers to reduce overtime payment; we assume 50 percent of 
overtime payments can be avoided through these market adjustments.
     Scenario 3: Employers adjust schedules and/or hire 
additional workers to eliminate overtime payments.
    Finally, we continue to estimate travel costs 19.2 percent of 
Overtime Scenario 1 costs.
    The Department excluded potential transfer effects associated with 
the minimum wage provision from the projections because the current 
number of workers earning less than the minimum wage is relatively 
small and will decline steadily as nominal wages increase. Although the 
Department expects that the parameters used in this analysis will not 
remain constant, it has no information on which to base estimates of 
how these key variables might change over time. Therefore, maintaining 
the assumptions used in the analysis for 2009 provide the best basis 
for projecting future costs and transfer effects.
    Based on the data and assumptions described in this section, and 
the employment and wage projections in Table 3-6, Table 4-4 presents 
the Department's projections through 2020 of overtime and travel 
payments attributable to the revisions to the companionship regulations 
FLSA proposed in this notice.

Table 4-4--Projected HHA and PCA Overtime Hours, Overtime Pay and Travel Pay Attributable to Proposed Revisions,
                                                  2010-2020[a]
----------------------------------------------------------------------------------------------------------------
                                       Overtime hours worked        Overtime and travel payments (millions)[c]
                                           (millions)[b]         -----------------------------------------------
              Year               --------------------------------                                     Travel/
                                    Scenario 1      Scenario 2      Scenario 1      Scenario 2      Scenario 3
----------------------------------------------------------------------------------------------------------------
                                                  Nominal dollars
----------------------------------------------------------------------------------------------------------------
2010............................            30.5            15.3          $147.1           $73.6           $28.2
2011............................            32.8            16.4           162.7            81.3            31.2
2012............................            35.0            17.5           177.2            88.6            34.0
2013............................            37.3            18.6           192.2            96.1            36.9
2014............................            39.5            19.8           207.7           103.9            39.9
2015............................            41.8            20.9           223.6           111.8            42.9
2016............................            44.0            22.0           240.0           120.0            46.1
2017............................            46.3            23.2           256.8           128.4            49.3
2018............................            48.6            24.3           274.0           137.0            52.6
2019............................            50.8            25.4           291.8           145.9            56.0
2020............................            53.1            26.5           309.9           155.0            59.5
----------------------------------------------------------------------------------------------------------------
                                                                            Inflation adjusted dollars
----------------------------------------------------------------------------------------------------------------
2010............................            30.5            15.3           144.8            72.4            27.8
2011............................            32.8            16.4           157.8            78.9            30.3
2012............................            35.0            17.5           169.3            84.6            32.5
2013............................            37.3            18.6           180.8            90.4            34.7
2014............................            39.5            19.8           192.4            96.2            36.9
2015............................            41.8            20.9           204.0           102.0            39.2
2016............................            44.0            22.0           215.6           107.8            41.4
2017............................            46.3            23.2           227.2           113.6            43.6
2018............................            48.6            24.3           238.8           119.4            45.8
2019............................            50.8            25.4           250.3           125.2            48.1
2020............................            53.1            26.5           261.9           130.9            50.3
----------------------------------------------------------------------------------------------------------------
[a] Calculations based on employment and wage data in Table 3-6 and specified assumptions.
[b] Under Scenario 3, no overtime payments are incurred.
[c] Because overtime payments under Scenario 3 are zero, total payments under Scenario 3 are identical to travel
  payments. Total payments under Scenarios 1 and 2 are equal to overtime payments under that scenario plus
  travel payments.

    The Department projects that paid overtime hours will increase from 
30.5 million to 53.1 million between 2010 and 2020 with a consequent 
increase in overtime pay from $147.1 million to $309.9 million assuming 
employers make no adjustment to overtime work patterns (Scenario 1). In 
inflation- adjusted dollars, overtime pay is projected to increase from 
$144.8 million to $261.9 million. Assuming employers are able to cover 
50 percent of overtime hours through scheduling changes and/or hiring 
additional workers (Scenario 2), the projected

[[Page 81227]]

increase is half that of Scenario 1. Travel pay is projected to 
increase from $28.2 million to $59.5 million in nominal dollars ($27.8 
million to $50.3 million in inflation-adjusted dollars) over that same 
period.
    To place these projected future transfer effects resulting from the 
proposed rule in context, the Department compared nominal transfer 
effects to projected Medicare spending over the same period. The 
Centers for Medicare & Medicaid Services report that in 2010 Medicare 
expenditures totaled $522.8 billion, $19.1 billion of which was spent 
on the provision of home health care services, and that annual Medicare 
expenditures are projected to increase to $932.1 billion by 2020.\101\ 
Assuming that expenditures of home health services as a percent of 
total Medicare expenditures remains constant, annual home health care 
expenditures might increase to $34.1 billion by 2020.\102\
---------------------------------------------------------------------------

    \101\ The Boards of Trustees of the Federal Hospital Insurance 
and Federal Supplementary Medical Insurance Trust Funds, Washington, 
DC, May 13, 2011. 2011 Annual Report of the Boards of Trustees of 
the Federal Hospital Insurance and Federal Supplementary Medical 
Insurance Trust Funds. Accessed at: https://www.cms.gov/reportstrustfunds/downloads/tr2011.pdf, October 7, 2011.
    \102\ The report indicates that expenditures of home health 
services as a percent of total Medicare expenditures are expected to 
increase by a small amount over that period.
---------------------------------------------------------------------------

    However, the total overtime and travel payments projected to result 
from the proposed rule will not paid by Medicare. On average, about 
51.7 percent of projected costs and transfer effects are expected to be 
paid by providers in the form of lower profits (see discussion of 
deadweight loss for details). Further, only about 75 percent of 
payments for home health care services are attributable to Medicare and 
Medicaid; patients and their families and their private insurance 
account for 20 percent of payments. About 5 percent is accounted for by 
a mix of other governmental programs.
    After adjusting projected overtime and travel transfer effects, the 
Department expects incremental Medicare payments attributable to the 
rule will increase from about $59.8 million in 2010 to $133.8 million 
in 2020 under Scenario 1, and from $34.7 million to $77.6 million under 
the more probable Scenario 2, and from $9.6 million to $21.5 million 
under Scenario 3 (as discussed above, the Department expects the market 
response to the rule will most likely lie somewhere between Scenario 2 
and Scenario 3). These incremental payments compose no more than 0.4 
percent of projected Medicare Home Health Care expenditures under 
Scenario 1, and 0.23 percent of those expenditures under Scenario 2, 
and 0.06 percent under Scenario 3. Table 4-5 summarizes projected 
Medicare budgets, incremental payments attributable to the proposed 
rule, and those payments as a percent of Medicare Home Health Care 
expenditures from 2010 through 2020.

                            Table 4-5--Projected Overtime and Travel Pay as Percent of Medicare Home Health Care Expenditures
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                    Medicare expenditures    Adjusted overtime & travel payments      OT & Travel as  % Medicare home
                                                        (billions)[a]          in nominal dollars (millions)[b]                 health care
                      Year                       -------------------------------------------------------------------------------------------------------
                                                               Home health     OT 1 +       OT 2 +       OT 3 +       OT 1 +       OT 2 +       OT 3 +
                                                     Total         care        Travel       Travel       Travel       Travel       Travel       Travel
--------------------------------------------------------------------------------------------------------------------------------------------------------
2010............................................       $522.8        $19.1        $59.8        $34.7         $9.6         0.31         0.18         0.05
2011............................................        522.8         19.1         63.5         36.9         10.2         0.33         0.19         0.05
2012............................................        557.4         20.4         70.2         40.8         11.3         0.34         0.20         0.06
2013............................................        572.2         20.9         76.5         44.4         12.3         0.37         0.21         0.06
2014............................................        606.6         22.2         83.0         48.2         13.4         0.37         0.22         0.06
2015............................................        643.4         23.5         89.6         52.0         14.4         0.38         0.22         0.06
2016............................................        675.8         24.7         96.5         56.0         15.5         0.39         0.23         0.06
2017............................................        716.1         26.2        103.6         60.1         16.7         0.40         0.23         0.06
2018............................................        760.3         27.8        110.8         64.3         17.9         0.40         0.23         0.06
2019............................................        809.6         29.6        118.3         68.7         19.1         0.40         0.23         0.06
2020............................................        864.5         31.6        125.9         73.1         20.3         0.40         0.23         0.06
--------------------------------------------------------------------------------------------------------------------------------------------------------
[a] Total Medicare expenditures projected by CMS; Home Healthcare Expenditures extrapolated based on the percent of total Medicare expenditures in 2010.
[b] Projected payments reduced by 9.1 percent to adjust for average percent of costs paid by agencies in the form of lower profits, then reduced by 25
  percent to adjust for percent of home health care purchases paid by patients and their families.

    The Department also projected deadweight loss and employment 
impacts over 10 years. These projections are calculated maintaining the 
assumptions concerning the price elasticities of supply and demand 
discussed in the first year deadweight loss analysis, projected 
regulatory familiarization costs summarized in Table 3-5, and projected 
overtime and travel payments presented in Table 4-4. The Department's 
calculated deadweight loss and employment impacts over 10 years are 
summarized in Table 4-6.

                           Table 4-6--Projected Deadweight Loss and Employment Impacts
----------------------------------------------------------------------------------------------------------------
                                                                                    Average annualized value ($
                                    Year 1  ($    Years 2-10  ($  Years 2-10  ($               mil.)
                                       mil.)         mil.) \a\       mil.) \a\   -------------------------------
                                                                                   3% Real rate    7% Real rate
----------------------------------------------------------------------------------------------------------------
                                        Regulatory Familiarization Costs
----------------------------------------------------------------------------------------------------------------
Agencies........................            $3.9            $0.3            $0.3            $0.7            $0.8
Families Hiring Self-employed...             6.0             3.2             4.0             3.8             3.9
----------------------------------------------------------------------------------------------------------------

[[Page 81228]]

 
                                                    Transfers
----------------------------------------------------------------------------------------------------------------
Minimum Wages (MW)
    to Agency-Employed Workers..            13.0             0.0             0.0             1.5             1.7
    to Self-Employed Workers....             3.1             0.0             0.0             0.4             0.4
Travel Wages....................            26.7            27.8            45.8            35.4            34.7
Overtime Scenarios
    OT 1........................           139.3           144.8           238.8           184.2           180.7
    OT 2........................            69.7            72.4           119.4            92.1            90.4
    OT 3........................             0.0             0.0             0.0             0.0             0.0
----------------------------------------------------------------------------------------------------------------
                                      Total Costs and Transfers by Scenario
----------------------------------------------------------------------------------------------------------------
Reg Fam + MW + Travel + OT 1....           192.1           176.2           289.0           226.0           222.2
Reg Fam + MW + Travel + OT 2....           122.4           103.8           169.6           133.9           131.9
Reg Fam + MW + Travel + OT 3....            52.7            31.4            50.2            41.8            41.5
----------------------------------------------------------------------------------------------------------------
                                                 Deadweight Loss
----------------------------------------------------------------------------------------------------------------
Reg Fam + MW + Travel + OT 1....           0.103           0.080           0.132           0.105           0.103
Reg Fam + MW + Travel + OT 2....           0.042           0.027           0.044           0.036           0.036
Reg Fam + MW + Travel + OT 3....           0.008           0.002           0.004           0.003           0.003
----------------------------------------------------------------------------------------------------------------
                                        Disemployment (number of workers)
----------------------------------------------------------------------------------------------------------------
Reg Fam + MW + Travel + OT 1....             793             739           1,169              938 \b\
Reg Fam + MW + Travel + OT 2....             505             435             686              555 \b\
Reg Fam + MW + Travel + OT 3....             218             132             203              172 \b\
----------------------------------------------------------------------------------------------------------------
\a\ These costs are a range where the first number represents the estimate for Year 2; the second estimate for
  Year 10.
\b\ Simple average over 10 years.

    Total average annualized regulatory familiarization costs, and 
minimum wage, overtime premium, and travel payments range from $41.5 
million to $226.0 million per year based on how employers adjust to the 
requirement to pay overtime wage premiums. These costs and transfers 
are projected to cause average annualized deadweight loss ranging from 
$3,000 to $105,000 per year. These costs and transfers are also 
projected to cause disemployment impacts ranging from 172 to 938 
workers per year.
Non-monetized Projected Impact
    Two additional aspects of home health care services might be 
affected by the proposed rule. First, the proposed rule might result in 
increased purchases of home health care services through the informal, 
or ``grey,'' market. Second, although the hours of care received by 
patients might be unaffected by the increased costs of care, the 
quality of that care might suffer (however, the quality of care also 
may increase due to increased professionalism and decreased turnover). 
These are discussed in turn below.
The Grey Market
    An unknown number of patients receive home care services through 
more informal arrangements with care providers, sometimes called the 
``grey'' market. Here, informal agreements are reached between the 
patient (or patient's family) and the caregiver regarding hours of care 
and hourly pay rates. Because income and payroll taxes can be avoided, 
services can be provided at lower cost than when provided through 
agencies.
    The proposed rule will increase costs to home health care agencies 
that offer services in states where they are not required to pay the 
minimum wage and/or overtime pay and an unknown percentage of those 
costs might be reimbursed by Medicare and Medicaid. If the costs are 
not fully reimbursed, home health care agencies might increase the 
rates they charge patients, have their profit margin squeezed, or both. 
If costs are passed through to patients and their families, they will 
have incentive to look for lower cost alternatives such as the grey 
market. In addition, workers who desire to work more than 40 hours per 
week might have opportunities to provide services through the grey 
market rather than work for multiple agencies. Although the proposed 
rule might increase incentives on both sides to use the grey market, 
there is no information available to project potential changes to that 
market.
Continuity of Care
    Continuity of care ``is commonly framed as being composed of 
provider continuity (a relationship between a patient and provider over 
time), information continuity (availability and use of data from prior 
events during current client encounters) and management continuity 
(coherent delivery of care from different doctors).'' \103\ In the home 
care scenario, concerns have been raised that continuity of care, 
specifically provider continuity, may suffer if employers opt not to 
pay overtime for aides who, for example, work more than 40 hours per 
week for a single client and instead employ other aides to also provide 
companionship to that client in the same workweek. Some are concerned 
that a break in the continuity of care

[[Page 81229]]

may result in a reduction in the quality of care.
---------------------------------------------------------------------------

    \103\ Walraven, C., Oake, N., Jennings, A., et al. The 
association between continuity of care and outcomes: a systematic 
and critical review. Journal of Evaluation in Clinical Practice, 
April 2009, 947-956.
---------------------------------------------------------------------------

    The Department understands that home health care involves more than 
the provision of impersonal services; when a caregiver spends 
significant time with a client in the client's home, the personal 
relationship between caregiver and patient can be very important. 
Certain clients may prefer to have the same caregiver(s), rather than a 
sequence of different caregivers. The extent to which home health care 
agencies choose to spread employment (hire more companions) rather than 
pay overtime may cause an increase in the number of caregivers for a 
client; the client may be less satisfied with that care, and 
communication between caregivers might suffer, affecting the quality of 
care for the client.\104\
---------------------------------------------------------------------------

    \104\ Brief of Amici Curiae City of New York. 2007.
---------------------------------------------------------------------------

    Although matching client and caregiver in a long-term personal 
relationship is the ideal for many clients, it may not be the norm. For 
instance, the turnover rate (those leaving and entering home care work) 
for workers in the home health care industry has been estimated to 
range from 44 to 65 percent per year.\105\ Other studies have found 
turnover rates to be much higher, up to 95 percent \106\ and, in some 
cases, 100 percent annually.\107\ Thus, many clients already experience 
a sequence of different caregivers, and it is not apparent that the 
proposed rule will necessarily worsen the turnover rate. In fact, 
coverage under the FLSA may reduce turnover rates. Frequent turnover is 
costly for employers in terms of recruitment costs and training of new 
aides and also in terms of the likelihood of a reduction of quality 
care or not being able to provide care at all. The employee turnover 
rate in this industry is high because of low wages, poor or nonexistent 
benefits, and erratic and unpredictable hours. Job satisfaction, and 
the desire to remain in a given position, is highly correlated with 
wages, workload, and working conditions. Increased pay for the same 
amount of work and overtime compensation likely would aid in employee 
retention and attracting new hires. Those employers who choose not to 
pay overtime essentially would need to spread the hours among their 
employees, resulting in more consistent work hours for many aides. 
Moreover, any extra wages earned may be used to pay for other benefits, 
such as health insurance coverage. As one study found, for this low-
income workforce, ``compensation accounts for more actual job turnover. 
[Therefore, h]igher wages, more hours, and travel cost reimbursement 
are found to be significantly associated with reduced turnover.'' \108\ 
Another report determined that ``increases in the federal or state 
minimum wage can make home care employment more desirable.'' \109\
---------------------------------------------------------------------------

    \105\ PHI, 2010a.
    \106\ Zontek, T., Isernhagen, J., Ogle, B. Psychosocial factors 
contributing to occupational injuries among direct care workers. 
American Association of Occupational Health Nurses Journal, August 
2009, 338-347.
    \107\ Ashley, A., Butler, S., Fishwick, N. Home care aide's 
voices from the field: Job experiences of personal support 
specialists. The Maine home care worker retention study. Home 
Healthcare Nurse, July/August 2010, 28(7), 399-405.
    \108\ Morris, L. Quits and job changes among home care workers 
in Maine: The role of wages, hours and benefits. The Gerontologist, 
2009, 49(5), 635-650.
    \109\ Burbridge, L. The labor market for home care workers: 
Demand, supply, and institutional barriers. The Gerontologist, 1993, 
33(1), 41-46.
---------------------------------------------------------------------------

    For the estimated 8 to 15 percent of aides who work more than 40 
hours per week, only a portion of that percentage likely provides 
services for the same client. Many who work overtime accrue long hours 
in the service of at least a few clients, traveling between client 
homes during the workweek. It is also conceivable that in a minority of 
cases, the aide provides companionship services around the clock for a 
stretch of a few or several days. Most, however, have been estimated to 
work 45 hours per week on average, not including travel time between 
client homes.
    Provider continuity that results in overtime work, however, has 
drawbacks. From the aide's perspective, the long work hours can be a 
burden. For instance, ``it cannot be denied shifts beyond the 
traditional 8 hours have been associated with increased risk of errors, 
incidents, and accidents.'' \110\ Many studies have shown that extended 
work hours result in increased fatigue, decreased alertness and 
decreased productivity, negatively affecting employee health and well-
being. Long work hours in the healthcare field ``have adverse effects 
on patient outcomes and increase health care errors and patient 
injuries.'' \111\ For example, nurses working more than 8 hours report 
more medication errors, falling asleep at work, a decrease in 
productivity, and impaired critical thinking abilities. The error rates 
double when nurses work 12.5 or more consecutive hours. A 2004 National 
Institute for Occupational Safety and Health report found that ``12-
hour shifts combined with more than 40 hours of work per week reported 
increases in health complaints, deterioration in performance, or slower 
pace of work.'' \112\ One study that analyzed 13 years worth of data 
and nearly 100,000 job records notes that ``long working hours 
indirectly precipitate workplace accidents through a causal process, 
for instance, by inducing fatigue or stress in affected workers.'' 
\113\ It is therefore telling that ``[d]irect care workers have the 
highest injury rate in the United States, primarily due to work-related 
musculoskeletal disorders.'' \114\ One of the purposes of the FLSA's 
overtime pay requirement is to induce employers to hire more people to 
work fewer hours each. Doing so in those circumstances where excessive 
overtime hours are worked may therefore result in better care provided.
---------------------------------------------------------------------------

    \110\ Keller, S. Effects of extended work shifts and shift work 
on patient safety, productivity, and employee health. American 
Association of Occupational Health Nurses Journal, December 2009, 
57(12), 497-502.
    \111\ Keller, S. 2009.
    \112\ Caruso, C., Hitchcock, E., Dick, R., et al. Overtime and 
extended work shifts: Recent findings on illnesses, injuries, and 
health behaviors. National Institute for Occupational Safety and 
Health, U.S. Department of Health and Human Services. April 2004.
    \113\ Dembe, A., Erickson J., Delbos, R., et al. The impact of 
overtime and long work hours on occupational injuries and illnesses: 
new evidence from the United States. Occupational and Environmental 
Medicine, 2005, 62, 588-597.
    \114\ Zontek et al, 2009. Psychosocial Factors Contributing to 
Occupational Injuries Among Direct Care Workers. AAOHN Journal, 
2009, Vol. 57, No. 8, 338-347. In this study, direct care workers 
includes nursing aides, orderlies, and attendants in any setting 
(institutional or residential).
---------------------------------------------------------------------------

    Many regard having the same home care aide for long hours as a 
cornerstone of ``continuity of care'' and having more aides to cover 
the same number of companion hours for a client as negatively impacting 
quality of care. As discussed above, however, the opposite may be true. 
Working extended hours may affect the quality of care that the aide is 
able to provide and even the aide's own health and well-being. Coverage 
for companions under wage and hour laws may also result in improved 
retention and hiring, which saves the employer costs related to 
turnover rates; job satisfaction; and increase in pay. Attendant 
benefits of spreading work hours more evenly may include job stability 
for companions, decreased risk of fatigue, errors and work-related 
injuries, and better overall job performance, resulting in improved 
client care and outcomes.
    Furthermore, it has been shown that paying employees below minimum 
wages, not paying for all hours worked or overtime, and providing no 
training or benefits is not the only path to success that an employer 
has in the home care industry. Another business model, in which 
employees receive training, an overtime wage differential, and health 
care benefits, has been

[[Page 81230]]

successful. Cooperative Home Care Associates (CHCA), based in New York, 
for example, has always paid workers overtime. Although overtime at 
CHCA is carefully managed, it can still be substantial (e.g., 30 
percent or more of employees exceed 40 work hours per week); allowing, 
even expecting overtime, permits CHCA, however, to use a staffing plan 
that maintains continuity of care. These policies have driven CHCA's 
turnover rate far below the industry average, a major factor in its 
financial success.\115\ In terms of employee coverage, CHCA cases 
requiring weekday and weekend coverage are assigned permanent aides who 
work on alternate weekends. Also, cases requiring 24-hour coverage, 
seven days per week, are shared among four aides, requiring only some 
overtime hours.\116\ Other agencies such as Community Care Systems, 
Inc., in Springfield, Illinois, have reduced overtime costs by 
distributing extra hours more evenly among workers through better 
tracking of work hours. Close monitoring of employee workloads and 
spreading of work hours also curbed overtime use for Illinois-based 
Addus HealthCare, one of the nation's largest home care employers. 
These employers pay overtime even in those states that do not require 
it, demonstrating that ``wage and hour protections are economically 
realistic for the industry, and can be achieved without excessive use 
of costly overtime hours.'' \117\ These examples suggest that requiring 
overtime pay in this industry does not inevitably cause disruption of 
employer-employee relationships and caregiver-patient relationships 
leading to higher turnover, discontinuity of patient care, and 
increased use of the grey market.
---------------------------------------------------------------------------

    \115\ Elsas & Powell, 2011.
    \116\ NELP report, page 26.
    \117\ NELP report, page 25-26.
---------------------------------------------------------------------------

Benefits
    This section describes the expected benefits of the proposed change 
to the companionship exemption. Potential benefits of this revision to 
the ``companionship services exemption'' flow from the transfer of 
regular and overtime wages to workers from their employers, and 
include: Reduced worker turnover, reduced worker injury rates, and 
decreased worker reliance on public assistance programs.
Transfer Effects
    Perhaps the most significant effect of the proposed rule is the 
transfer of income from businesses and their owners to workers, and 
potentially, from one group of workers to another group of workers. In 
economics, a transfer payment is broadly defined as a redistribution of 
income in the market system that does not affect output.
Transfer Effects Associated With Minimum Wage and Travel Provisions
    The proposed rule leads to an unambiguous transfer from employers 
to employees in those states that currently do not require agencies to 
pay minimum wage to employees who provide this type of home health care 
services. Similarly, payment for travel time is also an unambiguous 
transfer of income from businesses and their owners to workers. These 
are estimated to be approximately $39.7 million. In addition, the $3.1 
million in minimum wage payments to independent providers directly 
employed by families represent an unambiguous transfer from families to 
caregivers.
    Two factors could change the dynamics of this transfer scenario. 
First, increased wages and travel cost might be passed through to 
patients in the form of higher prices for home health care services. If 
those higher prices result in patients finding alternatives to home 
health care services (e.g., accessing the grey market for services or 
institutionalizing the patient), then the income transfer through 
travel and overtime pay is partially offset because the provision of 
home health services is reduced, resulting in reduced revenues to 
agencies, and the deadweight loss to the economy. This reduction in 
demand by households will be less pronounced if the demand for home 
health care services is inelastic (i.e., the hours of home health care 
services purchased does not change when price increases), as assumed in 
this analysis. The Department believes the market response to the 
proposed rule will be relatively small, but did not estimate the 
response due to lack of information.
    Second, the Department expects that over time some of these costs 
may be reimbursed to agencies through increased Medicare and Medicaid 
payments. To the extent that Medicare and Medicaid increase 
reimbursement rates to cover these costs, the transfer is from the 
federal and state agencies to workers.
Transfer Effects Associated With Overtime Provisions
    The transfer of income associated with the payment of the overtime 
differential is more ambiguous. Employers are likely to respond to 
overtime pay requirements along a spectrum ranging from (1) banning all 
overtime and spreading hours to other workers or hiring new workers to 
fill the available hours, to (2) maintaining current staffing patterns 
and paying overtime for all work hours exceeding 40 per week. To the 
extent that employers choose to pay overtime, the income transfer is 
from businesses and their owners to workers. However, to the extent 
that employers eliminate overtime and spread the now available hours to 
other employees or new hires, the transfer is from worker to worker. 
Employees who used to exceed 40 hours of work per week will work fewer 
hours, transferring income to fellow workers who will absorb the extra 
hours. It is also possible that those employees working greater than 
forty hours may distribute those hours among multiple employers.
Potential Macroeconomic Impacts of Transfer Effects
    In the first year, the proposed rule is expected to transfer $42.8 
million in income from businesses and families to home health care 
workers due to minimum wage and travel time pay requirements. Up to 
$139.3 million more might be transferred in the first year to workers 
due to the overtime provisions, although the total amount transferred, 
and the percent transferred from owners versus other workers depends on 
how owners modify staffing plans in response to the rule.
    Because employees in this industry earn on average hourly wages of 
approximately $10.14, it is reasonable to assume that a high percentage 
of the extra income would be spent by the employees and their families. 
The percent spent of each additional dollar earned is the marginal 
propensity to consume (MPC) out of income. It is also reasonable to 
assume that the MPC for these employees is higher than the MPC of their 
employers; for example, employees might spend $0.90 of each additional 
dollar earned, while their employers, with significantly higher 
incomes, might spend only $0.50 of each additional dollar earned. Thus, 
the transfer of income from employers to employees is likely to result 
in increased aggregate consumption because of employees' higher MPC.
    The additional consumption might stimulate the economy an amount 
that exceeds the initial expenditure through the multiplier effect 
(e.g., the increased purchases by home health care workers generate 
additional income for those businesses, whose owners then increase 
their own spending). Moody's Economy.com model suggests the multiplier 
effect for low-income consumers ranges from 1.64 for income associated 
with food stamps to 1.73 for

[[Page 81231]]

income from unemployment benefits.\118\ Thus, $1 of food stamps given 
to low income consumers increases GDP by $1.64 dollars.
---------------------------------------------------------------------------

    \118\ Nallari, R. Re-thinking Fiscal Mulitpliers. World Bank. 
Growth and Crisis Blog. April 20, 2010. Accessed at: http://blogs.worldbank.org/growth/re-thinking-fiscal-multipliers.
---------------------------------------------------------------------------

    The key unknowns in estimating any multiplier effect associated 
with the proposed rule include:
     Estimating income transfers strictly from employers to 
employees, excluding transfers from one group of employees to another 
group of similar employees.
     The difference between the MPC of employers and employees; 
the Department was unable to find estimates of MPC by annual income.
     The size of the multiplier.
    The Department did not estimate the multiplier effect due to the 
uncertainty associated with key variables and parameters for the 
calculation.
Reduction in Employee Turnover Rates
    Researchers have found that lower wages are associated with higher 
turnover and lower quality of care, and that increases in wages for 
home health care workers result in decreased turnover rates. Excessive 
employee turnover is costly to businesses, and as mentioned earlier, 
studies have found turnover rates in the home health care industry 
range from 44 to 95 percent per year, and even approach 100 percent per 
year.\119\
---------------------------------------------------------------------------

    \119\ PHI 2010a; Zontek, T., Isernhagen, J., Ogle, B., 2009; 
Ashley, A., Butler, S., Fishwick, N., 2010.
---------------------------------------------------------------------------

    Frequent turnover is costly for employers in terms of recruitment 
costs and training of new aides and also in terms of the likelihood of 
a reduction in the quality of care or not being able to provide care at 
all. The employee turnover rate in this industry is high because of low 
wages, poor or nonexistent benefits, and erratic and unpredictable 
hours. Job satisfaction, and the desire to remain in a given position, 
is highly correlated with wages, workload, and working conditions. 
Increased pay for the same amount of work and overtime compensation 
likely would aid in employee retention and attracting new hires. Those 
employers who choose not to pay overtime essentially would need to 
spread the hours among their employees, resulting in more consistent 
work hours for many aides.
    Decreasing the rate of employee turnover may result in significant 
cost savings to employers. For example, an agency employing 50 workers 
with a turnover rate of 35 percent replaces about 18 workers per year. 
The new workers hired to replace the workers who left must be 
recruited, interviewed and trained to perform the job tasks, requiring 
a significant investment of time and resources by the employer. If the 
turnover rate decreases by 10 percent to 25 percent per year, then only 
about 13 workers would be replaced annually.
Reduction in Worker Injuries and Illnesses
    Many studies have shown that extended work hours result in 
increased fatigue, decreased alertness, and decreased productivity, 
negatively affecting employee health and well-being. A 2004 National 
Institute for Occupational Safety and Health report found that ``12-
hour shifts combined with more than 40 hours of work per week reported 
increases in health complaints, deterioration in performance, or slower 
pace of work.'' \120\ One study that analyzed 13 years worth of data 
and nearly 100,000 job records notes that ``long working hours 
indirectly precipitate workplace accidents through a causal process, 
for instance, by inducing fatigue or stress in affected workers.'' 
\121\ It is therefore telling that ``[d]irect care workers have the 
highest injury rate in the United States, primarily due to work-related 
musculoskeletal disorders.'' \122\ The rate of days away from work 
(work days missed due to on-the-job injuries) for nursing aides, 
orderlies, and attendants was almost four times greater than the all-
worker rate--449 per 10,000 compared to 113 per 10,000 for all 
workers.\123\ One of the results of the FLSA's overtime pay requirement 
is to induce employers to hire more people to work fewer hours each. 
Doing so in those circumstances where excessive overtime hours are 
worked may therefore result in fewer injuries and illnesses incurred.
---------------------------------------------------------------------------

    \120\ Caruso, C., Hitchcock, E., Dick, R., et al. Overtime and 
extended work shifts: Recent findings on illnesses, injuries, and 
health behaviors. National Institute for Occupational Safety and 
Health, U.S. Department of Health and Human Services. April 2004.
    \121\ Dembe, A., Erickson J., Delbos, R., et al. 2005.
    \122\ Zontek and Isernhagen, 2009.
    \123\ NELP report (p. 27, FN45).
---------------------------------------------------------------------------

Reduced Reliance on Public Assistance
    An increase in wages might reduce home care worker reliance on 
public assistance programs to meet the needs of their own households. 
Recent research finds that approximately 40 percent of home health care 
workers receive public assistance.\124\ Almost 90 percent of these 
workers are women.\125\
---------------------------------------------------------------------------

    \124\ PHI 2010a, p. 36
    \125\ PHI 2010a, p. 26
---------------------------------------------------------------------------

    Assuming these workers are in a family consisting of themselves and 
two children, the average amount of public assistance for such families 
is about $10,300.\126\ In addition, many minimum wage workers also 
receive food stamps. The federally-assisted Supplemental Nutrition 
Assistance Program (SNAP, previously referred to as the Food Stamp 
Program) provided aid to 33.5 million participants in 2009 with total 
expenditures of $50.4 billion, an average of $1,500 in food stamps 
expenditures per participant.\127\ This would entail $4,500 per family 
for an assumed family of three. In total, the average home health 
services worker might receive $14,800 in public assistance and food 
stamps to provide for her/his family.
---------------------------------------------------------------------------

    \126\ TANF Eight Annual Report to Congress.
    \127\ Characteristics of Supplemental Nutrition Assistance 
Program Households: Fiscal Year 2009. U.S. Department of 
Agriculture, Food and Nutrition Service. October 2010.
---------------------------------------------------------------------------

    Increased wages should reduce demand for public assistance services 
resulting in a savings to these programs; however, the Department is 
unable to quantify the savings due to lack of data on how the benefits 
of these programs vary with income. The savings associated with the 
minimum wage provisions under the proposed rule might be small; the 
Department estimated that the average below-minimum wage worker would 
receive a raise of $0.23 per hour to reach minimum wage. If such 
employees work the average 35 hours per week for 52 weeks per year, 
their additional income will be about $400 per year. To the extent that 
the employees' work requires significant travel time and overtime, or 
added hours of work due to employer schedule adjustments, they will 
also receive additional income. The Department did not estimate this 
portion of the potential economic impact due to uncertainty about the 
number of workers who would receive payment for travel time or 
additional hours of work.
Improved Quality of Care
    As has been stated previously, one of the main benefits of this 
proposed rule is that the professionals who are entrusted to care for 
the elderly, disabled, and sick in their homes will have the same 
protections in the labor market as almost all other employees. 
Guaranteed minimum wage and overtime pay for home care jobs, comparable 
to similar occupations, will also more likely attract more qualified 
workers to the home care industry, which will improve the quality of 
care overall. The increased availability of home care workers will 
allow employers

[[Page 81232]]

to not only meet significant demand for home care services, but also 
spread employment, so that (1) workers are working fewer overtime hours 
which will result in less fatigue and more energy devoted to their 
clients; and (2) more workers will be serving fewer clients, which is a 
desire of many customers seeking home care. In addition, with the 
standard of pay raised, more highly trained and certified workers will 
seek out and remain in the HHA and PHA occupations, and a higher 
quality service will be provided to the client. While a monetary value 
cannot be placed on increased professionalism and improved care, those 
expected benefits are noteworthy.
Initial Regulatory Flexibility Analysis
    The Regulatory Flexibility Act of 1980 (RFA) as amended by the 
Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA), 
hereafter jointly referred to as the RFA, requires agencies to prepare 
regulatory flexibility analyses and make them available for public 
comment, when proposing regulations that will have a significant 
economic impact on a substantial number of small entities. See 5 U.S.C. 
603. If the rule is not expected to have a significant economic impact 
on a substantial number of small entities, the RFA allows an agency to 
certify such, in lieu of preparing an analysis. See 5 U.S.C. 605.
    For the reasons explained in this section, the Department believes 
this NPRM is not likely to have a significant economic impact on a 
substantial number of small entities, and therefore an initial 
regulatory flexibility analysis is not required by the RFA. However, in 
the interest of transparency and to provide an opportunity for the 
public to comment, the Department has prepared the following initial 
regulatory flexibility analysis to assess the impact of this regulation 
on small entities. The Department specifically invites comment on the 
impacts of the proposed rule on small businesses, including whether 
alternatives exist that will reduce burden on small entities while 
still meeting the objectives of the FLSA. The Chief Counsel for 
Advocacy of the Small Business Administration (SBA) was notified of a 
draft of this rule upon submission of the rule to the Office of 
Management and Budget under E.O. 12866, as amended, ``Regulatory 
Planning and Review'' 58 FR 51735, 67 FR 9385, 72 FR 2763.
1. Reasons Why Action by the Agency Is Being Considered
    The home care industry has undergone a dramatic transformation 
since the Department published the implementing regulations in 1975. 
There has been a growing demand for long-term in-home care for persons 
of all ages, in part because of the rising cost of traditional 
institutional care, and because of the availability of funding 
assistance for in-home care under Medicare and Medicaid. The growing 
demand for long-term in-home care for persons is also partly due to the 
significant increase in our aging population.\128\
---------------------------------------------------------------------------

    \128\ See Shrestha, Laura, The Changing Demographic Profile of 
the United States, Congressional Research Service p. 13-14 (2006).
---------------------------------------------------------------------------

    In response to the growing demand for long-term in-home care, the 
home health care services industry has grown. According to the National 
Association of Home Care (NAHC) publication, Basic Statistics About 
Home Care (March 2000), data from the Department of Health and Human 
Services' Health Care Financing Administration (HCFA) showed that the 
number of Medicare-certified home care agencies increased from 2,242 in 
1975 to 7,747 in 1999. In the NAHC 2008 update, this number increased 
to 9,284 by the end of 2007. The number of for-profit agencies not 
associated with a hospital, rehabilitation facility, or skilled nursing 
facility, i.e., freestanding agencies, increased more than any other 
category of agency from 47 in 1975 to 4,919 in 2006. These for-profit 
agencies grew from 2 percent of total Medicare-certified agencies in 
1975 to 68 percent by 2006, and now represent the greatest percentage 
of certified agencies. Public health agencies, which constituted over 
one-half of the certified agencies in 1975, now represent only 15 
percent.
    Public funds pay the overwhelming majority of the cost for 
providing home care services. Medicaid payments represent nearly 40 
percent of the industry's total revenues; other payment sources include 
Medicare, insurance plans, and direct pay. Based on data from the 
Centers for Medicare and Medicaid Services (CMS), Office of the 
Actuary, National Health Care Expenditures Historical and Projections: 
1965-2016, Medicare and Medicaid together paid over one-half of the 
funds to freestanding agencies (37 and 19 percent, respectively). State 
and local governments account for 20 percent, while private health 
insurance accounts for 12 percent. Out-of-pocket funds account for 10 
percent of agency revenues.
    There has been a similar increase in the employment of home health 
aides and personal care aides in the private homes of individuals in 
need of assistance with basic daily living or health maintenance 
activities. Bureau of Labor Statistics' (BLS) national occupational 
employment and wage estimates from the Occupational Employment 
Statistics (OES) survey show that the number of workers in these jobs 
tripled during the decade between 1988 and 1998, and by 1998 there were 
430,440 workers employed as home health aides and 255,960 workers 
employed as personal care aides. The combined occupations of personal 
care and home health aides constitute a rapidly growing occupational 
group. BLS statistics demonstrate that between 1998 and 2008, this 
occupational group has more than doubled with home health aides 
increasing to 955,220 and personal care aides increasing to 630,740. 
(http://www.bls.gov/oes/current/oes399021.htm).
    The growth in demand for in-home care and in the home health care 
services industry has not resulted in growth in earnings for workers 
providing in-home care. The earnings of employees in the home health 
aide and personal care aide categories remain among the lowest in the 
service industry. Studies have shown that the low income of direct care 
workers including home care workers continues to impede efforts to 
improve both jobs and care.\129\ Protecting domestic service workers 
under the Act is an important step in ensuring that the home health 
care industry attracts and retains qualified workers that the sector 
will need in the future. Moreover, the workers that are employed by 
home care staffing agencies are not the workers that Congress 
envisioned when it enacted the companionship exemption i.e., neighbors 
performing elder sitting, but are instead professional caregivers 
entitled to FLSA protection. In view of the dramatic changes in the 
home health care sector in the 36 years since these regulations were 
first promulgated and the growing concern about the proper application 
of the FLSA minimum wage and overtime protections to domestic service 
employees, the Department believes it is appropriate to reconsider 
whether the scope of the regulations are now too broad and not in 
harmony with Congressional intent.
---------------------------------------------------------------------------

    \129\ See Brannon, Diane, et al., ``Job Perceptions and Intent 
to Leave Among Direct Care Workers: Evidence From the Better Jobs 
Better Care Demonstrations'' The Gerontologist, Vol. 47, No. 6, p. 
820-829 (2007).
---------------------------------------------------------------------------

2. Statement of Objectives and Legal Basis for the Proposed Rule
    Section 13(a)(15) of the FLSA exempts from its minimum wage and 
overtime

[[Page 81233]]

pay provisions domestic service employees employed ``to provide 
companionship services for individuals who (because of age or 
infirmity) are unable to care for themselves (as such terms are defined 
and delimited by regulations of the Secretary).'' Due to significant 
changes in the home health care industry over the last 36 years, 
workers who today provide in-home care to individuals are performing 
duties and working in circumstances that were not envisioned when the 
companionship services regulations were promulgated. Section 13(b)(21) 
provides an exemption from the Act's overtime pay requirements for 
live-in domestic workers. The current regulations allow an employer of 
a live-in domestic worker to maintain a copy of the agreement of hours 
to be worked and to indicate that the employee's work time generally 
coincides with that agreement, instead of requiring the employer to 
maintain an accurate record of hours actually worked by the live-in 
domestic worker. The Department is concerned that not all hours worked 
are actually captured by such agreement and paid, which may result in a 
minimum wage violation. The current regulations do not provide a 
sufficient basis to determine whether the employee has in fact received 
at least the minimum wage for all hours worked.
    The Department has re-examined the regulations and determined that 
the regulations, as currently written, have expanded the scope of the 
companionship services exemption beyond those employees whom Congress 
intended to exempt when it enacted Sec.  13(a)(15) of the Act, and do 
not provide a sufficient basis for determining whether live-in workers 
subject to Sec.  13(b)(21) of the Act have been paid at least the 
minimum wage for all hours worked. Therefore, the Department proposes 
to amend the regulations to revise the definitions of ``domestic 
service employment'' and ``companionship services,'' and to require 
employers of live-in domestic workers to maintain an accurate record of 
hours worked by such employees. In addition, the proposed regulation 
would limit the scope of duties a companion may perform, and would 
prohibit employees of third-party employers from claiming the 
exemption.
3. Description of and, Where Feasible, an Estimate of the Number of 
Small Entities To Which the Proposed Rule Will Apply
Definition of Small Entity
    The RFA defines a ``small entity'' as a (1) small not-for-profit 
organization, (2) small governmental jurisdiction, or (3) small 
business. The Department used standards defined by SBA to classify 
entities as small for the purpose of this analysis. For the two 
industries that are the focus of this analysis, the SBA defines a small 
business as one that has average annual receipts of less than $13.5 
million for HHCS and $7 million for SEPD.
Data Sources and Methods
    The Department combined Quarterly Census of Employment and Wages 
data for the HHCS and SEPD industries, then used the Statistics of US 
Business (SUSB), 2002, data set to distribute establishments and 
employees to the following size categories: 0, 1-4, 5-9, 10-19, 20-99, 
100-499, and 500+ employees. Therefore, the Department analyzed small 
business impacts using establishment size as a proxy for firm size.
    Although basing this analysis on establishment size will bias 
results, the bias will tend to overestimate the number of small 
business affected by the rule and the impacts to those small 
businesses. First, the analysis overestimates the number of small 
entities; a firm composed of multiple establishments might earn 
aggregate revenues that exceed the threshold the SBA used to define 
``small'' in these industries. Second, costs are in part a function of 
the number of firms in the industry due to the need for each firm to 
become familiar with the proposed rule. Our cost model thus assigns 
those familiarization costs to each establishment. Again, to the extent 
firms own multiple establishments, compliance costs associated with 
regulatory familiarization will be smaller than estimated here. Third, 
compliance costs are also a function of the number of establishment 
employees. Because there are no data linking the failure to pay minimum 
and overtime wages to establishment size, the Department assumed 
compliance costs associated with meeting those requirements would be 
proportionate to the number of establishment employees. Therefore, 
these costs increase in proportion to establishment size (as measured 
by the number of employees), and smaller establishments are not unduly 
impacted relative to larger establishments.
Number of Small Entities Impacted by Proposed Rule
    Based on the estimated average annual revenues per establishment in 
each employment size category derived from SUSB data and attributed to 
the establishments in the HHCS and SEPD industries, it appears that no 
employers exceed the SBA size standards of $13.5 million in annual 
revenues for HHCS and $7 million in annual revenues for SEPD. Thus, for 
the purposes of this analysis, the entire HHCS and SEPD industries are 
composed of small businesses. Although in reality it is highly likely 
that there are some firms in the 100-499 and 500+ employee categories 
that earn revenues in excess of the SBA standard for their industry, we 
have not underestimated the number of small firms affected by the rule. 
We also believe we have not mischaracterized this sector in any 
meaningful way; we believe these industries are primarily, if not 
completely, composed of small businesses by SBA standards.
    Table 6-1 presents the estimated number of establishments, 
employees, and revenue by establishment size, although the Department 
is analyzing and presenting the impacts to small businesses without 
identifying any of the employers as large (in the 100-499 and the 500+ 
employee categories). Table 6-1 shows that the 500+ employee category 
employs 42 percent of workers, and accounts for 19 percent of 
establishments and 42 percent of revenue for the combined industries. 
Conversely, establishments with fewer than 20 employees account for 
only six percent of employment but nearly 44 percent of establishments.

                                 Table 6-1--Affected Establishments, Workers, and Revenue by Employment Size Categories.
--------------------------------------------------------------------------------------------------------------------------------------------------------
                                                                                                                                               Average
                                        Total      Percent of    Workers      Workers       Total      Percent of  Revenue  ($    Percent    revenue per
        Number of employees           employees      total      without MW   without OT     estab.       estab.        mil)       industry      estab.
                                        (1000)     employment                                                                     revenue      ($1000)
--------------------------------------------------------------------------------------------------------------------------------------------------------
0..................................            0          0.0            0            0        5,604          7.7         $645          0.8         $115
1-4................................           20          1.2          388        9,157       14,061         19.2        1,404          1.7          100
5-9................................           29          1.7          544       12,843        6,219          8.5        1,758          2.2          283

[[Page 81234]]

 
10-19..............................           57          3.3        1,089       25,730        6,088          8.3        3,082          3.8          506
20-99..............................          351         20.5        6,681      157,824       14,856         20.3       16,140         20.1        1,086
100-499............................          539         31.4       10,250      242,147       12,777         17.5       23,894         29.7        1,870
> 500..............................          718         41.9       13,662      322,745       13,570         18.5       33,559         41.7        2,473
                                    --------------------------------------------------------------------------------------------------------------------
    Total..........................        1,714        100.0       32,614      770,446       73,175        100.0       80,482        100.0        1,100
--------------------------------------------------------------------------------------------------------------------------------------------------------

4. Projected Reporting, Recordkeeping and Other Compliance Requirements 
of the Proposed Rule
    The FLSA sets minimum wage, overtime pay, and recordkeeping 
requirements for employment subject to its provisions. Unless exempt, 
covered employees must be paid at least the minimum wage and not less 
than one and one-half times their regular rates of pay for overtime 
hours worked. Workers performing domestic service but not meeting the 
proposed definition of companionship services and companions and live-
in domestic service workers employed by third parties will need to be 
paid in accordance with the FLSA's minimum wage and overtime pay 
provisions.
    Every covered employer must keep certain records for each non-
exempt worker. The regulations at 29 CFR part 516 requires employers to 
maintain records for employees subject to the minimum wage and overtime 
pay provisions of the FLSA. As indicated in this analysis, the NPRM 
would expand minimum wage and overtime pay coverage to approximately 
776,000 workers. The recordkeeping requirements under 29 CFR part 516 
are not new requirements, however, some employees would be included in 
the universe of covered employees if the NPRM were to be made final 
without change. This would result in an increase in employer burden and 
is estimated in the Paperwork Reduction Act (PRA) section of this NPRM. 
Note that the burdens reported for the PRA section of this NPRM include 
the entire information collection and not merely the additional burden 
estimated as a result of this NPRM.
Cost to Small Entities
    Tables 6-2 through 6-4 present the results of the first year, 
recurring year, and annualized cost and impact analyses as distributed 
by establishment size. The figures in these tables include the costs of 
regulatory familiarization, complying with minimum wage requirements, 
travel pay, and overtime pay assuming employers respond to work in 
excess of 40 hours per week by paying the overtime premium (Scenario 
1). This scenario is the most costly of the three examined, and thus 
the results presented here show the upper bound limit anticipated.

                          Table 6-2--First Year Compliance Costs by Establishment Size
----------------------------------------------------------------------------------------------------------------
                                                                                                     Cost per
                                                                                                   establishment
                                                            Cost      Percent of     Cost per      as a percent
                     Size category                        ($1000)     total cost   establishment    of average
                                                                                                      revenue
                                                                                                     (percent)
----------------------------------------------------------------------------------------------------------------
0.....................................................          300          0.2              54            0.05
1-4...................................................        2,881          1.6             205            0.21
5-9...................................................        3,317          1.8             533            0.19
10-19.................................................        6,305          3.4           1,036            0.20
20-99.................................................       37,467         20.5           2,522            0.23
100-499...............................................       56,949         31.1           4,457            0.24
> 500.................................................       75,719         41.4           5,580            0.23
                                                       ---------------------------------------------------------
    Total.............................................      182,938        100.0           2,500            0.23
----------------------------------------------------------------------------------------------------------------


                           Table 6-3--Recurring Compliance Costs by Establishment Size
----------------------------------------------------------------------------------------------------------------
                                                                                                     Cost per
                                                                                                   establishment
                                                            Cost      Percent of     Cost per      as a percent
                     Size category                        ($1000)     total cost   establishment    of average
                                                                                                      revenue
                                                                                                     (percent)
----------------------------------------------------------------------------------------------------------------
0.....................................................            0          0.0               0            0.00
1-4...................................................        2,128          1.2             151            0.15
5-9...................................................        2,984          1.7             480            0.17
10-19.................................................        5,978          3.3             982            0.19
20-99.................................................       36,671         20.5           2,468            0.23
100-499...............................................       56,264         31.4           4,403            0.24
> 500.................................................       74,992         41.9           5,526            0.22
                                                       ---------------------------------------------------------

[[Page 81235]]

 
    Total.............................................      179,018        100.0           2,446            0.22
----------------------------------------------------------------------------------------------------------------


                          Table 6-4--Annualized Compliance Costs by Establishment Size
----------------------------------------------------------------------------------------------------------------
                                                                                                     Cost per
                                                                                                   establishment
                                                            Cost      Percent of     Cost per      as a percent
                     Size category                        ($1000)     total cost   establishment    of average
                                                                                                      revenue
                                                                                                     (percent)
----------------------------------------------------------------------------------------------------------------
0.....................................................           40          0.0               7            0.01
1-4...................................................        2,228          1.2             158            0.16
5-9...................................................        3,029          1.7             487            0.17
10-19.................................................        6,022          3.4             989            0.20
20-99.................................................       36,777         20.5           2,476            0.23
100-499...............................................       56,355         31.4           4,411            0.24
> 500.................................................       75,088         41.8           5,533            0.22
                                                       ---------------------------------------------------------
    Total.............................................      179,539        100.0           2,454            0.22
----------------------------------------------------------------------------------------------------------------

    First year costs range from $54 for entities where the owner has no 
employees in addition to him- or herself (a 0 employee establishment), 
to $5,600 per establishment for entities with more than 500 employees 
(Table 6-2). Annual recurring costs are somewhat smaller, ranging from 
$151 per year per establishment in the 1 to 4 employee class, to $5,500 
in the 500 employee or more size class (Table 6-3). Over ten years, the 
rule is projected to cost establishments an annual average ranging from 
$7 for 0 employee establishments to $5,500 for 500+ employee 
establishments per year when costs are annualized using a 7 percent 
real interest rate (Table 6-4).
    Total costs and cost per establishment are consistently 
proportionate to establishment size as measured by either revenues or 
employment regardless of cost type (first year, recurring, or 
annualized). For example, employers with more than 500 employees are 
projected to incur 41 percent of total first year costs, which is 
proportionate to their share of the industry employment and revenues 
(see Table 6-2). In addition, the ratio of compliance costs to average 
establishment revenue is relatively similar regardless of establishment 
size. For example, Table 6-4 shows that average annualized compliance 
costs vary between 0.16 and 0.24 percent of average annual revenues for 
all establishments ranging from the 1 to 4 employee class to the 500+ 
employee class.
    In summary, first-year compliance costs do not exceed $2,600 for 
establishments with fewer than 100 employees, and do not exceed $5,600 
for those with more than 100 employees; first-year compliance costs do 
not exceed 0.24 percent of establishment revenue for all establishment 
size classes; average annualized compliance costs do not exceed $2,600 
for establishments with fewer than 100 employees, and do not exceed 
$5,600 for those with more than 100 employees; and average annualized 
compliance costs do not exceed 0.24 percent of establishment revenue 
regardless of establishment size.
    Impacts to small businesses are unlikely to vary significantly over 
time. Existing firms incur regulatory familiarization costs once, and 
these costs do not impose a significant economic burden. Recurring 
costs such as overtime and travel pay (transfer payments in the E.O. 
12866 analysis) are proportionate to firm size. These costs will 
increase if the firm grows, but in proportion to the firm's ability to 
bear them. As new firms enter the market, they will bear the same 
costs: one-time regulatory familiarization costs, and recurring 
payments for overtime and travel. Again, recurring costs will be 
proportionate to firm size. Therefore, if the proposed revisions to the 
companionship regulations are affordable for existing firms, they will 
be affordable to new market entrants as well.
    There are limitations to this analysis. It is assumed that the 
distribution of employees by establishment size has not changed 
significantly since 2002 (although the number of employees has 
increased significantly). We also assume that the occupations of HHA 
and PCA are distributed by establishment size similarly to other 
occupations in the HHCS and SEPD industries. With the exponential 
growth in these industries, it is possible that the distribution of 
workers by employment size class has shifted. In addition, the cost 
analysis conducted in this report is unable to capture the difference 
in costs for urban versus rural home health care agencies.
Differing Compliance and Reporting Requirements for Small Entities
    This NPRM provides no differing compliance requirements and 
reporting requirements for small entities. The Department has strived 
to minimize respondent recordkeeping burden by requiring no order or 
specific form of records that are required under the FLSA and its 
corresponding regulations. Moreover, employers would normally maintain 
the records under usual or customary business practices.
Least Burdensome Option or Explanation Required
    The Department believes it has chosen the most effective option 
that updates and clarifies the rule and which results in the least 
burden. Among the options considered by the Department, the least 
restrictive option was taking no

[[Page 81236]]

regulatory action and the most restrictive was defining companionship 
services as fellowship and protection of the aged or infirm individual 
accompanied by a five percent allowance for assistance with ADLs only. 
Taking no regulatory action does not address the Department's concerns 
discussed above under Need for Regulation. The Department found the 
most restrictive option to be overly burdensome on business in general 
and specifically small business.
    Pursuant to section 603(c) of the RFA, the following alternatives 
are to be addressed:
    i. Differing compliance or reporting requirements that take into 
account the resources available to small entities. The FLSA creates a 
level playing field for businesses by setting a floor below which 
employers may not pay their employees. As discussed elsewhere in this 
IRFA, the annualized cost of the proposed rule is estimated to be $158 
for an employer with 1-4 employees and $5533 for an employer with more 
than 500 employees. See Table 6-4. To establish differing compliance or 
reporting requirements for small businesses would undermine this 
important purpose of the FLSA and appears to not be necessary given the 
small annualized cost of the rule. The Department makes available a 
variety of resources to employers for understanding their obligations 
and achieving compliance. Therefore the Department declines to 
establish differing compliance or reporting requirements for small 
businesses.
    ii. The clarification, consolidation, or simplification of 
compliance and reporting requirements for small entities. This proposed 
rule simplifies and clarifies compliance requirements for employers of 
workers performing companionship services. The proposed rule imposes no 
reporting requirements. The recordkeeping requirements imposed by this 
proposed rule are necessary for the Department and domestic service 
employees to determine the employer's compliance with the law. The 
recordkeeping provisions apply generally to all businesses--large and 
small--covered by the FLSA, no rational basis exists for creating an 
exemption from compliance and recordkeeping requirements for small 
businesses in the HHCS and SEPD industries. The Department makes 
available a variety of resources to employers for understanding their 
obligations and achieving compliance.
    iii. The use of performance rather than design standards. Under the 
proposed rule, the employer may achieve compliance through a variety of 
means. The employer may elect to provide companionship services as 
defined in the proposed rule and maintain the exemption; or hire 
additional workers and/or spread employment over the employer's 
existing workforce to ensure employees do not work more than 40 hours 
in a workweek, and/or pay employees time and one-half for time worked 
over 40 hours in a workweek. In addition, the FLSA recordkeeping 
provisions require no particular order or form of records to be 
maintained so employers may create and maintain records in the manner 
best fitting their situation. The Department makes available a variety 
of resources to employers for understanding their obligations and 
achieving compliance.
    iv. An exemption from coverage of the rule, or any part thereof, 
for such small entities. Creating an exemption from coverage of this 
rule for businesses with as many as 500 employees, those defined as 
small businesses under SBA's size standards, is inconsistent with 
Congressional intent in expanding FLSA coverage to domestic service 
workers and its creation of the companionship services exemption.
5. Identification, to the Extent Practicable, of all Relevant Federal 
Rules That May Duplicate, Overlap, or Conflict With the Proposed rule
    The Department is not aware of any federal rules that duplicate, 
overlap, or conflict with this NPRM.
Unfunded Mandates
    Title II of the Unfunded Mandates Reform Act of 1995 (Pub. L.104-4; 
UMRA) establishes requirements for Federal agencies to assess the 
effects of their regulatory actions on State, local, and tribal 
governments as well as on the private sector. Under Section 202(a)(1) 
of UMRA, the Department must generally prepare a written statement, 
including a cost-benefit analysis, for proposed and final regulations 
that ``includes any Federal mandate that may result in the expenditure 
by State, local, and tribal governments, in the aggregate or by the 
private sector'' in excess of $100 million per year.
    State, local and tribal government entities are within the scope of 
the regulated community for this proposed regulation to the extent 
government agencies employ HHAs and PCAs to provide home health care 
services, and claim these employees are exempt from minimum wage and 
overtime requirements because of the companionship services exemption 
under the FLSA. State governments might also be affected by the rule 
because Medicaid payments for such services might increase as a result 
of these proposed revisions to the exemption.
    The Department has determined that this rule contains a Federal 
mandate that is likely to result in expenditures of $100 million or 
more for State, local, and tribal governments, in the aggregate, or the 
private sector in any one year. Total costs are projected to exceed 
$100 million in the first year of the rule and in average annualized 
costs (see Tables 4-1 and 4-2) under two of the three scenarios 
examined.
    The Department has determined that the rule does not significantly 
affect a substantial number of small business entities that provide 
home health care services. Although it has not estimated the number of 
government agencies that provide similar services, there is 
insufficient basis for expecting that costs and impacts to government 
agencies that provide these services will differ significantly from 
private business. Identified compliance costs consist of a one-time 
cost for regulatory familiarization, and potential additional costs per 
employee should the agency choose to pay overtime rather than increase 
employment to cover hours worked in excess of 40 hours per week by its 
employees. The data show that a relatively small percent of employees 
in these professions work more than 40 hours per week for the same 
employer. The Department expects that compliance costs for government 
agencies will be a similar magnitude as for private businesses.
    Finally, on average, about 75 percent of home health care costs are 
paid by Medicare and Medicaid, and the government agencies spent about 
$58.1 billion on home health care programs in 2009. The Department 
projects the average first year cost of the rule ranges from $43 to 
$182 million depending on how home health care agencies respond to 
overtime requirements. If Medicare and Medicaid continue to pay 75 
percent of home health care costs, roughly $32 million to $137 million 
in costs might be incurred by these government agencies. These costs 
compose 0.06 to 0.24 percent of total HHS and state outlays for home 
health care programs.

VIII. Executive Order 13132 (Federalism)

    The proposed rule does not have federalism implications as outlined 
in Executive Order 13132 regarding federalism. The proposed rule does 
not have substantial direct effects on the states, on the relationship 
between the national government and the states, or on the distribution 
of power and

[[Page 81237]]

responsibilities among the various levels of government.

IX. Executive Order 13175, Indian Tribal Governments

    This proposed rule was reviewed under the terms of Executive Order 
13175 and determined not to have ``tribal implications.'' The proposed 
rule does not have ``substantial direct effects on one or more Indian 
tribes, on the relationship between the Federal government and Indian 
tribes, or on the distribution of power and responsibilities between 
the Federal government and Indian tribes.'' As a result, no tribal 
summary impact statement has been prepared.

X. Effects on Families

    The undersigned hereby certifies that this proposed rule will not 
adversely affect the well-being of families, as discussed under section 
654 of the Treasury and General Government Appropriations Act, 1999.

XI. Executive Order 13045, Protection of Children

    Executive Order 13045, dated April 23, 1997 (62 FR 19885), applies 
to any rule that (1) is determined to be ``economically significant'' 
as defined in Executive Order 12866, and (2) concerns an environmental 
health or safety risk that the promulgating agency has reason to 
believe may have a disproportionate effect on children. This proposal 
is not subject to Executive Order 13045 because it has no environmental 
health or safety risks that may disproportionately affect children.

XII. Environmental Impact Assessment

    A review of this proposal in accordance with the requirements of 
the National Environmental Policy Act of 1969 (NEPA), 42 U.S.C. 4321 et 
seq.; the regulations of the Council on Environmental Quality, 40 CFR 
part 1500 et seq.; and the Departmental NEPA procedures, 29 CFR part 
11, indicates that the proposed rule will not have a significant impact 
on the quality of the human environment. As a result, there is no 
corresponding environmental assessment or an environmental impact 
statement.

XIII. Executive Order 13211, Energy Supply

    This proposed rule is not subject to Executive Order 13211. It will 
not have a significant adverse effect on the supply, distribution, or 
use of energy.

XIV. Executive Order 12630, Constitutionally Protected Property Rights

    This proposal is not subject to Executive Order 12630, because it 
does not involve implementation of a policy ``that has takings 
implications'' or that could impose limitations on private property 
use.

XV. Executive Order 12988, Civil Justice Reform Analysis

    This proposed rule was drafted and reviewed in accordance with 
Executive Order 12988 and will not unduly burden the Federal court 
system. The proposed rule was: (1) Reviewed to eliminate drafting 
errors and ambiguities; (2) written to minimize litigation; and (3) 
written to provide a clear legal standard for affected conduct and to 
promote burden reduction.

                                 Table A-1--Public Matching Registries by State
----------------------------------------------------------------------------------------------------------------
                                  Matching                                                           Consumer/
            State                 Service            Name        Maintained by     Eligibility    provider count
----------------------------------------------------------------------------------------------------------------
AR..........................  State-wide.....  Arkansas Direct  Arkansas         All consumers..         (-/669)
                                                Service Worker   Department of
                                                Registry.        Human
                                                                 Services,
                                                                 Division of
                                                                 Aging and
                                                                 Adult Services.
CA..........................  State-wide.....  In-Home          In-Home          Free for IHSS             (-/-)
                                                Supportive       Supportive       participants,
                                                Services,        Services         small fee for
                                                Regional         Public           private pay
                                                Registries.      Authority.       consumers.
CT..........................  State-wide.....  Rewarding Work   Connecticut      Free for            (720/2,347)
                                                Resources.       Department of    individuals
                                                                 Disability       receiving
                                                                 Services and     services from
                                                                 Rewarding Work   CT Dept of
                                                                 Resources, Inc.  Developmental
                                                                                  Services
                                                                                  (DDS), small
                                                                                  fee for
                                                                                  private pay
                                                                                  consumers.
FL..........................  State-wide.....  Florida          Delmarva         Free for all              (-/-)
                                                Developmental    Foundation,      consumers.
                                                Disabilities     the State of
                                                Resources-       Florida Agency
                                                Provider         for Health
                                                Search.          Care
                                                                 Administration
                                                                 , and the
                                                                 Agency for
                                                                 Persons with
                                                                 Disabilities.
ID..........................  Regional.......  Idaho            CIL-Disability   Free for all              (-/-)
                                                Disability       Action Center.   consumers.
                                                Action Center
                                                (registry Web
                                                site).
IL..........................  Regional.......  Advocates for    CIL-Advocates    Free for all              (-/-)
                                                Access Center    for Access.      consumers.
                                                for
                                                Independent
                                                Living
                                                (registry Web
                                                site).
                                               Lake County      CIL-Lake County  Free for all              (-/-)
                                                Center for                        consumers.
                                                Independent
                                                Living
                                                (registry Web
                                                site).
                                               LIFE Center for  CIL-LIFE.......  Free for all              (-/-)
                                                Independent                       consumers.
                                                Living
                                                (registry Web
                                                site).
                                               Southern         CIL-Southern     Free for all              (-/-)
                                                Illinois         Illinois.        consumers.
                                                Center for
                                                Independent
                                                Living
                                                (registry Web
                                                site).
KS..........................  Regional.......  Kansas           CIL-Kansas       Free for all              (-/-)
                                                Independent      Independent      consumers.
                                                Living           Living
                                                Resource         Resource
                                                Center-          Center.
                                                Registry of
                                                PAS.
ME..........................  State-wide.....  Alpha One        CIL-Alpha One..  Free for all              (-/-)
                                                Center for                        consumers.
                                                Independent
                                                Living-PCA
                                                Registry.

[[Page 81238]]

 
MA..........................  State-wide.....  Massachusetts    PCA Workforce    Free for          (2,133/8,800)
                                                PCA Directory.   Council and      MassHealth PCA
                                                                 Rewarding Work   consumers,
                                                                 Resources, Inc.  small fee for
                                                                                  private pay
                                                                                  consumers.
MI..........................  State-wide.....  Michigan         CREATED BY:      Free for                  (-/-)
                                                Quality          Michigan         Medicaid Home
                                                Community Care   Department of    Help consumers.
                                                Council          Community
                                                (registry Web    Health and Tri-
                                                site).           Area Aging
                                                                 Consortium.
NH..........................  State-wide.....  Granite State    CIL-Granite      Free for all              (-/-)
                                                Independent      State            consumers.
                                                Living-          Independent
                                                Personal Care    Living.
                                                Attendant
                                                Registry.
NJ..........................  State-wide.....  Rewarding Work   New Jersey       Small fee for       (450/2,486)
                                                Resources.       Division of      all consumers.
                                                                 Disability
                                                                 Services and
                                                                 Rewarding Work
                                                                 Resources, Inc.
NY..........................  Regional.......  AIM Independent  CIL-AIM          Free for all              (-/-)
                                                Living Center-   Independent      consumers.
                                                Personal         Living Center.
                                                Assistants
                                                Finder's Help
                                                Page.
ND..........................  State-wide.....  North Dakota     Minot State      Free for all              (-/-)
                                                Personal         University.      consumers.
                                                Assistance
                                                Registry.
OH..........................  Regional.......  Ohio Home Care   Ohio Department  Free for all              (-/-)
                                                Program          of Job and       consumers.
                                                Provider         Family
                                                Directory.       Services.
OR..........................  State-wide.....  Oregon Home      Oregon Home      Free for all              (-/-)
                                                Care             Care             consumers.
                                                Commission       Commission.
                                                Online
                                                Registry and
                                                Referral
                                                System.
PA..........................  Regional.......  Tri-County       CIL-Tri-County   Free for all              (-/-)
                                                Patriots for     Patriots.        consumers.
                                                Independent
                                                Living-Direct
                                                Care Workers'
                                                Registry.
RI..........................  State-wide.....  Rewarding Work   Rhode Island     Free for            (535/1,422)
                                                Resources.       Department of    consumers in
                                                                 Human Services   the following
                                                                 and Rewarding    programs:
                                                                 Work             Personal
                                                                 Resources, Inc.  Choice,
                                                                                  Respite, or
                                                                                  PASS, small
                                                                                  fee for
                                                                                  private pay
                                                                                  consumers.
SC..........................  State-wide.....  South Carolina   South Carolina   Free for all              (-/-)
                                                Personal Care    Department of    consumers.
                                                Worker Listing.  Health and
                                                                 Human
                                                                 services, and
                                                                 the Lieutenant
                                                                 Governor's
                                                                 Office on
                                                                 Aging.
VT..........................  State-wide.....  Rewarding Work   Vermont          Free for all        (990/1,333)
                                                Resources.       Department of    consumers.
                                                                 Disabilities,
                                                                 Aging and
                                                                 Independent
                                                                 Living, and
                                                                 Rewarding Work
                                                                 Resources, Inc.
WA..........................  State-wide.....  Washington Home  Washington Home  Free for                  (-/-)
                                                Care Referral    Care Quality     publicly-
                                                Registry.        Authority.       funded in-home
                                                                                  service
                                                                                  consumers.
WI..........................  Regional.......  Wisconsin        Wisconsin        Free for all              (-/-)
                                                Quality Home     Quality Home     consumers.
                                                Care             Care
                                                Commission-      Commission.
                                                Care Registry.
                             -----------------------------------------------------------------------------------
  Total.....................  ...............  ...............  ...............  ...............  (4,828/17,057)
----------------------------------------------------------------------------------------------------------------
Source: PHI, 2011a.

 Appendix B: Payment of Family Members To Provide Care

[[Page 81239]]



                                                                      Table B-1--Payment of Family Members To Provide Care
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
                       Program                                          Services family members can be paid to provide                     Types of family members who cannot be paid to provide
-----------------------------------------------------------------------------------------------------------------------------------------                          care
                                                                                                                                         -------------------------------------------------------
                                                                      Personal     Homemaker/    Any service                                              Parents/
            Type [a]                   Name [b]       Respite care      care          chore        needed         Other         None         Spouses    guardians of     Primary        Other
                                                                                                                                                           minors      caregivers
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Alabama
    FC..........................  Alabama CARES.....  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
    MC..........................  Elderly & Disabled  ............            x             x   ............  ............  ............            x             x   ............  ............
                                   Waiver.
Alaska
    FC..........................  NFCSP.............  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
    SC..........................  Innovative Respite  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
Arizona
    FC..........................  NFCSP.............            x   ............  ............  ............  ............  ............  ............  ............  ............  ............
    MC..........................  AZ Long-Term Care             x             x   ............  ............  ............  ............            x             x   ............  ............
                                   System (ALTCS).
    SC..........................  Non-Medical HCBS..  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
Arkansas
    FC..........................  Caring for the      ............            x   ............  ............  ............  ............            x             x   ............  ............
                                   Caregiver
                                   Arkansas
                                   Caregivers.
    MC..........................  ElderChoices                  x   ............            x   ............  ............  ............            x             x   ............  ............
                                   Medicaid Waiver.
California
    FC..........................  NFCSP.............            x             x   ............            x   ............  ............  ............  ............  ............  ............
    MC..........................  Multipurpose        ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Senior Services
                                   Program (MSSP).
    SC..........................  Adult Day Health    ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Care Program.
    SC..........................  Alzheimer's Day     ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Care Resource
                                   Center (ADCRC).
    SC..........................  Caregiver Resource            x   ............  ............  ............  ............  ............  ............  ............  ............  ............
                                   Centers (CRCs).
    SC..........................  In-Home Supportive            x             x   ............  ............  ............  ............            x   ............  ............            x
                                   Services (IHSS).
Colorado
    FC..........................  NFCSP HCBS for the  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
    MC..........................  Elderly, Blind and  ............            x   ............  ............  ............  ............            x   ............  ............  ............
                                   Disabled.
Connecticut
    FC..........................  NFCSP.............  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
    MC..........................  Home Care Program   ............            x   ............  ............  ............  ............            x             x   ............  ............
                                   for Elders.
    SC..........................  Statewide Respite   ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Care Program.
    SC..........................  Personal Care       ............            x             x   ............  ............  ............            x   ............  ............            x
                                   Assistance State-
                                   Funded Pilot
                                   Program.
Delaware
    FC..........................  CARE Delaware.....  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
    MC..........................  Elderly & Disabled  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Waiver.
District of Columbia
    FC..........................  NFCSP.............            x             x   ............  ............  ............  ............  ............  ............            x   ............
    MC..........................  Elderly & Physical            x             x   ............  ............  ............  ............            x             x   ............            x
                                   Disabilities
                                   Waiver.
Florida
    FC..........................  NFCSP.............            x   ............            x   ............  ............  ............  ............  ............  ............  ............
    MC..........................  Aged & Disabled               x             x   ............  ............  ............  ............  ............            x   ............  ............
                                   Adult Medicaid
                                   HCBS Waiver
                                   Respite for
                                   Elders.
    SC..........................  Living in Everyday  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Families (RELIEF).
    SC..........................  Home Care for the             x             x   ............            x   ............  ............  ............  ............  ............  ............
                                   Elderly.
    SC..........................  Community Care for  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   the Elderly.
    SC..........................  Alzheimer's         ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Disease
                                   Initiative.
Georgia
    FC..........................  NFCSP.............            x             x   ............  ............  ............  ............  ............  ............  ............            x
    MC..........................  Community Care      ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Services Program
                                   (CCSP).

[[Page 81240]]

 
Hawaii
    FC..........................  NFCSP.............  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
    MC..........................  Nursing Home        ............            x   ............  ............            x   ............            x             x   ............  ............
                                   Without Walls.
    SC..........................  Kupuna Care.......  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
    Idaho.......................  ..................  ............  ............  ............  ............  ............  ............  ............  ............  ............  ............
    FC..........................  NFCSP.............  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
    MC..........................  HCBS Aged &         ............            x   ............  ............  ............  ............            x             x   ............  ............
                                   Disabled Waiver.
    SC..........................  Senior Services     ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Act, Respite
                                   Program.
Illinois
    FC..........................  NFCSP.............            x             x   ............  ............  ............  ............  ............  ............            x   ............
    MC..........................  Community Care      ............  ............            x   ............  ............  ............            x   ............            x             x
                                   Program (CCP).
    MC..........................  Home Services       ............            x   ............  ............  ............  ............            x             x   ............  ............
                                   Program.
Indiana
    FC..........................  Caring and                    x   ............  ............  ............  ............  ............  ............  ............  ............  ............
                                   Compassion.
    MC..........................  Aged & Disabled     ............            x   ............  ............  ............  ............            x             x   ............  ............
                                   Medicaid Waiver.
    SC..........................  CHOICE............  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
    Iowa........................  ..................  ............  ............  ............  ............  ............  ............  ............  ............  ............  ............
    FC..........................  Iowa Family                   x             x   ............  ............  ............  ............  ............  ............  ............  ............
                                   Caregiver.
    MC..........................  Elderly Waiver....  ............            x   ............  ............  ............  ............            x             x   ............  ............
Kansas
    FC..........................  NFCSP.............  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
    MC..........................  Home & Community-             x             x   ............  ............            x   ............            x   ............  ............  ............
                                   Based Frail Elder
                                   Waiver.
    SC..........................  Senior Care Act     ............            x             x   ............  ............  ............            x   ............  ............  ............
                                   Program.
Kentucky
    FC..........................  NFCSP.............            x   ............  ............  ............            x   ............            x   ............  ............  ............
    SC..........................  Adult Day/                    x             x   ............  ............  ............  ............  ............  ............  ............  ............
                                   Alzheimer's
                                   Respite.
Louisiana
    FC..........................  NFCSP.............  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
    MC..........................  Medicaid Home and   ............            x   ............  ............  ............  ............            x             x   ............            x
                                   Community-Based
                                   Waiver.
Maine
    FC..........................  Family Caregiver              x   ............  ............  ............  ............  ............            x   ............  ............  ............
                                   Program.
    MC..........................  MaineCare.........            x             x   ............  ............  ............  ............            x   ............  ............  ............
    SC..........................  Home-Based Care...            x             x   ............  ............  ............  ............  ............  ............  ............            x
    SC..........................  Partners in Caring            x             x   ............  ............  ............  ............  ............  ............  ............  ............
Maryland
    FC..........................  NFCSP.............            x   ............  ............  ............  ............  ............  ............  ............  ............  ............
    MC..........................  Medicaid Waiver               x             x   ............  ............  ............  ............            x   ............  ............  ............
                                   for Older Adults.
    SC..........................  Respite for         ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Caregivers of
                                   Adults with
                                   Functional
                                   Disabilities.
Massachusetts
    FC..........................  NFCSP.............  ............            x             x   ............  ............  ............            x   ............  ............  ............
    MC..........................  Home and Community- ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Based Waiver.
    SC..........................  Home Care Program.  ............            x             x   ............  ............  ............            x             x   ............  ............
Michigan
    FC..........................  NFCSP.............  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
    MC..........................  MI Choice.........  ............            x             x   ............  ............  ............            x   ............  ............  ............
    SC..........................  State/Escheat       ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Respite.
    SC..........................  Caregiver Respite   ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Program.
Minnesota
    FC..........................  NFCSP.............            x             x   ............  ............  ............  ............  ............  ............            x   ............

[[Page 81241]]

 
    MC..........................  Elderly Waiver....  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
    SC..........................  Alternative Care              x             x   ............  ............  ............  ............            x             x   ............  ............
                                   Program.
Mississippi
    FC..........................  NFCSP.............  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
    MC..........................  Elderly & Disabled  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Waiver.
Missouri
    FC..........................  NFCSP.............            x   ............  ............  ............  ............  ............  ............  ............            x   ............
    MC..........................  Aged & Disabled     ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Waiver.
Montana
    FC..........................  Family Caregiving   ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Support.
    MC..........................  HCBS Program for    ............            x   ............            x   ............  ............            x             x   ............  ............
                                   Elderly &
                                   Physically
                                   Disabled.
Nebraska
    FC..........................  NFCSP.............            x   ............  ............  ............  ............  ............            x             x   ............  ............
    MC..........................  Aged & Disabled               x   ............            x   ............            x   ............            x             x             x             x
                                   Waiver.
    SC..........................  Respite Subsidy               x   ............  ............  ............  ............  ............            x             x             x   ............
                                   Program Across
                                   the Lifespan.
Nevada
    FC..........................  NFCSP.............  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
    MC..........................  Community Home-     ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Based Initiatives
                                   Program.
    SC..........................  Independent Living  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Grant.
    SC..........................  Community-Based     ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Care Care-.
                                  giving Training...
New Hampshire
    FC..........................  NFCSP.............            x             x             x   ............  ............  ............  ............  ............            x   ............
    MC..........................  Elderly and                   x             x   ............  ............  ............  ............            x             x   ............  ............
                                   Chronically Ill
                                   Waiver.
New Jersey
    FC..........................  NFCSP.............  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
    MC..........................  Community Care      ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Program for the
                                   Elderly &
                                   Disabled.
    MC..........................  Enhanced Community  ............            x             x   ............            x   ............            x             x   ............            x
                                   Options (ECO).
    SC..........................  New Jersey          ............  ............  ............            x   ............  ............  ............  ............
                                   Statewide Respite
                                   Care Program
                                   (SRCP).
    SC..........................  Adult Day Services  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Program for
                                   Persons with
                                   Alzheimer's
                                   Disease or
                                   Related Dementias.
    SC..........................  Jersey Assistance   ............            x             x   ............  ............  ............            x             x   ............            x
                                   for Community
                                   Caregiving.
New Mexico
    FC..........................  NFCSP.............            x             x   ............  ............  ............  ............            x   ............  ............  ............
    MC..........................  Disabled & Elderly  ............            x   ............  ............  ............  ............            x             x   ............  ............
                                   HCBS Waiver.
New York
    FC..........................  Eldercare Family    ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Support Program
                                   (EFSP).
    SC..........................  Respite Program...            x   ............  ............  ............  ............  ............  ............  ............  ............  ............
North Carolina
    FC..........................  NFCSP.............            x             x   ............  ............  ............  ............  ............  ............  ............  ............
    MC..........................  Community                     x             x             x   ............  ............  ............            x   ............  ............  ............
                                   Alternatives
                                   Program for
                                   Disabled Adults
                                   (CAP/DA).
    SC..........................  Respite Care                  x             x             x   ............  ............  ............  ............  ............  ............            x
                                   Program.
North Dakota
    FC..........................  NFCSP.............            x   ............  ............  ............  ............  ............  ............  ............  ............  ............
    MC..........................  Aged & Disabled               x             x             x   ............  ............  ............            x             x   ............  ............
                                   Waiver.
    SC..........................  Family Home Care..            x             x   ............  ............  ............  ............  ............            x   ............  ............
    Ohio........................  ..................  ............  ............  ............  ............  ............  ............  ............  ............  ............  ............
    FC..........................  NFCSP.............            x             x   ............  ............  ............  ............  ............  ............  ............  ............
    MC..........................  PASSPORT HCBS       ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Waiver Program.
    SC..........................  Alzheimer's                   x   ............  ............  ............  ............  ............  ............  ............  ............  ............
                                   Respite Program.
Oklahoma
    FC..........................  NFCSP.............            x   ............  ............  ............  ............  ............  ............  ............            x             x

[[Page 81242]]

 
    MC..........................  Advantage Program.  ............            x   ............  ............  ............  ............            x             x   ............  ............
    SC..........................  Respite Resource              x   ............  ............  ............  ............  ............  ............  ............            x   ............
                                   Network.
Oregon                            ..................  ............  ............  ............  ............  ............  ............  ............  ............  ............  ............
    FC..........................  NFCSP.............  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
    MC..........................  Medicaid Waiver/In-           x             x   ............  ............            x   ............  ............  ............  ............  ............
                                   Home Care.
    SC..........................  Lifespan Respite    ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Care Networks.
Pennsylvania
    FC..........................  NFCSP.............  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
    MC..........................  PA Department of    ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Aging 60+
                                   Medicaid Waiver.
    SC..........................  PA FCSP...........  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
    SC..........................  OPTIONS...........  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
    SC..........................  BRIDGE............  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
Rhode Island
    FC..........................  Partners in CaRIng            x   ............  ............  ............  ............  ............            x   ............            x   ............
    MC..........................  Home & Community-   ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Based Waiver.
South Carolina
    FC..........................  NFCSP.............            x             x   ............  ............  ............  ............            x             x             x   ............
    MC..........................  Elderly/Disabled    ............            x   ............  ............  ............  ............            x             x             x   ............
                                   Home and
                                   Community-Based
                                   Waiver.
South Dakota
    FC..........................  Caregiver Program.            x   ............  ............  ............  ............  ............            x             x   ............            x
    MC..........................  Home & Community-   ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Based Elderly
                                   Waiver.
Tennessee
    FC..........................  NFCSP.............  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
    SC..........................  Home & Community-   ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Based Long-Term
                                   Care for Non-
                                   Medicaid Elderly
                                   & Adults with
                                   Disabilities.
Texas
    FC..........................  NFCSP.............            x   ............  ............  ............  ............  ............            x   ............            x   ............
    MC..........................  Community-Based               x             x   ............  ............  ............  ............            x   ............  ............  ............
                                   Alternatives.
    SC..........................  Respite Care        ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Program.
    SC..........................  In-Home & Family    ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Support Program.
Utah
    FC..........................  Caregiver Support             x   ............  ............  ............  ............  ............            x   ............  ............  ............
                                   Program.
    MC..........................  Medicaid Aging                x             x   ............  ............  ............  ............            x   ............  ............  ............
                                   Waiver.
    SC..........................  Home & Community-             x             x   ............            x   ............  ............            x   ............  ............  ............
                                   Based
                                   Alternatives.
Vermont
    FC..........................  NFCSP.............            x   ............  ............  ............  ............  ............  ............  ............  ............  ............
    MC..........................  Home-Based                    x             x   ............  ............  ............  ............            x   ............  ............  ............
                                   Medicaid Waiver.
Virginia
    FC..........................  NFCSP.............  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
    MC..........................  Elderly & Disabled            x             x   ............  ............  ............  ............            x             x   ............  ............
                                   Waiver.
    SC..........................  Caregiver Grant               x             x   ............            x   ............  ............  ............  ............  ............  ............
                                   Program.
    SC..........................  Respite Care        ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Initiative Grant.
    SC..........................  Respite Care Grant  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Program 2003.
Washington
    FC..........................  NFCSP.............  ............  ............  ............  ............  ............            x   ............  ............  ............  ............
    MC..........................  Community Options   ............            x   ............  ............  ............  ............            x             x   ............  ............
                                   Program Entry
                                   System (COPES).
    SC..........................  WA FCSP...........  ............  ............  ............  ............  ............            x   ............  ............  ............  ............

[[Page 81243]]

 
    SC..........................  Respite Care        ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Services.
West Virginia
    FC..........................  Family Caregiver    ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Support.
    MC..........................  Medicaid Aged &     ............            x   ............  ............  ............  ............            x   ............  ............  ............
                                   Disabled Waiver.
Wisconsin
    FC..........................  NFCSP Community               x             x   ............  ............  ............  ............  ............  ............  ............  ............
                                   Options.
    MC..........................  Program Waiver                x             x             x   ............            x   ............            x             x   ............  ............
                                   (COP-W).
    SC..........................  Alzheimer's Family            x             x   ............  ............  ............  ............  ............  ............  ............  ............
                                   & Caregiver
                                   Support Program.
Wyoming
    FC..........................  NFCSP.............            x   ............  ............  ............  ............  ............  ............  ............  ............  ............
    MC..........................  HCBS Waiver for     ............            x             x   ............  ............  ............            x             x   ............  ............
                                   Elderly &
                                   Physically
                                   Disabled.
    SC..........................  Community Based In- ............  ............  ............  ............  ............            x   ............  ............  ............  ............
                                   Home Services
                                   Program (CBIHS).
------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
[a] Program Type: FC = National Family Caregiver Support Program; MC = Aged/Disabled Medicaid HCBS Waiver; SC = State-Funded Program
[b] Program Name: NFCSP= National Family Caregiver Support Program; HCBS = Home and Community-Based Services Sources: Feinberg et al., 2004; Feinberg & Newman, 2005.


[[Page 81244]]

List of Subjects in 29 CFR Part 552

    Domestic service workers, Companionship, Employment, Labor, Minimum 
wages, Overtime pay, Reporting and recordkeeping requirements, Wages.

    Signed at Washington, DC on this 16th day of December.
Nancy J. Leppink,
Deputy Administrator, Wage and Hour Division.
    For the reasons discussed in the preamble, the Wage and Hour 
Division proposes to amend 29 CFR part 552 as follows:

PART 552--APPLICATION OF THE FAIR LABOR STANDARDS ACT TO DOMESTIC 
SERVICE

    1. The authority citation for part 552 continues to read as 
follows:

    Authority:  29 U.S.C. 213(a)(15), (b)(21), 88 stat. 62; Sec. 
29(b) of the Fair Labor Standards Act Amendments of 1974 (Pub. L. 
93-259, 88 Stat. 76).
    2. Revise Sec.  552.3 to read as follows:


Sec.  552.3  Domestic Service Employment.

    The term ``domestic service employment'' means services of a 
household nature performed by an employee in or about a private home 
(permanent or temporary). The term includes services performed by 
employees such as companions, babysitters, cooks, waiters, butlers, 
valets, maids, housekeepers, nannies, nurses, janitors, laundresses, 
caretakers, handymen, gardeners, home health aides, personal care 
aides, and chauffeurs of automobiles for family use. This listing is 
illustrative and not exhaustive.
    3. Revise Sec.  552.6 to read as follows:


Sec.  552.6  Companionship services for the aged or infirm.

    (a) As used in section 13(a)(15) of the Act, the term 
``companionship services'' means the provision of fellowship and 
protection for a person who, because of advanced age or physical or 
mental infirmity, is unable to care for themselves. The provision of 
fellowship means to engage the person in social, physical, and mental 
activities, including conversation, reading, games, crafts, walks, 
errands, appointments, and social events. The provision of protection 
means to be present with the person in their home or to accompany the 
person when outside of the home to monitor the person's safety and 
well-being.
    (b) The term ``companionship services'' may include intimate 
personal care services that are incidental to the provision of 
fellowship and protection for the aged or infirm person. Intimate 
personal care services that are incidental to the provision of 
fellowship and protection for the aged or infirm person must be 
performed attendant to and in conjunction with the provision of 
fellowship or protection. The performance of incidental intimate 
personal care services must not exceed 20 percent of the total hours 
worked in the workweek. These incidental intimate personal care 
services include tasks assisting the person being cared for, such as:
    (1) occasional dressing, such as assistance with putting on and 
taking off outerwear and footwear;
    (2) occasional grooming, including combing and brushing hair, 
assisting with brushing teeth, application of deodorant, or cleansing 
the hands and face of the person, such as before or after meals;
    (3) occasional toileting, including assisting with transfers, 
mobility, positioning, use of toileting equipment and supplies (such as 
toilet paper, wipes, and elevated toilet seats or safety frames), 
changing diapers, and related personal cleansing;
    (4) occasional driving to appointments, errands, and social events;
    (5) occasional feeding, including preparing food eaten by the 
person while the companion is present and assisting with clean-up 
associated with such food preparation and feeding;
    (6) occasional placing clothing that has been worn by the person in 
the laundry, including depositing the person's clothing in a washing 
machine or dryer, and assisting with hanging, folding, and putting away 
the person's clothing; and
    (7) occasional bathing when exigent circumstances arise.
    (c) Incidental intimate personal care services does not include 
household work benefiting other members of the household, such as 
general housekeeping, making meals for other members of the household 
or laundering clothing worn or linens used by other members of the 
household. Similarly, household services performed by, or ordinarily 
performed by, employees such as cooks, waiters, butlers, valets, maids, 
housekeepers, nannies, nurses, janitors, laundresses, caretakers, 
handymen, gardeners, home health aides, personal care aides, and 
chauffeurs of automobiles for family use, are not ``companionship 
services'' unless they are performed only incidental to the provision 
of fellowship and protection as described in paragraph (b) of this 
section.
    (d) The term ``companionship services'' does not include medical 
care (that is typically provided by personnel with specialized 
training) for the person, including, but not limited to, catheter and 
ostomy care, wound care, injections, blood and blood pressure testing, 
turning and repositioning, determining the need for medication, tube 
feeding, and physical therapy. Performing such medical care in or about 
a private household is included in the category of domestic service 
employment. The term ``companionship services'' however, includes 
reminding the aged or infirm person of a medical appointment or a 
predetermined medicinal schedule. Such a reminder is part of the 
intimate personal care services that are incidental to the provision of 
fellowship and protection for the aged or infirm person.


Sec.  552.102  [Amended]

    4. Revise Sec.  552.102 (b) to read as follows:
* * * * *
    (b) If it is found by the parties that there is a significant 
deviation from the initial agreement, the parties should reach a new 
agreement that reflects the actual facts.
    5. Amend Sec.  552.109 to revise paragraphs (a) and (c) to read as 
follows:


Sec.  552.109  Third Party Employment.

    (a) Third party employers of employees engaged in companionship 
services within the meaning of Sec.  552.6 may not avail themselves of 
the minimum wage and overtime exemption provided by section 13(a)(15) 
of the Act, even if the employee is jointly employed by the individual 
or member of the family or household using the services. However, the 
individual or member of the family or household, even if considered a 
joint employer, is still entitled to assert the exemption, if the 
employee meets all of the requirements of Sec.  552.6.
    (b) * * *
    (c) Third party employers of household workers engaged in live-in 
domestic services within the meaning of Sec.  552.102 may not avail 
themselves of the overtime exemption provided by section 13(b)(21) of 
the Act, even if the employee is jointly employed by the individual or 
member of the family or household using the services. However, the 
individual or member of the family or household, even if considered a 
joint employer, is still entitled to assert the exemption.

[[Page 81245]]

Sec.  552.110  [Amended]

    6. In Sec.  552.110 revise paragraphs (b), (c), and (d) and add new 
paragraph (e) to read as follows:
* * * * *
    (b) The employer shall keep a copy of the agreement specified by 
Sec.  552.102 of this part and make, keep, and preserve a record 
showing the exact number of hours worked by the live-in domestic 
employee. The provisions of Sec.  516.2(c) of this title shall not 
apply to live-in domestic employees.
    (c) With the exception of live-in domestic employees, where a 
domestic service employee works on a fixed schedule, the employer may 
use a schedule of daily and weekly hours that the employee normally 
works and either the employer or the employee may: (1) Indicate by 
check marks, statement or other method that such hours were actually 
worked, and (2) when more or less than the scheduled hours are worked, 
show the exact number of hours worked.
    (d) With the exception of live-in domestic employees, the employer 
may require the domestic service employee to record the hours worked 
and submit such record to the employer.
    (e) No records are required for casual babysitters as defined in 
Sec.  552.5 of this chapter.
[FR Doc. 2011-32657 Filed 12-23-11; 8:45 am]
BILLING CODE 4510-27-P