Federal Register, Volume 76 Issue 248 (Tuesday, December 27, 2011)

[Federal Register Volume 76, Number 248 (Tuesday, December 27, 2011)]
[Proposed Rules]
[Pages 81190-81245]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-32657]

[[Page 81189]]

Vol. 76

Tuesday,

No. 248

December 27, 2011

Part V

Department of Labor

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Wage and Hour Division

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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]]

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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.

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