Agency home care aides must be paid overtime in Pennsylvania.
Is a home health aide entitled to overtime pay for working in excess of 40 hours a week? In Pennsylvania, the answer depends on who is the employer.
Home care agencies are a growing industry, expected to employ nearly two million aides by 2014. They are a key support in the bridge the government is trying to build to transition the infirm from institutional to home based long term care.
Pennsylvania’s Minimum Wage law requires that employees who work in excess of 40 hours in a workweek be paid overtime at the rate of 1½ times the worker’s regular rate of pay. However, the law exempts ““[d]omestic services in or about the private home of the employer” from the minimum wage and overtime requirements.
In a recent case the Pennsylvania Supreme Court held that a home health agency cannot take advantage of this “domestic services” exemption to avoid paying overtime to its home health aides. Bayada Nurses, Inc v. Department of Labor and Industry (decided November 17, 2010).
Bayada Nurses, Inc. employs over 1,000 workers from its more than 30 offices in Pennsylvania. It offers a range of home care services including aides who assist infirm individuals perform activities associated with daily living and who provide general companionship. Bayada’s householder clients are billed for each hour of service provided by an aide. The rate includes the aide’s hourly rate of pay, and an additional amount to cover workers’ compensation, insurance, taxes, and Bayada’s overhead (including profit). Bayada, however, does not pay its aides overtime.
Bayada’s aides are exempt from the overtime pay requirements of federal wage law (the Fair Labor Standards Act). However, Pennsylvania has its own wage law. According to the PA Department of Labor and Industry, the Pennsylvania Minimum Wage Act exempts only the services of aides who are hired directly by the householder, but not the services of aides who work for a third party agency like Bayada.
In Bayada, the home health agency asked the Court to find that it was entitled to claim the domestic services exemption because the agency and the householder jointly employ the aides. In the alternative, Bayada asked the Court to find that Pennsylvania must comply with the more liberal overtime pay rules of the federal Fair Labor Standards Act (FSLA). The Supreme Court unanimously rejected all of Bayada’s arguments.
The decision means that, in Pennsylvania, home health agencies must now pay overtime to aides who work more than 40 hours in a workweek. To come within the domestic services exemption: (1) the worker must be providing domestic services in or about a private home; and (2) the employer must be of a particular capacity, i.e., an employer in whose home the work is being performed.
Public Policy Implications
The Bayada case is another interesting battle in the continuing public policy war over how we pay for long term care. The decision serves the interests of home health aides, who now will receive extra compensation for overtime work. It may help promote this difficult occupation and draw needed workers to it. It does so, however, by raising the cost of home care services when provided by an agency. This may increase the incentive for care recipients to try to save money by hiring their aides directly. Direct hiring often involves “under the table” arrangements, without adequate background checks and supervision. From the government budget perspective, raising the cost of agency home care services is likely to result in faster spend down which may force the care recipient onto Medicaid sooner. There are no easy policy answers when it comes to long term care.
Both sides pressed their public policy arguments on the Court. Bayada argued that requiring it to pay its aides overtime will increase the amount it must charge its home care clients and may make the use of aides cost prohibitive. An increase in costs due to paying overtime will “lead to less services being provided for Bayada’s clients in financial distress and, in some cases, could lead to institutional care.”
Bayada’s public policy concern was also raised in a recent U.S. Supreme Court case which upheld the federal regulations that exempt home care agencies from having to pay overtime, Long Island Care at Home, Ltd, v. Evelyn Coke, 551 U.S. 158 (2007). The Coke case involved a 1974 amendment to the FLSA in which Congress had extended overtime protection to domestic employees like maids and cooks, but specifically excluded baby sitters and “companions” for the old and infirm. The law did not mention aides employed by third parties. But the federal regulations promulgated in 1975 exempted aides "who are employed by an employer or agency other than the family or household using their services . . . [whether or not] such an employee [is assigned] to more than one household or family in the same workweek . . . ." 29 CFR § 552.109(a)). New York City submitted a friend-of-court brief In Coke which estimated that overtime payments to home aides would increase Medicaid costs by $250 million a year and warned of the possibility of big service cuts.
In Bayada Nurses an amicus brief filed by the Service Employees International Union, Pennsylvania AFL-CIO and AARP sets out the countervailing policy considerations. It argues that the failure to adequately compensate home health care workers will lead to an even greater shortage of these critical workers. The current shortage of such workers is in part due to the lack of competitive wages and the demanding nature of the work. If wages do not improve, patients will suffer the consequences of inadequate services, forcing some prematurely into institutional care. The brief also points out that home health aides working for agencies like Bayada in other states are already receiving overtime pay.
Thus, both sides suggested that a Court decision against them will lead to increased institutionalization which is contrary to current state and federal policies that home and community based services are a preferred and cost effective way to provide long term living services. Can they both be right? Perhaps so, in this Catch-22 world of financing long term care.
In the future: The Pennsylvania legislature has the authority to change the minimum wage law and exempt agency employed home health aides from the overtime rules. It is to the legislature that Bayada and other home health agencies must now turn to press their public policy arguments. It will be interesting to see if they find a sympathetic ear in 2011 with Pennsylvania’s new Republican Party controlled legislature and administration.