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How the DOL Final Rule for Companion Caregivers Can Impact Franchising

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In 2015 the DOL will implement its Final Rule. It requires that certain home care workers currently exempted from receiving minimum wage and overtime pay receive these benefits. Learn how the DOL Final Rule can impact franchises.

In 1974, Congress extended the protections of Fair Labor Standards Act to “domestic service” employees, but exempted from the Act’s minimum wage and overtime provisions domestic service employees who provide “companionship services” to elderly people or people with illnesses, injuries, or disabilities who require assistance in caring for themselves. It also exempted from the Act’s overtime provision domestic service employees who reside in the household in which they provide services. On September 17, of this year a major change took place. The Department of Labor ( “DOL”) released its Final Rule extending FLSA minimum wage and overtime protections to the nearly two million workers who provide home care to seniors and individuals that require care. The final rule is effective January 1, 2015.

The DOL Fact Sheet provides a description of the major components of the DOL Final Rule:

 “Minimum Wage and Overtime Protections. This Final Rule revises the Department’s 1975 regulations to better reflect Congressional intent given the changes to the home care industry and workforce since that time. Most significantly, the Department is revising the definition of “companionship services” to clarify and narrow the duties that fall within the term and is prohibiting third party employers, such as home care agencies, from claiming the companionship or live-in exemptions. The major effect of this Final Rule is that more domestic service workers will be protected by the FLSA’s minimum wage and overtime provisions.”  Click here to access the DOL Final Rule Fact Sheet

The DOL Final Rule introduces a number of changes regarding caregivers. The following is an excerpt from the DOL publication Domestic Service Final Rule Frequently  Asked Questions.  The site link follows.

Q. What are the significant changes to the "domestic service" regulations?

A. The Department's Final Rule makes two significant changes: (1) the tasks that comprise exempt "companionship services" are more narrowly defined; and (2) the exemptions for companionship services and live-in domestic service employees may only be claimed by the individual, family, or household using the services rather than third party employers such as home health care agencies. The Final Rule also revises the recordkeeping requirements for employers of live-in domestic service employees. See Fact Sheet: Application of the Fair Labor Standards Act to Domestic Service; Final Rule.

(Visit the DOL site with FAQ’s for more information on a number of issues and changes)

In order to gain some perspective on the impending changes from the DOL Final Rule and its potential impact on the franchised home care sector I spoke with two leading franchise industry executives; Emma Dickinson, President of Home Helpers and David Goodman, President of Companion Connection Senior Care.

Emma Dickinson, Home Helpers:

Emma is very familiar with the DOL action. As President of one of the largest home care franchises in the country she has made numerous visits to Washington D.C. in an effort to help retain the companion exemption.

Emma believes that there will be continuing discussions about certain aspects of the new regulations before implementation but that the basic provisions will remain in place. She feels that the minimum wage component is not a major factor but rather that the main area of concern is the overtime piece especially regarding live-ins.

From a client perspective Emma predicts that since many agencies will reduce the hours of certain caregivers in order to reduce OT the agencies will need to recruit more caregivers. This would result in a client going from three caregivers to five or six caregivers. The net result could be a lack of consistency in care for some clients.

Franchisors should look to new technology to more efficiently document and administer home care services. This could possibly result in cost savings which could offset increased costs as a result of the new regulations. She explained that Home Helpers uses their Direct Link program which includes Tele-health to monitor client vital signs.

David Goodman, Companion Connection Senior Services 

David Goodman, President of Companion Connections has an extensive background in the home care industry. At the tender age of twenty three he opened a home care agency that currently does 12,000 home care live-in visits per year with annual revenues exceeding $3 million.

David believes that the impact of the new regulations will be primarily from the overtime provision. He believes it’s a manageable issue and that live-in services will receive the major impact. For those franchisors and franchisees that operate in states that don’t recognize the Domestic Worker Exemption their caregivers already receive the minimum wage and many are paid overtime, thus there will be no change to agencies in those states. {There are currently sixteen states (California, Colorado, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Jersey, New York, Pennsylvania, Washington, and Wisconsin) that already extend minimum wage and overtime protection to home healthcare workers, and five states (Arizona, Nebraska, North Dakota, Ohio, and South Dakota) and Washington DC that extend minimum-wage, but not overtime, protection.}

He echoed Emma’s prediction that there will be an increase in part time caregivers and this could disrupt the consistency of care provided to clients. This action would mirror what has happened with the Affordable Care Act.

David stressed the importance of franchisors operating as efficiently as possible in order to better control costs. This is not unlike what Medicare certified home health agencies need to do in order to compensate for reductions in Medicare reimbursements.

He predicts that the DOL and Federal and State governments will be aggressive in confirming that agencies comply with the new regulations. This could result in a “crack-down” on agencies that don’t follow the rules.

Since the DOL Final Rule will not be implemented until 2015 there is ample time for franchise companies to make adjustments and adapt where necessary to these changes. However, the fact remains that home care clients will continue to require quality home care services and this will not change.

For franchises the options available include operating more efficiently, increasing the part-time mix of caregivers and more effective recruiting. The franchise home care sector will adjust to meet the challenges presented by the DOL Final Rule.

© 2013 FranchiseKnowHow, LLC

Ed Teixeira is the President of FranchiseKnowHow, LLC. He can be reached at franchiseknowhow@gmail.com

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