Household Employees, Companions, Personal Attendants and the Minimum Wage

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Do I need to pay my home health aide or housekeeper minimum wage? What about overtime?

Apologies in advance to our readers, there is no simple yes/no answer to this question that covers all circumstances.

There are two basic points that must be understood in order to properly interpret the minimum wage and overtime rules as they apply to elder care workers.

• Domestic workers by definition are "non-exempt" workers under the Fair Labor Standards Act (FLSA). This means they are covered under minimum wage and overtime provisions.
• Most eldercare workers fall under the FLSA's coverages. All housekeepers and maids fall under the FLSA. Credentialed homecare providers such as RNs and LPNs are specifically excluded.
• Some eldercare workers fall under the FLSA's "companionship exemption" provision. More on this below.

Domestic employees have been covered by the Fair Labor Standards Act since 1974 and must be paid at least the Federal minimum wage, currently $7.25 per hour effective July 24, 2009. You are required to pay a domestic employee who lives out overtime (for hours above 40 in a week). Overtime is one and one-half times the normal hourly rate. Live-in employees must be paid for every hour they work but are not automatically entitled to the overtime differential. (There are some exceptions to the live-in exclusion, notably NY, NJ and MD.) If the household employee receives a "salary" that covers a work week of more than 40 hours, your employment agreement must explicitly state the regular and overtime rates of pay. See our exclusive Hourly Rate Calculator for help.

There are limited exemptions from minimum wage and overtime rules for "companionship services" in the FLSA. The Department of Labor cautions that ALL of the conditions below must be present to constitute "companionship services."

Companionship Services Defined: "Companionship services" means services for the care, fellowship, and protection of persons who because of advanced age or physical or mental infirmity cannot care for themselves. Such services include household work for aged or infirm persons including meal preparation, bed making, clothes washing and other similar personal services. General household work is also included, as long as it does not exceed 20 percent of the total weekly hours worked by the companion. Where this 20 percent limitation is exceeded, the employee must be paid for all hours in compliance with the minimum wage and overtime requirements of the FLSA." (See  DOL FACT SHEET: Companionship Exemptions.)

Please note, the US Department of Labor proposed a dramatic rules change to the definition of companionship services in December 2011 and is expected to act on the proposal early in 2012.

As a practical matter, the come-and-go caregiver is not likely to accept a position that does not pay a market rate, which is generally in excess of any minimum wage. Live-in caregivers with very limited caregiving duties are most likely to fit the companionship exemption and be attracted to the position that includes room/board and a weekly stipend. These caregivers are generally free to pursue other, outside employment during some or all of the week.

Many states -- including Colorado, Illinois, Kansas, Michigan, Minnesota, Nevada, New Jersey, New York, Pennsylvania, Washington and Wisconsin -- have separate minimum wage and overtime laws that apply to home care workers including companionship services. The FLSA is the floor - state regulations may broaden the employer's obligations. The stricter of the competing standards apply.

The DOL further states that "the term "companionship services" does not include services performed by trained personnel such as registered or practical nurses. Registered nurses are exempt from the FLSA's wage requirements where their time is spent in the performance of the duties of a nurse and are paid on a salary or a "fee basis" as defined by Regulations, 29 CFR Part 541." (See  DOL FACT SHEET: Companionship Exemptions.) Translation: Individuals who are trained personnel with licensing such as RNs or LPNs are 'exempt' from the FLSA and are not considered 'domestic employees' at all. They are free to negotiate a wage that is paid on a fee basis, salary, or hourly at their discretion. Depending on circumstances, they may still be considered your employee, simply not under the classification of 'domestic employment' as discussed in the FLSA. Most RNs and LPNs will be considered independent contractors, and as such your obligation is to issue a Form 1099 at year end documenting the fees you have paid the individual contractors.

Working hours are defined as all hours on duty, including meal time and sleep time if the employee is required to remain at the premises. In general, hours worked includes all time that the employee is required to be at the employer's home and all time that the employee is required to be 'on call' in the course of his/her duties. If the elder care giver is scheduled for a 24 hour (round the clock) shift, and if the care giver is provided uninterrupted sleep, 8 hours per 24 hour shift may be excluded from the hours worked calculation.

(There are many states which enforce higher minimum wages. Where Federal and state law have different minimum wage rates, the higher standard applies.)

Minimum wage and overtime rules for domestic service employment are specifically governed by the  Fair Labor Standards Act. Please familiarize yourself with these rules if you are considering a pay rate that does not meet the FLSA standards articulated above.

Workers' rights, enforcement of Wage & Hour claims and prosecution for willful misclassification of employees as contractors are high priorities in the Obama Administration. The Administration's Department of Labor proposed a series of rules changes to the "Companionship Exemption" that, if enacted, will substantially limit the minimum wage and overtime exemptions for elder care givers. Please see our December 2011 blog post "The Companionship Exemption Faces Repeal."

More Resources:

 Free Tip Sheet: Privately Employing Homecare Workers
 Calculate Nanny Payroll Taxes
 Minimum Wage by State
 Elder Law: Tax Exemption Vital To Hold Down Cost Of Home Care: Connecticut Law Tribune

For More Information contact HomeWork Solutions, Inc.
at 1-800-NaniTax or e-mail and submit a question.