On July 2, 2025, the United States Department of Labor (“USDOL”) issued a proposed rule (the “Proposed Rule”) that will allow home care agencies, once again, to claim the companionship and live-in overtime exemptions under the federal Fair Labor Standards Act (“FLSA”). A copy of the Proposed Rule can be found on govinfo.gov. Comments on the Proposed Rule may be submitted until September 2, 2025.
The Proposed Rule, if finalized, will only impact agencies in states whose exemptions mirror the FLSA. Many states, such as New Jersey, New York, and California, that don’t mirror the FLSA, will continue to require home health agencies to pay overtime to their companionship and live-in home care workers.
The Current USDOL Rule
Under the current rule, in place since 2013, “live-in” home care workers are not exempt from the FLSA’s overtime requirements. When determining overtime pay, the current rule allows the employer to exclude break periods, such as when the employee is sleeping or takes a meal break or other uninterrupted breaks.
Home care workers providing companionship services are similarly not exempt from the FLSA overtime requirements under the current rule. Such “companionship services” include accompanying an individual with an illness, injury, disability, or an elderly person who needs assistance in caring for themselves. Additionally, companionship services include assisting the individual cared for with activities of daily living, as long as such assistance is not given for more than 20 percent of the time that the home care worker works with the individual in a workweek.
The current rule negated nearly 40 years of exempting home care agencies from paying overtime to live-in and companionship domestic workers and sent the home care industry into turmoil. Home care agencies were suddenly forced to pay overtime to live-in and companionship home care workers, making it difficult for agencies to profit and compete with “black market” providers.
The Proposed Rule
The Proposed Rule would restore the pre-2013 exemptions and no longer require home care agencies to comply with the FLSA’s overtime requirements when compensating live-in and companionship domestic service employees, and expand the definition of covered “companionship services.” In commentary to the Proposed Rule, the USDOL reasons that the restoration of the exemptions will reduce the costs of home care services for individuals in need of care and/or their families because agencies may be able to provide services at lower rates. Additionally, the USDOL hopes to expand access to home care services by lowering the regulatory burden for consumers and agencies and by decreasing labor costs.
What Home Care Agencies Can Do if the Proposed Rule is Finalized
While the scope of any final rule is yet to be decided, agencies that have operations in states that generally follow all FLSA exemptions, such as Florida and Texas, should begin to review their compensation policies and pay structure in those states to determine potential cost savings. In addition, agencies will have to consider how to roll out any changes, communicate any changes to impacted home care workers in a sensitive manner, and whether any state or local notices are required.
Even if the Proposed Rule is enacted, home care agencies in all states must remain in compliance with more restrictive state wage and hour laws and regulations. For example, New Jersey, New York, and California do not currently recognize the companionship and live-in exemptions. While it is possible that these states will eventually follow the lead of the USDOL and reconsider the current exemptions, until then, the exemptions will have little or no impact in those states.
The Proposed Rule is just one example of how the USDOL has recently tried to ease the regulatory burden on third-party employers of home care workers. In May 2025, the USDOL issued a Field Assistance Bulletin that instructed its staff to no longer enforce its rule issued in 2024 that essentially created a “presumption” that home care workers classified as independent contractors, but are economically dependent on one agency, should be deemed employees. Instead, the USDOL’s investigators will revert to enforcing the FLSA in accordance with Fact Sheet #13 from July 2008. While this change in theory makes it easier for agencies to classify workers as independent contractors, the prior rule remains in effect and it remains to be seen whether the USDOL will seek to rescind it.
Please contact Frier Levitt if you wish to comment on the Proposed Rule, to ensure that your home care agency is in compliance with federal and state law and regulations, or if you have other questions about your agency’s classifications and wage and hour practices.
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