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Government Relations

Coke v. Long Island Care at Home:Is the Companionship Exemption Dead?

Claudia Schlosberg, Esq. and MandaraMeyers, Esq, Blank Rome LLP 1

In Coke v. Long Island Care at Home, 2

Evelyn Coke, a home healthcare atten-dant employed by an agency that wasnot paying her overtime, sued the

agency, alleging that the regulations defin-ing and interpreting companionship servic-es as an exemption from federal overtimelaws are unreasonable and impermissible.The court’s decision significantly changesthe traditional understanding of federalexemptions from overtime for companion-ship services in the Second Circuit.3

Overtime Exemptions under Federal Lawfor Companionship Services

The companionship exemption to the federal overtime law, the Fair LaborStandards Act (FLSA) provides that anemployer does not have to pay overtime to“any employee engaged in domestic serviceemployment to provide companionshipservices for individuals who (because of ageor infirmity) are unable to care for them-selves.” 29 U.S.C. § 213(a)(15). Manyagencies relied for years on this exemptionto avoid paying overtime to home-basedworkers providing personal care assistance.The traditional understanding was thatdirect support professionals (DSPs)employed either by agencies or familymembers to provide companionship ser-vices in private homes did not have to bepaid overtime. This was consistent with afederal regulation, 29 C.F.R. § 552.109(a),which expressly extended the exemption forcompanionship services to employees “whoare employed by an employer or agencyother than the family or household usingtheir services.”

Companionship services are specifical-ly defined under federal law as services forthe care, fellowship and protection of persons who, because of advanced age orphysical or mental infirmity, cannot carefor themselves. This may also includehousehold work, such as meal preparation,bed-making, clothes-washing, and otherpersonal services, so long as general house-hold work does not exceed 20 percent ofthe total weekly hours worked by the com-panion. Where 20 percent is exceeded, the employee must be paid for all hoursworked in compliance with the minimumwage and overtime requirements of theFLSA.

DSPs have largely not been paid over-time because they have been found tomeet the definition of domestic serviceworkers used by the Department of Labor(DOL),4 and because the nature of thework performed by DSPs has been held tofit within the scope of companionshipservices. Companionship services do notinclude services that must be performed bytrained personnel, such as a registered orpractical nurse (29 C.F.R. § 552.6).However, courts have repeatedly held thatthe nature of the training for DSPs is sig-nificantly different than that for registeredor practical nurses and does not makeDSPs trained personnel.5 Companionshipservices, under the broad definitionemployed by the federal government,include the work of DSPs, such as assis-tance with bathing, dressing, grooming,and other personal care tasks. Notably, theexecution of duties by DSPs that may alsobe performed by trained nurses does notpresent a problem, so long as the law doesnot require that these services be per-formed by trained personnel.

The Impact of Coke on Agencies Usingthe Companionship Exemption

In Coke, the court made two separatedecisions regarding the challenge to thecompanionship exemption. First, thecourt held that the companionship exemp-

tion for domestic service employees whoperform household work for the care ofthe elderly and infirm and general house-hold work incidental to that care is valid.Second, the court held that the exemptionfor employees providing companionshipservices who are employed by an agency oremployer other than the family/householdusing their services is not valid.

Specifically, then, the decision in Cokelimits the application of the companion-ship exemption under the FLSA only tothose individuals employed directly by afamily member of the recipient of services.This means that DSPs employed by agen-cies in the Second Circuit to provide com-panionship services are no longer eligiblefor an overtime exemption.

The Impact of Coke on Consumer-Directed Care Options

After Coke, consumers in the SecondCircuit who employ DSPs to provide com-panionship services under the broad defi-nition used by the DOL are still exemptfrom overtime payments under the FLSA.Agencies employing DSPs and then send-ing them out to individual homes, how-ever, are no longer exempt from payingovertime.

How then does Coke apply to theagency with choice model, where the consumer exercises significant control anddirection over the employee, although theagency is the employer of record? First, itshould be noted that agency with choiceprograms vary widely with respect to thedegree of autonomy accorded to partici-pants. In some cases, the agency is ulti-mately responsible for hiring and firingand may even be involved in directingdaily activities of the DSP. The agencymay also provide other supportive func-tions, such as training, employmentscreening and background checks, andsome supervision. The role of the agencymay mean that the consumer has less sayin the selection of his/her DSP or thescheduling of services. Alternatively, the

Reprinted with permission from LINKS Volume35, No. 4 April, 2005, published by the AmericanNetwork of Community Options and Resources(ANCOR). ANCOR is a national network ofproviders offering quality supports to people withdisabilities.

ANCOR—A national network of providers offering quality supports to people with disabilities.—www.ancor.org2 Links /April 2005

1 Claudia Schlosberg is a partner in the Health Law Group in Blank Rome’s Washington, D.C. office. Her practice focuses ongovernment relations and home and community-based service providers. Mandara Meyers practices health and labor law inBlank Rome’s Philadelphia office.

2 See, e.g., Coke v. Long Island Care at Home, 376 F. 3d 118 (2nd Cir. 2004).3 The Second Circuit covers Connecticut, New York and Vermont. While Coke is binding only on these states, the decision

may signify a trend towards limiting the companionship services exemption in other parts of the country and thus should beconsidered and monitored carefully.

4 Domestic service employment is defined in 29 C.F.R. § 552.3 as: services of a household nature performed by an employee inor about a private home (permanent or temporary) of the person by whom he or she is employed. The term includes employ-ees such as cooks, waiters, butlers, valets, maids, housekeepers, governesses, nurses, janitors, laundresses, caretakers, handy-men, gardeners, footmen, grooms, and chauffeurs of automobiles for family use. It also includes babysitters employed onother than a casual basis. This listing is illustrative and not exhaustive. Any references in this article to domestic service workers are to this broad definition employed by the Department of Labor and are thus relevant to DSPs.

5 Id.6 29 C.F.R. § 791.2(b). To determine if a joint employment relationship exists, courts have relied on an “economic reality” test.

Baystate Alternative Staffing, Inc. v. Herman, 163 F.3d 668, 675 (1st Cir. 1998). This involves analyzing several factors todetermine whether employees are economically dependent on the entity. Factors may include 1) the ability to hire and fire; 2) the ability to supervise and control work schedules or conditions of employment; 3) a determination of rate and method of payment; and 4) maintenance of employment records.

agency may turn all direct employmentfunctions over to the consumer so thatthe agency is essentially just acting as afiscal intermediary.

Regardless of the variations, in allagency with choice models, the agency,not the consumer, holds the IRS employ-er identification number and is the com-mon law employer with responsibility forhandling payroll, taxes and other paper-work. This relationship between theagency as the common law employer andthe consumers as the managing employermeans that the agency and the consumerwill likely be viewed as joint employers,and therefore, the exemption from over-time payments under the FLSA will notapply. A joint employment situation maybe found where: 1) employees are inter-changeable; 2) one employer acts directlyor indirectly in the interest of antheremployer in relation to the employee; and

3) one employer controls, is controlledby, or is under common control with theother employer.6 A joint employmentrelationship involving an agency will notbe enough to maintain the overtimeexemption after Coke, which indicates astrong reluctance to extend exemptions to more workers. Thus, at least withinConnecticut, New York and Vermont,agencies should fully comply with over-time payments for DSPs working morethan forty hours per week.

Conclusions and Recommendations For agencies in the Second Circuit,

Coke means that the companionshipexemption is no longer applicable. Whileit is not yet apparent whether Coke willbe followed in other jurisdictions, thistrend towards expanding overtime cover-age for DSPs employed by agencies maylikely spread to other states. The result in

Coke and any similar decisions in otherjurisdictions may indicate a shift towardsincreased support for and recognition ofthe work performed by DSPs. By extend-ing the umbrella of federal wage protectionlaws to DSPs, the Second Circuit’s deci-sion undeniably demonstrates the need to acknowledge and more appropriatelycompensate DSPs as part of a professionalworkforce in America. Expanding over-time protection for DSPs may thus movethe national effort to raise the wages andimprove the status of DSPs a significantstep forward. At the very least, decisionsacross the country that mandate overtimepay for DSPs may improve awareness ofthe critical services performed by theseindividuals and the need to continue pushing for changes to support their vitalwork. ■

Claudia Schlosberg is a partner in the

health law group at Blank Rome, LLP. She also is a

contributing editor to Links. Most recently, Ms.

Schlosberg served as Acting Director of Programs,

Policy and Training in the office for Civil Rights (OCR)

in the U.S. Department of Health and Human Services.

She can be reached at 202-772-5985 or

Schlosberg@BlankRome.com.

Mandara Meyers is an associate in Blank Rome’s

Philadelphia office, practicing in the Health Law and

Employment, Benefits and Labor groups. She deals

with public health and compliance issues and

regulatory and legislative advice.

Email: meyers@blankrome.com

AUTHOR LINK

Reprinted with permission from ANCOR LINKSVolume 35, No. 4 April 2005.