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United States Government Accountability Office: 
GAO: 

Report to Congressional Requesters: 

December 2014: 

Fair Labor Standards Act: 

Extending Protections to Home Care Workers: 

GAO-15-12: 

GAO Highlights: 

Highlights of GAO-15-12, a report to congressional requesters. 

Why GAO Did This Study: 

Older adults and people with disabilities are increasingly receiving 
care at home, and home care workers are performing increasingly 
skilled duties. DOL recently revised its FLSA regulations to extend 
minimum wage and overtime protections to more of those home care 
workers. The Home Care Rule, scheduled to go into effect January 2015, 
may affect a diverse set of stakeholders, including home care workers, 
consumers receiving home care services, private home care agencies, 
and state Medicaid programs. GAO was asked to assess the potential 
effects of this rule. 

GAO examined (1) changes DOL made in the Home Care Rule and factors it 
considered during the rulemaking process, (2) the potential effects of 
the rule identified by key stakeholders, and (3) steps DOL has taken 
to help state Medicaid agencies and other stakeholders understand and 
comply with the Home Care Rule. GAO visited six state Medicaid 
programs selected in part for variation in state Medicaid program 
design; reviewed relevant federal regulations; and interviewed 
government officials and representatives from 14 national 
organizations representing the spectrum of home care stakeholders, 
including workers and consumers. 

What GAO Found: 

The Department of Labor’s (DOL) Home Care Rule is expected to increase 
the number of home care workers who qualify for minimum wage and 
overtime protections under the Fair Labor Standards Act of 1938, as 
amended (FLSA). The Home Care Rule narrows the definition of 
companionship services and limits who may claim the companionship 
services exemption, among other changes. It is scheduled to go into 
effect in January 2015, although a challenge to the rule is currently 
pending in federal court. When developing the rule, DOL considered 
several factors, including the growth and specialization of the home 
care workforce, as well as the amount of time needed to make 
adjustments. 

Representatives from national organizations GAO interviewed identified 
potential effects of the Home Care Rule on jobs and earnings, employer 
costs, and care, but did not always agree. Some representatives said 
extending FLSA protections to home care workers will create more full-
time employment opportunities for part-time workers, while others said 
those who work more than 40 hours in a workweek may see reduced hours 
and earnings. Some representatives said employers may face increased 
business costs to pay overtime and some said that certain consumers 
could be placed in institutions because of possible service cost 
increases. Effects on Medicaid home care services will vary by state. 
Officials in five of six states GAO visited explained that they were 
still assessing possible changes to their programs, while one state 
had determined what changes it would make to comply with the new rule. 

Figure: Potential Redistribution of Home Care Worker Hours: 

[Refer to PDF for image: illustration] 

Worker A: 60 hours (full-time); 
Worker B: 30 hours (part-time); 
Worker C: 30 hours (part-time). 

Possible redistribution of work hours by employers to manage overtime 
among workers: 

Worker A: 40 hours (full-time); 
Worker B: 40 hours (full-time); 
Worker C: 40 hours (full-time). 

Source: GAO analysis of interviews with national stakeholders. 
GAO-15-12. 

[End of figure] 

After the Home Care Rule was published, DOL collaborated with other 
federal agencies and stakeholders to develop guidance, conduct 
outreach, and provide technical assistance to help stakeholders plan 
for implementation. For example, DOL worked with the Centers for 
Medicare & Medicaid Services to develop guidance on applying FLSA 
principles to different home care living arrangements commonly funded 
by Medicaid. DOL officials said they are focusing on technical 
assistance to help employers and states with implementation and have 
developed a phased-in enforcement strategy. The effects of the Home 
Care Rule, such as whether the workforce will grow or the use of 
institutional care will increase, remain uncertain, and DOL officials 
said they do not currently have any plans to evaluate the rule. 

What GAO Recommends: 

Depending on the outcome of the litigation, GAO recommends that the 
Secretary of Labor take steps to ensure the agency will be positioned 
to conduct a meaningful retrospective review of the rule at an 
appropriate time. DOL agreed with this recommendation and is working 
on developing data collection plans. 

View [hyperlink, http://www.gao.gov/products/GAO-15-12]. For more 
information, contact Andrew Sherrill, 202-512-7215 or 
sherrilla@gao.gov. 

Contents: 

Letter: 

Background: 

DOL Revised the Definition of Companionship Services in Light of the 
Changes in the Home Care Industry: 

Stakeholders Provided Numerous and Sometimes Differing Perspectives on 
the Potential Effects of the Home Care Rule on Employers, Workers, 
Consumers, and State Medicaid Programs: 

DOL Worked with Federal Agencies and Stakeholders to Develop Guidance 
on Implementing the Home Care Rule: 

Conclusions: 

Recommendation for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Comments from the Department of Labor: 

Appendix II: GAO Contact and Staff Acknowledgments: 

Figures: 

Figure 1: Key Elements of the Revised Definition of Companionship 
Services under the Home Care Rule: 

Figure 2: How Workers Can Determine If They Meet the Definition for 
the Companionship Services Exemption under the Home Care Rule: 

Figure 3: Outreach Conducted by DOL Before Issuing the Home Care Final 
Rule: 

Figure 4: Potential Redistribution of Home Care Worker Hours: 

Figure 5: Outreach Conducted by DOL after the Final Home Care Rule Was 
Issued: 

Figure 6: Different Types of Shared Living Arrangements Outlined in 
DOL Guidance: 

Figure 7: Example of a State's Responsibility for Paying Overtime in a 
Joint Employment Scenario: 

Abbreviations: 

ADL: activities of daily living: 

BLS: Bureau of Labor Statistics: 

CMS: Centers for Medicare & Medicaid Services: 

DOJ: Department of Justice: 

DOL: Department of Labor: 

FAQ: frequently asked questions: 

FLSA: Fair Labor Standards Act of 1938: 

HHS: Department of Health and Human Services: 

IADL: instrumental activities of daily living: 

NPRM: Notice of Proposed Rulemaking: 

WHD: Wage and Hour Division: 

[End of section] 

United States Government Accountability Office: 
GAO:
441 G St. N.W. 
Washington, DC 20548: 

December 17, 2014: 

The Honorable John Kline Chairman Committee on Education and the 
Workforce: 

The Honorable Tim Walberg: 
Chairman: 
Subcommittee on Workforce Protections: 
Committee on Education and the Workforce: 
House of Representatives: 

The home care workforce--comprising approximately 2 million workers--
is considered to be among the fastest growing in the United States, 
yet many of these workers have not been covered by the federal minimum 
wage and overtime law, the Fair Labor Standards Act of 1938 (FLSA). 
[Footnote 1] Home care workers provide support to people who have 
limited ability to care for themselves due to aging-related 
impairments or disabilities. The home care industry has experienced 
significant changes and growth in recent decades as home care has 
become a viable option for many, including people with significant 
care needs. Consumers often prefer home care over receiving care in an 
institutional setting because it allows them to maintain their 
independence and receive less costly services in their homes. State 
Medicaid agencies may cover home care for eligible individuals as an 
alternative to institutional care. 

As the home care workforce has grown to meet the demand, worker 
arrangements have become more formalized and workers often use private 
agencies to be matched with a consumer who needs care. As a result, 
policymakers have been reexamining rules that have excluded many home 
care workers from minimum wage and overtime protections. Recently, the 
U.S. Department of Labor (DOL) published a final rule, the Home Care 
Rule, revising its regulations under the FLSA to provide federal 
minimum wage and overtime protections to more home care workers. 
[Footnote 2] Many researchers and worker advocates support the changes 
to the FLSA regulations because they believe these changes will help 
improve working conditions for home care workers. However, other 
stakeholders are concerned that the changes will increase the costs of 
home care and potentially make it an unaffordable option for some 
consumers. To understand some of the potential effects, we reviewed: 
(1) changes the Department of Labor made in the Home Care Rule and 
factors it considered during the rulemaking process, (2) potential 
effects of the Home Care Rule identified by key stakeholders, and (3) 
steps the Department of Labor has taken to help state Medicaid 
agencies and other stakeholders understand and comply with the Home 
Care Rule. 

To address these objectives, we reviewed relevant provisions of the 
existing regulations,[Footnote 3] the proposed rule, DOL's regulatory 
impact analyses, and the final rule. We did not assess DOL's authority 
to issue the Home Care Rule or whether DOL's rulemaking procedures or 
analyses complied with applicable legal requirements.[Footnote 4] We 
also conducted structured interviews from October 2013 to July 2014 
with officials from 14 national organizations representing the 
spectrum of home care stakeholders: consumers, workers, employers, and 
states.[Footnote 5] We selected organizations based in part on whose 
interests they represent as well as recommendations from experts. We 
also reviewed the comments they submitted in response to the proposed 
rule, if any. We interviewed officials from DOL and the Department of 
Health and Human Services' Centers for Medicare & Medicaid Services. 
In addition, we visited a nongeneralizable sample of six states from 
December 2013 to May 2014: Arkansas, California, New York, 
Pennsylvania, Tennessee, and Vermont, which represent a variety of 
Medicaid programs and are geographically diverse. In selecting states, 
we included some whose laws already require minimum wage and overtime 
wages for home care workers, and some that do not, as described in the 
proposed rule. During our visits, we interviewed state and local 
officials to learn about their Medicaid programs, what specific 
changes they plan to make, if any, and any challenges they may face in 
doing so.[Footnote 6] In addition to state officials, we interviewed 
more than 20 other stakeholders in the states we visited--including 
private home care companies, managed care organizations, state 
associations, and fiscal agents--to gain their perspectives on the 
potential effects of the final rule and to inquire about pay and 
scheduling for home care workers. 

We conducted this performance audit from August 2013 to December 2014 
in accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit work to 
obtain sufficient, appropriate evidence to provide a reasonable basis 
for our findings and conclusions based on our audit objectives. We 
believe that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

Background: 

Home care workers support consumers of home care services, typically 
individuals with disabilities and older adults, with their personal 
care needs. Some of the activities that home care workers perform 
include helping with activities of daily living (ADLs) such as 
dressing, grooming, eating, or bathing, as well as instrumental 
activities of daily living (IADLs) that enable a person to live 
independently such as meal preparation, driving, light housework, 
managing finances, and assisting with medications. Home care services 
may be provided by one or more worker(s); however, given the personal 
nature of the work, experts have noted the benefits of maintaining 
continuity among home care workers, and consumers often prefer to 
receive care from a limited number of workers. Home care needs depend 
on many factors including each consumer's functional limitations and 
the availability of informal supports, such as those provided by 
family members, so the amount of time a home care worker provides care 
can vary. For example, home care workers may provide a few hours of 
home care per week or up to 24 hours per day depending on an 
individual's needs. Home care workers may be employed directly by the 
consumer or by a third party home health care agency that matches 
workers with consumers. Examples of traditional types of home health 
care companies include: for-profit home care agencies, voluntary non-
profits, and private not-for-profit home care agencies. 

Funding Sources for Home Care and the Role of Federal Agencies: 

A variety of public and private sources pay for home care services. 
The majority of home care is paid for by public sources, such as 
Medicaid.[Footnote 7] Medicaid is a federal-state program that 
provides health care services to certain low-income populations. 
Individuals who qualify for Medicaid and receive coverage for home 
care services include individuals aged 65 or older and individuals who 
are disabled or blind.[Footnote 8] Although Medicaid is jointly 
financed by the states and the federal government, it is directly 
administered by the states, with oversight from the Centers for 
Medicare & Medicaid Services (CMS), within the Department of Health 
and Human Services (HHS). State Medicaid spending for most services is 
matched by the federal government at a rate that is based in part on 
each state's per capita income according to a formula established by 
law.[Footnote 9] State Medicaid programs cover home care services 
through a wide and complex range of options within Medicaid, which 
include providing this coverage as an alternative to institutional 
care. The Medicaid program requires states to cover certain home 
health services, and states may also elect to cover additional home 
and community-based services under their Medicaid programs, or through 
special waivers that allow them added flexibility in covering these 
services.[Footnote 10] CMS has been working in partnership with 
states, consumers, providers, and other stakeholders to create a 
sustainable, person-driven long-term support system. According to CMS, 
the system aims to allow people with disabilities and chronic 
conditions to exercise choice and control, and to access quality 
services that assure optimal outcomes, such as independence and 
quality of life. States have an obligation to provide Medicaid 
services to eligible individuals with disabilities in the most 
integrated setting appropriate to their needs, consistent with title 
II, part A of the Americans with Disabilities Act, which is overseen 
by the Department of Justice.[Footnote 11] 

Department of Labor and the FLSA: 

The FLSA is the primary federal statute that establishes standards for 
minimum wage, overtime pay, and child labor. The FLSA requires that 
workers who are covered by the act and not specifically exempt from 
its provisions be paid at least the federal minimum wage (currently 
$7.25 per hour) and 1.5 times their regular rate of pay for hours 
worked over 40 in a workweek. The 1974 amendments to the FLSA extended 
coverage to workers employed in "domestic service" but established an 
exemption from the minimum wage and overtime provisions for 
individuals providing "companionship services" to older adults or 
people with disabilities.[Footnote 12] The amendments also created a 
more limited exemption from the overtime pay requirements for domestic 
service employees who reside in the household where they work (live-in 
domestic service workers).[Footnote 13] In 1975, DOL, the federal 
agency responsible for overseeing and enforcing the FLSA, issued the 
existing regulations which implemented these provisions and, among 
other things, defined "companionship services."[Footnote 14] These 
regulations define companionship services as those which provide 
"fellowship, care, and protection" to an elderly person or individual 
with a disability, and include household activities related to the 
care of that person such as preparing a meal, making the bed, and 
washing clothes, for example.[Footnote 15] Additionally, these 
regulations permit third party employers, such as home care services 
agencies, to claim the companionship services exemption for workers 
(which we refer to in this report as the companionship exemption). 
[Footnote 16] 

DOL Revised the Definition of Companionship Services in Light of the 
Changes in the Home Care Industry: 

DOL Narrowed the Definition of Companionship Services: 

In October 2013, DOL issued a final rule, commonly referred to as the 
Home Care Rule, revising its existing regulations on domestic services 
employment and the companionship services exemption. The Home Care 
Rule, scheduled to go into effect January 2015, makes three main 
changes to the existing regulations: [Footnote 17] 

* it updates terminology and narrows the definition of companionship 
services; 

* it limits who may claim the companionship services and live-in 
domestic services exemptions by stipulating that third party 
employers, such as private home care agencies, will no longer be able 
to claim these exemptions; and: 

* it changes the record-keeping requirements for employers of live-in 
domestic services workers. 

As a result of these changes, more home care workers will be entitled 
to protections under the FLSA, which may include the right to time and 
one-half of their regular hourly wage when they work more than 40 
hours in a week; compensation for time spent traveling between 
clients' homes; and compensation when they wake to care for clients on 
overnight shifts.[Footnote 18] According to DOL, the workers who will 
be directly affected by the change to the companionship services 
exemption are predominantly women in their mid-40s or older and 
minorities who have a high school diploma or less education. 

The existing regulations define companionship services as "fellowship, 
care, and protection," and the revised definition of companionship 
services includes "fellowship" and "protection" but limits the amount 
of time that a worker can spend on the provision of "care" (see figure 
1). Under the Home Care Rule, examples of "fellowship" and 
"protection" include activities such as engaging in conversation, 
reading, accompanying the person on walks or to appointments, and 
being present to monitor the person's safety and well-being. "Care" is 
defined to include assisting with activities of daily living and 
instrumental activities of daily living such as dressing, feeding, 
meal preparation, and light housework - precisely the types of 
activities that many home care workers engage in today. Under the 
existing regulations, which apply until the Home Care Rule goes into 
effect, workers may spend an unlimited amount of time providing these 
types of services and still be exempt from the FLSA minimum wage and 
overtime provisions.[Footnote 19] However, in order to qualify for the 
companionship services exemption under the revised regulation, the 
amount of time a worker spends on these types of activities may not 
exceed 20 percent of the total hours worked per person and per 
workweek. 

Figure 1: Key Elements of the Revised Definition of Companionship 
Services under the Home Care Rule: 

[Refer to PDF for image: illustration] 

Companionship services: 

No limit on amount of time the worker may spend on these types of 
activities per workweek: 

Fellowship: 
Examples: 
* Conversation; 
* Reading; 
* Games; 
* Crafts; 
* Exercise. 

Protection: 
Being present in the home or accompanying the person when
outside the home to monitor safety and well-being. 

No more than 20% of worker’s time may be spent on these activities per 
workweek: 

Care: 
Examples: 
* Meal preparation; 
* Feeding; 
* Bathing; 
* Dressing; 
* Driving. 

Source: GAO summary of Home Care Rule. GAO-15-12. 

Note: The Home Care Rule, including the revised definition illustrated 
here, is scheduled to go into effect January 1, 2015. 78 Fed. Reg. 
60,454, 60,557 (Oct. 1, 2013). Until the rule goes into effect, the 
existing regulatory definition applies. 29 C.F.R. § 552.6. 

[End of figure] 

In the revised Home Care Rule, DOL also limited who may claim the 
companionship services exemption. Under the existing regulations, 
third party employers may claim the companionship services exemption 
and are not required to pay home care workers who qualify for minimum 
wage and overtime. However, under the revised regulation, third party 
employers, such as private home care agencies, will no longer be able 
to claim the companionship services exemption from minimum wage and 
overtime.[Footnote 20] In contrast, the consumer or his/her family 
members may still claim the exemption if the home care worker 
primarily provides fellowship and protection and spends 20 percent or 
less of his or her weekly work hours per care recipient on activities 
of daily living (ADLs) and instrumental activities of daily living 
(IADLs) and if the worker meets certain other requirements (see figure 
2). 

Figure 2: How Workers Can Determine If They Meet the Definition for 
the Companionship Services Exemption under the Home Care Rule: 

[Refer to PDF for image: process illustration] 

1. Are you employed by anyone other than the person you assist or that 
person’s family or household (for instance, a home care agency or 
other entity)? 
Yes: Worker must be paid at least the federal minimum wage and 
overtime pay[A] (does not qualify for the companionship services 
exemption); 
No: continue. 

2. Do you provide domestic services that are primarily on behalf of 
other members of the household, such as doing laundry for another 
family member or preparing meals for someone other than the person 
being assisted? 
Yes: Worker must be paid at least the federal minimum wage and 
overtime pay[A] (does not qualify for the companionship services 
exemption); 
No: continue. 

3. Do you provide medically related services that typically require 
and are performed by trained medical personnel? These are services 
that may be invasive, sterile, or otherwise require exercising medical 
judgment, such as assisting with tube feeding or catheter care; 
Yes: Worker must be paid at least the federal minimum wage and 
overtime pay[A] (does not qualify for the companionship services 
exemption); 
No: continue. 

4. Do you spend more than 20% of your time in a workweek assisting 
with activities of daily living (such as dressing, grooming, feeding, 
bathing, and toileting) or instrumental activities of daily living 
(such as meal preparation, driving, managing finances, and arranging 
medical care)? 
Yes: Worker must be paid at least the federal minimum wage and 
overtime pay[A] (does not qualify for the companionship services 
exemption); 
No: Worker likely exempt and not entitled to federal minimum wage and 
overtime pay (likely qualifies for the companionship services 
exemption). 

Source: GAO analysis of Department of Labor’s self assessment for 
workers. GAO-15-12. 

[A] For questions 2-4, whether a worker must be paid at least the 
federal minimum wage and overtime pay will depend on the activities 
the worker performed that workweek. 

[End of figure] 

In Developing the Home Care Rule, DOL Considered Changes to the Home 
Care Industry and Time Needed for Implementation: 

When DOL was developing the Home Care Rule, it considered the growth 
in the home care industry and the resulting changes in the home care 
workforce. In March 2012, Congress held a hearing to examine the 
proposed rule and the possible effects of the narrowed definition of 
companionship services.[Footnote 21] According to testimony from a DOL 
official, the home care industry has "undergone a dramatic 
transformation"--due in part to increased demand for home care--since 
DOL issued its regulations on the companionship and live-in exemptions 
in 1975.[Footnote 22] For example, the official stated that the number 
of certified home health care agencies had increased from 2,242 in 
1975 to more than 10,000 at the end of 2009.[Footnote 23] The DOL 
official stated that the demand for home care has increased as a 
result of the growth in the aging population, the rising costs of 
institutional care, and the availability of funding assistance from 
federally supported programs, such as Medicaid. Similarly, the number 
of home care workers has increased. The Bureau of Labor Statistics 
(BLS) has reported that the total number of home care workers has more 
than doubled in each of the last two decades-with nearly 2.1 million 
workers in 2012-and is expected to be among the fastest growing 
occupations in the coming years.[Footnote 24] DOL officials also told 
us that as the industry has grown, home care workers' duties have 
become more specialized. Home care workers are assisting consumers 
with many more services than they had been when the exemptions were 
enacted. According to DOL officials, home care workers are 
increasingly providing specialized care, such as assistance with 
activities of daily living and limited medical-related care--services 
that were previously provided in nursing homes or other professional 
settings by trained nurses. 

With the expected continued growth in the demand for home care, DOL 
officials also told us that in developing the proposed rule, they 
considered how to improve worker wages and address high worker 
turnover. DOL officials have noted that the growth in the industry and 
worker responsibilities has not translated to growth in home care 
workers' wages, which are among the lowest in the country. 
Additionally, home care worker turnover has been a concern and one 
national group describes the characteristics of the home care 
workforce to have "chronically high rates of workforce instability." 
DOL officials said the Home Care Rule is an important step in ensuring 
that the home care industry attracts and retains qualified workers, 
which the industry will need in the future. 

The basic process by which federal agencies typically develop and 
issue regulations is set forth in the Administrative Procedure Act, as 
well as certain other statutes and Executive Orders.[Footnote 25] 
Federal rulemaking procedures generally include issuing a Notice of 
Proposed Rulemaking (NPRM) and providing an opportunity for public 
comment before issuing a final rule, and may also include conducting a 
cost-benefit analysis, among other things. During the rulemaking 
process for the Home Care Rule, DOL officials said that in addition to 
considering the thousands of public comments received in response to 
the proposed rule, the agency also sought input from stakeholders in a 
variety of forums. Figure 3 highlights some of the outreach that DOL 
conducted during the rulemaking process. 

Figure 3: Outreach Conducted by DOL Before Issuing the Home Care Final 
Rule: 

[Refer to PDF for image: timeline] 

2010: 
DOL notified the public it was considering updating the domestic 
service regulations in its Spring 2010 Regulatory Agenda. 

2010-2011: 
From March 2010 to October 2011, DOL conducted stakeholder meetings 
and calls with labor unions, academics, associations, and for-profit 
companies, among others. 

2011: 
President Obama publicly announced the proposed rule on December 15, 
2011. 

The proposed rule was published in the Federal Register on December 
27, 2011 (Comment period begins; scheduled to close February 27, 2012). 

2012: 

DOL staff attended a round table hosted by the Small Business 
Administration on February 1, 2012, and met with disability rights 
advocates. 

On February 24, 2012, DOL extended the comment period to March 12, 
2012. 

On March 13, 2012, DOL extended the comment period to March 21, 2012. 

Comment period ended (March 21, 2012). 

2013: 
DOL published the final rule on October 1, 2013 (Effective January 1, 
2015). 

Source: GAO analysis of Department of Labor documents. GAO-15-12. 

[End of figure] 

During the comment period, DOL received more than 26,000 public 
comments from various stakeholders. Comments were submitted by a range 
of stakeholders, including individuals and organizations representing 
home care workers, consumers of home care services, public and private 
home care agencies, the disability community, and state and federal 
government agencies. According to DOL, the comments reflected a wide 
variety of views, with most of the comments supporting FLSA 
protections for home care workers.[Footnote 26] 

In the final rule, DOL made some changes from the proposed rule in 
response to stakeholder comments. Among the changes, DOL: [Footnote 27] 

* Set the effective date for 15 months after the publication of the 
final rule. Because of concerns over the amount of time needed for 
employers and state Medicaid programs to make the necessary 
adjustments to their programs, the final rule set an extended 
effective date for the rule of January 1, 2015.[Footnote 28] 

* Modified the proposed recordkeeping requirements for live-in home 
care workers to allow employers to require their workers to record and 
submit their hours worked.[Footnote 29] Under the proposed rule, the 
employer could not require the live-in home care worker to record his 
or her hours worked; rather, the employer would be responsible for 
making, keeping, and preserving these records. However, DOL received 
comments that such a prohibition would be difficult for individual 
consumers who also serve as employers, particularly for those who have 
Alzheimer's disease, dementia, or developmental disabilities. 

* Clarified the description of services that qualify as "care" and 
which are subject to the 20 percent limit. [Footnote 30] In the 
proposed rule, DOL referred to these services as "intimate personal 
care services that are incidental to the provision of fellowship and 
protection." While DOL retained the fundamental purpose of the 
description, to make it easier for the regulated community to 
understand, the final rule defines the provision of care as assistance 
with activities of daily living (ADLs) and instrumental activities of 
daily living (IADLs). 

* Updated its estimate of the overall economic impact from a net cost 
of $4.7 million per year in the proposed rule to a net benefit in the 
final rule of between $3.9 and $27.3 million per year on average over 
10 years.[Footnote 31] DOL officials told us that developing estimates 
of the number of home care workers was one of the greatest challenges 
they faced when estimating economic impacts. However, they said that 
they believe that their assumptions related to their earlier estimate 
resulted in an overestimation of the number of workers. In general, 
limited data are available on the number of home care workers or the 
amount of services provided. As a result, information is limited on 
the characteristics of the home care workforce, the terms under which 
they are employed, the wage rates they currently earn, or the hours 
they currently work.[Footnote 32] The updated estimate of economic 
impact reflects changes to DOL's assumptions including, among others: 
(1) how employers might respond to overtime requirements; (2) the 
number of current home care workers without overtime coverage; (3) the 
costs associated with hiring new workers; and (4) an estimate of the 
benefits of reduced worker turnover resulting from workers receiving 
increased wages through travel reimbursement and overtime compensation. 

In the final rule, DOL also responded to some commenters' questions 
about how existing FLSA principles--those not changed by the Home Care 
Rule--will likely apply to home care workers. Many of these questions 
were raised because when the Home Care Rule becomes effective, the 
FLSA will apply to many home care arrangements that were not 
originally structured with FLSA requirements in mind. For example, 
many stakeholders raised questions about how to calculate work hours 
for live-in home care workers who spend some of their time sleeping, 
traveling, eating, or engaging in personal pursuits. DOL also 
responded to comments in the final rule related to applying FLSA 
principles to various home care structures, including those with 
shared living arrangements and those where more than one entity could 
be considered a worker's employer under the FLSA (known as joint 
employment). DOL provided additional information and example-based 
scenarios about how the existing FLSA principles for shared living and 
joint employment might apply, noting that actual determinations depend 
on the unique facts specific to each individual situation. 

Stakeholders Provided Numerous and Sometimes Differing Perspectives on 
the Potential Effects of the Home Care Rule on Employers, Workers, 
Consumers, and State Medicaid Programs: 

Potential Effects on Employers and the Cost of Implementation: 

The Home Care Rule is expected to extend FLSA overtime requirements to 
more home care workers and, as a result of this change, 
representatives of almost all of the 14 national organizations we 
interviewed agreed that employers will likely manage workers' hours 
more closely. Since third party employers such as private home care 
agencies will no longer be able to claim the companionship services or 
live-in exemption under the Home Care Rule, more employers will be 
required to pay workers an overtime premium when hours worked exceed 
40 hours per week.[Footnote 33] While almost all (13 out of 14) of the 
national organizations we interviewed agree that employers will 
actively manage overtime hours, they do not always agree on whether 
employers will experience a noticeable difference compared with their 
current operating procedures. 

Representatives in 5 of the 14 national organizations we interviewed 
explained how they think employers might react to applying the FLSA 
overtime requirements to home care workers and how those decisions 
could adversely affect business costs and services, including for 
small businesses. One possibility these representatives mentioned is 
that employers may avoid increased costs associated with overtime pay 
by limiting workers' hours. However, a couple of stakeholders noted 
that these employers would have some increased costs associated with 
hiring and training new workers to continue providing the same level 
of services to consumers. Representatives of one organization told us 
that small businesses, in particular, would not have the capacity to 
pay overtime wages and anticipate increased costs to adjust schedules 
for their current workers and to hire new workers. Stakeholders also 
discussed how the Home Care Rule could potentially decrease business 
for some employers. For example, representatives from one private home 
care agency we interviewed said they plan to pass along any additional 
costs incurred as a result of the Home Care Rule to consumers who pay 
for their care privately, which could potentially cause clients to 
leave their agency and seek care elsewhere. However, representatives 
from four national organizations who predict that the Home Care Rule 
will help reduce worker turnover also believe that the transition 
costs associated with extending FLSA coverage to home care workers 
should be moderate and manageable or that the Home Care Rule could 
potentially lead to cost savings for employers in the long-run due to 
reduced worker turnover. 

In order to estimate the economic impact of the Home Care Rule, DOL 
used several assumptions about how employers might choose to comply 
with the rule. For example, DOL estimated how much overtime employers 
might choose to pay workers and what the costs associated with hiring 
new workers would be. According to DOL, the effects of the rule will 
depend on what actions employers take and the costs and benefits of 
the rule will vary depending upon whether employers choose to continue 
current practices, rearrange worker schedules, or hire new workers. 
Because overtime compensation, hiring costs, and reduction in turnover 
depend on how employers choose to comply with the rule, DOL estimated 
a range of impacts. 

Potential Effects on the Home Care Workforce: 

Several national organizations representing the interests of workers 
identified potential effects on workers including increased pay and 
opportunities, especially for part-time workers. For example, 
representatives from four of these national organizations said the 
Home Care Rule may help create more full-time employment opportunities 
for part-time workers, and that if employers respond to the rule by 
actively managing workers' hours in order to avoid paying overtime, 
then part-time workers might benefit from a redistribution of work 
hours (see figure 4). These stakeholders believe that logging many 
hours of overtime may not be in a worker's best interest and can lead 
to low morale or increase the risk of workplace injury. In addition, 
some workers' wages may increase because they may be entitled to 
overtime pay and compensation for travel time when the Home Care Rule 
goes into effect. For example, DOL's economic analysis estimates that 
12 percent of home care workers currently work more than 40 hours per 
week, and whether some of these workers' wages will go up will depend 
on how much overtime employers choose to pay workers. 

Figure 4: Potential Redistribution of Home Care Worker Hours: 

[Refer to PDF for image: illustration] 

Worker A: 60 hours (full-time); 
Worker B: 30 hours (part-time); 
Worker C: 30 hours (part-time). 

Possible redistribution of work hours by employers to manage overtime 
among workers: 

Worker A: 40 hours (full-time); 
Worker B: 40 hours (full-time); 
Worker C: 40 hours (full-time). 

Source: GAO analysis of interviews with national stakeholders. 
GAO-15-12. 

[End of figure] 

On the other hand, representatives in 4 of the 14 national 
organizations we interviewed emphasized how workers who are employed 
for more than 40 hours in a workweek may be at a disadvantage once the 
Home Care Rule goes into effect (see figure 4). The representatives 
said these workers could see their hours and wages reduced by 
employers seeking to avoid paying overtime wages. At least two 
national organizations predict that in certain situations, workers 
will have to work for multiple agencies in order to maintain their 
current level of income. 

Extending minimum wage and overtime protections to home care workers 
may help expand the workforce and reduce turnover at a time when the 
demand for home care services is expected to increase, according to 
representatives in 8 of the 14 national organizations we interviewed, 
including worker and consumer advocacy organizations. These 
stakeholders often pointed to low wages and poor benefits as an 
impediment to recruiting and retaining qualified home care workers and 
the cause of high turnover. On the other hand, five national 
organizations, including disability advocacy groups and organizations 
representing employers, predict that if some workers' hours are 
reduced, the Home Care Rule could lead to higher turnover among 
workers and cause them to seek out other jobs, which could result in a 
labor shortage. 

Potential Effects on Consumers, Including the Cost and Continuity of 
Care: 

Extending FLSA coverage to home care workers could also have effects 
on consumers. For example, representatives in six national 
organizations we interviewed said the Home Care Rule could result in 
better quality of care for consumers by reducing turnover among 
workers. However, representatives in eight national organizations we 
interviewed expressed concern over how the implementation of the 
overtime requirements might potentially affect the continuity of care 
for some consumers. Employers and consumers seeking to minimize 
overtime payments might need to hire additional workers to provide 
care. Representatives in one national organization said because of the 
nature of the work, it is not unusual for consumers and home care 
workers to forge close relationships, and according to a personal 
attendant coalition we interviewed, introducing additional workers may 
disrupt the routines and continuity of care for consumers who need 
substantial care. One home care worker we interviewed said that 
continuity of care is important for developing trust and that the 
particular consumer she works with might be wary of introducing new 
workers into her home. Another home care worker said it takes a 
considerable amount of time to learn the different techniques used to 
support consumers with disabilities and that the Home Care Rule has 
the potential to disrupt established relationships between workers and 
consumers. 

Several national organizations discussed how the Home Care Rule could 
potentially affect the affordability of in-home care. Representatives 
in 8 of the 14 national organizations we interviewed noted specific 
situations where certain consumers receiving home care could be at 
risk of being transferred to an institution or having to move to an 
alternate setting because of possible service cost increases. For 
example, in anticipation of the Home Care Rule going into effect and 
increased costs, representatives from one home care agency we 
interviewed said some consumers have already decided to hire a 
neighbor or friend to meet their home care needs or have left their 
homes to move into a congregate setting. 

Potential Effects on State Medicaid Programs: 

Effects on Medicaid-funded home care services will likely vary by 
state since states have some flexibility in designing their Medicaid 
Programs and could choose to make adjustments in response to the rule. 
Many of the potential effects described by officials in the six states 
we visited are similar to some of those we heard from the national 
organizations-including concerns about cost and potential disruption 
of the continuity of care. Most state officials we interviewed were 
concerned about the potential effects of the Home Care Rule on 
existing programs that were structured and made affordable by means of 
the companionship or live-in exemptions. How the FLSA will apply in 
each case will depend in part on how services are delivered and the 
specific facts and circumstances of each situation. Among the 
potential effects we heard in the six states we visited were: 
[Footnote 34] 

* Consumer-directed programs--Consumers have the option to direct 
their own care in certain Medicaid-funded programs. Consumer-directed 
programs under Medicaid are designed to optimize consumers' autonomy 
and independence.[Footnote 35] In these programs, consumers may 
exercise their own decision-making authority in areas such as 
recruiting, hiring, training, and supervising workers. Officials in at 
least two states we visited expressed concern over how the Home Care 
Rule might affect the flexibility of these programs or restrict 
consumer choice in situations where the state may be considered an 
employer along with the consumer. For example, a consumer may 
potentially have less decision-making authority over how many workers 
are needed to provide care if a state exercises some control over 
workers and decides it is necessary to limit workers' hours to reduce 
overtime costs. According to the National Association of Medicaid 
Directors, maintaining current levels of consumer choice under 
Medicaid either becomes more expensive in certain situations as a 
result of the Home Care Rule, or may be sacrificed in some situations 
in favor of cost control. 

* Family caregivers--Some states with consumer-directed Medicaid 
programs allow consumers to hire family members to provide their care. 
According to the National Association of Medicaid Directors, paid 
family caregivers have become a common solution to the shortage of 
traditional home care workers. Some states may consider limiting the 
number of hours workers, including family members, can work in order 
to minimize overtime costs once the Home Care Rule goes into effect, 
which could potentially reduce the available workforce. In addition, 
some family caregivers may rely on the income they receive by 
providing care. In two states we visited, state officials specifically 
expressed concern over situations where family members' work hours may 
be reduced in response to the Home Care Rule in order to minimize 
overtime payments, which could reduce the family's income. In another 
state, officials were less concerned about the Home Care Rule's 
potential effect on family caregivers because one of their Medicaid 
home care programs includes certain restrictions on hiring a family 
member and limits the number of hours a family worker can provide care. 

Though DOL guidance describes the parameters of an employment 
relationship versus a familial relationship for the purposes of the 
Home Care Rule,[Footnote 36] officials from one national organization 
told us that it may be a challenge for some consumers and their family 
caregivers to determine when FLSA principles apply. According to DOL 
guidance, family workers may be entitled to FLSA minimum wage and 
overtime protections depending on the specific circumstances of the 
work arrangement. 

Side bar: 

What are family caregivers? 

Paid family caregivers are typically not career home care workers; 
rather they are usually close family members and friends willing to 
help the consumer. DOL guidance states that in situations where family 
members are paid care providers, there is both a familial and an 
employment relationship, and only hours worked within the scope of the 
employment relationship are covered by the FLSA. In these 
circumstances, the employment relationship is usually limited by a 
"plan of care" or other written agreement approved by the program 
funding the services. For example, a familial relationship rather than 
an employment relationship would exist for a father who has an adult 
son with a physical disability and helps his son with eating dinner 
and bathing in the evenings. If the son enrolls in a Medicaid-funded 
program and the father becomes his paid care provider under a program-
approved plan of care that funds 8 hours of services per day, then the 
father would also be in an employment relationship with his son for 
purposes of the FLSA for those 8 hours. 

[End of side bar] 

* Respite care--The Medicaid program also permits states to offer 
respite care--a break from caregiving responsibilities--to family 
caregivers. In one state we visited, officials expressed concern that 
FLSA principles would apply to respite workers. For example, officials 
in this state said a worker may easily incur overtime in overnight 
respite situations, which could potentially strain a consumer's budget 
for care. Introducing additional workers to provide respite in order 
to avoid overtime costs may not always be practical. For example, one 
state official said it may be very disruptive for some consumers, such 
as those with intellectual and developmental disabilities who do not 
handle changes well, to have different caregivers in a respite 
situation over the course of a weekend. 

* Live-in arrangements--Under some Medicaid-funded programs, home care 
workers and consumers may live together. Officials in two of the 
states we visited told us they were concerned about how FLSA 
requirements may affect live-in care arrangements for those consumers 
who require substantial care and how it could be costly to comply with 
the FLSA in certain live-in situations. Many of these live-in 
arrangements were designed without consideration of FLSA overtime 
requirements and were made affordable by reliance on the companionship 
and live-in exemptions. State officials in one state we visited said 
they may redesign one of their live-in programs in response to the 
Home Care Rule to help keep overtime costs down. However, they said it 
would require time to reevaluate and possibly rewrite parts of 
existing program guidance. 

* State budgets--Officials in all of the six states we visited said 
the Home Care Rule has the potential to strain limited state budgets. 
For example, officials in three states said that Medicaid rates may 
not be sufficient to cover additional costs incurred as a result of 
the rule, including compensable travel time between Medicaid 
beneficiaries. According to state officials in three of the states we 
visited, their state legislatures had not yet budgeted additional 
funding that may be needed to comply with the Home Care Rule once it 
goes into effect. States may have to make systems changes to track 
overtime among workers, for example, which could be costly and would 
require time to implement. States are also facing their own unique 
budgetary challenges. For example, officials from at least two states 
we visited mentioned wages increasing, which could also pose a 
financial strain and mean that implementing the Home Care Rule's 
overtime requirements will cost more. In one state we visited, the 
minimum wage is set to increase from $8.00 to $9.00 by December 31, 
2015. 

* Capacity--In addition to implementing the Home Care Rule, state 
officials we interviewed expressed concern over resources and having 
the capacity to implement and comply with other recent federal 
requirements. For example, officials in three states said that the 
Patient Protection and Affordable Care Act's penalties for employers 
failing to offer full-time employees affordable health insurance are 
scheduled to go into effect at roughly the same time as the Home Care 
Rule.[Footnote 37] CMS also recently issued regulations on home and 
community-based services and some state officials said that they have 
been focusing their attention on complying with these regulations. 
[Footnote 38] 

DOL Worked with Federal Agencies and Stakeholders to Develop Guidance 
on Implementing the Home Care Rule: 

DOL Developed Implementation Guidance: 

After the Home Care Rule was published, DOL developed guidance, 
conducted outreach, and provided technical assistance to help state 
Medicaid programs and other stakeholders plan for implementation. For 
example, to help workers and consumers determine if federal minimum 
wage and overtime pay are required, DOL has made available on its 
website several self-assessment tools which ask a series of questions 
about the nature of the work, the employer, and the services 
performed. In addition, DOL has answered various Frequently Asked 
Questions (FAQs) and developed fact sheets to explain how the Home 
Care Rule will apply. For example, DOL answers questions on its 
website about how to apply FLSA to the hours a worker spends sleeping, 
as is the case when a home care worker lives with a consumer. DOL has 
also published several fact sheets on specific topics on its website 
to provide stakeholders with compliance assistance, such as how the 
FLSA will apply to paid family caregivers once the Home Care Rule goes 
into effect. DOL officials said they have trained staff in the 
national and regional offices in order to expand their capacity for 
compliance assistance, such as providing technical assistance. 

In its 2014-2018 Strategic Plan, DOL states that one of its goals is 
to improve compliance with federal wage and overtime laws by providing 
compliance assistance and conducting outreach with 
stakeholders.[Footnote 39] After the final rule was issued, DOL 
collaborated with federal agencies and conducted outreach with 
stakeholders to help them better understand the implications of the 
rule on state Medicaid programs and develop applicable guidance (see 
figure 5). Since many Medicaid programs providing home care services 
were created with the expectation that the workers would be exempt 
from the FLSA, DOL initiated an interagency workgroup comprised of 
individuals from DOL, CMS, and DOJ to understand the variation among 
different state Medicaid programs and the laws that protect people 
with disabilities.[Footnote 40] DOL identified two areas in which 
Medicaid programs could use additional guidance and developed written 
guidance, sponsored webinars, and conducted outreach with all 50 
states to assist with compliance. In addition, CMS also issued 
guidance to assist states in understanding options for consumer-
directed programs in implementing the changes made by the Home Care 
Rule.[Footnote 41] 

Figure 5: Outreach Conducted by DOL after the Final Home Care Rule Was 
Issued: 

[Refer to PDF for image: timeline] 

2013: 

DOL published the final rule on October 1, 2013. 

DOL initiated an interagency workgroup with CMS and DOJ. 

2013-2014: 

DOL conducted outreach with workers and disability rights advocates, 
states, federal agencies, and national organizations (October 2013 - 
October 2014). 

2014: 

DOL issued shared living guidance (March 27, 2014). 

DOL issued joint employment guidance (June 19, 2014). 

DOL completed preliminary outreach with all 50 states (September 2014). 

2015: 

Home Care Rule is scheduled to go into effect January 1, 2015. 

DOL plans to continue outreach efforts with employers and states 
(ongoing). 

Source: GAO analysis of Department of Labor documents. GAO-15-12. 

[End of figure] 

The two major guidance documents DOL issued pertain to: 

* Shared living arrangements--In response to the proposed rule, DOL 
received many comments from stakeholders requesting that it clarify 
how FLSA wage and hour requirements apply to certain shared living 
arrangements funded under Medicaid.[Footnote 42] DOL consulted with 
stakeholders to learn about the different types of shared living 
models used by states and the differences among them. In March 2014, 
DOL issued an Administrator's Interpretation, which provided guidance 
on how FLSA principles apply to shared living arrangements.[Footnote 
43] A representative from one national organization we interviewed 
said that it was collaborating with another national organization to 
develop a reader-friendly guide on shared living to further help state 
Medicaid agencies and other home care providers implement FLSA 
requirements. The design of states' shared living programs can vary 
greatly, as can the specific facts and circumstances around these 
living situations. For example, in one state we visited, a state 
official said that most shared living arrangements in the state 
consist of home care providers opening up their homes to consumers. In 
another state we visited, home care workers typically move into the 
home of the consumer. The shared living guidance provides detailed 
examples about different types of live-in arrangements including: (1) 
those in which a consumer lives in a home care worker's house, (2) 
those in which a home care worker lives in a consumer's house, and (3) 
those in which the two move into a new house together (see figure 6). 

Figure 6: Different Types of Shared Living Arrangements Outlined in 
DOL Guidance: 

[Refer to PDF for image: illustration] 

Consumer moves into the home care worker’s home, integrating the 
consumer into the shared experiences of the home and family. 

Home care worker moves into consumer’s home, providing companionship 
and help at night or in emergencies. 

Consumer and home care worker move together into a new residence that 
accommodates both of them. 

Source: Department of Labor guidance. GAO-15-12. 

[End of figure] 

The guidance on shared living also explains that FLSA requirements may 
or may not apply to home care workers in these arrangements and will 
depend, in part, on whether the home care worker would be considered 
an employee or an independent contractor.[Footnote 44] To determine 
this, DOL uses the "economic realities" test, which reviews a series 
of factors. Some of the factors reviewed in determining whether a 
worker is an employee or an independent contractor include who sets 
wages and work hours and who determines how the work is 
performed.[Footnote 45] The guidance also provides various examples of 
shared living arrangements and what the result would be under the 
economic realities test. According to the guidance, in most situations 
where a consumer moves into the home care worker's existing home, the 
worker will not be considered an employee of the consumer under the 
FLSA. This is primarily because the home care worker has a greater 
degree of control over the work and investment in the arrangement, 
including maintaining and modifying the residence.[Footnote 46] On the 
other hand, the guidance says that when a worker moves into the home 
of a consumer, the worker will typically be considered an employee of 
the consumer under the FLSA, because the consumer has invested in and 
controls the residence, and likely sets the schedule and directs how 
and when tasks are to be performed. Several of the national 
organizations and states we interviewed appreciated DOL's efforts to 
explain how these different types of Medicaid services are delivered 
and the specific examples provided in the shared living guidance. 
Based on the guidance, officials in two states we visited said that 
they do not anticipate having to make changes because they believe the 
FLSA does not apply to them based on the way their shared living 
programs are structured. 

* Joint employment--DOL reached out to stakeholders to understand how 
different Medicaid programs are structured to develop guidance on the 
application of FLSA joint employment principles and to help states 
implement the Home Care Rule. Under the FLSA, a single worker may be 
an employee of two or more employers at the same time.[Footnote 47] 
For example, in the context of home care, a consumer and a third party 
such as a state Medicaid agency or a private home care agency may 
jointly employ a worker.[Footnote 48] Because the FLSA will apply to 
many more home care workers once the Home Care Rule goes into effect, 
in June 2014 DOL issued an Administrator's Interpretation providing 
guidance on joint employment. This guidance could help stakeholders 
understand situations in which there is a third party joint employer 
for purposes of FLSA, such as in certain Medicaid-funded consumer-
directed programs.[Footnote 49] According to DOL, most, but not all, 
consumer-directed programs will have a third party joint employer such 
as a private agency, non-profit organization, or public entity in 
addition to the consumer. 

States have been reexamining their roles and responsibilities under 
Medicaid in order to determine if they are third party joint employers 
in certain situations and therefore responsible for meeting the FLSA's 
minimum wage and overtime requirements, according to an official at 
the National Association of Medicaid Directors. States are 
particularly concerned about situations in which they may be a joint 
employer to home care workers who provide care for multiple consumers 
because such workers may accrue overtime. For example, in one state we 
visited, a home care worker said she works for three different 
consumers under the state's consumer-directed programs where the 
consumer or a family member is considered the employer. She does not 
work for any one consumer for more than 40 hours per week. If the 
state is a joint employer for these programs, it may be responsible 
for compensating the worker with overtime wages any time she works 
more than 40 hours per week cumulatively across any of the consumers 
(see figure 7). 

Figure 7: Example of a State's Responsibility for Paying Overtime in a 
Joint Employment Scenario: 

[Refer to PDF for image: illustration] 

Public entity: 

Home care worker: 
Consumer A: 25 hours a week; plus: 
Consumer B: 20 hours a week; plus: 
Consumer C: 20 hours a week; equals: 65 hours per week. 

If a public entity is a joint employer with the consumers, it may be 
responsible for paying the worker overtime for 25 hours in this 
scenario. 

Source: GAO analysis of Department of Labor guidance. GAO-15-12. 

Note: According to the Department of Labor, a home care worker who 
works for multiple consumers and a single third party joint employer 
must be paid at the overtime rate for any hours worked more than 40 in 
a single workweek, aggregating the time worked across consumers. 

[End of figure] 

Certain states have already determined that they are joint employers. 
Prior to issuing the Administrator's Interpretation on joint 
employment, DOL responded to specific inquiries from states about the 
application of FLSA to specific scenarios. For example, an Oregon 
state official asked DOL to provide an official opinion on whether the 
state would be considered a joint employer of home care workers who 
provided services under their Oregon-sponsored consumer-directed 
Medicaid program. DOL applied the "economic realities" test used by 
the courts, using information provided by the state and determined 
that the state would be considered a joint employer in that program. 
One state we visited, California, has already determined based on 
prior experience that it would be considered a joint employer under 
the FLSA in certain Medicaid-funded situations and would therefore be 
responsible for paying eligible workers overtime under the new rule. 
For one California program, the state considered limiting workers' 
hours to 40 hours per week to help control costs, but ultimately 
budgeted more than $170 million to pay the approximately 50,000 
workers in that program who work up to a certain amount of overtime, 
with that cost expected to increase. 

However, five of the six states we visited were still in the process 
of trying to determine how the FLSA joint employment principles apply 
to their specific Medicaid programs and whether they will have to make 
any changes to their programs to keep the cost of home care services 
affordable. Two of these states also said they need additional time to 
understand the joint employment guidance in order to determine how 
their existing Medicaid programs may be affected by the FLSA framework 
and what steps they may need to take to comply. Officials in these two 
states also said they are trying to figure out if any of their 
programmatic changes would require CMS approval. CMS officials said 
the approval process could take from 90 to 180 days, depending on the 
type of change.[Footnote 50] 

DOL Plans a Phased-In Enforcement Strategy but Does Not Have Plans to 
Evaluate the Effects of the Rule: 

While DOL has several enforcement mechanisms in place to oversee the 
Home Care Rule's implementation once it goes into effect, DOL 
officials said they are currently focusing their efforts on technical 
assistance to help employers and states with implementing the rule. 
[Footnote 51] For example, in October 2014, DOL announced that it will 
not bring enforcement actions against any employer for violations of 
FLSA resulting from the Home Care Rule through June 2015.[Footnote 52] 
DOL stated that it had received requests from national organizations 
representing state Medicaid programs and disability advocates and two 
states to extend the effective date of the Home Care Rule. According 
to DOL, these entities requested additional time to make programmatic, 
budgetary, and operational adjustments to state Medicaid programs. DOL 
also said it received requests from national organizations and worker 
advocates to implement the Home Care Rule on the published date of 
January 1, 2015 so that workers could be protected by the FLSA without 
delay. While DOL did not extend the effective date of the Home Care 
Rule, the agency recognized that the implementation of the Home Care 
Rule raised sensitive issues and it has been working with employers to 
minimize the effects on consumers who rely on home care. For these 
reasons, DOL stated that during the six month period of non-
enforcement, it will concentrate its resources on providing intensive 
technical assistance to the community, particularly state agencies 
administering home care programs. In the notice, DOL stated that from 
July 1, 2015 until December 31, 2015, it will make determinations on a 
case-by-case basis as to whether to bring enforcement actions in the 
home care context and will give strong consideration to an employer's 
efforts to meet the requirements under the FLSA. During this time 
period, DOL plans to continue extensive outreach and technical 
assistance. 

While DOL has adopted this phased-in enforcement strategy to promote 
compliance, the effects of the Home Care Rule still remain uncertain. 
In 2011, the President signed Executive Order 13563, entitled 
Improving Regulation and Regulatory Review. The order states that our 
regulatory system "must promote predictability and reduce 
uncertainty." The order directed each federal executive agency to 
develop a plan for conducting retrospective reviews of existing 
significant regulations, to determine whether they should be modified, 
streamlined, expanded, or repealed to make the agency's regulatory 
program more effective or less burdensome.[Footnote 53] We previously 
reported that retrospective reviews are useful because regulations can 
change the behavior of regulated entities and the public in ways that 
cannot be predicted prior to implementation. In addition, these 
reviews may result in various outcomes such as changes to regulations, 
changes or additions to guidance, decisions to conduct additional 
studies, or validation that existing rules were working as planned. 
[Footnote 54] We have also observed that it is important for agencies 
to consider in advance how they will evaluate their regulations, to 
better position them to conduct future retrospective analyses. DOL 
officials told us it would be premature to think about the effects of 
the rule since they are developing further implementation plans and 
focusing on providing technical assistance. DOL officials also said 
they had not made any plans for evaluating the Home Care Rule and that 
it is too early to design such a study. In 2007, we recommended that 
during the promulgation of certain new rules, agencies consider how 
and when they will measure the performance of the regulation, 
including how and when they will collect, analyze, and report the data 
needed to conduct a retrospective review. Consistent with that 
recommendation, guidance from the Office of Management and Budget also 
states that regulations should be designed and written in ways that 
facilitate evaluation of their consequences and thus promote 
retrospective analyses. 

Conclusions: 

Home care agencies and state Medicaid programs are responding to the 
Home Care Rule through programmatic and policy changes, and while more 
home care workers will be entitled to receive federal minimum wage and 
overtime pay protections as a result of the Home Care Rule, the 
effects of the rule will remain unclear until after it is implemented. 
The effects on workers and consumers will largely depend on how 
employers respond to overtime requirements and the changes that are 
made to state Medicaid programs. Given that many state Medicaid 
programs have relied on the companionship services exemption and 
emphasize providing care at home, state Medicaid officials continue to 
be concerned about maintaining services for consumers in their homes 
as opposed to institutions. DOL's recent announcement regarding the 
phase-in of its enforcement, coupled with its substantial outreach to 
stakeholders and revised estimate of the economic impact of the rule, 
highlight the challenges and complexity of implementing the rule. The 
future of the Home Care Rule will depend on the outcome of pending 
litigation and DOL's subsequent decisions about implementation. Should 
the rule go into effect as scheduled, once it is fully implemented, 
DOL will have an opportunity to examine some of the broader 
implications of the Home Care Rule such as whether the workforce grows 
as a result to meet any increased demand for home care and whether 
there is any resulting increase in the use of institutional care. 
However, in the absence of a plan to evaluate the effects of the rule, 
DOL may be unprepared to collect the necessary data to take advantage 
of this opportunity. Given the uncertainty of the Home Care Rule's 
ultimate impact, planning for a retrospective review is important 
because regulations can change behaviors and result in consequences 
that cannot be predicted prior to implementation. 

Recommendation for Executive Action: 

Depending on the outcome of the litigation, the Secretary of Labor 
should take steps to ensure the agency will be positioned to conduct a 
meaningful retrospective review consistent with the Executive Order at 
an appropriate time. These steps should be taken in consultation with 
the Centers for Medicare & Medicaid Services, and could include, for 
example, identifying metrics that could be used to evaluate the rule, 
and implementing a plan to gather and analyze the necessary data. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to DOL for review and comment. 
DOL's Wage and Hour Division (WHD) provided written comments which are 
reproduced in appendix I. WHD agreed with our recommendation that the 
agency position itself to conduct a meaningful retrospective review at 
an appropriate time. Moving forward, WHD said it is working to develop 
data collection plans and to explore a potential evaluation that is 
focused on the Home Care Rule. As part of this effort, WHD noted that 
DOL will continue to work with HHS and other federal partners. DOL 
also provided technical comments, which we incorporated as appropriate. 

We are sending copies of this report to appropriate congressional 
committees, the Secretary of Labor, and other interested parties. In 
addition, the report will be available at no charge on the GAO website 
at [hyperlink, http://www.gao.gov]. 

If you or your staffs have any questions concerning this report, 
please contact me at (202) 512-7215 or sherrilla@gao.gov. Contact 
points for our Offices of Congressional Relations and Public Affairs 
may be found on the last page of this report. Key contributors to this 
report are listed in appendix II. 

Signed by: 

Andrew Sherrill, Director: 
Education, Workforce, and Income Security Issues: 

[End of section] 

Appendix I: Comments from the Department of Labor: 

U.S. Department of Labor: 
Wage and Hour Division: 
Washington, DC 20210: 

December 4, 2014: 

Barbara D. Bovbjerg: 
Managing Director: 
Education, Workforce, and Income Security Issues: 
U.S. Government Accountability Office: 
Washington, D.C. 20548: 

Dear Ms. Bovbjerg: 

The Department of Labor's Wage and Hour Division (WHD) appreciates the 
opportunity to submit a statement in response to the Government 
Accountability Office (GAO) Draft Report (Report) titled "Fair Labor 
Standards Act: Extending Protections to Home Care Workers" (GAO-15-12). 

The Department was pleased to publish the Home Care Final Rule on 
October 1, 2013. This Rule updates out-of-date regulations to correct 
the exclusion of home care workers from the FLSA's minimum wage and 
overtime protections and ensures that nearly two million workers will 
receive the same basic protections already provided to most U.S. 
workers - including those who perform the same jobs in nursing homes. 
The Rule will also help to ensure that consumers have access to high-
quality care in their homes from a stable and increasingly 
professionalized workforce. 

As your Report reflects, the Rule is the result of a deliberate, 
thoughtful and inclusive rulemaking process completed over the course 
of several years. On December 27, 2011, the Department published a 
Notice of Proposed Rulemaking (NPRM) based on the Department's 
enforcement experience, relevant legislative history, significant 
stakeholder input, and a thorough review of research concerning the 
home care industry. During the rulemaking process, the Department 
carefully considered over 26,000 comments received in response to the 
NPRM, including comments from home care workers, consumers of home 
care services, state officials, small business owners and employers, 
worker advocacy groups and unions, employer and industry advocacy 
groups, the disability community, and others. 

We appreciate GAO's acknowledgment of the Department's significant 
outreach efforts during the rulemaking process and since promulgating 
the Final Rule. Since the Rule was published, we have worked closely 
with all stakeholders to implement the Rule in a manner that achieves 
two goals: extending basic labor protections to home care workers,
and ensuring that Medicaid participants and their families continue to 
have access to the critical home and community-based services upon 
which they rely, particularly services delivered through innovative 
models of care. 

In addition to extensive written guidance, the Department's 
unprecedented implementation program has included engagement with a 
wide variety of stakeholder organizations at every step throughout the 
implementation process. In the 14 months since the Rule was published, 
the Department has directly reached thousands of people through over 
200 webinars, conference calls, meetings and presentations, engaging
relevant state associations, states, consumers, disability and senior 
citizens' advocates, veterans' organizations, worker representatives, 
and industry groups, among others. As part of our individualized, 
ongoing technical assistance program, we have held at least one state-
specific conference call with representatives from all 50 state 
governments. We continue to stand ready to provide assistance to all 
stakeholders throughout the implementation process. 

As the Report states, GAO recommends that "Depending on the outcome of 
the litigation, the Secretary of Labor should take steps to ensure the 
agency will be positioned to conduct a meaningful retrospective review 
consistent with the Executive Order at an appropriate time. These 
steps should be taken in consultation with the Centers for Medicare & 
Medicaid Services, and could include, for example, identifying metrics 
that could be used to evaluate the rule, and implementing a plan to 
gather and analyze the necessary data." 

WHD agrees that the agency should position itself to conduct 
meaningful retrospective review at the appropriate time. Consistent 
with the government-wide goal of building and applying evidence 
relevant to addressing important policy challenges and to ensuring
programs are effective, WHD has been engaged in discussions on the 
topic of the unique data collection needs of implementing the home 
care rule. As evidenced in this audit, WHD has documented the 
extensive rulemaking-related activities to date. Moving forward, WHD 
is working with the Department to develop data collection plans and to
explore a potential evaluation focused on various aspects of this 
overall effort. As part of this effort, the Department of Labor will 
continue to engage with the Department of Health and Human Services 
and other federal partners. 

Again, thank you for the opportunity to comment on the Report. If you 
have any questions, please do not hesitate to contact us. 

Sincerely, 

Signed by: 

David Weil: 
Administrator: 

[End of section] 

Appendix II: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

Andrew Sherrill, (202) 512-7215 or sherrilla@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, Blake Ainsworth (Assistant 
Director), Anjali Tekchandani (Analyst-in-Charge), Robert Campbell, 
Sara Edmondson, and Meredith Moore made significant contributions to 
all phases of the work. Also contributing to this report were James 
Bennett, Kenneth Bombara, Catina Bradley, Sarah Cornetto, Patricia 
Donahue, Alexandra Edwards, Katherine Iritani, Kathy Leslie, Sheila 
McCoy, Linda McIver, Jean McSween, Clarita Mrena, Mimi Nguyen, and 
Kathleen van Gelder. 

[End of section] 

Footnotes: 

[1] The Fair Labor Standards Act of 1938 (FLSA), as amended, is the 
primary federal law that sets minimum wage and overtime pay standards. 
Ch. 676, 52 Stat. 1060 (codified as amended at 29 U.S.C. §§ 201-219). 
In general, the term "home care" is used as an umbrella term that 
includes all the nonmedical and paramedical services that can be 
provided in people's homes, including those services often provided by 
workers referred to as home health aides or personal care attendants. 

[2] Application of the Fair Labor Standards Act to Domestic Service, 
78 Fed. Reg. 60,454 (Oct. 1, 2013) (amending 29 C.F.R. pt. 552). For 
purposes of this report, we will refer to this final rule as the Home 
Care Rule. The rule is currently scheduled to go into effect January 
1, 2015. 

[3] In this report, we use the term "existing regulations" to refer to 
the regulations in effect on the date that this report was issued 
(December 17, 2014) and when DOL issued the final Home Care Rule. 

[4] These issues are currently under litigation. In June 2014, the 
Home Care Association of America, International Franchise Association, 
and National Association for Home Care and Hospice filed a complaint 
in federal court alleging, among other things, that DOL exceeded its 
statutory authority in issuing the rule. See Home Care Ass'n of Am. v. 
Weil, No. 14-967 (D.D.C. filed June 6, 2014). As of December 9, 2014, 
the lawsuit was pending before the U.S. District Court for the 
District of Columbia. 

[5] The 14 national organizations we interviewed are: National 
Association of States United for Aging and Disabilities, National 
Association of State Directors of Developmental Disabilities Services, 
National Association of Medicaid Directors, National Association for 
Home Care & Hospice, The National Consumer Voice for Quality Long-Term 
Care, Direct Care Alliance, National Employment Law Project, American 
Network of Community Options and Resources, ADAPT, Paraprofessional 
Healthcare Institute, AARP, Service Employees International Union, 
National Council on Disability, and the Small Business Administration 
Office of Advocacy. The Small Business Administration Office of 
Advocacy is an office within the Small Business Administration and the 
National Council on Disability is an independent federal agency. 
Thirteen of the 14 organizations we interviewed had provided comments 
on the proposed rule during the public comment period. In addition to 
the 14 national organizations, we also interviewed private home care 
companies, a consulting group, and a personal attendant coalition in 
one state. 

[6] From July 2014 to August 2014, we conducted follow-up interviews 
with officials in four of the six states. 

[7] Other public sources that may pay for home care services include 
Medicare, certain programs administered by the Veterans Health 
Administration, and state and local programs. 

[8] Medicaid provides coverage of different types of services provided 
in an individual's home, which include home health services and home 
and community-based services. These may include "home care services" 
as that term is used in this report. 

[9] 42 U.S.C. § 1396d(b). 

[10] For example, under section 1915(c) of the Social Security Act, 
states may seek CMS approval of waivers that allow states to provide a 
broad range of home and community-based services. Under these section 
1915(c) waivers, states may cover personal care and other types of 
services that allow individuals to remain in their homes as an 
alternative to institutional care. See 42 U.S.C. § 1396n(c). Over 300 
different section 1915(c) waivers have been approved by CMS and have 
been implemented by various states. 

[11] In 1999, the Supreme Court held that states must serve 
individuals with disabilities in community-based settings under 
certain circumstances. Olmstead v. L.C., 527 U.S. 581 (1999). 
Accordingly, states must ensure that in serving their Medicaid 
populations, they are compliant with this mandate as well as title II 
of the Americans with Disabilities Act and DOJ's implementing 
regulations, which prohibit discrimination on the basis of disability 
by public entities. See 42 U.S.C. § 12131 et seq., 28 C.F.R. pt. 35. 

[12] Fair Labor Standards Amendments of 1974, Pub. L. No. 93-259, § 7, 
88 Stat. 55, 62 (codified at 29 U.S.C. §§ 202(a), 206(f), 207(l), 
213(a)(15)). Specifically, the exemption applies to casual babysitters 
and "any employee employed in domestic service employment to provide 
companionship services for individuals who (because of age or 
infirmity) are unable to care for themselves (as such terms are 
defined and delimited by regulations of the Secretary)." 

[13] Codified at 29 U.S.C. § 213(b)(21). 

[14] Extension to Domestic Service Employees, 40 Fed. Reg. 7404 (Feb. 
20, 1975) (codified at 29 C.F.R. pt. 552). 

[15] 29 C.F.R. §§ 522.6, 522.106. Companionship services may also 
include "general household work," provided that such work does not 
exceed 20 percent of the total weekly hours worked. 

[16] 29 C.F.R. § 552.109. Employees providing companionship services 
who are employed by "an employer or agency other than the family or 
household using their services" are exempt. Third party employers may 
also claim the overtime exemption for live-in domestic workers. 

[17] In the Home Care Rule, DOL also updated certain terminology; for 
example, it deleted governesses, grooms, and footmen from the 
definition of "domestic service employment," and added nannies and 
home health aides. 78 Fed. Reg. 60,454, 60,557 (Oct. 1, 2013). 

[18] Whether a particular worker may be entitled to pay for these 
hours depends on the circumstances. DOL has regulations on the 
compensability of sleep time, 29 C.F.R. §§ 785.20-785.23, and travel 
time, 29 C.F.R. §§ 785.33-785.41, which were unchanged by the Home 
Care Rule. 

[19] However, under the existing regulations, the companion must 
provide these services with respect to the elderly or disabled person 
and not generally to other persons. 29 C.F.R. § 552.106. As previously 
mentioned, any general household work must not exceed 20 percent of 
the total weekly hours worked. 29 C.F.R. § 552.6. 

[20] Similarly, under the revised Home Care Rule, third party 
employers may not claim the live-in domestic services exemption from 
the FLSA's overtime requirements, although they are entitled to claim 
this exemption under the existing regulations. 

[21] DOL had published the proposed rule on December 27, 2011. 
Application of the Fair Labor Standards Act to Domestic Service, 76 
Fed. Reg. 81,190 (Dec. 27, 2011). 

[22] According to this DOL official, who cited the FLSA's legislative 
history, the FLSA was not meant to apply to workers who are 
essentially "elder sitters" who watch over elderly or infirm 
individuals in the same manner that a babysitter watches over 
children. Additionally, she said that at that time, home care workers 
who provided these types of companionship services were not considered 
to be the "breadwinners" responsible for their own families' support. 
Ensuring Regulations Protect Access to Affordable and Quality 
Companion Care: Hearing Before the H. Subcomm. on Workforce 
Protections, Comm. on Education and the Workforce, 112th Cong. 8-23 
(2012) (statement of Nancy J. Leppink, Deputy Administrator Wage and 
Hour Division, U.S. Department of Labor). 

[23] See National Association of Home Care and Hospice, "Basic 
Statistics about Home Care" (2010 update). 

[24] Paid home care workers are known by a variety of job titles such 
as home health aide and personal care aide, among others. DOL 
officials said they used data for occupations classified by BLS as 
Personal Care Aides and Home Health Aides to represent the universe of 
potentially affected home care workers. BLS projects that between 2012 
and 2022, these will be the fastest growing occupations in overall 
growth and two of the top three fastest growing occupations in terms 
of rate of growth. Over this time period, BLS projects that these two 
occupational categories will add more than1 million new jobs. 

[25] Some of the other relevant laws and Executive Orders include, 
among others, the Paperwork Reduction Act of 1980, the Regulatory 
Flexibility Act, as amended by the Small Business Regulatory 
Enforcement Fairness Act of 1996, the Congressional Review Act, 
Executive Order 12866 (Regulatory Planning and Review), and Executive 
Order 13563 (Improving Regulation and Regulatory Review). 

[26] In the preamble to the final rule, DOL characterized the 26,000 
comments it received by saying that many were: (1) very general 
statements of support or opposition; (2) personal anecdotes that do 
not address a specific aspect of the proposed changes; (3) comments 
that are beyond the scope or authority of the proposed regulations; or 
(4) identical or nearly identical "form letters" sent in response to 
comment initiatives sponsored by various constituent groups. 

[27] This is not meant to be an exhaustive list; DOL may have made 
other changes not described here. In addition, DOL elected not to make 
changes in response to some comments. We did not evaluate whether DOL 
appropriately considered or responded to the comments. 

[28] In the final rule, DOL noted that this effective date exceeds the 
30-day minimum delayed effective date required under the 
Administrative Procedure Act and the 60-day delayed effective date for 
"major rules" under the Congressional Review Act. Although DOL stated 
that it typically utilizes the legislatively-required effective dates, 
as applicable, it has in the past extended the effective date for a 
significant FLSA rule in response to comments. DOL received comments 
suggesting a range of effective dates, from "immediately" to 18 months 
later. 

[29] The final rule requires employers of live-in home care workers to 
maintain accurate records of actual hours worked. The existing 
regulations, by contrast, allow individual, household, or family 
employers who have an agreement with their live-in home care workers 
describing the workers' hours of work and non-work time to rely on the 
agreement to establish the employee's hours of work in lieu of 
maintaining precise records of the hours actually worked. This 
simplified recordkeeping option is not available to third party 
employers. 29 C.F.R. §§ 552.102(b), 552.110(b). 

[30] As previously noted, one central change made by the Home Care 
Rule is that the companionship services exemption will apply only when 
the amount of time a worker spends on certain activities-including 
activities of daily living and instrumental activities of daily living-
does not exceed 20 percent of the total hours worked per workweek per 
consumer. The description of services that are subject to this limit 
was changed in the final rule from the description in the proposed 
rule. 

[31] Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives and, if the 
regulation is necessary, to select regulatory approaches that maximize 
net benefits (including potential economic, environmental, public 
health and safety effects, distributive impacts, and equity). DOL 
determined that this rule is economically significant within the 
meaning of Executive Order 12866 and therefore prepared a regulatory 
impact analysis. 

[32] Navigant Economics, Estimating the Economic Impact of Repealing 
the FLSA Companion Care Exemption, (March 2012). The Paraprofessional 
Healthcare Institute (PHI) estimates that approximately 10 percent of 
home care workers work more than 40 hours per week. PHI analysis of 
the U.S. Census Bureau, Current Population Survey (CPS), 2010 Annual 
Social and Economic (ASEC) Supplement. 

[33] Unless specifically exempted, employees covered by the FLSA must 
receive overtime pay for hours worked in excess of 40 in a workweek at 
a rate not less than time and one-half their regular rates of pay. 29 
U.S.C. § 207(a)(1). 

[34] We visited states from December 2013 to May 2014. We conducted 
follow-up interviews with officials in four of the six states from 
July 2014 to August 2014. 

[35] In the preamble to the Home Care Rule and FLSA guidance, DOL 
refers to "consumer-directed" programs. CMS uses the term "self-
directed." See 42 C.F.R. §§ 441.301, 441.740. According to recent CMS 
guidance, both terms hold the same meaning. 

[36] Department of Labor, Wage and Hour Division, "Fact Sheet #79F: 
Paid Family or Household Members in Certain Medicaid-Funded and 
Certain Other Publicly Funded Programs Offering Home Care Services 
Under the Fair Labor Standards Act (FLSA)" June 2014. 

[37] Among other things, the act provides that, beginning in 2014, 
employers with 50 or more full-time employees that fail to offer their 
full-time employees (and their dependents) affordable health insurance 
will be subject to a tax penalty. Full-time employees are those who 
work an average of 30 or more hours of work per week. Pub. L. No. 111-
148, § 1513(a), 124 Stat. 119, 253 (2010), (amending 26 U.S.C. § 
4980H). The Internal Revenue Service has delayed implementation of the 
penalty and has announced that it will gradually be phased in 
beginning in 2015. 

[38] Medicaid Program: State Plan Home and Community-Based Services, 5-
Year Period for Waivers, Provider Payment Reassignment, and Home and 
Community-Based Setting Requirements for Community First Choice and 
Home and Community-Based Services (HCBS) Waivers, 79 Fed. Reg. 2948 
(Jan. 16, 2014). 

[39] GAO also recommended in a prior report and DOL agreed that it 
should develop a systematic approach for identifying areas of 
confusion about FLSA requirements--including gathering and using input 
from FLSA stakeholders--to help inform compliance assistance efforts 
and improve its guidance to employers and workers. GAO, Fair Labor 
Standards Act: The Department of Labor Should Adopt a More Systematic 
Approach to Developing Its Guidance, [hyperlink, 
http://www.gao.gov/products/GAO-14-69] (Washington, D.C.: Dec. 18, 
2013). 

[40] States are required, under title II of the Americans with 
Disabilities Act and Department of Justice regulations, to administer 
services, programs, and activities in the most integrated setting 
appropriate to the needs of qualified individuals with disabilities. 
28 C.F.R. § 35.130(d). See also 42 U.S.C. § 12131 et seq.; Olmstead v. 
L.C., 527 U.S. 581 (1999). 

[41] CMCS Informational Bulletin, "Self-Direction Program Options for 
Medicaid Payments in the Implementation of the Fair Labor Standards 
Act Regulation Changes" July 3, 2014. 

[42] Shared living arrangements occur when workers and consumers live 
together in a private home and are commonly funded by Medicaid. These 
programs are referred to by various titles, such as "adult foster 
care," "host home," "paid roommate," "supported living," or "life 
sharing." 

[43] Department of Labor, Wage and Hour Division, Administrator's 
Interpretation No. 2014-1: The application of the Fair Labor Standards 
Act to home care services provided through shared living arrangements, 
including adult foster care and paid roommate situations. March 2014. 
See also Department of Labor, Wage and Hour Division, "Fact Sheet 
#79G: Application of the Fair Labor Standards Act to Shared Living 
Programs, including Adult Foster Care and Paid Roommate Situations" 
March 2014. 

[44] The FLSA applies only when there is an employee-employer 
relationship; it does not require payment of minimum wage and overtime 
compensation to workers who are properly categorized as independent 
contractors. 

[45] DOL has existing guidance on how courts and the department 
determine whether a worker is an employee and therefore covered by the 
FLSA. According to this guidance, workers who are economically 
dependent on the business of the employer are considered to be 
employees. All facts relevant to the relationship between the worker 
and the employer must be considered. The factors considered can vary 
and no one set of factors is exclusive. Department of Labor, Wage and 
Hour Division, "Fact Sheet #13: Am I an Employee?: Employment 
Relationship Under the Fair Labor Standards Act (FLSA)" May 2014. 

[46] According to the guidance, in most shared living arrangements in 
a home care worker's home, the worker will not be an employee of the 
consumer or a third party (provided the third party's role is 
limited), but will be considered an independent contractor instead. 
See Department of Labor, Wage and Hour Division, "Fact Sheet #79G: 
Application of the Fair Labor Standards Act to Shared Living Programs, 
including Adult Foster Care and Paid Roommate Situations" March 2014. 

[47] See 29 C.F.R. § 791.2. If an employee is jointly employed by two 
employers (i.e., employment by one employer is not completely 
disassociated from employment by the other), the employee's work for 
the joint employers during the workweek "is considered as one 
employment," and the joint employers are responsible, both 
individually and jointly, for FLSA compliance, including paying 
overtime compensation for all hours worked over 40 during the workweek. 

[48] Employers may be consumers, private home care agencies, non-
profit organizations, or a public entity such as a state or county, 
depending on how states' programs are designed and how certain roles 
and responsibilities are defined. To determine whether an entity is an 
employer under the FLSA, courts and DOL use the "economic realities" 
test, described above. 

[49] Department of Labor, Wage and Hour Division, Administrator's 
Interpretation No. 2014-2: Joint employment of home care workers in 
consumer-directed, Medicaid-funded programs by public entities under 
the Fair Labor Standards Act. June 2014. DOL also revised its pre-
existing Fact Sheet on joint employment; see Department of Labor, Wage 
and Hour Division, "Fact Sheet #79E: Joint Employment in Domestic 
Service Employment Under the Fair Labor Standards Act (FLSA)" June 
2014. 

[50] According to CMS officials, this may require changes to waivers, 
and in some cases, CMS can approve amendments to waivers retroactively. 

[51] DOL's 2014-2018 Strategic Plan also states that compliance is 
dependent upon the effective use of enforcement tools. The FLSA 
authorizes DOL to enforce its provisions by, for example, conducting 
investigations, assessing penalties, supervising payments of back 
wages and bringing suit in court on behalf of employees. Workers also 
have the right under the FLSA to file a private lawsuit to recover 
wages they claim they are owed because of their employer's violation 
of the act's minimum wage or overtime pay requirements. For more 
information see GAO, Fair Labor Standards Act: The Department of Labor 
Should Adopt a More Systematic Approach to Developing Its Guidance, 
[hyperlink, http://www.gao.gov/products/GAO-14-69] (Washington, D.C.: 
Dec. 18, 2013). 

[52] See Application of the Fair Labor Standards Act to Domestic 
Service; Announcement of Time-Limited Non-Enforcement Policy. 79 Fed. 
Reg. 60,974 (Oct. 9, 2014). 

[53] Exec. Order No. 13,563, 76 Fed. Reg. 3821 (Jan. 21, 2011). 

[54] GAO, Reexamining Regulations: Agencies Often Made Regulatory 
Changes, but Could Strengthen Linkages to Performance Goals, 
[hyperlink, http://www.gao.gov/products/GAO-14-268] (Washington, D.C.: 
Apr. 11, 2014) and GAO, Reexamining Regulations: Opportunities Exist 
to Improve Effectiveness and Transparency of Retrospective Reviews, 
[hyperlink, http://www.gao.gov/products/GAO-07-791] (Washington, D.C.: 
July 16, 2007). 

[End of section] 

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