In the next two years, two new laws will affect millions of workers providing home care to the elderly, disabled, and/or children. In California, the Governor recently signed AB 241, which gives “personal attendants” the right to overtime in certain circumstances. AB 241 will be effective on January 1, 2014, but will expire on January 1, 2017, unless the Legislature extends the date. Similarly, the Department of Labor (“DOL”) created new rules significantly limiting the scope of the Fair Labor Standards Act’s (“FLSA”) existing overtime exemptions for domestic service workers providing “companionship” and those who live in the households where they provide care. The new FLSA rules are effective on January 1, 2015.

Below is a brief review of these important developments.

Scope of Assembly Bill 241

In California, Wage Order 15 governs the working conditions for household occupations, including “personal attendants” – defined as persons employed by a household or third party recognized in the health care industry to work in households to supervise, feed, or dress the elderly, disabled, and children. Wage Order 15 currently exempts certain personal attendants from overtime, rest breaks and meal periods and other wage-hour rules. Personal attendant services include assistance bathing, showering, obtaining medical care, preparing meals, shopping, and using a telephone. Personal attendants may include nannies and caregivers.

The exemption does not apply to nurses or personal attendants who spend more than 20% of their workweek on work that does not qualify as personal attendant services (such as taking blood or providing medical services).

AB 241 will require most employers (even private households) who use personal attendants to pay overtime when they work more than nine hours in a workday or 45 hours in a workweek. Of course, this overtime rule is more generous to employers than California’s regular overtime rule, which requires non-exempt employees to be paid overtime for work in excess of eight hours in a workday or 40 hours in a workweek.

AB 241 excludes from its coverage personal attendants who: (1) perform services through the In-Home Supportive Services program; (2) have specified familial relationships with the employer; (3) are certain types of babysitters; (4) are employed by certain licensed health facilities as specified in the Health and Safety Code; (5) are employed pursuant to certain voucher programs connected with the State Department of Developmental Services; or (7) provide child care and who are exempt from certain licensing requirements of the Health and Safety Code.

Once AB 241 becomes effective, there will be three categories of domestic worker employers in California: (1) those who do not employ personal attendants who must pay overtime under the regular overtime rules for non-exempt employees; (2) those who employ personal attendants subject to AB 241 who must pay overtime under the new rules in 2014; and (3) those who employ personal attendants excluded from AB 241 and remain covered by Wage Order 15’s current exemption.

The New DOL Companionship and Live-In Domestic Worker Rules

Since 1975, domestic service workers providing “companionship services” to the elderly, ill, injured, or disabilities and those who reside in the households where they provide services have been exempt under the FLSA. Such workers include home health aides, attendants, and caregivers, among others. The new DOL rules: (1) clarify and narrow the type of services that constitute “companionship”; (2) limit the application of the current companionship and live-in domestic worker exemptions to only employers who are the individual, family, or household using the services (i.e., employers like home care agencies cannot use the exemptions); and (3) impose new recordkeeping obligations on employers of live-in domestic service employees.

Courts have interpreted the current definition of “companionship services” so broadly that essentially any services provided for the elderly, ill, or disabled in a “private home” (i.e., not a retirement home or assisted living/skilled nursing facility) qualifies for the exemption. Under the DOL’s new rules, “companionship services” are limited to “fellowship and protection.” “Fellowship” means engaging the client in activities like conversation, reading, games, crafts, and walks. “Protection” means to be present with the client in her home or accompanying her when outside the home to monitor her safety and well-being. So, driving and providing medical services will generally not qualify as “companionship.” Domestic workers who provide certain “care” services (e.g., dressing, grooming, meal prep, housework) may still qualify for the exemption if those care services do not exceed 20% of the hours worked every week.

The new rules also limit the companionship exemption to situations in which the individual receiving services (or a family member) hires the caregiver. Third-party employers, like home care agencies, will not qualify.

Finally, the new rules require employers of live-in domestic service workers to maintain accurate records of hours worked. Although not specified in the new rules, employers with employees who will lose current exempt status will also have to maintain accurate time records of hours when the rules go in effect.

Tips for Employers

For employers affected by both AB 241 and the DOL’s new rules, it is important to remember that when both laws apply, the more restrictive law will govern. So, beginning in 2015 when the DOL rules are effective, California employers will have to pay non-exempt caregivers overtime when they work more than nine hours in a workday (the California standard) or 40 hours in a workweek (the FLSA standard).

Employers in this industry should carefully evaluate their practices to determine whether any of their employees will lose their exempt status under AB 241 or the DOL’s new rules and modify recordkeeping and payroll policies in anticipation of the new laws.

There are other nuances to AB 241 and the new DOL rules not addressed in this article. Employers should consult with experienced legal counsel for a more in-depth analysis of these developments.