Victory for Home Care Workers Bodes Well for Overtime Rule

After the Department of Labor (DOL) issued regulations last year requiring third-party providers of home care services to pay the minimum wage and overtime to their employees, various employer groups filed suit in federal court in an attempt to have the new rules struck down. In short, they argued that the Secretary of Labor didn’t have the legal authority under the Fair Labor Standards Act (FLSA) to change the definition of “companionship services” it had used in the regulations it promulgated in 1975 to set wage and hour rules for home care workers. The U.S. District Court judge who heard the case, Richard Leon, didn’t just agree with the employers, he wrote a vituperative opinion expressing his outrage that the Department of Labor was arrogantly usurping congressional powers.

Calling on his inner George W. Bush, the judge declared that the Department of Labor was trying to “seize unprecedented authority to impose overtime and minimum wage obligations in defiance of the plain language of Section 213. It cannot stand.”

Last week, in Home Care Association v. Weil, a unanimous three-judge panel of the U.S. Court of Appeals for the District of Columbia Circuit disagreed with Judge Leon about the “plain language” of the statute and overruled him, finding that “the Department’s authority [to change its regulations] is clear.” The appeals court pointed out that the Supreme Court had already decided that Section 213 of the Fair Labor Standards Act doesn’t unambiguously compel any conclusion about whether third-party providers of home care services are exempt from the overtime and minimum wage requirements. Judge Leon forgot that the issue was so far from plain that back in 1975 that DOL considered covering third-party employers, before choosing not to. (How he forgot, since he cited DOL’s hesitation himself, is another story.)

Importantly, the Court of Appeals found that Congress delegated broad authority to DOL to interpret the FLSA, which permits the department to change its regulations as long as it provides a reasoned explanation and shows good reasons for its new policy. The Obama administration’s decision to require fair pay and protection against excessive work hours for nearly two million (mostly female) caregivers who have struggled to earn enough to make ends meet was not a power grab—it was a caring Labor Department using the authority Congress gave it to protect some of the most vulnerable workers in the United States.

The Home Care Association decision bodes well for another exercise of the secretary’s authority under the FLSA: the forthcoming rule updating the so-called white collar overtime exemptions, which would grant or secure the right to overtime pay for up to 15 million workers. The FLSA explicitly gives the Secretary of Labor the authority to define and delimit the exemption from overtime pay requirements (and even the minimum wage) provided by Section 213 of the Act with respect to bona fide executives, administrators, and professionals. Under the current regulations, a salaried employee at McDonald’s or Walmart, for example, earning as little as $24,000 per year can be designated an exempt manager and denied any extra pay if she works over 40 hours a week, even though the hourly workers she manages will get time-and-a-half pay for the overtime they work. That’s an absurd result, which employers have been taking advantage of to underpay workers for too long.

There are really no valid grounds to dispute the secretary’s authority to update the overtime rules. And given that the proposed rule sets a new minimum salary for the exemption that is well within the historic range of past salary levels, it is unlikely that any judge—even Judge Richard Leon—will find that the secretary’s authority has been exceeded.