Back in December, the Department of Labor’s Wage & Hour Division published a proposed rule that would extend minimum-wage and overtime pay protections to the home care workers who assist elderly and disabled patients with their daily needs. The Fair Labor Standards Act requires that nonexempt workers be paid minimum wage (currently $7.25 per hour) and 1.5 times their pay for hours worked above 40 hours in a week. (It also prohibits most forms of child labor, but allows children to work in agriculture, as Celeste has discussed.) Many of us are exempt from these requirements because we’re salaried executive, administrative, or professional employees. There are other FLSA exemptions based on industry or job type, and one of those exemptions is for “companions for the elderly.” Under this exemption, home care workers who help clients with bathing, dressing, eating, wound care, and other essential activities are denied minimum-wage and overtime pay. The result is predictable: In 36 states, average hourly wages for Personal Care Aides are below 200% of the federal poverty level wage for full-time workers in one-person households.

As that statistic suggests, home health workers’ earnings can vary depending on the state where they work. Fifteen states (Colorado, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Jersey, New York, Pennsylvania, Washington, and Wisconsin) already extend minimum wage and overtime protection to home healthcare workers, and six states (Arizona, California, Nebraska, North Dakota, Ohio, and South Dakota) and DC extend minimum-wage, but not overtime, protection. The Obama administration’s proposed rule would extend FLSA protections to all home health workers, and this change would have the most impact in the 29 states that don’t currently require minimum and overtime wages for home health workers.

The main rationale for this rule change is that Congress’s intent in exempting “companions for the elderly” from FLSA protections was to make it easy for neighbors and friends to help out the elderly in their communities — not to keep two million home care workers from earning fair wages. But the Economic Analysis accompanying the proposed rule also describes some larger benefits that may not be immediately obvious.

Who will pay?
Of course, if home care workers start earning more money, someone’s going to have to pay for that, and the transition won’t be painless. According to DOL’s economic analysis, Medicare and Medicaid together cover about 75% of the payments for home healthcare services. Growth in Medicare costs certainly isn’t anything to cheer about, but DOL puts it in perspective: the additional costs are unlikely to amount to more than half of one percent of the program’s total expenditures. Medicaid expenses are shared between states and the federal government, and some states will likely struggle to cover the additional costs for home healthcare — but they might also see some savings, which I’ll get to in a minute.

More than half of the additional costs from extending the FLSA to home healthcare workers would likely be borne by reduced profits for the agencies that employ them, DOL predicts. USA Today’s Kelly Kennedy notes that the home health industry was one of the few to be profitable during the recession, and that one of the industry’s leading companies spent a large sum fighting the proposed rule.

Another 20% of home health expenditures come from the private sector — some are paid by private insurers, and others out of pocket. Families paying for home health services entirely out of pocket would be hardest hit by the rule change, and DOL predicts that many would purchase less care. In some cases, this would mean a greater burden on unpaid family caregivers, who already face serious financial and other hardships. Some clients would shift to purchasing home healthcare in the “grey market,” which likely means that the workers would have less training and supervision and lack access to the unemployment, disability, and Social Security benefits they’d receive if they were working officially and paying payroll taxes.

Who will benefit?
The most important outcome of DOL’s proposed rule change will be higher wages for home healthcare workers who are currently receiving less than the minimum wage and no overtime pay. Some will also benefit from the FLSA requirement that they be reimbursed for time they spend traveling between clients.

These benefits to workers can in turn help their families, communities, and clients, DOL’s analysis finds. Because most of these workers have low incomes, they’re likely to spend much of their extra earnings, which will generate more local economic activity. Home care workers’ current low earnings also make many of them eligible for public programs; recent research finds that around 40% of home health workers currently get public assistance in the form of food stamps and Medicaid, for an average total of $14,800 per worker who’s getting assistance for her family. So, some of the Medicaid programs facing higher costs for home-health services might also see their beneficiary rolls diminish as formerly eligible home health workers earn more income.

Higher wages, overtime pay, and payment for travel time can also help attract and retain workers to an industry that currently has a high rate of turnover — from 44% to 100% per year, according to different studies cited by DOL. Reducing the turnover rate can save employers money and also give stability to clients, who benefit from being able to develop long-lasting relationship with the workers who attend to some of their most intimate needs.

DOL’s economic analysis also predicts that home health agencies will prefer to spread job-hours among more workers (including some additional hires) rather than pay overtime to workers who are currently putting in more than 40 hours per week. Reducing overtime can result in health benefits for both workers and their patients, DOL explains:

Many studies have shown that extended work hours result in increased fatigue, decreased alertness, and decreased productivity, negatively affecting employee health and well-being. A 2004 National Institute for Occupational Safety and Health report found that “12-hour shifts combined with more than 40 hours of work per week reported increases in health complaints, deterioration in performance, or slower pace of work.” One study that analyzed 13 years worth of data and nearly 100,000 job records notes that “long working hours indirectly precipitate workplace accidents through a causal process, for instance, by inducing fatigue or stress in affected workers.” It is therefore telling that “[d]irect care workers have the highest injury rate in the United States, primarily due to work-related musculoskeletal disorders.” The rate of days away from work (work days missed due to on-the-job injuries) for nursing aides, orderlies and attendants was almost four times greater than the all-worker rate–449 per 10,000 compared to 113 per 10,000 for all workers. One of the results of the FLSA’s overtime pay requirement is to induce employers to hire more people to work fewer hours each. Doing so in those circumstances where excessive overtime hours are worked may therefore result in fewer injuries and illnesses incurred.

Extending FLSA protections to home healthcare workers will not only correct a long-standing injustice, but provide significant benefits to workers, their families, state economies, and home health clients. While the burdens that the rule change will place on agencies and family caregivers should not be ignored (and, in the case of caregivers, should be addressed by other policies), they should also not stand in the way of achieving a stronger home healthcare workforce.

The Department of Labor has extended the public comment period for this proposed rule through March 12.

Comments

  1. #1 Disgruntled Emporer
    March 6, 2012

    glad someone is getting a raise. I haven’t had one in 4 years. My advice to high school students: Start working for money the day you turn thriteen years old. Mow lawns, do odd jobs, etc. Put 35% min of it into savings. As soon as you turn 16 get a real part time job sacking groceries or omething like that while still doing other odd jobs for people. As soon as you turn 18 forget college and go straight to work. Over the years you will have saved enough to get you started.

    College is ok for some but not for everyone. Most people I know who have engineering degrees or spent enormous amounts of money work the same job with the same pay as they would have gotten had they not even entered a college classroom.

    I wasted part of my life in college that could have been spent saving for retirement. Of course I learned a few things but education is worthless if it is never used.

    I found out a long time ago that if you are born poor you will die poor, unless you hit a lucky streak, or become some miserable old slave owner busniess man like many businesses today.

    Look around. Businesses, particulalry those privately owned are out to line their pockets. The only reason that people get paid is that it is against federal law not to pay them. Outside of the threat of imprisonment, slavery would still exist. I have never met a poor business man. Ever. The reason they are so rich is that they make slaves out of their employees making each employee do three peoples’ job while paying as little as they can legally get by with.

    It is businesses like these that should be shut down and the owner deported. Federal law should restrict old miesers from owning people. Better yet there should be a commission set up to regulate what kind of person is allowed to obtain a business liscense. Greedy old farts need not apply.

    So kids, take it from me. Skip college, work, save, and die and leave it to the government. Either way you go someone else will always get what you work for. Might as well eliminate the middle man.

  2. #2 lia
    March 10, 2012

    I find it funny that the article states that private pay clients make up only 20% of home care clients–and that home care owners have been profitable in the downturn of economy. I own a home care agency in california–where (it is NOT mentioned) has a minimum wage requirement for our workers as well as NO MEDICARE–or MEDICAID–reimbursement. The statistics listed are false-90% of my clients pay out of pocket–my profit margin (due to increase in Workers Comp costs for the class code 8827-and EDD raise to 6.2% to cover the LAST helpfull extention of benefits)is under 10%(no pocket lining here). The seniors will pay for this–as will the workers who are currently working 12 hour or live-in shifts to support themselves–how will it help when the will work 32 hours instead of 45? With this change–Independant contractors would be the ONLY ones to benefit–and the Seniors and employee hired caregivers would suffer; in a time when clients personal incomes have diminished due to the economy–Nursing homes will be full. But again our Government proposes to help the employee–and places the burden on the employer–cannot IMAGINE why unemployemnt is so HIGH!

  3. #3 Liz
    March 12, 2012

    Thanks for the on-the-ground perspective, lia. As far as the 20% figure goes, DOL’s estimates was counting costs, not the number of clients. So, it’s possible that half of all home-health clients are private pay, but that they’re only paying 20% of total home-health costs. That could happen if Medicare and Medicaid are paying for the clients who need the most extensive, and therefore costliest, care.

    California is indeed one of the states that requires minimum-wage and overtime pay for home health workers already, so workers and agencies there will be affected less by the rule change than their counterparts in states that don’t already have those requirements in place. I’m glad you brought up workers’ compensation as a payer — workers’ comp is run by states, so allowances and reimbursement for workers’ comp clients will also vary from state to state.