Labor & Employment Law Daily Wrap Up, WAGE-HOUR—OVERTIME—S.D. Ohio: DOL wins $15M in unpaid overtime and liquidated damages for home care aides, (Jan 13, 2025)

By Marjorie Johnson, J.D.

The court rejected the employer’s challenge to a 2013 DOL regulation preventing third-party home care agencies from claiming certain FLSA exemptions, finding that the Supreme Court’s Loper Bright decision had no impact.

In a U.S. Department of Labor (DOL) enforcement action against a home care firm for alleged violations of FLSA’s overtime and recordkeeping rules, a federal district court in Ohio held that an employment relationship existed, rejected the firm’s challenge to the DOL’s 2013 Rule barring third-party agency’s from claiming the FLSA’s companionship and live-in exemptions, and found that the firm utilized an unlawful rate reduction practice to avoid paying the proper premium overtime rate. Granting the DOL’s motion for summary judgment, the court also found that the violations were willful and applied the three-year statute of limitations, awarded $7.5M in back wages and an equal amount in liquidated damages, and allowed the DOL to seek additional damages if the employer produced records that showed a continuing violation (Department of Labor v. Americare Healthcare Services, LLC, No. 2:21-cv-5076 (S.D. Ohio Jan. 9, 2025)).

Challenges to 2013 DOL Rule. Americare Healthcare Services argued that the FLSA’s exemptions for companionship and live-in workers relieved them from their obligation to pay the aides the overtime premium and squarely challenged as unlawful a DOL regulation promulgated in 2013 (the 2013 Rule) which provides that third-party agencies are not entitled to claim either exemption. The firm’s owner and his other home care agency, Intra-National, have also brought a federal lawsuit in Pennsylvania under the Administrative Procedure Act (APA) seeking a declaratory judgment that the 2013 Rule be set aside as arbitrary and capricious and DOL has responded with an enforcement action. Both cases remain pending.

Aides were employees. At the outset, the court applied the economic reality test and found that an employment relationship existed between Americare and its health care aides, rejecting the firm’s assertion that the relationship was temporary since aides often follow clients who switch agencies. While there may be high turnover in the industry, over 70 percent of the aides stayed with the home care agency for over a year which indicated an employment relationship. The right-of-control factor also weighed in favor of finding an employment relationship considering collectively the exclusive relationship between the firm and the aides, its close supervision of their hours and whereabouts through a GPS-enabled electronic verification platform, and its disciplinary power over them.

2013 Rule upheld. After a lengthy analysis, the court rejected the firm’s challenge the 2013 Rule and its subsequent codified regulations as arbitrary and capricious, unreasonable, and in violation of the text of the FLSA, the APA, and the major questions doctrine. Having found that the 2013 Rule was a valid exercise of regulatory authority, the court found as a matter of law that the firm and its owner were not entitled to claim either the companionship or live-in exemptions to the FLSA’s overtime requirements.

Regulatory backdrop. Prior to the 2013 Rule, DOL’s regulations allowed third-party agencies to claim the live-in and companionship exemptions, which meant third-party agencies did not have to provide overtime pay to their home care workers. In a 2007 case, Long Island Home Care at Home, Ltd. v. Coke, the Supreme Court rejected a challenge to that regulation, explaining that Congress did not expressly answer the third-party employment question in the text of FLSA and granted the authority to DOL to resolve the issue. After the DOL announced the 2013 Rule but before it went into effect, a group of trade associations representing third-party employers challenged the Rule under the APA in Home Care Ass’n of Am. v. Weil. While the district court declared the regulation invalid under the Supreme Court’s Chevron doctrine, the D.C. Circuit reversed and held that the regulation was a reasonable exercise of rulemaking authority and was neither arbitrary nor capricious.

Loper Bright does not impact Rule’s validity. Amongst other things, the home care firm now argued that because the Supreme Court has overruled the Chevron deference framework in its recent decision in Loper Bright Enterprises v. Raimondo, 144 S. Ct. 2244 (2024), the D.C. Circuit’s Home Care decision no longer offers persuasive guidance. The district court disagreed, explaining that while Loper Bright changed the framework for analyzing agency regulations that interpret “ambiguous statutes,” the case had no such impact here since “both the 1974 Amendments and § 213(a)(15) of the FLSA unambiguously delegate authority to DOL to prescribe the rules and regulations to shape the parameters of the exemptions to the FLSA.” Indeed, the Loper Bright Court recognized § 213(a)(15) as an example of a statute that “expressly delegates to an agency the authority to give meaning to a particular statutory term.” Since the delegation of statutory authority to DOL was clear and unambiguous, the Loper Bright decision did not impact the outcome here, the court ruled.

Willful violations. The DOL also established that the home care firm acted willfully and thus the three-year statute of limitations applied. Because the firm did not dispute that it paid straight time for all overtime hours worked from October 2018 to September 2019, DOL was entitled to summary judgment for those FLSA violations. The firm also violated the FLSA’s overtime provisions from September 2019 to April 2024, during which time it undisputedly lowered aides’ regular rate of pay when they worked overtime hours such that they were paid one and one-half times the lowered rate for overtime hours worked.

Though the owner claimed that the firm could not afford to pay overtime without a rate adjustment, “[a] employer cannot implement a compensation system designed to avoid paying the minimum wage and overtime requirements.” Indeed, DOL regulations illustrate an example of an unlawful pay practice analogous to the firm’s pay practice. This scheme “offends the core policy goals of the FLSA,” and the firm had other options, such as hiring more aides, not offering overtime opportunities, or implementing a company-wide rate reduction. Instead, it “utilized a rate reduction practice to avoid paying the proper premium overtime rate.”

Back wages and liquidated damages. DOL sought $555,905 for the overtime hours when the home care firm did not pay any overtime from 2018 to 2019 and an additional $6,922,915 for back wages after it lowered the regular rate of pay and effectively paid the aides straight time for all overtime hours worked. Because the firm failed to point to any errors in DOL’s calculations and did not provide their own calculations, court granted DOL’s motion for summary judgment and awarded $7,478,820 in back wages. The court also found that the firm and its owner were also liable for liquidated damages, rejecting their good faith defense, as well as injunctive relief prohibiting the firm and its owner from violating FLSA overtime and recordkeeping provisions.

And if the firm’s records confirmed a continuing violation from April 2024 to present, DOL could seek additional back wages and liquidated damages.

The case is No. 2:21-cv-5076.

Judge: Sargus, E.

Attorneys: Haley R. Jenkins, U.S. Department of Labor, for Department of Labor. Bruce C. Fox (Obermayer Rebmann Maxwell & Hippel) for AmeriCare Health Services, LLC. Hugh T. McKeegan (Del Sole Cavanaugh Stroyd) for Dilli Adhikari.

Companies: AmeriCare Health Services, LLC

Cases: WageHour Overtime Exemptions EmployeeStatus CoverageLiability RemediesDamages OhioNews