The U.S. Department of Labor (DOL) says pay for home health aides can exclude travel and vary weekly as long as it still meets or exceeds minimum hourly wage. But overtime pay must be calculated accordingly.
That’s according to guidance in an opinion letter from the department’s Wage and Hour Division (WHD). The letter addresses a home health company’s question on whether a compensation plan complies with the Fair Labor Standards Act (FLSA).
This comes after DOL mandated that in-home care workers are eligible for overtime and minimum wage protections in 2015. In the months and years that followed, compliance issues and payroll lawsuits spiked.
But based on the opinion, the hourly pay plan outlined in the letter is in compliance with FLSA.
The plan calculates weekly pay by multiplying an employee’s time with clients by pay rate, which is typically “$10.00 per hour with a client including travel time,” according to the letter. That number is then divided by total hours worked, which includes time with clients and any travel between client locations.
At a minimum, the employer guarantees that the resulting hourly pay meets both federal and state minimum wage rate requirements, according to the DOL letter. As such, WHD concluded that the payment calculation complies with FLSA.
But the plan’s overtime policy might open itself up to lawsuits, according to the letter. In fact, overtime has been a common driver of home health lawsuits in recent years, according to Angelo Spinola, a shareholder and attorney at international labor and employment legal firm Littler Mendelson.
“We have seen lately in the last 18 months a real rise in lawsuits and DOL audits pertaining to rate manipulation,” Spinola said.
A rate manipulation claim can occur when companies pay employees working 40 or more hours per week a lower hourly rate than those that are part time to reduce overtime costs.
“You can pay different rates for different kinds of work, like travel time versus service time or live-in care versus another type of care, but not based on the hours,” Spinola said.
Additionally, FLSA requires that hourly employees receive overtime pay at least one and a half times their regular pay rate after they work more than 40 hours. That’s why the payment plan detailed in the letter could pose problems, according to WHD.
It says employees who work more than 40 hours are generally paid time and a half at a rate of $10 per hour — but depending on the week and the circumstances, aides can make more than $10 per hour.
“If the employer always assumes a regular rate of pay of $10 per hour when calculating overtime due, then the employer will not pay all overtime due to employees whose actual regular rate of pay exceeds $10 per hour,” the letter says.
But if aides make $10 or less per hour, the compensation is in compliance with the FLSA’s overtime requirements, according to the letter.
Beyond reading federal laws and guidance, home health companies should have their pay practices assessed for both state and federal compliance, Spinola said.
“Home care continues to be the most targeted industry for these pay practice lawsuits, class actions and otherwise,” Spinola said. “We are dealing with dozens and dozens of these cases right now specific to home care, and I think that’s going to continue until the industry as a whole becomes more compliant.”
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