Bill That Could Increase Home Health Labor Costs Signed into Law

A labor bill that widens the scope of who is considered an employee in one state has been signed into law.

California Governor Gavin Newsom, a Democrat, signed the legislation Wednesday — potentially creating problems for some home health and hospice providers there going forward.

“It will definitely have implications for [home-based] care,” National Association for Home Care & Hospice (NAHC) President William A. Dombi told Home Health Care News. “However, the impact probably fits into the to-be-determined category.”

The law requires employers to consider a set of new criteria in categorizing their workers. The goal is to make it harder for companies in the gig economy to inappropriately label workers as direct contractors — but home-based care organizations are not exempt from the new rules.

To be considered a direct contractor, a worker must be free from control and direction of the hiring entity, perform a task outside of the company’s usual course of business and regularly perform the type of work they’re doing for hire independently. Otherwise, workers must be brought on as employees, with access to perks such as overtime, benefits and unemployment.

This poses a problem for some home health and hospice agencies in the state.

Currently, they’re allowed to bring in certain workers — such as therapists and staffing agency workers — as independent contracts. And sometimes it’s a necessity due to the high demand and low supply of certain specialists.

However, those direct contractors still must follow instructions from their “hiring entities” to ensure best practices and outcomes for patients, meaning they would have to be hired as employees when the new law goes into effect Jan. 1.

“[California home health and hospice agencies] would have a significant increase in labor costs,” Angelo Spinola, a shareholder and attorney at Littler Mendelson, previously told HHCN. “Most estimate the labor cost increase — when you talk about benefits, overtime and all that — is at least 20% to 30% of a hike.”

Meanwhile, California home care agencies would not likely be affected, as they are already required to hire caregivers as employees.

Other concerns by the home-based care community include whether the legislation will eventually spread to the rest of the country, as California often sets nationwide legislative trends.

Still, many commend the law — previously known as Assembly Bill 5 (AB 5) — as a win for workers. 

“This is really an important piece of legislation that is sending a signal that is making it clear that workers not only have the power to make this happen but that have all the rights,” Caitlin Connolly, who focuses on home care at the National Employment Law Project, told HHCN.