1. © Copyright 2015, Vorys, Sater, Seymour and Pease LLP. All Rights Reserved. THE COMPANIONSHIP SERVICES EXEMPTION Presented By: Michael O’Brien Vorys, Sater, Seymour and Pease LLP 614.464.8362 | mfobrien@vorys.com

2. © Copyright 2015, Vorys, Sater, Seymour and Pease LLP. All Rights Reserved. OVERVIEW Status of law today New regulations Impact of federal court decision on new regulations Your questions

3. © Copyright 2015, Vorys, Sater, Seymour and Pease LLP. All Rights Reserved. WHAT IS THE FAIR LABOR STANDARDS ACT? It is a federal law originally enacted in 1938 The key requirements of the FLSA are: ―Payment of minimum wage to covered employees ―Payment of overtime to non-exempt employees 3

4. © Copyright 2015, Vorys, Sater, Seymour and Pease LLP. All Rights Reserved. FEDERAL MINIMUM WAGE Current FLSA minimum wage: $7.25 per hour 4

5. © Copyright 2015, Vorys, Sater, Seymour and Pease LLP. All Rights Reserved. OHIO MINIMUM WAGE Current Ohio minimum wage: $8.10 per hour Increases annually each January 1 based on rate of inflation Employers must pay the higher of the federal or state minimum wage 5

6. © Copyright 2015, Vorys, Sater, Seymour and Pease LLP. All Rights Reserved. OVERTIME FLSA requires employers to pay non-exempt employees one and one-half times their “regular rate” of pay for each “hour worked” over 40 per week. 6

7. © Copyright 2015, Vorys, Sater, Seymour and Pease LLP. All Rights Reserved. NON-EXEMPT EMPLOYEES Employees who are not exempt from the FLSA’s requirements: ―Must be paid at least minimum wage. ―Must be paid overtime (one and a half times their regular hourly rate) for all hours worked over 40 in a work week. 7

8. © Copyright 2015, Vorys, Sater, Seymour and Pease LLP. All Rights Reserved. EXEMPT EMPLOYEES All employees must be paid the minimum wage and overtime unless they fall into one of the FLSA exemptions. The burden of proving an exemption falls on the employer. Exemptions are narrowly construed against the employer. 8

9. © Copyright 2015, Vorys, Sater, Seymour and Pease LLP. All Rights Reserved. COMPANIONSHIP SERVICES EXEMPTION The FLSA has a “Companionship Services” (“CS”) exemption. The CS exemption provides an exemption from both the minimum wage and overtime requirements of the FLSA. The exemption applies to “employees employed in domestic service employment to provide companionship services for individuals who (because of age or infirmity) are unable to care for themselves.” 9

10. © Copyright 2015, Vorys, Sater, Seymour and Pease LLP. All Rights Reserved. RESTRICTIONS ON CS EXEMPTION “20% Exception”: Employee may not spend more than 20% of total weekly hours performing general non-patient related household work that is “incidental” to the care of the person(s) they are serving. Household work related to care, such as meal preparation, bed making, washing of clothes, and similar services, is not included in the 20%. 10

11. © Copyright 2015, Vorys, Sater, Seymour and Pease LLP. All Rights Reserved. RESTRICTIONS ON CS EXEMPTION (cont’d) “Trained Personnel” Exception: CS may not be provided by “trained personnel,” such as RNs, LPNs, or practical nurses. CNAs (certified nursing assistants) and STNAs (state tested nursing assistants) are not considered “trained personnel.” 11

12. © Copyright 2015, Vorys, Sater, Seymour and Pease LLP. All Rights Reserved. RESTRICTIONS ON CS EXEMPTION (cont’d) The “Private Home” Requirement: To qualify for the CS exemption, the services must be provided in a private home. If the services are being provided on property which the employer owns, manages, or controls, the CS exemption does not apply. The services must be provided to individuals in their own or their families’ home, apartment, condominium, etc. (rented or owned by those individuals and/or their families). 12

13. © Copyright 2015, Vorys, Sater, Seymour and Pease LLP. All Rights Reserved. REVISED COMPANIONSHIP SERVICES EXEMPTION In 2014, the DOL announced revisions to the CS regulations. The new CS regulations were to go into effect on 1/1/2015. However, they did not take effect, due to rulings in December 2014 and January 2015 from the U.S. District Court for the District of Columbia. 13

14. © Copyright 2015, Vorys, Sater, Seymour and Pease LLP. All Rights Reserved. TWO KEY COMPONENTS OF THE REVISED COMPANIONSHIP SERVICES REGULATIONS Component #1: Third party employers of direct care workers would no longer be permitted to claim the CS exemption, even if the services were provided in the home of the individual or his/her family. The exemption would be available only to individuals and families who employ CS workers directly rather than through companies or agencies. 14

15. © Copyright 2015, Vorys, Sater, Seymour and Pease LLP. All Rights Reserved. Component #2: A more restrictive CS duties test that, for practical purposes, would extinguish the CS exemption: ―If employee performs any domestic services during a workweek that are primarily for the benefit of other members of the household (e.g., making dinner for family, doing laundry of another household member), exemption is lost for that week. ―Excludes employees from the exemption who perform any medical tasks that typically require training and are performed by medical personnel (e.g., catheter care, turning/repositioning, ostomy care, tube feeding, treating bedsores, physical therapy). 15 TWO KEY COMPONENTS OF THE REVISED COMPANIONSHIP SERVICES REGULATIONS (cont’d)

16. © Copyright 2015, Vorys, Sater, Seymour and Pease LLP. All Rights Reserved. Component #2: (cont’d) ―Employee who provides “care” (e.g., dressing, grooming, feeding, bathing, toileting, transferring, meal preparation, driving, light housework, assistance with taking medications) for more than 20% of the workweek loses exemption for that week. 16 TWO KEY COMPONENTS OF THE REVISED COMPANIONSHIP SERVICES REGULATIONS (cont’d)

17. © Copyright 2015, Vorys, Sater, Seymour and Pease LLP. All Rights Reserved. EFFECT OF FEDERAL COURT DECISION On 12/22/14, the federal court struck down the first component of the new regulations, ruling that prohibiting third party employers from taking advantage of the CS exemption was inconsistent with the FLSA. 17

18. © Copyright 2015, Vorys, Sater, Seymour and Pease LLP. All Rights Reserved. On 12/31/14, the court issued an order staying enforcement of the second component of the new regulations (the restrictive definition of CS) until 1/1/15. On 1/14/15, the court struck down the second component of the new regulations, noting that the DOL’s new definition of companionship was so restrictive that it would have effectively written the CS exemption out of existence. 18 EFFECT OF FEDERAL COURT DECISION (cont’d)

19. © Copyright 2015, Vorys, Sater, Seymour and Pease LLP. All Rights Reserved. Current status: ―The DOL appealed the federal district court’s decisions regarding the new CS regulations to the Court of Appeals for the D.C. Circuit. ―The Court of Appeals heard oral argument on the appeal on May 7, 2015. 19 EFFECT OF FEDERAL COURT DECISION (cont’d)

20. © Copyright 2015, Vorys, Sater, Seymour and Pease LLP. All Rights Reserved. Bottom line: Until the Court of Appeals rules, the old CS regulations that were in place prior to 1/1/15 are still in effect. This means that third party employers of CS workers may still take advantage of the CS exemption to the same extent they could prior to 1/1/15. 20 EFFECT OF FEDERAL COURT DECISION (cont’d)

21. © Copyright 2015, Vorys, Sater, Seymour and Pease LLP. All Rights Reserved. THE FUTURE? Scenario 1 – Court of Appeals rules in favor of DOL and overturns district court decision. ―Likely appeal to U.S. Supreme Court ―Court of Appeals might or might not stay enforcement of new CS regulations while appeal is pending. ―If stayed, old regulations would remain in effect during appeal. ―If not stayed, new regulations would take effect. DOL might provide a grace period before enforcing new regulations. 21

22. © Copyright 2015, Vorys, Sater, Seymour and Pease LLP. All Rights Reserved. Scenario 2 – Court of Appeals rules against DOL and affirms district court decision. ―Likely appeal to U.S. Supreme Court by DOL ―Old regulations would remain in effect during appeal. ―Supreme Court could decide to hear the appeal. If that happens, Supreme Court would ultimately decide the issue. ―Supreme Court could decide not to hear the appeal. In that case, the old regulations would remain in effect. 22 THE FUTURE? (cont’d)

23. © Copyright 2015, Vorys, Sater, Seymour and Pease LLP. All Rights Reserved. FLSA PENALTIES If the DOL prevails, and the new CS regulations go into effect, employers must comply or face penalties. Penalties for violation of the FLSA can include: Two years of unpaid wages and overtime for non-willful violations Three years of unpaid wages and overtime for willful violations Liquidated damages — an additional penalty equal to the amount of unpaid wages and overtime Attorneys’ fees if employee prevails 23

24. © Copyright 2015, Vorys, Sater, Seymour and Pease LLP. All Rights Reserved. QUESTIONS / FOLLOW-UP Michael O’Brien Vorys, Sater, Seymour and Pease LLP 614.464.8362 | mfobrien@vorys.com