The Labor Department underestimated the cost of its proposal extending minimum wage and overtime protections to in-home caregivers underestimates, according to an industry group representing in-home care franchise owners. If the proposal is implemented as planned, the study concludes, both the quality of care provided to seniors and the financial health of the in-home care industry will suffer.
The report, Economic Impact of Eliminating the FLSA Exemption for Companionship Services, was released by the International Franchise Association in mid-February and is based on the responses of more than 3,000 franchisees who own companion care businesses. Among the study’s key findings:
- Amount of Overtime Work: According to the IFA, the DOL’s analysis of the proposed rule changes understated the extent of overtime work among companion care workers, at least among those working for franchise-operated companion care businesses. The IFA found that average amount of overtime worked by franchise employees is three times greater than that estimated by the DOL. As a result, the cost of paying overtime to employees will be far greater than DOL claims. DOL’s estimates are based on the number of employees currently working overtime. But if the proposal goes through, that number will increase significantly and so will employer costs, the study concludes.
- Consequential Costs: DOL also underestimates the management costs of adding staff and the cost of paying workers to travel between work sites. The DOL study acknowledges “additional managerial costs to agencies might occur as a result of changes in staffing” and adds that “the Department has no basis for estimating these costs, but believes they are relatively small.” IFA claims, however, that the increased costs of hiring, training, and managing additional employees is a major concern for many employers, and may be a greater cost than the DOL anticipates. IFA also found that the DOL’s estimate for paying workers who travel would cover only 2.5 percent of all companion caregivers.
- Employment Changes: Businesses that responded to the IFA survey indicated a strong intention to avoid paying higher overtime costs. As a result, many employers would hire additional workers at a low wage, which would in turn decrease take-home pay for many current hourly employees.
- Quality of Care: About 75 percent of those surveyed said they expected to pass along increased costs to their customers, thereby raising the cost of caregiver services for seniors. These costs often are direct to seniors, since Medicare and Medicaid only cover health services—and not all caregiver services are health-related.
Indeed, those who use companion care services are motivated by a desire not to move from their homes into a nursing home or assisted living setting. However, with increased costs being passed on to caregiver clients, there are two possible results. First, for those who need care for a substantial portion of the time, an increase in the cost of companion care could push them in the direction of moving to an institution, which in many cases would mean personal financial resources are soon exhausted and the cost of care would shift to Medicaid.
Second, for those who do not have a medical condition in need of close oversight, higher costs for companion care could lead to seeking a cheaper alternative (grey market) source of companion care. Others may respond to the increased cost by reducing or attempting to forego home care altogether. Another possible outcome is that some adult children of elderly parents might leave the workforce to care for a parent.
Recently DOL extended the deadline for stakeholders to respond to its proposal by two weeks, to March 12. Comments may be submitted online at www.regulations.gov, or in the mail to Mary Ziegler, Director, Division of Regulations, Legislation, and Interpretation, Wage and Hour Division, U.S. Department of Labor, Room S-3502, 200 Constitution Avenue NW, Washington D.C. 20210. All submissions must include the agency name and Regulatory Information Number (RIN) 1235-AA05.