Home Care Workers in Community-Based Programs: Legal Issues for Medicaid Programs

Transcription

1 Home Care Workers in Community-Based Programs: Legal Issues for Medicaid Programs The expansion of community-based programs means Medicaid programs are increasing their use of home-care workers to provide services ranging from assistance with activities of daily living to delegated nursing and medication administration. How these community programs are structured raises important labor-law issues. The U.S. Labor Department is now implementing new rules that remove exemptions from the Fair Labor Standards Act that were previously available to State Medicaid program employers of home workers. Employers of most home care workers must now pay overtime and travel time. As a result of the legal and programmatic developments, States must tackle numerous questions about their community-based programs. How are home-care workers supervised? Compensated and taxed? Who can hire and fire the workers the participant, the State program, or both? Does the State approve or set qualifications for workers? Is the State an employer or just a payor? If the State is an employer, must it make changes to its community-based programs? What are the options? This session will explore legal issues surrounding how these programs are structured, focusing chiefly on how states comply with state and federal labor laws, as well as the sometimes competing requirements of the Civil Rights Division of the Justice Department, and CMS all while working within State budget constraints. I. Overview A. Federal law historically has exempted employers of home care workers servicing Medicaid recipients in the community from the Fair Labor Standard Act s minimum wage and overtime protections. Under pre-2015 U.S. Labor Department rules, the employers of the workers have availed themselves of the so-called companionship services exemption. The DOL s companionship services exemption protected state Medicaid programs, as well as private entities, from having to compensate home care workers for overtime and travel time. B. DOL s new rules (1) narrow the definition of companionship services and (2) prohibit third party employers e.g., State Medicaid programs, MCOs, and home care agencies from availing themselves of either the companionship services exemption or the live-in domestic service worker exemption. State employers of home care workers in self-directed Prepared by David S. Lapp, Assistant Attorney General, Maryland Office of Attorney General, for the 2015 Conference of the American Association of Public Welfare Attorneys. Page 1

2 Medicaid programs will be responsible for paying overtime and travel expenses under FLSA. II. Key Questions A. What is the effect of DOL s change to the companionship exemption for State Medicaid programs? B. Are State Medicaid programs employers subject to FLSA? C. If State Medicaid programs are employers, what options are available for controlling the budgetary impact of paying for overtime and travel? 1. Must States increase Medicaid budgets to pay OT and travel without restriction? 2. Can States add program limits to avoid liability for overtime and travel? a. Limit workers to 40 hours? b. To serving one participant? c. To serving one location? 3. Can (and should) States prohibit independent home care providers, so that all home care workers are employed by agencies, which would be responsible for compliance with FLSA. 4. What other options are available to the States? D. What about compliance with DOJ/HHS Olmstead? Can exceptions to direct caps on hours and other limitations be created without undermining the caps themselves? E. What are the practical implications of and impediments to state Medicaid program compliance? F. What happens if a State can t change its community programs quick enough to timely comply with DOL s regulations? Prepared by David S. Lapp, Assistant Attorney General, Maryland Office of Attorney General, for the 2015 Conference of the American Association of Public Welfare Attorneys. Page 2

3 G. What about compliance with State labor laws? Is a joint employer under federal law necessarily an employer under State law? III. Implementation Issues A. Maryland 2014 message to U.S. Labor Department, detailing its implementation issues: The State Medicaid program does not have system or technical capacity to begin paying travel and overtime for this population of workers on January 1, In July 2014, CMS issued an information bulletin regarding Medicaid program reimbursement options that account for the cost of reimbursing home care workers for over time and travel time. Maryland s Medicaid computer systems cannot, at present, calculate and apportion these expenses to individual participants in a way that would satisfy CMS guidance for federal financial participation. To pay travel and overtime, the Medicaid program would need to undertake substantial changes to its IT systems. In the absence of an extension, the only technically feasible approach for us would be to impose significant new restrictions on both workers and consumers. To come into full compliance with the new rule by January 1, 2015, we would be forced to (a) end the self-direction option by requiring all participants to use agency instead of independent home care workers, or (b) restrict independent home care workers to working no more than a total of 40 hours per week and serving no more than one participant per day. These options would disadvantage workers, because they would be limited in the hours they can work and the people they can serve. They may also disadvantage consumers who want to self-direct, especially those who do not need a substantial number of hours on the days that they need services. We expect that significant dissatisfaction would result from the adoption of either of these paths. B. Billing and Reimbursement. Medicaid billing and reimbursement is generally based on individual recipient services. If a personal care worker works 40 hours for one Prepared by David S. Lapp, Assistant Attorney General, Maryland Office of Attorney General, for the 2015 Conference of the American Association of Public Welfare Attorneys. Page 3

4 recipient and 20 hours for another, the State must allocate responsibility for paying overtime. Some States allow Medicaid recipients to negotiate the hourly rate paid personal care assistants. If one recipient pays a provider $10/hour and another $12/hour, the State must adopt a process for determining the appropriate overtime and travel time rate. C. IT Systems 1. State Medicaid computer systems are premised on billing processes under which providers claim reimbursement for services rendered to a single participant. CMS guidance offers States limited options for paying overtime and travel time. Overtime and travel time may not be readily claimed and paid through these systems, as the costs are not directly attributable to one participant. CMS would require some States to implement significant (and potentially costly) changes to their IT systems so they can calculate and pay travel and overtime costs. 2. Example: CMS position on paying for travel time a. The State can pay minimum wage for travel time even when the provider is paid a higher rate for other services. b. Providers are considered fully released from their duties after 30 continuous minutes. c. Travel time is not paid for a split shift when both shifts are at the same location. d. The employer can pay reasonable estimates of travel time if the travel is not immediate and uninterrupted. D. ADA/Olmstead Compliance 1. Along with their budgetary constraints, States must implement the DOL regulations consistent with the Americans for Disabilities Act and the Supreme Court s Olmstead decision. The civil rights units of U.S. DOJ and DHHS, in collaboration with DOL, have warned states not to modify their Medicaid programs (in order to comply with the Prepared by David S. Lapp, Assistant Attorney General, Maryland Office of Attorney General, for the 2015 Conference of the American Association of Public Welfare Attorneys. Page 4

5 DOL rules) in ways that would violate Olmstead. 2. The federal agencies recognize that home care workers provide essential services that enable people with disabilities to live in their own homes and communities instead of institutions and that one logical response is for the States to comply with the DOL regulations by limiting home care worker hours and travel. 3. DOJ/HHS warn States that they need to consider reasonable modifications to policies capping overtime and travel time for home care workers, including exceptions to these caps when individuals with disabilities otherwise would be placed at serious risk of institutionalization. IV. Options for Medicaid Home-Worker Programs Query: What s the impact of each option on participant self-direction? A. Retain Existing Consumer-Employed Home Work Programs and Comply 1. Pay for travel time and overtime 2. Program limits to avoid overtime and travel time costs 3. Without additional funding or limits, might Medicaid recipients see a reduction in available hours of personal assistance? B. Agency-Only Home Care Workers 1. Maryland regulation change The purpose of this action is to specify dates by which participant-employed providers of personal assistance may no longer enroll, nor bill, and by which plans of service may no longer include participant-employed providers. Regulation: The Department may not accept nor approve plans of service with participant-employed providers on or after August 1, Prepared by David S. Lapp, Assistant Attorney General, Maryland Office of Attorney General, for the 2015 Conference of the American Association of Public Welfare Attorneys. Page 5

6 Advocacy organization comments on rule change: [W]e have serious concerns about the potential impact of employing an agency-only model as the agency re-designs its self-direction program. By requiring all providers to register with an agency, [Maryland Medicaid] is creating an employer-employee relationship between the agency and any formerly independent care provider. As such, the agency is given control over a consumer s personal care where previously the consumer him/herself was the final authority on directing his/her supports. 3. Maryland rule on agency providers and self direction: Agencies employers of home-care workers are required to allow participants to have a significant role in the selection and dismissal of their providers of their choice, for the delivery of their specific care, and for the services and supports identified in their person-centered service plan. C. Cash and Counseling 1. Some States already have cash and counseling programs, which pay direct assistance to Medicaid recipients. The cash payments can be used to pay an independent home worker for in-home care rather than having the funding paid to a home-care agency to supply a home worker provider. 2. Cash and counseling programs generally place a greater burden on recipients to coordinate their own care. They may also create burdens on recipients to handle matters such as tax withholding, unemployment compensation and employer issues. D. Other? Prepared by David S. Lapp, Assistant Attorney General, Maryland Office of Attorney General, for the 2015 Conference of the American Association of Public Welfare Attorneys. Page 6

7 DEPARTMENT OF HEALTH & HUMAN SERVICES Centers for Medicare & Medicaid Services 7500 Security Boulevard, Mail Stop S Baltimore, Maryland CMCS Informational Bulletin DATE: July 3, 2014 FROM: SUBJECT: Cindy Mann, Director Center for Medicaid and CHIP Services Self-Direction Program Options for Medicaid Payments in the Implementation of the Fair Labor Standards Act Regulation Changes This informational bulletin is intended to assist states in understanding Medicaid reimbursement options that will enable them to account for the cost of overtime and travel time that may be compensable as the result of the changes to the Department of Labor s regulations regarding domestic service employment under the Fair Labor Standards Act (FLSA). In the Final Rule, Application of the Fair Labor Standards Act to Domestic Service, 78 FR (Oct. 1, 2013), the Department of Labor (DOL) revised its 1975 regulations pertaining to the FLSA s companionship services exemption from minimum wage and overtime, and the live-in domestic service worker exemption from overtime. These regulatory revisions, which will become effective on January 1, 2015, have implications for Medicaid home and communitybased programs, including the fact that they may contribute toward a more stable personal care workforce. Notably, DOL modified the third party employment regulation, 29 C.F.R , to prohibit employers, other than the individuals receiving services or their families or households, from claiming the companionship services exemption from minimum wage and overtime or the live-in domestic service employee exemption from overtime (78 FR ). 1 The Medicaid program provides states with the ability to offer individuals receiving home and community based services the choice to direct their own services through several options under the State Medicaid Plan and waivers found at Program-Information/By-Topics/Delivery-Systems/Self-Directed-Services.html. These models represent an important option for individuals and have helped Medicaid long term services and supports (LTSS) programs better meet the needs and preferences of individuals served. Based on the law described in new DOL guidance, referenced below, it is anticipated that many states will determine that, for purposes of the FLSA, home care workers in self-direction programs have joint third party employer(s) in addition to being employed by the beneficiary. In selfdirection models where there is a third party joint employer, the DOL regulation states that all work is subject to minimum wage and overtime requirements. 1 Descriptions of these FLSA domestic service employment exemptions can be found at :

8 Page 2- CMCS Informational Bulletin Economic Realities Test In order for states to know whether their self-directed 2 programs are impacted by the regulatory changes of the FLSA, they will need to, among other things, determine whether these programs have a third party employer. New DOL guidance, Administrator s Interpretation No (AI), 3 explains that courts apply an economic realities analysis to determine whether an entity is an employer for purposes of FLSA. This economic realities test examines a number of factors to determine whether a worker is economically dependent on a purported employer, thus creating an employment relationship. As the DOL guidance describes, the factors considered by the courts include, but are not limited to, whether the potential employer has the power to hire and fire the employees, supervise and control the employees work, determine the rate of payment, maintain employment records, and control where the work is performed. The DOL guidance describes that no one factor is controlling, and whether a particular entity is an employer for FLSA purposes is based on the totality of the circumstances. CMS strongly encourages state officials and other potential joint employers to carefully review and develop a working knowledge of the DOL AI, which includes several hypothetical situations that illustrate when there may be a consumer as sole employer, or where there may be one or more third party employers. Each state will need to seek guidance from its own legal counsel, with clarification from DOL, if needed, to determine where the FLSA rules apply in its Medicaid program. When the DOL regulations become effective on January 1, 2015, the third party employer (whether the state, another public entity, and/or a private entity), may no longer avail itself of the companionship services exemption from minimum wage and overtime compensation, or the livein domestic service employee exemption from overtime compensation. With the implementation of these regulatory changes regarding the FLSA, many states will need to develop policies and consider programmatic changes in order to address the costs related to overtime and/or worker time spent traveling between worksites (i.e., individuals homes), to avoid or minimize negative impacts to individual budgets, and to preserve the ability of individuals to self-direct services and supports effectively. CMS offers technical assistance to states seeking to make adjustments to current or future home and community-based services (HCBS) or other home care programs to accommodate FLSA related costs in Medicaid reimbursement design. The Intersection of the FLSA with Medicaid Self-Direction Program Requirements After states and other entities evaluate their status as potential third-party employers, states will need to evaluate their self-directed (and other) program structures and policies to ensure compliance with FLSA requirements, and to continue to assure individual access to necessary services identified in the person-centered plan of care as required under Medicaid authorities. We expect that many states will incorporate the new provisions for overtime and travel in order to ensure that individuals are able to remain in their homes with their preferred workers. However, we understand that some states, due to budgetary constraints, may determine the need 2 The FLSA guidance references consumer-direction. We use the terminology self-direction in this bulletin to be consistent with CMS regulations at 42 CFR and 42 CFR Both terms hold the same meaning. 3 The AI is available at

9 Page 3- CMCS Informational Bulletin to implement policies to limit the use of overtime or to minimize the need for compensable travel time between beneficiaries. When states impose limitations on overtime or the use of compensable travel time, they will need to develop strategies that continue to protect individuals access to the services and supports authorized in his/her person-centered plan. For example, as identified in the 1915(c) Waiver Technical Guide, 4 these strategies may need to include exceptions made in the event of statedefined circumstances, such as worker shortages or when requiring additional caregivers would place an individual at risk of harm due to specialized needs of the individual or in an emergency situation. As always, states should not only consider Medicaid requirements, but also those under the Americans with Disabilities Act and the Supreme Court s decision in Olmstead v. L.C., 527 U.S. 581 (1999). States that establish an individual budget for each person in self-direction will need to consider how their programs address situations when a worker employed by the third party employer provides services to more than one beneficiary in a given week. States may need to make adjustments to the reimbursement made to the Financial Management Services (FMS) or other third parties to account for the FLSA requirements. The two major issues are: 1. Situations in which the cumulative hours worked for all beneficiaries result in overtime costs that are not attributable to any one person s use of services, but must be paid by the third party employer, and 2. Compensable worker time associated with travel between beneficiaries (e.g., from one person s home to another) that is owed to the worker by the third party employer, but which is not a direct Medicaid service attributable to any one beneficiary. Through long-standing Medicaid policy, overtime costs and compensable travel time costs that are incurred by a direct care worker cannot be considered administrative costs in the Medicaid program. To be reimbursable under Medicaid, these costs must be allocated as reasonable costs of delivering a covered Medicaid service. The cost of compensable travel time under FLSA may be considered a reasonable cost of delivering a unit of Medicaid service. In 1915(c) waivers, costs beyond an individuals control would not be considered part of a selfdirected budget 5 and CMS strongly urges states to ensure that overtime or travel costs beyond an individual s control not be deducted from the individual s self-directed budget under any other HCBS Medicaid authority as well. Costs that result from a provider working for multiple beneficiaries may be distributed across all the individuals served by a joint employer without being deducted from the individually controlled self-direction budget Instructions, Technical Guide and Review Criteria for 1915(c) Home and Community-Based Waivers. Page 252. Retrieved from Topics/Waivers/Downloads/Technical-Guidance.pdf on June 25, Instructions, Technical Guide and Review Criteria for 1915(c) Home and Community-Based Waivers. Page 215. Retrieved from Topics/Waivers/Downloads/Technical-Guidance.pdf on June 25, 2014.

10 Page 4- CMCS Informational Bulletin Potential Reimbursement Options When Self Direction Programs Involve Direct Service Workers who Provide Services to More than one Individual per Week The following two options are examples of approaches states may use in self-direction programs where there is a third party joint employer and an individual beneficiary controls a service budget. We note some benefits and deficits of each option that states might consider in deciding how to approach reimbursement design: Option 1. The state designs a new reimbursement option under which a financial management services agency would submit claims for each self-directed consumer to the Medicaid agency that includes: 1) the actual service costs incurred from each individual (to be deducted from his/her authorized self-directed budget, which could include, if authorized, overtime costs incurred just for that individual beneficiary); and 2) a per member/per month service fee negotiated with the state to cover expected overtime and travel costs across the FMS book of business. Considerations: a. Individuals would still be able to control a budget for individually controllable costs and the rate development would be similar to that of agency-based care. b. In order to keep actual costs of overtime and compensable travel time at or below the per member/per month fee, the FMS may have an incentive to restrict some individuals preference for workers. c. This will also necessitate the ability to create PMPM rate setting that will be new to implement and review. Option 2. The state/program operating agency/fms allocates the actual compensable overtime and travel costs that workers accrue across all of the beneficiaries that received Medicaid reimbursable services from the third party employer. 6 Medicaid would reimburse actual overtime and travel costs as a cost of providing service, divided amongst beneficiaries, but the costs would not be deducted from individual self-directed budgets. Under Medicaid, as noted above, the compensable travel and/or overtime costs cannot be billed as an administrative cost. Therefore, the payments for shared overtime and travel will be factored into service cost across all beneficiaries. The overtime and travel time becomes a FFS reimbursement from Medicaid to the operating agency. Considerations: a. A formula-based system may be easier than attempting to more discretely allocate shared costs to specific individuals who share a worker. b. As a fee for service reimbursement from the Medicaid program to the agency, budgeting for the program would be less predictable. 6 When a third party employer (such as a state or operating agency) has multiple entities who process payroll, the employer will need to have a mechanism to track whether employees are receiving pay from more than one entity and thus possibly should be paid overtime and/or compensable travel between beneficiaries.

11 Page 5- CMCS Informational Bulletin Potential Options When the State Sets the Rates and Authorizes the Number of Hours or Other Units an Individual Receives The following are examples of reimbursement approaches a state Medicaid program could use when the state sets the rates and authorizes the number of hours or other units of service a beneficiary can receive. They are based on use of an hourly or other unit reimbursement rate rather than an overall service budget controlled by the beneficiary. Option 1. The FMS or other designated entity, through an employment agreement, receives a unit service rate, which includes reimbursement developed to reflect both the FMS activities and the workers pay (including overtime and travel compensation). This would be a flat unit rate across all beneficiaries. Considerations: a. Would be consistent with other community based unit payment methods. b. The FMS may restrict some beneficiary preference for workers, where the FMS would be at risk for high overtime costs. Option 2. The state develops tiered payment rates or modifiers to a base rate, which may include multiple factors such as: incremental compensable overtime, distance from town or county center, acuity factors, and provider availability (to account for overtime and travel if needed). A state may choose to implement this as modifiers to procedure codes. This is essentially risk adjustment to Option 1, above, to account for individuals where factors that would increase cost are present. Considerations: a. States may already have such systems in place for shift differentials or other added cost. b. May be administratively complex to monitor appropriate use of modifiers and to control costs to valid use. The state will need to develop documentation standards to properly account for the additional payments. c. May be administratively complex to determine which individuals qualify for each separate modifier, who can authorize each modifier, and develop and monitor these processes. Payment When the Individual is the Sole Employer When a beneficiary is considered a sole employer under the economic realities test as described in the DOL AI, s/he may have new obligations to pay minimum wage and/or overtime compensation due to the new rule s narrowed definition of companionship services. 7 If the services provided by the worker do not meet this new definition, the DOL guidance clarifies that the beneficiary must now pay minimum wage and overtime compensation for all hours worked, 7 Descriptions of FLSA domestic service employment exemptions can be found at:

12 Page 6- CMCS Informational Bulletin unless the worker is live-in, in which case there may still be an overtime exemption. 8 Additional cost considerations for overtime must meet state program rules and should be factored into the individual s self-directed budget. Currently, states have different policies on overtime. Some allow beneficiary discretion within a self-directed budget, and others allow beneficiary discretion only in exceptions where needed for health and welfare. The state will have to consider and account for new FLSA policies in determining the beneficiary budgets for self-directed care when overtime will be a factor. A worker may incur overtime working for just one beneficiary who is considered the sole employer, and, in that situation, treatment of overtime could be rightfully allocated to the beneficiary incurring the cost. It should be noted that transportation to and from the employer at the beginning and end of the work day (i.e., commuting time) is never required to be paid. * * * * * In conclusion, CMS reminds states that they should consult DOL s guidance and seek legal counsel in determining where and how FLSA impacts direct care programs operating under Medicaid. CMS is available to offer technical assistance to states seeking to adjust Medicaid reimbursement and other program policies to appropriately support FLSA compliance in home and community based LTSS. If you have any questions in regard to this bulletin, please contact Dianne Kayala at Dianne.kayala@cms.hhs.gov. 8 The live-in domestic service employee exemption fact sheet is located at:

13 United States Court of Appeals FOR THE DISTRICT OF COLUMBIA CIRCUIT Argued May 7, 2015 Decided August 21, 2015 No HOME CARE ASSOCIATION OF AMERICA, ET AL., APPELLEES v. DAVID WEIL, SUED IN HIS OFFICIAL CAPACITY, ADMINISTRATOR, WAGE & HOUR DIVISION, ET AL., APPELLANTS Appeal from the United States District Court for the District of Columbia (No. 1:14-cv-00967) Alisa B. Klein, Attorney, U.S. Department of Justice, argued the cause for appellants. With her on the briefs were Vincent H. Cohen, Jr., Acting U.S. Attorney, Beth S. Brinkmann, Deputy Assistant Attorney General, and Michael S. Raab, Attorney. Eric T. Schneidermann, Attorney General, Office of the Attorney General for the State of New York, Barbara Underwood, Solicitor General, Seth Kupferberg, Assistant Attorney General, were on the brief for amici curiae States of New York, et al. in support of appellants.

14 2 Kate Andrias was on the brief for amici curiae Paraprofessional Healthcare Institute and 26 Consumer and Policy Organizations in support of appellants. Arthur B. Spitzer was on the brief for amici curiae Women=s Rights, Civil Rights, and Human Rights organizations and scholars in support of appellants. Judith A. Scott, Nicole G. Berner, Renee M. Gerni, Craig Becker, Lynn Rhinehart, William Lurye, and Claire Prestel were on the brief for amici curiae American Federation of Labor and Congress of Industrial Organizations, et al. in support of appellants. Jonathan S. Massey was on the brief for amici curiae Members of Congress in support of appellants. Daniel B. Kohrman was on the brief for amicus curiae AARP in support of appellants. Samuel R. Bagenstos was on the brief for amicus curiae the American Association of People with Disabilities in support of appellants. Maurice Baskin argued the cause for appellees. With him on the brief was William A. Dombi. Derek Schmidt, Attorney General, Office of the Attorney General for the State of Kansas, Jeffrey A. Chanay, Chief Deputy Attorney General, Toby Crouse, Special Assistant Attorney General, Mark Brnovich, Attorney General, Office of the Attorney General for the State of Arizona, Samuel S. Olens, Attorney General, Office of the Attorney General for the State of Georgia, Bill Schuette, Attorney General, Office of the Attorney General for the State of Michigan, Adam Paul

15 3 Laxalt, Attorney General, Office of the Attorney General for the State of Nevada, Wayne Stenehjem, Attorney General, Office of the Attorney General for the State of North Dakota, Herbert H. Slatery, III, Attorney General, Office of the Attorney General for the State of Tennessee, Ken Paxton, Attorney General, Office of the Attorney General for the State of Texas, and Brad D. Schimel, Attorney General, Office of the Attorney General for the State of Wisconsin were on the brief for amici curiae States of Kansas, et al. Stephanie Woodward was on the brief for amici curiae ADAPT and the National Council On Independent Living in support of appellees. Michael Billok was on the brief for amicus curiae the Consumer Directed Personal Assistance Association of New York in support of appellees. Michaelle L. Baumert and Henry L. Wiedrich were on the brief for amici curiae Members of Congress in support of appellees. Before: GRIFFITH, SRINIVASAN and PILLARD, Circuit Judges. Opinion for the Court filed by Circuit Judge SRINIVASAN. SRINIVASAN, Circuit Judge: The Fair Labor Standards Act s protections include the guarantees of a minimum wage and overtime pay. The statute, though, has long exempted certain categories of domestic service workers (workers providing services in a household) from one or both of those protections. The exemptions include one for persons who provide companionship services and another for persons who live in the home where they work. This case concerns

16 4 the scope of the exemptions for domestic-service workers providing either companionship services or live-in care for the elderly, ill, or disabled. In particular, are those exemptions from the Act s protections limited to persons hired directly by home care recipients and their families? Or do they also encompass employees of third-party agencies who are assigned to provide care in a home? Until recently, the Department of Labor interpreted the statutory exemptions for companionship services and live-in workers to include employees of third-party providers. The Department instituted that interpretation at a time when the provision of professional care primarily took place outside the home in institutions such as hospitals and nursing homes. Individuals who provided services within the home, on the other hand, largely played the role of an elder sitter, giving basic help with daily functions as an on-site attendant. Since the time the Department initially adopted that approach, the provision of residential care has undergone a marked transformation. The growing demand for long-term home care services and the rising cost of traditional institutional care have fundamentally changed the nature of the home care industry. Individuals with significant care needs increasingly receive services in their homes rather than in institutional settings. And correspondingly, residential care increasingly is provided by professionals employed by thirdparty agencies rather than by workers hired directly by care recipients and their families. In response to those developments, the Department recently adopted regulations reversing its position on whether the FLSA s companionship-services and live-in worker exemptions should reach employees of third-party agencies who are assigned to provide care in a home. The new

17 5 regulations remove those employees from the exemptions and bring them within the Act s minimum-wage and overtime protections. The regulations thus give those employees the same FLSA protections afforded to their counterparts who provide largely the same services in an institutional setting. Appellees, three associations of home care agencies, challenged the Department s extension of the FLSA s minimum-wage and overtime provisions to employees of third-party agencies who provide companionship services and live-in care within a home. The district court invalidated the Department s new regulations, concluding that they contravene the terms of the FLSA exemptions. We disagree. The Supreme Court s decision in Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158 (2007), confirms that the Act vests the Department with discretion to apply (or not to apply) the companionship-services and live-in exemptions to employees of third-party agencies. The Department s decision to extend the FLSA s protections to those employees is grounded in a reasonable interpretation of the statute and is neither arbitrary nor capricious. We therefore reverse the district court and remand for the grant of summary judgment to the Department. I. The FLSA, 29 U.S.C. 201 et seq., generally requires covered employers to pay a minimum wage, and also requires payment of overtime compensation at an hourly rate equaling 150% of normal pay for weekly work hours beyond forty. 29 U.S.C. 206(a), 207(a)(1). The Fair Labor Standards Amendments of 1974, Pub. L. No , 88 Stat. 55, extended the Act s minimum-wage and overtime protections to employees in domestic service, i.e., service in a household. 29 U.S.C. 206(f), 207(l). The congressional committee reports accompanying the 1974 Amendments

18 6 explained that domestic service includes services performed by persons employed as cooks, butlers, valets, maids, housekeepers, governesses, janitors, laundresses, caretakers, handymen, gardeners, footmen, grooms, and chauffeurs of automobiles for family use. S. Rep. No , at 20 (1974); H.R. Rep. No , at (1974). The 1974 Amendments also exempted defined categories of domestic-service workers from certain FLSA protections. This case concerns two of those exemptions. First, 29 U.S.C. 213(a)(15), pertaining to companionship services, provides that the FLSA s minimum-wage and overtime requirements shall not apply with respect to any employee employed in domestic service employment to provide companionship services for individuals who (because of age or infirmity) are unable to care for themselves (as such terms are defined and delimited by regulations of the Secretary). Second, 29 U.S.C. 213(b)(21), pertaining to live-in domestic-service workers, provides that the Act s overtime protections shall not apply with respect to any employee who is employed in domestic service in a household and who resides in such household. The 1974 Amendments included a broad grant of rulemaking authority empowering the Secretary of Labor to prescribe necessary rules, regulations, and orders with regard to the amendments made by this Act Amendments, Pub. L. No , 29(b), 88 Stat. 76. In 1975, the Department of Labor adopted implementing regulations. Those regulations addressed the treatment of companionship-services workers and live-in domestic-service workers who are employed by third-party agencies. The regulations provided that the 213(a)(15) exemption for companionship services and the 213(b)(21) exemption for live-in workers included individuals who [were] employed by an employer other than the family or household using their

19 7 services. 29 C.F.R (a), (c) (2014). The regulations also defined the term companionship services to mean those services which provide fellowship, care, and protection for a person who, because of advanced age or physical or mental infirmity, cannot care for his or her own needs. 29 C.F.R (2014). Additionally, [s]uch services may include household work related to the care of the aged or infirm person such as meal preparation, bed making, washing of clothes, and other similar services. Id. Subsequently, in 1993, 1995, and 2001, the Department, citing dramatic changes in the provision of home care services, proposed regulatory amendments to remove thirdparty-agency employees from the scope of the companionship-services and live-in worker exemptions. See Application of the Fair Labor Standards Act to Domestic Service, 66 Fed. Reg (Jan. 19, 2001); Application of the Fair Labor Standards Act to Domestic Service, 60 Fed. Reg. 46,797 (Sept. 8, 1995); Application of the Fair Labor Standards Act to Domestic Service, 58 Fed. Reg. 69,310 (Dec. 30, 1993). In 2001, for example, the Department explained that workers who today provide in-home care to individuals needing assistance with activities of daily living are performing types of duties and working in situations that were not envisioned when the companionship-services regulations were promulgated. 66 Fed. Reg. at None of those proposals to alter the regulatory treatment of thirdparty-agency employees gained final adoption. In 2002, the companionship-services portion of the thirdparty-employer regulation became the subject of a legal challenge brought by an employee of a third-party agency who sought overtime and minimum-wage protections. Ultimately, the Supreme Court rejected her challenge, upholding the regulation s inclusion of third-party-employed

20 8 workers within the Act s companionship-services exemption. Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158 (2007). The employee argued that the framework of Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984), should not apply, and that, if it did, the statutory exemption unambiguously applied only to workers employed directly by private households, thus rendering the third-party regulation invalid. The Court disagreed. It held that the the text of the FLSA does not expressly answer the third-partyemployment question ; that Congress had granted authority to the Department to resolve the issue; and that the Department s answer i.e., its regulation including employees who work for third-party agencies within the companionship-services exemption was reasonable. Coke, 551 U.S. at 168, 171. In 2013, the Department again considered reversing course on the third-party-employer issue, this time adopting a final regulation doing so. In the 1970s, the Department observed, many individuals with significant care needs were served in institutional settings rather than in their homes. Application of the Fair Labor Standards Act to Domestic Service, 78 Fed. Reg. 60,454, 60,455 (Oct. 1, 2013). But [s]ince that time, there has been a growing demand for longterm home care. Id. As more individuals receive services at home rather than in nursing homes and other institutions, workers who provide home care services... perform increasingly skilled duties analogous to the professional services performed in institutions. Id. The Department concluded that, given the changes to the home care industry and workforce since the original 1975 regulations, the new regulation would better reflect Congressional intent behind the 1974 Amendments. Id. at 60,454. As authority for the new regulation, the Department cited, in addition to the statutory exemptions themselves, the general grant of

21 9 rulemaking authority in 29(b) of the 1974 Amendments. Id. at 60,557. Under the new regulation, third-party employers of companionship-services and live-in employees may no longer avail themselves of the statutory exemptions. With respect to companionship services, the revised regulation states that [t]hird party employers of employees engaged in companionship services... may not avail themselves of the minimum wage and overtime exemption provided by section [2]13(a)(15). 29 C.F.R (a) (2015). With respect to live-in workers, the revised regulation states that [t]hird party employers of employees engaged in live-in domestic service employment... may not avail themselves of the overtime exemption provided by section [2]13(b)(21). Id (c). The new rules also narrow the Department s definition of companionship services, which has the effect of limiting the scope of the Act s companionship-services exemption. Among other adjustments, the regulation now states that [t]he term companionship services... includes the provision of care such as meal preparation, driving, light housework, managing finances, assistance with the physical taking of medications, and arranging medical care only if that care does not exceed 20 percent of the total hours worked. Id (b) (2015). In 2014, appellees, a group of trade associations representing third-party agencies that employ home care workers, filed a lawsuit challenging the regulations under the Administrative Procedure Act. In December 2014, shortly before the new regulations were to take effect, the district court granted partial summary judgment to appellees, declaring invalid the revised third-party-employer regulation. Home Care Ass n of Am. v. Weil, No. 14-cv-967 (RJL), 2014 WL (D.D.C. Dec. 22, 2014). The court ended its

22 10 analysis at Chevron step one, finding that the Department s decision to exclude a class of employees from the exemptions based on the nature of their employer[s] contravened the plain terms of the statute. Id. at *5-6. In light of the district court s vacatur of the third-party-employer regulation, appellees could make use of the companionship-services exemption, and they therefore gained standing to attack the Department s revised definition of companionship services. In a separate opinion, the district court vacated that definition, finding that its twenty-percent limitation on hours of care contravened both the text of the statutory exemption and congressional intent. Home Care Ass n of Am. v. Weil, No. 14-cv-967 (RJL), 2015 WL , at *4-5 & n.5 (D.D.C. Jan. 14, 2015). The Department now appeals. II. We review the new third-party-employer regulation pursuant to the two-step Chevron framework. See Util. Air Regulatory Grp. v. EPA, 134 S. Ct. 2427, 2439 (2014). If Congress has directly spoken to the precise question at issue, then the court, as well as the agency, must give effect to the unambiguously expressed intent of Congress. Chevron, 467 U.S. at But if the statute is silent or ambiguous with respect to the specific issue, we analyze whether the agency s answer is based on a permissible construction of the statute. Id. at 843. The Department contends that its revised third-partyemployer regulation lies within the scope of its rulemaking authority under the general agency delegation in 29(b) of the 1974 Amendments, as confirmed by the Supreme Court s decision in Coke. The Department further argues that the new regulation is a reasonable exercise of the Department s authority at Chevron step two and is neither arbitrary nor

23 11 capricious. We agree with the Department and uphold the regulation. A. Appellees contend that the new third-party-employer regulation fails at the first step of Chevron. In their view, the FLSA does not delegate to the Department the authority to exclude a class of employers from the Act s companionshipservices and live-in worker exemptions. That argument is foreclosed by the Supreme Court s decision in Coke. The Court in Coke confronted three distinct statutory arguments about the applicability of the companionshipservices exemption to employees of third-party providers. First, respondent Coke, the employee, urged that the 1974 Amendments clearly express[] congressional intent to exempt only companions employed directly by private households, not companions employed by third-party agencies. Brief for Respondent at 5, Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158 (2007) (No ), 2007 WL , at *5 (capitalization altered). Second, various amici, including the appellees here, made the opposite argument viz., that the unambiguous language of the companionship-services exemption requires applying it to employees of third-party providers. Brief for National Association for Home Care & Hospice, Inc. as Amicus Curiae in Support of Petitioners at 3, Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158 (2007) (No ), 2007 WL , at *3. Finally, the petitioner home care agency, supported by the United States, put forward an intermediate position. In their view, the text of the statutory exemption does not address third-party employment, leaving the agency discretion to resolve the matter at Chevron step two. Brief for United States as Amicus Curiae Supporting Petitioners at 8,

24 , Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158 (2007) (No ), 2007 WL , at *8, *17-18; see Brief for Petitioners at 10-12, Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158 (2007) (No ), 2007 WL , at * The Supreme Court rejected the competing arguments that the statutory text unambiguously compels a result in either direction. The Court held that the text of the FLSA does not expressly answer the third-party-employment question and that there is also no clear answer in the statute s legislative history. Coke, 551 U.S. at 168. Instead, the question of whether to include workers paid by thirdparties within the scope of the [exemption s] definitions is among the details that the statute leaves to the agency to work out. Id. at 167. In support of that conclusion, the Court referenced the Secretary of Labor s general authority to prescribe necessary rules, regulations, and orders with regard to the amendments made by the Act Amendments, Pub. L. No , 29(b), 88 Stat. at 76; see Coke, 551 U.S. at 165 (citing 29(b)). Because that grant of authority provides the Department with the power to fill... gaps through rules and regulations, and because the subject matter of the regulation in question concerns a matter in respect to which the agency is expert, the treatment of thirdparty employers under the exemption, the Court concluded, had been entrusted [to] the agency. Coke, 551 U.S. at 165. The Court s conclusion precludes appellees Chevron step-one argument. It is true that Coke addressed a challenge solely to the companionship-services portion of the prior regulation, while this case also encompasses a challenge to the live-in worker provision of the revised regulation. But the Coke Court s characterization of third-party-employer treatment as an interstitial matter... entrusted [to] the

25 13 agency to work out equally applies to the Department s authority under the FLSA s live-in worker exemption. Indeed, Congress framed the companionship-services and live-in worker exemptions with precisely parallel construction and phrasing. Section 213(a)(15) exempts from the FLSA s minimum-wage and maximum-hour requirements any employee employed in domestic service employment to provide companionship services for individuals who... are unable to care for themselves. 29 U.S.C. 213(a)(15) (emphasis added). And 213(b)(21) symmetrically exempts from the Act s maximum-hour requirements any employee who is employed in domestic service in a household and who resides in such household. 29 U.S.C. 213(b)(21) (emphasis added). Both provisions invite further specification, the details of which turn upon the kind of thorough knowledge of the subject matter and ability to consult at length with affected parties that an agency, such as the DOL, possesses. Coke, 551 U.S. at 165, Appellees also stress that the companionship-services exemption provides for the Secretary to define[] and delimit[] its terms, while the live-in worker exemption contains no similar supplement. Compare 29 U.S.C. 213(a)(15), with id. 213(b)(21). The Supreme Court in Coke, however, did not focus on the define[] and delimit[] language in 213(a)(15). Rather, in holding that the Department had authority to fill [the third-partyemployment] gap[] through rules and regulations, the Court relied on 29(b) s general grant of authority to establish rules implementing the 1974 Amendments. Coke, 551 U.S. at 165. The Court invoked the precise terms of 29(b) s general grant of implementation authority the authority to prescribe necessary rules, regulations, and orders with regard to the amendments made by this Act in the portion of its opinion holding that the third-party-employment question had been

26 14 delegated to the Secretary. Id. And although the Court also cited 29 U.S.C. 213(a)(15) as a source of agency authority alongside 29(b), the define[] and delimit[] language, unlike the language of 29(b), was neither reproduced nor highlighted. See Coke, 551 U.S. at 165. Because 29(b) gives an agency broad power to enforce all provisions of the 1974 Amendments including both 213(a)(15) and 213(b)(21) the Department s authority is clear with respect to both FLSA exemptions. Gonzales v. Oregon, 546 U.S. 243, 258 (2006) (emphasis added) (citing Nat l Cable & Telecomm. Ass n v. Brand X Internet Servs., 545 U.S. 967, 980 (2005)). Appellees get no further in arguing that, even if the regulation upheld in Coke amounted to a valid exercise of the Department s authority to define the terms of the companionship-services exemption, the revised regulation does not. Appellees posit that, while the Secretary may define terms within the phrase employee employed in domestic service employment to provide companionship services, the Department exceeded its authority when, instead of defining that phrase, it issued a rule providing that thirdparty employers may not avail themselves of the exemption. 29 C.F.R (a). That argument fails for the reason already given: The Department s authority does not flow solely from the define[] and delimit[] language of 213(a)(15), but instead, as the Coke Court emphasized, comes from the general grant provided by 29(b) to work out the statutory gaps through rules and regulations. Coke, 551 U.S. at 165. Indeed, in finding it within the Department s broad grant of authority to decide whether to include workers paid by third parties within the scope of the companionshipservices exemption, the Court explicitly contemplated that the

27 15 full range of potential outcomes lay within the agency s discretion. Id. at Should the FLSA cover all companionship workers paid by third parties?, the Court asked. Id. at 167. Or should it instead cover some such companionship workers...? Should it cover none? Id. All of those possibilities, the Court made clear, were the Department s to assess. Id. Appellees remaining step-one arguments are unavailing. Appellees contend that the Department s new rules conflict with the legislative history of the FLSA amendments. But the Coke Court explicitly found that the statute s legislative history provides no clear answer to the third-partyemployment question. Coke, 551 U.S. at 168. And while appellees seek to attach significance to Congress s amendment of other subsections of 213 in 1996 and 1999 without altering either 213(a)(15) or 213(b)(21), the Coke Court, having been advised about that congressional inaction, see Brief for the United States as Amicus Curiae at 20 n.5, Coke, 551 U.S. 158 (No ), apparently found it immaterial to the Chevron step one inquiry. Appellees similarly argue that Congress s more recent inaction in the face of proposed legislation to exclude third-party employers from the statutory exemptions shows congressional intent to allow employers to continue making use of the exemptions. But failed legislative proposals are a particularly dangerous ground on which to rest an interpretation of a prior statute. Cent. Bank of Denver, N.A. v. First Interstate Bank of Denver, N.A., 511 U.S. 164, 187 (1994) (internal quotation marks omitted). And here, Congress s failure to enact legislation does nothing to upset Coke s holding that the text of the FLSA does not expressly answer the third-party-employment question. 551 U.S. at 168.

28 16 For those reasons, we reject appellees challenge to the regulations at Chevron step one. The Department has the authority to work out the details of the companionshipservices and live-in worker exemptions, and the treatment of third-party-employed workers is one such detail. Id. at B. Because we conclude that Congress delegated authority to the Department to determine whether employees of thirdparty agencies should fall within the scope of the companionship-services and live-in worker exemptions, we proceed to Chevron step two. At that step, if the implementing agency s construction is reasonable, a court must accept the agency s construction of the statute. Fin. Planning Ass n v. SEC, 482 F.3d 481, 498 (D.C. Cir. 2007) (quoting Brand X, 545 U.S. at 980). The Department s interpretation readily satisfies that standard. Appellees Chevron step-two argument largely rehashes their step-one submission. Their primary contention is that the total exclusion of third party employers from availing themselves of access to the companionship and live-in exemptions cannot be a permissible construction of the Act. Appellees Br Coke belies that argument. As the Court explained, the text of the FLSA does not expressly answer the third-party-employment question, leaving it to the Department to determine whether the FLSA should apply to all, some, or none of the home care workers paid by third parties. Coke, 551 U.S. at The Department s resolution of that question is entirely reasonable. The Department explained that bringing domestic-service workers paid by third-party employers

29 17 within the FLSA s protections would be consistent with congressional intent. The 1974 Amendments intended to expand the coverage of the FLSA to include all employees whose vocation was domestic service, the Department observed, 78 Fed. Reg. at 60,454, not to roll back coverage for employees of third parties who already had FLSA protections, id. at 60,481. Because Congress s overriding intent was to bring more workers within the FLSA s protections, the Department determined that the companionship-services and live-in exemptions from coverage should be defined narrowly in the regulations to achieve the law s purpose. Id. at 60,482. In the Department s view, a narrow construction of the statutory exemptions draws further support from the general principle that coverage under the FLSA is broadly construed so as to give effect to its remedial purposes, and exemptions are narrowly interpreted... to those who clearly are within the terms and spirit of the exemption. Id. (citing A.H. Phillips, Inc. v. Walling, 324 U.S. 490, 493 (1945)). The Department thus decided to interpret the exemptions as narrow ones that target individuals who are not regular breadwinners or responsible for their families support. Id. at 60,481 (citing H. Rep. No , p. 36). The Department s understanding is consistent with Congress s evident intention to include within the coverage of the Act all employees whose vocation is domestic service. S. Rep. No , at 20 (emphasis added); see H.R. Rep. No , at 33-34, 36 (similar). Both the 1974 Senate and House Reports, in explaining the purpose behind the companionship exemption and another exemption covering casual babysitting services, drew a contrast between casual employees and employees whose vocation is domestic service. S. Rep. No , at 20; H.R. Rep. No , at 33-34, 36. And one Senator, when commenting on

30 18 the expansion of the FLSA to cover domestic-service employees, contrasted the type of assistance provided by a neighbor or an elder sitter with the professional domestic who does this as a daily living. 119 Cong. Rec. 24,801 (July 19, 1973) (statement of Sen. Burdick). It is true that the Department points to no legislative materials concerning the live-in exemption in particular. But it was reasonable for the Department to assume that Congress intended the live-in exemption to operate in much the same way as the similarly worded companionship exemption i.e., to exclude from the FLSA s scope casual employees who are not regular bread-winners or responsible for their families support. 78 Fed. Reg. at 60,481 (citing S. Rep. No , p. 20; H.R. Rep. No , p. 36). Based on its understanding of congressional intent, the Department reasoned that the 1974 Congress would have wanted the FLSA s protections to extend to the home care workers of today who are employed by third-party agencies. [T]oday, few direct care workers are the elder sitters envisioned by Congress when enacting the exemption, the Department observed. 78 Fed. Reg. at 60,482. Instead, home care workers employed by third parties are professional caregivers, often with training or certification, who work for agencies that profit from the employees services. See id. at 60,455; National Employment Law Project, Comments to Proposed Revisions to the Companionship Exemption Regulations, RIN 1235-AA (Mar. 21, 2012), reprinted in J.A. at In light of the purpose and objectives of the [1974] amendments as a whole, 78 Fed. Reg. at 60,482, the Department decided to prohibit third party employers from claiming [the companionship and livein] exemptions, id. at 60,480. The Department thereby applied the FLSA s protections to workers for whom such employment is a vocation. S. Rep. No , at 20. We

31 19 find the Department s resolution to be fully reasonable and see no basis for setting it aside at Chevron step two. C. Appellees contend that, even if the new third-party regulation passes muster at Chevron step two, it should still be invalidated as arbitrary and capricious. See 5 U.S.C. 706(2)(A). According to appellees, the Department failed to provide an adequate justification for reversing four decades of policy interpreting the Act. Appellees Br. 40. The Department needed to satisfy a higher burden, appellees submit, because the new regulation departed from prior rules and policies. Id. Contrary to appellees suggestion, there is no requirement that the agency s change in policy clear any heightened standard. FCC v. Fox Television Stations, Inc., 556 U.S. 502, 514 (2009). Instead, we ask whether actions that are a departure from prior agency practice, like other agency actions, rest on a reasoned explanation. Id. at 515. A reasoned explanation, in the event of an alteration in approach, would ordinarily demand that [the agency] display awareness that it is changing position, and of course the agency must show that there are good reasons for the new policy. Id. But beyond that, the APA imposes no special burden when an agency elects to change course. The Department s explanation for its updated rule meets those standards. In addition to reasoning that its original regulation misapplied congressional intent, the Department justified its shift in policy based on the dramatic transformation of the home care industry since [the thirdparty-employer] regulation was first promulgated in Fed. Reg. at 60,481. When Congress enacted the 1974

32 20 Amendments, the vast majority of the private household workers were employed directly by a member of the household. Report to the Ninety-Third Congress by the Secretary of Labor: Minimum Wage and Maximum Hours Standards Under the Fair Labor Standards Act 28 (Jan. 19, 1973). By the time the Supreme Court decided Coke in 2007, the vast majority of home care workers were instead employed by third-party agencies. See Brief of the Alliance or Retired Americans, et al. as Amici Curiae in Support of Respondent at 6, Long Island Care at Home, Ltd. v. Coke, 551 U.S. 158 (2007) (No ), 2007 WL , at *6. The duties of typical home care workers also changed. In the 1970s, many individuals with significant needs received care in institutional settings rather than in their homes. See 78 Fed. Reg. at 60,455. Since that time, there has been an increased emphasis on the value of providing care in the home and a corresponding shift away from institutional care. As the Department recognized even by 2001, [d]ue to significant changes in the home care industry over the last 25 years, workers who today provide in-home care to individuals needing assistance with activities of daily living are performing types of duties and working in situations that were not envisioned when the companionship-services regulations were promulgated. 66 Fed. Reg. at In light of the Department s reasoned explanation for its change in policy, we conclude that its departure from past practice was neither arbitrary nor capricious. D. Appellees see a strong[] indicat[ion] in the administrative record that removing third-party-employed workers from the scope of the exemptions will make home

33 21 care less affordable and create a perverse incentive for reinstitutionalization of the elderly and disabled. Appellees Br. 44. The Department disagreed with that characterization in the final rule, concluding that care recipients would be benefitted, not harmed, by the new regulations. See 78 Fed. Reg. at 60,459, 60,483. The Department s conclusion has ample support in the record. When issuing the final rule, the Department acknowledged the existence of certain comments claiming that the proposed changes would harm home care workers and recipients. [R]aising the cost of service provided through home care agencies, those comments suggested, would incentivize employment through informal channels rather than through such agencies. 78 Fed. Reg. at 60,481. Some commenters also argued that expanding FLSA coverage would increase institutionalization of the elderly and would accelerate workforce turnover due to reduced work hours per shift. The Department rejected those contentions based on the administrative record. Fifteen states, the Department explained, already provide minimum wage and overtime protections to all or most third party-employed home care workers who would come within the FLSA s scope under the Department s rule. Id. at 60,482. Yet commenters raising concerns about the rule s effects did not point to any reliable data from those states indicating that extension of minimum-wage and overtime protection to home care workers had led either to increased institutionalization or a decline in continuity of care. Id. at 60,483. To the contrary, some commenters noted an absence of evidence from those states suggesting any decline in access to (or quality of) home care services owing to the extension of minimum-wage and overtime protections to home care workers. See Addendum to Reply Br. 14, 21.

34 22 The industry s own survey indicated that home care agencies operating in overtime and non-overtime states already have very similar characteristics, including a similar percentage of consumers receiving 24-hour care. 78 Fed. Reg. at 60,503. Appellees suggest that, even if the Department s conclusions are defensible with regard to the companionship exemption, we should still invalidate its revised approach with regard to the live-in exemption because only four of those fifteen states require payment of overtime to live-in domestic-service employees. Appellees Br. 46. The Department was aware of those differences when making its decision, however, as it included a table in the final rule detailing the nuances of each state s overtime and minimumwage laws. 78 Fed. Reg. at 60, Whether focused on fifteen states or a subset of four states, the Department s core observation that commenters could point to no evidence indicating that extension of protections to home care workers in the relevant states effected an increase in institutionalization or workforce turnover remains true. The Department instead reasonably credited comments suggesting that the new rule would improve the quality of home care services. The rule will bring more workers under the FLSA s protections, the Department concluded, which will create a more stable workforce by equalizing wage protections with other health care workers and reducing turnover. Id. at 60,483. Increased protections will also ensur[e] that the home care industry attracts and retains qualified workers, improving the quality of home care services. Id. at 60,548. The Department predicted that the revised regulations would benefit consumers because supporting and stabilizing the direct care workforce will result in better qualified employees, lower turnover, and a higher

35 23 quality of care. Id. at 60, Those sorts of [p]redictive judgements about areas that are within the agency s field of discretion and expertise are entitled to particularly deferential review, as long as they are reasonable. BellSouth Telecomm., Inc. v. FCC, 469 F.3d 1052, 1060 (D.C. Cir. 2006) (internal quotation marks omitted). The Department s judgments are. III. In addition to challenging the third-party-employer regulation, appellees also challenge 29 C.F.R (2015), the regulation defining the scope of companionship services encompassed by the Act s companionship-services exemption. Appellees contend that the Department s revised, and more limited, definition of companionship services conflicts with the FLSA and is arbitrary and capricious. We lack Article III jurisdiction to consider appellees challenge. In light of our disposition with respect to the third-partyemployer regulation, appellees cannot show that the revised definition of companionship services causes their member companies injury in fact. See Friends of the Earth, Inc. v. Laidlaw Envtl. Servs., Inc., 528 U.S. 167, (2000). Appellees conceded before the district court that, until the court vacated the third-party-employer regulation, their members lacked standing to pursue injunctive relief against [the enforcement of 29 C.F.R ], because third-party employers were not allowed to avail themselves of the exemption under any definition of companionship services, and [appellees] were therefore not directly harmed by [ 552.6]. Mem. in Supp. of Emergency Mot. for Temporary Stay of Agency Action and Req. for Expedited Consideration, No. 14-cv-967, Dkt. No. 23-1, at 1-2 (filed Dec. 24, 2014). Appellees make no effort in their appellate briefing to revisit

36 24 that understanding. Because we now reverse the district court s vacatur of 29 C.F.R , appellees cannot make use of the companionship-services exemption, and their members thus suffer no direct injury as a result of the Department s narrowed definition of companionship services. We therefore lack jurisdiction to consider appellees challenge to that definition. * * * * * For the foregoing reasons, we reverse the district court s judgments and remand for the entry of summary judgment in favor of the Department. So ordered.

37 U.S. Department of Justice Civil Rights Division Department of Health and Human Services Office for Civil Rights December 15, 2014 Dear Colleague: On October 1, 2013, the Department of Labor promulgated a rule extending the minimum wage and overtime protections of the Fair Labor Standards Act (FLSA) to most home care workers ( Home Care Rule ). Application of the Fair Labor Standards Act to Domestic Service, 78 Fed. Reg. 60,454 (Oct. 1, 2013). The Home Care Rule becomes effective on January 1, The Civil Rights Division and the Department of Health and Human Services Office for Civil Rights (OCR) recognize the importance of ensuring adequate workplace protections for home care workers, who provide critical services to millions of Americans. At the same time, it is important that states implement the Department of Labor s rule in ways that also comply with their obligations under Title II of the Americans with Disabilities Act (ADA). In particular, because home care workers, such as personal care assistants and home health aides, often provide essential services that enable people with disabilities to live in their own homes and communities instead of in institutions, states should consider whether reasonable modifications are necessary to avoid placing individuals who receive home care services at serious risk of institutionalization or segregation. The Department of Justice and OCR enforce the rights of people with disabilities to live integrated lives free from unnecessary segregation in institutions. Specifically, Title II of the ADA requires that no qualified individual with a disability shall, by reason of such disability, be excluded from participation in or be denied the benefits of the services, programs, or activities of a public entity, or be subjected to discrimination by any such entity. 2 As directed by Congress, the Attorney General issued regulations implementing Title II, which are based on regulations issued under section 504 of the Rehabilitation Act. 3 The Title II regulations require public entities to administer services, programs, and activities in the most integrated setting 1 The Department of Labor announced that it will not bring an enforcement action against any employer related to FLSA obligations under the new Home Care Rule before June 30, It will then use prosecutorial discretion until December 31, 2015 to determine whether to bring enforcement actions, taking into account the good faith efforts of states and other entities to bring their home care programs into compliance with the Home Care Rule. Application of the Fair Labor Standards Act to Domestic Service; Announcement of Time-Limited Non- Enforcement Policy, 79 Fed. Reg. 60,974 (Oct. 9, 2014) U.S.C (1990). 3 See id (a); 28 C.F.R (a) (1991); Exec. Order No. 12,250 (1980), 45 Fed. Reg. 72,995 (1980), reprinted in 42 U.S.C. 2000d-1. Section 504 of the Rehabilitation Act of 1973 similarly prohibits disability-based discrimination. 29 U.S.C. 794(a) ( No otherwise qualified individual with a disability... shall, solely by reason of her or his disability, be excluded from the participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance.... ).