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Top home health franchises earn gross profit margins as high as 40 percent, making home care one of the five most profitable franchise ventures in the country, according to a report (pdf) by Franchise Business Review, a market research firm.

The report was highlighted in a recent USA Today article.

But despite these huge profits, the home health industry has spent hundreds of thousands of dollars fighting a proposed federal rule that would extend basic wage protections to home care workers.

Asked about this discrepancy by USA Today, PHI Policy Research Director Dorie Seavey said, “I find it really hard to reconcile that one of the most profitable sectors is pinching pennies when it comes to workers.”

Home health aides earned a median wage of $9.91 an hour (pdf) in 2011. Adjusting for inflation, that’s a 12 percent decline from their 2001 wages.

In December, President Obama proposed to end the “companionship exemption” in the federal Fair Labor Standards Act, which excludes home care workers from minimum-wage and overtime protections.

During a recent public-comment period, 26,000 comments on the proposal were submitted to the Department of Labor, of which three quarters were in support. Publication of a final rule could come as early as this summer.

– by Matthew Ozga

Terry Bucher

The U.S. cannot build the home care workforce it needs to care for the aging baby-boomer generation unless home care workers are paid fairly, argues an op-ed published in the Orlando Sentinel on April 27.

The op-ed was written by Terry Bucher, the president emeritus of the Florida Professional Association of Care Givers.

In the op-ed, Bucher explains that Florida is one of 29 states that do not offer home care workers basic wage protections, such as minimum wage or time-and-a-half overtime pay. The federal Fair Labor Standards Act similarly excludes home care workers from such protections.

“Florida’s home-care workers are dedicated and diligent,” Bucher writes. “But until they are guaranteed a fair wage, Florida will simply not be able to attract enough qualified workers to meet the growing need for home-care services.”

Hope for a Federal Rule Change

In late 2011, the Obama administration proposed a federal rule change that would finally extend basic wage protections to home care workers.

Bucher notes that the Department of Labor received 26,000 public comments regarding the proposal — most of them in favor of the change.

The DOL must act to extend overtime and minimum wage protections to home care workers, Bucher writes.

She cites PHI research (pdf) in arguing that the $84 billion home care industry can easily afford to pay its workers a fair wage.

Additionally, better wages for home care workers would lower worker turnover, Bucher writes. High turnover rates are costly to home care companies and result in lower-quality care for elders and people with disabilities.

– by Matthew Ozga

PHI President Steven L. Dawson and Center for Economic and Policy Research Co-Director Dean Baker, in an op-ed published in The Washington Post on March 29, contend that the exemption of home care workers from federal minimum wage and overtime protections under the Fair Labor Standards Act is an “issue that affects the welfare of women,” but gets little attention.

In “Home Health Aides Deserve a Living Wage,” Dawson and Baker write that “caregiving in America is a female occupation.” Women are the vast majority of family caregivers and comprise 90 percent of the paid home care workforce (pdf) — which explains why home care workers have been excluded from basic federal labor guarantees.

“Caregiving, like other forms of domestic service, has traditionally been considered less important than jobs done by white men,” Dawson and Baker write. “The idea that domestic work is not ‘real work’ has kept wages low for all types of ‘women’s work.’” The annual income of home care workers is $16,600.

“Extending minimum wage and overtime protections to home-care workers is another step in America’s progress toward ending gender and racial discrimination,” Dawson and Baker write. “But fairness is not the only reason to make this change,” they add, noting that it would also help to reduce costly turnover and meet the rapidly increasing demand for these workers as the nation’s population ages.

“The country needs a national solution that helps us all meet our family responsibilities. That includes building a skilled, stable workforce by treating caregiving as real work and paying those who provide these services a living wage,” Dawson and Baker advise.

More Media Coverage on the Companionship Exemption

PHI National Policy Director Steve Edelstein was interviewed by America’s Workforce Radio on March 30 on the proposal to revise the companionship exemption.

National Domestic Workers Alliance Director Ai-Jen Poo and Jobs with Justice Executive Director Sarita Gupta, the co-directors of Caring Across Generations (CAG), discussed workers’ rights with Bill Moyers on his new PBS television show. CAG is a coalition of 200 organizations, including PHI, that seek to provide quality care and dignity for aging Americans and their caregivers.

For other media coverage and more information on the companionship exemption, visit PHI’s Campaign for Fair Pay site.

– by Deane Beebe

Steven Edelstein

SUMMARY: Steve Edelstein, PHI national policy director, discusses the background and current status of efforts to extend federal minimum wage and overtime protections to home care workers on the America’s Work Force radio program in Ohio.

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Recorded: March 30, 2012
Duration: 12:00
File Size: 16.5 MB

As the clock struck midnight on March 21, the public comment period on the proposed rule to revise the “companionship exemption” under the Fair Labor Standards Act (FLSA) drew to a close.

Nearly 10,000 comments on whether home care workers should be extended basic federal minimum wage and overtime protections, including comments submitted by PHI (pdf), have been registered on the official government website.

The next step is for DOL to review all of the submitted information before it issues a final rule on the companionship exemption, which is anticipated to be sometime this summer.

Kudos to the Workers

The day before the comment period closed, the Workforce Protections Subcommittee of the U.S. House of Representatives Education and the Workforce Committee held a hearing entitled, “Ensuring Regulations Protect Access to Affordable, Quality Companion Care.”

While there was much disagreement between Committee Chair Tim Walberg (R-MI), Ranking Member Lynn Woolsey (D-CA), and the hearing witnesses about whether revising the regulation to include home care workers was affordable for business and how it would impact consumers and workers, everyone agreed that home care workers are invaluable: they make it possible for elders and people with disabilities to live independently in their homes instead of in more costly nursing homes.

Walberg sang the praise of the home care workers who assisted his own parents in their later years. However, despite giving kudos to the home care workforce for the important work that they do — including the many workers in attendance at the hearing — Walberg claimed that extending home care workers a fair wage would raise costs and have unfavorable consequences for consumers and workers.

Woolsey countered by saying that today home care is a “booming industry” and the services and supports that the “modern” home care workforce provides “far exceeds [the] fellowship and companionship” services that FLSA originally intended to exempt.

Woolsey said that the “bottom line” of the home care business is to “bill twice what the worker receives,” but the worker then “ends up on public assistance” with the taxpayers paying the cost.

Impact Has Been Manageable

Catherine Ruckelshaus, legal co-director of the National Employment Law Project, was among the witnesses who testified (pdf) in favor of extending home care workers basic labor protections. She explained that Congress never intended to carve out home care workers from FLSA when it revised the law in 1974 to include other domestic workers.

Fifteen states already provide overtime and protections and another five provide minimum wage protections, and the “impacts have been manageable,” Ruckelshaus said.

She added that there is no data that shows that states that have more labor protections “have higher rates of institutionalization,” which suggests that “the remaining states are capable of making this shift without major disruptions to their long-term care systems.”

In a statement (pdf) submitted for the record, PHI reiterated its position that home care aides cannot continue to be treated as if they are casual companions:

Home care is the nation’s fastest-growing occupation (pdf), expected to grow to over 3 million workers by 2020. Yet these workers, who are 90 percent female with a median age of 45, continue to be treated in the same fashion as teenage babysitters. Home care, however, is a true vocation, and should be treated as such under the law.

Industry Studies Are Seriously Flawed

Opponents of extending home care workers basic labor protections have been trying to support their claims with recent industry-funded studies, but PHI has conducted its own analyses, finding that these studies — which suggest that the proposed regulations will have a negative impact on businesses, consumers, and workers — are seriously flawed.

All of the witnesses’ testimony, an archived webcast, and other information from the hearing are available on the DOL website.

– by Deane Beebe

– by Dorie Seavey, Ph.D., PHI Policy Research Director

During the past two months, private-duty trade associations have produced three different studies designed to bolster their position that narrowing the overtime exemption would have serious negative consequences for home care companies, clients, and workers. Yet each of these studies presents serious flaws.

In two surveys of their membership, these associations had the opportunity to acquire solid industry data on the employment patterns of home care workers: how many work overtime, and how often; how many work part-time and would like to work more; and how much they are paid. This kind of information could have usefully complemented the U.S. Department of Labor‘s (DOL) analysis, which relied on all the nationally representative, statistically valid data available on these questions. So, what do the new studies tell us?

SURVEYS

The Companionship Services Exemption Survey, funded by the National Association for Home Care and Hospice–affiliated Private Duty Homecare Association (PDHA) and the National Private Duty Association (NPDA), includes a question about the percent of employees who work overtime. Yet regrettably the study fails to report respondents’ answers to this question. Rather, the survey emphasizes opinion questions that are phrased to lead respondents to answers that align with the associations’ opposition to the proposed regulations.

Not Nationally Representative or Statistically Valid

The second study, Economic Impact of Eliminating the FLSA Exemption for Companionship Services — prepared by IHS Global Insight and paid for by the International Franchise Association (IFA) — like the PDHA/NPDA survey, relies on what is known as a “convenience sample”: a sample confined to those members that returned a completed survey. This type of sample is not considered nationally representative or statistically valid and, at best, merely reflects the positions and experiences of the companies that actually completed the survey, leading to a strong likelihood of bias.

Dorie Seavey

Low Response Rates

IFA, an association dedicated to preserving and enhancing the regulatory climate for the growth of franchising, sampled nine of its 27 franchise home care companies to participate in the survey. These nine companies in turn represent 3,259 franchisees, of which only 17 percent actually participated in the survey, for a total of 554 franchisees. This is considered a very poor response rate, affecting the validity of the findings. The PDHA and NPDA survey received roughly twice as many responses (1,458 “home care companies” responded) but the report doesn’t provide a response rate, thereby leaving its validity in question.

To put these survey response numbers in perspective: according to the U.S. Bureau of Labor Statistics, in 2010 there were 55,929 establishments in “Services for the Elderly and Persons with Disabilities,” the industry that encompasses the vast majority of home care companies specializing in the provision of non-medical home care services. Furthermore, approximately 70 percent of these companies were non-profit organizations (see Chapter 3 of PHI’s Caring in America report). This means that the for-profit segment of the industry represented by the three trade associations sponsoring the surveys constitutes just a segment, and certainly not the majority, of the entire home care industry.

Unintentional Support for DOL’s Conclusion of Small Adjustment Costs

The most remarkable empirical finding of these two survey-based studies is inadvertent: fully 40 percent of respondent companies report that they already extend minimum wage and overtime to home care workers! Why? Because the companies are located in states that require them to do so or because they voluntarily elect to meet these basic standards. It’s hard to imagine stronger evidence in support of the DOL’s conclusion that the economic impact on the home care industry of the proposed revisions to the companionship services exemption is likely to be small. If providing these labor protections is so cost-prohibitive to the industry, how do these businesses continue to operate and even thrive?

ECONOMIC STUDY

The third industry-sponsored study, Estimating the Economic Impact of Repealing the FLSA Companion Care Exemption, paid for by the same private-duty associations that financed the first survey, was conducted by two economists at Navigant Economics who are complete newcomers to the field of home care labor market analysis. The study does little more than reiterate limitations in the available data used by DOL to assess the costs of narrowing the companionship exemption. The analysis asserts that the costs would be “substantial” but it does not provide an estimate of the costs.

The study’s most self-promoted achievement is an estimation — which they claim to be superior to that of DOL’s — of the decrease in demand for “companion care labor” caused by an increase in wages, known in economic theory as the “elasticity of demand.” The Navigant report overemphasizes the role of this elasticity in assessing the impact of proposed regulations and fails to acknowledge that the costs of the regulatory change will be driven more by how those agencies not already extending overtime protections to their aides respond to new payment requirements. As DOL notes, “those employers who adjust schedules and redistribute hours can be expected to decrease overtime costs significantly” (NPRM, p. 100).

Probably the most disturbing inference made in the Navigant study is that, since millions of employees, such as fisherman, movie theatre employees, and criminal investigators, are also exempt from minimum wage and overtime protection, continuing to exempt home care workers should not be such a big deal. This conclusion is clearly out of touch with the reality that home care occupations top the list of the country’s fastest-growing jobs and constitute one of the largest workforces ever produced by our economy.

Companionship Exemption Comment Period Extended through March 21

The U.S. Department of Labor (DOL) has extended the public comment period through March 21 on its proposed revisions to the companionship exemption. The revised rule would extend home care workers federal minimum wage and overtime protections under the Fair Labor Standards Act, if it becomes law.

To learn more about the companionship exemption, see sample comments, and make a comment on the official public comment website, visit the PHI Campaign for Fair Pay.

Hearing

The Subcommittee on Workforce Protections of the U.S. House of Representatives’ Committee on Education and the Work Force is holding a hearing on the companionship exemption proposal on March 20 at 10:00 at the Rayburn House Office Building in Room 2175. There will be a live webcast of the hearing.