The Home Health Care Labor Law Debate

PRN Funding’s founder and president Phil Cohen recently published an article on the Factoring Investor detailing the current debate over home health care labor law. Despite the fact that PRN works with home care companies every day, the NPR article “Home Care Aides Await Decision on New Labor Rules” that describes the controversy came as a surprise.

The Current Law

Currently, 2.5 million home health care aides in the US are not required to receive minimum wage or overtime due to an amendment in labor law from 1974.

Instead, home care givers are treated legally like “adult babysitters” even though they provide an important and valuable service and typically work 12 hours a day or more and on weekends. Almost every other employee in the US receives minimum wage and overtime pay under the Fair Labor Standards Act (FLSA)– including nursing home workers, who perform the same kinds of tasks.

Changes in the Works

According to the article, the Obama Administration announced in 2011 that the law would be revised but has yet to make a formal approval for the changes. The new rule would ensure that home health care aides are guaranteed both minimum wage and overtime as prescribed by the FLSA.

The changes to the regulations are being proposed now because while the law has stayed the same for decades, the home health care industry has grown and transformed. 80 million baby boomers are aging fast and the home health care industry has more than doubled in the last eight years.

The Controversy

Just like with any issue, certain nuances make enacting the change less straightforward than it appears. While it seems logical that home care workers be treated like the rest of us, certain groups don’t want to see the law change because of unintended consequences.

Certain home care companies and trade groups like the National Association for Home Care and Hospice support paying employees at least minimum wage, but not overtime or weekends. The reasoning is that home care profits are mostly fixed by Medicaid, and the cost of overtime couldn’t be offset by a raise in price.

Another association that is concerned about the possible change is the disability rights group ADAPT. While they want workers to be adequately compensated, they cannot support the changes because the higher price tag means that people with disabilities most likely will have to find several attendants. This is disruptive and potentially dangerous for the residents who need consistency.

Implications For Factoring Companies and Brokers

For a factoring company or broker that deals with home care or staffing companies, a change in labor law has implications for business.

If the law is revised by the Obama administration, then home care aids will have to be compensated more by their companies. To counteract this, the companies will most likely restrict the number of hours that the employees can work, and look for more part-time workers—especially with Obamacare coming into full effect in 2014. Home care companies will have to change their business somehow to deal with the change in law, and change usually requires cash flow.

Factoring companies and brokers should be prepared to handle the changes to home care and staffing, and for brokers especially this requires having within your network a company that specializes in healthcare.