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Pennsylvania’s Domestic Services Exemption Not Applicable to Third-Party Employers

A recent decision by the Supreme Court of Pennsylvania interpreted Pennsylvania’s domestic-services exemption from overtime and minimum-wage requirements to apply only to an employer who is a householder of the private dwelling where the home-care services are performed, and to not apply to a third-party employer – even if that third-party employer were to qualify as a “joint employer” with the householder.

At issue in Bayada Nurses, Inc. v. Commonwealth of Pennsylvania, 2010 Pa. LEXIS 2585 (Pa. Nov. 17, 2010), is the Pennsylvania Minimum Wage Act of 1968 (the "Act"), which exempts from the statute's minimum wage and overtime requirements employment for "[d]omestic services in or about the private home of the employer." 43 P.S. § 333.105(a)(2). A regulation promulgated by the Pennsylvania Department of Labor and Industry (the "Department"), defines "domestic services" as "[w]ork in or about a private dwelling for an employer in his capacity as a householder, as distinguished from work in or about a private dwelling for such employer in the employer's pursuit of a trade, occupation, profession, enterprise or vocation." 34 Pa. Code § 231.1(b).  The Pennsylvania Supreme Court interpreted the regulation as drawing a distinction regarding the type of employer for which an employee had to work in order for the exemption to apply; specifically, the work had to be performed for an employer in his or her capacity as a householder.

Pennsylvania’s domestic-services exemption is similar to – but not the same as – the companionship exemption contained in the Fair Labor Standards Act (“FLSA”).  The FLSA’s companionship exemption provides for an exemption from minimum wage and overtime requirements for "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." 29 U.S.C. § 213(a)(15). In 1975, the U.S. Department of Labor promulgated regulations clarifying that "[e]mployees who are engaged in providing companionship services, as defined in § 552.6, and who are employed by an employer or agency other than the family or household using their services, are exempt from the [FLSA’s] minimum wage and overtime pay requirements by virtue of section 13(a)(15)." 29 C.F.R. § 552.109(a).

In the lawsuit, Bayada Nurses, Inc.(“Bayada”) sought a judgment declaring (1) the definition of domestic services found in the Department’s regulation to be inconsistent with the Act and void to the extent it denied agency employers the domestic-services exemption; (2) Bayada's clients are employers for purposes of the Act, such that Bayada and its clients may take advantage of the domestic services exemption as “joint employers”; and (3) the domestic services exemption should be interpreted consistent with the FLSA.
Rejecting Bayada’s first contention, the Pennsylvania Supreme Court reasoned that the statutory language of the exemption imposes two requirements: (1) the worker must be providing domestic services in or about a private home; and (2) the employer must be of a particular capacity, i.e., an employer in whose home the work is being performed.  The court characterized the statute as unambiguous, and concluded that it focuses on one type of employer, i.e., a householder. Accordingly, the Court held that the Department's regulation is consistent with the Act’s limited exemption for domestic services.

The Court also rejected Bayada’s second contention premised on a joint-employment theory, interpreting the statute and underlying regulation to mean that an employer must be a householder to satisfy Pennsylvania's narrow domestic-services exemption. The Court went on to explain that if Bayada's householder client were to qualify for the exemption, Bayada still could not qualify for the exemption – even if it were to qualify as a joint employer with the householder client – because it is not a householder.

Finally, dismissing Bayada’s third contention that the Act must be interpreted consistently with the FLSA’s companionship exemption, the court reasoned that the FLSA does not supersede state law in this area and the Act’s domestic-services exemption is more narrow than the FLSA’s companionship exemption. Thus, the Court held that regulations promulgated under the Act were not constrained by the DOL’s regulations interpreting the FLSA.

Implications for Caregiver Registries

  • The implications of the decision in Bayada Nurses, Inc. for caregiver registries are not certain. As a general proposition, caregiver registries do not employ caregivers; they merely refer caregivers to clients.  Thus, the decision confirming that Pennsylvania’s domestic-services exemption does not apply to third-party employers does not necessarily affect caregivers who obtain client opportunities through caregiver registries, although it could.
  • In cases where a caregiver is determined to be an independent contractor, the issue is moot, because the Act applies only to employees; it does not cover independent contractors.
  • If a caregiver is found to be an employee, the determinative issue would be whether the “employer” is the client or the registry.  As noted, caregiver registries are only referral services; they generally do not employ caregivers who perform home care.  Nonetheless, these determinations are highly factual. In cases where the client pays the caregiver directly, there would seem to be an especially compelling argument that the registry is not the caregiver’s employer and that the caregiver is covered by Pennsylvania’s domestic-services exemption, provided that the exemption’s requirements are otherwise satisfied.

The foregoing is intended solely as general information and may not be considered tax advice; nor can it be used or relied upon for the purpose of (i) avoiding penalties under any taxing statute or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein. You should not take any action based upon any information contained herein without first consulting legal counsel familiar with your particular circumstances.