Eliminating Overtime Exemption For Companion Care Workers Would Harm Seniors, Small Business Owners And Workers

February 24, 2012 // Franchising.com // WASHINGTON - The International Franchise Association today released a new cost-impact study demonstrating that the U.S. Department of Labor's proposal to eliminate the longstanding overtime exemptions for hundreds of thousands of workers in the companion care industry will significantly raise the cost of care for seniors and negatively impact a growing sector of the economy responsible for creating thousands of new jobs.

"This is a solution to a problem that does not exist and will only harm those who need companion care the most, our nation's seniors," said IFA President & CEO Steve Caldeira. "By requiring overtime pay for companion care workers, the Department of Labor is continuing its track record of imposing costly, burdensome and unnecessary regulations at a time when an increasing number of seniors are enjoying companion care as a cost-effective alternative to traditional care. We urge the DOL to withdraw its proposal in light of the impact this regulation will have on workers, small business owners and clients, including many seniors, in the companion care industry."

The report, Economic Impact of Eliminating the FLSA Exemption for Companionship Services, follows a Dec. 27, 2011, Notice for Proposed Rulemaking (76 Fed. Reg. 81190) eliminating the exemption from minimum wage and overtime provisions for workers who provide companionship services and live-in domestic services. A comment period was originally set to end on Feb. 27, 2012. After reviewing requests for an extension of up to 90 days from members of Congress and the public, including IFA and several franchise businesses, the comment period was only extended by 14 days to Monday, March 12.

Key findings of the report, prepared by IHS for IFA from a survey and analysis of 542 franchise businesses in the companion care sector, show:

  • The average amount of overtime worked by companion care employees in these franchise agencies is three times greater than DOL's estimate.
  • More than 4,000 franchise businesses and nearly 340,000 companion care workers in this sector may be negatively impacted by the DOL proposed rule changes if enacted.
  • DOL's analysis understates other costs, such as not considering additional management costs for adding staff to avoid the cost of paying overtime.
  • The impact of price increases on customers, to cover additional overtime costs, was greatly underestimated.
  • Companion care agencies expect nearly one quarter (23%) of their clients will be forced to seek institutional care or "underground services" from unlicensed providers.
  • Many seniors and others who receive companion care services may be negatively impacted due to the higher fees and interruptions to the continuity of their care.

The home health care sector is one of the fastest growing segments in the franchise industry, with more than two dozen franchise systems and more than 4,000 franchise business owners. The typical franchise owner has one location, with total annual revenue of $500,000 - $1 million. The average location employs 76 workers and receives 86 percent of its revenue from companion care services. One out of ten clients require 24-hour, live-in service, and one out of four clients require more than 40 hours per week of companion care services.

"These proposed rule changes would be particularly acute for America's seniors, who may be negatively impacted due to the higher fees and changes in their daily schedules," said Caldeira.

According to a survey of franchise business owners accompanying the report, 78 percent of companion care franchise business owners expect the DOL's proposed rule changes to have a significant impact on their business, 69 percent expect a significant increase in costs, and 75 percent expect to raise fees to their clients if the DOL rules are enacted. Several companion care franchise business owners voiced specific concerns regarding the potential impact DOL rules would have to their business if enacted.

"Surveys consistently show that 85 to 90 percent of seniors prefer to age in their homes. Home Instead Senior Care franchisees provide services that allow many seniors to achieve this goal by keeping non-medical home care affordable and accessible. The Department of Labor's proposed rule change jeopardizes the ability of seniors and those with disabilities to enjoy the benefits of home health care. This study is a useful tool that demonstrates the impact the proposed rule change would have on seniors and their families," said Roger Baumgart, Chief Executive Officer, Home Instead, Inc.

"Home Care businesses will not be able to afford to pay the overtime rates and be able to stay in business. Clients will suffer the most because they will not be able to have the continuity of care that is so crucial to many of our Alzheimer and dementia clients. The caregivers will not be able to make enough money to live on so they will either leave the field or try to work for several different agencies. This is a no-win situation," said Suzanne Morrison, Healthcare Advantages LLC (Brightstar), Duluth, GA.

"If this rule is adopted, it will move caregivers to an unregulated 'underground' market as clients will no longer be able to pay for live-in care through a regulated agency. Caregivers will lose take home pay as clients will not be able to pay overtime -resulting in an overall loss in jobs. Finally, less taxes will be collected as more caregivers will be paid under the table and not report their income," said Ben Solomon, Northwest Homecare & Staffing Services (Right At Home), Omaha, NE.

About the International Franchise Association

The International Franchise Association is the world's oldest and largest organization representing franchising worldwide. Celebrating over 50 years of excellence, education and advocacy, IFA works through its government relations and public policy, media relations and educational programs to protect, enhance and promote franchising. Through its media awareness campaign highlighting the theme, Franchising: Building Local Businesses, One Opportunity at a Time, IFA promotes the economic impact of the more than 825,000 franchise establishments, which support nearly 18 million jobs and $2.1 trillion of economic output for the U.S. economy. IFA members include franchise companies in over 300 different business format categories, individual franchisees and companies that support the industry in marketing, law and business development.


Alisa Harrison

Matthew Haller



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