Paying In-home Caregivers: What You Need to Know About the Fair Labor Standards Act

Jan 18

Your mom, dad, or spouse are living at home, but their health is starting to decline. They need some help with daily activities like cooking, dressing, or bathing or to prevent them from wandering. You want to keep them in the comfort of their own home as long as possible, so you start looking for in-home care options. Maybe you hire a caregiver through an agency. Maybe you work out a private arrangement with a friend or family member. Either way, there are some important things you need to know about how that caregiver is paid and the requirements under the Fair Labor Standards Act.The Fair Labor Standards Act (FLSA) was passed in 2015 and requires employers to pay caregivers minimum wage plus overtime for work in excess of 40 hours per week. The work week must be defined at the beginning of the relationship and must be consistent (so it can’t run from Sunday to Thursday one week and Friday to the following Thursday the next week to “balance” hours worked). There are some particulars under this law that the person receiving care and/or the family members arranging that care need to be aware of.Who is the “employer,” and who is the “consumer”? The answer may not be as intuitive as it seems, and these definitions may not be the same under the FLSA as they are for the IRS. For example, say you hire a caregiver through an in-home care agency to assist your spouse. Your spouse receiving care is the consumer. But who is the employer? Is it the care agency, or is it you? You might assume the employer is the agency. However, under the FLSA, you can be held accountable if the care agency is not meeting the law’s pay requirements. If the agency is not paying minimum wage and overtime, the caregiver could potentially sue you – and you may be on the hook for paying two times the total damages that caregiver sustained while caring for your spouse. To protect yourself, when hiring a caregiver through an agency, always ask for written confirmation that they meet all requirements under the FLSA. You might also investigate whether there is an indemnity clause indicating their responsibility for fair payment in your contract.Are there exemptions to FLSA requirements? What about family members providing care? The short answer is “yes.” Here’s a brief summary of some exceptions:

Companionship care. If the caregiver is providing predominantly companionship services rather than direct care, the FLSA requirement for overtime pay may not apply. What does companionship care mean? The caregiver must spend less than 20% of their time helping with activities of daily living (ADLs) or instrumental activities of daily living (IADLs), such as cooking, cleaning, bathing, dressing, or transferring (to name only a few). If the caregiver is mostly watching the person to make sure they don’t stray from home, going on outings with them, or doing activities together at home, they may fall in this category. Note that the requirement to pay the caregiver minimum wage still applies.
Family caring for family. There are two types of family-provided care to consider: “natural supports” provided out of love, affection, and duty, or caregiving services provided under a caregiver agreement. The FLSA acknowledges that family members provide “natural supports” to their loved ones, and all care provided in this spirit is exempt from the FLSA requirements. However, if family members are providing care under a formal caregiver agreement – a strategy which may be beneficial for Medicaid or VA benefits purposes – all care provided under that agreement is subject to the terms of the FLSA. It may be possible to combine both types of family care (e.g. work 40 hours under the caregiver agreement, then provide additional “natural supports” by cooking for and assisting the loved one during a family gathering). Family caregivers should talk to a qualified elder law attorney to learn more about the ins and outs of caregiver agreements, documenting care for Medicaid and VA purposes, and making sure they don’t run afoul of FLSA requirements.
Live-in caregivers. If you hire a caregiver to live with your loved one or yourself, the FLSA requirement to pay minimum wage applies, but the overtime requirement does not.

Other takeaways. There are some additional factors to consider in certain caregiving arrangements: Paying In-Home Caregivers FLSA

Weekly or monthly flat rates. If you agree to pay a caregiver a set rate per week or month, you still need to honor the FLSA requirements. You must consider your state’s minimum wage and make sure their labor hours don’t exceed that amount. For example, you might hire a caregiver in Tennessee who agrees to work for $250/week. As of 2018, Tennessee’s hourly minimum wage is $7.25. The maximum number of hours the caregiver can work in one week is about 34.48. If the caregiver works more than that in a week, you must pay extra at the rate of $7.25 per hour.
Self-directed fiscal intermediaries. Some Medicaid recipients who receive home and community-based services may hire a caregiver through a fiscal intermediary (FI). The FI implements human resource activities and handles accounting and reporting to ensure compliance with the Medicaid waiver program. If you or your loved one are in this situation, confirm that the FI properly reports the care provided and the amount the caregiver is paid to avoid FLSA repercussions.
Don’t assume under-the-table arrangements protect you. We always advise against making unreported payments to caregivers (or anyone)! Some families may choose to enter these arrangements anyway. Doing so exposes the person receiving care and their family to potential law suits. You may think the caregiver will be reluctant to sue because doing so will expose their own lack of reporting to the IRS. But if the potential payout (remember, damages-times-two) is significant enough, or if they become disgruntled (which is not uncommon in caregiver situations), you could be on the hook for a substantial payment plus legal fees. For both moral and legal reasons, it’s always best to do the right thing – and that’s the only reliable way to protect yourself and your family from risk.

If you have questions about long-term care arrangements for yourself or a loved one, or if you need help determining how to find and pay for care, please give us a call. We will be happy to work with you and your family to ensure you meet all the legal requirements of caregiving arrangements and to ensure you or your loved one receive the best possible care in the right environment.Image ID 107463925 © Chernetskaya | Dreamstime.com

Amelia Crotwell, JD

Amelia Crotwell, founder and managing partner at Elder Law of East Tennessee, has guided families through long-term care and special needs challenges for nearly two decades. Specializing in Life Care Planning and special needs trusts, Amelia also collaborates across all areas of elder law, including wills, trusts, Medicare, Medicaid, probate, and veterans benefits planning. Certified as an Elder Law Attorney since 2011, she is president-elect of the Life Care Planning Law Firms Association and co-chair of their strategic planning committee. Amelia is deeply involved in the Special Needs Alliance and a prominent member of the National Academy of Elder Law Attorneys. She played a key role in founding the Tennessee chapter of NAELA, serving as its first president. A member of the Tennessee Bar Association and past chair of its Elder Law Section Executive Council, Amelia also dedicates time to pro bono work and community education. She earned her J.D., summa cum laude, from the University of Tennessee College of Law and teaches Elder Law there as an adjunct professor since 2018.