DOL Provides Guidance Regarding When There is an Employment Relationship with Caregivers

By Brian M. O'Neal - McMahon Berger, PC

July 23, 2018

There has been a lot of uncertainty in recent years concerning when an entity will be considered an employer of caregivers under the Fair Labor Standards Act (FLSA). On July 13, 2018, the U.S. Department of Labor’s Acting Administrator of the Wage and Hour Division (WHD) issued a Field Assistance Bulletin on the subject of “Determining whether nurse or caregiver registries are employers of the caregiver.” For purposes of the Bulletin, the DOL considers a registry to be an entity that typically matches caregivers with people who need caregiving services. The term “registry” is used throughout the Bulletin for purposes of simplicity, but the Bulletin is certainly relevant to any entity that provides placement, payroll, or any type of intermediary services for caregivers and the clients receiving services from caregivers. The Bulletin considers caregivers to include individuals who provide services under such titles as home health aides, personal care attendants, or home care workers. As a result, the primary focus is on services provided by caregivers in the home of a client.

In general, the Bulletin seems to reflect the DOL’s willingness to take a more flexible approach to making a determination as to whether a registry will be considered an employer of a caregiver under the FLSA. The Bulletin states the WHD of the DOL should consider a variety of factors in making such a determination and the analysis should not depend on any single factor. The WHD field staff are to consider the totality of the circumstances in evaluating whether there is an employment relationship.

Common factors that will be assessed by the DOL in making a determination about employer status include: (1) conducting background and reference checks; (2) hiring and firing; (3) scheduling and assigning work; (4) controlling the caregiver’s work; (5) setting the pay rate; (6) receiving continuous payments for caregiver services; (7) paying wages; (8) tracking caregiver hours; and (9) purchasing equipment and supplies.

The DOL clarifies that a registry’s performance of basic or legally required background checks by itself does not indicate the registry is an employer of the caregiver. Further, a set-up where the client rather than the registry has complete control in hiring and firing a caregiver still certainly weighs in favor of a finding that the registry is not an employer of the caregiver. Likewise, a registry’s lack of control over the work schedule of the caregiver weighs in favor of a finding that the registry is not an employer. Thus, to avoid being deemed an employer, the work schedule should be determined directly by the client and the caregiver. It also continues to remain important for any registry-type of entity to avoid directly monitoring, supervising, evaluating, or disciplining the caregiver if the entity intends to maintain that it is not the employer of the caregiver.

An analysis of who sets the pay rate of the caregivers has been given considerable weight by the DOL in the past. The recently issued Bulletin does not indicate that this factor is to be given more weight than any other factors. Regardless, it remains extremely important to provide the client with the greatest amount of control possible under the circumstances with respect to setting the pay rate of the caregiver. The Bulletin does state that it does not indicate a registry is an employer of the caregiver if the registry simply charges fees for administrative or ministerial functions such as payroll processing or producing tax documents. It is also clear that a registry is in a better position to argue it is not the employer if the caregiver is reimbursed through the funds of the client rather than a situation where the registry guarantees direct payment of its own funds to the caregiver even if the client does not ultimately pay for the services.

The Bulletin also states that performing payroll services after the client or caregiver submits time records does not indicate the registry is the caregiver’s employer. However, if a registry is active in creating and verifying time records, then such evidence weighs in favor of a finding of an employment relationship between the registry and the caregiver. Moreover, a registry’s investment in the tools necessary for the caregiver to perform his/her services may indicate the registry is acting as the caregiver’s employer. Finally, the Bulletin provides clarification that requiring a caregiver to have an EIN, insurance, and/or issuing him/her an IRS 1099 Form or calling him/her an independent contractor will not be considered important to the employer status analysis.

In sum, the Bulletin provides reason for an entity to be encouraged that it can make a strong argument it is not the employer of the caregiver if at least a majority of relevant factors clearly weigh in favor of a finding that the entity is not in an employment relationship with the caregiver. An organization should consider the factors set forth in the Bulletin when making decisions about an arrangement with caregivers and clients and also limit contact with the caregivers to the fullest extent possible to strengthen its argument that there is no employment relationship with the caregivers.

The St. Louis employment law attorneys at McMahon Berger have been representing employers across the country in labor and employment matters, including those relating to an assessment of employee status, for over sixty years, and are available to discuss these issues and others. As always, the foregoing is for informational purposes only and does not constitute legal advice regarding any particular situation or issue. The choice of a lawyer is an important decision and should not be based solely on advertisements.