Providing much needed guidance to industry employers still wrestling with fallout from the United States Department of Labor’s drastic reduction to the scope of the companionship exemption, District Court Judge Sandra S. Beckwith held this week that a home care agency properly relied on the temporary vacatur of the DOL’s new federal regulations in electing not to pay overtime to its home healthcare employees during the period while the vacatur was in effect.   Bangoy, et al. v. Total Homecare Solutions, LLC, S.D. Ohio No. 1:15-CV-573 12/21/15.

In October 2013, the United States Department of Labor issued proposed regulations drastically curtailing the scope of the “companion exemption” by, in part, providing that agencies which employ home companion workers may no longer avail themselves of the exemption and by redefining “companionship services.” In December 2014, the District Court for the District of Columbia held in Home Care Association of America, et al. v. Weil, that the DOL exceeded its rule-making authority in eliminating this FLSA exemption for home health workers employed by home care agencies, and vacated the rule. It likewise vacated the new definition of “companionship services” in January 2015. However, in August 2015, the D.C. Circuit Court of Appeals reversed the lower court, holding that the new rules constituted a valid exercise of DOL’s rulemaking authority. The employer in Total Homecare Solutions, LLC, relying on the lower court’s vacatur of the regulations, allegedly did not pay overtime to its home healthcare employees during the interim eight month period between the trial court and appellate court decisions.

In granting Total Homecare Solutions’ motion to dismiss in Bangoy, the Court rejected plaintiffs’ “heads I win, tails you lose” argument that the defendant-employer should be held liable for overtime during the period of vacatur of the DOL rule. Any other conclusion, Judge Beckwith explained, would have placed the defendant-employer in an “untenable position.” The Court held that the vacatur of a federal rule renders it “a nullity and unenforceable” and stated that allowing plaintiffs to recover during the period of vacatur would have an “impermissible retroactive effect.” The Court also noted that DOL’s non-enforcement of the rule until 30 days after the D.C. Circuit’s decision upholding it “strongly suggests that the rule should not be given retroactive effect in cases between private parties” because public enforcement actions and actions for determining private rights should generally not be at variance.

The Total Homecare Solutions decision provides a strong defense for industry employers faced with FLSA litigation over the period prior to DOL’s enforcement the new rule. Note that the DOL has now taken the position that the rule is now effective, pending the Home Care Association of America’s petition for review by the U.S. Supreme Court.