Few people would dispute that caregivers earn every cent they are paid. Recent law changes have been made with the ultimate objective of improving caregiver employment and compensation.
Fair Labor Standards Act (FLSA) Rules
In addition to the Internal Revenue Service, Medicaid and state employment laws, the US Department of Labor through the Fair Labor Standards Act (FLSA) establishes responsibilities and provides enforcement for paying caregivers and other workers. The FLSA rules have been recently updated impacting caregivers employment and compensation.
Prior to 2016, there were broad exemptions for overtime pay for caregivers. Changes to the FLSA now requires that caregivers are paid no less than minimum wage and overtime for over 40 hours per week. There are very few exemptions to this.
If an individual hires a caregiver directly, under the FLSA, that individual is responsible for following FLSA rules. Some agencies utilize independent contractors as caregivers. However, under the FLSA, most caregivers are deemed to be employees.
If an individual hires a caregiver through an agency, like CareBuilders at Home, the FLSA views the relationship as joint employment of the caregiver (i.e. the caregiver is employed by both the agency and the agency’s client). The client can rely on the agency to pay the caregiver and keep appropriate records under the FLSA, but the client is also personally responsible for any wages that are owed to the caregiver under wage and overtime laws.
Caregiver Employment and Compensation
This joint employment relationship begs the question, what happens if the agency has an issue that forces it to go out of business? Unlike most agencies, the local CareBuilders at Home office is not the employer of caregivers. CareBuilders at Home caregivers are employed by the franchisor, CareBuilders at Home in New York. This limits the client’s exposure to any unpaid wages due a caregiver.
Direct Hire, Independent Contractor or Employee
It is likely that a caregiver hired directly by an individual or if a caregiver is an independent contractor of an agency, that caregiver may not be bonded, insured, or protected by workers compensation insurance. Agencies that use independent contractors as caregivers do not pay employment taxes leaving that burden on the backs of the independent contractor caregiver. These agencies can pass on this savings to their individual clients, but the impact of this is to lower the rate of pay to caregivers and to leave the caregiver and client unprotected by insurance. Agencies who employ their caregivers provide other services including supervision and training and caregiver backup in the case of an absence.
So selection of a reputable agency who employs their caregivers is important for many reasons.
Minimum Wage Increase
There has been much discussion regarding raising the minimum wage from the current rate of $8.50 in Arizona to a more livable wage of $15.00 per hour. Caregiver wages and related direct costs of employment taxes and insurance comprise approximately 70-80% of the cost of home care. So the impact of an increase in the minimum wage, while helping to compensate caregivers better, will result in an increase in the cost of caregiver services of up to 50%. Unfortunately this could make caregiver services that many fixed income people struggle to afford even less affordable. It may also result in fewer caregiver positions as more people are forced to look for alternatives to caregiver services. Caregiver employment and compensation will always be a hot topic and rules and regulations will be constantly changing.
Source: “Paying Minimum Wage and Overtime to Home Care Workers A Guide for Consumers and their Families to the Fair Labor Standards Act” United States Department of Labor, Wage and Hour Division