Costs for Live-in Health Aides in Bergen and Passaic Counties Set to Rise

December 25, 2014


It hasn’t been easy for Linda Leeder’s family to honor her 92-year-old father’s wish that he remain in his home, despite his advancing Alzheimer’s disease.

To raise money for the live-in aide he requires, his kids secured a reverse mortgage on the home he’s lived in for 55 years. The Franklin Lakes woman figures the financing arrangement will pay for three to four years of home care.

Key facts about the home-care industry:

  • There are 2 million home-care workers in the U.S.
  • Their number is expected to grow by 50 percent by 2022.
  • It is the fastest-growing sector of the American economy.
  • Nationally, the median hourly wage is $9.38.
  • 56 percent work part-time hours.

Source: Paraprofessional|Healthcare Institute

But hotly contested federal labor regulations taking effect Thursday could mean the aide who cares for Leeder’s father will have to be paid overtime for more of her working hours, instead of a flat daily rate.

“I think this will massacre the live-in industry,” said Lenny Verkhoglaz, principal owner of Executive Care, the Hackensack-based employer of the aide.

Verkhoglaz estimates that the cost of a round-the-clock live-in aide — about $67,000 a
year — could increase by $10,000.
“Families won’t be able to afford the increases we’d have to charge,” said Verkhoglaz,
who estimates that 80 percent of his clients in Bergen, Passaic and three other counties pay out of pocket, often exhausting life savings or home equity.

Worker groups and aging advocates contend that the federal government’s move to put such hourly and live-in aides on par with other protected employee groups will help build a more stable workforce. That, in turn, could lead to less turnover and burnout in a field that will need to expand with the aging of the baby boomer population — a generation more likely to demand home care over institutional care.

“If the business model of the home-care industry is so shaky that they can’t afford to pay people according to federal law, then I think that needs to be considered,” said Sarah Leberstein, staff attorney for the National Employment Law Project.

The group is one of several labor organizations that pressed the Obama administration for the new rules, which are the subject of a two-pronged legal challenge.

The debate over whether live-in home-care workers should be entitled to overtime pay for the hours they are not asleep or on a meal break has simmered for years. The controversy promises to stretch into another year, now that industry groups won a slight reprieve this week from a federal judge who struck down some of the changes scheduled for Thursday.

At issue is a 40-year-old provision of federal wage and overtime laws known as the “companionship exemption.”

The provision, enacted in 1974 amendments to the Fair Labor Standards Act, meant that live-in or hourly domestic workers who “provide fellowship, care and protection” to an elderly or infirm person were not entitled to the minimum wage and overtime protections that other domestic workers had.

For nearly a decade, worker advocates have lobbied to do away with the exemption, which they say harkens to an era when relatives informally hired a neighbor or an acquaintance to serve as companions to the elderly. Today, home care is increasingly provided by for-profit elder-care chains that count on a cheap workforce to do a job that has become far more physically and emotionally taxing.

“Research indicates that a lot of these companies are pretty profitable and may be able to pay these higher wages without passing those rates onto the consumers,” said Debbie Chalfie, senior legislative representative for AARP.

AARP expressed concerns about some language in the new rules, but largely supports the effort to ensure home-care workers receive fair compensation.

“These workers are doing really important work that has changed substantially in the time since this companionship worker exemption was created,” Chalfie said.

But aging advocates recognize that this fair-wage dispute is far more octopus-like than other labor-industry clashes, given that the cost of elder care has become a social and economic conundrum, not just for families, but for government officials struggling to rein in spiraling Medicaid costs.

In July, New Jersey embarked on a new effort to use Medicaid money to pay for more home care, which is far cheaper than nursing homes. But those programs won’t pay for the kind of round-the-clock care that Leeder’s father needs and wants, even if he were deemed eligible.

“Unless we take some steps to help families pay for it, staying at home isn’t going to be an option for many,” Chalfie said.

Leeder calls her father’s aide an “angel” and a “dear friend” whom the family trusts and relies upon. But she was taken aback when told that the cost of a live-in aide could rise by thousands of dollars a year, fearing the increase would eat up the reverse mortgage money much sooner than planned.

“This would devastate us,” Leeder said. “We were feeling so comfortable that we had this nest egg to work with.”

Regarding wages, home health aides in New Jersey fare better than others because the state’s labor rules are more stringent than federal ones. While the typical wage is about $10 an hour, those working hourly shifts must be paid minimum wage and time and a half for more than 40 hours in a week.

For that reason, the new labor rules have less impact in New Jersey than in states where no protection exists for home-care workers. New Jersey also requires that some overtime be paid to live-in aides. But Verkhoglaz said the state lets employers use a formula that essentially pays the aide straight time for 40 hours a week and overtime for an additional 16.

Under the formula, Verkhoglaz’s live-in employees make $100 to $140 a day, depending on their experience level and the nature of the care. The basic rate he charges families is $185 a day.

The new rules will require a better accounting of the time when a worker is on duty and off duty, Leberstein said. Employers can subtract for sleep and meal time, but only if the employee does not face frequent interruptions.

The push to make home-care workers subject to federal protections began in earnest in 2007, when a home-care worker employed by an agency challenged the exemption before the Supreme Court. The court let the exemption stand, prompting three attempts by Congress to pass another amendment to the law extending minimum wage and overtime requirements to both hourly and live-in aides. After those bills died, the Obama administration adopted Labor Department rules in October 2013 that substantially limit the instances when an employer can use the companionship exemption to avoid paying minimum wage and overtime.

Industry groups filed suit, with the first challenge contesting a provision that says third-party employers, like Verkhoglaz’s agency, are never exempt from paying overtime, while families who hire workers directly still could be in some circumstances.

That was the provision struck down Monday by U.S. District Judge Richard J. Leon of the District of Columbia, who chastised the Obama administration for “another thinly veiled effort to do through regulation what could not be done through legislation.”

The ruling provides little clarity for employers like Verkhoglaz, who has yet to notify his clients of a possible price increase because he’s hoping the courts can be persuaded by the argument that administration officials rejected: that live-in aides need to be paid by a different wage formula because they are given a place to stay and their working hours can’t always be delineated from their resting and recreating ones.

In addition to the Labor Department’s likely appeal of Monday’s ruling, the judge has yet to rule on a second industry challenge to the most substantive change in the rules — a provision that says employers can claim an overtime exemption only if the aide spends 80 percent of his or her time providing companionship.

“The worker would really have to be there primarily to keep watch over an elderly person, sitting with them, reading to them, playing cards,” Leberstein said. “That does not apply to the vast majority of these workers, who are providing far more hands-on care than that or who are cooking and providing housekeeping.”

A ruling on that challenge is expected later in 2015, and the Labor Department considers the new definition of companionship to be in effect starting Thursday, although enforcement will be delayed six months so employers can adapt.

“The final rule’s extension of minimum wage and overtime protections to most home-care workers is the right policy — both for those employees, whose demanding work merits these fundamental wage guarantees, and for recipients of services who deserve a stable and professional workforce allowing them to remain in their homes and communities,” the department announced in a statement after the court ruling.

Home-care industry groups, however, were declaring victory, emboldened by the strong language the judge used in overturning one provision and hopeful |that the second challenge will |lead to the guts of the new regulations being overturned later next year.

The conflicting views left Verkhoglaz confused enough to call his lawyer for an opinion on how he should pay his workers beginning next week. The advice was to stick with the status quo.

“In business, uncertainty is our worst enemy,” Verkhoglaz said.

That’s especially true when your business is to provide stable care to a 92-year-old in decline.

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