Earlier today, Secretary of Labor Thomas Perez announced that the Department of Labor has finalized a rule extending minimum-wage and overtime protections to home care workers. Starting on January 1, 2015, the wage and overtime provisions of the Fair Labor Standards Act will apply to home health aides, personal care aides, and other direct care workers employed by agencies. The agencies will have to pay workers minimum wage ($7.25/hour in those states that haven’t adopted higher minimum wages) and 1.5 times their regular wage for hours worked above 40 per week. In addition, workers who travel between multiple clients’ homes in the course of a workday must be paid for time spent traveling between those sites.

Home care workers had been exempt from these federal requirements because they were considered to fall into the “companions for the elderly” category of work, which is exempt from FLSA protections. Fifteen states (Colorado, Hawaii, Illinois, Maine, Maryland, Massachusetts, Michigan, Minnesota, Montana, Nevada, New Jersey, New York, Pennsylvania, Washington, and Wisconsin) already extend minimum wage and overtime protection to home healthcare workers, and six states (Arizona, California, Nebraska, North Dakota, Ohio, and South Dakota) and DC extend minimum-wage, but not overtime, protection. For specifics on the state laws, as well as the federal regulations, see the National Employment Law Project’s report Fair Pay for Home Care Workers: Reforming the U.S. Department of Labor’s Companionship Regulations Under the Fair Labor Standards Act.

As I wrote back in March 2012, when DOL was accepting comments on their proposed rule, DOL’s economic analysis suggests that Medicare and Medicaid together cover 75% of payments for home healthcare services, and private insurers pay another 12%. The remainder includes families paying out of pocket for home health services. In the 29 states that don’t already extend minimum wage to home care workers, costs to all payers may increase. For some families, higher costs to hire agency workers may result in greater burdens for unpaid family caregivers, many of whom already face substantial hardships. DOL also anticipates that home-care agencies will shoulder more than half of the additional costs, in the form of reduced profits.

Thousands of home care workers currently receiving less than minimum wage or lacking overtime and travel-time pay can expect to see their paychecks grow starting in 2015. That’s welcome news in an industry where around 40% of workers rely on public assistance like food stamps or Medicaid, to the tune of $14,800 per worker receiving assistance for her family. Low-income workers tend to spend most of their pay, so higher earnings for home care workers can translate to more economic activity in home care workers’ communities.

“They work hard and play by the rules and they should see that work and responsibility rewarded,” President Obama said of the nation’s nearly two million home care workers when announcing the proposed rule in December 2011. Today’s news release emphasizes the role home care workers play in US healthcare:

“Many American families rely on the vital services provided by direct care workers,” said Secretary of Labor Thomas E. Perez. “Because of their hard work, countless Americans are able to live independently, go to work and participate more fully in their communities. Today we are taking an important step toward guaranteeing that these professionals receive the wage protections they deserve while protecting the right of individuals to live at home.”

“Direct care workers play a critical role in ensuring access to high-quality home care that many people need in order to remain healthy and independent in their communities, and they should be compensated fairly for this important work,” said Secretary of Health and Human Services Kathleen Sebelius. “We will continue to engage with consumers, states, advocates and home care providers in the implementation of this rule to help people with disabilities, older adults and their families receive quality, person-centered services.”

DOL’s economic analysis of the proposed rule also predicted that agencies would respond to the rule change by spreading work among more employees to avoid paying overtime. Limiting overtime can reduce fatigue and other negative impacts on workers, and that can translate into higher-quality care for clients.

Implementation of this rule will not be without hardship, and additional policy changes are necessary to ensure that all elderly and disabled people get appropriate, high quality care and that family caregivers have the support they need. With today’s announcement, though, DOL takes a welcome step to correct a long-standing injustice, and that’s worth cheering for.