DOL Proposes Domestic Service Exemption for Home Healthcare Providers

If you work in home healthcare, you probably didn’t choose this career because you love reading the Federal Register over your morning coffee.
But a new proposed rule from the U.S. Department of Labor (DOL) could significantly change how home healthcare providers pay their workers –
especially when it comes to minimum wage and overtime under the Fair Labor Standards Act (FLSA).

On July 2, 2025, the DOL released a proposed rule that would restore older “domestic service” exemptions and make it easier for third-party
home care agencies to treat certain workers as exempt from federal minimum wage or overtime – particularly those providing
“companionship services” or working as live-in domestic service employees. For agencies, this proposal feels like a major reset.
For workers, advocates say it could mean losing hard-won protections. For families and clients, it raises questions about affordability and access to care.

In this guide, we’ll unpack what the proposal does, how we got here, what it could mean for home healthcare providers and workers,
and what practical steps agencies can take while the rule is still in the “proposed” stage.

What Is the DOL’s New Domestic Service Exemption Proposal?

The DOL’s proposed rule, titled “Application of the Fair Labor Standards Act to Domestic Service,” would roll back key parts of the 2013
“Home Care Final Rule.” That 2013 rule narrowed exemptions for domestic service workers and generally prevented third-party employers,
like home care agencies, from using the companionship and live-in domestic service exemptions for their employees.

The 2025 proposal would do almost the opposite: it would return to the pre-2013 regulatory framework, based largely on 1975 regulations,
and once again allow many home care agencies to treat qualifying workers as exempt from federal minimum wage and/or overtime,
depending on the exemption involved.

Key goals of the proposal

• Restore the ability of third-party home care employers to claim the companionship services exemption for qualifying workers.
• Restore the ability of third-party employers to claim the live-in domestic service exemption for workers who reside in the household.
• Broaden and clarify the definition of “companionship services,” emphasizing fellowship, care, and protection.
• Align regulations more closely with Congress’s 1974 amendments to the FLSA, which originally carved out exemptions for certain domestic workers.

Importantly, this is still a proposed rule. It is not final, and it may change significantly after the public comment period and further review.

Quick Refresher: FLSA, Domestic Service, and Home Healthcare

To understand what the DOL is trying to do, it helps to review a few FLSA basics.

What is the FLSA?

The Fair Labor Standards Act is the federal law that sets baseline rules for minimum wage, overtime pay, child labor, and recordkeeping.
It generally requires employers to pay at least the federal minimum wage (currently $7.25 per hour) and overtime (1.5 times the regular rate)
for hours worked over 40 in a workweek – unless a specific exemption applies.

What counts as “domestic service” work?

“Domestic service” refers to work performed in or about a private home. In the home care context, that can include:

• Home health aides
• Personal care attendants
• Companions for older adults or people with disabilities
• Live-in caregivers who reside in the client’s household

These workers may be employed directly by a family or individual, or by a third-party agency that assigns them to clients.

The two key domestic service exemptions

The FLSA contains two major exemptions that matter here:

• Companionship services exemption (Section 13(a)(15)) – Certain workers who provide “companionship services” to individuals
  who cannot care for themselves because of age or infirmity may be exempt from minimum wage and overtime, if strict criteria are met.
• Live-in domestic service exemption (Section 13(b)(21)) – Workers employed in domestic service who reside in the household
  where they work can be exempt from overtime, though they still must receive at least the federal minimum wage.

Historically, these exemptions were interpreted broadly, and third-party agencies could make use of them. That changed in 2013.

How We Got Here: From 1975 to the 2013 Home Care Final Rule

In 1975, the DOL issued regulations that allowed both individuals and third-party agencies to claim domestic service exemptions for
companionship and live-in workers, as long as specific conditions were met. For decades, many agencies relied on those exemptions
to avoid paying overtime (and, in some cases, minimum wage) to certain caregivers.

In 2013, the DOL adopted the “Home Care Final Rule,” which did two big things:

• Narrowed the definition of “companionship services” so more hands-on caregiving and medically related tasks were no longer exempt.
• Prohibited third-party employers (such as home health agencies) from claiming the companionship and live-in domestic service exemptions
  at all – even if the services themselves met the technical definition.

The 2013 rule took effect in 2015 and had a major impact. Many workers gained minimum wage and overtime protections. Agencies, meanwhile,
saw labor costs go up, especially for long shifts, 24-hour care, and live-in arrangements.

The new 2025 proposed rule is essentially an attempt to “undo” much of that 2013 shift, at least at the federal level.

What the New Proposal Would Change for Home Healthcare Providers

Let’s break the proposal into key pieces that home healthcare providers should understand.

1. Restoring exemptions for third-party agencies

Under the proposal, third-party employers could once again claim:

• The companionship services exemption, potentially eliminating both minimum wage and overtime for qualifying companions.
• The live-in domestic service exemption, eliminating overtime (but not minimum wage) for qualifying live-in workers.

Practically, this means agencies may be able to:

• Pay flat daily or shift rates for long companionship shifts without overtime, if requirements are met.
• Structure live-in arrangements without incurring significant overtime premiums.
• Reduce per-hour labor costs in some service lines, especially 24-hour or extended coverage cases.

However, this flexibility comes with conditions. Agencies will still need to carefully document job duties, living arrangements, and hours worked
to show that an exemption legitimately applies.

2. A broader definition of “companionship services”

The proposal emphasizes that companionship services include fellowship, protection, and care. “Care” can cover assistance with activities of daily
living (ADLs) and some instrumental activities of daily living (IADLs), such as:

• Bathing, dressing, toileting, feeding, and mobility assistance
• Meal preparation, light housekeeping related to the client, and medication reminders

The more expansive this definition, the easier it becomes for agencies to classify certain home care jobs as exempt companionship services.
That could significantly reshape scheduling models and pay practices for non-medical caregivers.

3. Live-in domestic service arrangements

The proposal would restore the earlier approach to live-in domestic workers, making it easier for third-party employers to use the overtime exemption
when a caregiver resides in the client’s household. Agencies would still need accurate records and clear agreements around:

• What counts as work time versus personal time or sleep time
• How many days per week the worker resides in the household
• Compensation arrangements (salary, day rate, or other methods)

Get those details wrong, and an “exempt” live-in situation can quickly become the basis for a costly wage-and-hour claim.

4. Federal versus state law: the floor, not the ceiling

Even if the federal rule makes exemptions easier to claim, agencies cannot ignore state and local wage-and-hour laws. Many states:

• Have higher minimum wages than the federal rate.
• Require overtime at lower thresholds or in different patterns (for example, daily overtime).
• Limit or restrict exemptions for domestic workers.

In other words, the proposed federal rule may loosen things at the national level, but providers still have to comply with stricter state or local laws.
For multi-state agencies, this becomes a compliance puzzle: what is possible under federal law may be prohibited under state law.

What This Could Mean for Workers and Clients

The DOL has framed the proposal as a way to improve access to affordable home-based care and reduce regulatory burdens on agencies and families.
Critics argue that it would weaken protections for a workforce that is already underpaid and often undervalued.

Potential implications for workers

• Loss of overtime pay: Many caregivers currently rely on overtime to make ends meet. Restoring exemptions could limit those earnings,
  particularly for staff who regularly work more than 40 hours per week.
• Complex pay structures: Flat day rates or shift rates might sound simple, but without careful calculation, they can end up
  lowering the worker’s effective hourly rate.
• Job availability: Supporters of the proposal argue that agencies might be able to serve more clients and create more positions
  if labor costs are lower. Whether this translates into better overall compensation is less clear.

Potential implications for clients and families

• Cost and access: Families paying privately for 24-hour care or extended shifts often feel the financial pressure of overtime rules.
  If agencies can use exemptions more readily, some clients may see lower rates or more flexible care options.
• Continuity of care: The ability to structure longer shifts without overtime might make it easier to keep the same caregiver
  with a client, improving continuity and emotional comfort.
• Quality concerns: Worker advocates warn that reducing pay protections could lead to higher turnover, burnout, and staffing shortages,
  all of which affect quality of care.

In short, this is a classic policy trade-off: affordability and flexibility on one side, and wage protections and job quality on the other.

What Home Healthcare Providers Should Do Now

While the rule is still in the proposal stage, agencies should treat this as a planning window. You don’t need to change your pay practices yet,
but you should be thinking several moves ahead.

1. Stay updated on the rulemaking process

Track developments through:

• The Federal Register and DOL Wage and Hour Division updates
• Industry associations and professional groups
• Employment law firms and HR advisories focused on home care

Pay attention to the final language of any rule, not just early commentary or headlines. Small wording changes can have big legal consequences.

2. Map your current workforce

Identify the roles that might be affected if the domestic service exemptions become more accessible again:

• Non-medical companions providing primarily fellowship and supervision
• Live-in caregivers who genuinely reside in the client’s home
• Mixed-duty workers who perform some companionship and some direct care tasks

For each group, consider how you currently schedule and pay them, and what might be possible (and lawful) under a new rule.

3. Don’t forget state law compliance

Before you get excited about federal exemptions, check state and local rules where you operate. You may find that:

• Your state has its own domestic worker bill of rights.
• State overtime rules apply even when federal exemptions are available.
• Additional recordkeeping, notice, or contract requirements apply to domestic workers.

In some jurisdictions, you may not be able to use the exemptions at all, no matter what the federal rule says.

4. Revisit scheduling and staffing models

If the rule is finalized, you may decide to:

• Offer more live-in or extended-shift companionship arrangements.
• Use exemptions selectively for certain roles while keeping others fully non-exempt.
• Design pay structures that legally qualify for exemptions but still remain competitive in your market.

The key is to avoid a one-size-fits-all approach. Overusing exemptions can create morale issues and increase turnover, even if it reduces short-term costs.

Real-World Experiences and Practical Scenarios

It’s one thing to read about exemptions in the abstract; it’s another to live through the changes. Here are some “life on the ground” experiences
and scenarios that illustrate how rules like this can play out for home healthcare providers, workers, and families.

Case study 1: The 24-hour dementia care client

Imagine a small agency serving an older adult with advanced dementia who needs 24-hour supervision. Under the post-2015 rules, the agency might have:

• Scheduled multiple aides in overlapping shifts to avoid excessive overtime.
• Paid overtime when one aide consistently worked more than 40 hours a week.
• Charged the family a higher rate to cover overtime and administrative complexity.

If the new domestic service exemption rule becomes final and the agency classifies certain workers as exempt companions, it might:

• Staff one or two primary companions for longer shifts with a flat daily rate.
• Reduce the number of different faces the client sees, improving continuity.
• Potentially lower costs for the family – but also reduce the worker’s overtime earnings.

Workers who enjoyed the higher paycheck from overtime may feel they are being asked to do more for less. Agencies will have to balance
client affordability with fair and competitive pay to avoid losing their best staff.

Case study 2: The live-in caregiver who “half lives” at the client’s home

Another common scenario: a caregiver spends four or five days per week sleeping at the client’s home, then returns to their own residence on off days.
Under the current rules, treating this worker as a live-in domestic service employee for exemption purposes can be challenging, especially for a third-party agency.

If the proposed rule restores broader live-in exemptions for third-party employers, the agency might decide to:

• Formalize the arrangement as a live-in role with a set weekly salary.
• Exclude certain sleep and personal time from hours worked, as allowed under the regulations.
• Stop paying overtime while still meeting minimum wage requirements.

From the worker’s perspective, predictability and the security of a stable weekly income may be a plus. But if the schedule regularly stretches beyond
60 or 70 hours of “on duty” time, the lack of overtime may feel like a significant sacrifice, especially in high-cost-of-living areas.

Case study 3: The agency that got burned by misclassification

Many agencies learned the hard way after the 2013 rule that misclassifying home care workers can be expensive. In one typical scenario:

• The agency treated several workers as exempt companions, even as they performed a lot of non-exempt caregiving and household tasks.
• Over a few years, those workers logged large amounts of unpaid overtime.
• Eventually, a complaint or audit led to back wage assessments, liquidated damages, and legal fees.

If the new domestic service exemption rule is finalized, some agencies may be tempted to rush back into broad use of exemptions.
The lesson from the past is clear: exemptions are tools, not shortcuts. They require:

• Accurate job descriptions and clear boundaries between exempt and non-exempt duties.
• Careful tracking of hours, especially for live-in and extended-shift workers.
• Regular review with legal or HR professionals who understand wage-and-hour law for domestic service workers.

Agencies that approach the new rule thoughtfully – instead of treating it like a magic cost-cutting switch – are more likely to stay out of trouble.

Case study 4: Worker and client perspectives in tension

Consider a caregiver who has been earning overtime for several years under the current rules. They have built their budget around that paycheck,
supporting children, paying rent, and covering rising costs. If their agency reclassifies their position as exempt under the new rule, the caregiver may:

• Lose overtime pay while still working long hours.
• Feel that their work – emotionally and physically demanding – is undervalued.
• Start looking for a better-paying opportunity, even if they love their client.

Meanwhile, the client’s family may finally feel like they can afford consistent in-home care without constantly worrying about overtime rates.
This is the human tension at the center of the proposed domestic service exemption changes. Policy choices have real effects on real relationships
between caregivers, clients, and families.

Conclusion: Preparing for Change Without Overreacting

The DOL’s proposal to restore domestic service exemptions for home healthcare providers is a big deal, but it’s not a done deal.
Providers should closely monitor the rulemaking process, understand how the exemptions work, and start modeling what compliant pay
and scheduling strategies could look like if the rule becomes final.

At the same time, agencies need to think beyond pure compliance. Long-term success in home healthcare still depends on attracting and retaining
skilled caregivers, building trust with families, and delivering consistent, high-quality care. Even if the law allows broad use of exemptions,
your business reality may demand a more balanced approach to pay and scheduling.

The bottom line: use this proposal as a prompt to revisit your wage-and-hour strategy, but pair legal flexibility with practical wisdom and
a genuine commitment to valuing the people who make home care possible.

sapo: The U.S. Department of Labor has proposed a major change to how home healthcare workers are classified under the Fair Labor Standards Act. By restoring domestic service exemptions for companionship and live-in caregivers, the rule could lower labor costs for agencies and families while potentially reducing wage protections for workers. This in-depth guide explains what the proposal does, how it affects home healthcare providers, workers, and clients, and what steps agencies should take now while the rule is still under review.