Summary
The FLSA companionship exemption home care regulatory environment in 2026 is in transition but not resolved: the DOL’s proposed rule and FAB 2025-4 enforcement suspension have changed the federal picture significantly, but the 2013 rule remains the law, private rights of action are unaffected, state law requirements in major markets like New York, New Jersey, and California continue independently, and a final rule has not been issued. The FLSA companionship exemption home care compliance approach most consistent with current risk is a complete state-by-state analysis before any payroll practice changes, with qualified employment counsel advising on both the federal proposed rule and applicable state wage statutes. If you’re looking for home care software that supports flexible payroll configuration by state, tracks classification changes, and maintains the documentation that wage and hour compliance reviews require, myEZcare is worth a serious look.
Introduction
The home care agency owner had attended the webinar in August, heard that enforcement of the 2013 FLSA rule had been suspended, and updated his payroll system to stop calculating overtime for companion workers.
Six months later, a state wage and hour complaint landed.
The federal enforcement suspension hadn’t changed state law. His agency was in New Jersey, which doesn’t mirror the FLSA on the companionship exemption and continued to require overtime. The federal picture had changed. The state picture hadn’t. And the agency’s payroll system had only been looking at one of them.
The FLSA companionship exemption home care regulatory environment is more complicated in 2026 than at any point in the past decade — not because the answer is unclear, but because federal and state rules are now pointing in different directions in ways that create significant compliance exposure for agencies that follow one and miss the other. On July 2, 2025, the Department of Labor issued a proposed rule that would reinstate the FLSA’s minimum wage and overtime exemptions for home care workers employed by third-party agencies, returning to the pre-2013 framework that governed the industry for nearly 40 years. On July 25, 2025, the DOL issued Field Assistance Bulletin 2025-4 instructing its investigators to immediately stop enforcing the 2013 rule while the proposed rule is pending. Neither of these actions has finalized the rollback. The 2013 rule remains the law. And in many of the largest home care markets in the country, state law applies regardless of where the federal rule ultimately lands. Understanding the FLSA companionship exemption home care regulatory picture requires tracking all three layers simultaneously — the proposed federal rule, the current enforcement posture, and the state-specific legal framework that governs your specific workforce.
The Regulatory History That Created This Moment
The FLSA companionship exemption home care relationship stretches back to 1974, when Congress amended the Fair Labor Standards Act to extend coverage to domestic service workers — and simultaneously created two exemptions. Section 13(a)(15) of the amended FLSA exempted workers providing companionship services from both minimum wage and overtime requirements. Section 13(b)(21) exempted live-in domestic service employees from overtime — but not minimum wage. Congress authorized the DOL to define the terms through regulation, and in 1975 the DOL promulgated implementing rules at 29 CFR Part 552 that allowed third-party employers, including home care agencies, to claim both exemptions. Those regulations remained substantially unchanged for nearly 40 years.
In 2013, the Obama administration’s DOL reversed course. The revised rule narrowed the definition of companionship services — capping care duties at no more than 20% of total hours worked per week for exempt employees — and, critically, prohibited third-party employers from claiming either the companionship or the live-in exemptions entirely. The rule was challenged in litigation but survived under Chevron deference, the doctrine requiring courts to defer to federal agencies’ reasonable interpretations of ambiguous statutes. Enforcement began in 2015. FLSA companionship exemption home care compliance changed fundamentally: agencies that had not been paying minimum wage or overtime to companion and live-in workers were now required to, and a wave of investigations and back-pay settlements followed for those who were unprepared.
The current proposed rollback rests on a different legal foundation. In 2024, the Supreme Court overturned Chevron deference in Loper Bright Enterprises v. Raimondo, instructing courts to determine the best reading of a statute independently rather than defer to agency interpretation. The July 2, 2025 proposed rule explicitly relies on Loper Bright, asking whether the DOL’s pre-2013 interpretation — allowing third-party employers to claim the FLSA companionship exemption — is the better reading of the statutory text Congress enacted in 1974. The DOL has tentatively concluded that it is, and proposes returning to the 1975 regulatory framework. The comment period closed September 2, 2025. A final rule has not yet been issued.
What Field Assistance Bulletin 2025-4 Does — and Doesn’t Do
This is the FLSA companionship exemption home care distinction that home care agencies most need to understand precisely. FAB 2025-4, issued July 25, 2025, is an enforcement instruction to the DOL’s Wage and Hour Division field investigators. It directs investigators to immediately discontinue enforcement of the 2013 rule, including closing open cases, and instructs that WHD investigators may not investigate or take enforcement action against third-party home care agencies that claim the companionship or live-in exemptions.
What FAB 2025-4 does not do is change the law. The 2013 rule remains in effect as written. FAB 2025-4 is an internal enforcement guidance document — it governs what federal investigators do, not what the statute requires. The bulletin itself explicitly notes that it does not limit the WHD’s ability to enforce the FLSA or any other applicable statute, and that the WHD reserves its right to take enforcement action in specific matters the administrator deems appropriate. More significantly for FLSA companionship exemption home care compliance planning: FAB 2025-4 has no effect on private rights of action. A home care worker who believes they are owed overtime under the current law can still file suit directly — the federal government’s suspension of enforcement doesn’t eliminate the employee’s individual right to pursue a wage claim.
The practical exposure that FAB 2025-4 does not eliminate includes state agency investigations, private litigation by current or former employees, collective actions under applicable state wage laws, and any future enforcement reversal if the administration or its enforcement priorities change before a final rule is issued. FLSA companionship exemption home care compliance decisions made in reliance on FAB 2025-4 alone — without analyzing state law exposure and private litigation risk — are decisions made on an incomplete picture of the compliance landscape.
Which Workers Are Covered — and Which Aren’t
Under the proposed rule, the FLSA companionship exemption home care classification would cover workers who provide fellowship, protection, and care — as the 1975 framework defined it — to individuals who are elderly or who cannot care for themselves because of illness, injury, or disability. The 20% cap on care duties that the 2013 rule imposed would be eliminated: under the proposed return to 1975 standards, a companion worker who provides significant personal care assistance during the workday would still qualify for the exemption without the hour-tracking burden the 2013 framework required.
The live-in exemption under the proposed rule would cover domestic service employees who reside in the client’s household. If finalized, this would restore the overtime exemption for third-party agency workers living in client homes — a specific population whose scheduling and compensation structure has been significantly complicated by the 2013 rule’s requirements.
FLSA companionship exemption home care classification does not extend to all home care workers. Skilled nursing care — services requiring the professional skills and training of a licensed practical or registered nurse — is not companionship services under any version of the FLSA framework. Home health aides providing skilled care beyond personal assistance and companionship are not exempt under the proposed rule or under the 1975 standard. The exemption under the proposed rule would cover companion and personal care workers employed by third-party agencies — approximately 3.7 million workers nationally — not the full home care workforce.
The State Law Layer That Changes Everything by Market
The FLSA companionship exemption home care analysis cannot stop at the federal proposed rule. Several of the states with the largest home care markets have enacted wage and overtime protections that do not mirror the FLSA’s companionship exemption — and a finalized federal rollback would have no effect on those state requirements. New York, New Jersey, and California have each independently declined to recognize the FLSA’s companionship and live-in exemptions. Companion and live-in workers employed by third-party home care agencies in those states are entitled to overtime under state law regardless of whether the federal FLSA exemption is reinstated. The opening scenario in this post — a New Jersey agency that updated its payroll based on federal enforcement suspension and received a state wage and hour complaint — reflects exactly this exposure.
Your FLSA companionship exemption home care payroll compliance analysis has to answer a state-specific question before a federal one: does your state independently require overtime for companion and live-in workers, regardless of what the FLSA requires? That question requires a review of your state’s wage and hour statutes and any applicable state administrative guidance — not just the federal regulatory picture. Home care agencies operating across multiple states face this analysis in each state separately. FLSA companionship exemption home care compliance in California is a different question than in a state that mirrors the FLSA’s exemption framework, even if the federal rule is finalized in exactly the form proposed.
Here is the FLSA companionship exemption home care state analysis that every agency should complete before adjusting payroll practices:
- Does your state have its own minimum wage or overtime statute? Most states do. If so, your state statute’s provisions for domestic service or companionship workers apply independently of the FLSA.
- Has your state Department of Labor issued guidance on the companionship exemption? Some states have issued guidance expressly declining to adopt the federal exemption or requiring overtime regardless of federal status.
- Does your state currently require overtime for companion workers employed by third-party agencies? If yes, that requirement is unaffected by FAB 2025-4 or any final federal rule.
- Have you reviewed any pending state-level legislative activity on this question? Several states have considered legislation to establish state-specific protections for home care workers independent of federal FLSA standards.
What Agencies Should Do Right Now
The FLSA companionship exemption home care compliance posture that most accurately reflects the current environment is: don’t change payroll practices in reliance on FAB 2025-4 alone without first completing a state law analysis and consulting with qualified employment counsel. That’s the approach most employment attorneys are advising — and it reflects the specific risk the opening scenario illustrates.
For FLSA companionship exemption home care agencies that want to begin preparing for the possible final rule, the most productive current action items are: reviewing your current classification of companion and live-in workers and documenting the basis for those classifications; verifying your state’s specific wage and overtime requirements for domestic service workers through your state DOL or legal counsel; and reviewing your home care software’s payroll and scheduling configuration to confirm that any changes to overtime calculations can be applied at the state level, not just the federal one.
The FLSA companionship exemption home care workforce context that should inform these decisions is real and significant. The approximately 3.7 million workers potentially affected by this proposed rule are, by the DOL’s own demographic data, a workforce that is 85% women and two-thirds people of color — workers who have been the subject of federal wage protection policy for fifty years specifically because they were historically excluded from labor market protections extended to other workers. The DOL’s own proposed rule acknowledges that the rollback could negatively impact worker morale and compensation. That workforce reality is the human dimension of an FLSA companionship exemption home care compliance question that most payroll and operations analysis frames entirely as a cost structure question. Both dimensions are real, and the agencies that navigate this most carefully are the ones that account for both in their decision-making rather than treating the enforcement suspension as permission to move quickly.
See how myEZcare’s home care software supports state-configurable payroll management, caregiver classification tracking, and the documentation workflows that FLSA companionship exemption home care compliance requires across multi-state operations. Schedule a free demo today and bring your current state payroll configuration into the conversation.
