Today, we will examine the Department of Labor's effort to narrow the long-standing companionship services exemption under the Fair Labor Standards Act. As we all know, the FLSA continues to serve as the foundation of federal wage and hour standards. Today's discussion is not about whether we stand by this important law more than 70 years after its enactment. The question before the subcommittee is whether the rules and regulations intended to enforce the law adequately reflect the policy decisions made by the people's elected representatives.
Nearly four decades ago, Congress amended the FLSA to extend its overtime and minimum wage requirements to domestic workers. However, policymakers recognized then the importance of ensuring seniors and individuals with disabilities have access to affordable in-home care. This support can often help a senior spend more years in the comfort of their own home, or allow an individual with a disability to enjoy the independence afforded a life outside institutional care.
Due to the vital role of in-home care in the lives of these individuals, in 1974 Congress created an exemption under FLSA for companion care workers. Through public rulemaking, the department has since held the exemption extends to all companion care workers, regardless of how they are employed, and this reasonable regulatory approach was unanimously upheld by the U.S. Supreme Court less than five years ago.
Unfortunately, access to this critical support is threatened by a regulatory initiative introduced last December. Under the Labor Department's proposal, only employees who follow a rigid set of arbitrary standards would qualify for an exemption. The proposed regulation would also eliminate the existing exemption for companion care workers employed by a third-party, as well as the exemption for workers jointly employed by a third-party and the individual receiving care.
The department's proposed regulation essentially overturns decades of companionship care policy. These changes run contrary to what Congress intended when it first established this important exemption nearly four decades ago. While I recognize the delivery of services has evolved over the years, the need to maintain access to affordable in-home care has not.
As a result of this dramatic regulatory shift, higher costs would inevitably ensue. In fact, the Labor Department estimates this proposal would increase the cost of in-home companion care from anywhere between $420 million to upwards of $2.3 billion, over the first 10 years alone.
And there is great concern that this estimate is just the tip of the iceberg. A survey of companion care franchise businesses determined the department understated the extent of overtime work performed by employees and based a number of its underlying assumptions on incomplete data. The report finds, "The Department of Labor has significantly understated some of the economic impacts that will result from the proposed changes in regulations."
Without objection, I would like to insert this survey conducted on behalf of the International Franchise Association Educational Foundation into the record.
Understating the true cost of a regulatory proposal that already carries a price tag of up to $2.3 billion is startling. Some have said the costs will simply be "transferred" from the employer to the worker and have no impact on the demand for services. Such a flawed understanding of basic economics ignores the reality that these costs will ultimately be paid by the consumer, whether a senior citizen, taxpayer, family member, or individual with a disability. As costs rise, those who receive in-home care will be forced to confront difficult choices, such as accepting a diminished quality of care or relying upon institutional services outside the home.
I have had an opportunity to hear the concerns of providers who reside in my congressional district, as well as others located across the country. In fact, Michigan is already dealing with the consequences of these changes, and I look forward to having one of my constituents give the committee a firsthand account of how the people of my home state are faring under this policy.
The act of making responsible public policy often involves finding a balance between competing interests. Current policies that govern the delivery of in-home companion care have served our nation well for nearly forty years. The administration has a responsibility to provide a clear and compelling reason why that important balance must now be upset and a greater burden must be placed on some of our most vulnerable citizens.