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COMMENTARY: Private-Duty Trade Associations Fund Three Flawed Studies Attacking FLSA Revision

March 15, 2012

— by Dorie Seavey, Ph.D., PHI Policy Research Director

During the past two months, private-duty trade associations have produced three different studies designed to bolster their position that narrowing the overtime exemption would have serious negative consequences for home care companies, clients, and workers. Yet each of these studies presents serious flaws.

In two surveys of their membership, these associations had the opportunity to acquire solid industry data on the employment patterns of home care workers: how many work overtime, and how often; how many work part-time and would like to work more; and how much they are paid. This kind of information could have usefully complemented the U.S. Department of Labor‘s (DOL) analysis, which relied on all the nationally representative, statistically valid data available on these questions. So, what do the new studies tell us?

SURVEYS

The Companionship Services Exemption Survey, funded by the National Association for Home Care and Hospice–affiliated Private Duty Homecare Association (PDHA) and the National Private Duty Association (NPDA), includes a question about the percent of employees who work overtime. Yet regrettably the study fails to report respondents’ answers to this question. Rather, the survey emphasizes opinion questions that are phrased to lead respondents to answers that align with the associations’ opposition to the proposed regulations.

Not Nationally Representative or Statistically Valid

The second study, Economic Impact of Eliminating the FLSA Exemption for Companionship Services — prepared by IHS Global Insight and paid for by the International Franchise Association (IFA) — like the PDHA/NPDA survey, relies on what is known as a “convenience sample”: a sample confined to those members that returned a completed survey. This type of sample is not considered nationally representative or statistically valid and, at best, merely reflects the positions and experiences of the companies that actually completed the survey, leading to a strong likelihood of bias.

Dorie Seavey

Low Response Rates

IFA, an association dedicated to preserving and enhancing the regulatory climate for the growth of franchising, sampled nine of its 27 franchise home care companies to participate in the survey. These nine companies in turn represent 3,259 franchisees, of which only 17 percent actually participated in the survey, for a total of 554 franchisees. This is considered a very poor response rate, affecting the validity of the findings. The PDHA and NPDA survey received roughly twice as many responses (1,458 “home care companies” responded) but the report doesn’t provide a response rate, thereby leaving its validity in question.

To put these survey response numbers in perspective: according to the U.S. Bureau of Labor Statistics, in 2010 there were 55,929 establishments in “Services for the Elderly and Persons with Disabilities,” the industry that encompasses the vast majority of home care companies specializing in the provision of non-medical home care services. Furthermore, approximately 70 percent of these companies were non-profit organizations (see Chapter 3 of PHI’s Caring in America report). This means that the for-profit segment of the industry represented by the three trade associations sponsoring the surveys constitutes just a segment, and certainly not the majority, of the entire home care industry.

Unintentional Support for DOL’s Conclusion of Small Adjustment Costs

The most remarkable empirical finding of these two survey-based studies is inadvertent: fully 40 percent of respondent companies report that they already extend minimum wage and overtime to home care workers! Why? Because the companies are located in states that require them to do so or because they voluntarily elect to meet these basic standards. It’s hard to imagine stronger evidence in support of the DOL’s conclusion that the economic impact on the home care industry of the proposed revisions to the companionship services exemption is likely to be small. If providing these labor protections is so cost-prohibitive to the industry, how do these businesses continue to operate and even thrive?

ECONOMIC STUDY

The third industry-sponsored study, Estimating the Economic Impact of Repealing the FLSA Companion Care Exemption, paid for by the same private-duty associations that financed the first survey, was conducted by two economists at Navigant Economics who are complete newcomers to the field of home care labor market analysis. The study does little more than reiterate limitations in the available data used by DOL to assess the costs of narrowing the companionship exemption. The analysis asserts that the costs would be “substantial” but it does not provide an estimate of the costs.

The study’s most self-promoted achievement is an estimation — which they claim to be superior to that of DOL’s — of the decrease in demand for “companion care labor” caused by an increase in wages, known in economic theory as the “elasticity of demand.” The Navigant report overemphasizes the role of this elasticity in assessing the impact of proposed regulations and fails to acknowledge that the costs of the regulatory change will be driven more by how those agencies not already extending overtime protections to their aides respond to new payment requirements. As DOL notes, “those employers who adjust schedules and redistribute hours can be expected to decrease overtime costs significantly” (NPRM, p. 100).

Probably the most disturbing inference made in the Navigant study is that, since millions of employees, such as fisherman, movie theatre employees, and criminal investigators, are also exempt from minimum wage and overtime protection, continuing to exempt home care workers should not be such a big deal. This conclusion is clearly out of touch with the reality that home care occupations top the list of the country’s fastest-growing jobs and constitute one of the largest workforces ever produced by our economy.

Companionship Exemption Comment Period Extended through March 21

The U.S. Department of Labor (DOL) has extended the public comment period through March 21 on its proposed revisions to the companionship exemption. The revised rule would extend home care workers federal minimum wage and overtime protections under the Fair Labor Standards Act, if it becomes law.

To learn more about the companionship exemption, see sample comments, and make a comment on the official public comment website, visit the PHI Campaign for Fair Pay.

Hearing

The Subcommittee on Workforce Protections of the U.S. House of Representatives’ Committee on Education and the Work Force is holding a hearing on the companionship exemption proposal on March 20 at 10:00 at the Rayburn House Office Building in Room 2175. There will be a live webcast of the hearing.

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