Last week, the Department of Labor issued a new rule raising the salary threshold below which workers are entitled to overtime pay. This is a pretty big deal – prior to now, only those making below $23,660, about seven percent of the workforce, were eligible for overtime. Thanks to the Department’s new regulation, as of December 1st workers making below $47,476 will now be eligible for time and a half pay when they work more than 40 hours a week.

More prominent commentators have written about the potential impacts of the rule far better than I, but on balance, it seems like a step forward for working Americans, whose wage growth has stagnated for decades. The rule has a particular disability element, however. The Department of Labor coupled the rule with a time-limited non-enforcement policy applying to most residential based providers of Intellectual and Developmental Disability (I/DD) services. Essentially, for the majority of agencies providing services to people with I/DD, the Department of Labor will decline to enforce this new overtime threshold for the next three years.

The non-enforcement policy (which, full disclosure, ASAN joined other groups in advocating for), raises interesting questions. Why are Medicaid-funded employers different from other ones? What rationale justifies different rules applying to them, albeit only temporarily? Others have written on the hypocrisy of progressive organizations seeking to maintain unfair labor practices inconsistent with their stated principles. Is this just another example of a right for me but not for thee?

On balance, I think not. Agencies providing community services to people with disabilities are uniquely situated among employers, in that virtually all of the funding they receive comes from state Medicaid programs. Unlike private business, for whom added labor costs can be covered by reducing profits, or donation-supported non-profits, who can cultivate new donors, most disability service-providers rely exclusively on Medicaid reimbursements set by state government. Where the state chooses to raise rates in line with new labor regulations, this isn’t a problem. Where it does not, however, small and medium sized providers are forced to scale back services to the people they serve in order to stick around.

This isn’t the first time that this issue has come up. In 2011, the Department of Labor proposed a new regulation drastically narrowing an exemption to the Fair Labor Standards Act known as the “Companionship Exemption”, allowing home care workers to be paid without regard to overtime and minimum wage law. Under the new rules, promulgated in final form in 2013 and having recently come into effect in late 2015 after an extended court battle, the Companionship Exemption no longer applied to the vast majority of workers providing services to seniors and people with disabilities in community-based Medicaid programs. For the first time, federal labor law would apply fully to this population.

While the application of minimum wage requirements was not a significant burden (most states already required this in state law), requiring time-and-a-half for overtime was. State Medicaid rates to agencies (and individual budgets for people with disabilities who self-direct their own services) had never taken into account the need for overtime costs. Furthermore, given the low rate of pay most support workers receive and the difficulty in finding a good interpersonal “match” between worker and client, it has long been commonplace for workers to work well in excess of forty hours a week.

Without access to new Medicaid funds, agencies and self-directing people with disabilities would be unable to cover the cost of overtime, raising the potential of cutbacks in worker hours and/or services received. Such cutbacks could lead to people with disabilities forced into nursing homes and institutions as a result. Disability rights advocates (myself included) were justly concerned, and many fought hard against the new rule. Considerable controversy ensued.

In so far as the Companionship Exemption regulation planned for the likely impact on providers supported by state Medicaid programs, it did so in the expectation that it would force a crisis, triggering necessary state reforms. This way of thinking is simple: if provider agencies were forced to pay overtime on hours worked above forty hours a week, they will successfully pressure their legislators to allocate funds to cover their added costs. Under this formula, new labor law and the additional Medicaid funding needed to pay for it are the proverbial “chicken and the egg”. One has to come first – and proponents of the Companionship Exemption rule hoped to force the new funding by requiring that overtime be paid. And in some cases, this is exactly what happened. Unfortunately, not every state responds the same way to a crisis.

Some states have simply declined to allocate new funds to assist agencies to comply with the rule, working under the assumption that agencies will act on their own to prohibit their workers from working above the 40-hour threshold. Many of these states have directly prohibited worker overtime in self-directed programs, where people with disabilities manage workers without an agency. These worker hours caps cause serious problems for people with disabilities. The new caps threaten long standing support relationships and force many – particularly those in rural areas or with specific cultural and linguistic competency needs – to struggle to find new providers (a problem MySupport, a new tech platform some colleagues and I developed, is designed to help solve, I should add). Workers are also worse off, facing a cut-back in hours and a reduction in income as a result.

And because of a long standing labor law doctrine called “joint employment”, which stipulates that entities that play a significant role in designating working conditions or wages may also be considered employers even if they are not the entity signing paychecks, a number of states realized they had to limit the number of hours a worker could work for any Medicaid-funded recipient of services within a self-directed program. Not only could workers not work more than forty hours a week for a single client under these rules – they can’t work more than forty hours a week for any client funded by the Medicaid program, since the state is considered a “joint employer” with the person receiving services. Since collective bargaining agreements and state-designated wage rates can tip the balance into a state becoming a joint employer, this is causing some states to consider rolling back such measures, leaving labor rights worse off in these jurisdictions.

What lesson should we draw from this? Should Medicaid providers be permanently exempt from overtime obligations and other aspects of labor law? No – such a policy would not only be unfair to workers, it would be terrible for people with disabilities. Already, publicly funded community based services struggle to attract an adequate workforce, with sky-high turnover rates and workers living in almost as much poverty as the people they support.

It is no accident that the Department’s non-enforcement policy represents a delay rather than an exemption of the Department’s enforcement of the new overtime rule. The intent behind this measure is to allow state legislatures sufficient time to allocate new funding, allowing the implementation of these labor protections to be put in place in a responsible way, without harming those receiving services.

 

In fact, one can argue that the Department’s non-enforcement policy really doesn’t go far enough. After all, the Fair Labor Standards Act is not enforced solely through government action. Private citizens can bring lawsuits for unpaid wages any time they want, and the Department’s non-enforcement of the new rules does not change their applicability to I/DD service-providers. And, of course, eventually, the Department will enforce its own rules, and there is no guarantee states will do the right thing and raise rates before then.

Since the fight over the Companionship Exemption rule (and as efforts to raise state and federal minimum wage laws proceed), disability rights advocates have been discussing the need to tie Medicaid rates to new labor laws. Some more progressive states have passed state statutes doing so already. But this is a national problem, and it requires a national solution.

At the federal level, there are a variety of avenues that could accomplish this. The most reliable would be a change in law. Congress certainly has the authority to require states to adjust Medicaid rates in line with minimum wage and other labor law modifications, and perhaps offering an enhanced Medicaid match rate for labor law changes originating at the federal level (like an increase in the national minimum wage). Should such a measure prove politically difficult, it is possible that more limited progress could be secured through administrative action from the Departments of Justice and Health and Human Services.

After the promulgation of the Companionship Exemption rule, DOJ and the Health and Human Services Office of Civil Rights issued a Dear Colleague letter to the field instructing states that they may need to provide for reasonable modifications to caps on worker hours in order to comply with their obligations under the ADA and the Supreme Court’s 1999 Olmstead v. L.C. decision. The letter states that states must provide for, “reasonable modifications to policies capping overtime and travel time for home care workers, including exceptions to these caps when individuals with disabilities otherwise would be placed at serious risk of institutionalization…[but] whether a reasonable modification is needed and what the modification should be depends on the specific factual circumstances.”

A series of enforcement actions to better articulate the parameters under which states must offer an exceptions policy (and the circumstances under which it would be triggered) would go a long way to making this guidance more meaningful to the lives of people with disabilities. Still, exceptions to worker hours caps won’t fix the bulk of the harm caused by the overtime rule. What’s needed are changes to state and federal law to require Medicaid rates to rise automatically when labor law increases provider costs.

Such a policy would address the conflict between labor and disability rights advocates. We should be able to find a way to protect both of our interests. Labor must realize that forcing a crisis in disability support is an irresponsible and dangerous way to secure new funding – and disability advocates should join forces with unions to build a viable political coalition for planned and responsible increases in worker compensation.

Workers providing disability services deserve the full protections of labor law and people with disabilities deserve adequate access to community support from workers they trust. It’s past time that we put in place policies that protect the rights of both workers and people with disabilities.

• disability rights
• economics of disability
• Leaving NCD
• politics
• power and policy
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