A Home Care Q&A to Get Your Agency Through Year-end

11-14-2018
Yonina F. Shineweather, CPA, Senior Compliance Manager


November is National Home Care and Hospice Month. So, we’re taking time out to answer some of your most important questions as your agency dives into year-end. From ACA, to tax reform, to joint employment, and more.

Let’s get started…

Q: For the past couple of years, ACA deadlines have been extended.What’s this year going to look like?

A: For the past 3 years, the IRS has extended the deadline for employers to give ACA forms to their employees. But as things stand now, there is no extension this year. Therefore, the ACA forms – which are known as the 1095-Cs – have to be distributed to your employees by January 31st, 2019. And this year, for the first time, there is really no talk about any extension. It looks like it’s going to be a very rushed ACA year-end.

In terms of employer filing, on paper you have until the end of February to file. But if you file electronically, you have a little bit more time, as electronic forms are due the end of March (this year, the deadline is April 1 because March 31 is a Sunday).

Q:How will tax reform affect Home Care Agencies? 

A: The first and biggest change that comes to mind is the change to employee withholdings, especially for employees working for multiple employers – which is common in the home care industry. The Tax Cuts and Jobs Act – which is what most people call Tax Reform – totally revamped the way employees are going to think about their federal withholdings. It’s now much more a function of the income employees may have from other sources, like second jobs and spousal income. All home care agencies should strongly encourage employees to check their federal withholdings using the IRS tax calculator to see if their withholding needs any adjustment.

Another effect – probably of smaller impact but still significant – is that moving expense reimbursements are no longer tax-free. To clarify, when employers reimburse employees for job-related moving expenses, that is no longer tax-free for employees, although employers can take it as a compensation deduction for their own corporate tax purposes.

And one even smaller effect is that bicycle commuting is no longer considered a tax-free benefit – that’s bad news for employees who ride their bikes to their work sites. Commuter and parking benefits are still allowable tax-free to the employee up to the applicable limits, but the employer can’t claim them as deductions for their corporate taxes.

Q: Sometimes we hear questions about the right way to calculate overtime when aides work at different rates during the week.Can you speak to this?

A: Overtime calculations are definitely a big compliance pitfall in the industry. I’ve seen it happen where the DOL (Department of Labor) will come in and find violations at an agency, assess back pay, AND liquidate damages of 100% of the back pay – meaning if you owe your employees an additional $1,000, you’ll have to pay $2,000. And the scary part about DOL violations is that they can go back up to two years for unintentional and up to three years for willful violations, and New York specifically they can go back as far as six years. There will also be interest and attorney fees as a result of a DOL violation. Employers need to get this right.

This comes up especially in home care because it’s very common to have employees working for multiple rates e.g. getting paid different rates for different jobs. So, at what rate do you pay OT? First, you calculate the regular rate using the weighted average of all the different rates for the week. Then you take half of that regular rate multiplied by the number of OT hours worked, and pay that as OT Premium. You also must remember, of course, to pay those OT hours at straight time as well.

Employers must also make sure that the paystub clearly shows how many overtime hours the employee worked, the regular rate for those OT hours, the OT rate, and the overtime premium. The best way to see an example of this is to check out our Viventium webinar on the topic, which you can register for here.

Q: What exactly is joint employment and how is it a potential pitfall to Home Care Agencies?

A: 
42 states, including New York, New Jersey, Connecticut, Ohio, and California, allow some form of consumer-directed home care, where the patient can pick their caregiver and the care will still be reimbursed. Patients will often choose a close family friend or relative. 

In this case, the agency’s job is not to be the employer, but to be the conduit of the reimbursements to the caregiver. The problem is – according to legal experts in the industry – the agency may find itself in a joint liability, or a joint employment situation. Since the agency is paying caregivers under its own FEIN, the agency can be held liable for workplace accident or injuries to caregivers, property, and third parties. For example, if the caregiver, while on duty, willfully or negligently injures a visitor to the patient’s home, the agency could find itself involved in a civil damages suit, being deemed the employer, or at least a joint employer with the patient.

Now, keep in mind that the agency doesn’t hire, supervise, or manage the caregiver that the patient selects. They are just funneling CMS reimbursements. And yet, if something were to happen to or as a result of this person, the agency is at risk of a lawsuit.

Is there any way to have the patient deemed the employer – the sole employer – and for the agency to rid itself of liabilities for circumstances beyond its control?

Many employers are looking for a solution on how to avoid this. One potential solution is to act as a reporting agent, and not pay the caretaker under the agency’s EIN – but rather each patient has their own EIN. That means the agency would need to use a Schedule R, Agent reporting model. In this case, the employer is clearly and solely the reporting agent and the patient has their own EIN number, so that they are clearly the employer, bearing all corresponding liability.

Q:As year-end approaches, clients often review pay practices and consider employee’s pay rate schedules. There’s been a lot of talk recently about the 13-hour rule in New York, which also affects agencies in other areas who send aides into New York. Many agencies are confused about their obligations to employees who work a 24-hour shift. Can you shed some light on this?

A: There’s been a lot of controversy about the 13-hour rule. Let’s say you have an aide who goes to a patient for an overnight shift. They are there for 24 hours. Do you pay them for 24 hours? The DOL has said that you don’t have to pay them for all 24 as long as the following conditions are met, a. they get 8 hours of sleep, 5 of which are uninterrupted and b. you give them 3 uninterrupted meal periods of an hour each. In this case, you would only have to pay them for 13 hours. This has been standard industry practice for a while now. 

Last year, three different New York courts refused to uphold this rule and overruled it. They said that agencies must pay their aides 24 hours. The DOL has plans to make the 13-hour rule permanent, but they haven’t done it yet. As of now, they have issued an emergency rule saying that 13 hours of pay is OK. Sooner or later, they will come out with a final rule. And recently the court said that the DOL doesn’t even have the right to issue an emergency ruling about this, since it is not an emergency.

The best advice for agencies is to talk to their legal team and check if they are comfortable with you continuing to use the 13-hour rule or not. And don’t forget, this rule applies to any agency, even if they aren’t located in New York, and they send aides to do work in the state.

Want to hear our entire Q&A? Click the link below to listen to the podcast.

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