Opinion ID: 2442355
Heading Depth: 2
Heading Rank: 3

Heading: entitlement to domestic services exemption

Text: We now turn to the issue of whether Bayada may benefit from the domestic services exemption under the Act. Specifically, we first address the question of whether the Department's application of its regulation is reasonable. We then address Bayada's related contention that it is entitled to an opportunity to create a factual record or amend its petition for review. Bayada argues that the Act exempts from its minimum wage and overtime regulations employment for domestic services in or about the private home of the employer. 43 P.S. § 333.105(a)(2). Bayada notes that, in 1977, the Department promulgated a regulation defining domestic services as work in and about a private dwelling for an employer in his capacity as a householder, as distinguished from work in or about a private dwelling for such employer in the employer's pursuit of a trade, occupation, profession, enterprise or vocation. Bayada asserts the identity of the employer is not relevant under the Act, contending the domestic services exemption is occupational in nature. According to Bayada, the exemption is applicable so long as the domestic services are performed for an employer in or about his or her private home in such employer's capacity as a householder. Bayada maintains the Department's opposition to the application of the domestic services exemption is premised upon its contention that Bayada, and not its householder client, is the sole employer for purposes of the Act. According to Bayada, the Department's position ignores the possibility of joint employment which, Bayada contends, is in direct conflict with the broad definition of employer under the Act, the Department's own regulation, and the common law of Pennsylvania, which contemplates joint employment. More specifically, Bayada argues that its householder clients share the key attributes of an employer within the statutory definition of the Act and under the common law economic realities test. Bayada offers that its householder clients (1) select and approve the individual employee who will be allowed into the client's home; (2) set the employee's hours of work; (3) control all aspects of the services provided in the home; and (4) retain the right to terminate the relationship. Thus, Bayada argues, its aides are jointly employed by Bayada and its householder clients. While Bayada submits the economic realities test, used to determine employer status, was satisfied in this matter, it suggests it is not the appropriate test. Rather, Bayada advocates that the borrowed servant doctrine is applicable to the circumstances in the present matter. From this, Bayada extrapolates that, having established that the domestic services are provided in the home of Bayada's householder clients, as employers, the householder clients may benefit from the domestic services exemption, and, that the exemption applies to Bayada as well. Again, Bayada urges that the domestic services exemption is an occupational-based exemption, not dependent upon the identity of the employer. Likewise, due to the broad definition of employer, which includes any person acting directly or indirectly in the interest of an employer in relation to the employee, 43 P.S. § 333.103(g), Bayada contends it qualifies as an employer of the aides because it acts directly or indirectly in the interests of Bayada's householder clients in relation to the aides as employees. Related thereto, Bayada also argues that the Department concluded erroneously that only a householder employer is entitled to an exemption. According to Bayada, the Department's approach would deny Bayada, as a joint employer, the exemption, which would conflict with the definition of employer, which includes those acting directly or indirectly in relation to any employee. Moreover, Bayada argues that no deference should be given to the Department's interpretation of the Act, because, here, the regulation is inconsistent with the statute itself. Finally, Bayada maintains that not permitting the exemption will harm those whom least can afford it. Bayada's householder clients are billed for each hour of service provided by an aide. The rate includes the aide's hourly rate of pay, and an additional amount to cover workers' compensation, insurance, taxes, and Bayada's overhead. According to Bayada, paying its aides overtime will directly impact (and increase) the amount Bayada charges its clients and may make the use of aides cost prohibitive. Bayada concludes that an increase in costs due to paying its aides overtime would lead to less services being provided for Bayada's clients in financial distress and, in some cases, could lead to institutional care. Bayada Brief at 52. Furthermore, Bayada contends that the Department's current interpretation of the Act is in direct conflict with the FLSA. Specifically, Bayada avers the FLSA exempts from federal minimum wage and overtime provisions employment in domestic services in the homes of clients employed by third-party agencies. Section 213(a)(15) of the FLSA exempts any employee... employed in domestic service employment to provide companionship services for individuals who (because of age or infirmity) are unable to care for themselves (as such terms are defined and delimited by regulations of the Secretary). 29 U.S.C. § 213(a)(15). Bayada points to the definition by the United States Department of Labor (DOL) of domestic service employment as services of a household nature performed by an employee in or about a private home (permanent or temporary) of the person by whom he or she is employed. 29 C.F.R. § 552.3. Furthermore, Bayada offers the DOL concluded that agency employment satisfies the exemption, 29 C.F.R. § 552.109(a), and that this regulation was upheld by the United States Supreme Court. Bayada contends that, because the FLSA and the Act parallel one another, the federal and state laws should be read in pari materia. Furthermore, Bayada urges that the language under the FLSA and the Act are nearly identical, and that the language in both statutes focuses on the kind of work to be performed. Bayada concludes that the Department should interpret the language in the Act consistently with this occupation-based focus. Further, Bayada rejects the Department's position that the Act's domestic services exemption may be more stringent than the FLSA's exemption. According to Bayada, the Commonwealth Court misconstrued the nature of Bayada's arguments below. Specifically, Bayada develops that they presented two related arguments before the court: (1) whether the regulation was unreasonable as applied, such that agency employers, like Bayada, were excluded from the exemption's benefits and protections in circumstances where the agency employer was jointly employing aides in concert with its householder clients; and (2) whether Bayada was in fact entitled to the exemption under a plain reading of the Act and the regulation to the extent it was jointly employing the aides in concert with its householder clients. Thus, Bayada maintains there is a controlling factual issue and the Commonwealth Court inappropriately made the factual determination that Bayada failed to demonstrate control by its household clients over the work of the aides. This, according to Bayada, is in spite of its allegation in its petition that [Bayada's] clients have the right to select their [aides]; control the [aides'] hours of employment; direct and supervise the [aides'] tasks and activities during the workday; as well as to request the services of a new or alternative [aide]. In sum, the [aide] is under the total direction and control of the client while performing services in the client's home. Petition for Review at 17, ¶ 73. Therefore, Bayada asserts it was inappropriate for the Commonwealth Court to conclude that the allegations failed to demonstrate the requisite control by the householder clients over the work performance of the aides. Rather, it contends its assertion regarding the control exercised by the clients is an issue of fact which should not have been addressed by the court at this stage. Bayada contends that it appears the Commonwealth Court concluded Bayada would be entitled to the domestic services exemption if it could establish control on the part of the householder client sufficient to give rise to a joint employment relationship. Thus, Bayada presses that it pled the requisite control to survive the Department's preliminary objections. Finally, Bayada claims the Commonwealth Court failed to permit Bayada the opportunity to amend its petition for review in order to address any lack of specificity. According to Bayada, it pled the elements necessary to set forth a prima facie case, and it qualifies as a joint employer entitled to the domestic services exemption under the Act. If the Commonwealth Court found that Bayada failed to demonstrate control by its clients over the work performance of its aides, then, according to Bayada, the court should have permitted Bayada the opportunity to amend its petition. The Department counters that a demurrer is appropriate. Specifically, the Department explains in great detail that the regulation was properly enacted as part of its rulemaking authority. According to the Department, the Act grants it broad powers to adopt regulations to carry out the Act's purpose of protecting employees from unreasonable and unfair wages and to safeguard the established minimum wage. 43 P.S. § 333.101. Indeed, the Department highlights that the Act specifically requires the Secretary and the Department to adopt regulations implementing its provisions to carry out the purposes of [the] act and to safeguard the minimum wage rates. 43 P.S. § 333.109. Furthermore, the Department maintains that the regulation is reasonable. The Act provides an exemption from overtime and minimum wage requirements for [d]omestic services in or about the private home of the employer. 43 P.S. § 333.105(a)(2). While the Act does not provide a definition of the term domestic services, the Department avers that its regulation gives meaning to the term consistent with the domestic services exemption contained in the Act. Moreover, the Department also offers that the language of the statutory exemption is clear and unambiguous, as it requires that the homeowner be the employer in order for the exemption to apply. In this vein, the Department avers that, where the interpretation of the agency charged with enforcing a statute is not clearly erroneous, the interpretation is entitled to great deference and is to be given controlling weight. The Department also contends that, even if a joint employer relationship exists, Bayada cannot avoid the Act's overtime requirements. Contrary to Bayada's assertions, the Department stresses that the focus on the exemption is on the location of the work and the capacity of the employer. As noted by the Department, Bayada is not a householder who employs individuals for domestic services, and, thus, it is excluded from benefiting from the exemption which is expressly limited to the employer as a householder. Moreover, the Department argues that Bayada could not proffer any facts that would change its status to that of a joint employer. According to the Department, even taking all of Bayada's averments as truethat Bayada is responsible for paying the wages to its employees who perform services for its clients who are aged and infirm; pays its aides an hourly rate with each hour of service being billed to its client; screens the aides, conducts criminal background and reference checks; bills its clients for the aides' hourly rate of pay; and adds amounts in the billing for workers' compensation, insurance, taxes, as well as Bayada's overheadBayada cannot fall within the statutory or regulatory meaning of domestic services, regardless of whether or not a joint employment relationship exists. The Department also stresses that the FLSA's provisions on domestic service exemption is not synonymous with the Act. Since the Act's exemption is more restrictive and narrowly construed in favor of the employee, the federal exemption does not preempt the Act. Specifically, the Department notes that the FLSA never incorporated the language of the Act which exempts domestic services in or about the private home of the employer. 43 P.S. § 333.105(a)(2). Similarly, the federal regulations under the FLSA exempt third-party agency employers from paying overtime. 29 C.F.R. § 552.109(a). Thus, according to the Department, the federal law containing a third-party exemption is less restrictive than the Act, and its regulations reveal the differences between the two laws. As the language of the two statutes is not the same, similar interpretation is not mandated. The Department concludes that the FLSA preempts state law only where the state law is less beneficial to employees, and, thus, the federal statute establishes a national floor under which wage protections cannot drop, but more generous state employee protections are not precluded. The Department takes the position that, because the Commonwealth Court properly granted its demurrer, based upon Bayada's factual averments and the legal arguments presented, a remand would be improper. The Department avers Bayada failed to request to amend its pleadings before the Commonwealth Court. The Department points to Pa.R.Civ.P. 1028(c)(1) which provides a party may file amended pleadings within twenty days after the service of a copy of preliminary objections, but notes Bayada did not avail itself of this opportunity. Furthermore, the Department maintains amendment is inappropriate if a party is unable to state a claim upon which relief could be granted. Here, the Commonwealth Court found that, even assuming all facts pled by Bayada to be true, Bayada failed to state a legally sufficient claim. Amicus AARP, the Pennsylvania AFL-CIO, and the Service Employees International Union all support the Department's legal arguments and add that, as a matter of policy, the failure to adequately compensate home health care workers, who provide services to older persons and persons with disabilities, will lead to an even greater shortage of these critical workers. According to Amici, the current shortage of such workers is exacerbated by the lack of competitive wages and the demanding nature of the work. Contrary to Bayada's assertions, Amici argue that, if wages do not improve, patients will suffer the consequences of inadequate services, forcing some prematurely into institutional care. Amici maintain that, for those individuals able to secure home health care assistance, the high turnover rate which already plagues this type of work will diminish the quality and consistency of the care received. Finally, according to Amici, agency employers, like Bayada, are already paying minimum wage and overtime in other states without adverse effects. As our analysis involves interpreting the Act's domestic services exemption, and the Department's regulation interpreting this exemption, we necessarily begin by considering the Statutory Construction Act. 1 Pa.C.S.A. §§ 1501 et seq. The Statutory Construction Act is clear: the objective of all interpretation and construction of statutes is to ascertain and effectuate the intention of the legislature. 1 Pa. C.S.A. § 1921(a). Further, the best indication of the General Assembly's intent is the plain language of the statute. Martin v. Cmwlth., Dep't of Transp., Bureau of Driver Licensing, 588 Pa. 429, 438, 905 A.2d 438, 443 (2006). When the words of a statute are clear and unambiguous, there is no need to look beyond the plain meaning of the statute under the pretext of pursuing its spirit. 1 Pa.C.S.A. § 1921(b); see Commonwealth v. Conklin, 587 Pa. 140, 152, 897 A.2d 1168, 1175 (2006). Consequently, only when the words of a statute are ambiguous should a court seek to ascertain the intent of the General Assembly through consideration of the various factors found in Section 1921(c). 1 Pa.C.S.A. § 1921(c); Koken v. Reliance Ins. Co., 586 Pa. 269, 288, 893 A.2d 70, 81 (2006). As the clearest indication of the legislature's intention is the words it has employed, we first direct our attention to the language of the domestic services exemption. As a general proposition, an employer must pay its employees a minimum wage plus overtime for hours worked over 40 hours per week. [7] The Act provides certain exemptions, however, including an exemption for employment concerning domestic services. The relevant language in 43 P.S. § 333.105(a)(2) directs: (a) Employment in the following classifications shall be exempt from both the minimum wage and overtime provisions of this act:    (2) Domestic services in or about the private home of the employer. Id. In 1977, the Department promulgated a regulation interpreting the undefined term domestic services. 34 Pa.Code § 231.1. [8] In so doing, the Department drew a distinction regarding the type of employer for which an employee had to work in order for the domestic services exemption to apply. Specifically, the work had to be performed for an employer in his or her capacity as a householder: Domestic services Work in or about a private dwelling for an employer in his capacity as a householder, as distinguished from work in or about a private dwelling for such employer in the employer's pursuit of a trade, occupation, profession, enterprise or vocation. Id. As noted above, in construing a statute, a reviewing court is to discern the intent of the legislature. Here, the plain and unambiguous statutory language of the Act sets forth two requirements to come within the domestic services exemption: (1) the worker must be providing domestic services in or about a private home; and (2) the employer must be of a particular capacity, i.e., an employer in whose home the work is being performed. Thus, the unambiguous language of the statute focuses on one type of employera householder. The Department's regulation is consistent with this limited exemption for domestic services. The regulation draws from the statutory language and merely demarcates work for an employer in his or her capacity as a householder and work for an employer in his or her capacity of pursuing a trade or enterprisesuch as, a third-party agency employer. Under the Department's regulation, working for the householder employer permits an exemption from overtime requirements. Working for a third-party agency employer does not. Therefore, we conclude that the Department's definition of domestic services as set forth in the regulation, which distinguishes between householder employers and third-party agency employers, is not in conflict with the Act, as it closely tracks the domestic services exemption contained therein, and is reasonable as it is entirely consistent with the General Assembly's intent regarding the scope of the domestic service exemption. See Tire Jockey Serv. Inc. v. Dep't of Envtl. Prot., 591 Pa. 73, 108, 915 A.2d 1165, 1186 (2007) (finding regulation valid and binding on courts as long as it is adopted within the agency's granted power, issued pursuant to a proper procedure, and is reasonable). Furthermore, we do not find that the Act's limited exemption, or the Department's interpretive regulation, runs afoul of the federal wage and hour laws. Bayada urges us to look to federal law to permit it, as a third-party agency employer, to be exempt from paying its employees overtime. Bayada further asserts that the Department's regulation is in conflict with the FLSA, and, instead, should be read in pari materia with its federal counterpart. We, however, find Pennsylvania's domestic services exemption to be materially distinct from the federal exemption, and find the Commonwealth's more narrow exemption, which is more beneficial to our Commonwealth's employees, to be a permissible exercise of state regulation. Specifically, in 1968, the Act exempted domestic service from overtime requirements. Six years later, in 1974, Congress amended the FLSA to provide for an exemption from minimum wage and overtime requirements for  any employee employed in domestic service employment to provide companionship services for individuals who (because of age or infirmity) are unable to care for themselves. 29 U.S.C. § 213(a)(15) (emphasis added). It is plain that Congress did not incorporate the Act's verbiage which limited the domestic services exemption to work in or about the private home of the employer. 43 P.S. § 333.105(a)(2). Moreover, the DOL in 1975 specifically permitted this exemption for third-party agency employers. 29 C.F.R. § 552.109(a). [9] Thus, from the above it becomes clear that the language of the two statutes is materially distinct, and, further, that the federal regulatory approach and our Commonwealth's regulatory approach have differed with respect to the scope of the domestic services exemptionwith Pennsylvania's domestic services exemption under the Act being more limited, and, thus, more protective of the right of a worker to a minimum wage and overtime. While the Act's exemption for domestic services is more limited than the federal exemption, it is permissible for a state to enact more beneficial wage and hour laws. Indeed, the federal statute establishes only a national floor under which wage protections cannot drop, but more generous protections provided by a state are not precluded. 29 U.S.C. § 218 (stating that the FLSA shall not subvert any Federal or State law or municipal ordinance establishing a minimum wage higher than the minimum wage established under [the FLSA] or a maximum workweek lower than the maximum workweek established [by the FLSA].); Pac. Merch. Shipping Ass'n. v. Aubry, 918 F.2d 1409, 1425 (9th Cir.1990). Courts confronting related issues have held that the FLSA does not prohibit state regulation of wages and overtime if the state's standards are more beneficial to workers. See, e.g., Pettis Moving Co., Inc. v. Roberts, 784 F.2d 439, 441 (2d Cir.1986); Manliguez v. Joseph, 226 F.Supp.2d 377, 388-89 (E.D.N.Y.2002). Thus, the Commonwealth Court properly concluded that: the FLSA does not supersede state law; Pennsylvania may enact and impose more generous overtime provisions than those contained under the FLSA which are more beneficial to employees; and it is not mandated that state regulation be read identically to, or in pari materia with, the federal regulatory scheme. Thus, we reject Bayada's assertion that federal law compels a different result than that reached by the Commonwealth Court. Accordingly, finding the Department's regulation to be reasonable and consistent with the intent of the General Assembly, and finding that that federal wage and hour law does not compel a different interpretation of the Act, we uphold the Department's regulation. Having concluded that the Department's regulation constitutes a valid exercise of its authority and that it is reasonable and consistent with the clear intent of the legislature, we address Bayada's further contention that it may enjoy the domestic service exemption if it is a joint employer with its householder clients. As noted above, Bayada asserts that its householder clients are joint employers with Bayada. Drawing on the plain language of the statute, as well as the Department's regulation, we conclude that an employer may enjoy the domestic services exemption only if it is a householder. Again, the Act exempts employment for domestic services about the private home of the employer. As noted above, the plain language of the exemption is based upon the providing of domestic services, the location of the work, and the capacity of the employerwork performed in the home of the employer, and only where the employer is the householder. Thus, the employer must be a householder to satisfy Pennsylvania's narrow exemption from paying overtime wages to the employee. Furthermore, the Department's regulation, which is entitled to deference, allows for an employer in his or her capacity as a householder to enjoy the exemption, but specifically prohibits third-party agency employers from benefiting from this limited exemption. As Bayada does not contend that it is a householder employer, under the clear and unambiguous statutory language used in the Act, as well as the Department's reasonable interpretation of the Act through its regulation, the domestic services exemption does not extend to Bayada. This is the case even if Bayada's household clients might otherwise qualify for the exemption. [10] Not permitting Bayada, as a third-party agency employer who is not a householder, the ability to deny its employees overtime pay is entirely in alignment with the limited nature of the domestic services exemption as set forth in the plain language of the Act and the Department's regulation. [11] Finally, Bayada contends that it should be given leave to amend its complaint or is entitled to a remand to develop a factual record. Where it appears that the law will not permit recovery, the court may sustain preliminary objections in the nature of a demurrer. MacElree, supra . In making this decision, the court must accept as true all well pleaded material allegations and any reasonable inferences therefrom. However, a court need not accept as true conclusions of law, unwarranted inferences, allegations, or expressions of opinion. Pa. State Lodge v. Dep't of Labor and Indus., 692 A.2d 609, 613 (Pa.Cmwlth.1997), aff'd without opinion, 550 Pa. 549, 707 A.2d 1129 (1998). Here, taking all facts alleged by Bayada as true, we conclude that Bayada does not fall within the unambiguous language of the domestic services exemption or of the regulation defining domestic serviceswork in or about a private dwelling  for an employer in his capacity as a householder.  34 Pa.Code § 231.1 (emphasis added). As noted above, since Bayada makes no factual allegation that it employs its aides in its capacity as a householder, Bayada cannot fall within the plain meaning of the statute or the regulation, regardless of whether a joint-employer relationship can be established. Thus, because Bayada failed to set forth a legally cognizable claim for relief, remand for factual development would be inappropriate. Likewise, a court is not required to permit amendment of a pleading if a party is unable to state a claim on which relief could be granted. Werner v. Zazyczny, 545 Pa. 570, 584, 681 A.2d 1331, 1338 (1996). Therefore, we are satisfied that the Commonwealth Court properly granted the Department's demurrer and dismissed Bayada's petition for review, finding that Bayada failed to state a claimupon which relief could be granted, even assuming all of the factual averments contained in Bayada's petition were true, and that the court did so properly without leave to amend or for development of a factual record. For the above-stated reasons, we affirm the order of the Commonwealth Court. Jurisdiction relinquished. Former Justice GREENSPAN did not participate in the decision of this case. Chief Justice CASTILLE and Justices SAYLOR, EAKIN, BAER and McCAFFERY join the opinion.