Home Health Agencies: State Payroll Compliance Issues (2026)

Where state law touches home health agencies specifically

Since January 1, 2015, home care agencies and other third-party employers cannot claim the companionship services exemption and must pay minimum wage and overtime after 40 hours even when the worker is jointly employed by the household. The exemption itself covers fellowship and protection only, with care limited to 20 percent of hours per consumer per workweek and no medically related tasks.

Medicaid waiver payments for care of an eligible individual who lives in the caregiver's own home are excludable from federal income tax under Notice 2014-7, so no income tax is withheld, but an agency that employs the caregiver must still withhold and pay Social Security and Medicare taxes. Excluded amounts go on Form W-2 box 12 with code II rather than box 1.

An agency may rely on a caregiver's written statement signed under penalties of perjury that the care recipient lives in the caregiver's home under the plan of care, and should not file Form 1099-NEC for payments it knows are excludable. Payments from the care recipient's private funds are not excludable.

The state layer every employer carries

Each state where an employee of a home health agency works can set its own minimum wage, its own overtime trigger, a pay-frequency law, a new hire reporting deadline shorter than the federal 20 days, a final paycheck deadline, and a continuation coverage rule below the federal COBRA threshold. The state pages on this site carry those facts state by state from one data file, so the numbers here and on the multi-state checker never disagree.