California cracks down on illegal care home business model

SAN JOSE, Calif. – Throughout its investigation into care home compliance of labor laws across California, the Department of Labor has found a new trend of illegal payment by care home owners.

Called limited liability corporations or LLCs, care home owners pay their caregivers as independent contractors instead of as employees, stripping them of fundamental worker’s rights.

Michael Eastwood, assistant director at the Department of Labor, Wage and Hour Division in San Jose said they have heard reports of attempts in spreading this business model within the residential care home community in California.

“Imagine one day you’re working at a care home as a caregiver, as an employee and the next day your boss says you’re an owner or a contractor so you don’t get minimum wage,” said Eastwood. “You don’t get overtime. You don’t get worker’s compensation. You don’t get unemployment.”

The Department of Labor has been working with various care home owner organizations to educate them and bring them into compliance.

One group, 6beds Inc., has multiple training sessions with the Labor Department and is working to stop owners who use the LLC model.

“These employees have their rights and need to be protected,” said SoCal 6beds president Ron Simpson, PhD. “We need to treat our caregivers with the same kindness and respect and dignity which we want them to treat our residents.”

The Labor Department says that owners found guilty of using the LLC model will face consequences.

“We have seen many homes that have closed in the geographic areas where these audits are intense,” said Simpson. “In the last few months the data we have received from the Department of Social Services shows that the rate of closing is almost doubling that what it was a year ago.”

Eastwood added that if an employment relationship is determined between workers that are in fact employees, they will be computing back wages, assessing liquidated damages and civil money penalties wherever appropriate.

The Department of Labor encourages all workers who may be victims of this practice or who feel that their rights as workers are being violated to please file a complaint at

All calls are confidential and immigration status does not disqualify from worker’s rights.



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