If you own a private duty home care agency and you are thinking about selling in the next two years, there is one line on your profit and loss statement a buyer will study harder than your revenue growth, your client count, or your referral mix. It is overtime.

That line is now attached to an unresolved federal rulemaking. On August 14, 2026 the U.S. Department of Labor published its regulatory agenda in the Federal Register, and the Wage and Hour Division listed its proposal to rewrite how the Fair Labor Standards Act applies to domestic service workers at the final rule stage, carried in the Department’s Regulatory Plan as sequence number 94 (U.S. Department of Labor, Agenda of Regulations, 91 FR 53020, August 14, 2026). In plain language: the rule that made home care agencies pay overtime to caregivers is one step away from being rewritten, and nobody outside the Department knows the date.

This is not a prediction. We do not know how the Department will finalize the rule, whether it will be challenged in court, or when it would take effect. What we do know is how buyers behave when a material cost input is sitting in a regulatory queue, and what an owner can do so that uncertainty does not come out of their sale price. That is the useful part, and it is where most of this article goes.

What is actually happening with the federal home care overtime rule?

The sequence is short and worth getting exactly right, because a great deal of secondhand commentary on this subject is wrong.

• 1974. Congress extended the Fair Labor Standards Act to domestic service employees, but wrote in two exemptions. Workers providing “companionship services” were exempt from minimum wage and overtime, and live-in domestic service employees were exempt from overtime.
• 1975. The Department of Labor issued regulations that defined companionship services broadly and allowed third party employers, meaning agencies, to claim those exemptions. Those regulations governed the industry for close to forty years.
• 2013. The Department reversed course. It narrowed the definition of companionship services so that hands-on care could be no more than 20 percent of a worker’s hours, and it barred third party employers from claiming either exemption at all. Home care associations sued. The district court vacated the key provisions, the D.C. Circuit reversed on August 21, 2015 in Home Care Association of America v. Weil, and the rule took effect on October 13, 2015. It has governed agency payroll ever since.
• July 2, 2025. The Department proposed rescinding the 2013 rule in its entirety and returning to the 1975 regulations (Application of the Fair Labor Standards Act to Domestic Service, 90 FR 28976). The comment period closed September 2, 2025.
• August 14, 2026. The Department’s published agenda moved that proposal to the final rule stage.

Two things follow, and both matter to a seller. First, nothing has changed yet. The 2013 rule is the law today, and an agency that stops paying overtime on the strength of a proposal is inviting a wage and hour claim it will lose. Second, the change is no longer hypothetical enough to ignore. A proposal sitting at the final rule stage in the Department’s own published plan is a different animal from one that has gone quiet, and buyers read that agenda too.

What did the 2013 rule change, and why did it matter so much?

The 2013 rule did two separate things, and owners tend to remember only one of them.

The first change was the definition. Before 2013, an exempt companion could perform an unlimited amount of care work, and the 20 percent cap applied only to general household chores. After 2013, care itself, meaning help with dressing, grooming, feeding, bathing, toileting, transferring, meal preparation, light housework, medication reminders, and arranging medical care, was capped at 20 percent of hours per client per week. In practice that definition excluded almost every real caregiver assignment. If your aide is helping someone shower, that is not companionship as the 2013 rule defines it.

The second change was structural, and it is the one that reshaped agency economics. The 2013 rule prohibited third party employers from claiming either exemption at all. Even where an assignment genuinely was companionship, an agency could not use the exemption. Only the consumer or their household could. That is the provision the Department is now proposing to undo.

The practical result over the last decade is the operating pattern most home care owners will recognize on sight. Schedules get built to keep caregivers under 40 hours. Cases get split across two or three aides where the client wanted one. Live-in and 24 hour arrangements get priced defensively or declined outright. Overtime becomes a number the scheduler is measured on rather than a number the client asks for. None of that was an accident of management style. It was the rule.

How big is the population this rule touches?

Larger than almost any other regulated group in American health care, which is part of why the rulemaking is contested.

In its own economic analysis the Department of Labor assumed that 3.7 million home care workers employed by third party agencies could be affected, plus roughly 1.5 million more employed directly by consumers or their families as independent providers. Applying the Regulatory Flexibility Act, the Department estimated the rulemaking could reach 60,039 small businesses: 27,140 in home health care services and 32,899 in services for the elderly and persons with disabilities. In both industries small businesses are 96 percent of all businesses (90 FR 28976, July 2, 2025). The Office of Information and Regulatory Affairs classified the proposal as economically significant, the designation reserved for rules with an annual effect on the economy of at least 100 million dollars.

Workforce data says the same thing from a different direction. As of May 2025 there were 4,305,810 home health and personal care aides employed nationally, at a median wage of 17.21 dollars an hour, or 35,800 dollars a year (U.S. Bureau of Labor Statistics, Occupational Employment and Wage Statistics, occupation 31-1120, May 2025). That is the largest single occupation in health care by headcount, and it sits near the bottom of the national wage distribution. Any rule that changes how those hours are compensated moves a very large number at once.

Meanwhile the agency universe keeps growing. Federal data for 2025 counts 54,978 private establishments in home health care services, up 3,350 from 2024, a 6.5 percent increase in a single year, with average weekly wages of 806 dollars, up 3.2 percent (BLS Quarterly Census of Employment and Wages, NAICS 6216, 2025 annual averages, private ownership). Employment in the same industry reached 1,886,100 in July 2026, with average hourly earnings of 27.91 dollars in June 2026 (BLS Current Employment Statistics, series CES6562160001 and CES6562160003).

Read those together and the market picture is clear. New agencies are being formed every year, wages are rising steadily rather than dramatically, and the single largest cost lever in the model is under federal review. That is a fragmented, competitive, labor-bound industry, and it is exactly the kind of industry where a cost rule decides which businesses are worth buying.

Why does a labor rule move home care valuations at all?

Because in home care, labor is not a cost category. It is the business.

A home care agency sells caregiver hours. There is no equipment moat, no owned real estate in most cases, no proprietary technology, and in the non-medical segment, frequently no Medicare certification to protect the position. What a buyer purchases is a book of clients, a roster of caregivers who show up, a referral network, and the spread between the bill rate and the pay rate. Direct labor typically consumes the large majority of every dollar of revenue. When the rule that governs the premium on hours 41 and beyond changes, gross margin changes with it, and gross margin is what the multiple is applied to.

Consider what a rescission would actually touch, in order of how much it moves the number:

• The overtime premium itself. The Department’s own analysis describes the majority of the transfer under its proposal as avoided overtime premiums. For an agency that currently pays real overtime, this is a direct margin item.
• Scheduling cost. Splitting a 50 hour case across two caregivers is not free. It costs recruiting, onboarding, mileage, supervision, and the client satisfaction hit that comes with a rotating face. Those costs are buried in your administrative line, not your labor line, which is why owners routinely understate what the 2013 rule costs them.
• Declined revenue. Every live-in inquiry and every 24 hour case an agency turned away because the math did not work is revenue that never entered the model. It is invisible in the financials and very visible in a buyer’s growth thesis.
• Caregiver retention. This one cuts the other way, and honest analysis has to say so. Caregivers who currently earn overtime would lose it. In a market with high turnover, an agency that quietly cuts caregiver earnings can lose the roster that made it worth buying.

That last point is the one most commentary skips, and it is why we are not treating a rescission as a straightforward win for sellers. A rule change lowers the legal floor. It does not lower the market price of a caregiver in a county where four other agencies are hiring. Agencies that assume the two are the same thing will find out otherwise at exactly the wrong time.

Your state may make the federal rule irrelevant

This is the single most important qualifier in this article, and it is the one that determines whether any of the above applies to your agency.

The Fair Labor Standards Act sets a floor, not a ceiling. States are free to require minimum wage and overtime protections that the federal rule does not. The Department acknowledged this directly in its proposal, noting that some of the 3.7 million agency-employed workers “may not be affected as a practical matter if they remain subject to minimum wage and overtime pay requirements under state law.” A number of states extended wage and hour coverage to home care workers under their own statutes, independently of what the Department of Labor did in 2013.

The consequence for an owner is straightforward. If your state independently requires overtime for home care workers, a federal rescission changes very little about your payroll and nothing about your valuation. If your state relies on the federal standard, a rescission could change both. Two agencies with identical revenue, identical margins, and identical client counts can therefore have completely different exposure to this rulemaking based only on where they operate. That is not a detail to guess at. Ask your employment counsel to give you a written answer about your specific state before you build any assumption into a sale process.

How buyers underwrite an unresolved rule

Buyers do not wait for regulatory certainty. They price it. Here is what that looks like in practice, based on how experienced acquirers handle any open cost variable.

They underwrite the current rule, not the proposed one. A serious buyer builds their model on the law as it stands. If the rule changes in their favor after closing, that is upside they did not pay for. This is the most important thing for a seller to understand: you will almost never get paid in advance for a favorable rule that has not been finalized.

They test whether your compliance was real. The diligence question is not “will overtime rules change.” It is “did this agency comply with the rule that existed.” Misclassified caregivers, unpaid travel time between clients, off-the-clock documentation, and sleep time deductions on live-in cases are all classic home care wage and hour exposures, and they carry multi-year lookbacks. An agency that saved money by not complying has not created margin. It has created a liability that will be quantified, escrowed against, and deducted.

They ask what happens to the roster. If your caregivers currently earn overtime and a rescission would remove it, the buyer wants to know how many of them would leave. An owner who can answer that with data about their own workforce, hours distribution, tenure, and pay bands, is answering a question most sellers cannot.

They look for structure when the range is wide. Where a variable is genuinely unresolvable, buyers reach for earnouts, holdbacks, and indemnities rather than walking away. A seller who understands the variable can negotiate the structure. A seller who is surprised by it in diligence usually accepts whatever structure is offered.

Does this argue for selling now, or waiting?

Honestly, it argues for neither on its own, and any advisor who tells you a pending rule is a reason to rush should be asked to show their work.

The case for not waiting is that the outcome is unknowable and the wait is unbounded. This rulemaking has already run more than a year past the close of its comment period. If it is finalized, litigation is a realistic possibility given the history of the 2013 rule, which itself was enjoined, vacated in part, and then reinstated on appeal. An owner who wants to be out in eighteen months cannot organize their life around a docket.

The case for waiting is narrower and applies to a specific agency: one in a state that follows the federal standard, with heavy live-in or 24 hour demand it has been declining, and a caregiver base that would tolerate the change. For that agency, a rescission could genuinely unlock revenue it cannot currently serve, and demonstrating a year of that new revenue is worth more than explaining it as potential.

For everyone else, the rule is a variable to be documented, not a clock to be raced. The things that reliably drive a home care sale price are unchanged: clean books, a real caregiver retention story, referral sources that do not depend on the owner personally, and documented compliance. We wrote about the revenue side of that equation in our piece on what payer mix does to a home care agency’s value, and this article is the cost-side companion to it.

What to do in the next 90 days

Whether you sell next year or in five years, these steps make your agency more valuable and they cost almost nothing.

• Get your state’s answer in writing. One question to employment counsel: does our state independently require minimum wage and overtime for home care workers employed by an agency, regardless of the federal companionship exemption? Put the answer in your diligence file.
• Quantify your actual overtime. Pull twelve months of payroll and calculate overtime hours and overtime dollars as a percentage of total direct labor. Most owners guess this number and most guess low. A buyer will calculate it in an afternoon.
• Count what you turned down. Track declined live-in and 24 hour inquiries for one quarter. If you have been saying no because of the overtime math, that is a documented growth case rather than a claim.
• Audit the classic exposures. Travel time between clients in the same day, sleep time deductions, unpaid training and documentation time, and any caregiver treated as an independent contractor. These are the wage and hour items that surface in diligence and reduce price. Fix them now, while it is cheap.
• Map your caregiver hours distribution. How many caregivers work more than 40 hours, how much of their income is overtime, and how long have they been with you. That single table answers the retention question a buyer will ask.
• Do not change your pay practices based on a proposal. The 2013 rule is the law until a final rule says otherwise and takes effect. Acting early is the one move here that can actually cost you the business.

What does not change either way

It is worth ending on the parts of a home care sale that no rulemaking touches.

Buyers still want caregiver retention they can verify, not describe. They still want referral relationships that belong to the agency rather than to the owner’s personal reputation. They still want client concentration that does not depend on two accounts. They still want a scheduling and documentation system a new operator can run from day one. They still want financial records that reconcile to tax returns without an explanation. Agencies with those five things sell in every regulatory environment, and agencies without them struggle in all of them.

The overtime rule is worth watching because it is genuinely large and genuinely unresolved. It is not worth reorganizing your business around. The owners who will do best when it lands, whichever way it lands, are the ones whose agencies were already clean.

Frequently asked questions

Where to go from here

If you want the fuller picture of how home care agencies are valued and sold, start with our home care business valuation and selling guide, which covers the private duty model end to end. Owners on the clinical side should read the companion home health agency valuation and sale process guide instead, since the payer and certification issues are different. If you are earlier than that, the prepare for your exit section of our seller learning center is the right starting point.

To see what is currently trading in this space, our live inventory includes a Texas licensed in-home care agency in the Dallas and Fort Worth area, an Illinois home care franchise, and a San Diego home health agency on the clinical side.

And if you want a confidential read on what your own agency is worth under the rule as it stands today, reach out to our team. No obligation, no listing agreement required to have the conversation.

This article is general information about a pending federal rulemaking and is not legal advice. Wage and hour obligations depend on your state and on the specific facts of your operation. Consult employment counsel before changing any pay practice.