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Tinsley v. Covenant Care Services, LLC

United States District Court, E.D. Missouri, Southeastern Division

January 12, 2017

TYRAL TINSLEY on behalf of himself and all others similarly situated, Plaintiffs,
COVENANT CARE SERVICES, LLC, et al., Defendants.



         This matter is before the Court on Defendants' Motion for Summary Judgment (Doc. 72) and Plaintiffs' Cross Motion for Partial Summary Judgment as to Liability and Liquidated Damages (Doc. 116).

         I. Background

         Plaintiffs comprise a group of current and former employees who worked for Defendant Covenant Care Services, LLC. (“Covenant Care”), an agency that offers in-home care, adult day care for disabled adults, and other services. Plaintiff represents a group of Independent Support Living Aides and Lead Independent Support Living Aides (“ISL Aides”), who provide in-home care services to Defendants' clients.[1] ISL Aides are paid an hourly wage. ISL services are provided at the clients' residences, which can include up to two other disabled roommates in a single residence.

         The Third Amended Complaint alleges that Defendants failed to properly pay Plaintiffs and all other similarly situated employees overtime compensation at a rate of not less than one-and-one-half times the regular rate of pay for work performed in excess of forty hours per week, in violation of the Fair Labor Standards Act (AFLSA@), 29 U.S.C. § 2010 et seq., and Missouri law. Plaintiffs bring the following three claims: (1) failure to pay overtime wages to non-exempt employees in violation of the FLSA (Count I); (2) failure to pay overtime wages in violation of Missouri Revised Statute ' 290.500, et seq. (Count II); and (3) Missouri common law claims for quantum meruit/unjust enrichment for Defendants' failure to pay overtime (Count III). Plaintiffs seek to recover their back pay, individually and on behalf of the proposed class. They also seek liquidated damages.

         Plaintiffs admit that they were paid “straight time” for all hours worked; they argue that they were not paid one and one-half times their regular rate of pay for hours worked beyond forty per week. Defendants classified ISL Aides as exempt employees pursuant to the “companionship exemption” of the FLSA, and they were paid the same hourly rate for all hours worked regardless of the number of hours worked.

         On March 27, 2015, the Court granted Plaintiffs' Unopposed Motion for Conditional Certification pursuant to 29 U.S.C. § 216(b). Seventeen individuals filed opt-in consents to join this lawsuit as party plaintiffs, although some opt-in Plaintiffs have elected to withdraw or have otherwise been dismissed from the lawsuit. On February 2, 2016, the Court granted Plaintiffs' Motion for Class Certification. (Doc. 99.) The Court also granted Plaintiffs' Request to Continue Defendants' Motion for Summary Judgment pursuant to Rule 56(d), and stayed Defendants' Motion for Summary Judgment as to Defendants' defenses of exemption and good faith. A new briefing schedule was issued. Defendants' Motion for Summary Judgment is now fully briefed, and Plaintiffs have filed a cross Motion for Partial Summary Judgment as to Liability and Liquidated Damages, which is also fully briefed.

         II. Motion for Summary Judgment

         II. A. Summary Judgment Standard

         Pursuant to Federal Rule of Civil Procedure 56(a), a district court may grant a motion for summary judgment if all of the information before the court demonstrates that “there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986). The burden is on the moving party. City of Mt. Pleasant, Iowa v. Associated Elec. Co-op. Inc., 838 F.2d 268, 273 (8th Cir. 1988). After the moving party discharges this burden, the nonmoving party must do more than show there is doubt as to the facts. Matsushita Elec. Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Instead, the nonmoving party must set forth specific facts showing there is sufficient evidence in his favor to allow a jury to return a verdict for him. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986); Celotex, 477 U.S. at 324.

         In ruling on a motion for summary judgment, the court must review the facts in a light most favorable to the party opposing the motion and give that party the benefit of any inferences that logically can be drawn from those facts. Matsushita, 475 U.S. at 587; Woods v. DaimlerChrysler Corp., 409 F.3d 984, 990 (8th Cir. 2005). The Court may not “weigh the evidence in the summary judgment record, decide credibility questions, or determine the truth of any factual issue.” Kampouris v. St. Louis Symphony Soc., 210 F.3d 845, 847 (8th Cir. 2000). Finally, the court must resolve all conflicts of evidence in favor of the nonmoving party. Robert Johnson Grain Co. v. Chemical Interchange Co., 541 F.2d 207, 210 (8th Cir. 1976).

         II. B. Discussion

         Defendants argue that the Court should dismiss Plaintiffs' claims because Plaintiffs were properly classified as exempt employees under the FLSA. Defendants further argue that they have made a good faith effort to comply with the FLSA and that Plaintiffs' claims for a willful violation and liquidated damages therefore fail as a matter of law.

         In their Response and Cross Motion for Partial Summary Judgment, Plaintiffs first argue that Defendants have waived the argument that ISL Aides are exempt from overtime compensation by not formally pleading this claim as an affirmative defense. Plaintiffs next contend that ISL Aides are not exempt from overtime requirements because they do not qualify for the companionship exemption for the following reasons: (1) Defendants' clients do not reside in “private homes”; and (2) Plaintiffs' job duties do not fall within the exemption. Plaintiffs further argue that Defendants cannot establish that they acted in good faith in classifying ISL Aides as exempt from overtime compensation. Plaintiffs thus request that the Court deny Defendants' Motion for Summary Judgment, and grant Plaintiffs' cross motion as to both liability and liquidated damages under both state and federal law.

         II.B.1. Pleading Requirement

         As previously noted, Plaintiffs argue as a preliminary matter that Defendants have waived their argument that ISL Aides are exempt from overtime compensation by failing to formally plead this claim. Plaintiffs, citing Magana v. Northern Mariana Islands, 107 F.3d 1436 (9th Cir. 1997), argue that all exemptions under the FLSA are affirmative defenses that must be pled with specificity.

         Defendants contend that they properly pled the exemption defense in their Answer to the Third Amended Complaint. They argue that Plaintiffs' assertion to the contrary is not well taken, as Plaintiffs have been on notice of the companionship exemption. The undersigned agrees.

         In Magana, the defendant employer raised an exemption argument for the first time in their motion for summary judgment. 107 F.3d at 1445. The plaintiff employee argued that defendants' exemption argument was an affirmative defense that was not raised in the initial responsive pleading and was, therefore, waived. Id. The Ninth Circuit held that the district court erred in granting summary judgment for Defendants “without determining whether their delay in raising the affirmative defense prejudiced Magana.” Id. at 1446. The Court stated that the “district court should make this determination on remand.” Id.

         Here, Defendants did not specifically raise the exemption argument as an affirmative defense. Defendants, however, stated as follows in their Answer to Plaintiffs' Third Amended Complaint:

Defendants admit that the FLSA requires non-exempt covered employees to be compensated at a rate of not less than one and one-half the regular rate of pay for work performed in excess of forty hours in a workweek. Defendants deny that Plaintiff and all others similarly situated are non-exempt covered employees…

(Doc. 83, at & 40.) Defendants made the same statement in response to Plaintiffs' First Amended Complaint and Second Amended Complaint. (Doc. 19, at & 38; Doc. 46, at & 40.) Other courts have found similar statements sufficient to satisfy pleading requirements when no prejudice resulted. See, e.g. Salaka v. Live Music Tutor, Inc., No. 614CV1154ORL40DAB, 2016 WL 639366, at * 8 (M.D. Fla. Jan. 27, 2016) (“While it would be more appropriate for Defendants to have raised the issue via affirmative defense, it is not fatal here in view of…the absence of any prejudice”) (citing Bergquist v. Fid. Info. Servs., Inc., 399 F.Supp.2d 1320, 1324-26 (M.D. Fla. 2005)).

         More importantly, Plaintiffs have suffered no prejudice due to Defendants' failure to raise the exemption issue as an affirmative defense. Defendants point out that Plaintiffs have been on notice of the companionship exemption since early 2015, pursuant to Covenant Care's deposition testimony and interrogatory responses noting that it classified ISL Aides as exempt. Defendants also note that Plaintiffs requested that the Court extend discovery deadlines so they could address the companionship exemption. The Court stayed Defendants' Motion for Summary Judgment as to Defendants' defenses of exemption and good faith to allow Plaintiffs to obtain discovery on this issue. (Doc. 99.) Further, the undersigned recalls that the attorneys for both parties informed the Court at the Rule 16 conference on August 5, 2014, that the ultimate issue in this case was whether the companionship exemption applied. Thus, any claim by Plaintiffs of prejudice resulting from Defendants' failure to explicitly plead the companionship exemption as an affirmative defense is disingenuous, and the issue of whether Plaintiffs are exempt is properly before the Court. Defendants, out of an abundance of caution, have moved to amend their Answer to the Third Amended Complaint to explicitly plead the companionship exemption (Doc. 124-1 at 11), and the Court will grant this motion (Doc. 124).

         II.C. Application of the Companionship Exemption

         The FLSA requires employers to pay all covered employees at least time and one-half for all hours worked in excess of forty hours. 29 U.S .C. § 207(a)(1). The FLSA provides several exceptions to its general requirement that an employee receive overtime and minimum wages for all hours worked. Pursuant to § 213(a)(15) of the Act, the minimum wage and overtime provisions do not apply to “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).” (Emphasis added.) Congress enacted this exemption to “enable guardians of the elderly and disabled to financially afford to have their wards cared for in their own private homes as opposed to institutionalizing them.” Welding v. Bios Corp., 353 F.3d 1214, 1217 (10th Cir. 2004) (quoting Lott v. Rigby, 746 F.Supp. 1084, 1087 (N.D.Ga. 1990)). “Exemptions to the FLSA are ‘narrowly construed in order to further Congress' goal of providing broad federal employment protection.'” Fezard v. United Cerebral Palsy of Cent. Ark., 809 F.3d 1006, 1010 (8th Cir. 2016) (quoting Spinden v. GS Roofing Products Co., 94 F.3d 421, 426 (8th Cir. 1996)). Defendants bear “the burden of ‘prov[ing] that this exemption applies by demonstrating that [its] employees fit plainly and unmistakably within the exemption's terms and spirit.'” Id.

         Prior to January 1, 2015, the United States Department of Labor (“DOL”) defined the phrase “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. The regulation also provides a non-exhaustive list of examples, including cooks, butlers, valets, maids, nurses, and chauffeurs, among others. Id. Section 552.101 further provides that the physical form of the residence does not determine whether it is a private home. The statute provides that “[a] separate and distinct dwelling maintained by an individual or a family in an apartment house, condominium or hotel may constitute a private home, ” even though they are commercial in form and operation. Id. at ' 552.101(a)-(b). Similarly, those who work in structures resembling private homes, but are “primarily rooming or boarding houses are not considered domestic service employees.” Id. at ' 552.101(b).

         The parties in this matter disagree on two important points. First, Plaintiffs claim they did not work in “private homes” as defined under the companionship exemption. Second, Plaintiffs claim that their job responsibilities as ISL Aides do not meet the definition of “domestic service employees.” Defendants disagree with both of these claims.

         II.C.1. History related to the Companionship Care Overtime Exemption

         The history related to the overtime exemption for companionship care is instructive in examining the issues in this case. The regulations that were applicable during the relevant time-frame for this lawsuit, approximately March 10, 2009 through December 31, 2014, allowed third party employers of employees who provided companionship care in a private home to avoid paying overtime for any hours worked by such employees in excess of forty hours per week. Effective January 1, 2015, the Department of Labor promulgated new regulations that removed the overtime pay exemption for “third party employers of employees engaged in companionship services” by directing that the employers are not allowed to “avail themselves of the minimum wage and overtime exemption. . .” 29 C.F.R. ' 552.109(a)(2015). On August 21, 2015, the District of Columbia Circuit Court of appeals affirmed the new regulation in Home Care Ass'n of Am. v. Weil, 799 F.3d 1084, 1089 (D.C.Cir. 2015) and the Supreme Court later denied a writ of certiorari, 135 S.Ct. 2506 (Jun. 27, 2016).

         In Home Care Ass'n of Am. v. Weil, the D.C. Circuit provided background concerning the FLSA's overtime exemption for companionship caregivers (or domestic service employees) and described an issue in that case, which is similar to the instant case. That segment of the decision is set forth below:

The Fair Labor Standard Act's protections include the guarantees of a minimum wage and overtime pay. The statute, though, has long exempted certain categories of “domestic service” workers (workers providing services in a household) from one or both of those protections. The exemptions include one for persons who provide “companionship services” and another for persons who live in the home where they work. This case concerns the scope of the exemptions for domestic-service workers providing either companionship services or live-in care for the elderly, ill, or disabled. In particular, are those exemptions from the Act's protect-tions limited to persons hired directly by home care recipients and their families? Or do they also encompass employees of third-party agencies who are assigned to provide care in a home?
Until recently, the Department of Labor interpreted the statutory exemptions for companionship services and live-in workers to include employees of third-party providers. The Department instituted that interpretation at a time when the provision of professional care primarily took place outside the home in institutions such as hospitals and nursing homes. Individuals who provided services within the home, on the other hand, largely played the role of an “elder sitter, ” giving basic help with daily functions as an on-site attendant.
Since the time the Department initially adopted that approach, the provision of residential care has undergone a marked transformation. The growing demand for long-term home care services and the rising cost of traditional institutional care have fundamentally changed the nature of the home care industry. Individuals with significant care needs increasingly receive services in their homes rather than in institutional settings. And correspondingly, residential care increasingly is provided by profess-sionals employed by third-party agencies rather than by workers hired directly by care recipients and their families.
In response to those developments, the Department recently adopted regulations reversing its position on whether the FLSA's companionship-services and live-in worker exemptions should reach employees of third-party agencies who are assigned to provide care in a home. The new regulations remove those employees from the exemptions and bring them within the Act's minimum-wage and overtime protections. The regulations thus give those employees the same FLSA protections afforded to their counterparts who provide largely the same services in an institutional setting.

Home Care Ass'n of Am., 799 F.3d at 1086-87.

         Considering the history and development of the home care industry, it is fair and reasonable for the exemption to benefit home care recipients and their families when the families directly hire domestic service workers; the result is that the ordinary family will not also incur the financial burden of overtime pay. See Welding, 353 F.3d at 1217. On the other hand, it would not be fair for an in-home care agency that generates profit from the overtime work of its employees to benefit from the exemption without paying overtime to its employees.

         On January 7, 2015, Covenant Care Service's RN Director, Rebecca Reagan, notified employees that, in accord with the new regulation, Covenant Care would begin paying “in-home care aides” overtime for hours worked in excess of forty hours in a week. The letter also emphasized that any “overtime must be authorized by a direct supervisor or on call personnel.” (Doc. 61-10 at 1.) As previously stated, the new regulation went into effect after the filing of the instant lawsuit.

         II.C.2. Facts Relevant to the “Private Home” Determination[2]

         Covenant Care provides in-home care services for disabled individuals needing certain forms of assistance. As previously noted, Covenant Care is an ISL provider through the Missouri Department of Mental Health (“DMH”). Covenant Care employs ISL Aides to provide the majority of the direct-care services in the ISL clients' residences. As to the homes in which ISL clients reside, the Missouri Division of Developmental Disabilities (DD) offers “A Guide for Individuals and Families to Understand the Division of Developmental Disabilities” Housing Initiative entitled “It's My Home!” (Doc. 121-1.) The mission of the Initiative “is to develop quality, affordable, accessible housing for people with disabilities in safe locations where they can access support services, transportation, employment, and recreation throughout their lifespan.” (Doc. 121-1 at 2.) Another page in the Guide notes:

In the past you had to live in a hospital, nursing home or with a large group of other people in order to get help with the supports you needed. Today you can live in the community with everyone else and get supports designed just for you!

Id. at 13. The Guide even offers considerations for the disabled individual when selecting the location of their home such as whether a bus line, shopping malls and grocery stores, or family and friends, their work place, or “fun things to do” are close to the home? Id. at 15.

         Consistent with the DD Housing Initiative, ISL services are provided in the disabled individual's (“client”) residence, which can include the client living alone, living with his or her family, or living with up to two other disabled roommates. To qualify as a provider of ISL services with the DMH, those services must be provided to individuals that live in homes of their choice, with no more than four individuals sharing a residence, and the residence must be owned or leased by at least one of the individuals (or the individual's family member or legal guardian) receiving services. Covenant Care began providing ISL services in the Fall of 2010. (Doc. 113-4 at 5, Depo. of Rebecca Reagan; Doc. 113-9 at 10, Depo. of Chris Reagan.)

         The parties have identified only one plaintiff who worked in the home of a Covenant Care ISL client who owns their home. (Doc. 73 at 27; see also Doc. 76-5 at 19, Depo. of Claudette McCarter.) The majority of Covenant Care clients lease properties from eleven different individuals or entities. Covenant Care does not operate any group homes. Prior to January 1, 2015, Covenant Care was owned by Defendant Warren Reagan and Defendant Rebecca Reagan; they are husband and wife. Defendant Chris Reagan, son of Warren and Rebecca Reagan, was an employee with significant management and control of Covenant Care prior to January 1, 2015. The business is primarily managed by Defendants Rebecca and Chris Reagan.

         Two of the entities leasing homes to ISL clients include ABC Realty and BKC Properties. BKC Properties, LLC, was formed by Defendant Warren Reagan on February 4, 2004. The company reportedly invests in real estate and as of December 22, 2015, owned 55 properties. (Doc. 113-5 at 2, Depo. of Chris Reagan on behalf of BKC Properties, LLC.) Defendant Warren Reagan was the sole owner of BKC Properties in 2004; Rebecca Reagan was added as a member in 2005 or 2006. Id. ABC Realty is a limited liability company owned and operated by Defendant Chris Reagan and his wife, Brandee Reagan. ...

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