Gaul v. Accura Health Ventures, LLC

• Docket Number: Case No. 4:22-cv-00154
• Decision Date: 18 January 2023
• Citation: 651 F.Supp.3d 1054
• Parties: Jessica GAUL, individually and on behalf of others similarly situated, Plaintiff, v. ACCURA HEALTH VENTURES, LLC; American Healthcare Management Services, LLC d/b/a Accura Healthcare Management Services; Accura Healthcare Holdings LLC; and American Healthcare Associates, Inc. d/b/a Accura Healthcare of Iowa, Defendants.
• Court: U.S. District Court — Southern District of Iowa

651 F.Supp.3d 1054

Jessica GAUL, individuallyandon behalf of others similarly situated, Plaintiff, v. ACCURA HEALTH VENTURES, LLC; American Healthcare Management Services,LLC d/b/a Accura Healthcare Management Services;Accura Healthcare Holdings LLC; and American Healthcare Associates, Inc.d/b/a Accura Healthcare of Iowa, Defendants.

Case No. 4:22-cv-00154

United States District Court, S.D. Iowa, Central Division

Signed January 18, 2023

Brian P. Galligan, Reid Law Firm, Des Moines, IA, Angeli Murthy, Pro Hac Vice, Morgan & Morgan, P.A., Plantation, FL, Matthew Scott Parmet, Pro Hac Vice, Parmet PC, Houston, TX, for Plaintiff.

Benjamin Patrick Roach, Frank B. Harty, Katie Lynn Graham, Nyemaster Goode PC, Des Moines, IA, for Defendants.

ORDER DENYING MOTION FOR SUMMARY JUDGMENT AND GRANTING MOTION FOR CONDITIONAL CERTIFICATION

STEPHEN H. LOCHER, UNITED STATES DISTRICT JUDGE

Following a ransomware attack affecting third-party payroll processing software, Defendants failed to pay PlaintiffJessica Gaul the correct overtime rate for one pay period.Defendants also, however, failed to withhold enough for taxes in that period and two subsequent pay periods, and thus Gaul arguably received more in take-home pay than she should have.Defendants argue that because they eventually paid the correct withholding amounts to taxing authorities, there has been no Fair Labor Standards Act violation.The Court disagrees and therefore DENIES Defendants' Motion for Summary Judgment.The Court GRANTS Gaul's motion for conditional certification of the class.

I.UNDISPUTED MATERIAL FACTS

A. Gaul's Employment with Accura.

DefendantAmerican Healthcare Management Services, LLC d/b/a Accura Healthcare Management Services (hereinafter, "Accura")¹ is a healthcare management company that operates skilled nursing and senior living facilities throughout the Midwest.(ECF 33-1, ¶ 1.)Gaul worked for Accura as a part-time Licensed Practical Nurse (LPN) until December 12, 2021, at Accura's facility in Carroll, Iowa.(Id., ¶¶ 4, 6.)Effective December 13, 2021, Gaul was promoted to the position of Minimum Data Set (MDS) Coordinator and became a full-time Accura employee.(Id., ¶¶ 9-10.)

Gaul's promotion came with changes to her compensation.As an LPN, she earned $26.29 per hour plus a "shift differential" of $1.00 to $2.00 per hour when she worked extra weekend shifts.(Id., ¶¶ 7-8.)As MDS Coordinator, her pay increased to $29.00 per hour.(Id., ¶ 11.)She was no longer eligible for shift differential payments as MDS Coordinator except that she would still receive the extra $1.00 to $2.00 in pay if she picked up extra weekend shifts as an LPN.(Id., ¶¶ 12-13.)

Accura paid employees on two-week payroll cycles, but it divided employees into two separate groups to stagger payroll dates.(Id., ¶ 14.)Gaul was in Payroll Group B.(Id., ¶ 15.)Gaul did not participate in any Accura benefits plans, so the only withholdings from her paycheck were state and federal taxes.(Id., ¶ 16.)

B. Ransomware Attack on Accura's Timekeeping and Payroll Processing Software, Kronos.

Accura uses software called Kronos for timekeeping and payroll processing.(Id., ¶ 17.)On December 13, 2021, Accura learned Kronos was unavailable due to a ransomware attack.(Id.)Sometime after the attack, Accura provided timesheets to employees to use to track their hours manually for the duration of the Kronos outage.(Id., ¶ 19.)The Kronos outage lasted approximately six weeks.(Id., ¶ 20.)During this period, employees recorded hours by hand and turned them in to supervisors.(Id., ¶ 26.)

For Gaul and others in Payroll Group B, the first payroll period impacted by the Kronos outage ran from December 5 to December 18, 2021.(Id., ¶ 21.)The second payroll period impacted by the outage ran from December 19, 2021, to January 1, 2022, and the third ran from January 2 to January 15, 2022.(Id., ¶¶ 22-23.)This Order will refer to these as Pay Periods 1B, 2B, and 3B.(Id., ¶¶ 21-23.)After Pay Period 3B, the Kronos outage was resolved and no further pay periods were affected.(Id., ¶ 24.)

C. Gaul's Wages During the Kronos Outage Period.

During Pay Periods 1B, 2B, and 3B, Accura paid Gaul based on hours she manually recorded, which were then inputted into a spreadsheet.(Id., ¶¶ 27-28.)The parties agree that Gaul worked 40 hours at regular pay and 5 hours at overtime pay during Pay Period 1B; 78.1 hours at regular pay and 2.58 hours at overtime pay during Pay Period 2B; and 80 hours at regular pay and 29.5 hours at overtime pay during Pay Period 3B.(Id., ¶¶ 29-31, 54, 63.)The pay dates were December 24, 2021; January 7, 2022; and January 21, 2022, respectively.(Id., ¶¶ 21-23.)

Accura miscalculated Gaul's regular and overtime hourly rates for Pay Period 1B because it used November data—i.e., data from before her promotion took effect—to calculate those rates.(Id., ¶ 37.)This meant Accura paid her $26.29 per hour (instead of $29) for 40 hours of regular pay and $39.44 per hour (instead of $43.50) for 5.2 hours of overtime pay.(Id., ¶¶ 30-31.)Accura corrected this error during Pay Periods 2B and 3B by paying Gaul $29 per hour for regular hours and $43.50 for overtime hours.(Id., ¶¶ 54, 63.)Accura also paid other amounts to Gaul during these latter Periods, including 16 hours of holiday pay, a $75 bonus, and $16.50 in "shift differential for only hours worked as an LPN" during Pay Period 2B and $900 in "shift pick-up bonuses" and "$72.50 for shift differential" during Pay Period 3B.(Id., ¶¶ 55, 56, 63.)To estimate tax withholding, Accura again used November data and withheld 16%.(Id., ¶ 34.)

When Kronos became operational again, Accura used it to "re-run the payroll" to reconcile the wage calculations and deductions made during Pay Periods 1B, 2B, and 3B.(Id., ¶ 41.)The Kronos calculations deviated in several ways from how Gaul had been paid based on the manual process.In Pay Period 1B, Kronos applied the correct hourly rates—$29 per hour for regular hours and $43.50 for overtime—that should have applied starting December 13 when Gaul's promotion took effect.(Id., ¶ 47;ECF 18-3, p. 18.)Kronos also gave Gaul credit for 14 hours of paid time-off (PTO) during Pay Period 1B, which Accura alleges was a mistake because Gaul was not eligible for PTO until she became a full-time employee.(ECF 33-1, ¶¶ 44-45.)Gaul disputes whether the PTO credit was improper, and it is unclear why Kronos included it.(Id.)Whether right or wrong, the PTO credit had the effect of causing Kronos to add an extra $406 to Gaul's gross earnings during Pay Period 1B beyond the additional amount resulting from the application of the correct hourly rate.(Id., ¶¶ 43, 44, 50.)In total, the Kronos calculation determined Gaul had been underpaid by approximately $535 in gross earnings during Pay Period 1B.(Id., ¶¶ 50, 52.)

There were also discrepancies between the Kronos reconciliation and manual calculations with respect to Pay Periods 2B and 3B.For Pay Period 2B, Kronos calculated Gaul's gross wages to be $2,941.65, whereas the manual calculation had been only $2,894.83.(Id., ¶¶ 57-58.)For Pay Period 3B, Kronos calculated Gaul's gross wages to be $4,906.54, whereas the manual calculation had been only $4,285.75.(Id., ¶¶ 64-65.)The significant discrepancy in Pay Period 3B was largely the result of Kronos for some reason calculating Gaul's weekend shift differential—i.e., the extra pay she received for picking up weekend shifts as an LPN—to be $29 per hour, when it should have been $1.00 or $2.00 per hour.(Id., ¶ 66-67.)This resulted in a $27.00 per hour difference in Gaul's favor, and even more for overtime hours.(Id., ¶ 68.)

The calculations in the Kronos reconciliation did not merely deviate from the manual process with respect to gross earnings.Those calculations also deviated sharply, as least with respect to Gaul, on the issue of tax withholdings.Specifically, the Kronos reconciliation concluded that Accura should have been withholding taxes from Gaul's pay at a substantially higher rate than the 16% rate applied during the Kronos outage, which, in turn, had been based on applying the rate from Gaul's paystubs in November 2021 before she was promoted to a full-time position.(E.g., id., ¶¶ 34, 37, 59.)In other words, Accura was not taking out enough taxes from Gaul's pay during the Kronos outage period.(Id.)Accura alleges that it eventually paid the correct amount of withholdings over to taxing authorities, although it is unclear when this occurred.(Id., ¶¶ 51, 61, 72, 76.)

Due to the interplay between gross earnings, tax withholding, and net earnings—not to mention the dispute over whether Gaul was entitled to the PTO credit during Pay Period 1B—the two sides disagree on the fundamental question of whether Gaul was "overpaid" or "underpaid" during the Kronos outage.Accura focuses on net earnings to conclude Gaul was overpaid, in the aggregate, during Pay Periods 1B, 2B, and 3B.(Id., ¶¶ 73-74.)Gaul focuses on gross earnings to conclude she was underpaid both collectively and during each Pay Period individually.(Id., ¶ 73.)She also argues, in any event, that any overpayment in Pay Periods 2B and 3B could not be used to "fix" the underpayment in Pay Period 1B.

The following chart summarizes the calculations (without adjusting for Accura's argument that the Kronos reconciliation mistakenly gave Gaul credit for PTO in Pay Period 1B and too much shift differential pay in Pay Period 3B):

 Pay Period Gross Wages (Manual Calculation) Gross Wages (Kronos Reconciliation) Net Wages (Manual Calculation) Net Wages (Kronos Reconciliation)  1B  $1,257.98  $1,792.50  $1,055.20  $1,385.75  2B  $2,894.83  $2,941.65  $2,428.21  $2,142.83  3B  $4,285.75  $4,906.54  $3,594.92  $3,415.88  TOTAL  $8,438.56  $9,640.69  $7,078.33  $6,944.46  Variance   1,202.13  $133.87   

(Id., ¶¶ 52, 61, 72.)

D.Certification Issues.

Gaul asserts that Accura's use of the manual tracking system and November data "led to...