In re Minn. Living Assistance, Inc.

Decision Date20 August 2018
Docket NumberA17-1821
Citation919 N.W.2d 87
Parties In the MATTER OF MINNESOTA LIVING ASSISTANCE, INC., d/b/a Baywood Home Care
CourtMinnesota Court of Appeals

Bruce J. Douglas, Stephanie J. Willing, Ogletree, Deakins, Nash, Smoak & Stewart, P.C., Minneapolis, Minnesota (for relator Minnesota Living Assistance, Inc., d/b/a Baywood Home Care)

Lori Swanson, Attorney General, Jonathan D. Moler, Assistant Attorney General, St. Paul, Minnesota (for respondent Minnesota Department of Labor and Industry)

Considered and decided by Reilly, Presiding Judge; Larkin, Judge; and Bjorkman, Judge.


In this certiorari appeal, relator challenges a final agency decision granting summary disposition to affirm a compliance order issued by respondent Minnesota Department of Labor and Industry (the department) for violations of the Minnesota Fair Labor Standards Act (MFLSA), Minn. Stat. §§ 177.21 -.35 (2016). Because we conclude that genuine issues of material fact preclude a grant of summary disposition and that the department exceeded its authority by applying an unpromulgated rule, we reverse and remand for further proceedings.


Relator Minnesota Living Assistance, Inc. d/b/a Baywood Home Care (Baywood) is a Minnesota corporation that employs home health aides to provide companionship services for individuals in need of assistance to stay in their homes. The employees work 24-hour shifts in client homes. During the time period relevant to this appeal, Baywood paid its employees a daily rate of $165 or $170.

In March 2014, the department received a complaint that Baywood was not paying overtime required by the MFLSA and initiated an investigation into whether Baywood violated the MFLSA between March 21, 2012, and March 21, 2014 (the audit period). As a result of that investigation, the department issued a compliance order, determining that Baywood had violated the MFLSA by failing to pay overtime to 112 home-health-aide employees (the employees) and ordering payment of back wages totaling $557,713.44 and an equal amount in liquidated damages.1 Baywood contested the order, and the department initiated contested-case proceedings under the Minnesota Administrative Procedure Act (MAPA). See Minn. Stat. §§ 14.57 -.69 (2016) (governing contested-case proceedings).

After engaging in discovery, Baywood and the department filed cross-motions for summary disposition. Baywood asserted that it paid the employees under a "split-day plan" that included overtime pay and, alternatively, that the department erred by failing to exercise discretion in determining whether to award liquidated damages. The department disputed that Baywood used a split-day plan, and alternatively asserted that the MFLSA does not permit split-day plans. The department also asserted that it lacked discretion to forgo an award of liquidated damages. An administrative-law judge (ALJ) heard oral argument and issued proposed findings of fact and conclusions of law and a recommendation that the compliance order be affirmed with respect to the overtime violations. The parties submitted exceptions and arguments, and a designee for the commissioner of labor and industry (the commissioner) issued a final administrative order affirming the compliance order.

Baywood appeals.


I. Did the commissioner err by determining that no genuine fact issues exist regarding whether Baywood used a split-day plan?

II. Did the commissioner exceed his authority by applying an unpromulgated rule to preclude split-day plans?

III. Did the commissioner err by concluding that Minn. Stat. § 177.27, subd. 7, requires an award of liquidated damages?


The commissioner is authorized by statute to investigate violations of the MFLSA and issue compliance orders to employers. Minn. Stat. § 177.27, subds. 1-4. An employer may contest a compliance order by filing a written notice of objection with the commissioner within 15 calendar days. Id. , subd. 4. If a timely objection is filed, a contested-case hearing must be held in accordance with MAPA. Id. After contested-case proceedings are initiated, an ALJ shall recommend a summary disposition of a case if "there is no genuine issue as to any material fact." Minn. R. 1400.5500(K) (2017). "Summary disposition is the administrative equivalent of summary judgment." Pietsch v. Minn. Bd. of Chiropractic Exam'rs , 683 N.W.2d 303, 305 (Minn. 2004).

"On review from an order granting summary disposition, the scope of our review is governed by MAPA." In re Gillette Children’s Specialty Healthcare , 883 N.W.2d 778, 785 (Minn. 2016). This court

may affirm the decision of the agency or remand the case for further proceedings; or it may reverse or modify the decision if the substantial rights of the [relator] may have been prejudiced because the administrative findings, inferences, conclusion or decisions are
(a) in violation of constitutional provisions; or
(b) in excess of the statutory authority or jurisdiction of the agency; or
(c) made upon unlawful procedure; or
(d) affected by other error of law; or
(e) unsupported by substantial evidence in view of the entire record as submitted; or
(f) arbitrary or capricious.

Minn. Stat. § 14.69. When review of an agency decision involves statutory interpretation, this court is not bound by the agency’s interpretation, although it may be entitled to some weight if the statute is technical in nature and the agency’s interpretation is one of longstanding application. Arvig Tel. Co. v. Nw. Bell Tel. Co. , 270 N.W.2d 111, 114 (Minn. 1978).

Under Minn. Stat. § 177.25, subd. 1, Minnesota employers are required to pay employees "compensation for employment in excess of 48 hours in a workweek at a rate of at least 1-1/2 times the regular rate at which the employee is employed." In this respect, the MFLSA differs from its federal counterpart, the Fair Labor Standards Act (FLSA), which requires overtime pay for hours worked in excess of 40 per workweek. See 29 U.S.C. § 207(a)(1) ; Minn. Stat. § 177.25, subd. 1. This case arises solely under the MFLSA because, until 2015, employees providing companionship services were exempt from overtime requirements under federal administrative rules. See Home Care Ass'n of Am. v. Weil , 799 F.3d 1084, 1088-90 (D.C. Cir. 2015) (summarizing history of exemption). Thus, during the audit period, the employees were exempt from the FLSA but entitled to overtime pay under the MFLSA. See Minn. Stat. § 177.23, subds. 7 (defining employee as an individual employed by an employer with certain exceptions but not excepting companionship-services workers); 11 (defining "hours" for purposes of companionship-services workers to exclude an eight-hour period between 10 p.m. and 9 a.m., during which employees were free to sleep or engage in private pursuits).

It is undisputed in this case that the employees worked hours in excess of 48 per week and that Baywood paid the employees a daily rate of $165 or $170. What is disputed is whether the employees were paid overtime pursuant to a split-day plan and whether the MFLSA allows such plans. The parties also dispute whether the commissioner was required to award statutory liquidated damages. We address each of these issues in turn.2


Baywood asserts the commissioner erred by granting summary disposition despite the evidence Baywood offered regarding its alleged split-day plan. As we note above, "summary disposition is the administrative equivalent of summary judgment." Pietsch , 683 N.W.2d at 305 ; see also Minn. R. 1400.6600 (2017) (providing that, in ruling on motions where administrative rules are silent, the ALJ shall apply Minnesota Rules of Civil Procedure to the extent appropriate to promote fair and expeditious hearing). In deciding a motion for summary disposition, the commissioner is required to view the facts in the light most favorable to the nonmoving party. In re Rate Appeal of Benedictine Health Ctr. , 728 N.W.2d 497, 500 & n.3 (Minn. 2007). The commissioner "must not weigh facts or determine the credibility of affidavits and other evidence." Montemayor v. Sebright Prods., Inc. , 898 N.W.2d 623, 628 (Minn. 2017) (quotation omitted). "All doubts and factual inferences must be resolved against the moving party." Id. (quotation omitted). When a genuine issue of material fact exists, summary disposition is inappropriate even if it appears unlikely that the nonmoving party will ultimately prevail. See, e.g. , City of Coon Rapids v. Suburban Eng'g, Inc ., 283 Minn. 151, 157-58, 167 N.W.2d 493, 497 (1969) (reversing grant of summary judgment).

In determining that Baywood violated the overtime requirements of the MFLSA, the department divided Baywood’s daily rates ($165 and $170) by the 16 paid hours in a shift3 to deduce that the employees were paid $10.31 or $10.63 an hour, and were not paid overtime as part of the daily rate. Baywood asserts that it paid its employees under a split-day plan—with a regular rate paid for the first 5.5 hours and an overtime rate paid for the remaining 10.5 hours—and that the commissioner erred by granting summary disposition in spite of the evidence that it provided to support its assertion of this split-day pay plan.

Baywood’s evidence included an affidavit from its president, Dorothy Muffett, and affidavits from four Baywood employees. Muffett averred that, consistent with industry practice, Baywood’s compensation was expressed as a daily rate, and that she or one of her administrative employees would explain the daily rate to new employees. Muffett further averred:

The compensation plan that Baywood adopted during the relevant time period of this audit was to calculate a companion’s pay at a rate that was higher than both the federal and state minimum wages for the first 5.5 hours of a shift and at 1.5 times that rate as a daily premium for the next 10.5 hours of a shift, for a total of 16 hours.

Each of the employee-affiants testified to their understanding that Baywood’s pay was composed of straight...

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