Probert v. Family Centered Serv. of Alaska Inc.

• Decision Date: 23 June 2011
• Docket Number: No. 09–35703.,09–35703.
• Citation: 161 Lab.Cas. P 35920,651 F.3d 1007,11 Cal. Daily Op. Serv. 7769,17 Wage & Hour Cas.2d (BNA) 1490,2011 Daily Journal D.A.R. 9288
• Parties: Robert PROBERT; Loretta Probert, Plaintiffs–Appellees,Gene Grissom; Sandra Grissom; Donna Grimes; Kenneth McDaniels; John Grimes; Leona McDaniels; Eric Cloninger; Debra Cloninger, Plaintiff–Intervenors–Appellees,v.FAMILY CENTERED SERVICES OF ALASKA, INC.; John W. Regitano; Kathy Cannoe; Susan Dale; Lonnie Hovde; Deborah L. Coxon, Defendants–Appellants.
• Court: U.S. Court of Appeals — Ninth Circuit

651 F.3d 1007

161 Lab.Cas. P 35,920

17 Wage & Hour Cas.2d (BNA) 1490

11 Cal. Daily Op. Serv. 7769

2011 Daily Journal D.A.R. 9288

Robert PROBERT; Loretta Probert, Plaintiffs–Appellees,Gene Grissom; Sandra Grissom; Donna Grimes; Kenneth McDaniels; John Grimes; Leona McDaniels; Eric Cloninger; Debra Cloninger, Plaintiff–Intervenors–Appellees,

v.FAMILY CENTERED SERVICES OF ALASKA, INC.; John W. Regitano; Kathy Cannoe; Susan Dale; Lonnie Hovde; Deborah L. Coxon, Defendants–Appellants.

No. 09–35703.

United States Court of Appeals, Ninth Circuit.

Argued and Submitted July 26, 2010.Filed June 23, 2011.

Kenneth L. Covell (argued), Law Offices of Kenneth L. Covell, Fairbanks, AK, for plaintiffs-appellees Loretta and Robert Probert and plaintiffs-intervenors Debra and Eric Cloninger, Donna and John Grimes, Gene and Sandra Grissom, and Kenneth and Leona McDaniels.Richard D. Monkman (argued), Sonosky, Chambers, Sachse, Miller & Munson, LLP, Juneau, AK, for defendants-appellants Family Centered Services of Alaska, John W. Regitano, Kathy Cannoe, Susan Dale, Lonnie Hovde, and Deborah L. Coxon.Appeal from the United States District Court for the District of Alaska, Ralph R. Beistline, Chief District Judge, Presiding. D.C. No. 4:07–cv–00030–RRB.Before: MARY M. SCHROEDER, DIARMUID F. O'SCANNLAIN and RICHARD R. CLIFTON, Circuit Judges.

OPINION

CLIFTON, Circuit Judge:

Defendants Family Centered Services of Alaska (“FCSA”) and its officers filed this interlocutory appeal challenging the district court's conclusion that FCSA's Therapeutic Family Homes (“Homes”) are covered by the Fair Labor Standards Act (“FLSA”) and are subject to its overtime provisions. We conclude that the Homes are not covered by that statute because they are not an “institution primarily engaged in the care of the sick, the aged, mentally ill or defective who reside on the premises of such institution.” 29 U.S.C. § 203(r)(2)(A). As a result, we reverse and remand for further proceedings.

I. Background

Plaintiffs Loretta and Robert Probert and Plaintiffs–Intervenors Debra and Eric Cloninger, Donna and John Grimes, Gene and Sandra Grissom, and Kenneth and Leona McDaniels are married couples who worked as “house parents” in FCSA's Homes. Each Home housed up to five children. All the children were “severely emotionally disturbed” as defined by the Alaska law that qualifies the Homes for Medicaid funding, 7 Alaska Admin. Code § 43.471, and each of the children had at least one diagnosed mental disorder under Axis–I of the current Diagnostic and Statistical Manual of Mental Disorders. The children attended local public schools and participated in other activities away from the Homes. The children participated in group therapy conducted by clinicians in the Homes, but received most of their medical and psychological treatment outside the Homes. Plaintiffs were not licensed medical or social service professionals.

Plaintiffs sued FCSA for overtime pay under the FLSA.¹ After denying Plaintiffs' first motion for partial summary judgment, the district court granted a similar motion for partial summary judgment in their favor, concluding that FCSA through its Homes, was operating “ ‘an institution primarily engaged in the care of the ... mentally ill or defective who reside on the premises of such institution,’ ” 29 U.S.C. § 203(r)(2)(A), and was therefore an enterprise subject to the FLSA's overtime provisions, id. § 207(a)(1). The district court observed that the FLSA does not define “institution.” As an analogy, the district court looked to a federal Medicaid regulation, not directly applicable to this situation, that defined “institution” as “an establishment that furnishes (in single or multiple facilities) food, shelter, and some treatment or services to four or more persons unrelated to the proprietor,” 42 C.F.R. § 435.1010, and concluded that the “Homes (either individually or as a group) could be considered an ‘institution.’ ” The court also relied on FCSA's own website, which described the Homes as “provid[ing] quality residential care to male and female youth ages 6–18 that are experiencing mental health and behavioral issues and are at imminent risk of psychiatric placement outside of their community.”

After denying FCSA's motion for reconsideration, the district court certified both orders for an immediate appeal under 28 U.S.C. § 1292(b). We granted FCSA permission to appeal.

II. Discussion

The FLSA sets a national minimum wage, 29 U.S.C. § 206(a)(1), and requires overtime pay of one and a half times an employee's hourly wage for every hour worked over 40 hours in a week. Id. § 207(a)(1). With certain exceptions not relevant to this case, see id. § 213, these requirements apply both on an individual basis to any employee “who in any workweek is engaged in commerce or in the production of goods for commerce,” and on an enterprise-wide basis to all employees “employed in an enterprise engaged in commerce or in the production of goods for commerce.” Id. §§ 206(a)(1), 207(a)(1). Because of the use of the terms “commerce” and “enterprise,” it was originally understood that these statutes did not cover employees of most non-profit organizations.

In 1966, however, Congress amended the FLSA to bring certain kinds of non-profit institutions within the scope of “enterprise” coverage. Under the relevant amendment, “ ‘[e]nterprise’ means ... activities performed ... by any person or persons for a common business purpose.” Id. § 203(r)(1). Activities are deemed to have a business purpose when they are performed

in connection with the operation of a hospital, an institution primarily engaged in the care of the sick, the aged, the mentally ill or defective who reside on the premises of such institution, a school for mentally or physically handicapped or gifted children, a preschool, elementary or secondary school, or an institution of higher education (regardless of whether or not such hospital, institution, or school is operated for profit or not for profit).

Id. § 203(r)(2)(A). The amendment further provides that such an institution qualifies as an “[e]nterprise engaged in commerce or in the production of goods for commerce.” Id. § 203(s)(1)(B). Institutions covered by these provisions are therefore subject to FLSA's minimum wage and overtime requirements even if they are operated not for profit.

Plaintiffs argue that each of the FCSA Homes in which they worked is covered by the statute as “an institution primarily engaged in the care of ... the mentally ill ... who reside on the premises of such institution.” ² The FLSA is a remedial statute that is “to be liberally construed to apply to the furthest reaches consistent with Congressional direction.” Dent v. Cox Communications Las Vegas, Inc., 502 F.3d 1141, 1146 (9th Cir.2007) (internal quotation marks omitted); see also 29 C.F.R. § 779.101 (“An employer who claims an exemption under the Act has the burden of showing that it applies.”). Nonetheless, we conclude that the language of the statute does not cover the FCSA Homes, for two primary reasons.

The first reason is that the Homes were not “primarily engaged” in providing “care,” as that term is used in the statute. The statute refers to “care” in relation to groups with special needs, namely “the sick, the aged, the mentally ill or defective.” 29 U.S.C. § 203(r)(2)(A). As such, we understand “care” in this context to include something more like treatment. What the Homes primarily provided, as their name suggests, was a home or a residence. As noted above, the children attended school, engaged in activities, and received most of their medical and psychological treatment from medical and mental health professionals outside the Homes. Obviously, for children a home should be more than simply a place to live, and the children presumably benefitted from Plaintiffs' “care” as house parents. But Plaintiffs were not medical or social service professionals and were not primarily focused on providing the type of “care” that those professionals provide.

The language of the statute clearly suggests a covered institution must provide more than the general care of a residence. In addition to requiring that the institution's patrons “reside on the premises of [the] institution,” the institution must provide “care” of the type that is provided to “the sick, the aged, the mentally ill or defective.” If residing on the premises were enough by itself to define the given premises as covered by the statute, then the requirement that the institution be “primarily engaged” in the “care” of the individuals residing there would be superfluous. We are to avoid interpreting a statute in that manner. See TRW Inc. v. Andrews, 534 U.S. 19, 31, 122 S.Ct. 441, 151 L.Ed.2d 339 (2001) (“It is a cardinal principle of statutory construction that a statute ought, upon the whole, to be so construed that, if it can be prevented, no clause, sentence, or word shall be superfluous, void, or insignificant.” (internal quotation marks omitted)).

Second, the Homes do not appear to us to be “institutions” as that term is used in this statute. Around the time the 1966 amendment was drafted, the Oxford English Dictionary offered the following definition of “institution”:

An establishment, organization, or association, instituted for the promotion of some object, esp. one of public or general utility, religious, charitable, educational, etc., e.g. a church, school, college, hospital, asylum,...