Zachary v. Rescare Oklahoma, Inc.

• Decision Date: 20 December 2006
• Docket Number: No. 03-CV-836-TCK-FHM.,No. 02-CV-496-TCK-FHM.,02-CV-496-TCK-FHM.,03-CV-836-TCK-FHM.
• Citation: 471 F.Supp.2d 1183
• Parties: Tanya ZACHARY, et al., Plaintiffs, v. RESCARE OKLAHOMA, INC., and Rescue, Inc., Defendants.
• Court: U.S. District Court — Northern District of Oklahoma

471 F.Supp.2d 1183

Tanya ZACHARY, et al., Plaintiffs, v. RESCARE OKLAHOMA, INC., and Rescue, Inc., Defendants.

No. 02-CV-496-TCK-FHM.

No. 03-CV-836-TCK-FHM.

United States District Court, N.D. Oklahoma.

December 20, 2006.

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Terry Arthur Hall, Armstrong & Lowe PA, Tulsa, OK, for Plaintiffs.

Adam Wade Childers, Gayle L. Barrett, Amanda Leigh Maxfield, Michael Wayne Bowling, Peggy Lee Clay, Crowe & Dunlevy, Oklahoma City, OK, Gayle L. Barrett, Madalene A.B. Witterholt, Crowe & Dunlevy, Tulsa, OK, for Defendants.

ORDER

KERN, District Judge.

Before the Court is Defendants' Motion for Partial Summary Judgment Regarding the Good Faith/Reasonableness Defense to Alleged Willful Violations of the Fair Labor Standards Act (Docket No. 260).¹ The title of Defendants' motion suggests that they only seek judgment that the good-faith defense contained in 29 U.S.C. § 260 applies, which would preclude an award of liquidated damages. However, the substance of Defendants' motion makes clear that they, also seek judgment that any alleged violations were not "willful" and that a two-year statute of limitations under 29 U.S.C. § 255 applies, which would limit the length of Plaintiffs' recovery period. (See Defs.' Mot. for Partial Summ. J. Regarding the Good Faith/Reasonableness Defense to Alleged Willful Violations of the FLSA at 2) ("ResCare is entitled to summary judgment establishing that any violation of the FLSA was not willful `and that ResCare's actions were taken in good faith."). Also before the Court is Plaintiffs' Motion for Partial Summary Judgment (Docket No. 240).

I. Procedural History

Plaintiffs are or have been employed by Defendants as habilitation training specialists ("HTS") or habilitation training specialist supervisors ("HTSS"). Plaintiffs worked with developmentally disabled clients of Defendants. Plaintiffs allege that Defendants failed to pay them overtime as required by the Fair Labor Standards Act ("FLSA"), 29 U.S.C. § 201, et seq., and that such failure was willful. Defendants contend Plaintiffs were exempt from the overtime provisions of the FLSA pursuant to the companionship services exemption contained in 29 U.S.C. § 213(a)(15).

Plaintiffs in Case No. 02-CV-496 filed their Amended Complaint on August 1, 2002, and the case was assigned to Judge James O. Ellison. Plaintiffs in Case No. 03-CV-836 filed their Complaint on December 5, 2003, and the case was assigned to the undersigned. The undersigned transferred Case No. 03-0V-836 to Judge Ellison as related to Case No. 02-CV-496. On December 30, 2004, Judge Ellison granted the parties' Joint Motion to Consolidate, and the cases were consolidated for all purposes pursuant to Federal Rule of Civil Procedure 42(a).

In October of 2005, Judge Ellison heard arguments on the parties' cross motions for summary judgment on the issue of liability. By Order dated November 18, 2005, Judge Ellison addressed eighteen (18) specific households and granted in part and denied in part the motions for summary judgment. By Order dated January 13, 2006, Judge Ellison addressed eleven (11) additional households and granted in part and denied in part the motions for summary judgment. On February 8, 2006, upon the retirement of Judge Ellison, the cases were transferred to the undersigned. On March 2, 2006, Magistrate Judge Frank H. McCarthy conducted a scheduling conference and entered a scheduling order to govern the remaining events in the case. Pursuant to this scheduling order, the parties filed additional motions for summary judgment. By Order dated November 30, 2006, the undersigned addressed one motion for summary judgment, ruling that Defendants were "joint employers" for purposes of FLSA liability. (See Docket No. 293.) The Court now turns to the remaining motions for summary judgment.

II. Summary Judgment Standard

Summary judgment is proper only if "there is no genuine issue as to any material fact, and the moving party is entitled to judgment as a matter of law." FED. R.CIV.P. 56(c). The moving party bears the burden of showing that no genuine issue of material fact exists. See Zamora v. Elite Logistics, Inc., 449 F.3d 1106, 1112 (10th Cir.2006) (citation omitted). The Court resolves all factual disputes and draws all reasonable inferences in favor of the non-moving party. Id. (citation omitted). However, the party seeking to overcome a motion for summary judgment may not "rest on mere allegations" in its complaint but must "set forth specific facts showing that there is a genuine issue for trial." FED.R.CIV.P. 56(e).

III. Statute of Limitations — 29 U.S.C. § 255

The statute governing the FLSA limitations period provides:

(a) [An FLSA action] may be commenced within two years after the cause of action accrued, and every such action shall be forever barred unless commenced within two years after the cause of action accrued, except that a cause of action arising out of a willful violation may be commenced within three years after the cause of action accrued.

29 U.S.C. § 255 (emphasis added). The burden is on the employee to prove that the employer committed a willful violation. See Terwilliger v. Home of Hope, Inc., 21 F.Supp.2d 1305, 1308 (N.D.Okla.1998). "The standard for willful violations is whether the employer `knew or showed reckless disregard for the matter of whether its conduct was prohibited by the [FLSA]:'" See Reich v. Monfort, Inc., 144 F.3d 1329, 1334 (10th Cir.1998). "If an employer acts reasonably in determining its legal obligation, its action cannot be deemed willful . . ." McLaughlin v. Richland Shoe Co., 486 U.S. 128, 135 n. 13, 108 S.Ct 1677, 100 L.Ed.2d 115 (1988): "Negligence or an incorrect assumption that a pay plan complies with the FLSA do not meet the criteria for a willful violation of the FLSA." Terwilliger, 21 F.Supp.2d at 1308. Whether an FLSA violation is willful is a mixed question of law and fact but factual issues predominate. Id. Where there are disputed issues of fact, this Court submits the issue of willfulness to the jury. See Linn v. Developmental Svcs. of Tulsa, Inc., 891 F.Supp. 574, 580 (N.D.Okla.1995).

Defendants' conduct alleged to be prohibited by the FLSA is their application of the companionship services exemption to deprive Plaintiffs of overtime pay from August 1999 to December 2003. Under the companionship services exemption, an exemption from overtime is granted 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." 29 U.S.C. § 213(a)(15). "Domestic service employment" is defined in the relevant regulations as "services of a household nature performed by an employee in or about a private home." 29 C.F.R. § 552.3. "Congress created the companionship services exemption to enable guardians of the elderly and disabled to afford to have their wards cared for in their own private homes as opposed to institutionalizing them." Linn, 891 F.Supp. at 577. "All exemptions to the FLSA must be narrowly construed and are limited to those establishments plainly and unmistakably within the terms and the spirit of the exemption invoked." See id. (quotation omitted). Defendants assert that they did not pay overtime because the residences in which Plaintiffs were working were "private homes" and therefore qualified for the companionship services exemption. Plaintiffs assert that such decision was in reckless disregard of Defendants' FLSA obligations, such that Plaintiffs are entitled to the three-year statute of limitations that applies to "willful" violations.

The undisputed evidence in the summary judgment record reveals the following timeline of relevant events. In May of 1995, the undersigned entered an opinion in Linn v. Developmental Services., Incorporated, 891 F.Supp. 574, 579 (N.D.Okla. 1995), which held that HTSSs (employed by an entity other than Defendants here) were entitled to FLSA overtime because the residences at issue were more closely analogous to state-maintained facilities than private homes. Key factors in that case were that the defendant acquired the residences and the furniture for the residences; maintained a set of keys to the residences; made decisions on the number of people and composition of people in a residence; were signatories on the leases; and paid the rent for the clients to the landlord. Id.

In September of 1995, Defendants entered the Oklahoma market. In 1997, Plaintiffs began complaining about Defendants' failure to pay overtime. On April 4, 1997, Mr. Lou Greer, a Wage-Hour Investigator with the United States Department of Labor ("DOL") Wage and Hour Division, sent a letter to ResCare Oklahoma in Oklahoma City, stating:

[I]t is alleged that employees employed as [HTSs] regularly work in excess of forty hours in a week without receiving time and one-half. . . . While certain employees can be considered "exempt" from the Act's requirements, it appears that these employees are working in a non-exempt capacity and are, therefore, entitled to overtime compensation . . . . My purpose in writing this letter is to request that you review the material provided . . . then to review your pay practices to see that they conform to these requirements.

(Defs.' Mot. for Partial Summ. J. Regarding the Good Faith/Reasonableness Defense to Alleged Willful Violations of the FLSA at Ex. 3 (emphasis added).) On September 22, 1997, the same investigator sent a letter to ResCare, Inc. in Louisville Kentucky, stating, "This will advise you that I have closed my investigation of your Oklahoma City branch office under the provisions of the Fair Labor Standards Act of 1938. I did not find any violations of the Act." (Id. at Ex. 4 (emphasis added).)²

In May 2000, the Tenth Circuit issued a decision in Johnston v. Volunteers of America, Incorporated, 213 F.3d 559, 565 (10th Cir.2000), wherein the circuit affirmed another...