Fowler v. Incor , 279 F. App'x 590 ( 2008 )

FILED
United States Court of Appeals
Tenth Circuit
May 12, 2008
UNITED STATES COURT OF APPEALS
Elisabeth A. Shumaker
FOR THE TENTH CIRCUIT Clerk of Court
KENT W. FOWLER; CODY
FOWLER; LARRY BURRIS;
MICHAEL LEACH; FRANCES
WOODS; ROSEOLA THORNBURG;
KATHERINE CARROLL; BETTIE No. 05-7113
BURNETT; LISA SMITH; ALICE (D.C. No. 6:03-CV-00321-RAW)
SMITH; LESA HORNEY; (E.D. Okla.)
CHRISTINE LANE-HUCKABY;
KENYA WASHINGTON; YOLANDA
WHITE; ANGELA MCVAY;
WAKEETHA ATKESON; ANGIE
MILLER; RUBY MCGEE; CARMEN
KIRKLAND; ANNTONETT
TAYLOR; DELORIS WILSON; TIA
SALLIS; SHERRY SALLIS; BRUCE
MCCARTHY; NICOLE PIERCE;
CYNTHIA WHITEFIELD; JORETTA
TRUITT; JUDY BLACKMER;
LAJOYA DAVIS; LECEIF SPRING;
MISTY GRAHAM; SONYA JULY;
STEPHANIE NEWMAN, individually
and standing in the stead of other
persons similarly situated,
Plaintiffs-Appellants,
v.
INCOR; SHELTERED WORK
ACTIVITY PROGRAM, INC., an
Oklahoma Corporation d/b/a INCOR;
EDWARD BREEN; BETSY BREEN,
Defendants-Appellees.
ORDER AND JUDGMENT *
Before HENRY, Chief Judge, ANDERSON and McCONNELL, Circuit Judges.
Appellee Incor is in the business of providing services to developmentally
disabled adults in northeastern Oklahoma, including operation of a residential
program. Its residential-program employees work as habilitation training
specialists and/or house managers, responsible for round-the-clock care of Incor’s
clients, most of whom have physical disabilities and function at mental levels
ranging from a one-year to six-year-old. The employees sued for unpaid wages
under the Fair Labor Standards Act, 29 U.S.C. §§ 201-219 (FLSA). Prior to trial,
the district court entered summary judgment for Incor that denied liquidated
damages and applied a two-year statute of limitations. Following a bench trial,
the court made findings of fact and conclusions of law, and entered judgment in
favor of Incor and against the employees on all of their claims. 2 We affirm the
*
After examining the briefs and appellate record, this panel has determined
unanimously to grant the parties’ request for a decision on the briefs without oral
argument. See Fed. R. App. P. 34(f); 10th Cir. R. 34.1(G). The case is therefore
ordered submitted without oral argument. This order and judgment is not binding
precedent, except under the doctrines of law of the case, res judicata, and
collateral estoppel. It may be cited, however, for its persuasive value consistent
with Fed. R. App. P. 32.1 and 10th Cir. R. 32.1.
2
The trial court ruled that Edward Breen and Betsy Breen, the owners of
Incor, are employers under 29 U.S.C. § 203(d) and thus jointly and severally
(continued...)
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court’s summary judgment order applying a two-year statute of limitations to the
employees’ claims. However, we vacate the court’s findings of fact and
conclusions of law, reverse its order on summary judgment denying liquidated
damages, and remand the case for further proceedings consistent with this order
and judgment.
I. PRIVATE HOMES
A. The Statutory And Regulatory Framework
The employees’ first claim was for overtime wages on the theory that they
were not providing companionship services in private homes. The FLSA requires
payment of overtime compensation for certain employees who work more than
forty hours per week. 29 U.S.C. § 207. At the same time, 29 U.S.C. § 213(a)(15)
provides an exemption for overtime to, inter alia, “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[.]” A related
Department of Labor (DOL) regulation provides that “domestic service
employment” means “services of a household nature performed by an employee in
2
(...continued)
liable for any judgment. The Breens do not cross-appeal from the ruling and are
bound by it.
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or about a private home . . . of the person by whom he or she is employed.”
29 C.F.R. § 552.3. 3
B. The Burden Of Proof
The Supreme Court has held that FLSA “exemptions are to be narrowly
construed against the employers seeking to assert them and their application
limited to those establishments plainly and unmistakably within their terms and
spirit.” Arnold v. Ben Kanowsky, Inc., 361 U.S. 388, 392 (1960). Further, “the
general rule [is] that the application of an exemption under the [FLSA] is a matter
of affirmative defense on which the employer has the burden of proof.” Corning
Glass Works v. Brennan, 417 U.S. 188, 196-97 (1974); see also Sanders v.
Elephant Butte Irrigation Dist. of N.M., 112 F.3d 468, 470 (10th Cir. 1997). In
light of these principles, we have held that an employer must prove an exemption
by “clear and affirmative evidence.” Aaron v. City of Wichita, 54 F.3d 652, 657
(10th Cir. 1995).
Our use of “clear and affirmative evidence,” id., has lead to confusion
whether this in fact means clear and convincing evidence – a burden beyond the
3
In Long Island Care at Home, Ltd. v. Coke, 127 S. Ct. 2339 (2007), the
Supreme Court upheld the validity of § 552.109(a), which extends the application
of the companionship services exemption to workers employed by a third party
such as Incor. See also Welding v. Bios Corp., 353 F.3d 1214, 1217 n.3 (10th Cir.
2004) (“The exemption can apply even when the domestic service employee is
actually employed by a service agency[.]”); Johnston v. Volunteers of Am., Inc.,
213 F.3d 559, 562 (10th Cir. 2000) (same). In the interest of judicial economy,
we delayed our review of this case pending the decision in Long Island Care.
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preponderance of evidence standard traditionally applied in civil cases. This is
not the case; instead, clear and affirmative evidence is simply an “invocation of
the familiar principle of statutory interpretation that exemptions from a statute
that creates remedies that should be construed narrowly,” Yi v. Sterling Collision
Centers, Inc., 480 F.3d 505, 508 (7th Cir. 2007), and “also that the burden of
proof is on the [employer], since entitlement to an exemption is an affirmative
defense.” Id. at 507. “[A] silent or ambiguous record” is not affirmative
evidence. United States v. Bush, 405 F.3d 909, 921 (10th Cir. 2005).
C. The Standard Of Review
In determining whether an exemption to the FLSA applies, we review the
trial court’s factual determinations for clear error and its legal conclusions
de novo. Sanders, 112 F.3d at 470. Specifically, the key factors described in
Welding v. Bios Corp., 353 F.3d 1214 (10th Cir. 2004), used to determine whether
a residence is a private home, are questions of fact reviewed under a clearly
erroneous standard. Sanders, 112 F.3d at 470. However, the question of whether
a particular living unit is a private home and therefore excluded from overtime, is
a question of law reviewed de novo. Id. Further, “[w]hether the district court
failed to consider or accord proper weight or significance to relevant evidence are
questions of law [this court] review[s] de novo.” Flying J Inc. v. Comdata
Network, Inc., 405 F.3d 821, 829 (10th Cir. 2005) (quotation marks and citations
omitted).
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Despite our disapproval of the practice, 4 the trial court essentially adopted
verbatim the proposed findings of fact and conclusions of law submitted by Incor.
Compare “Defendant’s Findings of Fact and Conclusions of Law,” Aplt. App.,
Vol. X at 5414-86, with “Findings of Fact and Conclusions of Law,” id. at
5487-5584. But we need not decide whether the findings of fact are clearly
erroneous, because the findings and conclusions misstate the law and fail to
consider or give proper weight to relevant evidence, which are legal questions we
review de novo. On remand, we direct the court to make its own findings of fact
based on its review of the evidence and to apply the law set forth in this order and
judgment.
D. Analysis
In determining whether companionship services are provided in a private
home, “the object of evaluation is the living unit of the person receiving the
services, i.e., the client. The client’s living unit consists of the client’s bedroom
4
We disapprove of the practice for many reasons, including that “[t]he
court’s wholesale adoption of one party’s proposed findings of fact and
conclusions of law provides little aid on appellate review, particularly in the
likely event that the adopted submission takes an adversarial stance.” Flying J
Inc. v. Comdata Network, Inc., 405 F.3d 821, 830 (10th Cir. 2005) (citation
omitted).
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and the common areas to which the client has access. [5] The court must evaluate
each living unit separately[.]” Welding, 353 F.3d at 1218.
The key inquiries to determine whether the living unit is a private home are
“who has ultimate management control of the living unit and whether the living
unit is maintained primarily to facilitate the provision of assistive services.”
Id. at 1219. There are several factors used to answer these key inquiries,
including: (1) did the client live in the living unit as his or her private home
before receiving services; (2) who owns the living unit; (3) who manages and
maintains the residence; (4) would the client be allowed to live in the living unit
if he or she was not receiving services; (5) the relative difference in the cost/value
of the services provided and the total cost of maintaining the living unit; and
(6) whether the service provider uses any part of the living unit for its own
business purposes. Id. at 1219-20.
“The first factor is whether the client lived in the living unit as his or her
private home before beginning to receive the services.” Id. As Welding teaches,
having lived in the living unit as a private home prior to the onset of services is
“a powerful indicator that the residence is a private home.” Id. There is the
“easy-to-spot private home . . . where the families lived in their homes prior to
5
In addition to a traditional single-family home, Department of Labor
regulations provide 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.” 29 C.F.R. § 552.101(a).
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and independent of their receipt of companion services,” id. (citation and
quotation marks omitted), compared to non-private homes where the clients have
never lived without the assistance of a service provider. In its proposed
conclusions of law, Incor tried to explain away the lack of any evidence on this
factor by representing that “[m]ore importantly . . . the uncontradicted evidence at
trial was that Incor’s clients were always allowed to freely move into different
residences and with roommates, if they so choose.” Aplt. App., Vol. X at 5573.
Setting aside the fact that this sweeping conclusion lacks record support, it has
nothing to do with whether the client lived in the living unit as his or her private
home before beginning to receive services.
“The second factor is who owns the living unit. Ownership is significant
because it evidences control.” Welding, 353 F.3d at 1219. In situations where the
living units are owned by a third party, “that is a more ambiguous indicator, and
the court must look to see who leases the unit from the third party.” Id. Contrary
to Incor’s finding that “no evidence was presented at trial that Incor had any
possessory interest in, or right to, the client’s homes,” Aplt. App., Vol. X at 5574,
Incor was listed as the tenant/lessee or responsible party on four leases (2200
Turner Street, 901 Erie, 200 East Monroe, and 505 North G Street), which “is
some indication that it is not a private home.” Welding, 353 F.3d at 1219. And
although it is true that the clients signed or made their marks on the leases for the
remaining living units, which “is some indication that [they are] private home[s],”
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id., that is not the end of the inquiry. Instead, “residences []managed by
[habilitation training specialists] . . . do not fit plainly and unmistakably into the
ordinary connotation of the words ‘private home’ . . . notwithstanding the fact
that the lease may bear the name of a developmentally disabled person.”
Johnston v. Volunteers of Am., Inc., 213 F.3d 559, 565 (10th Cir. 2000).
“The third factor is who manages and maintains the residence. In other
words, who provides the essential things that the client needs to live there, such
as paying the mortgage or rent, paying for gas, electricity, and water, providing
clean linens and clothes, and providing food?” Welding, 353 F.3d at 1219.
“If many of the essentials of daily living are provided for by the client or the
client’s family, that weighs strongly in favor of it being a private home. If they
are provided for by the service provider, that weighs strongly in favor of it not
being a private home.” Id. at 1220. Incor’s findings failed to consider “who
provides the essential things that the client needs to live there[.]” Instead, it
offered that because the clients and/or their guardians participated in developing
individual training plans and had service agreements with Incor, they had
management control. This distorts Welding, which states that the object of
evaluation is the living unit – not ancillary agreements.
“The fourth factor is whether the client would be allowed to live in the unit
if the client were not contracting with the provider for services.” Id. at 1220.
As a matter of common sense, “[i]f the client would be allowed to live in the unit
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without contracting for the services, that weighs in favor of it being a private
home. If the client would not be allowed to live in the unit without contracting
for the provider’s services, that weighs in favor of it not being a private home.”
Id. Contrary to Welding, Incor re-framed the inquiry as the “[p]otential
[c]ontinuity of [o]ne [c]lient in the [r]esidence,” Aplt. App., Vol. X at 5575, and
reasoned that because it was not the landlord, a client would be allowed to live in
the unit even if he or she fired Incor. This ignores the fact that there was no
evidence that any landlord would have rented to any of these clients unless they
had a service provider. In the absence of such evidence, Incor could only
speculate that “there is no reason to believe a client could not remain in their
home in the event Incor’s services were terminated.” Id. The error was
compounded by relying on 42 U.S.C. § 3604(f)(1)(A) for the conclusion that a
landlord could not terminate the lease and/or refuse to rent to disabled persons.
The statute, however, applies only to properties owned, operated, or financed by
the federal government. See id. § 3603(a)(1)(A)-(D).
“The fifth factor is the relative difference in the cost/value of the services
provided and the total cost of maintaining the living unit (including government
subsidies).” Welding, 353 F.3d at 1220. As Welding explains, this factor
“relate[s] to the purpose for which the living unit is primarily maintained.” Id.“If the cost/value of the services is incidental to the other living expenses, that
weighs in favor of it being a private home. If the cost/value of the services is a
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substantial portion of the total cost of maintaining the living unit, that weighs in
favor of it not being a private home.” Id. Incor tortured the fifth factor beyond
recognition. Because its analysis is not easily summarized, we quote it in full:
[T]he HTS services were paid in full by the DHS (i.e., the client paid
nothing for the services). Conversely, the client was responsible to
‘pay up to 90% of the income, not to exceed $14.00 per day’ to cover
the expenses of maintaining the living unit (i.e., rent, insurance,
utilities, groceries, etc.). Thus, the cost of the HTS services to the
client was not any portion of the total cost to the client for
maintaining his or her home.
Aplt. App., Vol. X at 5575. An example of how the fifth Welding factor should
be applied is Edward Breen testified for one client for one year at 505 Judy Lane,
daily living expenses were $47,000, habilitation services were $60,736, and
transportation costs were $3,700. The trial court should then compare the relative
difference between $60,736 (the cost/value of the habilitation services) against
$110,436 (the total cost of maintaining the living unit). Because $60,736 “is a
substantial portion of the total cost of maintaining the living unit, that weighs in
favor of it not being a private home.” Welding, 353 F.3d at 1220.
“[T]he sixth [and final] factor is whether the service provider uses any part
of the residence for the provider’s own business purposes.” Id. Although Incor
did maintain desks, file cabinets, and store paperwork in some of the homes, its
proposed findings and conclusions ignored the specific evidence with regard to
specific residences.
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Although the district court purported to conduct the home-by-home analysis
required by Welding, in some respects it misstated the law and failed to apply the
key factors to the relevant evidence. For example, instead of inquiring whether
Incor’s clients had previously lived in their current homes, as Welding prescribes,
353 F.3d at 1219, the court pointed instead to what it called “uncontradicted
evidence at trial . . . that Incor’s clients were always allowed to freely move into
different residences and with roommates, if they so choose.” Aplt. App., Vol. X
at 5573. We have some doubts that the record supports this reading, but more
importantly, it is a different question than that framed by our precedents.
Similarly, the court found that Incor had no possessory interest in any of the
units, id. at 5574, but did not explain how this analysis applied to the four units
(2200 Turner Street, 901 Erie, 200 East Monroe, and 505 North G Street) for
which Incor was listed as the tenant/lessee or responsible party. For a third
example, Welding requires that the court determine whether the value of the
services provided is a “substantial portion” of the total cost of maintaining the
living unit. 353 F.3d at 1220. The district court, instead, looked to the
proportion of total cost borne by the client, as opposed to the DHS. Aplt. App.,
Vol. X at 5575.
We therefore remand the case for new findings of fact in light of the law
explained above. We also remind the court that Incor bears the burden of proving
that these are private homes by a preponderance of the evidence.
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II. GENERAL HOUSEHOLD WORK
A. The Statutory And Regulatory Framework
The employees’ second claim was for overtime compensation based on the
theory that even if they were working in private homes, they spent more than
twenty percent of the total hours worked each week performing general household
tasks. As a general rule, the FLSA requires payment of overtime compensation
for employees who work more than forty hours per week. See 29 U.S.C. § 207.
However, it provides an exemption 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). In turn, the DOL defines “companionship services” as
those services which provide fellowship, care, and protection for a
person who, because of advanced age or physical or mental infirmity,
cannot care for his or her own needs. Such services may include
household work related to the care of the aged or infirm person such
as meal preparation, bed making, washing of clothes, and other
similar services. They may also include the performance of general
household work: Provided, however, [t]hat such work is incidental,
i.e., does not exceed 20 percent of the total weekly hours worked.
29 C.F.R. § 552.6.
Section 552.6 distinguishes household work related to the care of a client,
which includes meal preparation, bed making, laundry, and other similar services,
from general household work, which is unrelated to the care of the client.
In McCune v. Oregon Senior Services Division, 643 F. Supp. 1444, 1450
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(D. Or. 1986), aff’d, 894 F.2d 1107 (9th Cir. 1990), (interpreting Section 552.6
to determine whether the minimum wage requirement of 29 U.S.C. § 206 apply)
the court set forth the general test as
[d]usting or cleaning [the client’s bedroom or living room] appears to
be routine, general household work, rather than work related to the
individual. Cleaning a spill by the client in either room, by contrast,
would be non-routine care more related to the individual than the
general household, and would not be included in the twenty percent
figure.
The regulation defines care related to the individual as
including meal preparation, bed making, washing of clothes and
‘other similar services.’ These similar services would presumably
include other types of personal care, such as bathing, feeding, or
cleaning spills.
Care related to the individual has been expanded to include more frequent
vacuuming and dusting for a client with allergies, mopping and sweeping for
clients who crawl on the floor, and habilitation training, which often includes
training the client to do housework, cooking, and attending to personal hygiene.
See Terwilliger v. Home of Hope, Inc., 42 F. Supp. 2d 1231, 1241-42, 1253
(N.D. Okla. 1999).
B. The Burden Of Proof
For the reasons explained in Section I, B, supra, Incor bears the burden of
proving its entitlement to this exemption under a remedial statute that must be
narrowly construed. The district court, however, imposed the burden of proof on
the employees. The court based its conclusion on language in Terwilliger,
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42 F. Supp. 2d at 1252, that calls the “‘20% rule’ . . . an exception to the
companionship services exemption.” Aplt. App., Vol. X at 5578 n.17. This,
however, does not shift the burden of proof. There is no “exception to an
exemption” in 29 C.F.R. § 552.6; instead, the exemption is the “companionship
services” exemption in 29 U.S.C. § 213(a)(15). Further, even if § 552.6 was an
exception, the employer would still bear the burden of proof. See, e.g., Acton v.
City of Columbia, 436 F.3d 969, 976 (8th Cir. 2006) (holding that “[t]he burden is
on the employer to establish that the remuneration in question falls under an
exception [to the FLSA];” Johnson v. City of Columbia, S.C., 949 F.2d 127,
129-30 (4th Cir. 1991) (holding that “[e]xemptions from or exceptions to [the
FLSA’s] requirements are to be narrowly construed against the employer asserting
them[,] and [s]ince the [employer] seeks to come within the . . . exceptions, the
burden is on the [employer] to show that it is entitled to the benefits of those
exceptions”) (quotation omitted); Donovan v. Brown Equip. & Serv. Tools, Inc.,
666 F.2d 148, 153 (5th Cir. 1982) (same).
The district court also ruled, in the alternative, that it would rule in favor of
Incor “even if [it] were to place the burden of proof regarding the 20% rule on
[Incor],” Aplt. App., Vol. X at 5580. We are unable to review that alternative
holding on this record. The relevant facts were disputed, and the court did not
separately identify which factual conclusions rested on the erroneous allocation of
the burden of proof. For example, the court rejected the employees’ estimates of
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how much time they spent on general household work because they did not
“attempt[] to reconstruct through contemporaneous time records the amount of
housework that he or she performed while serving as an HTS, whether the
housework was related to the client or general in nature.” Id. at 5537. The
question, however, should have been whether Incor introduced sufficient evidence
to establish that the exemption applied. The lack of contemporaneous time
records could be relevant to the ultimate conclusion (assuming that such
recordkeeping was required, which appears not to have been the case), but the
district court erred in basing its conclusion on a defect in the employees’ case
rather than on the content of the employer’s evidence. The court did not explain
how, on this record, it could have reached the alternative holding that the
employer it would rule in favor of Incor even if the employer bore the burden of
proof.
We think it better to vacate this portion of the decision and allow the
district court to undertake a fresh evaluation of the case in light of the proper
burden of proof.
III. TRAINING TIME
A. The Statutory And Regulatory Framework
The employees’ third claim was for regular wages for time spent in training
classes under the theory that their attendance was involuntary. The FLSA
obligates an employer to pay its employees for all hours worked. “Work” is not
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defined in the FLSA, but an employee generally must be paid for his time that is
controlled and required by the employer regardless of whether it involves any
mental or physical exertion. See 29 C.F.R. §§§ 785.1, 785.6, 785.7; Armour &
Co. v. Wantock, 323 U.S. 126, 133 (1944). To that end, the DOL has promulgated
regulations regarding training, including 29 C.F.R. § 785.27, which provides:
Attendance at lectures, meetings, training programs and similar
activities need not be counted as working time if the following four
criteria are met:
(a) Attendance is outside of the employee’s regular working hours;
(b) Attendance is in fact voluntary;
(c) The course, lecture, or meeting is not directly related to the
employee’s job; and
(d) The employee does not perform any productive work during such
attendance.
The regulations further provide that training is not “voluntary” if an employee’s
“[a]ttendance . . . is . . . required by the employer. It is not voluntary in fact if
the employee is given to understand or led to believe that his present working
conditions or the continuance of his employment would be adversely affected by
nonattendance.” 29 C.F.R. § 785.28.
B. The Burden Of Proof
An employer seeking to avoid application of the FLSA’s general rule that
work is compensable bears the burden of proving an exception. Acton, 436 F.3d
at 976; Johnson, 949 F.2d at 129-30; Donovan, 666 F.2d at 153. For the reasons
explained in Section I, B, supra, Incor bears the burden of proving its entitlement
to this exemption under a remedial statute that must be narrowly construed.
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C. The Standard Of Review
The trial court’s factual determinations are reviewed for clear error,
Sanders, 112 F.3d at 470, but whether a given set of facts constitutes “work”
under the FLSA is a question of law reviewed de novo. Chao v. Tradesmen Int’l,
Inc., 310 F.3d 904, 907 (6th Cir. 2002); Birdwell v. City of Gadsden, 970 F.2d
802, 807 (11th Cir. 1992). Further, “[w]hether the district court failed to consider
or accord proper weight or significance to relevant evidence are questions of law
[this court] review[s] de novo.” Flying J Inc., 405 F.3d at 829.
D. Analysis
The DOL acknowledges that “[t]he ultimate decision on interpretations of
the [FLSA] are made by the courts. 29 C.F.R. § 785.2. Nonetheless, because the
agency “must determine in the first instance the positions [it] will take in the
enforcement of [the FLSA],” the regulations “seek to inform the public of [the]
positions” that it will take. Id. “[They] should thus provide a ‘practical guide for
employers and employees as to how the office representing the public interest in
its enforcement will seek to apply [the FLSA].’” Id. (quoting Skidmore v. Swift &
Co., 323 U.S. 134, 138 (1944)). Because 29 C.F.R. §§ 785.27 and 785.28 are
interpretative regulations, the courts should defer to them only to the extent they
have the power to persuade. Skidmore, 323 U.S. at 138. Similarly, the courts are
not bound by informal administrative opinions; instead, “[i]nterpretations such as
those in opinion letters – like interpretations contained in policy statements,
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agency manuals, and enforcement guidelines, all of which lack the force of law –
do not warrant Chevron-style deference.” Christensen v. Harris County, 529 U.S.
576, 587 (2000); see also Rodriguez v. Whiting Farms, Inc., 360 F.3d 1180, 1189
(10th Cir. 2004).
Although the trial court erroneously afforded Chevron deference 6 to
§ 785.28 and an opinion letter concerning the child-care industry, we find these
sources persuasive under Skidmore, and therefore employ them in our analysis.
Section 785.28 provides that training is not “voluntary” if an employee’s
attendance . . . is . . . required by the employer. It is not voluntary in fact if the
employee is given to understand or led to believe that his present working
conditions or the continuance of his employment would be adversely affected by
nonattendance.” And the opinion letter states in relevant part that
where a State requires employers to provide training as a condition of
the employer’s license to remain open for business – e.g., a day care
center operator’s license is conditional on all employees receiving a
fixed number of hours of child care training each year. As the
operator would typically require employees to attend such training, it
would not be voluntary, and this criterion would not be met.
Opinion Letter from Dept. of Labor, Wage and Hour Div. (Sept. 9, 1996), 1996
WL 1031798.
Despite its length, the district court’s analysis of this point, which was
adopted word-for-word from the employer’s proposed findings, does not relate the
6
Chevron deference refers to Chevron U.S.A., Inc. v. Natural Resources
Defense Council, Inc., 467 U.S. 837 (1984).
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evidence to the legal standard. The evidence, as we discern it from the record,
consisted of testimony from employees and Betsy Breen, and some documentary
evidence. The employees testified that any employee who missed training faced
removal from the work schedule or being fired. Ms. Breen testified that the
consequences of the failure to attend training varied “depend[ing] on what the
training was and how many times they missed it. If it was a first training and
they’d missed it, then they just continued on their schedule. If it was a repeated
failure to attend a required training, then they might be removed from the
schedule.” Aplt. App., Vol. X at 5608. The documentary evidence included a
letter from Incor to an employee stating that she was “taken off the schedule due
to not having [a required course]” and that she could only get back on the schedule
when she “received a certificate.” Id., Vol. XVI at 8484. The district court does
not explain how this evidence supports a conclusion that the training was
voluntary, for purposes of § 785.28. We therefore vacate this portion of the
decision and remand to the district court to evaluate the evidence in light of the
regulatory criteria.
IV. LIQUIDATED DAMAGES AND STATUTE OF LIMITATIONS
A. The Statutory And Legal Framework
The employees argue that the trial court erred in granting Incor’s motion for
summary judgment as to liquidated damages and the application of a two-year
statute of limitations to their claims. Because the court applied the wrong
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definition of willfulness and misapplied the burden of proof as to liquidated
damages, we reverse and remand the liquidated damages claim for further
proceedings consistent with this order and judgment. We affirm the court’s order
applying a two-year statute of limitations.
Although a standard of willfulness applies to both liquidated damages and
the statute of limitations under the FLSA, the definitions and burdens of proof
differ for each. Ordinarily, an employer who violates FLSA is liable for both
unpaid wages and an additional equal amount as liquidated damages. 29 U.S.C.
§ 216(b). To avoid such damages, the employer must show “to the satisfaction of
the court that the act or omission giving rise to such action was in good faith and
that he had reasonable grounds for believing that his act or omission was not a
violation of the [FLSA].” 29 U.S.C. § 260. Good faith is a subjective test that
requires “the employer have an honest intention to ascertain and follow the
dictates of [the FLSA].” Dep’t of Labor v. City of Sapulpa, 30 F.3d 1285, 1289
(10th Cir. 1994) (quotation omitted). Reasonableness “imposes an objective
standard by which to judge the employer’s behavior.” Id. Only in those instances
where the court finds that the employer meets this burden, it may, “in its sound
discretion,” deny liquidated damages. Pabst v. Okla. Gas & Elec. Co., 228 F.3d
1128, 1136 (10th Cir. 2000); see also City of Sapulpa, 30 F.3d at 1289 (holding
that even if the trial court finds that the employer acted in good faith and
reasonably, it may still award liquidated damages).
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A two-year statute of limitations applies to an action for unpaid wages under
the FLSA, except where an employer acts willfully, in which case, a three-year
period applies. 29 U.S.C. § 255(a). The employee bears the burden of proving
that the employer acted willfully. McLaughlin v. Richland Shoe Co., 486 U.S.
128, 135 (1988); see also Gilligan v. City of Emporia, 986 F.2d 410, 413
(10th Cir. 1993). For purposes of the statute of limitations, “willful” means “the
employer either knew or showed reckless disregard for the matter of whether its
conduct was prohibited by [the FLSA].” McLaughlin, 486 U.S. at 133; see also
Reich v. Monfort, Inc., 144 F.3d 1329, 1334 (10th Cir. 1998).
B. The Burden Of Proof
Summary judgment is proper if the pleadings, discovery materials, and any
affidavits show that there is no genuine issue as to any material fact, and the
moving party is entitled to a judgment as a matter of law. Fed. R. Civ. P. 56(c).
The district court must view the evidence and draw all reasonable inferences
therefrom in the light most favorable to the nonmoving party. In re Wal-Mart
Stores, Inc., 395 F.3d 1177, 1189 (10th Cir. 2005). As part of this function the
court may not make credibility determinations or weigh the evidence, and must
disregard all evidence favorable to the moving party that the trier of fact is not
required to believe. Gossett v. Oklahoma, 245 F.3d 1172, 1175 (10th Cir. 2001).
Summary judgment “necessarily implicates the substantive evidentiary
standard of proof that would apply at the trial on the merits.” Anderson v. Liberty
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Lobby, Inc., 477 U.S. 242, 252 (1986). Therefore, a party opposing summary
judgment who does not bear the burden of proof at trial, is not required to come
forward with evidence to defeat summary judgment. On the other hand, where the
nonmoving party bears the burden of proof at trial, he cannot rely on his pleadings
to defeat summary judgment; instead, he must come forward with evidence
sufficient to create a genuine issue of material fact. Celotex Corp. v. Catrett,
477 U.S. 317, 322 (1986). Under either scenario, the moving party must
demonstrate its entitlement to judgment as a matter of law.
C. The Standard Of Review
“We review the district court’s grant or denial of summary judgment
de novo.” Gilligan, 986 F.2d at 412. Applying the same legal standard as the
district court and viewing the evidence in the light most favorable to the party
opposing the motion, “[i]f there is no genuine issue as to any material fact and the
movant is entitled to judgment as a matter of law, summary judgment is
appropriate.” Id. (quoting Rule 56(c)).
D. The Evidence On Summary Judgment
1. Incor’s Evidence
a. Edward Breen’s Affidavit
Edward Breen attended a conference in Oklahoma in 1993 at which Joni
Fritz, the executive director of the American Network of Community Options and
Resources (ANCOR), was invited to speak. According to Mr. Breen, Ms. Fritz
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told the group that the companionship services exemption “would apply to HTS
services provided in the homes of the clients.” Aplt. App., Vol. II at 1156-57. At
or about the same time, Mr. Breen heard that another Oklahoma service provider,
BIOS, had received confirmation from the DOL that HTS services “provided in the
clients’ homes was [sic] exempt from the FLSA overtime requirements.” Id. at
1157. This news prompted him to contact the DOL, at which time he spoke to
Steven Voss, who told him that “the [DOL] was treating HTS services as
‘companions’ under the FLSA and that HTS services were exempt from overtime
requirement.” Id.
In April 1994, the Oklahoma Department of Human Services,
Developmental Disabilities Services Division (DDSD) sponsored a conference
where Ms. Fritz was again invited to speak. “Once again, Ms. Fritz advised the
service providers to utilize the companion exemption with respect to HTS services
provided in the homes of the clients.” Id. Mr. Breen revised Incor’s HTS job
description in 1995, to incorporate the companionship exemption. Id. at 1158.
b. Joni Fritz’s Affidavit
Joni Fritz was the executive director of ANCOR from 1976 through 1999.
ANCOR is a “national organization whose purpose is to provide information and
advice to organizations that support people with mental retardation and other
developmental disabilities.” Id., Vol. III at 1354. She received a letter from the
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DOL, “which informed us for the first time about the Section 13(a)(15) exemption
for employees who provide ‘companionship services.’” Id.
In 1993, in response to the closure of a state mental institution, Ms. Fritz
was invited to speak at a conference in Oklahoma attended by Edward Breen,
where she told the group that the companionship exemption “would apply to
habilitation training services provided that those services were performed in the
homes owned or leased by people with developmental disabilities who required
support.” Id. at 1355. In April 1994, Ms. Fritz returned to Oklahoma for another
conference, which was again attended by Mr. Breen. Once again, she told the
group that the exemption applied and “it was [her] impression that the State of
Oklahoma officials were endorsing the use of the companionship exemption in
order to provide better and more consistent services to people with developmental
disabilities while reducing the state’s operating costs.” Id.
c. The BIOS Form
Incor provided two pages from a 1991-93 DOL investigation of BIOS, a
service provider in Oklahoma, titled “WHISARD Compliance Action Report.”
Id. at 1358. In the conclusions and recommendations section it states that it
conducted an office audit for BIOS, which is under contract with the state to
provide care for clients released from a state institution, and “13A15 Companion
Services Applicable.” Id. at 1359.
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d. Incor Memorandum
A June 28, 1993, memorandum from Edward Breen to Incor’s employees
memorializes his telephone conversation with DOL employee Steven Voss.
In response to the employees’ questions about overtime, Mr. Breen contacted the
DOL, and Mr. Voss allegedly told him the DOL “is treating the HTS category
under the heading of Companion.” Id. at 1361.
e. John Rowe’s Affidavit
John Rowe worked as a case management supervisor for Oklahoma from
1983 through 1994. He attended the two conferences where Joni Fritz spoke about
issues “affecting organizations that provide services to the developmentally
disabled.” Id. at 1364. He echoed that Ms. Fritz explained that “the overtime
provisions of [FLSA] did not apply to individuals providing services like a [HTS]
in the homes of the clients,” id., and that the “‘companion exemption’ allowed
provider organizations to pay [HTSs] their regular hourly rate, regardless of the
number of hours worked, when providing HTS/companion services.” Id.
Mr. Rowe opined that the state did not favor overtime pay because it would save
money and provide more consistent care. Following Ms. Fritz’s presentations and
her “endorsement by state officials as an authority, many provider organizations
began utilizing the companion exemption in the mid to early 90’s.” Id. at 1365.
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2. The Employees’ Evidence
The employees presented evidence showing what Incor did not do to
investigate the propriety of relying on the companionship services exemption.
Among other things, the employees’ evidence established: (1) Incor never read a
legal opinion concerning the companionship exemption; (2) Incor never sought the
advice of a lawyer about the exemption; (3) prior to being sued, Incor never
questioned its decision not to pay overtime; (4) prior to being sued, Incor was
aware of lawsuits against other service providers but never inquired how those
companies operated; (5) Betsy Breen never read any of the opinions in the lawsuits
against other service providers; (6) Incor’s auditors informed it that a lawsuit
involving overtime and the exemption had gone to court; and (7) employee
Kent Fowler was “told to cut shifts down to 40 hours where possible,” id.,
Vol. VIII at 4415, so Incor could “avoid a lawsuit.” Id., Vol. IX at 4981-82.
E. Analysis
Regarding the statute of limitations, we apply the same standard as the
district court and review whether the employees’ evidence, viewed in the light
most favorable to them, was sufficient to create a genuine issue of material fact as
to whether Incor acted willfully, i.e., whether it “either knew or showed reckless
disregard for the matter of whether its conduct was prohibited by [the FLSA].”
McLaughlin, 486 U.S. at 133; see also Gilligan, 986 F.2d at 413. We agree that
the evidence failed to create a triable issue of fact and that Incor was entitled to
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judgment as a matter of law. Although cases involving knowledge, motive, and/or
intent are not well suited to summary disposition, Baum v. Great W. Cities, Inc.,
703 F.2d 1197, 1210-11 (10th Cir. 1983), this does not mean that summary
judgment is never proper. Instead, the evidence, viewed in the light most
favorable to the employees, showed that Incor relied on the advice of industry
consultants and state officials in implementing a policy that was in widespread use
in Oklahoma and elsewhere. Admittedly, Incor did not consult a lawyer or
investigate the lawsuits against other service providers, however this is not enough
to prove recklessness. Therefore, we affirm the court’s summary judgment order
for the application of a two-year statute of limitations.
As to liquidated damages, the district court erred because it applied the test
of willfulness used for the statute of limitations and reasonableness and placed the
burden of proof on the employees. Aplt. App., Vol. IX at 4984. Because the trial
court misapplied the law, we remand the issue of liquidated damages for further
proceedings consistent with this order and judgment. For Incor to obtain summary
judgment, the material facts must be undisputed and establish its right to judgment
as a matter of law. This means that Incor must satisfy the subjective test of good
faith that requires “an honest intention to ascertain and follow the dictates of [the
FLSA],” City of Sapulpa, 30 F.3d at 1289 (quotation omitted), and the objective
test of reasonableness. Id. Even if Incor meets this burden, the court may in its
discretion award liquidated damages. Id. If the issue cannot be resolved on
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summary judgment, the court is directed to conduct a hearing to determine whether
liquidated damages are appropriate. We also remind the court that it may not
make credibility determinations on summary judgment, Gossett, 245 F.3d at 1175,
and thus must disregard any credibility determinations made at trial to shore up its
summary judgment order. 7
V. CONCLUSION
We AFFIRM the trial court’s order applying a two-year statute of
limitations to the employees’ claims. We VACATE the court’s findings of fact
and conclusions of law and REVERSE its order on summary judgment denying
the employees’ claim for liquidated damages, and REMAND the case for further
proceedings consistent with this order and judgment.
Entered for the Court
Michael W. McConnell
Circuit Judge
7
The trial court’s findings of fact and conclusions of law comment on the
credibility of Edward Breen and Betsy Breen. In particular, the court noted that
even if they violated the FLSA, it “would be wholly incapable, after observing
their testimony and demeanor on the witness stand, of believing such violations
resulted from bad faith, malicious intent or even wilful (sic) negligence[.]”
Aplt. App., Vol. X at 5498-99.
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