Affo v. Granite Bay Care, Inc.

KAYI AFFO, ET AL., PLAINTIFFS

v.GRANITE BAY CARE, INC., ET AL., DEFENDANTS

CIVIL NO. 2:11-CV-482-DBH

C/W CIVIL NO. 2:12-CV-115-DBH

UNITED STATES DISTRICT COURT DISTRICT OF MAINE

DATED: MAY 30, 2013

DECISION AND ORDER ON MOTIONS FOR SUMMARY JUDGMENT

AND FOR PARTIAL SUMMARY JUDGMENT

The plaintiffs provided care in Maine to clients of Granite Bay Care, Inc. ("Granite Bay Care") with disabilities. They did so under two job titles—Adult Foster Care Provider ("Provider") and Direct Support Professional.¹ They have sued Granite Bay Care, a second corporation, and Granite Bay Care's corporate officers and shareholders for unpaid wages and overtime through 2011 under Maine and federal law, on the basis that they worked over 40 hours per week.² The two officers/shareholders and the second corporation have moved for summary judgment on all claims on the basis that they were not the plaintiffs'"employers" under either federal or state law; the plaintiffs have moved for summary judgment on the proposition that both corporations were employers.³ I grant the second corporation's motion on all claims and deny the plaintiffs' motion. I grant the individual defendants' motion on the state claim, but deny it on the federal claim. Both corporations and the two individual defendants also have moved for summary judgment on the federal claim, on the basis that they relied in good faith on a Department of Labor ruling or interpretation. I deny that motion. The plaintiffs have moved for summary judgment on their state law claim against all the defendants. I grant that motion as against Granite Bay Care.

The triable issues remaining are liability on the federal claim, whether the individuals can be treated as employers under federal law, and damages.

UNDISPUTED FACTS GENERALLY⁴

At all relevant times, Granite Bay Care was a for-profit business that provided residential services for persons with mental disabilities. Stipulated Facts ¶¶ 38, 40, 43 (ECF No. 53). Kasai Mumpini and Caroletta Alicea were its only shareholders and corporate officers. Defs.' Statement of Material Facts("DSMF I") ¶ 5 (ECF No. 62); Pls.' Statement of Material Facts in Opp'n to Defs.' Statement of Material Facts ("Pls.' Resp. I") ¶ 5 (ECF No. 68). Granite Bay Care's purpose was "to assist individuals with disabilities to realize their fundamental right to obtain their goals and enhance their quality of life." Stipulated Facts ¶ 38. Granite Bay Care provided care and support by setting up private homes for the disabled individuals. Stipulated Facts ¶ 17. To carry out its purpose, Granite Bay Care engaged various categories of personnel—among them, Adult Foster Care Providers, Direct Support Professionals, and Respite Workers. Stipulated Facts ¶ 41.

Granite Bay Connections, Inc., was a nonprofit entity that provided comparable services in New Hampshire. DSMF I ¶ 11; Pls.' Resp. I ¶ 11. (To distinguish it from Granite Bay Care, I will refer to it as "Granite Bay New Hampshire.") Mumpini and Alicea were also officers and directors of that nonprofit corporation. Id.

Granite Bay Care compensated Providers by a stipend. Stipulated Facts ¶ 5. The Provider contracts required that the Providers be responsible for the care of the disabled client twenty-four hours per day, five days per week between Sunday at 4:00 p.m. and Friday at 4:00 p.m. Stipulated Facts ¶¶ 2, 34. Granite Bay Care provided "Respite Workers" for the remaining period of time (between Friday at 4:00 p.m. and Sunday at 4:00 p.m.) unless the Provider remained in the home with the client over the weekend. Stipulated Facts ¶ 4. The Direct Support Professionals, on the other hand, worked Mondays to Fridays, 8 a.m. to 4 p.m., and Granite Bay Care paid them by thehour. Stipulated Facts ¶¶ 3, 7. Granite Bay Care did not require Providers to work as Direct Support Professionals, but gave them the option to do so. Stipulated Facts ¶ 3. These plaintiffs served in both roles. Stipulated Facts ¶ 33.

ANALYSIS

In Part I, I deal with the argument of some defendants that they cannot be liable because they were not the plaintiffs' employer. In Part II, I determine whether the defendants have an affirmative good faith defense to federal liability. In Part III, I deal with whether the plaintiffs have established liability on their state law claim.

I. Were Mumpini, Alicea, and Granite Bay New Hampshire Employers and Therefore Liable Under Federal or State Law?

A. The Individuals Kasai Mumpini and Caroletta Alicea (1) Federal Fair Labor Standards Act ("FLSA") Claim

To establish liability on their FLSA claim, the plaintiffs must show that a particular defendant that they are suing is their employer. 29 U.S.C. § 207. The FLSA defines "employer" as "any person acting directly or indirectly in the interest of an employer in relation to an employee." 29 U.S.C. § 203(d).

The First Circuit has observed that "[t]aken literally this [section 203(d) definitional] language would support liability against any agent or employee with supervisory power over other employees." Donovan v. Agnew, 712 F.2d 1509, 1510 (1st Cir. 1983). But the First Circuit also said that it would not lightly infer that the conventional corporate shield to personal liability should be disregarded, and that it was "difficult to accept . . . that Congress intendedthat any corporate officer or other employee with ultimate operational control over payroll matters be personally liable . . . ." Id. at 1513. Instead, Agnew adopted an "economic reality" approach to who is an employer under the FLSA. Id. at 1514. Agnew found FLSA liability for "corporate officers with a significant ownership interest who had operational control of significant aspects of the corporation's day to day functions, including compensation of employees, and who personally made decisions to continue operations despite financial adversity during the period of nonpayment." Id. (citation omitted). Baystate Alt. Staffing, Inc. v. Herman, 163 F.3d 668, 677 (1st Cir. 1998), confirmed the Agnew approach. Baystate said that the facts in Agnew "relevant to the personal liability determination" were (1) "the significant ownership interest of the corporate officers"; (2) "their operational control of significant aspects of the corporation's day to day functions, including compensation of employees";⁵ and (3) "the fact that they personally made decisions to continue operating the business despite financial adversity and the company's inability to fulfill its statutory obligations to its employees." Id. at 677-78. The First Circuit continued this approach once again in Chao v. Hotel Oasis, Inc., 493 F.3d 26 (1st Cir. 2007).

Agnew makes ownership a factor, but does not specify how important it is. Other circuits say that alone it is not enough and that neither ownership nor ultimate authority is determinative. See, e.g., Alvarez Perez v. Sanford-Orlando Kennel Club, Inc., 515 F.3d 1150, 1161 (11th Cir. 2008) (president/majority shareholder not an employer because he was not involved in the supervision, hiring, firing, or compensation of employees; even if president could have played a greater role in day-to-day operations, "unexercised authority is insufficient to establish liability as an employer" (citation omitted)); Patel v. Wargo, 803 F.2d 632, 638 (11th Cir. 1986) (president/majority shareholder not "involved in the day-to-day operation of the facility," regardless of whether he "might have played a greater role" given his status as president); Wirtz v. Pure Ice Co., 322 F.2d 259, 262-63 (6th Cir. 1963) ("There is little question from the record but what Thompson as the majority stockholder and dominant personality in Pure Ice Company, Inc., could have taken over and supervised the relationship between the corporation and its employees had he decided to do so. A careful reading of the record, however, indicates that he did not do so.").

On the control factor, Agnew and its progeny focus on the day-to-day operational control that corporate officers directly and personally exercise (as opposed to ultimate operational control that a president/CEO routinely has by virtue of the office). See, e.g., Agnew, 712 F.2d at 1511, 1514 ("directly involved in decisions affecting employee compensation"; "operational control of significant aspects of the corporation's day to day functions"); Baystate, 163F.3d at 678 ("authority to manage certain aspects of the business's operations on a day-to-day basis"; "personal responsibility for making decisions about the conduct of the business that contributed to the violations of the Act"); Hotel Oasis, 493 F.3d at 34 ("corporate officer principally in charge of directing employment practices"); see also Alvarez Perez, 515 F.3d at 1160 ("[I]n order to qualify as an employer for this purpose, an officer 'must either be involved in the day-to-day operation or have some direct responsibility for the supervision of the employee.'" (quoting Patel, 803 F.2d at 638)); Wirtz, 322 F.2d at 263 ("That he might have taken over and acted . . . in the interest of an employer (the corporation) in relation to an employee' is beside the point as long as he did not do so.").

On the third factor, the First Circuit concerns itself with who was "instrumental in 'causing' the corporation to violate the FLSA." Hotel Oasis, 493 F.3d at 34 (citations omitted); see also Baystate, 163 F.3d at 678 ("the personal responsibility for making decisions about the conduct of the business that contributed to the violations of the Act"); Agnew, 712 F.2d at 1514 ("who personally made decisions to continue operations despite financial adversity during the period of nonpayment" (citation omitted)).

I now address each of these three factors in turn, recounting the undisputed facts relevant to each of the legal principles.

(i) Ownership

This factor requires relatively little discussion. Mumpini and Alicea were Granite Bay Care's sole shareholders and corporate officers. DSMF I ¶ 5; Pls.'Resp. I ¶ 5. Although the cases...