Scheck v. Maxim Healthcare Servs., Inc.

333 F.Supp.3d 751

Linda SCHECK, on behalf of herself and other similarly situated employees, Plaintiff,

v.MAXIM HEALTHCARE SERVICES, INC., Defendant.

Case No. 5:17CV2480

United States District Court, N.D. Ohio, Eastern Division.

Signed August 8, 2018

Filed August 9, 2018

Andrew R. Biller, Markovits, Stock & DeMarco, Columbus, OH, C. Ryan Morgan, Morgan & Morgan, Orlando, FL, Andrew P. Kimble, Markovits, Stock & DeMarco, Cincinnati, OH, for Plaintiff.

Allison N. Powers, Morgan, Thomas F. Hurka, Morgan, Lewis & Bockius, Chicago, IL, David A. Campbell, III, Gregory C. Scheiderer, Liana R. Hollingsworth, Vorys, Sater, Seymour & Pease, Cleveland, OH, Lincoln O. Bisbee, Morgan, Lewis & Bockius, Washington, DC, for Defendant.

ORDER

JOHN R. ADAMS, UNITED STATES DISTRICT JUDGE

This matter is before the Court upon Defendant Maxim Healthcare Services, Inc. ("Maxim") Motion to Dismiss Plaintiff's Linda Scheck's ("Plaintiff") Complaint pursuant to Federal Rule of Civil Procedure 12(b)(6). Plaintiff has opposed the motion to dismiss. Having considered the parties' arguments, the Court holds that the Motion to Dismiss (Doc. 9) is GRANTED IN PART . The reasons for the Court's decision are set forth below.

I. BACKGROUND

Plaintiff brings this putative class action against her former employer, Maxim, under the Fair Labor Standards Act, 29 U.S.C. §§ 201, et seq. ("FLSA") and Ohio law, for unpaid overtime compensation from January 1, 2015 to October 31, 2015. In the context of a motion to dismiss, the Court accepts Plaintiff's statement of facts regarding Maxim's operations.

Maxim provides in-home personal care, management, and/or treatment of a variety of conditions by nurses, therapists, medical social works, and Home Health Aides ("HHAs"). (Doc. 1, ¶ 11.) Plaintiff worked for Maxim as an HHA, allegedly from approximately July 1, 2010 to July 1, 2016. (Id. , ¶ 7.) As an HHA, Plaintiff provided companionship services "in the homes of [Maxim's] clients to whom she was assigned." (Id. , 18.) Consequently, she was classified as an exempt employee under the FLSA, pursuant to the companionship services exemption. (Id. , ¶ 19.) During Plaintiff's employment, she worked more than 40 hours in some workweeks. (Id. at ¶¶ 8, 18.) Because Plaintiff was an exempt companionship services employee, however, Maxim paid her straight time for all hours worked over 40 in a workweek.

In mid-October 2015, Maxim began paying "full and complete overtime compensation" to all HHAs nationwide, including Plaintiff. (Id. , ¶ 33.) Plaintiff filed this lawsuit more than two years later, on November 27, 2017.

II. STANDARD OF REVIEW

A motion to dismiss tests the legal sufficiency of the complaint. See Reeves v. PharmaJet, Inc. , 846 F.Supp.2d 791, 795 (N.D. Ohio, 2012). The Court accepts as true all well-pleaded factual allegations and construes the complaint in the light most favorable to the plaintiff. Id. This does not mean, however, that everything in a complaint, or every inference that can be drawn therefrom, must be accepted at face value. The Court need not accept legal conclusions or unwarranted factual inferences at the motion to dismiss stage. Id. A complaint must "provide the grounds of [the plaintiff's] entitlement to relief," which "requires more than labels and conclusions." Bell Atlantic Corp. v. Twombly , 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007) (internal quotation marks and alterations omitted). "[A] formulaic recitation of the elements of a cause of action will not do" to overcome a motion to dismiss. Id.

III. DISCUSSION

This suit concerns the "Home Care Final Rule" (or, the "Final Rule"), a rule promulgated by the United States Department of Labor in 2013 to extend FLSA wage and overtime protections to home care workers. The D.C. Circuit's decision in Home Care Ass'n of Am. v. Weil , 799 F.3d 1084, 1087-90 (D.D.C. 2015) summarizes the relevant history of the companionship services exemption and third-party employer regulation.

Congress amended the FLSA in 1974 to exempt employees providing "companionship services" from the statute's minimum wage and overtime provisions. Id. at 1087. The Department of Labor ("DOL") adopted implementing rules in 1975 and, for the next 38 years, the governing rule permitted third-party employers to rely upon the companionship services exemption. Id. at 1088-89.

In 2013, the DOL adopted the new Home Care Final Rule, which provided that third-party employers could no longer "avail themselves" of the FLSA's companionship services exemption. Id. at 1089. The DOL chose to delay implementation of the regulation until January 1, 2015. Id.

In December 2014, shortly before the third-party-employer regulation was scheduled to take effect, the U.S. District Court for the District of Columbia ruled that it was invalid under the framework established in Chevron, U.S.A., Inc. v. Nat. Res. Def. Council , 467 U.S. 837, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984). Weil , 799 F.3d at 1089-90 (citing Home Care Ass'n of Am. v. Weil , 76 F.Supp.3d 138 (D.D.C. 2014) ). The district court vacated the third-party-employer regulation, thereby preventing it from going into effect. Weil , 799 F.3d at 1090.

The DOL appealed the district court ruling, and on August 21, 2015, the D.C. Circuit reversed the lower court. Id. , 799 F.3d at 1084. Subsequently, the DOL issued guidance stating that it would not institute enforcement proceedings for violations of the regulation until 30 days after the Court of Appeals issued its mandate. See 80 Fed. Reg. 55029 (Sept. 14, 2015).

The D.C. Circuit issued its mandate on October 13, 2015. The DOL then indicated that it would not bring enforcement actions for violations of the regulation prior to November 12, 2015. See Application of the Fair Labor Standards Act to Domestic Service: Dates of Previously Announced 30-Day Period of Non-Enforcement, 80 Fed. Reg. 65646 (Oct. 27, 2015).

Plaintiff filed her lawsuit on November 27, 2017. Plaintiff's FLSA claim is premised entirely on her contention that the DOL's Home Care Final Rule became effective on January 1, 2015, the original effective date. If January 1, 2015 is in fact the effective date, then Plaintiff and other similarly-situated HHA's are owed overtime between that date and mid-October, 2015, when Maxim began paying overtime. (Doc. 1, ¶ 28.) Plaintiff's FLSA claim fails if this Court concludes that the third-party-employer regulation did not become effective on January 1, 2015, but instead became effective on October 13, 2015, when the D.C. Circuit issued its mandate overturning the district court's 2014 order vacating the rule. Thus, the issue before the Court pursuant to Maxim's Motion to Dismiss is whether recovery for unpaid overtime under the third-party-employer regulation should begin with alleged violations occurring on January 1, 2015, or should be limited to the period after October 13, 2015.

The Sixth Circuit has not addressed this issue, and federal courts across the country have come to conflicting conclusions. Indeed, district courts within the Southern District of Ohio have reached opposite conclusions regarding the appropriate effective date of the Home Care Final Rule. Compare Bangoy v. Total Homecare Sols., LLC , Case No. 1:15CV573, 2015 WL 12672727, *3 (S.D. Ohio Dec. 21, 2015) (finding that forcing employers to comply with the DOL's overtime rule while it was vacated and on appeal would put them "in an untenable position"), and Lee v. Caregivers for Indep., LLC , Case No. 1:16CV946, 2017 WL 2666413, *5 (S.D. Ohio June 21, 2017) (finding that, because the district court in Weil vacated the Home Care Final Rule before it became effective, "the sequence of events created a legal nullity which prevented the regulation from ever taking effect until the D.C. Circuit issued its mandate on October 13, 2015"), with Brittmon v. Upreach, LLC , 285 F.Supp.3d 1033, 1039 (S.D. Ohio, 2018) (the principle of retroactivity of judicial decisions compels the conclusion that the Final Rule became effective as of January 1, 2015), and Dillow v. Home Care Network, Inc. Case No. 1:16CV612, 2017 WL 749196, * 5 (S.D. Ohio Feb. 27, 2017) (holding that the effective date of the regulation at issue is January 1, 2015), and Richert v. LaBelle Homehealth Care Serv. LLC , Case No. 2:16CV437, 2017 WL 4349084, *2 (S.D. Ohio Sept. 29, 2017) (holding that the effective date of the Home Care Final Rule is January 1, 2015 in accordance with the "well-established rule that judicial decisions are presumptively retroactive in their effect and operation"), and Rembert v. A Plus Home Health Care Agency LLC , Case No. 2:17CV387, 2018 WL 2015844, *3 (S.D. Ohio May 21, 2018) (finding that the Final Rule to effect on January 1, 2015 in adherence with the principle of retroactive application of judicial decisions).

In what appears to be the only decision out of the Northern District of Ohio to date on this issue, a judge of this Court found that the principle of retroactivity of judicial decisions compels a conclusion that the Final Rule became effective on January 1, 2015. See Kennedy v. Certain Care, LLC , Case No. 1:17CV2444, 2018 WL 1224360, *2-3 (N.D. Ohio March 9, 2018) (Gwin, J.).

It appears that the majority of district courts that have ruled on the issue have held that the DOL's Home Care Final Rule became effective on January 1, 2015. See Brittmon , 285 F.Supp.3d at 1039 (citing decisions holding that the Final Rule became effective on January 1, 2015). The analysis begins under Harper v. Va. Dep't of Taxation , 509 U.S. 86, 97, 113 S.Ct. 2510, 125 L.Ed.2d 74, 125 L.Ed. 74 (1993), with the general retroactivity principle set forth in that case. Under the Harper retroactivity principle, judicial decisions, as opposed to statutes and regulations, apply retroactively. Accordingly, when a court "applies a rule of federal law to the parties before it, that rule is the controlling interpretation of federal law and must be given full retroactive effect in all cases still open...