Loy v. Rehab Synergies ( 2023 )

Case: 22-40411 Document: 00516794285 Page: 1 Date Filed: 06/21/2023
United States Court of Appeals
for the Fifth Circuit
United States Court of Appeals
Fifth Circuit
____________ FILED
June 21, 2023
No. 22-40411 Lyle W. Cayce
____________ Clerk
Valerie Loy, On Behalf of Herself and All Others Similarly Situated;
ReAnna McNames; Nancy Garcia; Sophia Silva; Mardel
Hollie Weger; Cara Bradford; Ryan Degerstrom;
Angela La Manna; Jameson Lee; Eyvonnia McCrary-
Yaylor; Sheena McLaurin; Lanita Meadows; Mattie L.
Rogers; Debra Smith; Ricardo Macias; Mary Picardi;
Leigh A. Strolis; Veronica Zubowski; Keri Johnson;
Julie Hildebrandt; Robert Scott; David Brent Little;
Kathryn Campbell,
Plaintiffs—Appellees,
versus
Rehab Synergies, L.L.C.,
Defendant—Appellant.
______________________________
Appeal from the United States District Court
for the Southern District of Texas
USDC No. 7:18-CV-4
______________________________
Before Ho, Oldham, and Douglas, Circuit Judges.
Dana M. Douglas, Circuit Judge:
Valerie Loy (“Loy”) brought a Fair Labor Standards Act (“FLSA”)
suit against Rehab Synergies alleging violations of the federal overtime law.
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The district court, over Rehab Synergies’ objection, allowed the case to
proceed as a collective action and a jury found Rehab Synergies liable. On
appeal, Rehab Synergies contends that the district court abused its discretion
by allowing the case to proceed as a collective action. We AFFIRM.
I.
A.
Rehab Synergies operates 44 facilities throughout Texas that provide
speech, physical, and occupational therapy services. Four regional directors
and 44 facility directors (“directors of rehab” or “DORs”) have
responsibility for these facilities, with each regional director overseeing 10 to
13 facilities, each headed by a DOR. At any given time, Rehab Synergies has
between 400 and 600 therapists and assistants working at its facilities. The
size of each facility, the number of therapists that work at each facility, and
the number of patients served at each facility varies.
The 22 plaintiffs (“Plaintiffs”) in this case worked in five different job
positions—speech language pathologist (“SLP”), physical therapist
(“PT”), physical therapist assistant (“PTA”), occupational therapist
(“OT”), and certified occupational therapist assistant (“COTA”)—at 20
Rehab Synergies’ facilities serving a variety of patients with different
conditions, including patients with dementia and patients recovering from
strokes, accidents, and surgeries. Plaintiffs reported to a total of 22 different
DORs.
Regardless of job title and facility, all Plaintiffs were subject to
productivity requirements. Rehab Synergies calculated each therapist’s
productivity by dividing the amount of his or her billable time by the total
hours he or she was clocked in. In general, billable time was time spent on
patient care, while non-billable time was time spent performing other tasks
when a patient was not present. Plaintiffs used a computer program to clock
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in and track their time. Plaintiffs’ productivity requirements ranged from
88% to 100%. Rehab Synergies had a companywide goal of 90% productivity.
To achieve 90% productivity, a therapist needed to record 54 minutes of
billable time for every hour on-the-clock, leaving the equivalent of just six
minutes per hour to complete non-billable tasks.
Plaintiffs had access to a number of “efficiency measures,” however,
that could help boost their productivity, including: (1) multi-tasking by
performing certain non-billable tasks while also performing a billable task;
(2) “layering modalities,” meaning providing therapy to more than one
patient at the same time or providing more than one type of therapy to a
patient at the same time; and (3) supervising student interns, whose
productive time would then be included in the supervising therapist’s
productive time. Nevertheless, Plaintiffs had trouble meeting productivity
requirements. Plaintiffs claimed that they did non-billable work “off-the-
clock” to boost their productivity and as a result worked unpaid overtime.
Some Plaintiffs claimed that their DOR expressly told them to change their
time entries to increase their productivity, while others claimed that their
DOR implied that they should do so. Some Plaintiffs claimed they explicitly
told their DOR that they were working off-the-clock, while others claimed
that their DOR was aware of off-the-clock work even though it was not
explicitly discussed.
B.
In January 2018, Loy filed a lawsuit against Rehab Synergies alleging
violations of the FLSA’s overtime provisions and seeking to pursue a
collective action. Loy, an SLP who worked at two of Rehab Synergies’
locations from March 2014 through August 2016, alleged that she and other
therapists often worked more than 40 hours a week without getting paid for
overtime due to “onerous productivity requirements” set by Rehab
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Synergies, and further, alleged that Rehab Synergies knew of and “expressly
encouraged” its employees to work “off the clock” in violation of the FLSA.
After limited discovery, the district court granted Loy’s opposed
motion to conditionally certify a collective action and authorized the sending
of notice to approximately 1,000 eligible opt-in plaintiffs comprising “all
therapists . . . who have been employed by Defendant at any time since
March 8, 2015 at any of Defendant’s skilled nursing facilities in the state of
Texas.” After additional discovery, Rehab Synergies moved to decertify the
collective. The district court denied the motion, concluding that Plaintiffs
were similarly situated. 1
Of approximately 1,000 potentially eligible plaintiffs, about 50 joined
the collective action. By the time of trial, the number of plaintiffs had
dropped to 22. During the trial, Rehab Synergies renewed its motion for
decertification both at the close of Plaintiffs’ evidence and the close of its own
case. Both motions were denied. The jury returned a verdict in favor of
Plaintiffs. As requested by Rehab Synergies, the jury made individual liability
findings as to whether each Plaintiff proved that he or she performed unpaid
work that Rehab Synergies knew or had reason to know was occurring and
individual findings as to the amount of unpaid work performed by each
Plaintiff. The jury also found that Rehab Synergies had willfully violated the
FLSA.
_____________________
1
Although the district court “conditionally certified” the collective action and
allowed notice to be sent pursuant to the two-step Lusardi approach—which, at the time,
had been permitted but not explicitly endorsed by this court—by the time Rehab Synergies
filed its motion for decertification this court in Swales had rejected Lusardi’s “conditional
certification” step. Swales v. KLLM Transp. Servs., L.L.C., 985 F.3d 430, 441 (5th Cir.
2021) (citing Lusardi v. Xerox Corp., 118 F.R.D. 351 (D.N.J. 1987)). In evaluating the
motion for decertification, the district court applied the standards in Swales.
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II.
This court reviews a district court’s decision to allow an FLSA case
to proceed as a collective action for abuse of discretion. Swales v. KLLM
Transp. Servs., L.L.C., 985 F.3d 430, 439 (5th Cir. 2021) (citing Steele v.
Leasing Enters., Ltd., 826 F.3d 237, 248 (5th Cir. 2016)). “A district court
abuses its discretion if it bases its decision on an erroneous view of the law or
on a clearly erroneous assessment of the evidence.” Hesling v. CSX Transp.,
Inc., 396 F.3d 632, 638 (5th Cir. 2005). Whether the district court applied
the correct legal standards is reviewed de novo; its factual findings are subject
to deferential clear-error review; and its ultimate decision to allow the case
to proceed as a collective action is reviewed for abuse of discretion. See
Swales, 985 F.3d at 439.
III.
Before addressing the merits, we briefly address and dispose of
Plaintiffs’ contentions that we lack jurisdiction. First, Plaintiffs claim that
Rehab Synergies did not preserve its collective action challenge for appellate
review because it did not raise it in a post-verdict motion in the trial court.
The caselaw cited by Plaintiffs in support is inapposite. While our precedent
requires sufficiency-of-the-evidence challenges to be raised in a post-verdict
motion as a prerequisite to appellate review, McLendon v. Big Lots Stores, Inc.,
749 F.3d 373, 374 (5th Cir. 2014), errors in the trial court “duly objected to,
dealing with matters other than the sufficiency of the evidence . . . may be
raised on appeal” without first being presented to the trial court in a post-
verdict motion. 9B Arthur R. Miller, Federal Practice and
Procedure § 2540 (3d ed. 2022). Rehab Synergies “duly objected to” the
district court’s collective action decision three times during the proceedings
and thus properly preserved the issue for appeal.
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Second, Plaintiffs assert that this appeal is moot because the district
court did not allow Plaintiffs to rely on representative proof, but instead
required all 22 plaintiffs to testify and had the jury make separate findings of
liability for each plaintiff, such that the Seventh Amendment would preclude
reexamination of the jury’s findings even if there were new, individual trials.
Plaintiffs do not, however, cite a case that supports their position, and we are
aware of none. “A case becomes moot only when it is impossible for a court
to grant any effectual relief whatever to the prevailing party.” Knox v. Serv.
Emps. Int’l Union, Local 1000, 567 U.S. 298, 307 (2012) (cleaned up). Here,
if we determine that the district court abused its discretion in allowing the
case to proceed as a collective action, we could grant “effectual relief” by
vacating and remanding for individual trials. This case is not moot.
IV.
Turning to the merits, an FLSA case may be brought “by any one or
more employees for and in behalf of himself or themselves and other
employees similarly situated.” 29 U.S.C. § 216(b). “A collective action
allows [FLSA] plaintiffs the advantage of lower individual costs to vindicate
rights by the pooling of resources. The judicial system benefits by efficient
resolution in one proceeding of common issues of law and fact arising from
the same alleged [unlawful] activity.” Hoffmann-La Roche Inc. v. Sperling,
493 U.S. 165, 170 (1989); Sandoz v. Cingular Wireless LLC, 553 F.3d 913, 919
(5th Cir. 2008) (“Congress’ purpose in authorizing § 216(b) class actions
was to avoid multiple lawsuits where numerous employees have allegedly
been harmed by a claimed violation or violations of the FLSA by a particular
employer.”) (quoting Prickett v. DeKalb Cnty., 349 F.3d 1294, 1297 (11th Cir.
2003)).
In Swales, we explained that, when managing a putative FLSA
collective action, “a district court should identify, at the outset of the case,
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what facts and legal considerations will be material to determining whether a
group of ‘employees’ is ‘similarly situated.’ And then it should authorize
preliminary discovery accordingly.” Swales, 985 F.3d at 441. To decide
whether a group of employees is similarly situated, the district court must
consider “whether merits questions can be answered collectively.” Id. at
442. “After considering all available evidence, the district court may
conclude that the Plaintiffs and Opt-ins are too diverse a group to be
‘similarly situated’ for purposes of answering” the relevant legal questions
on the merits. Id. at 443. If answering the merits questions “requires a highly
individualized inquiry into each potential opt-in’s circumstances,” then the
employees are likely not similarly situated. Id. at 442. It is the plaintiffs’
burden to establish that they are similarly situated. Id. at 443.
Pre-Swales, district courts following the Lusardi approach considered
three factors when deciding whether employees were “similarly situated”:
“(1) [the] disparate factual and employment settings of the individual
plaintiffs; (2) the various defenses available to [the] defendant which appear
to be individual to each plaintiff; [and] (3) fairness and procedural
considerations.” Id. at 437 (quoting Thiessen v. Gen. Elec. Cap. Corp., 267
F.3d 1095, 1103 (10th Cir. 2001)) (alterations in original); Roussell v. Brinker
Int’l, Inc., 441 F. App’x 222, 226 (5th Cir. 2011). While Swales rejected
Lusardi’s two-step method of “conditional certification” and notice
followed by a motion to decertify, courts may still find it useful to consider
the Lusardi factors to help inform or guide the similarly situated analysis
given the similarities between Swales and Lusardi’s second step. See, e.g.,
Badon v. Berry’s Reliable Res., LLC, No. 2:19-CV-12317, 2021 WL 933033, at
*3 (E.D. La. Mar. 11, 2021). That said, use of these factors is not mandatory,
as there is no one-size-fits-all analysis or mechanical test to apply: “The
bottom line is that the district court has broad, litigation-management
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discretion,” “cabined by the FLSA’s ‘similarly situated’ requirement.”
Swales, 985 F.3d at 443.
Rehab Synergies contends that the district court abused its discretion
in two ways. First, Rehab Synergies argues that the district court committed
an error of law by misidentifying the “central merits issue.” Second, Rehab
Synergies asserts that the district court abused its discretion because all three
Lusardi factors weigh against a determination that Plaintiffs were similarly
situated. As explained below, we disagree.
A.
Rehab Synergies asserts that the district court committed legal error
when analyzing whether Plaintiffs were similarly situated by misidentifying
the “merits question” as whether Plaintiffs were subject to a common
productivity requirement instead of whether Rehab Synergies knew or
should have known that Plaintiffs were working overtime. We review de novo
whether the district court applied the correct legal standards. Swales, 985
F.3d at 439.
To recover unpaid overtime under the FLSA, an employee “must
show that he was ‘employed’ . . . during the periods of time for which he
claims unpaid overtime,” which requires a showing that the employer “had
knowledge, actual or constructive, that he was working.” Newton v. City of
Henderson, 47 F.3d 746, 748 (5th Cir. 1995) (citation omitted). Constructive
knowledge exists if an employer “exercising reasonable diligence would
acquire knowledge of this fact.” Brennan v. Gen. Motors Acceptance Corp., 482
F.2d 825, 827 (5th Cir. 1973). “An employer who is armed with [knowledge
that an employee is working overtime] cannot stand idly by and allow an
employee to perform overtime work without proper compensation, even if
the employee does not make a claim for the overtime compensation.”
Newton, 47 F.3d at 748 (quoting Forrester v. Roth’s I.G.A. Foodliner, Inc., 646
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F.2d 413, 414 (9th Cir. 1981)) (alteration in original); see also 29 U.S.C.
§ 203(g) (“‘Employ’ includes to suffer or permit to work”); 29 C.F.R.
§ 785.11 (“Work not requested but suffered or permitted is work time”).
However, “if the ‘employee fails to notify the employer or deliberately
prevents the employer from acquiring knowledge of the overtime work, the
employer’s failure to pay for the overtime hours is not a violation[.]’”
Newton, 47 F.3d at 748 (quoting Forrester, 646 F.2d at 414).
After a thorough review of the district court’s orders, we conclude
that there was no legal error. The district court appropriately considered
“whether merits questions [could] be answered collectively.” Swales, 985
F.3d at 442. In its order denying Rehab Synergies’ motion to decertify, the
district court addressed both the legal requirement of employer knowledge
and Plaintiffs’ evidence on the issue when determining whether Plaintiffs
were similarly situated.
Rehab Synergies cites Chambers v. Sears Roebuck and Co. for the
proposition that an employer’s use of productivity measures does not
demonstrate its actual or constructive knowledge of employees’ off-the-clock
work to meet those measures. 428 F. App’x 400, 420 (5th Cir. 2011). But
the present case is clearly distinguishable from Chambers, where the plaintiffs
relied only on the fact that the “stated purpose” of the company’s
productivity requirement was to increase efficiency as circumstantial
evidence of constructive knowledge of off-the-clock work while “fail[ing] to
cite to any direct evidence that Sears had actual or constructive knowledge
that they were performing these tasks outside of the working day.” Id. Here,
by contrast, the district court did not rely solely on the existence of a
productivity requirement to determine that Plaintiffs were similarly situated,
but also evidence of employer knowledge of off-the-clock work in violation of
the FLSA.
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B.
Next, Rehab Synergies asserts that the district court abused its
discretion in concluding that Plaintiffs were similarly situated. As the parties
structure their arguments in terms of the Lusardi factors, for ease of analysis,
we consider each factor in turn.
i. Disparate factual and employment settings
According to Rehab Synergies, the district court erroneously accepted
Plaintiffs’ assertion of a common productivity requirement, which could only
be met by working off-the-clock, while ignoring factual differences in each
plaintiff’s work situation which undermined a finding of similarity. Rehab
Synergies asserts that there was no common productivity goal. Instead, it
points to varying productivity requirements applicable to different plaintiffs,
ranging from 88% to 100%. Additionally, Rehab Synergies argues that the
district court erred by disregarding universally applicable company policies
requiring FLSA compliance and prohibiting off-the-clock work. After
reviewing the record, we conclude that the district court’s factual findings
were not clearly erroneous.
Plaintiffs all testified that they were subject to productivity
requirements. Additionally, members of Rehab Synergies’ management
testified to productivity requirements of at least 90% across all facilities.
Plaintiffs did not need to be subject to identical productivity requirements to
be similarly situated. Nor are company policies requiring FLSA compliance
and prohibiting off-the-clock work dispositive given the evidence that Rehab
Synergies also had an unwritten policy or practice of off-the-clock work.
In Roussell v. Brinker International—a collective action by servers at
various Chili’s Restaurants challenging an unlawful practice of coercing
tipped employees to share tips with tip-ineligible employees—the employer
contended that the plaintiffs were not similarly situated because there was
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“no ‘single, uniform, nationwide policy or practice of coerced tip-sharing,’”
but only acts of “rogue manager[s].” 441 F. App’x at 226. We disagreed and
affirmed the district court’s certification because “[a]lthough there was no
corporate policy mandating tip-sharing, the district court found the
deposition testimony indicative of a pattern.” Id. “This conclusion was not
an abuse of discretion,” we said, because the evidence showed that “[a]ll
[plaintiffs] were subjected to some form of managerial coercion in tipping,”
despite differences in their individual employment settings and the lack of a
formal corporate policy mandating unlawful tip-sharing. Id. Likewise, here,
the district court’s factual finding that Plaintiffs were all subject to Rehab
Synergies’ unwritten policy or practice of off-the-clock work was not clearly
erroneous, and its conclusion that they were similarly situated not an abuse
of discretion.
Rehab Synergies also argues that, even if Plaintiffs were subject to
similar productivity requirements, they were still not “similarly situated”
because whether the company had actual or constructive knowledge that they
were working overtime could not be answered collectively due to their
disparate employment settings. Rehab Synergies is correct that Plaintiffs
worked in five different positions at 20 different facilities, reported to 22
different directors during the relevant period, and testified to differing
interactions with their directors regarding productivity requirements and off-
the-clock work. Even with these differences, however, there was evidence
that Rehab Synergies had knowledge of Plaintiffs’ off-the-clock work.
“There is need for care in evaluating distinctions among employees, but
those distinctions must make a difference relevant to the legal issues
presented.” Id. at 226–27. Here, the evidence supported the conclusion that
Plaintiffs were all subject to Rehab Synergies’ practice or pattern of
knowingly countenancing or expressly encouraging off-the-clock work. The
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district court did not abuse its discretion in concluding that they were
similarly situated.
ii. Individualized defenses
Next, Rehab Synergies contends that it had two “individualized
defenses” that were not appropriate for collective treatment: (1) Plaintiffs’
differing access to and use of various efficiency measures to boost
productivity; and (2) Plaintiffs’ differing achievement of productivity goals.
Nothing about the collective action mechanism prevented Rehab Synergies
from presenting evidence of its defenses, especially considering that
Plaintiffs were not permitted to rely on representative proof and instead were
required to testify individually. Indeed, there was testimony at trial as to both
defenses, including testimony elicited from Rehab Synergies on cross-
examination. 2 This supports the conclusion that it was not an abuse of
discretion for the district court to allow the case to proceed as a collective
action. Furthermore, while Rehab Synergies emphasizes factual differences
between individual Plaintiffs, it has not shown that the district court’s
determination that its defenses applied to Plaintiffs’ common claims was
erroneous.
iii. Fairness and procedural considerations
Last, Rehab Synergies argues that the trial itself demonstrated that it
was an abuse of discretion to permit the case to proceed as a collective action.
Rehab Synergies focuses on (1) the district court requiring all 22 Plaintiffs to
testify (either live or by deposition) and requiring the jury to make individual
findings as to each Plaintiff, which it claims resulted in 22 “mini-trials” and
_____________________
2
In their brief, Plaintiffs suggest that the jury appears to have “at least partially
credited the individualized defenses” because it did not award any Plaintiff the full amount
of unpaid overtime requested, nor apply an across-the-board reduction to each Plaintiff.
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revealed the district court’s “tacit recognition” that Plaintiffs were not
similarly situated; and (2) the district court allowing Plaintiffs’ counsel to
argue to the jury in closing that it should draw an adverse inference from
Rehab Synergies’ failure to call the director of each facility to testify to rebut
each Plaintiff. In short, Rehab Synergies argues that the trial resulted in a
“disparity” where Plaintiffs were able to testify individually and
simultaneously take advantage of the benefits of a collective action, while
arguing to the jury that Rehab Synergies needed to put on proof of its
defenses as to each Plaintiff by calling all individual facility directors to
testify. We disagree.
First, it is not improper for a district court to limit representative
testimony or require individual testimony. We approved of a similar practice
in Roussell. See 441 F. App’x at 227 (“We would give Brinker’s arguments
more credence if this case had proceeded on a truly representative basis.
Instead, all 55 plaintiffs presented individualized evidence through testimony
to the jury or deposition excerpts to the court.”). Moreover, it was Rehab
Synergies that successfully moved the district court—over Plaintiffs’
objection—to require the jury to make individual findings of liability.
Second, Plaintiffs’ adverse-inference argument does not suggest a
“disparity” as a result of the case proceeding as a collective action; rather,
the record shows that any “disparity” had other causes. Pre-trial, Rehab
Synergies filed a motion in limine to preclude any adverse inference
arguments if Plaintiffs were allowed to try the case on representative proof
and Rehab Synergies was not allowed to call each individual Plaintiff as a
witness or was otherwise limited in the number of rebuttal witnesses. Here,
however, the district court instead required every Plaintiff to testify at trial.
When Rehab Synergies attempted to include all its facility directors on its
witness list for trial, even though it had failed to disclose all of them in its
initial or supplemental Rule 26 disclosures, the district court granted
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Plaintiffs’ motion to limit Rehab Synergies to calling timely-disclosed
witnesses. Finally, Rehab Synergies’ request at trial for a jury instruction
prohibiting the drawing of an adverse inference based on the failure to call a
witness was denied, presumably because the case had not proceeded on
representative proof. From the foregoing, we conclude that the district
court’s decision to allow the case to proceed as a collective action did not
result in a lack of fairness or procedurally prevent Rehab Synergies from
defending the case. 3
V.
In sum, after reviewing the briefs, the record, and the relevant law, we
conclude that the district court applied the correct legal standards and that
its factual findings were not clearly erroneous. Because the Plaintiffs were
similarly situated, it would have been inconsistent with the FLSA to require
22 separate trials absent countervailing due process concerns that are simply
not present here. See Sandoz, 553 F.3d at 919. The district court did not
abuse its discretion in allowing the case to proceed as a collective action.
AFFIRMED.
_____________________
3
While asserting that the district court’s rulings limiting its witness list and
permitting an adverse inference argument resulted in unfairness, Rehab Synergies did not
move for a new trial on either basis and has not appealed the district court’s evidentiary
ruling or jury instructions.
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