Robert Probert, et al v. Family Centered Services of Al, et al

Filing

FILED OPINION (MARY M. SCHROEDER, DIARMUID F. O'SCANNLAIN and RICHARD R. CLIFTON) REVERSED AND REMANDED. Judge: RRC Authoring. FILED AND ENTERED JUDGMENT. [7794897]

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FOR PUBLICATION

UNITED STATES COURT OF APPEALS
FOR THE NINTH CIRCUIT
ROBERT PROBERT; LORETTA
PROBERT,
Plaintiffs-Appellees,
GENE GRISSOM; SANDRA GRISSOM;
DONNA GRIMES; KENNETH
MCDANIELS; JOHN GRIMES; LEONA
MCDANIELS; ERIC CLONINGER;
DEBRA CLONINGER,
Plaintiff-Intervenors- Appellees,
v.
FAMILY CENTERED SERVICES OF
ALASKA, INC.; JOHN W. REGITANO;
KATHY CANNOE; SUSAN DALE;
LONNIE HOVDE; DEBORAH L.
COXON,
Defendants-Appellants.





No. 09-35703
D.C. No.
4:07-cv-00030-RRB
OPINION



Appeal from the United States District Court
for the District of Alaska
Ralph R. Beistline, Chief District Judge, Presiding
Argued and Submitted
July 26, 2010—Anchorage, Alaska
Filed June 23, 2011
Before: Mary M. Schroeder, Diarmuid F. O’Scannlain and
Richard R. Clifton, Circuit Judges.
Opinion by Judge Clifton

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PROBERT v. FAMILY CENTERED SERVICES

OF

ALASKA

COUNSEL
Kenneth L. Covell (argued), Law Offices of Kenneth L.
Covell, Fairbanks, Alaska, for plaintiffs-appellees Loretta and
Robert Probert and plaintiffs-intervenors Debra and Eric
Cloninger, Donna and John Grimes, Gene and Sandra Grissom, and Kenneth and Leona McDaniels
Richard D. Monkman (argued), Sonosky, Chambers, Sachse,
Miller & Munson, LLP, Juneau, Alaska, for defendantsappellants Family Centered Services of Alaska, John W.
Regitano, Kathy Cannoe, Susan Dale, Lonnie Hovde, and
Deborah L. Coxon.

OPINION
CLIFTON, Circuit Judge:
Defendants Family Centered Services of Alaska (“FCSA”)
and its officers filed this interlocutory appeal challenging the
district court’s conclusion that FCSA’s Therapeutic Family
Homes (“Homes”) are covered by the Fair Labor Standards
Act (“FLSA”) and are subject to its overtime provisions. We
conclude that the Homes are not covered by that statute
because they are not an “institution primarily engaged in the
care of the sick, the aged, mentally ill or defective who reside
on the premises of such institution.” 29 U.S.C. § 203(r)(2)(A).
As a result, we reverse and remand for further proceedings.
I.

Background

Plaintiffs Loretta and Robert Probert and PlaintiffsIntervenors Debra and Eric Cloninger, Donna and John
Grimes, Gene and Sandra Grissom, and Kenneth and Leona
McDaniels are married couples who worked as “house parents” in FCSA’s Homes. Each Home housed up to five chil-

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dren. All the children were “severely emotionally disturbed”
as defined by the Alaska law that qualifies the Homes for
Medicaid funding, 7 Alaska Admin. Code § 43.471, and each
of the children had at least one diagnosed mental disorder
under Axis-I of the current Diagnostic and Statistical Manual
of Mental Disorders. The children attended local public
schools and participated in other activities away from the
Homes. The children participated in group therapy conducted
by clinicians in the Homes, but received most of their medical
and psychological treatment outside the Homes. Plaintiffs
were not licensed medical or social service professionals.
Plaintiffs sued FCSA for overtime pay under the FLSA.1
After denying Plaintiffs’ first motion for partial summary
judgment, the district court granted a similar motion for partial summary judgment in their favor, concluding that FCSA
through its Homes, was operating “an institution primarily
engaged in the care of the . . . mentally ill or defective who
reside on the premises of such institution,’ ” 29 U.S.C.
§ 203(r)(2)(A), and was therefore an enterprise subject to the
FLSA’s overtime provisions, id. § 207(a)(1). The district
court observed that the FLSA does not define “institution.” As
an analogy, the district court looked to a federal Medicaid
regulation, not directly applicable to this situation, that
defined “institution” as “an establishment that furnishes (in
single or multiple facilities) food, shelter, and some treatment
1
FCSA’s contracts with the house parents stated the annual compensation and said that the house parents were exempt from overtime compensation. Probert’s contract required him to work 40 hours per week, and
Loretta Probert’s required her to work at least 10 hours per week. But
Plaintiffs claim that full-time and part-time house parents alike frequently
worked as many as 98 hours per week. FCSA disputes the number of
hours each Plaintiff worked, but that dispute is not before us on this interlocutory appeal. The parties also debate whether the house parents were
salaried employees, but that question is not before us on appeal, either. We
determine only whether the district court correctly determined that
FCSA’s homes qualified as an “enterprise” subject to the FLSA’s overtime provision.

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or services to four or more persons unrelated to the proprietor,” 42 C.F.R. § 435.1010, and concluded that the “Homes
(either individually or as a group) could be considered an
‘institution.’ ” The court also relied on FCSA’s own website,
which described the Homes as “provid[ing] quality residential
care to male and female youth ages 6-18 that are experiencing
mental health and behavioral issues and are at imminent risk
of psychiatric placement outside of their community.”
After denying FCSA’s motion for reconsideration, the district court certified both orders for an immediate appeal under
28 U.S.C. § 1292(b). We granted FCSA permission to appeal.
II.

Discussion

[1] The FLSA sets a national minimum wage, 29 U.S.C.
§ 206(a)(1), and requires overtime pay of one and a half times
an employee’s hourly wage for every hour worked over 40
hours in a week. Id. § 207(a)(1). With certain exceptions not
relevant to this case, see id. § 213, these requirements apply
both on an individual basis to any employee “who in any
workweek is engaged in commerce or in the production of
goods for commerce,” and on an enterprise-wide basis to all
employees “employed in an enterprise engaged in commerce
or in the production of goods for commerce.” Id.
§§ 206(a)(1), 207(a)(1). Because of the use of the terms
“commerce” and “enterprise,” it was originally understood
that these statutes did not cover employees of most non-profit
organizations.
[2] In 1966, however, Congress amended the FLSA to
bring certain kinds of non-profit institutions within the scope
of “enterprise” coverage. Under the relevant amendment,
“ ‘[e]nterprise’ means . . . activities performed . . . by any person or persons for a common business purpose.” Id.
§ 203(r)(1). Activities are deemed to have a business purpose
when they are performed

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in connection with the operation of a hospital, an
institution primarily engaged in the care of the sick,
the aged, the mentally ill or defective who reside on
the premises of such institution, a school for mentally or physically handicapped or gifted children, a
preschool, elementary or secondary school, or an
institution of higher education (regardless of whether
or not such hospital, institution, or school is operated
for profit or not for profit).
Id. § 203(r)(2)(A). The amendment further provides that such
an institution qualifies as an “[e]nterprise engaged in commerce or in the production of goods for commerce.” Id.
§ 203(s)(1)(B). Institutions covered by these provisions are
therefore subject to FLSA’s minimum wage and overtime
requirements even if they are operated not for profit.
Plaintiffs argue that each of the FCSA Homes in which
they worked is covered by the statute as “an institution primarily engaged in the care of . . . the mentally ill . . . who
reside on the premises of such institution.”2 The FLSA is a
remedial statute that is “to be liberally construed to apply to
the furthest reaches consistent with Congressional direction.”
Dent v. Cox Communications Las Vegas, Inc., 502 F.3d 1141,
1146 (9th Cir. 2007) (internal quotation marks omitted); see
also 29 C.F.R. § 779.101 (“An employer who claims an
exemption under the Act has the burden of showing that it
applies.”). Nonetheless, we conclude that the language of the
statute does not cover the FCSA Homes, for two primary reasons.
[3] The first reason is that the Homes were not “primarily
engaged” in providing “care,” as that term is used in the statute. The statute refers to “care” in relation to groups with special needs, namely “the sick, the aged, the mentally ill or
2

We assume for the purposes of this appeal that residents of the Homes
qualify as “mentally ill.”

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defective.” 29 U.S.C. § 203(r)(2)(A). As such, we understand
“care” in this context to include something more like treatment. What the Homes primarily provided, as their name suggests, was a home or a residence. As noted above, the children
attended school, engaged in activities, and received most of
their medical and psychological treatment from medical and
mental health professionals outside the Homes. Obviously, for
children a home should be more than simply a place to live,
and the children presumably benefitted from Plaintiffs’ “care”
as house parents. But Plaintiffs were not medical or social service professionals and were not primarily focused on providing the type of “care” that those professionals provide.
[4] The language of the statute clearly suggests a covered
institution must provide more than the general care of a residence. In addition to requiring that the institution’s patrons
“reside on the premises of [the] institution,” the institution
must provide “care” of the type that is provided to “the sick,
the aged, the mentally ill or defective.” If residing on the
premises were enough by itself to define the given premises
as covered by the statute, then the requirement that the institution be “primarily engaged” in the “care” of the individuals
residing there would be superfluous. We are to avoid interpreting a statute in that manner. See TRW Inc. v. Andrews,
534 U.S. 19, 31 (2001) (“It is a cardinal principle of statutory
construction that a statute ought, upon the whole, to be so
construed that, if it can be prevented, no clause, sentence, or
word shall be superfluous, void, or insignificant.” (internal
quotation marks omitted)).
[5] Second, the Homes do not appear to us to be “institutions” as that term is used in this statute. Around the time the
1966 amendment was drafted, the Oxford English Dictionary
offered the following definition of “institution”:
An establishment, organization, or association, instituted for the promotion of some object, esp. one of
public or general utility, religious, charitable, educa-

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tional, etc., e.g. a church, school, college, hospital,
asylum, reformatory, mission, or the like; as a literary and philosophical institution, a deaf and dumb
institution, the Royal National Life-boat Institution,
the Royal Masonic Benevolent Institution . . . , the
Railway Benevolent Institution, etc.
5 Oxford English Dictionary 354 (1933, reprinted 1961). The
FCSA Homes do not fit well within that definition.
Nor do the Homes fit well with the neighboring parts of the
relevant statute. They are not very much like
a hospital, . . . , a school for mentally or physically
handicapped or gifted children, a preschool, elementary or secondary school, or an institution of higher
education (regardless of whether or not such hospital, institution, or school is operated for profit or not
for profit).
29 U.S.C. § 203(r)(2)(A).
[6] In ascertaining the meaning of an ambiguous term, “we
may use canons of construction, legislative history, and the
statute’s overall purpose to illuminate Congress’s intent.”
Ileto v. Glock, Inc., 565 F.3d 1126, 1133 (9th Cir. 2009)
(internal quotation marks omitted). One of those canons of
statutory construction is noscitur a sociis, which counsels that
an ambiguous term “is given more precise content by the
neighboring words with which it is associated.” United States
v. Williams, 553 U.S. 285, 294 (2008). Thus, our interpretation of “institution” should be informed by the other establishments listed in that statute, namely hospitals and schools.
Those facilities are staffed by professionals and provide more
comprehensive medical, psychological, or educational programs, usually for a much larger population. The FCSA
Homes, run by two house parents and housing no more than
five children each, seem by comparison out of place. We con-

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clude, therefore, that they are not meant to be included within
that list of establishments.
The legislative history of the 1966 amendment to the FLSA
does not point to a different conclusion. The Senate report, for
example, frequently refers to “hospitals and related institutions” as shorthand for the “enterprises,” other than schools,
covered by § 203(r)(2)(A). See S. Rep. No. 89-1487, at 5, 8,
13, 25, 26, 28 (1966). The report never mentions foster homes
or group homes or any other facility similar to the FCSA
Homes.
Plaintiffs argue that we should interpret § 203(r)(2)(A) to
include FCSA’s Homes because guidance from the Department of Labor indicates that a reference to “nursing homes”
in that provision should be interpreted broadly. See Dep’t of
Labor, Wage and Hour Division, Field Operations Handbook
(FOH), ch. 12, § 12g02 (“[Institutions primarily engaged in
the care of the aged] are not limited to nursing homes, . . . but
include those institutions generally known as nursing homes,
rest homes, convalescent homes, homes for the elderly and
infirm, and the like.”). Plaintiffs argue that by the same reasoning, “institution primarily engaged in the care of the . . .
mentally ill” should be interpreted broadly to include FCSA’s
Homes. We disagree.
The FCSA Homes are very different from nursing homes
and the related facilities listed in the handbook. The children
who live at the FCSA Homes spend much of their time, perhaps a majority of their waking hours, elsewhere. They leave
the Homes to attend school, participate in activities, and
receive medical and psychological treatment. Residents of
nursing homes are not necessarily confined completely to
those facilities, but the expectation is that the vast majority of
their time is spent there. Those facilities are also staffed with
professionals, not simply house parents, and residents may be
expected to receive substantially greater “care” in those facilities.

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Furthermore, it does not appear to us that the FOH is a
proper source of interpretive guidance. See Christensen v.
Harris Cnty., 529 U.S. 576, 587 (2000). The handbook itself
says that it “is not used as a device for establishing interpretative policy.” FOH, Foreword at 1, available at
http://www.dol.gov/whd/FOH/index.htm (last checked June
15, 2011).
III.

Conclusion

[7] We conclude, therefore, that the Homes operated by
FCSA are not covered by the overtime provisions of the
FLSA. We reverse the district court’s interlocutory order
granting partial summary judgment and remand for further
proceedings consistent with this opinion.
REVERSED and REMANDED.