White et al v. Northwest Alabama Treatment Center Inc

Filing 26

MEMORANDUM OPINION AND ORDER DENYING WITHOUT PREJUDICE 8 MOTION for Summary Judgment. Defendant is DIRECTED to file an Answer to the Complaint within fourteen (14) days. Signed by Magistrate Judge T Michael Putnam on 8/13/2018. (JLC)

FILED
2018 Aug-13 PM 05:02
U.S. DISTRICT COURT
N.D. OF ALABAMA

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ALABAMA
SOUTHERN DIVISION
ROBERT WHITE, et al.,
Plaintiff,
v.
NORTHWEST ALABAMA
TREATMENT CENTER, INC.,
Defendant.

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Case No. 2:17-cv-01233-TMP

MEMORANDUM OPINION and ORDER
This matter is before the court on the Defendants’ Motion for Summary
Judgment. (Doc. 8). 1 The defendant, Northwest Alabama Treatment Center, Inc.
(“NWATC”), filed its motion on September 22, 2017, seeking to dismiss the
plaintiff’s complaint in its entirety. Under the Consolidated Omnibus Budget
Reconciliation Act of 1984 (“COBRA”), 29 U.S.C. §§ 1161-1169 (2017), the
defendant argues that the small employer exception bars the plaintiff’s claim
because NWATC does not employ more than twenty full-time employees. 19
U.S.C. § 1161(b).

1

The motion has been fully briefed, and the parties have

Originally, the Defendant filed a motion to dismiss supported by evidence outside of the
pleadings. Because the evidence did not qualify for the incorporation by reference doctrine, the
court converted the motion to dismiss into a motion for summary judgment and allowed the
plaintiffs to conduct limited discovery to respond to the motion. (Doc. 21).

consented to dispositive jurisdiction by a United States Magistrate Judge in
accordance with 28 U.S.C. § 636(c). (Doc. 16).
I.

SUMMARY JUDGMENT STANDARD
Under Federal Rule of Civil Procedure 56(a), summary judgment is proper

“if the movant shows that there is no genuine dispute as to any material fact and
the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a). The
party asking for summary judgment “always bears the initial responsibility of
informing the district court of the basis for its motion, and identifying those
portions of ‘the pleadings, depositions, answers to interrogatories, and admissions
on file, together with the affidavits, if any’ which it believes demonstrate the
absence of a genuine issue of material fact.” Celotex Corp. v. Catrett, 477 U.S.
317, 323 (1986) (quoting former Fed. R. Civ. P. 56(c)). The movant can meet this
burden by presenting evidence showing there is no dispute of material fact or by
showing that the nonmoving party has failed to present evidence in support of
some element of its case on which it bears the ultimate burden of proof. Celotex,
477 U.S. at 322-23. There is no requirement, however, “that the moving party
support its motion with affidavits or other similar materials negating the
opponent’s claim.” Id. at 323.
Once the moving party has met its burden, Rule 56 “requires the nonmoving
party to go beyond the pleadings and by her own affidavits, or by the ‘depositions,
2

answers to interrogatories, and admissions of file,’ designate ‘specific facts
showing that there is a genuine issue for trial.’” Id. at 324 (quoting former Fed. R.
Civ. P. 56(e)).

The nonmoving party need not present evidence in a form

necessary for admission at trial; however, he may not merely rest on his pleadings.
Celotex, 477 U.S. at 324. “[T]he plain language of Rule 56(c) mandates the entry
of summary judgment, after adequate time for discovery and upon motion, against
a party who fails to make a showing sufficient to establish the existence of an
element essential to that party’s case, and on which that party will bear the burden
of proof at trial.” Id. at 322.
After the plaintiff has properly responded to a proper motion for summary
judgment, the court “shall” grant the motion if there is no genuine issue of material
fact, and the moving party is entitled to judgment as a matter of law. Fed. R. Civ.
P. 56(a). The substantive law will identify which facts are material and which are
irrelevant. Anderson, 477 U.S. at 248. A dispute is genuine “if the evidence is
such that a reasonable jury could return a verdict for the nonmoving party.” Id. at
248. “[T]he judge’s function is not himself to weigh the evidence and determine
the truth of the matter but to determine whether there is a genuine issue for trial.”
Id. at 249. His guide is the same standard necessary to direct a verdict: “whether
the evidence presents a sufficient disagreement to require submission to a jury or
whether it is so one-sided that one party must prevail as a matter of law.” Id. at
3

251-52; see also Bill Johnson’s Restaurants, Inc. v. N.L.R.B., 461 U.S. 731, 745 n.
11 (1983).
However, the nonmoving party “must do more than simply show that there
is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co.,
Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). The evidence supporting a
claim must be “substantial,” Marcus v. St. Paul Fire and Marine Ins. Co., 651 F.2d
379 (5th Cir., Unit B, 1981); a mere scintilla of evidence is not enough to create a
genuine issue of fact. Young v. City of Palm Bay, 358 F.3d 859, 860 (11th Cir.
2004); Kesinger ex rel. Estate of Kesinger v. Herrington, 381 F.3d 1243, 1249-50
(11th Cir. 2004).

If the evidence is merely colorable, or is not significantly

probative, summary judgment may be granted.

Anderson, 477 U.S. at 249

(citations omitted); accord Spence v. Zimmerman, 873 F.2d 256 (11th Cir. 1989).
Furthermore, the court must “view the evidence presented through the prism of the
substantive evidentiary burden,” so there must be sufficient evidence on which the
jury could reasonably find for the plaintiff. Anderson, 477 U.S. at 254; Cottle v.
Storer Communications, Inc., 849 F.2d 570, 575 (11th Cir. 1988). Nevertheless,
credibility determinations, the weighing of evidence, and the drawing of inferences
from the facts are the function of the jury, and therefore the evidence of the nonmovant is to be believed and all justifiable inferences are to be drawn in his favor.
Anderson, 477 U.S. at 255. The non-movant need not be given the benefit of every
4

inference but only of every reasonable inference. Brown v. City of Clewiston, 848
F.2d 1534, 1540 n. 12 (11th Cir. 1988).
II.

FACTS
Viewing the facts favorably to the non-moving plaintiff, the following

appear be undisputed. The plaintiff, Robert White, opened NWATC in 1993 and,
at the time of his termination, served as the President and Program Sponsor. Part
of his duties included the power to employ, manage, and terminate personnel. On
February 18, 2017, NWATC terminated White’s employment, but White “was not
terminated for gross misconduct.” (Doc. 1, ¶ 19). NWATC maintained a group
health plan that insured both White and his wife. However, NWATC did not
notify White or his wife of their rights to continue coverage under COBRA
following his termination.
According to White, NWATC employed both full-time and part-time
employees. He states by affidavit that:

The position or job classification of the employee often determined
whether the employee was considered full-time or part-time. Most
full-time employees were salaried while part-time employees were
paid hourly. . . . A 40-hour work week has never been used to
determine whether an employee was full-time or part-time.

5

(Doc. 23-1 at 3, ¶ 6). 2 Under the Personal Time Off (“PTO”) policy, NWATC
treats full-time employees differently than part-time employees.

Part-time

employees who work between “at least 20 hours but less than 32 hours per week”
qualify for PTO if certain requirements are met. (Doc. 23-1 at 8). Furthermore, on
the PTO policy provided by the defendant to White, a handwritten notation states
that an employee by the name of “David [wa]s working full-time” at some point in
2016. (Doc. 23-1 at 8). 3 Additionally, White identifies at least twenty employees
who were employed full-time during at least part of the 2016 calendar year.
III.

DISCUSSION

Under COBRA, employers that sponsor a group health plan must allow
“each qualified beneficiary who would lose coverage under the plan as a result of a
qualifying event . . . to elect, within the election period, continuation coverage
under the plan.” 29 U.S.C. § 1161(a). After a qualifying event occurs, the plan’s
administrator must notify the qualified beneficiary of the beneficiary’s right to
elect continuation coverage. § 1166(a)(4). However, § 1161(a) does not “apply to

2

NWATC argues that, under its unwritten employment practice, an employee must work
40 hours per week to qualify for full-time status. Because there is a fact dispute on this point, the
court must view the fact in the light most favorable to the non-movant, White. As will be
explained more fully below, it does not appear to the court that NWATC’s employment practice
requires employees to work 40 hours per week to qualify for full-time status.
3

NWATC argues that it does not employ any full-time employees. Because there is a fact
dispute on this point, the court must view the fact in the light most favorable to the non-movant,
White. As will be explained more fully below, NWATC hired full-time employees despite its
assertions to the contrary.
6

any group health plan for any calendar year if all employers maintaining such plan
normally employed fewer than 20 employees on a typical business day during the
preceding calendar year.” § 1161(b).
Although the Eleventh Circuit has not authoritatively adopted a test to
determine when an employer employs more than 20 employees on “a typical
business day,” the Northern District of Georgia has adopted the Department of
Treasury’s regulation to make that determination. See, e.g., Giddens v. University
Yacht Club, Inc., No. Civ.A. 2:05-cv-19-WC, 2006 WL 508056, at *3-7 (N.D. Ga.
March 1, 2006). The Treasury Department’s regulation (“Regulation 54”) states
as follows:

Q–5: What is a small-employer plan?
A–5: (a) Except in the case of a multiemployer plan, a small-employer
plan is a group health plan maintained by an employer (within the
meaning of Q&A–2 of this section) that normally employed fewer
than 20 employees (within the meaning of paragraph (c) of this Q&A–
5) during the preceding calendar year. . . .
(b) An employer is considered to have normally employed fewer than
20 employees during a particular calendar year if, and only if, it had
fewer than 20 employees on at least 50 percent of its typical business
days during that year.
(c) All full-time and part-time common law employees of an employer
are taken into account in determining whether an employer had fewer
than 20 employees; however, an individual who is not a common law
employee of the employer is not taken into account. Thus, the
following individuals are not counted as employees for purposes of
7

this Q&A–5 even though they are referred to as employees for all
other purposes of §§ 54.4980B–1 through 54.4980B–10—
(1) Self-employed individuals (within the meaning of section
401(c)(1));
(2) Independent contractors (and their employees and
independent contractors); and
(3) Directors (in the case of a corporation).
(d) In determining the number of employees of an employer, each
full-time employee is counted as one employee and each part-time
employee is counted as a fraction of an employee, determined in
accordance with paragraph (e) of this Q&A–5.
(e) An employer may determine the number of its employees on a
daily basis or a pay period basis. The basis used by the employer must
be used with respect to all employees of the employer and must be
used for the entire year for which the number of employees is being
determined. If an employer determines the number of its employees
on a daily basis, it must determine the actual number of full-time
employees on each typical business day and the actual number of parttime employees and the hours worked by each of those part-time
employees on each typical business day. Each full-time employee
counts as one employee on each typical business day and each parttime employee counts as a fraction, with the numerator of the fraction
equal to the number of hours worked by that employee and the
denominator equal to the number of hours that must be worked on a
typical business day in order to be considered a full-time employee. If
an employer determines the number of its employees on a pay period
basis, it must determine the actual number of full-time employees
employed during that pay period and the actual number of part-time
employees employed and the hours worked by each of those part-time
employees during the pay period. For each day of that pay period,
each full-time employee counts as one employee and each part-time
employee counts as a fraction, with the numerator of the fraction
equal to the number of hours worked by that employee during that pay
period and the denominator equal to the number of hours that must be
worked during that pay period in order to be considered a full-time
8

employee. The determination of the number of hours required to be
considered a full-time employee is based upon the employer's
employment practices, except that in no event may the hours required
to be considered a full-time employee exceed eight hours for any day
or 40 hours for any week.

26 C.F.R. § 54.4980B-2.
In this case, a genuine issues of material fact exists concerning NWATC’s
employment practices (namely, how many hours an employee must work to be
considered a full-time employee of NWATC) and whether NWATC employed
more than 20 full-time employees during at least half of its pay periods. 26 C.F.R.
§ 54.4980B-2. NWATC’s employment practice is not entirely clear to the court
because the evidence cuts both ways. However, the evidence in the record, when
viewed in a light most favorable to White, does not support NWATC’s assertions
that it required employees to work 40 hours per week to be considered full-time
employees or that it employed fewer than 20 full-time employees more than half of
its pay periods.
First, NWATC alleges that “employees must work at least 40 hours per
week in order to be considered a full-time employee[,]” (Doc. 9-1 at 3, ¶ 8).
Additionally, NWATC has alleged numerous times, in its papers and during oral
argument, that it does not employ any full-time employees. However, the evidence
does not support these broad assertions.

NWATC admits that none of its

employees work 40 hours per week. (Doc. 9-1 at 3, ¶¶ 8, 9; see also doc. 9-1 at 69

7). In fact, NWATC asserts that none of its salaried employees worked more than
28 hours per week. (Doc. 9-1 at 3, ¶ 10). In his affidavit, plaintiff White asserts:

The position or job classification of the employee often determined
whether the employee was considered full-time or part-time. Most
full-time employees were salaried while part-time employees were
paid hourly. . . . A 40-hour work week has never been used to
determine whether an employee was full-time or part-time.

(Doc. 23-1 at 3, ¶ 6). Furthermore, White has identified twenty-one employees
who were considered full-time employees based upon his personal knowledge as
the former President and Program Sponsor of NWATC. While White himself does
not count as an employee for the purposes of the Regulation 54 formula, White
additionally identified himself as a former full-time employee of NWATC.
Importantly, on a document produced by NWATC to White, 4 which contains
NWATC’s PTO policy, a handwritten notation appears: “David is working fulltime . . . 10/07/16.” (Doc. 23-1 at 8).
Clearly evidence exists suggesting that NWATC employed full-time
employees, who worked fewer than 40 hours per week. All of the individuals
identified by White in his affidavit worked fewer than 40 hours per week yet were

4

During oral argument, NWATC indicated that it did not disclaim the authenticity of the
document in question when it produced the document to White.
10

considered full-time employees.5 Even disregarding the individuals identified by
White and despite NWATC’s contention that the existence of one full-time
employee (“David”) does not create a genuine issue of material fact (doc. 24 at 45), the fact that NWATC employed at least one full-time employee undercuts its
assertion that “employees must work at least 40 hours per week in order to be
considered a full-time employee.” (Doc. 9-1 at 3, ¶ 8). Although it is not clear
who “David” is, by examining the defendant’s original Regulation 54 chart (doc.
9-1) for any individual with the given name of David or any individual with the
initial “D.,” it is clear to the court that none of these individuals worked at least 40
hours per week. NWATC did not employ an individual with the given name of
David.

Individuals with the initial “D.” include: Carlos D. Richardson, who

worked 60.67 hours per semi-monthly pay period 6 as a salaried employee (doc. 9-1
at 6-7, 8); Paul D. Sanford, who worked fewer than 40 hours per week as an hourly
employee (doc. 9-1 at 6-7); Quiawanna D. Dallas, who worked fewer than 40
hours per week as an hourly employee (doc. 9-1 at 6-7); and Ryan D. Scott, who
worked fewer than 40 hours per week as an hourly employee (doc. 9-1 at 6-7).7

5

Admittedly, Julia F. Faison/Allen, Martha C. Moore, and Shirley A. Cummings all
occasionally worked greater than 40 hours per week, but this appears to be overtime.

6

It appears to be undisputed that the employees were paid twice a month.

7

There are no other employees with the initial “D.” Inferentially, “David” must be one of
these individuals if NWATC has identified each of the employees working for NWATC. If
“David” is not one of these individuals, then NWATC has not identified all of NWATC’s
11

The existence of a full-time employee named “David”, who was either Carlos D.
Richardson, Paul D. Sanford, Quiawanna D. Dallas, or Ryan D. Scott, undercuts
NWATC’s assertion that “employees must work at least 40 hours per week in
order to be considered a full-time employee.” (Doc. 9-1 at 3, ¶ 8). Because
“David,” a full-time employee, necessarily had to work less than 40 hours per
week, NWATC did not require employees to work 40 hours per week to be
considered full-time employees.
NWATC has not produced evidence of any full-time employees working 40
hours per week, and this allows the court to infer that full-time employees
(including “David”) worked fewer than 40 hours per week. At this stage, on a
summary judgment motion, NWATC possessed the burden of producing evidence
demonstrating that the following fact was not in dispute: that “employees must
work at least 40 hours per week in order to be considered a full-time employee.”

employees, which necessarily means that the chart is not complete and is unreliable. An
incomplete and unreliable chart cannot demonstrate whether NWATC employer 20 or more fulltime employees during at least half of its pay periods, necessary to support summary judgment.
Furthermore, NWATC cannot now argue that “David” does not exist given the email
between NWATC employees who discuss “David” taking over Martha Moore’s job
responsibilities in 2016. (Doc. 23-1 at 6). During oral argument, NWATC indicated that it did
not disclaim the authenticity of the email in question when it produced the email to White.
Therefore, NWATC must have employed an individual by the name of “David.”
Even if “David” is not any of the individuals on the chart, the court may reasonably infer
either that “David” worked less than 40 hours per week when compared to the hours worked by
other employees or that “David” worked 40 hours per week. The court simply does not know
how many hours “David” worked per week, and NWATC has not produced definitive evidence
one way or the other.
12

(Doc. 9-1 at 3, ¶ 8). Here, NWATC cannot rely on an absence of evidence to meet
its burden when some evidence in the record suggests that NWATC hired full-time
employees who worked less than 40 hours per week.
Second, in the PTO policy produced by the defendant, NWATC draws a
distinction between part-time and full-time employees for the purpose of
qualifying for and accruing PTO. (Doc. 23-1 at 8). Full-time employees are
eligible to accrue PTO without qualification, and full-time employees accrue the
maximum amount of PTO. (Doc. 23-1 at 8). Part-time employees are eligible to
accrue PTO only if they are “regularly scheduled to work an average of at least 20
but less than 32 hours per week[,]” and part-time employees accrue “half the
maximum time . . . .” (Doc. 23-1 at 8). A reasonable inference from the PTO
policy indicates that employees who work more than 32 hours per week are
considered full-time employees. However, it is not clear to the court whether an
employee must work greater than 32 hours per week to qualify for full-time PTO
benefits; it is conceivable, given White’s testimony the an employee’s full-time
status turned on whether he was salaried or not, that an employee may be
considered full-time despite working less than 32 hours per week. Nonetheless,
the PTO policy appears to be the strongest evidence of NWATC’s employment

13

practice8 and persuasively undercuts NWATC’s assertion that “employees must
work at least 40 hours per week in order to be considered a full-time employee.”
(Doc. 9-1 at 3, ¶ 8).
Finally, the payroll records relied upon by NWATC fail to affirmatively
demonstrate NWATC’s employment practice. The payroll records themselves do
not denote who is considered a full-time or a part-time employee; however, the
payroll records do denote who is considered an hourly or salaried employee.
NWATC contends that it does not consider salaried employees “to be full-time
employees because they do not work 40 hours per week.” (Doc. 9-1 at 3, ¶ 11).
Conversely, White testified by affidavit that “[m]ost full-time employees were
salaried while part-time employees were paid hourly[,]” but ultimately, he
contends that “[t]he position or job classification of the employee often determined
whether the employee was considered full-time or part-time.” (Doc. 23-1 at 3, ¶
8

However, without evidence demonstrating how each NWATC employee accrued PTO,
the court cannot know definitively which employees are considered full-time employees and
which employees are considered part-time employees. It appears that full-time and part-time
employees can be identified by the rate at which they accrued PTO. The parties can classify
each employee as a full-time employee if that employee accrued PTO at the maximum rate with
respect to the employee’s length of creditable service. The same notion applies to part-time
employees. (See Doc 23-1 at 8 (comparing length of creditable service and accrual per pay
period and noting that part-time employees accrue at half the rate of full-time employees)). Once
full-time employees are identified by this method, it is conceivable that a proper Regulation 54
denominator can be calculated by averaging the hours worked by full-time employees. The
average of the full-time employees’ hours would equal “the number of hours required to be
considered a full-time employee . . . based upon the employer’s employment practices.” 26
C.F.R. § 54.4980B-2. Then to determine the fractional amount of each part-time employee, each
part-time employee’s time would be divided by this newly calculated denominator, which more
accurately reflects NWATC employment practice.
14

6). On this point, the parties dispute the classification of salaried employees.
Therefore, the court must view this dispute in a light most favorable to White, the
non-movant: “[m]ost full-time employees were salaried while part-time employees
were paid hourly.” (Doc. 23-1 at 3, ¶ 6). Any employee who was denoted as
salaried on the payroll records likely was considered to be a full-time employee
under NWATC’s practice.
Thus, NWATC has not shown that it is undisputed that its employment
practice requires an employee to work 40 hours per week in order to be considered
a full-time employee. 26 C.F.R. § 54.4980B-2. Because a genuine issue of
material fact exists as to NWATC’s employment practice, the denominator used by
NWATC in calculating the fractional amount of a part-time employee pursuant to
Regulation 54 is incorrect and, at this point, unknown. Without knowing the
number of hours required to be considered a full-time employee (i.e., without
plugging the correct denominator into the Regulation 54 formula), neither
NWATC nor the court can determine the number of full-time employees employed
by NWATC when using the Regulation 54 formula.9 Therefore, the court cannot

9

Neither the original Regulation 54 chart (doc. 9-1 at 6-7) nor the updated chart supplied
by NWATC (doc. 24-1) is undisputed evidence. The original chart used a denominator (“hours
in pay period”) that did not accurately reflect NWATC’s employment practice. NWATC did not
require employees to work 40 hours per week to qualify for full-time status. NWATC cannot
reduce each part-time employee to a fraction using a 40-hour-per-week denominator that does
not accurately reflect the actual number of hours required to be considered a full-time employee.
Simply put, the fractional amount will never be correct because NWATC did not reduce its
employment practice to an objectively accurate denominator.
15

determine, as a matter of law, that NWATC has met its summary judgment burden
in proving its employment practice or that NWATC “employed fewer than
20 employees on a typical business day” to warrant judgment as a matter of law.
29 U.S.C. § 1161(b).

Two fact questions remain: (1) what is NWATC’s

employment practice with respect to classifying full-time and part-time employees
and (2) how many full-time employees did NWATC employ during each pay
period in 2016.

Furthermore, the updated chart continued to use the same 40-hour-per-week denominator
as the original chart without appropriately scaling each employee’s hours to use that
denominator. While NWATC scaled the hours worked by employees identified by White as fulltime employees to 86.67, NWATC failed to appropriately scale the number of hours worked by
each of the remaining part-time employees to a comparable number (not necessarily 86.67).
Effectively, NWATC did not scale each part-time employees’ hours to what their comparable
part-time hours would have been if full-time employees actually worked 40 hours per week. The
fraction for a part-time employee who works 20 hours per week as compared to a full-time
employee who works 32 hours per week (20/32 = 0.625) is greater than the fraction for a parttime employee who works 20 hours per week as compared to full-time employees who work 40
hours per week (20/40 = 0.5). Here, it is undisputed that none of NWATC’s employees worked
40-hour weeks. Therefore, it is not appropriate to compare each part-time employee’s actual
number of hours to a hypothetical full-time employee who worked 40 hours per week. Without
using a proper scale to continue applying the 40-hour-per-week denominator, NWATC failed to
accurately compare part-time employees’ hours to the number of hours required to be considered
a full-time employee.
NWATC needed either to update the denominator in the original chart or appropriately
scale the number of hours worked by each part-time employee in the updated chart. Therefore,
in both charts, NWATC failed to reflect its actual employment practice.
16

IV.

CONCLUSION

Accordingly, because the court cannot decide NWATC’s employment
practice as a matter of law at this time, the motion for summary judgment (doc. 8)
is DENIED WITHOUT PREJUDICE.
The defendant is DIRECTED to file an answer to the complaint within
fourteen (14) days.
DONE this 13th day of August, 2018.

_______________________________
T. MICHAEL PUTNAM
UNITED STATES MAGISTRATE JUDGE

17