Jessica GAUL, individually and on behalf of others similarly situated, Plaintiff, v. ACCURA HEALTH VENTURES, LLC; American Healthcare Management Services, LLC d/b/a Accura Healthcare Management Services; Accura Healthcare Holdings LLC; and American Healthcare Associates, Inc. d/b/a Accura Healthcare of Iowa, Defendants.
ORDER DENYING MOTION FOR SUMMARY JUDGMENT AND GRANTING MOTION FOR CONDITIONAL CERTIFICATION
Following a ransomware attack affecting third-party payroll processing software, Defendants failed to pay Plaintiff Jessica Gaul the correct overtime rate for one pay period. Defendants also, however, failed to withhold enough for taxes in that period and two subsequent pay periods, and thus Gaul arguably received more in take-home pay than she should have. Defendants argue that because they eventually paid the correct withholding amounts to taxing authorities, there has been no Fair Labor Standards Act violation. The Court disagrees and therefore DENIES Defendants’ Motion for Summary Judgment. The Court GRANTS Gaul's motion for conditional certification of the class.
I. UNDISPUTED MATERIAL FACTS
A. Gaul's Employment with Accura.
Defendant American Healthcare Management Services, LLC d/b/a Accura Healthcare Management Services (hereinafter, “Accura”)1 is a healthcare management company that operates skilled nursing and senior living facilities throughout the Midwest. (ECF 33-1, ¶ 1.) Gaul worked for Accura as a part-time Licensed Practical Nurse (LPN) until December 12, 2021, at Accura's facility in Carroll, Iowa. (Id., ¶¶ 4, 6.) Effective December 13, 2021, Gaul was promoted to the position of Minimum Data Set (MDS) Coordinator and became a full-time Accura employee. (Id., ¶¶ 9–10.)
Gaul's promotion came with changes to her compensation. As an LPN, she earned $26.29 per hour plus a “shift differential” of $1.00 to $2.00 per hour when she worked extra weekend shifts. (Id., ¶¶ 7–8.) As MDS Coordinator, her pay increased to $29.00 per hour. (Id., ¶ 11.) She was no longer eligible for shift differential payments as MDS Coordinator except that she would still receive the extra $1.00 to $2.00 in pay if she picked up extra weekend shifts as an LPN. (Id., ¶¶ 12–13.)
Accura paid employees on two-week payroll cycles, but it divided employees into two separate groups to stagger payroll dates. (Id., ¶ 14.) Gaul was in Payroll Group B. (Id., ¶ 15.) Gaul did not participate in any Accura benefits plans, so the only withholdings from her paycheck were state and federal taxes. (Id., ¶ 16.)
B. Ransomware Attack on Accura's Timekeeping and Payroll Processing Software, Kronos.
Accura uses software called Kronos for timekeeping and payroll processing. (Id., ¶ 17.) On December 13, 2021, Accura learned Kronos was unavailable due to a ransomware attack. (Id.) Sometime after the attack, Accura provided timesheets to employees to use to track their hours manually for the duration of the Kronos outage. (Id., ¶ 19.) The Kronos outage lasted approximately six weeks. (Id., ¶ 20.) During this period, employees recorded hours by hand and turned them in to supervisors. (Id., ¶ 26.)
For Gaul and others in Payroll Group B, the first payroll period impacted by the Kronos outage ran from December 5 to December 18, 2021. (Id., ¶ 21.) The second payroll period impacted by the outage ran from December 19, 2021, to January 1, 2022, and the third ran from January 2 to January 15, 2022. (Id., ¶¶ 22–23.) This Order will refer to these as Pay Periods 1B, 2B, and 3B. (Id., ¶¶ 21–23.) After Pay Period 3B, the Kronos outage was resolved and no further pay periods were affected. (Id., ¶ 24.)
C. Gaul's Wages During the Kronos Outage Period.
During Pay Periods 1B, 2B, and 3B, Accura paid Gaul based on hours she manually recorded, which were then inputted into a spreadsheet. (Id., ¶¶ 27–28.) The parties agree that Gaul worked 40 hours at regular pay and 5 hours at overtime pay during Pay Period 1B; 78.1 hours at regular pay and 2.58 hours at overtime pay during Pay Period 2B; and 80 hours at regular pay and 29.5 hours at overtime pay during Pay Period 3B. (Id., ¶¶ 29–31, 54, 63.) The pay dates were December 24, 2021; January 7, 2022; and January 21, 2022, respectively. (Id., ¶¶ 21–23.)
Accura miscalculated Gaul's regular and overtime hourly rates for Pay Period 1B because it used November data—i.e., data from before her promotion took effect—to calculate those rates. (Id., ¶ 37.) This meant Accura paid her $26.29 per hour (instead of $29) for 40 hours of regular pay and $39.44 per hour (instead of $43.50) for 5.2 hours of overtime pay. (Id., ¶¶ 30–31.) Accura corrected this error during Pay Periods 2B and 3B by paying Gaul $29 per hour for regular hours and $43.50 for overtime hours. (Id., ¶¶ 54, 63.) Accura also paid other amounts to Gaul during these latter Periods, including 16 hours of holiday pay, a $75 bonus, and $16.50 in “shift differential for only hours worked as an LPN” during Pay Period 2B and $900 in “shift pick-up bonuses” and “$72.50 for shift differential” during Pay Period 3B. (Id., ¶¶ 55, 56, 63.) To estimate tax withholding, Accura again used November data and withheld 16%. (Id., ¶ 34.)
When Kronos became operational again, Accura used it to “re-run the payroll” to reconcile the wage calculations and deductions made during Pay Periods 1B, 2B, and 3B. (Id., ¶ 41.) The Kronos calculations deviated in several ways from how Gaul had been paid based on the manual process. In Pay Period 1B, Kronos applied the correct hourly rates—$29 per hour for regular hours and $43.50 for overtime—that should have applied starting December 13 when Gaul's promotion took effect. (Id., ¶ 47; ECF 18-3, p. 18.) Kronos also gave Gaul credit for 14 hours of paid time-off (PTO) during Pay Period 1B, which Accura alleges was a mistake because Gaul was not eligible for PTO until she became a full-time employee. (ECF 33-1, ¶¶ 44–45.) Gaul disputes whether the PTO credit was improper, and it is unclear why Kronos included it. (Id.) Whether right or wrong, the PTO credit had the effect of causing Kronos to add an extra $406 to Gaul's gross earnings during Pay Period 1B beyond the additional amount resulting from the application of the correct hourly rate. (Id., ¶¶ 43, 44, 50.) In total, the Kronos calculation determined Gaul had been underpaid by approximately $535 in gross earnings during Pay Period 1B. (Id., ¶¶ 50, 52.)
There were also discrepancies between the Kronos reconciliation and manual calculations with respect to Pay Periods 2B and 3B. For Pay Period 2B, Kronos calculated Gaul's gross wages to be $2,941.65, whereas the manual calculation had been only $2,894.83. (Id., ¶¶ 57–58.) For Pay Period 3B, Kronos calculated Gaul's gross wages to be $4,906.54, whereas the manual calculation had been only $4,285.75. (Id., ¶¶ 64–65.) The significant discrepancy in Pay Period 3B was largely the result of Kronos for some reason calculating Gaul's weekend shift differential—i.e., the extra pay she received for picking up weekend shifts as an LPN—to be $29 per hour, when it should have been $1.00 or $2.00 per hour. (Id., ¶ 66–67.) This resulted in a $27.00 per hour difference in Gaul's favor, and even more for overtime hours. (Id., ¶ 68.)
The calculations in the Kronos reconciliation did not merely deviate from the manual process with respect to gross earnings. Those calculations also deviated sharply, as least with respect to Gaul, on the issue of tax withholdings. Specifically, the Kronos reconciliation concluded that Accura should have been withholding taxes from Gaul's pay at a substantially higher rate than the 16% rate applied during the Kronos outage, which, in turn, had been based on applying the rate from Gaul's paystubs in November 2021 before she was promoted to a full-time position. (E.g., id., ¶¶ 34, 37, 59.) In other words, Accura was not taking out enough taxes from Gaul's pay during the Kronos outage period. (Id.) Accura alleges that it eventually paid the correct amount of withholdings over to taxing authorities, although it is unclear when this occurred. (Id., ¶¶ 51, 61, 72, 76.)
Due to the interplay between gross earnings, tax withholding, and net earnings—not to mention the dispute over whether Gaul was entitled to the PTO credit during Pay Period 1B—the two sides disagree on the fundamental question of whether Gaul was “overpaid” or “underpaid” during the Kronos outage. Accura focuses on net earnings to conclude Gaul was overpaid, in the aggregate, during Pay Periods 1B, 2B, and 3B. (Id., ¶¶ 73–74.) Gaul focuses on gross earnings to conclude she was underpaid both collectively and during each Pay Period individually. (Id., ¶ 73.) She also argues, in any event, that any overpayment in Pay Periods 2B and 3B could not be used to “fix” the underpayment in Pay Period 1B.
The following chart summarizes the calculations (without adjusting for Accura's argument that the Kronos reconciliation mistakenly gave Gaul credit for PTO in Pay Period 1B and too much shift differential pay in Pay Period 3B):
(Id., ¶¶ 52, 61, 72.)
D. Certification Issues.
Gaul asserts that Accura's use of the manual tracking system and November data “led to the failure to pay all earned wages, including overtime, to Gaul and Accura's other affected employees.” (ECF 25-1, pp. 9–10.)2 She notes that Accura essentially admitted this in June 2022 when it wrote a company-wide memorandum attaching checks for those employees who were determined to have “net amounts due” following the Kronos reconciliation. (ECF 25-3.) Gaul's filings include a Declaration stating: “Based on discussions with my co-workers, my familiarity with Accura's pay practices, and my observations and experiences, I know that most or all other nonexempt employees for Accura who had to use the Kronos system had the same problems being fully paid for the same work we did.” (ECF 25-2, ¶ 15.) She says “[a]ll of us were paid based on estimates, or were not paid on time for all the hours we worked because after the outage took place, Accura did not put in a system to make sure we were paid for all our work, including overtime at 1.5 times our normal hourly rates.” (Id., ¶ 16.) She asserts: “I believe that if my co-workers were notified of this lawsuit and their right to challenge this pay practice that many of them would participate.” (Id., ¶ 17.) Gaul has not, however, presented any evidence beyond the statements in her Declaration indicating that others are interested in joining her case.
For its part, Accura admits it used “average ․ hours recorded” to determine pay for some employees in Payroll Group A for one pay period from November 27 to December 11, 2021, but asserts that it used actual hours “as tracked by employees on timecards” for all other payroll, including all payroll for employees like Gaul in Payroll Group B. (ECF 25-4, p. 12.) Accura also asserts that Gaul misunderstands who employed her. Gaul identified her employer as “Accura Health Ventures, LLC,” but Accura says the entity is actually “American Healthcare Management Services, LLC.” (ECF 32, p. 6.) According to Accura, there are twenty-one facilities in the State of Iowa that have employees of this entity. (Id., pp. 7–8.)
II. LEGAL STANDARDS.
A. Summary Judgment Standards.
“Summary judgment is appropriate where the evidence, viewed in the light most favorable to the nonmovant, shows that no genuine issue of material fact exists, such that the movant is entitled to judgment as a matter of law.” Tusing v. Des Moines Indep. Cmty. Sch. Dist., 639 F.3d 507, 514 (8th Cir. 2011) (citing Wingate v. Gage Cnty. Sch. Dist., No. 34, 528 F.3d 1074, 1078 (8th Cir. 2008)). “There is no genuine issue of material fact when ‘the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party.’ ” Grage v. N. States Power Co.-Minnesota, 813 F.3d 1051, 1054 (8th Cir. 2015) (quoting Torgerson v. City of Rochester, 643 F.3d 1031, 1042 (8th Cir. 2011)). The burden of proving the absence of any genuine issue of material fact rests on the movant. Id. Nonetheless, “a nonmovant may not rest upon mere denials or allegations, but must instead set forth specific facts sufficient to raise a genuine issue for trial.” Tusing, 639 F.3d at 514 (quoting Wingate, 528 F.3d at 1078–79).
B. Fair Labor Standards Act and Iowa Wage Payment Collection Act
“The purpose of the FLSA ‘is to protect the rights of those who toil, of those who sacrifice a full measure of their freedom and talents to the use and profit of others.’ ” Specht v. City of Sioux Falls, 639 F.3d 814, 819 (8th Cir. 2011) (quoting Benshoff v. City of Va. Beach, 180 F.3d 136, 140 (4th Cir. 1999)). “It does so in part by setting forth substantive wage, hour, and overtime standards.” Kasten v. Saint-Gobain Performance Plastics Corp., 563 U.S. 1, 11 (2011). This includes, as relevant here, a provision establishing that “no employer shall ․ [have a] workweek longer than forty hours unless such employee receives compensation for his employment in excess of the hours above specified at a rate not less than one and one-half times the regular rate at which he is employed.” 29 U.S.C. § 207(a)(1). Gaul argues Accura violated this overtime requirement when it failed to pay her overtime wages at one-and-one-half times her regular rate. Accura appears to concede, at least for present purposes, that Gaul is not exempt from FLSA requirements.
Gaul also brings claims under the Iowa Wage Payment Collection Law, Iowa Code Chapter 91A (the “IWPCL”). The IWPCL “requires employers to ‘pay all wages due its employees, less any lawful deduction’ on designated regular intervals of time.” Condon Auto Sales & Serv., Inc. v. Crick, 604 N.W.2d 587, 596 (Iowa 1999) (quoting Iowa Code § 91A.3(1)). “A regular payday shall not be more than twelve days, excluding Sundays and legal holidays, after the end of the period in which the wages were earned.” Iowa Code § 91A.3(1). “An employer who fails to pay wages to an employee as required under the law is liable to the employee for the unpaid wages, court costs, and attorney fees incurred in the recovery of the unpaid wages.” Crick, 604 N.W.2d at 596 (citing Iowa Code § 91A.8). In addition, if the failure to pay is “intentional,” the employer shall be liable for liquidated damages. Iowa Code § 91A.8.
C. Conditional Certification.
“When a plaintiff seeks to certify an FLSA collective [action], courts in this Circuit typically proceed in two stages: first, the conditional certification or notice stage; and second, the final certification (or decertification) stage.” Frazier v. PJ Iowa, L.C., 337 F. Supp. 3d 848, 861 (S.D. Iowa 2018). “In both stages, the burden is on the plaintiff to establish that the members are ‘similarly situated’; however, the standard toughens as litigation progresses.” Id. at 862. (internal citation omitted) (quoting Bouaphakeo v. Tyson Foods, Inc., 564 F. Supp. 2d 870, 891–92 (N.D. Iowa 2008)). In the first stage, the “main issue for the Court to determine is whether the named plaintiffs demonstrate that they are ‘similarly situated’ to the proposed members of the collective.” Id. (citing 29 U.S.C. § 216(b)). Plaintiffs must provide “some factual basis from which the court can determine if similarly situated potential plaintiffs exist.” Robinson v. Tyson Foods, Inc., 254 F.R.D. 97, 99 (S.D. Iowa 2008) (citations omitted). “This is a lenient standard, but the plaintiff nevertheless bears the burden, and ‘more than mere allegations’ are required.” Frazier, 337 F. Supp. 3d at 862 (quoting Robinson, 254 F.R.D. at 99).
III. LEGAL ANALYSIS.
A. The Court Denies Accura's Motion for Summary Judgment on Gaul's FLSA Claim.
Accura admits it calculated Gaul's overtime wage rate too low during Pay Period 1B. Nonetheless, it argues the shortfall was more than corrected in subsequent pay periods due to other mistakes and the interplay between gross earnings, tax withholdings, and net earnings. In essence, Accura argues an employer is not liable under the FLSA even if it fails to pay the right overtime rate so long as: (a) it also fails to withhold the right amount in taxes; (b) the employee's net pay ends up higher than it otherwise would have been; (c) the employer eventually pays the proper amount of withholding to taxing authorities; and/or (d) the employer pays excess amounts to the employee in subsequent pay periods. In other words, according to Accura, the FLSA is a “no harm, no foul” statute.
The Court rejects Accura's position. Although the parties have not cited, and the Court cannot independently locate, any cases addressing the precise scenario present here, courts in analogous circumstances have consistently refused to allow employers to avoid FLSA liability by manipulating the timing or calculation of employee pay. In Walling v. Helmeric & Payne, for example, the Supreme Court rejected an employer's attempt to use a “split-day” payment plan to avoid overtime requirements while still paying employees the minimum wage. 323 U.S. 37, 42 (1944). The Court held that “freedom of contract” between employers and employees “does not include the right to compute the regular rate in a wholly unrealistic and artificial manner so as to negate the statutory purposes [of the FLSA].” Id.
Similarly, in Calderon v. Witvoet, the Seventh Circuit held that an employer violated the FLSA by implementing a payment arrangement in which a portion of employee wages were withheld until the end of the season, at which time they were paid as a “bonus.” 999 F.2d 1101, 1107 (7th Cir. 1993). The employer claimed the delayed payment arrangement was a “service” to the employees because it had the effect of forcing them to save. Id. The Seventh Circuit concluded this was irrelevant. “If the FLSA requires timely payment in cash or a cash equivalent such as a check, and this requirement may not be varied by agreement, it follows that even the workers’ enthusiastic assent to deferred payment—a form of employer-held savings account—is ineffectual.” Id.; see also Howard v. City of Springfield, Ill., 274 F.3d 1141, 1149 (7th Cir. 2001) (rejecting interpretation of FLSA that would allow employer to “manipulate the payments to suit its economic concerns”).
The only thing that makes Accura's situation different from these cases is that Accura did not devise a pay-too-little-fix-it-later scheme in advance; instead, it appears to have come up with the idea many months after the pay periods in question as part of the reconciliation after Kronos came back online. It does not matter under the FLSA, however, whether an employer devises an unlawful scheme upfront or merely employs it later as a retrofitted solution to an earlier problem. See, e.g., Roland Elec. Co. v. Black, 163 F.2d 417, 421 (4th Cir. 1947) (rejecting argument that year-end bonuses could be used to circumvent FLSA liability); Acosta v. Min & Kim, Inc., No. 15-CV-14310, 2018 WL 500333, at *7 (E.D. Mich. Jan. 22, 2018), aff'd, 919 F.3d 361 (6th Cir. 2019) (“[W]hat matters is not just the end result, but the methodology used.”). The FLSA is violated either way. See Bell v. Iowa Turkey Growers Co-op., 407 F. Supp. 2d 1051, 1062–63 (S.D. Iowa 2006) (refusing to use accidental overpayments to offset overtime deficiencies from a separate pay period).
Stated differently, courts have held that offsets to FLSA liability “should be calculated on a period by period basis.” Nolan v. City of Chicago, 125 F. Supp. 2d 324, 331 (N.D. Ill. 2000); see also Bell, 407 F. Supp. 2d at 1063. Accura is urging the Court to adopt an aggregated approach in which an overpayment of net wages in a subsequent pay period is interpreted retroactively as a correction for the underpayment in the first pay period. The Court agrees with Nolan and Bell that such an approach “would harm the [employees] and confer a benefit upon the [employer], which is clearly not intended by the FLSA.” Nolan, 125 F. Supp. 2d at 332; accord Bell, 407 F. Supp. 2d at 1063. Accura did not cure the FLSA problem created by undercalculating the overtime rate in Pay Period 1B by accidentally paying too much in net wages in Pay Periods 2B and 3B. See Nolan, 125 F. Supp. 2d at 332 (“By calculating credits on a pay period by pay period basis, both the [employees] and the [employer] receive the benefits and credits to which the FLSA entitles them.”).
This conclusion is unchanged by the fact that Accura's tax withholding errors resulted in a minimal (or even net-positive) impact to Gaul's take-home pay. Tax withholdings are “part of the wages of an employee and are held in trust for the benefit of the United States.” Cline v. United States, 997 F.2d 191, 194 (6th Cir. 1993) (citing 26 U.S.C. § 7501). When, as here, an employee's overtime rate is set too low, the payment deficiency exists just as much in the tax withholdings as in the take-home pay. Thus, any miscalculation in the withholding rate is part of the problem, not part of the solution.
Holding otherwise would give employers considerable latitude for making mischief. An employer facing a cash shortage could, for example, unilaterally reduce the employee's overtime rate but also manipulate the withholding rate so the employee's take-home pay would not change. According to Accura, so long as the employer covers the shortfall by the time the tax bill comes due, such a scheme would satisfy the FLSA. The Court disagrees. See Walling, 323 U.S. at 42; Howard, 274 F.3d at 1149; United States v. Klinghoffer Bros. Realty Corp., 285 F.2d 487, 491 (2d Cir. 1960) (affirming conviction for criminal FLSA violation even though employees were given “a vague understanding that at some indefinite future date ․ they would be taken care of”). “Any other conclusion in this case would exalt ingenuity over reality and would open the door to insidious disregard of the rights protected by the Act.” Walling, 323 U.S. at 42.
Accura's argument, if accepted, also would undermine well-established law on related FLSA issues. For example, courts have long recognized that a cause of action under the FLSA “accrues at each regular payday immediately following the work period during which the services were rendered for which the wage or overtime compensation is claimed.” Halferty v. Pulse Drug Co., Inc., 821 F.2d 261, 271 (5th Cir. 1987); accord, e.g., Stone v. Troy Construction, LLC, 935 F.3d 141, 154 (3d Cir. 2019); Hughes v. Region VII Area Agency on Aging, 542 F.3d 169, 187 (6th Cir. 2008). Accura's interpretation of the FLSA would mean these cases are wrongly decided, and an underpaid employee does not have a claim until the passage of an indeterminate period after payday during which the employer might take corrective action or make other mistakes that “balance out” the first one.
Consider: on payday for Pay Period 1B (December 24, 2021), Gaul was paid $1,257.98 in gross wages and had $202.78 withheld for taxes. (ECF 33-1, ¶ 52.) These calculations were undeniably too low in both respects, and thus she could have sued Accura the following day. See, e.g., Calderon, 999 F.2d at 1107 (“[T]he FLSA requires the employer to pay on time.”) There is nothing in the language of the FLSA or case law interpreting it to suggest this conclusion should change simply because Accura later stumbled its way into paying Gaul too much for subsequent pay periods. It had the obligation to get it right, on time, the first time. See id. at 1107–08 (holding that FLSA is violated even though belated payments are made); Black, 163 F.2d at 421.
The Court also rejects Accura's reliance on the following language from a Department of Labor interpretive bulletin: “When the correct amount of overtime compensation cannot be determined until some time after the regular pay period, however, the requirements of the Act will be satisfied if the employer pays the excess overtime compensation as soon after the regular pay period as is practicable.” 29 C.F.R. § 778.106. Accura argues the Kronos outage was an “emergency and unplanned” issue that made it impracticable to determine the correct amount of overtime compensation. The Court agrees with the first part, but not the second. Immediately after the Kronos outage began, Accura implemented a manual timesheet system to track hours worked by Gaul and other employees in Payroll Group B. No estimates were required. Calculating Gaul's overtime pay therefore was a matter of simple arithmetic: the 5.2 hours on her timesheet times $43.50 per hour. The Kronos outage did not make this math any more challenging. Moreover, Accura figured out the correct hourly and overtime rates for Gaul before the Kronos outage was even resolved and paid the correct rates in Pay Periods 2B and 3B. It follows that it was not “impracticable” as a matter of law for Accura to determine the correct amount of overtime compensation in a timely manner. See Cahill v. City of New Brunswick, 99 F. Supp. 2d 464, 475 (D.N.J. 2000) (“[M]ere bureaucratic inertia is no excuse for late payment or nonpayment of wages.”).
For these reasons, the Court DENIES Accura's motion for summary judgment on Gaul's claim under the FLSA as it relates to Accura's failure to pay the correct overtime rate in Pay Period 1B. The parties should be advised, however, that the Court does not believe the existing record supports an FLSA claim for Pay Periods 2B and 3B. Gaul admits her overtime rate was correctly calculated during these periods, and the Court cannot divine any other basis for an FLSA violation in those Periods.
B. The Court Denies Accura's Motion for Summary Judgment on Gaul's IWPCL Claim.
Unlike the briefing on the FLSA claim, which was comprehensive and well-done by both sides, the parties’ briefs devote little attention to Gaul's IWPCL claim. Accura argues the claim fails as a matter of law because Accura overpaid Gaul—as measured by net earnings—over the three Pay Periods. (ECF 18-2, pp. 5–6.) Gaul's response never even mentions the IWPCL beyond a few vague references to “Iowa law” and “state wage and hour laws.” (ECF 33, pp. 3, 10.) Otherwise, she apparently assumes her FLSA arguments apply with equal force to the IWPCL.
The two statutes are not the same, and the Court is uncertain whether the IWPCL would allow an overpayment in a future pay period to offset an earlier underpayment. The Court need not reach this issue, however, because there are factual disputes that would preclude summary judgment either way. Accura asserts, for example, that Gaul was not entitled to 14 hours of PTO during Pay Period 1B, and thus the eventual Kronos calculation was too high by $406. Gaul disputes this assertion, arguing that she earned the paid time off during an earlier period of full-time work. (ECF 33-1, ¶ 44 (“Plaintiff was permitted to keep PTO that she accrued when she worked previously as a full-time floor nurse prior to switching to part-time.”).) Similarly, Gaul disputes—for lack of discovery, consistent with her motion for relief under Fed. R. Civ. P. 56(d)—how and when Accura calculated and paid the tax withholdings that are at the center of Accura's position that Gaul received net overpayments during Pay Periods 1B, 2B, and 3B. (Id., ¶¶ 60, 71.) Given these factual disputes and the limited discovery that has occurred to date, the Court would not grant summary judgment on the IWPCL claim even if the statute allows later overpayments or tax withholding errors to “fix” earlier underpayments. The Court therefore DENIES Accura's motion for summary judgment on the IWPCL claim.
C. The Court GRANTS Gaul's Motion for Conditional Certification.
Gaul survived summary judgment on her FLSA claim, but solely with respect to Pay Period 1B and only for reasons that may be idiosyncratic to her; namely, the fact that she received a promotion just as the Kronos outage occurred and therefore was entitled to pay at a higher overtime rate in December than she received in November. These same idiosyncrasies raise questions about whether the Court should grant her motion for conditional certification.
Gaul argues that Accura's “common policy and practice of using November  data to pay for hours worked during the Kronos outage violated the FLSA in the same manner as to both her and the proposed collective.” (ECF 39, pp. 4–5.) Gaul's pleadings reveal, however, a subtle but important shift in how she has articulated her legal theory over the course of the case. In earlier filings, Gaul focused on Accura's use of estimates as to the number of hours worked. The Class and Collective Action Complaint, for example, focused on allegations that Accura “issued paychecks based on scheduled hours or estimated hours, or simply duplicated paychecks from pay periods prior to the Kronos hack,” resulting in “employees who were non-exempt and worked overtime [being] paid less than the hours they worked in the workweek, including overtime hours.” (ECF 1, ¶¶ 74–75.) Similarly, Gaul's Memorandum in Support of Conditional Certification argues that the “single decision, policy, or plan” for certification purposes was Accura's decision to “estimate[ ] [employee] hours instead of paying them their exact hours worked, including overtime, in violation of the FLSA.” (ECF 25-1, pp. 16–17.)
It now appears to be undisputed that Accura never estimated hours worked by Gaul or any other employees in Payroll Group B, all of whom tracked their actual hours using manual timesheets. Instead, Accura only estimated hours for employees in Payroll Group A, and only for the pay period that was ending just as the Kronos outage began. (ECF 25-3, p. 1.) Gaul's Reply in Support of Motion for Conditional Certification therefore widens the net by asserting that the “common decision and policy” was the use of “November data and estimates to calculate Accura's payroll obligations for hours during the Kronos outage.” (ECF 39, p. 5.) In other words, the issue is not just about using November data to estimate hours worked, but also to estimate other information such as hourly rates. At the hearing on the Motion for Conditional Certification, Gaul advanced another variation on its theory by arguing that Accura violated the FLSA when it aggregated multiple pay periods to determine over- or underpayment for its employees rather than treating each pay period individually.
The Court has doubts about whether an employee for whom November data is used to estimate the number of hours worked is similarly situated to those for whom November data is used the estimate the rate of pay. The policy giving rise to the former is likely to have had an impact across the board (with some employees presumably paid too high and others too low), while the “policy” giving rise to the latter will affect only a narrow subset of employees like Gaul who happened to receive a pay increase in early December. Moreover, Accura may have a stronger defense under 29 C.F.R. § 778.106 for employees in the hours worked category because, at least for one payroll period, it had no record of actual hours. This gives Accura better footing to argue it was not “practicable” to pay overtime compensation on the regular payday. By contrast, as explained above, Accura's argument under § 778.106 is weaker with respect to Gaul because she tracked her actual hours and thus her overtime compensation was a matter of simple arithmetic.
Similar divergence may arise in connection with liquidated damages. “An award of liquidated damages under § 216(b) is mandatory unless the employer can show good faith and reasonable grounds for believing that it was not in violation of the FLSA.” Braswell v. City of El Dorado, 187 F.3d 954, 957 (8th Cir. 1999) (citing Hultgren v. Cnty. of Lancaster, Neb., 913 F.2d 498, 509 (8th Cir. 1990)). Accura may have a harder time proving good faith as to Gaul because it already knew her actual hours worked when it underpaid her in Pay Period 1B, in contrast to the employees in Payroll Group A for whom the hours worked data was inaccessible due to the Kronos outage.
On the other hand, however, there are indicia that Gaul and other employees are similarly situated. The record shows that Kronos came back online in January 2022, yet Accura did not complete its reconciliation or make “true up” payments to employees until roughly five months later, in mid-June. (ECF 25-3, p. 2.) Something important happened during the intervening period: Gaul filed and served this lawsuit. (ECF 1 (filed May 5, 2022); ECF 6 (served May 12, 2022).) This timeline suggests a direct relationship between Gaul's experience and those of other Accura employees. Moreover, there is evidence that Gaul was not the only employee for whom Accura miscalculated tax or insurance withholdings during the Kronos outage period. (ECF 25-3, p. 2 (explaining that reconciliation payments were adjusted for errors in withholding).) As explained above, the Court doubts an overpayment or withholding error in a subsequent pay period can be used to offset an FLSA violation from an earlier period. Gaul's newfound theory that Accura violated the FLSA by aggregating data across multiple pay periods therefore may be an issue on which she and other employees are “similarly situated” regardless of whether November data was used for hours worked or rate of pay.3
The parties also disagree on a related issue: whether the Court should consider the absence of evidence of interest from other potentially affected employees in joining this lawsuit when evaluating the motion for conditional certification. Accura cites cases in which courts have treated this as a relevant consideration (ECF 32, pp. 15–16), while Gaul directs the Court's attention to others treating it as “illogical” or otherwise inappropriate at this early stage (ECF 39, pp. 6–7). The Court believes the cases cited by Accura are more persuasive. See, e.g., Bouaphakeo, 564 F. Supp. 2d at 892 (“The supporting evidence should include evidence that other similarly situated individuals desire to opt in to the litigation because others’ interest in joining the litigation is relevant to whether or not to put a defendant employer to the expense and effort of notice to a conditionally certified class of claimants.”) (cleaned up). After all, Gaul (and any other FLSA plaintiff) surely would use the presence of consents or declarations from other employees as a factor in evaluating whether the class should be conditionally certified. See, e.g., Davis v. NovaStar Mortg., Inc., 408 F. Supp. 2d 811, 816 (W.D. Mo. 2005) (“Plaintiffs state that the fact that a significant number of consents have been filed prior to the issuance of notice is a strong indication that there are similarly situated individuals who desire to opt in.”). The Court does not understand why the absence of such evidence should not also be part of the analysis. See Bouaphakeo, 564 F. Supp. 2d at 892. The standard for conditional certification may be “lenient,” but it is not a one-way street.
Nonetheless, in the circumstances presented here, the Court will conditionally certify the class despite the absence of evidence of interest from other Accura employees. The alleged FLSA violations are technical and subtle, and thus many Accura employees may not even realize there has been an arguable violation. (By the same token, the damages from any such violation may prove to be quite small, as appears to be the case for Gaul.) Moreover, on the whole, the Court concludes Gaul has satisfied her minimal burden of establishing that she and other putative collective members “are similar in important respects and are subjected to similar policies or circumstances,” Dernovish v. AT & T Operations, Inc., No. 09-0015-CV-W-ODS, 2010 WL 143692, at *1 (W.D. Mo. Jan. 12, 2010), notwithstanding the idiosyncratic features of Gaul's situation. Whether Gaul can survive the more stringent burden of proving certification down the road is, of course, a very different question. For now, however, the Court GRANTS her motion for conditional certification.
D. The Court Orders Notice on the Terms Set Forth Below.
The parties’ final area of dispute involves the form and method of notice to potential members of the collective. The Court agrees with Defendants that it is appropriate to give the parties time to meet-and-confer on this issue, particularly given that Gaul's theory for the “common policy” has evolved since she filed her motion for class certification. The Court will, however, provide the following guidance to assist the parties in their efforts:
- the notice period should be sixty (60) days;
- notice should be provided by U.S. Mail and email;
- the notice process should include a reminder notice;
- notice should include at least an approximation of the end date of the pay periods affected by the Kronos outage to ensure recipients understand the narrow time period at issue, as in: “If you worked in Iowa for American Healthcare Management Services, LLC d/b/a Accura Healthcare Management Services (“Accura”) in December 2021 and/or January 2022, YOU MAY BE ENTITLED TO JOIN A LAWSUIT FOR UNPAID WAGES AND MONEY DAMAGES.”4 A conforming change also should be made in Section 1, entitled “Why are you getting this notice?”
- notice should not include any language regarding the Court's evaluation of the merits of Gaul's claim. Some parts of the Court's analysis may apply to other potential members of the collective, while others are likely to be unique to Gaul. Accordingly, any attempt to summarize the Court's ruling in a notice to other potential class members might be misleading.
- notice should be sent to non-exempt employees of the twenty-one facilities identified on pages 7 and 8 of Defendants’ Resistance to Plaintiff's Motion for Class Certification (ECF 32).
Based on the candor and quality of arguments during the recent hearing, the Court is confident the parties will engage in good-faith efforts to implement this guidance and provide notice to potential collective members. All the same, if disputes arise, the Court will entertain motion practice. The parties either must reach agreement as to the notice process or file a motion with the Court on or before February 3, 2023.
The Court DENIES Defendants’ Motion for Summary Judgment and GRANTS Plaintiff's Motion for Conditional Certification.
IT IS SO ORDERED.
1. Although Gaul has sued four Accura-related entities, Defendants allege that American Healthcare Management Services, LLC, is her only employer and the only proper defendant. Gaul denies this for lack of information and directs the Court's attention to her recent motion for relief under Fed. R. Civ. P. 56(d), which was denied without prejudice. (ECF 23, 31.) Given the underdeveloped state of the record on this issue, the Court would not consider granting summary judgment on it without giving Gaul more time to take discovery. The Court therefore will assume solely for present purposes that Gaul is employed by all four Defendants. Accordingly, all references to “Accura” in this Order should be interpreted as including all four Defendants. Defendants are free to file a renewed motion for summary judgment on this issue after discovery has progressed further.
2. All citations to page numbers are to the auto-populated page numbers by the ECF system, located in the upper-right corner of each page. These page numbers often do not correspond to the numbers placed by the parties on the bottom of their filings.
3. Accura correctly argues that Gaul did not articulate this theory in the briefing on her motion for conditional certification. In the interest of judicial efficiency, however, the Court will consider it anyway, as: (a) nothing would prevent Gaul from raising it in a supplemental filing or as part of a new motion for conditional certification; and (b) the record already contains enough information for the Court to evaluate it.
4. The parties are free to agree to other language than what the Court has stated here, which is simply designed to illustrate the Court's belief that the notice must include an end-date to help potential class members understand their eligibility.
STEPHEN H. LOCHER, UNITED STATES DISTRICT JUDGE
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