Reported / Citable
Background
Shelby Williams and Randy Pouncy sued Cenikor Foundation under the Fair Labor Standards Act, seeking minimum-wage and overtime compensation for unpaid labor they performed during the primary treatment phase of Cenikor’s residential substance-abuse program. Participants worked for outside businesses, which paid Cenikor directly at hourly rates at or above the federal minimum wage. Cenikor used that revenue to help fund its operations while providing participants with housing, food, medical care, counseling, and other services.
Pouncy completed the unpaid primary treatment phase in February 2017. Williams remained in that phase until October 2017 and testified that a Cenikor employee told him his earnings would be saved and later returned to him. Cenikor sought summary judgment on both plaintiffs’ claims, arguing that they were not employees, that no alleged FLSA violation was willful, and that Cenikor acted in good faith.
The Court’s Holding
The court granted summary judgment on all of Pouncy’s claims. Because the plaintiffs presented no evidence from which a jury could find that Cenikor knew or recklessly disregarded that its practices violated the FLSA, the ordinary two-year limitations period applied rather than the three-year period for willful violations. Pouncy’s unpaid work ended more than two years before the action was filed on May 22, 2019. Williams could proceed only on claims accruing on or after May 22, 2017.
The court denied summary judgment on Williams’s timely claims because a genuine factual dispute remained over whether he was an employee under the Fifth Circuit’s primary-beneficiary test. A jury could credit Williams’s testimony that he expected compensation and could find that Cenikor benefited more from his work for outside businesses, particularly given evidence that he sometimes worked more than 60 hours per week, once worked nearly 100 hours in a week, and occasionally missed counseling because of work. Although Williams obtained substantial rehabilitative benefits and his labor did not displace Cenikor employees, those circumstances did not establish as a matter of law that he was the primary beneficiary. The court deferred consideration of Cenikor’s good-faith defense to liquidated damages.
Key Takeaways
- Absent evidence that Cenikor knew or recklessly disregarded that its conduct violated the FLSA, the two-year limitations period governed the plaintiffs’ claims.
- Pouncy’s claims were time-barred, while Williams’s claims accruing on or after May 22, 2017 survived the limitations challenge.
- Williams presented enough evidence concerning expected compensation, extensive work hours, reduced access to counseling, and Cenikor’s receipt of outside-business payments to require a trial on employee status.
Why It Matters
The decision applies the Fifth Circuit’s fact-intensive primary-beneficiary framework to unpaid labor performed by rehabilitation-program participants for third-party businesses. Successful treatment and other personal benefits do not automatically foreclose FLSA employee status when the evidence could show that the treatment provider obtained the greater benefit from the participant’s labor.
The ruling also illustrates the practical importance of evidence supporting willfulness: without it, the shorter limitations period can eliminate otherwise disputed FLSA claims before the court reaches employee status or liability.