On November 4, 2022, the Ninth Circuit Court of Appeals held that Los Angeles County was a joint employer of In-Home Supportive Services (“IHSS”) program workers (“IHSS providers”), rendering the County responsible for overtime owed to IHSS providers under the Fair Labor Standards Act (“FLSA”). The decision, Ray v. Los Angeles County Dept. of Public Social Services, also revisits the test for FLSA joint employer status, as well as clarifies the standard under which liquidated damages may be awarded under the FLSA. Although the holding pertaining to a county’s liability for overtime owed to IHSS providers may be limited to counties, the Court’s analysis of the test for joint employer status and whether to award liquidated damages is applicable to all employers.
Background on the California IHSS Program
California’s IHSS program offers in-home supportive services to eligible low-income elderly, blind, or disabled individuals (i.e., program recipients). IHSS providers help recipients with their daily activities and chores. More than 500,000 individuals work as IHSS providers throughout California.
Due to the complex relationships between IHSS providers, care recipients, counties and the State of California, courts have long debated the legal entity that employs IHSS providers. As for the day-to-day of IHSS provider work, recipients supervise, hire, and fire IHSS providers, set provider work schedules, and review and approve provider time sheets. As for the state, the state receives IHSS provider timesheets, approves new rates set by the counties, and issues paychecks to IHSS providers – sometimes directly, sometimes indirectly. In contrast, counties set IHSS provider pay rates, recruit IHSS providers, maintain databases of possible providers for recipients, and generally set IHSS provider work hours. Moreover, under the California Welfare and Institutions Code, a county may establish a separate public authority to deliver in-home supportive services, and such public authority is the employer of record of IHSS providers for purposes of collective bargaining only – not for other legal liability. Finally, funding for IHSS programs is split between counties and the state, with a portion of the state contribution deriving from the federal government.
Background on the Ray Case
In 2013, the U.S. Department of Labor (“DOL”) issued a new rule entitling IHSS providers (and other homecare workers) to overtime pay under the FLSA. The rule was intended to go into effect on January 1, 2015. However, the validity of the rule was challenged in federal court. That litigation resolved in October 2015. The state of California began paying overtime to IHSS providers in February 1, 2016.
In June 2017, IHSS provider Trina Ray filed a suit for unpaid overtime against the County of Los Angeles (“County”) seeking overtime wages due between January 1, 2015 and February 1, 2016. Ten thousand other IHSS providers working in the County of LA joined Ray’s collective action lawsuit.
At the outset, the County asked the Court to dismiss the case, arguing it was immune from suit under the Eleventh Amendment of the United States Constitution. In 2019, the Court ruled against the County on its immunity argument, and Ray’s case went forward. The County next argued that Ray could not win her case because the County did not employ IHSS providers under the definition of joint employment under the FLSA. The County argued this despite a Ninth Circuit ruling from 1983 that held the state and counties were joint employers of IHSS providers under the FLSA. According to the County in the new Ray case, the economic reality of the relationship between the County and IHSS providers had changed since 1983 such that the County was no longer a joint employer under the FLSA.
The Ninth Circuit Finds that Counties Remain Joint Employers of IHSS Providers under the FLSA
As mentioned above, the Ninth Circuit ruled in 1983 that the state and counties jointly employed IHSS workers under the FLSA. The case is Bonnette v. Cal. Health & Welfare Agency. (Note: because the DOL had not construed the FLSA’s overtime rules to apply to IHSS providers until 2013, the issue in Bonnette was whether IHSS workers were owed minimum wage.)
Under Bonnette, a joint employer relationship may be established by looking at numerous factors to evaluate the “economic reality” of an employer’s relationship with a worker, the most important of which are: (1) who has the power to hire and fire the employees; (2) who supervises and controls employee work schedules or conditions of employment; (3) who determines the rate and method of payment; and (4) who maintains employment records. The Bonnette court concluded that counties were joint employers of IHSS providers under this standard.
In Ray, the County argued it was no longer a joint employer of IHSS providers due to new ways IHSS providers are paid under the California IHSS program. Specifically, whereas the County used to pay providers directly or pay the recipients (who then paid the providers), now the state issues paychecks directly to IHSS providers. The Court rejected the County’s argument, reasoning that the state’s issuance of a paycheck does not free the County from a joint employer relationship. Instead, the Court noted the various ways in which the County continues to exert a significant amount of economic control over IHSS workers, including the following: the County now contributes a greater share of funding to the IHSS program; the County now sets IHSS provider pay rates through collective bargaining; the County may choose the providers’ method of payment. The Court also noted various ways in which the County continues to exercise significant control over the employment relationship, including that the County determines the tasks IHSS workers will perform, as well as their work hours, and that from the IHSS workers’ perspective, the County is the public face of the employer of IHSS providers.
Based on the above factors, the Ninth Circuit concluded that the County maintains both economic and structural control over IHSS providers, rendering it a joint employer under Bonnette. Note that although the Court analyzed facts specific to Los Angeles County, to the extent facts are similar in other counties, the Court’s reasoning would be applicable to other counties.
The County’s Actions Were Not In Bad Faith
An employer that violates the FLSA shall be subject to liquidated damages in an amount equal to back pay owed unless it can show the violation was not in bad faith. In Ray, the Court found that the evidence did not support a finding of bad faith against the County – even though it is undisputed that the County failed to pay overtime owed from January 1, 2015 through February 1, 2016. This is because, regardless of the County’s efforts to do otherwise, the County was not able to provide overtime compensation until the State made it available. The state did not start paying overtime until February 1, 2016.
Moreover, despite the state’s delay, the County made efforts to comply with the overtime requirements in public by providing training on implementing the new FLSA overtime requirements. Because the Court found the County’s decisions to have been made “above board and justified in public,” this served as evidence that the County’s actions were more likely to have been made in good faith.
What Employers Need to Know
Counties should expect an uptick in FLSA claims in the wake of the Ray decision. Although counties may not know the extent to which IHSS providers work hours in excess of forty per week, IHSS program directors should nonetheless work with legal counsel and other key county personnel to manage the effects of the Ray decision. Due to LCW’s work with counties and IHSS public authorities throughout the state, as well as our firm’s experience in FLSA compliance and litigation, please feel free to contact us if needed.
Daniel Seitz is an associate in LCW’s Los Angeles office and regularly works on public sector wage and hour issues.
Lisa S. Charbonneau is a partner in LCW’s San Francisco office. She is member of LCW’s Labor Relations Practice Group Executive Committee and LCW’s Wage and Hour Practice Group Executive Committee. She and other firm attorneys bargain IHSS contracts throughout the state.