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Jacobs v. New York Foundling Hospital

August 11, 2009

LINDA JACOBS, WENDY SLAUGHTER, AND KENNETH BROWN, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, PLAINTIFFS-APPELLANTS,
v.
NEW YORK FOUNDLING HOSPITAL, DEFENDANT-APPELLEE.



SYLLABUS BY THE COURT

Appellants appeal from an April 16, 2007 judgment of the United States District Court for the Eastern District of New York (Azrack, M.J.) granting, inter alia, appellee's motion for summary judgment and dismissing appellants' claim that they were unlawfully denied overtime pay in violation of the Fair Labor Standards Act of 1938, 29 U.S.C. § 207(a)(1). Appellants contend appellee is an "enterprise" obligated to pay overtime because certain contractual and regulatory relations render its activities "in connection with the activities of a public agency" pursuant to § 203(r)(2)(C) and thus "performed for a business purpose." We disagree and affirm the judgment.

Per curiam.

Argued: August 27, 2008

Before NEWMAN and CALABRESI, Circuit Judges.*fn1

Appellants Linda Jacobs, Wendy Slaughter, Kenneth Brown, and the remainder of the class are former employees ("Employees") of the Foster and Boarding Home Programs operated by appellee New York Foundling Hospital ("Foundling"). All allege that they were not compensated properly for overtime work, in violation of the Fair Labor Standards Act of 1938 ("FLSA" or "Act"), 29 U.S.C. § 201--219, and appeal from an April 16, 2007 judgment of the United States District Court for the Eastern District of New York (Azrack, M.J.)*fn2 granting Foundling's motion for summary judgment and dismissing the Employees' claim for premium pay.

On appeal, the Employees contend that Foundling, a private, non-profit, independent contractor, is an "enterprise" under 29 U.S.C. § 203(r)(1) because its contractual and regulatory relations with the New York City Administration for Children's Services ("ACS") render its activities "in connection with the activities of a public agency" pursuant to 29 U.S.C. § 203(r)(2)(C) and thus "performed for a business purpose." Accordingly, the Employees claim, Foundling owes them overtime pay under the Act. Because we conclude that the Act's definition of "enterprise" does not extend to a private, non-profit, independent contractor associated by regulation and contract with a public agency, Foundling is not obligated to pay overtime under the Act. We therefore affirm.

BACKGROUND

I. New York Foundling Hospital

New York Foundling Hospital is a private, charitable provider of social services to children and families in the New York City area. Founded in 1869 by a Catholic religious order as a home for abandoned children, today its services include foster care, adoption, and physical and mental health initiatives.

All of the children served through Foundling's Foster Home and Boarding Home Programs are referred by ACS, which is responsible for administering New York City's child welfare services and is authorized to contract with private providers like Foundling under New York Social Services Law § 423(2). The Foster Home Program deals with approximately 150 abused or neglected children without special needs who have been removed from their biological families and placed with foster parents. The Boarding Home Program serves the same category of children who could not have or have not yet been placed with foster parents. Foundling's funding is derived exclusively from charitable grants and other federal, state, and local government sources. Almost half of its total revenue originates as payments from ACS.

The relationship between ACS and Foundling is set forth in a number of agreements premised upon Foundling's status as an independent contractor and, in turn, the entities' operational independence. The contracts provide that Foundling's "executive staff shall manage its affairs and programs and shall have the responsibility for the day-to-day provision of Services to and for each child placed with it." Foundling "alone is responsible for . . . [the] work, direction, compensation and personal conduct" of its employees, as well as for their recruiting, screening, and training. Foundling can unilaterally terminate the agreements, in whole or in part, with thirty days notice.

ACS exercises no control over Foundling's Board of Directors, structure, finances and governance, except to the extent that it retains some degree of oversight over Foundling's programs and client relations. The Foster Care Agreement, for instance, requires Foundling to "recruit a sufficient number and variety of prospective foster parents" to meet the level ACS calculates is appropriate for a targeted area. Foundling must generally accept all ACS-referred children, establish grievance procedures for its service recipients with decisions appealable to ACS, and allow ACS to monitor and review all of its "program activities, procedures[] [and] records . . . as ACS deems necessary . . . including, at reasonable times, unannounced and unscheduled visits" to Foundling's offices and to its clients.

II. Procedural History

On March 3, 2004, the named Employees commenced an action against Foundling to recover unpaid overtime pay. The named Employees contended such payment was required under the FLSA because, 1) Foundling was an enterprise engaged in commerce (the "enterprise coverage claim"), or, alternatively, 2) Foundling's individual employees were engaged in commerce (the "individual coverage claim"). The named Employees also asserted an overtime claim based on New York state labor law. On December 13, 2004, the named ...


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