September 30, 2025|Franchise Frontlines
September 30, 2025 | U.S. District Court for the Southern District of Indiana | Unpublished Opinion
Executive Summary
In an unpublished decision, Judge Sarah Evans Barker of the Southern District of Indiana denied the Department of Labor’s motion for summary judgment seeking contempt sanctions against Heal at Home, LLC; TPS Caregiving, LLC d/b/a Comfort Keepers; and their owner, Timothy Paul. The Secretary alleged that Defendants violated a 2022 Consent Judgment requiring compliance with the Fair Labor Standards Act (FLSA) overtime provisions. Defendants cross-moved for summary judgment, arguing that their wage-rate adjustments complied with the FLSA and did not violate any explicit command in the Consent Judgment. The court granted Defendants’ motion, finding that the Secretary failed to establish clear and convincing evidence of any significant violation and that Defendants made reasonable and diligent efforts to comply with the order.
Relevant Background
According to the allegations presented in the underlying enforcement action, Heal at Home and Comfort Keepers provide in-home caregiving services to a primarily Medicaid-funded patient population. The two businesses share ownership and frequently utilize the same field staff. A 2020 Department of Labor investigation concluded that the companies constituted a single enterprise and joint employers for FLSA purposes, requiring aggregation of their field staff’s hours to calculate overtime. The Secretary brought suit in 2021, alleging unpaid overtime. That lawsuit resulted in a 2022 Consent Judgment requiring Defendants to comply with FLSA overtime rules, aggregate employee hours across entities, and pay more than $432,000 in back wages and liquidated damages.
After entry of the Consent Judgment, Defendants implemented significant operational changes. They created a unified payroll company—TPS Medical Holdings—to ensure aggregation of work hours across related entities. They also made company-wide adjustments to regular hourly rates for field staff and later made additional adjustments in response to patient-driven schedule changes. Defendants asserted that these changes were prospective and designed to comply with the FLSA’s overtime requirements, especially given the fixed-rate constraints of Medicaid reimbursement.
In July 2024, the Secretary filed a petition for contempt. The Secretary alleged that Defendants had “manipulated” employees’ regular rates during overtime weeks to pay workers close to straight time, and that their recordkeeping practices violated the FLSA. Defendants denied those allegations and argued that the Consent Judgment did not prohibit prospective wage adjustments and contained no recordkeeping provisions. The parties filed cross-motions for summary judgment.
Decision
The court granted summary judgment to Defendants on the contempt petition and denied the Secretary’s motion. The court emphasized the demanding “clear and convincing evidence” standard governing civil contempt and held that the Secretary had not shown any significant violation of an unambiguous command.
The court first found that the Consent Judgment contained no explicit prohibition against adjusting employees’ base hourly wages before those wages were earned. The judgment required Defendants to comply with FLSA overtime rules and aggregate hours, but it did not restrict an employer’s lawful ability to prospectively change regular rates. Because the Consent Judgment did not mention recordkeeping obligations, the court held that any criticisms of Defendants’ payroll documentation could not support contempt.
The court then analyzed the “reasonable and diligent efforts” requirement. It found substantial record evidence that Defendants made ongoing efforts to comply with the Consent Judgment, including creating a unified payroll company to aggregate hours, consulting counsel regularly, paying all back wages required by the judgment, and consistently paying overtime at time-and-a-half after the payroll consolidation. The court noted that Defendants’ owner sought guidance promptly whenever concerns arose, including emailing counsel after reading a news report about a Pennsylvania homecare agency found liable for similar wage practices.
Although the Secretary argued that rate reductions were designed to evade overtime obligations, the court found inadequate proof under the heightened contempt standard. The court noted that Defendants’ wage adjustments were prospective, occurred before overtime hours were worked, and were accompanied by written notices or documented employee consent. The court carefully evaluated the parties’ January 2023 email exchange and concluded that, rather than demonstrating evasive intent, it demonstrated Defendants’ good-faith attempts to understand and comply with FLSA obligations.
Because the Secretary provided no clear evidence of a significant violation and did not show lack of diligence, the court concluded that contempt sanctions were inappropriate. The court also denied the Secretary’s request for coercive fines, back wages, third-party audits, and other additional relief. Finally, the court emphasized that while it expressed no view on whether the wage-rate adjustments complied with the FLSA as a matter of underlying law, the Consent Judgment did not clearly forbid the conduct at issue.
Looking Forward
This decision may provide guidance for employers, including franchisors and multi-unit operators, who operate under consent judgments or other injunctive agreements requiring ongoing compliance with wage-and-hour laws. One lesson is that courts may decline to expand the scope of a consent judgment beyond its plain text. When a consent order does not explicitly prohibit certain types of wage or rate adjustments, a court may be reluctant to impose contempt sanctions absent unmistakable evidence of noncompliance.
The ruling also illustrates how courts may view an employer’s good-faith efforts to comply with FLSA obligations. Consolidating payroll, seeking legal advice, paying required back wages, and documenting wage-rate changes may help demonstrate diligence in close cases. While the underlying legality of prospective wage adjustments may depend on FLSA rules and fact-specific circumstances, the court’s decision shows that a contempt finding requires more than a disagreement over payroll strategy or administrative design.
The opinion further suggests that where compensation structures change due to external constraints—such as Medicaid reimbursement rules—courts may consider whether employers acted reasonably in managing those constraints. Finally, businesses operating across multiple entities or affiliates may take note of the importance of centralized payroll systems and clear records when navigating the complexities of joint employment and enterprise-based wage rules.
As always, the practical implications for other employers, including franchisors and large brand systems, will depend on the language of any applicable consent judgment, the statutory environment, and the factual record developed in the event of a future compliance dispute.
This article is based solely on the opinion of the Court in this matter. The author has not conducted any independent investigation into the facts. For the avoidance of doubt, each statement related to the law and facts in this article is drawn from the Court’s opinion in this case.
Thomas O’Connell is a Shareholder at Buchalter APC and Chair of the firm’s Franchise Practice Group. For questions about this article or media inquiries, you can contact Tom at toconnell@buchalter.com.
This communication is not intended to create, and does not create, an attorney-client relationship or any other legal relationship. No statement herein constitutes legal advice, nor should it be relied upon or interpreted as such. This communication is for general informational purposes only and is not a substitute for legal counsel. Readers should not act or refrain from acting based on any information provided without seeking appropriate legal advice specific to their situation. For more information, visit www.buchalter.com.
