May 27, 2026|Franchise Frontlines
May 27, 2026 | United States District Court for the Northern District of Mississippi | Slip Copy
Executive Summary
In a slip-copy decision, Judge James D. Maxwell II of the United States District Court for the Northern District of Mississippi dismissed forty-four defendants from an FLSA collective action brought by a certified nursing assistant who worked for Care Givers, LLC. The plaintiff alleged that Care Givers and forty-four related entities should all be treated as her employer because they shared common ownership, used common payroll and management services, participated in shared benefits arrangements, used standardized forms and policies, and were otherwise corporately related. The moving defendants argued that the plaintiff lacked standing to sue them because she did not work for them and had not shown that any of them employed her as a matter of economic reality. The court agreed, holding that common enterprise allegations may matter to FLSA coverage, but FLSA liability requires an employer-employee relationship with each defendant. Because the plaintiff did not allege or prove that any defendant other than Care Givers hired, fired, supervised, scheduled, disciplined, directed, or otherwise controlled her work, the court dismissed all other defendants.
Relevant Background
Plaintiff Lacunya Hodges worked as a certified nursing assistant at Care Givers, LLC, a nursing facility in Coahoma County, Mississippi. She filed a putative FLSA collective action on behalf of herself and other hourly, non-exempt employees, alleging that they frequently worked more than forty hours per week but did not receive overtime pay required by the FLSA.
Hodges did not sue only Care Givers. She also named forty-two other limited liability companies that owned and operated individual nursing homes, along with Administrative Systems, Inc. and Medico, LLC. Sixteen of the nursing-home entities were Mississippi companies, and twenty-six were Louisiana companies. Hodges alleged that ASI provided administrative and payroll services, including overtime computation and payment, to the other defendants. She alleged that Medico served as sponsor of the nursing-home defendants’ 401(k) plan.
The complaint devoted substantial attention to “joint employer” allegations. Hodges alleged that the defendants, although technically separate legal entities, were under common ownership and control of the Beebe family, which allegedly owned and operated more than fifty nursing homes in Mississippi and Louisiana. She alleged that the defendants functioned as one large company and jointly shared authority and responsibility to hire and fire employees, supervise work schedules, and determine rates and methods of pay. She pointed to standardized employee forms and handbooks, shared administrative services, common participation in a retirement plan, administrators’ use of email addresses ending in “@asimgt.com,” and the listing of ASI’s president as a corporate officer for Medicare and Medicaid purposes.
All defendants except Care Givers moved to dismiss. They argued that Hodges lacked standing because they were not her employer and that the complaint failed to plausibly allege an FLSA claim against them. The Louisiana entities also challenged personal jurisdiction. The court permitted limited jurisdictional discovery on standing and personal jurisdiction. After that discovery, the moving defendants argued that the record confirmed they were not, in any real economic sense, Hodges’s employer. Hodges shifted her emphasis slightly, arguing that the defendants formed an “organized group of persons” and therefore operated as a coordinated enterprise.
Decision
The court dismissed all moving defendants for lack of standing under Rule 12(b)(1). Because the moving defendants lodged a factual attack on standing, the court considered the complaint and the evidence developed through jurisdictional discovery. The court emphasized that standing requires a plaintiff to show an injury in fact that is traceable to the defendant’s allegedly unlawful conduct and redressable by a favorable decision.
The court began by explaining the nature of an FLSA collective action. The FLSA allows an employee to sue on behalf of herself and other similarly situated employees, but opt-in employees do not become plaintiffs unless and until they file written consent. A named plaintiff must still establish standing as to each defendant. In other words, the plaintiff must allege that each defendant injured her. The fact that other entities may have employed potential opt-in plaintiffs does not permit the named plaintiff to sue those entities if they did not employ her.
That principle mattered because the plaintiff’s alleged injury was unpaid overtime. Under the FLSA, that injury is traceable only to an employer. The court therefore held that Hodges could proceed only against entities that employed her. The fact that other defendants might have employed other potential opt-in plaintiffs did not establish Hodges’s standing to sue them.
The court then drew the central distinction in the opinion: single enterprise is not joint employment. The court explained that the FLSA’s “enterprise” theory applies to coverage, not liability. Enterprise coverage addresses whether the employer is sufficiently engaged in commerce, including whether related activities can be aggregated to satisfy the FLSA’s annual-dollar-volume requirement. FLSA liability, however, depends on an employer-employee relationship. The court stated that “being part of a common enterprise goes to the question of FLSA coverage,” while “FLSA liability is a different consideration.”
The court rejected Hodges’s repeated effort to use common enterprise allegations as a substitute for employment control. Her theory that forty-five defendants formed one large company did not answer whether each defendant employed her. The court explained that an employer is not liable for employees of a separate entity in the same enterprise. Instead, there must be an employer-employee relationship with each purported employer. An employment relationship with one entity in an enterprise is not enough to make other entities in the same enterprise joint employers.
The court also distinguished horizontal joint employment. In a horizontal joint-employment case, a worker has more than one employer, and the issue is whether hours worked for those employers should be aggregated for overtime purposes. The court explained that if Hodges had alleged she simultaneously worked at two or more related nursing facilities each week, common ownership and management could have been relevant. But she alleged she worked at only one facility, Care Givers. As a result, the association among the named defendants was not enough. The controlling question was the economic reality of the relationship between Hodges and each purported joint employer.
Turning to the forty-two nursing-home defendants, the court found no standing. Hodges did not allege or prove that she had an employer-employee relationship with any of them. Her consistent assertion was that they had similar ownership, management, and policies. But the heart of the economic-reality test is control and dependence. Hodges presented no evidence that nursing homes she never worked for controlled the details of her service to Care Givers or that she was economically dependent on them.
The court reached the same conclusion as to Medico. Hodges alleged that Medico sponsored the retirement plan for employees of the other defendants and owned the building from which ASI operated. She did not allege or prove that Medico employed her. The court viewed Medico’s inclusion as based only on corporate relatedness, which was not enough to establish standing.
ASI warranted more detailed analysis because it provided administrative services. The court applied the Fifth Circuit’s economic-reality factors: whether the alleged employer possessed the power to hire and fire, supervised and controlled work schedules or conditions of employment, determined the rate and method of payment, and maintained employment records.
The court found that Hodges did not allege or produce evidence that ASI hired or fired her. Her evidence involved a Department of Human Services investigative report regarding another nursing home, not Care Givers, which suggested that a regional supervisor decided to terminate an employee. The court refused to infer from that report that an ASI regional supervisor disciplined employees at Care Givers or exercised discipline over Hodges. The court emphasized that conclusory allegations and inferences are not enough to establish the required link between employee and purported employer.
The supervision-and-control factor also favored ASI. Hodges emphasized similar employee policies and procedures across the nursing-home network and asserted that they originated from ASI. But the court found that playing some role in developing policies did not show that ASI applied or enforced those policies against Hodges. The court explained that cooperation between affiliates does not imply control, and that providing manuals and guidelines resembles services provided by a third-party consultant. Nor did ASI’s president being identified as a “Corporate Compliance Officer” for Medicare and Medicaid purposes show that she controlled Hodges as an employer.
The court acknowledged that ASI, as payroll-services provider, calculated paychecks from information provided by Care Givers and maintained records for Care Givers employees. But the court held that providing human-resources services such as payroll and insurance does not make an entity a joint employer. Hodges produced no evidence that she communicated with ASI, interacted with ASI, reported to ASI, received work directives from ASI, or even knew ASI existed while she worked for Care Givers. The court therefore found no reason to doubt that ASI was an outsourced provider of human-resource and compliance services rather than Hodges’s employer.
The court concluded by emphasizing that the FLSA should not be interpreted to subsume typical outsourcing relationships. The economic-reality test exists to distinguish entities that function as employers from business partners, vendors, affiliates, and service providers that support the direct employer. Because Hodges lacked standing to sue the moving defendants, the court dismissed them and allowed the case to proceed only against Care Givers.
Looking Forward
This decision is a strong reminder that FLSA plaintiffs cannot use “single enterprise” as a shortcut to joint-employer liability. Enterprise allegations may matter when a defendant argues it is too small or insufficiently engaged in commerce to be covered by the FLSA. But coverage is not liability. A plaintiff seeking unpaid overtime must still show that each defendant was her employer as a matter of economic reality.
That distinction has substantial value for franchisors, multi-unit operators, management companies, private equity platforms, affiliated entities, and shared-services providers. Plaintiffs often try to transform common ownership, centralized services, common handbooks, common email domains, uniform policies, benefits administration, payroll support, compliance assistance, and management relationships into joint-employer allegations. Hodges rejects that move. The court required a defendant-specific employment relationship, not generalized corporate relatedness.
For franchisors, the opinion reinforces the difference between system support and employment control. A franchisor may provide brand standards, compliance guidance, model forms, technology platforms, payroll integrations, training resources, or operational guidance. Those functions can support consistency and legal compliance across a system. They should not, without more, make the franchisor the employer of a franchisee’s employees. The more direct question is whether the franchisor hires, fires, supervises, schedules, disciplines, sets pay, maintains employment records in an employer capacity, or otherwise controls the worker’s employment as a matter of economic reality.
The ASI analysis is particularly useful. ASI calculated paychecks, maintained records, and allegedly helped develop policies. Those facts were not enough because the plaintiff did not report to ASI, receive work directives from ASI, interact with ASI, or show that ASI applied employment policies to her. That part of the opinion helps separate back-office administration from employer control. Payroll processing and HR support are not irrelevant, but they do not create joint-employer liability when the record shows that the direct employer supplies the underlying information and controls the employment relationship.
The court’s treatment of horizontal joint employment also matters. Horizontal joint employment can exist where a worker actually works for more than one related employer and the issue is whether the hours should be combined for overtime purposes. The court explained that this was not such a case because Hodges worked only for Care Givers. In franchise and multi-entity systems, that distinction can be important. The fact that related businesses share ownership or administrative infrastructure does not permit a worker employed by one entity to sue every related entity unless the worker can show an actual employment relationship with each defendant.
This decision also supports early motion practice. The court addressed standing before certification, allowed limited jurisdictional discovery, and then dismissed non-employer defendants before the case expanded further. That sequence may be useful in defending FLSA collective actions where the named plaintiff tries to increase the opt-in pool by naming entities that did not employ her. Employers and franchisors should consider whether a standing challenge can narrow the case before notice and certification issues multiply the litigation.
The practical lesson is not that shared services are risk-free. Shared-service entities, franchisors, and affiliates should still avoid unnecessary involvement in hiring, firing, discipline, scheduling, wage-setting, and day-to-day supervision. A different record could support joint-employer liability if the service provider or affiliated entity actually controls those functions. But Hodges confirms that courts should not treat ordinary outsourcing, administrative support, or corporate affiliation as enough to create FLSA liability.
For franchisors and employers, the case offers a concise defensive principle: a plaintiff cannot sue a corporate family, system, or network merely because it exists. The plaintiff must tie the alleged wage injury to a defendant that employed her. Without that link, common ownership and shared administration do not create FLSA standing or liability.
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 Partner at Buchalter LLP 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.
