Medicaid Waiver Payroll Intermediaries Are Not “Employers” Under the FLSA/CMWA Absent Hiring, Supervision, or Pay-Setting Control

I. Introduction

Kolonziaa v. Allied Cmty. Res., Inc. is a Second Circuit summary order (expressly non-precedential) affirming summary judgment for two related entities—Allied Community Resources, Inc. (“Allied Resources”) and its parent, Allied Community Services, Inc. (“Allied Services”)—on claims under the Fair Labor Standards Act (“FLSA”) and the Connecticut Minimum Wage Act (“CMWA”).

The plaintiffs, Isaac Kolonziaa and Michele May-Javeed, sought to proceed on behalf of a putative FLSA collective and a Rule 23 CMWA class of personal care assistants who provided in-home services to elderly or infirm “waiver participants” eligible under Connecticut Department of Social Services (“DSS”) Medicaid Waiver Programs. Allied Resources had a contract with DSS that included payroll-processing-related functions for caregivers.

The central issue was whether Allied Resources (and separately Allied Services) qualified as the plaintiffs’ “employer” for minimum-wage and overtime purposes—despite the program structure in which DSS authorizes services and budgets, and caregivers provide care in participants’ homes.

II. Summary of the Opinion

The Second Circuit affirmed the district court’s conclusion that no reasonable jury could find Allied Resources or Allied Services to be the plaintiffs’ employer under either the FLSA or the CMWA.

  • FLSA (Allied Resources): Applying the “economic reality” inquiry through the Carter “formal control” factors, the court held the record did not support Allied Resources’ power to hire/fire, supervise schedules/conditions, or determine pay. Maintaining employment records alone was insufficient.
  • CMWA (Allied Resources): Even assuming either (a) an FLSA-style economic reality test or (b) a Connecticut-focused multifactor approach, Allied Resources still did not qualify as the employer because it did not set hours, control day-to-day work, or determine wages.
  • Allied Services: Plaintiffs conceded they did not work for Allied Services, and their interactions with others who may have worked in Allied Services facilities could not establish employment. Plaintiffs could not maintain collective/class claims against an entity that was not their employer.

III. Analysis

A. Precedents Cited

1. Procedural and evidentiary framework at summary judgment

  • 1077 Madison St., LLC v. Daniels — Cited for de novo review and the rule that summary judgment is appropriate when there is no genuine dispute of material fact and the movant is entitled to judgment as a matter of law. This frames the appellate lens: the question is not whether plaintiffs alleged employment, but whether record evidence could allow a reasonable jury to find it.
  • Capitol Recs., LLC v. Vimeo, Inc. — Reinforces that a genuine dispute exists only where evidence could allow a reasonable jury to decide for the non-movant. The court uses this to emphasize that speculative inferences (e.g., “approval” stamps or administrative checklists) must connect to legally relevant control.
  • Davis v. New York — Used to reject conclusory assertions as insufficient to defeat summary judgment. This is important because one plaintiff’s interrogatory claim of “supervision” by an Allied employee was treated as too conclusory without supporting specifics showing control over schedule or conditions.

2. FLSA “employer” analysis: economic reality and formal control

  • Carter v. Dutchess Community College — Supplies the four “formal control” factors: (1) power to hire and fire, (2) supervision/control of schedules or conditions, (3) determination of rate and method of payment, and (4) maintenance of employment records. The court organized its FLSA analysis around these factors and found three of four absent on this record.
  • Barfield v. N.Y.C. Health & Hosps. Corp. — Provides the core principle that FLSA employment turns on “economic reality” rather than technical concepts, assessed under the totality of circumstances. It also endorses using the Carter factors as indicators of formal control while cautioning against mechanical application.
  • Herman v. RSR Sec. Servs. Ltd. — Adds two key points: (a) the “overarching concern” is whether the alleged employer possessed power to control the workers, and (b) no single Carter factor is dispositive. The panel used Herman to explain why recordkeeping alone could not establish employer status.

3. Collective/class procedure context

  • Scott v. Chipotle Mexican Grill, Inc. — Cited twice: first to explain why plaintiffs often pair FLSA collectives with Rule 23 state-law classes; later to highlight the distinction between FLSA “similarly situated” and Rule 23 predominance. In this case, Scott also supported the court’s practical point: a plaintiff cannot pursue a collective/class against an entity that is not the plaintiff’s employer in the first place.

4. CMWA “employer” uncertainty and alternative tests

  • Rodriguez v. Kaiaffa, LLC — Cited for the proposition that Connecticut appellate courts have not definitively interpreted “employer” under Conn. Gen. Stat. § 31-58(d). This opened the door for the panel to affirm under either of two approaches recognized in federal decisions.
  • Dixon v. Zabka — Example of District of Connecticut authority applying an FLSA-like “economic reality” test to CMWA claims.
  • Flemming v. REM Conn. Cmty. Servs. Inc. (citing Butler v. Hartford Tech. Inst.) — Example of a Connecticut-leaning multifactor focus (hours set, wages paid, control of day-to-day responsibilities, daily operations). The panel used this line to show that even if “payment” is present, the missing elements of control and wage-setting remain fatal.

B. Legal Reasoning

1. Why Allied Resources was not an FLSA employer

The court’s reasoning is best understood as a distinction between (i) administrative/payroll functions required by a government program contract and (ii) employer-type control over work.

(a) Power to hire and fire

Plaintiffs relied on a “New Employee Application Checklist” with fields like “Date of Hire,” “Employment Authorized,” and an “Approved” mark. The court treated this as evidence of ministerial processing of paperwork, not proof that Allied Resources actually made hiring decisions. It also rejected reliance on a “DSS Provider Agreement” signed by plaintiffs because Allied Resources was not a party to that agreement; employer authority could not be inferred from a contract to which the alleged employer was not bound.

(b) Supervision and control of schedules/conditions

Plaintiffs pointed to training calls, timesheets submitted to Allied Resources, an Electronic Visit Verification system, and a contract requirement for some on-site reviews. The panel held these facts showed, at most, that Allied Resources tracked and processed information and satisfied DSS compliance requirements—not that it controlled the day-to-day caregiving work, the scheduling, or the working conditions in participants’ homes. Timesheet review was tied to mathematical accuracy and authorization/fraud checks, not performance supervision.

(c) Rate and method of payment

This factor was especially adverse to plaintiffs: the record established that DSS set the pay rates through authorized, itemized budgets and that Allied Resources was constrained by DSS approval requirements. Plaintiffs also admitted their rates were established by DSS and reflected in budgets Allied Resources did not create. Thus, Allied Resources paying wages (processing payment) did not equate to determining wages.

(d) Employment records

Allied Resources did maintain employment records. But under Herman v. RSR Sec. Servs. Ltd., no single factor is dispositive; recordkeeping alone could not overcome the lack of hiring/firing power, supervision, or wage-setting authority.

2. Why Allied Resources was not a CMWA employer

Given uncertainty in Connecticut law, the court affirmed under either test:

  • FLSA-like economic reality: same result as the FLSA analysis.
  • Flemming/Butler-style factors: although Allied Resources paid wages, there was no evidence it determined wages, set hours, controlled day-to-day responsibilities, or ran daily operations of caregiving.

3. Why Allied Services was not an employer

The panel treated this as straightforward: plaintiffs admitted they did not work for Allied Services and did not claim it controlled their work. Mere interaction with others who might have been Allied Services employees could not create an employment relationship. The court also underscored a standing/fit principle embedded in collective/class procedure: plaintiffs cannot litigate employer-liability claims against an entity that was not their employer merely because other putative members might have worked for that entity.

C. Impact

Although designated non-precedential, the decision provides a clear, program-specific template for litigating “employer” status in Medicaid waiver / fiscal intermediary contexts:

  • Administrative infrastructure is not enough: Payroll processing, onboarding paperwork, EVV systems, and compliance spot-checks—without authority to hire/fire, direct day-to-day work, or set wages—are unlikely to satisfy Carter-style control.
  • Budget-driven public program structures matter: Where a state agency authorizes services and budgets and constrains payment, courts may view the intermediary as implementing state-set compensation rather than determining it.
  • CMWA claims may rise or fall with the same control facts: Even with doctrinal uncertainty under Conn. Gen. Stat. § 31-58(d), plaintiffs should expect federal courts to test for meaningful operational control, not simply wage payment mechanics.
  • Entity selection is critical for collective/class actions: The decision highlights the practical barrier to suing a parent or related corporation when the named plaintiffs cannot plausibly allege they were its employees.

IV. Complex Concepts Simplified

  • “Economic reality” test: A functional inquiry into who actually controls the work and the worker’s economic dependence—focusing on real-world power, not labels in contracts.
  • Carter factors: Common indicators of “formal control” under the FLSA: hiring/firing power; supervision of schedules/conditions; setting pay; keeping records. Courts weigh them together; none is automatically decisive.
  • Summary judgment: A case can be resolved without trial if, even viewing the evidence favorably to the non-moving party, a reasonable jury still could not find for that party on a legally required element (here, employer status).
  • FLSA “collective action” vs. Rule 23 “class action”: FLSA collectives proceed for “similarly situated” employees who opt in; Rule 23 classes require stricter showings (including predominance) and typically include members unless they opt out.
  • Medicaid waiver “provider” structure: Care may be authorized and funded through state-administered budgets, while intermediaries handle administrative tasks—creating recurring disputes about whether intermediaries are employers or merely program administrators.

V. Conclusion

Kolonziaa v. Allied Cmty. Res., Inc. affirms that, in the Medicaid waiver setting, an entity that primarily performs payroll/administrative tasks—and lacks meaningful authority to hire/fire, supervise day-to-day caregiving, or set pay—will not be treated as an “employer” under the FLSA, and likely not under the CMWA either. The opinion’s core takeaway is that control, not paperwork or payment mechanics, drives employer status; and plaintiffs must tether collective/class claims to an entity that employed them in fact, not merely in organizational proximity.