Judge orders Comprehensive Healthcare to pay nearly $36M for labor violations

A federal judge on Monday ordered an embattled nursing home corporation to pay nearly $36 million in back wages and penalties after finding that Comprehensive Healthcare Management Services violated U.S. labor laws.

U.S. District Judge William Stickman IV ordered the company, which operated 15 nursing homes in Western Pennsylvania, to pay $17.9 million in back wages to nearly 6,000 employees, and an equal amount in damages, finding that the payroll errors were made “willfully — if not maliciously.”

“Make no mistake, these were not occasional, innocent payroll errors,” he wrote. “Rather, the court finds that (owner Sam) Halper, CHMS and facility defendants created and intentionally maintained a system through which employees were consistently, systematically and willfully subjected to payroll practices that did not remotely comply with the provisions of the (Fair Labor Standards) Act.”

Messages left with Comprehensive’s attorneys on Tuesday were not immediately returned.

Comprehensive operated in Allegheny, Westmoreland, Beaver, Lawrence, Mercer and Butler counties.

Their 15 facilities included Cheswick Rehabilitation and Wellness in Indiana Township, The Grove at Irwin, The Grove at Latrobe, The Grove at Harmony, Monroeville Rehabilitation & Wellness, Mt. Lebanon Rehabilitation & Wellness and Brighton Rehabilitation and Wellness in Beaver County.

Stickman’s 57-page opinion came following a 13-day bench trial that featured 50 witnesses and concluded Feb. 15.

The Labor Department filed the complaint against Comprehensive in 2018, accusing the company of failing to keep adequate pay records and failing to pay mandatory overtime.

It was just one of several court actions filed against Comprehensive, which, in December, was found guilty in criminal court of health care fraud, although five executives were acquitted.

In reaching his conclusions in the payroll case, Stickman agreed with the government. He also said Comprehensive failed to accurately classify employees as exempt from overtime rules.

The judge said in his opinion that the payroll system at the nursing homes was adversarial, shortchanging employees and then forcing them to fight to receive their just compensation, leading to repeated errors in their paychecks.

“The frustration and futility of this process led many employees to simply give up, either by quitting their job altogether or making do with the incorrect pay,” the court wrote.

Stickman said in his opinion that he found the witnesses presented by the Labor Department to be “substantially more credible than those presented by defendants,” noting that all of Comprehensive’s witnesses were current supervisors.

“These witnesses all had a direct current stake in this litigation,” Stickman wrote. “Additionally, a number of them had to testify in the presence of Halper, who is directly or indirectly their boss.”

The judge said that defense witnesses’ selective memory issues “at times strained credulity” and “by and large, their testimony is simply unworthy of belief.”

Stickman said he found Halper to be “completely incredible.”

“Halper’s testimony epitomized the overarching nature of all defendants’ witnesses’ testimony — selective, self-serving, disingenuous and not remotely credible.”

Stickman called the government’s testimony “clear, consistent and credible.”

In reaching his conclusions, Stickman said the evidence showed that Comprehensive paid employees based on their scheduled hours and not the hours actually worked. Comprehensive also automatically deducted lunch breaks, even when employees worked through them.

In addition, the court found that Comprehensive improperly classified some employees as exempt from federal overtime requirements.

The government had sought $20.5 million in back wages, but Stickman found that some of the employees included in those calculations were exempt.

Stickman ordered Comprehensive to follow the federal Labor Standards Act.

Prior to the start of the labor violations trial, Comprehensive sought to sell seven of its nursing homes for $56 million.

Although the government attempted to block the sale, arguing that the company was attempting to offload assets to halt the government’s ability to recover damages, Stickman said the department did not meet its burden, thereby clearing the way for the sale to go through.

Comprehensive filed Chapter 11 bankruptcy petitions for 22 entities on May 17 in Pittsburgh. In case filings, they say that they continue to operate 13 nursing homes.