Background
Following Hurricane Maria, the nonprofit organization The Facilitators: Iron Horse, Inc. received funding from the Federal Emergency Management Agency to provide disaster relief services in Puerto Rico. The nonprofit hired the appellants as employees. When FEMA denied a request for additional funding, the nonprofit could not pay the workers, who then sued FEMA and the nonprofit for back pay under the Fair Labor Standards Act. The district court granted summary judgment in favor of FEMA, ruling that the workers were not FEMA employees.
The court’s reasoning
The court applied the economic reality test to determine if an employment relationship existed between the workers and FEMA. The test examines whether the alleged employer had the power to hire and fire, supervised work schedules, determined pay rates, and maintained employment records. The court found that the nonprofit, not FEMA, possessed the authority to hire and fire the workers, controlled their work schedules and conditions, determined their pay, and maintained their records. The court rejected arguments that FEMA’s involvement in training or the location of work created an employment relationship, noting that FEMA was merely a grant recipient in the arrangement. The court also declined to reconsider the summary judgment based on new evidence and rejected the claim that FEMA was in default for failing to answer a second amended complaint.
The uncontroverted facts show that it was TFCI and not FEMA that possessed the authority to hire and to fire the appellants.
Perez v. Federal Emergency Management Agency, 24-2131 (1st Cir. 2026)
What it means going forward
The ruling clarifies that federal agencies funding nonprofit disaster relief efforts are generally not liable as employers for the workers hired by those nonprofits under the Fair Labor Standards Act, absent direct control over the employment relationship.
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