Williams et al v. Cenikor Foundation et al

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UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF TEXAS
HOUSTON DIVISION
SHELBY LEE WILLIAMS, et al.,
Plaintiffs,
VS.
§
§
§
§
§
§
§
§
§
CIVIL ACTION NO. 4:19-CV-02828
CENIKOR FOUNDATION, et al.,
Defendants.
MEMORANDUM & ORDER
Before the Court is Defendant Cenikor Foundation (“Cenikor”)’s Motion for Partial
Summary Judgment (ECF No. 87). Cenikor moves for summary judgment on all claims brought
by Plaintiffs Shelby Lee Williams and Randy Edward Pouncy. For the reasons that follow, the
Court GRANTS IN PART AND DENIES IN PART the Motion.
I. 	BACKGROUND
A. Procedural History
This case has a lengthy history before this Court. To summarize briefly, Plaintiffs Williams
and Pouncy first filed this suit in 2019 as a collective action under the Fair Labor Standards Act
(“FLSA”). See ECF No. 1. In February of 2020, the case was consolidated with Klick v. Cenikor
Foundation (No. 4:19-cv-01583). See ECF No. 32. Plaintiffs sought to recover minimum wage
and overtime compensation from Cenikor for allegedly unpaid labor performed as part of
Cenikor’s substance abuse treatment program.
United States District Court
Southern District of Texas
ENTERED
August 03, 2026
Nathan Ochsner, Clerk
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In May of 2021, Plaintiffs Williams and Pouncy moved to sever this case, opting to proceed
on their claims individually rather than through a collective action. See ECF No. 43. This Court
granted Plaintiffs’ request for severance and this case proceeded as a separate action. See Minute
Entry of July 6, 2021. The case was subsequently stayed, on parties’ joint motion, from August
2022 until May 2025, pending an interlocutory appeal in Klick that determined the proper legal
standard through which to analyze the employee status of participant workers in a drug
rehabilitation program. See ECF No. 60. The Fifth Circuit issued its decision in Klick on February
9, 2024. Klick v. Cenikor Foundation, 94 F.4th 362 (5th Cir. 2024) (remanding for application of
alternative legal standard).1
The Court lifted the stay in this case on May 7, 2025. It subsequently granted Defendant’s
motion to exclude the eight would-be plaintiffs who had filed “opt-in” notices when the case was
proceeding as a collective action, but granted Plaintiffs leave to amend their complaint to include
these “opt-in” plaintiffs as parties. Cenikor has now moved to dismiss the new plaintiffs’ claims
and moved for summary judgment on Plaintiffs Williams’ and Pouncy’s claims.
B. Relevant Factual Background
The Court will summarize the relevant facts, drawing all “reasonable inferences” in favor
of Plaintiffs Williams and Pouncy. Hathaway v. Bazany, 507 F.3d 312, 319 (5th Cir. 2007). Except
as noted, the following facts are not disputed. Because the Court ultimately concludes that Mr.
Pouncy’s claims are barred by the statute of limitations, it will focus on those facts that are relevant
1 Klick has since been dismissed by stipulation.
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to Mr. Williams. Some of these facts are discussed in more detail in the relevant sections of this
opinion.
Cenikor is a non-profit rehabilitation center that assists individuals struggling with alcohol
and drug addiction. ECF No. 87, Ex. A (“Kuhlman Decl.”) at ¶ 3. At issue in this case is Cenikor’s
long-term in-patient treatment program, which, among other things, requires participants to work
for “community business partners” (outside businesses) such as General Plastics, the Southern
Floral Company, and the Houston Rodeo and Livestock Association. See ECF No. 87, Ex. B
(“Williams Depo.”) at 234-37. Cenikor billed these outside businesses directly for the labor
performed by Cenikor participants. Kuhlman Decl. at ¶ 18. It always charges hourly rates at or
above the federal minimum wage. Id. Cenikor made over seven million dollars in 2017 from tis
participants’ labor with outside businesses. ECF No. 99, Ex. B (“Audit”) at 6. Participants’
vocational services generated a similar amount of revenue in 2018. Id. at 7. This revenue goes back
into the Foundation to help offset its operational expenses. Kuhlman Decl. at ¶ 11. This revenue is
not sufficient to fund the entirety of Cenikor’s operations. Id. While enrolled at Cenikor,
participants receive access to clinical services as well as basic personal needs such as housing,
food, and medical care. Id. at ¶ 7. Cenikor requires eligible participants to apply for government
assistance and assign those benefits to Cenikor in order to offset the program’s food costs. Id. at ¶
12.
Cenikor’s treatment program proceeds in three phases: orientation, primary treatment, and
re-entry. Id. at ¶ 5. The orientation phase typically lasts approximately thirty days during which
participants familiarize themselves with the rules of the community, participate in group and
individualized counseling sessions, and work with counselors to develop an individualized
treatment plan. Id. The primary phase typically lasts about 18 months. Id. at ¶ 6. During the primary
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phase, participants begin working for outside employers, which Cenikor refers to as “vocational
work therapy.” Id. According to Cenikor, “[p]articipation in work therapy is critical to a patient’s
likelihood for success and long-term sobriety because the patients learn responsibility, the
importance of work, and self-reliance, among other things.” Id. Participants are not paid for the
work they performed for outside businesses during this phase. During the re-entry phase,
participants independently obtain employment from a third party, for which they are paid directly.
Williams Depo. at 68. They also pay rent to Cenikor during this phase. Id. at 89. Plaintiffs are
seeking compensation under the FLSA only for work performed during the primary treatment
phase of the program.
Upon 	admission 	to 	the 	program, 	participants 	were 	required 	to 	sign 	numerous
acknowledgements and agreements. As relevant here, these documents included statements that
“Cenikor provides a comprehensive therapeutic treatment program and includes work assignments
as a part of rehabilitation[,]” that “my work assignment is part of my treatment[,]” and that
““[r]esidents receive no monetary compensation for assigned responsibilities in the facility, or any
on-the-job training during the primary treatment phase.” See ECF No. 87, Exs. B-129, B-130. The
agreements further stated that “I. . . understand that under no circumstances can Cenikor be under
any obligation to me; that I am a beneficiary and not an employee.” Ex. B-130.
Plaintiff Randy Pouncy enrolled in Cenikor’s residential treatment program on September
1, 2015. Kuhlman Depo. at ¶ 16. Mr. Pouncy finished the primary treatment phase of Cenikor in
February of 2017. ECF No. 87, Ex. C. (“2021 Pouncy Depo.”) at 50-51. He left the program
altogether in June of 2017, while he was participating in the re-entry phase. Id. at 16.
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Plaintiff Shelby Williams enrolled in Cenikor in September of 2016, after being arrested
for possession of a controlled substance and driving while intoxicated (DWI). Williams Depo. at
85, 102-03. He finished the primary treatment phase in October of 2017 and successfully graduated
from Cenikor in September of 2018. Id. at 26, 31. Mr. Williams enrolled in Cenikor voluntarily
(that is, not as a result of a court order). Id. at 59-60. He testified that he enrolled to “try to get on
track with [his] life.” Id. at 51, 60-61. On February 27, 2017, after he had been enrolled in Cenikor
for five months, Mr. Williams was sentenced to ten years of imprisonment, which was suspended
in favor of ten years of probation. Id. at 103-04. As a condition of his probation required that he
successfully complete Cenikor. ECF No. 87, Ex. H (Court Transcript) at Vol. 2, p. 6. Prior to
enrolling in Cenikor, Mr. Williams used marijuana every day from the age of thirteen. Williams
Depo. at 56-57. He also struggled to maintain steady employment. Id. at 31. Since graduating from
Cenikor in 2018, he has not used marijuana or any other drug and has maintained steady
employment. Id. at 57, 31.
Mr. Williams and Mr. Pouncy paid modest admissions fees in order to attend the Cenikor
program. Kuhlman Decl. at ¶ 17. While there is dispute as to which forms Plaintiffs actually signed,
Plaintiffs’ signatures appear on the aforementioned agreements regarding the lack of compensation
for their work as part of the “vocational therapy” program. According to Mr. Williams, he was told
by a Cenikor employee upon admission that Cenikor would save the paychecks he earned through
his work without outside employers during the primary treatment phase and give him that money
during the re-entry phase. Williams Depo. at 68. Cenikor disputes that any employee made such a
statement. See ECF No. 87, Ex. E (“Reeves Depo.”).
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II. 	LEGAL STANDARD
Summary judgment under Rule 56 “is proper ‘if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show that there is no
genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter
of law.’” Celotex Corp. v. Catrett, 477 U.S. 317, 322 (1986) (quoting F ED. R. C IV. P. 56(c)). A
genuine issue as to a material fact arises “if the evidence is such that a reasonable jury could return
a verdict for the nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986).
The Court must draw all “reasonable inferences . . . in favor of the nonmoving party, but the
nonmoving party ‘cannot defeat summary judgment with conclusory allegations, unsubstantiated
assertions, or only a scintilla of evidence.’” Hathaway v. Bazany, 507 F.3d 312, 319 (5th Cir. 2007)
(quoting Turner v. Baylor Richardson Medical Center, 476 F.3d 337, 343 (5th Cir. 2007)).
“[T]he movant bears the initial responsibility of demonstrating the absence of a genuine
issue of material fact with respect to those issues on which the movant bears the burden of proof
at trial.” Transamerica Ins. Co. v. Avenell, 66 F.3d 715, 718 (5th Cir. 1995). “For any matter on
which the non-movant would bear the burden of proof at trial, however, the movant may merely
point to the absence of evidence and thereby shift to the non-movant the burden of demonstrating
by competent summary judgment proof that there is an issue of material fact warranting
trial.” Id. at 718–19.
III. 	ANALYSIS
Cenikor raises multiple arguments in support of its Motion for Summary Judgment. First,
it argues that Plaintiffs cannot meet their burden to show that they were employees of Cenikor
under the primary beneficiary test. In the alternative, Cenikor argues (1) that there is no evidence
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that any violation of the FLSA was “willful,” meaning that a two-year statute of limitations applies
to Plaintiffs’ claims and (2) that the Court should decline to award Plaintiffs liquidated damages
because Cenikor acted in good faith. Because the applicable statute of limitations question is for
Mr. Pouncy’s claims, the Court addresses the question of willfulness before turning to the question
of whether a jury could conclude that either Plaintiff was an employee under the FLSA.
A. 	Evidentiary Objections
Prior to addressing the Motion for Summary Judgment, it is necessary to address Plaintiffs’
objections to Cenikor’s summary judgment evidence. Specifically, Plaintiffs object to Matthew
Kuhlman’s Declaration (ECF No, 87. Ex. A) and Matthew Kuhlman’s Deposition (ECF No. 87,
Ex. G) on the basis that neither exhibit was disclosed to Plaintiffs prior to Cenikor’s filing of the
Motion for Summary Judgment. Plaintiffs also note that Kuhlman’s deposition was taken in the
Klick v. Cenikor case. Under the Federal Rules of Civil Procedure, “[a] deposition lawfully taken.
. . in any federal- or state-court action may be used in a later action involving the same subject
matter between the same parties, or their representatives or successors in interest, to the same
extent as if taken in the later action.” FED. R. C IV . P RO. 32(a)(8). Plaintiffs assert that they were
not parties in Klick at the time that Kuhlman’s deposition was taken.
Plaintiffs’ objections to Kuhlman’s deposition are without merit. As Defendant points out,
Mr. Kuhlman’s deposition was noticed by the consolidated Plaintiffs in Klick on May 21, 2021,
and took place on June 25, 2021. See ECF No. 100, Ex. K (Kuhlman Deposition Notice); ECF No.
87, Ex. G (Kuhlman Depo.). Plaintiffs’ claims were not severed from Klick until July 6, 2021. See
Minute Entry of July 6, 2021. Contrary to their assertions, Plaintiffs were therefore parties in Klick
at the time the deposition was taken, and the deposition is admissible in this action under Rule
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32(a)(8). Moreover, Plaintiffs’ counsel, Curt Hesse, was actually present at Kuhlman’s deposition.
See Kuhlman Depo. at 1-2, 56:18-57:8 (Mr. Hesse’s appearance). Plaintiffs thus cannot claim to
be prejudiced by Cenikor’s reliance on the deposition.
The Court also overrules Plaintiffs’ objections to Mr. Kuhlman’s declaration. While
Plaintiffs correctly point out that parties must produce “the name and, if known, the address and
telephone number of each individual likely to have discoverable information—along with the
subjects of that information—that the disclosing party may use to support its claims or defenses,”
FED. R. C IV. P RO. 26(a)(1)(A)(ii), Cenikor complied with this rule by identifying Mr. Kuhlman in
its initial disclosures. See ECF No. 100, Ex. J. Plaintiffs point to no authority for the proposition
that a party is required to disclose every summary judgment affidavit from a previously disclosed
witness prior to filing a Motion for Summary Judgment, and the Court declines to impose such a
requirement.
B. Plaintiffs’ Additional Arguments
The Court also pauses to address other arguments put forward by Plaintiffs that do not
concern the merits of the Motion for Summary Judgment.
First, Plaintiffs argue that even if Cenikor has met its summary judgment burden, the Court
should deny the Motion because “the better course” is to proceed to trial. See ECF No. 99 at 12-
13. This argument is based on outdated legal authority and misstates the applicable law. See FED.
R. C IV. P RO. 56(a) (“The court shall grant summary judgment if the movant shows that there is no
genuine dispute as to any material fact.”) (emphasis added). The Court gives it no weight.
Next, Plaintiffs argue that the Motion should be denied because Cenikor’s answer did not
adequately allege its good-faith defenses. Cenikor’s answer, filed in 2021, alleged two affirmative
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defenses based on good faith. First, it stated that “Plaintiffs are not entitled to any liquidated
damages because Defendant acted in good faith and had reasonable grounds for believing that any
alleged acts or omissions did not violate the FLSA.” ECF No. 37 at ¶ 85. Although it does not
move for summary judgment on this basis, Cenikor also asserted that Plaintiffs claims are barred
because “any action taken in connection with Plaintiffs’ compensation was done in good faith
conformance with and reliance upon written and/or other administrative regulations, orders,
rulings, approvals, interpretations, practices or enforcement policies of the Wage and Hour
Division of the United States Department of Labor and other related administrative agencies,
including state agencies.” Id. at ¶ 96. Plaintiffs never moved to strike these affirmative defenses
and did not move for a more definite statement. Under these circumstances, the Court finds that
Plaintiffs had “fair notice” of these affirmative defenses. F ED. R. C IV. P RO. 8(e).
Finally, Plaintiffs argue that the Court should defer ruling on the questions of willfulness
and good faith until after trial. The Court declines to defer ruling on the question of willfulness. It
is Plaintiffs’ burden to put forward evidence sufficient from which a jury could conclude that
Cenikor acted willfully, and resolution of this question has a dispositive impact on one Plaintiff’s
claims. The mere fact that the question is fact-heavy and intertwined with liability does not relieve
Plaintiffs of their burden to overcome summary judgment by presenting some evidence from which
a jury could conclude that Cenikor acted willfully.
The Court agrees with Plaintiffs as to Cenikor’s good-faith defense, however. Cenikor has
argued that the Court has discretion to decline to award Plaintiffs liquidated damages if “the act or
omission giving rise to [the lawsuit] was in good faith and that [Cenikor] had reasonable grounds
for believing that [its] act or omission was not a violation of the [FLSA].” 29 U.S.C. § 260. But as
Plaintiffs correctly point out, the Court may still decide to impose liquidated damages even if a
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defendant successfully establishes a § 260 good-faith defense. Nero v. Industrial Molding Corp.,
167 F.3d 921, 928 (5th Cir. 1999) (stating that “even if a trial court is satisfied that an employer
acted both in good faith and reasonably, it may still award liquidated damages [under the FLSA]
at its discretion in any amount up to that allowed by 29 U.S.C. § 216(b).”) (internal citation
omitted). Because the question of good faith is material only to the question of how the Court
should exercise its discretion to impose damages, not liability, the Court declines to address
Cenikor’s good faith defense at this time.
C. The Applicable Statute of Limitations
The Court begins by addressing the question of which statute of limitations applies, and
the impact of the relevant statute of limitations on Plaintiffs’ claims. Because the Court concludes
that Plaintiffs have presented no evidence that any violation of the FLSA was “willful,” a two-year
statute of limitations applies to Plaintiffs’ claims. While Mr. Williams filed suit within two years
of the latest date on which his cause of action accrued, his claims may proceed with respect to the
portion of his vocational therapy that occurred on or after May 22, 2017. But because Mr. Pouncy’s
claims fall outside of the two-year statute of limitations, Cenikor is entitled to summary judgment
on his claims.
i. 	Plaintiffs have provided no evidence that any violation of the FLSA was
willful.
In general, an action under the FLSA must commence “within two years after the cause of
action accrued.” 29 U.S.C. §§ 255(a). However, “a cause of action arising out of a willful violation
may be commenced within three years after the cause of action accrued.” Id. The plaintiff bears
the burden of proving that an employer’s violation was willful. See Cox v. Brookshire Grocery
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Co., 919 F.2d 354, 355—56 (5th Cir. 1990). Cenikor argues that Plaintiffs have produced no
evidence of willfulness, meaning that the two-year statute of limitations applies to their claims.
A violation of the FLSA is willful if the employer “either knew or showed reckless
disregard for the matter of whether its conduct was prohibited by the statute.” Ikossi-Anastasiou v.
Bd. of Supervisors of La. State Univ., 579 F.3d 546, 552 (5th Cir. 2009). Examples of evidence
that courts have found probative of willfulness include “(1) admissions that an employer knew its
method of payment violated the FLSA prior to the accrual of the action; (2) continuation of a pay
practice without further investigation after being put on notice that the practice violated the FLSA;
(3) earlier violations of the FLSA that would put the employer on actual notice of the Requirements
of the FLSA; (4) failure to keep accurate or complete records of employment; and (5) prior internal
investigations which revealed similar violations.” Bingham v. Jefferson Cnty., Tex., No. 1:11-CV-
48, 2013 WL 1312563, at *14 (E.D. Tex. Mar. 1, 2013), report and recommendation adopted as
modified, No. 1:11-CV-48, 2013 WL 1312014 (E.D. Tex. Mar. 27, 2013) (collecting cases).
Here, Plaintiffs assert that “there is evidence that Cenikor received complaints about not
paying Williams and Pouncy, had a history of litigation regarding the Program, caught the attention
of members of congress and flaunted regulations specifically promulgated to prevent the
exploitations of program participants.” ECF No. 99 at 37. However, they do not point to any
specific evidence in support of these claims, and the Court is not persuaded.
While there is evidence that both Williams and Pouncy expressed dissatisfaction with their
lack of compensation during the primary treatment phase of the Cenikor program, this does not
constitute evidence that Cenikor knew or should have known that its program violated the FLSA.
The question is not whether Cenikor was aware that its patients were not paid for their work during
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the primary treatment phase (which it clearly was), but rather whether Cenikor knew that this
arrangement violated the FLSA. As Cenikor has pointed out, it structured its “vocational therapy”
program around legal authority from the Ninth Circuit which found that a similar program
involving the Salvation Army did not violate the FLSA because program participants were not
“employees.” See Williams v. Strickland, 87 F.3d 1064, 1067 (9th Cir. 1996). Under these
circumstances, Williams and Pouncy’s complaints about the fact that they were not paid do not
constitute evidence of willfulness.
Plaintiffs’ claims that Cenikor had a “history of litigation” regarding its vocational therapy
program and that the program “caught the attention of members of congress” also do not constitute
evidence of willfulness. At the outset, Plaintiffs do not specify the “history of litigation” to which
they refer, and submit no evidence of prior lawsuits against Cenikor. Since it is Plaintiffs’ burden
to demonstrate willfulness, this vague gesturing will not suffice to overcome summary judgment.
To the extent Plaintiffs refer to the Klick v. Cenikor litigation, that case was filed in 2019, well
after the alleged FLSA violations in this case occurred. Similarly, Plaintiffs have submitted a letter
from Senators Elizabeth Warren and Tammy Baldwin to the Government Accountability Office
(GAO), requesting that GAO conduct an investigation into mandatory vocational requirements at
drug and alcohol rehabilitation facilities, including whether such programs violate the FLSA. See
ECF No. 99, Ex. C. But even assuming this letter (which does not specifically mention Cenikor)
could constitute evidence of a willful violation, it cannot do so in this case because it is dated
November 19, 2020—several years after the alleged FLSA violations occurred. To the extent
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Plaintiffs rely on an April 24, 2019 Reveal News article cited earlier in their Response, this too
was published after the alleged violations.2 See ECF No. 99 at 15-16.
Finally, Plaintiffs point to various Texas regulations governing state-licensed chemical
treatment facilities. See 26 Tex. Admin. Code § 564.16 (“[P]rovider[s] shall not exploit
relationships with individuals receiving services for personal or financial gain of the provider or
its personnel.”); 26 Tex. Admin. Code § 564.705(b) (“The facility shall not require clients to
participate in any fund raising or publicity activities for the facility.”); 26 Tex. Admin. Code §
564.705(c) (“The facility and its personnel shall not enter into a business or personal relationship
with a client. . . until at least two years after services to the client cease.”); 26 Tex. Admin. Code
§ 564.701(a)(4) (“You have the right to be free from abuse, neglect, and exploitation.”). But these
regulations do not pertain to a vocational work therapy program such as the one at issue in this
case, and do not serve as evidence of a willful violation of the FLSA.3
2 Defendant has objected to the Reveal News article and the letter from Senators Warren and
Baldwin as inadmissible hearsay and nor properly authenticated. The Court agrees with Defendant
that these documents constitute hearsay to the extent that Plaintiffs seek to use them to prove the
truth of what they assert, namely, facts about Cenikor’s labor practices. Presuming Plaintiffs could
authenticate these documents at trial, they would theoretically be admissible to prove that Cenikor
had notice that its vocational therapy program might violate the FLSA. But since both of these
documents were created only after the alleged violations in this case occurred, they are not relevant
to that purpose here.
3 Plaintiffs also cite provisions of the regulations governing Texas Department of Mental Health
and Mental Retardation facilities and psychiatric hospitals. See 26 Tex. Admin. Code § 320.7(27)
(stating that persons receiving mental health services from department facilities have “[t]he right
to fair compensation for labor performed for the department facility. . . in accordance with the Fair
Labor Standards Act.”). But this regulation pertains to facilities run by Texas Department of
Mental Health and Mental Retardation, not non-profit drug and alcohol treatment facilities like
Cenikor, and, in any case, is irrelevant to the question of willfulness.
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Because Plaintiffs have not produced any evidence from which a jury could reasonably
conclude that the purported violations of the FLSA were willful, a two-year statute of limitations
applies to these plaintiffs’ FLSA claims.
ii. 	Mr. Pouncy’s claims are barred by the statute of limitations.
Plaintiffs Williams and Pouncy filed this case on May 22, 2019. See ECF No. 1
(Complaint). Mr. Pouncy left Cenikor in June of 2017, while he was participating in the re-entry
phase. 2021 Pouncy Depo. at 16. However, he graduated from the primary treatment phase of the
program in February of 2017. Id. at 50-52. From that point onwards, he was paid directly for his
labor by third-party employers. Id. Since it is undisputed that Plaintiffs’ FLSA claims apply only
to the unpaid vocational therapy they performed during the primary phase, Mr. Pouncy’s claims
fall outside the two-year statute of limitations. See id. at 52-53.
Mr. Williams, on the other hand, was participating in unpaid vocational therapy at Cenikor
through at least October of 2017. Williams Depo. at 26. The portion of his FLSA claims that
occurred after May 22, 2017 therefore falls within the two-year statute of limitations.
D. Mr. Williams’ Employee Status
The Court turns to the question of whether Plaintiffs’ evidence is sufficient to create a
factual dispute as to whether Mr. Williams was an “employee” of Cenikor for the purposes of the
FLSA.
i. 	The Primary Beneficiary Test
In Klick v. Cenikor, the Fifth Circuit held that “a primary beneficiary test provides a helpful
framework for discerning employee status” in the context of a drug treatment program that requires
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participants to work for third-party employers without pay. Klick v. Cenikor Found., 94 F.4th 362,
372 (5th Cir. 2024). This test is “commonly applied when evaluating whether volunteers, trainees,
and interns are ‘employees’ under the FLSA.” Id. at 370. As the name implies, the key inquiry is
whether the participant or the employer received the primary benefit from the relationship. “Non-
exhaustive factors to consider include the plaintiffs’ expectation of compensation, the therapeutic
value of the Program, whether the relationship displaces paid employees, and any other
considerations that may ‘shed light on which party primarily benefits from the relationship.’” Id.
at 372.
Cenikor correctly points out that every Circuit to consider the question has concluded that
participants in similar rehabilitation programs are not employees under the primary beneficiary
test. See Williams v. Strickland, 87 F.3d 1064, 1067 (9th Cir. 1996); Vaughn v. Phoenix House
Found., Inc., 957 F.3d 141, 144 (2d Cir. 2020); Fochtman v. Hendren Plastics, Inc., 47 F.4th 638,
641 (8th Cir. 2022); Armento v. Asheville Buncombe Cmty. Christian Ministry, Inc., 856 F. App’x
445, 453 (4th Cir. 2021). This does not decide the question, however. The primary beneficiary test
is an individualized, “fact-intensive inquiry which requires a careful evaluation of the totality of
the circumstances.” Klick, 94 F.4th at 372. “While the determination of whether an individual is
an ‘employee’ is a matter of law, there are often associated factual inquiries required before such
a determination can be made.” Id. at 369. The Court therefore rejects Cenikor’s implicit argument
that a participant in any “vocational therapy” program at a rehabilitation facility—no matter how
exploitative—is not an employee under the FLSA. Instead, the Court proceeds to examine the
“economic reality between [Cenikor and Mr. Williams]” based on the evidence before it in this
case. Id.
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This case is unique from all but one of the aforementioned Circuit Court cases in that
Plaintiffs are not seeking compensation for work performed within Cenikor’s facilities, but rather
for third-party businesses which paid their wages directly to Cenikor. These wages in turn helped
fund Cenikor’s operations, including food, housing, and counseling services for program
participants. Under these circumstances, “it is not possible to declare that the arrangement benefits
solely one party or another.” Fochtman, 47 F.4th at 646. But the Court concludes that, viewing the
evidence in the light most favorable to Mr. Williams, a reasonable jury could find that Cenikor
was the primary beneficiary of the employment relationship. The Court will address each factor in
turn.
ii. 	Expectation of Compensation
The evidence is sufficient for a reasonably jury to conclude that Mr. Williams expected to
be compensated for his work for third-party businesses during the primary treatment phase. Mr.
Williams stated during his deposition that:
Steve Reeves, the guy in admissions—according to him when I signed up, he told
me that I would go to work in the first phase of the program and that they would
save my checks. And whenever I get to re-entry, they would give me that money
plus the money that I saved while I’m in re-entry.
Williams Depo. at 68.
According to Mr. Williams, Mr. Reeves made these statements during Mr. Williams’ in-
person intake meeting. Id. at 95. While Mr. Williams remembered signing some of the intake
agreements that bear his signature, he denied signing those documents stating that he would receive
no monetary compensation for the work performed as part of his vocational therapy. See id. at 122-
23 (acknowledging having signed some documents); id. at 144-45; 146; 157; 161 (denying having
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signed some documents).4 Mr. Williams further testified that he complained to Dwayne Parr, a
Cenikor employee in the financial services office, when he did not receive the money he had
believed was set aside from him. Id. at 71-72. According to Mr. Williams. Mr. Parr responded,
“Are you sober?” to which Mr. Williams responded in the affirmative. Id. at 73. Mr. Parr then
stated, “There you go.” Id. In his interrogatory responses, Mr. Williams similarly maintained that
a Cenikor employee had told him that he would be compensated for his vocational therapy work,
but stated that the employee was named Anthony King. See ECF No. 87, Ex. B-136.
It is well-established that “[t]he fact that this testimony is self-serving is not, in and of
itself, sufficient to defeat summary judgment.” Matter of Highland Cap. Mgmt., L.P., 116 F.4th
422, 431 (5th Cir. 2024) (citing United States v. Stein, 881 F.3d 853, 859 (11th Cir. 2018)).
Nonetheless, Cenikor asks the Court to disregard Mr. Williams’ statements regarding his
expectation of compensation because they are internally contradictory. But while there are narrow
circumstances under which “a court may decide that there are so many inconsistencies [in a
witness’ statements] that the testimony does not need to be put before a jury,” Mr. Williams’
statements are not so inconsistent as to fall within this exception. Matter of Highland Cap. Mgmt.,
L.P., 116 F.4th 422, 432 (5th Cir. 2024). While Mr. Williams’ statements are inconsistent with
regard to the name of the Cenikor employee who told him that he would be paid for his vocational
therapy work, his deposition testimony on this point is detailed and specific. A reasonable jury
could credit Mr. Williams’ testimony that a Cenikor employee told him that he would receive
4 Cenikor also argues that Mr. Williams’ testimony about his expectation of compensation is
insufficient to defeat summary judgment because it is inconsistent with the documents bearing his
signature which state that he would “receive no monetary compensation” and that he was a
beneficiary rather than an employee of Cenikor. See Ex. B-129; Ex. B-130. But while this is
certainly something a jury could consider in evaluating the credibility of Mr. Williams’ testimony,
it is insufficient for the purposes of summary judgment.
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payment for the work he performed with outside businesses during the primary treatment phase.5
This factor therefore weighs in favor of employee status.
iii. 	The Therapeutic Value of the Program
Cenikor next argues that Mr. Williams cannot claim employee status because he benefitted
substantially from his participation in Cenikor’s rehabilitative program, including through
achieving sobriety. While this factor presents a close question, the Court disagrees.
It is clear from the summary judgment evidence that Mr. Williams did benefit substantially
from certain elements of Cenikor’s rehabilitative program, particularly from group and individual
counseling. See, e.g., Williams Depo. at 91-92 (discussing benefits of counseling). It is also
uncontested that enrollment at Cenikor helped Mr. Williams overcome his addiction and achieve
sobriety for the first time in his adult life, the value of which Mr. Williams characterized as
“unlimited.” Id. at 171. The Court does not seek to diminish the therapeutic benefits of other
aspects of Cenikor’s in-patient treatment program.
The benefits of the “vocational therapy” aspect of Cenikor’s program specifically are much
less clear, however. First, the available evidence suggests that Mr. Williams was often required to
work grueling hours for Cenikor’s community business partners, sometimes leaving him little time
for participation in rehabilitative activities outside of work. During his deposition, Mr. Williams
testified that he regularly worked 60 hours per week or more for third-party employers as part of
his vocational therapy for Cenikor. See Williams Depo. at 226 (testifying that he worked from 6:00
5 This case is distinguishable from Williams v. Strickland, in which the Ninth Circuit affirmed
summary judgment despite the plaintiff’s testimony that he “believed he was in an employment
relationship” because here, Mr. Williams testified that a Cenikor employee affirmatively
represented to him that he would be paid for his work with third-party businesses. 87 F. 3d at 1067.
This testimony is therefore different from the Williams plaintiff’s assertion of a “unilateral state of
mind, which was not expressed to anyone at the time of his admittance.” Id.
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pm to 3:00 am seven days per week for the Houston Rodeo and Livestock Show); id. at 235-36
(testifying that he worked from 5:00 am to 5:00 pm six days per week at Pasadena Skid & Pallet);
id. at 236-37 (testifying that he worked from 8:00 am to 6:00 pm six days per week at the Houston
Strawberry Festival); id. at 237 (testifying that he worked from 10:00 pm to 8:00 am six days per
week at the Southern Floral Company). For at least one employer, Mr. Williams worked nearly
100 hours per week. Id. at 207; 223 (testing that he worked from 5:00 pm to 7:00 am seven days
per week at Simos). For other employers, Mr. Williams worked between 40 and 55 hours per week.
Id. at 233 (testifying that he worked from 8:00 am to 4:00 pm five days per week at General
Plastics); id. at 234 (testifying that he worked from 8:00 am to 5:00 pm six days per week at the
Houston Golf Association); id. at 235 (testifying that he worked from 8:00 am to 4:00 pm five
days per week for the Houston Astros).
The Court concludes that the high number of hours worked by Mr. Williams weighs in
favor of employee status. The evidence suggests that Mr. Williams gained benefits such as an
improved work ethic and on-the-job training from his participation in vocational therapy with
third-party employers.6 See id. at 191 (“Q. And you did feel like you developed a better work ethic
while you were in the Cenikor program? A. Yes, ma’am.”); id at 194 (Mr. Williams agreeing that
he developed job skills through the vocational therapy that he could utilize once he entered the re-
entry phase). But “the presence of a rehabilitative element does not preclude an employment
relationship” between a participant and a drug rehabilitation facility. Williams, 87 F.3d at 1067.
Here, a jury could reasonably conclude that vocational therapy had diminishing returns for Mr.
Williams when he was required to work in excess of 50 or 60 hours per week. Indeed, Mr.
6 Mr. Williams also received certain work-related certifications while at Cenikor, but these were
not provided through or during his work for third-party employers. See Williams Depo. at 37; id.
at 41; id. at 44.
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Williams’ work hours were sometimes so extreme that he was required to skip counseling sessions.
Id. at 226 (testifying that he did not attend counseling while working at the Houston Rodeo because
it conflicted with his work hours). Additionally, while Mr. Williams likely received the same
benefits whether he worked 40 or 80 hours per week, Cenikor received overtime pay from its
community business partners when Mr. Williams’ hours exceeded 40 hours per week. This
evidence could lead a jury to reasonably conclude that Cenikor, rather than Mr. Williams, gained
the greater benefit from his vocational therapy.
The long hours and types of jobs worked by Mr. Williams also distinguish this case from
other cases in which courts have concluded that participants in similar rehabilitative programs
were not employees. For example, in Williams v. Strickland, the plaintiff “engaged in work therapy
on a full-time basis” during his stay at the Salvation Army. 87 F.3d at 1065. His work included
restoring furniture for sale at the Salvation Army store and sorting food and clothing donations.
Id. In Vaughn v. Phoenix House Foundation, Inc., the plaintiff worked 48 hours per week in
various jobs within the treatment facility, including serving as a “point person” for other patients,
working in the garbage room, and working at the facility’s warehouse. No. 14-CV-3918 (RA),
2019 WL 568012, at *1 (S.D.N.Y. Feb. 12, 2019), aff’d sub nom. Vaughn v. Phoenix House New
York Inc., 957 F.3d 141 (2d Cir. 2020). By contrast, Mr. Williams often worked 60 or more hours
per week for third-party employees who paid his wages directly to Cenikor.7 Like the plaintiffs in
Williams and Vaughn, Mr. Williams also performed less formal work within Cenikor, such as
mowing the lawn, acting as a barber for other participants, and acting as a “verbal coordinator”
7 Although the Eighth Circuit’s opinion in Fochtman dealt with a more comparable program in
which program participants performed work for outside for-profit businesses rather than directly
for the foundation, the Court focused its decision on the plaintiffs’ lack of expectation of
compensation and did not examine the number of hours worked. 47 F.4th at 645.
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responsible for meting out consequences for other participants to violated community rules. See
Williams Depo. at 130-32. But unlike those plaintiffs, Mr. Williams is not seeking compensation
for this work. Indeed, he testified that these roles helped him feel like he was giving back to the
Cenikor community, which was important to him. Id. at 141-42.
Mr. Williams himself summarized the situation when asked during his deposition whether
he agreed that Cenikor improved his life. He replied: “Yeah, they did, but they also made me work
for free, too.” Williams Depo. at 85-86. Viewing the evidence in the light most favorable to Mr.
Williams, the Court agrees that while Mr. Williams clearly benefited from certain aspects of
Cenikor’s program, the benefits he reaped from his unpaid labor with third-party employers were
minimal. Cenikor, on the other hand, made over seven million dollars in both 2017 and 2018 from
the labor performed with outside businesses by participants like Mr. Williams. The opposite
conclusion would require the Court to assume that a drug rehabilitation program can demand a
virtually unlimited number of hours of unpaid labor from its patients, regardless of the therapeutic
benefits of this labor, so long as the patient is ultimately successful in overcoming his addiction.
iv. 	Displacement of Other Employees
The next factor in the primary beneficiary test is “whether the relationship [between the
parties] displaces paid employees.” Klick, 94 F.4th at 372. In some ways, this factor is a poor fit
for the circumstances of Mr. Williams’ work. It is undisputed that Cenikor participants did not
displace paid employees of Cenikor. While participants like Mr. Williams clearly displaced paid
employees of the third-party for-profit businesses for which they worked during the primary
treatment phase, these third-party employers were paying Cenikor participants—these wages were
just paid to Cenikor rather than to the participants themselves. The third-party employers therefore
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did not benefit from unpaid labor by employing Mr. Williams and other Cenikor participants,
which is part of what the FLSA seeks to avoid.
The Court therefore concludes that this factor weighs slightly in favor of Cenikor.
However, the Court does not give this factor much weight in determining who was the primary
beneficiary of the relationship between Mr. Williams and Cenikor because it centers on the benefits
to the third-party businesses, rather than the benefits to Cenikor.
v. 	Other Considerations
Finally, the Court examines “other considerations that may ‘shed light on which party
primarily benefits from the relationship.’” Klick, 94 F.4th at 372. Cenikor points to several other
factors that it argues weigh against a finding of employee status. Most persuasively, it argues that
Mr. Williams entered Cenikor for his own personal purposes—namely, to get sober and turn his
life around—rather than for the purpose of making money. Cenikor also points out that Mr.
Williams “avoid[ed] a ten-year prison sentence” by participating in Cenikor. ECF No. 87 at 25.
Cenikor is correct that “[a]n individual who, ‘without promise or expectation of
compensation, but solely for his personal purpose or pleasure, worked in activities carried on by
other persons either for their pleasure or profit,’ is outside the sweep of the [FLSA].” Tony & Susan
Alamo Found. v. Sec’y of Lab., 471 U.S. 290, 295 (1985) (quoting Walling v. Portland Terminal
Co., 330 U.S. 148, 152 (1947)). It is also true that Mr. Williams enrolled in Cenikor to “try to get
on track with [his] life” after being arrested on drug-related charges, and that he achieved this goal
during his two years at Cenikor. Williams Depo. at 51; 56-57. While Mr. Williams entered Cenikor
voluntarily, he was later sentenced to probation, which included a condition that he successfully
graduate from Cenikor.
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While the Court agrees with Cenikor that these facts weigh against employee status, they
are not dispositive at summary judgment. For largely the reasons articulated with respect to the
therapeutic value of Cenikor’s program, the Court concludes that the fact that Mr. Williams entered
Cenikor in order to overcome his addiction does not categorically exclude him from compensation
under the FLSA. Additionally, while at least one court has found that the fact that participants
enrolled in the recovery program as an alternative to incarceration weighed against employee
status, this was in the context of determining whether the participants expected compensation. See
Fochtman, 47 F. 4th 638 at 646 (“[T]he overriding consideration is that the DARP participants
undertook the recovery program for their own purposes to avoid imprisonment, and. . . had no
reason to expect compensation.”). Here, Mr. Williams has introduced evidence that he did expect
to be paid for his labor with third-party businesses when he signed up for Cenikor, that he often
worked in excess of 60 hours per week, that Cenikor monetarily benefited from this labor, and that
he would have enjoyed the same rehabilitative benefits from his participation in Cenikor had he
not been required to work these lengthy hours. While a jury could certainly look to Mr. Williams’
motives for enrolling in Cenikor in determining the credibility of his testimony that he expected
compensation, the fact that he was required to complete Cenikor as part of his probation does not
bar a finding of employee status. If this were so, people in Mr. Williams’ position would have no
choice but to work without pay under even the most exploitative conditions or go to prison.
Although this situation admittedly presents a close case, the Court concludes that a factual dispute
remains as to which party primarily benefited from Mr. Williams’ vocational therapy.
Cenikor also argues that summary judgment is appropriate because Cenikor’s vocational
therapy program does not conflict with the principal purposes of the FLSA. Specifically, Cenikor
argues that the arrangement did not threaten to depress wages because the third-party businesses
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Cenikor partnered with were still required to pay minimum wage and overtime and that Cenikor
participants were not dependent on wages to maintain a minimum standard of living because they
were guaranteed room and board from Cenikor. But while these are reasonable conclusions from
the available evidence, a jury could also reasonably conclude that Cenikor’s program does conflict
with the FLSA’s “goal of outlawing from interstate commerce goods produced under conditions
that fall below minimum standards of decency.” Alamo, 471 U.S. at 296. While Cenikor
participants did not work for free from the perspective of the third-party business partners, they
were also uniquely vulnerable to exploitation because they did not have the ability to decline to
work excessive hours or to quit their jobs without risking expulsion from Cenikor. It is also unclear
whether Cenikor’s third-party business partners paid the same amount for Cenikor participants’
labor as it did for its regular employees, which could in turn depress wages for normal paid
employees. In the absence of any concrete evidence to the contrary, a jury could conclude that this
arrangement conflicts with the goals of the FLSA.8
vi. 	Conclusion
The primary beneficiary test is “a fact-intensive inquiry which requires a careful evaluation
of the totality of the circumstances.” Klick, 94 F.4th at 372. Considering the totality of the evidence
in the light most favorable to Mr. Williams, the Court concludes that a jury could reasonably
conclude that Cenikor was the primary beneficiary of the work that Mr. Williams performed for
8 Cenikor also points to the fact that its participants were not guaranteed employment at the end of
the program and that the program was tailored to each participants needs and goals. While the lack
of guaranteed employment at the end of the program has been considered relevant when using the
primary beneficiary test to address the employee status of interns and trainees, the Court does not
find it helpful under the facts of this case, given Plaintiffs worked for third-party employers who
paid their wages to Cenikor, rather than directly for Cenikor. The Court finds Cenikor’s arguments
about the tailoring of its program to participants’ unique needs repetitive of the arguments about
the therapeutic value of the program.
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third-party for-profit businesses during the primary treatment phase. Since a factual dispute
remains as to Mr. Williams’ employee status under the FLSA, summary judgment is unwarranted
on this basis.
IV. 	CONCLUSION
For the reasons stated herein, Cenikor’s Motion for Summary Judgment is GRANTED IN
PART AND DENIED IN PART. The Motion is GRANTED with regard to all claims by Plaintiff
Randy Pouncy, because Plaintiffs have produced no evidence that any violation of the FLSA was
“willful” such that Mr. Pouncy’s claims would fall within the applicable statute of limitations. The
Motion is DENIED with respect to all claims by Plaintiff Shelby Williams that accrued on or after
May 22, 2017, because a factual dispute remains as to Mr. Williams’ status as an employee.
IT IS SO ORDERED.
Signed at Houston, Texas on August 3, 2026.
_______________________________
Keith P. Ellison
United States District Judge
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