FEMA Disaster-Grant Oversight Does Not Create an FLSA Employment Relationship with Nonprofit Case-Management Staff

1. Introduction

Vernaliz Meredith Perez v. FEMA (1st Cir. Apr. 22, 2026) arises from post–Hurricane Maria disaster-relief operations in Puerto Rico. FEMA, acting through its Disaster Case Management Program, awarded grant funds to a nonprofit entity, The Facilitators: Iron Horse, Inc. (“TFCI”), which in turn hired the plaintiffs (case managers and related staff).

When FEMA later denied TFCI’s request for additional funding, the plaintiffs alleged that they worked for weeks without full pay and were ultimately terminated. They sued FEMA (and TFCI) seeking unpaid wages, contending that FEMA was their employer under the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq.

Core issue: Whether FEMA—by funding the program, operating facilities in which the work occurred, and setting program parameters—was an “employer” (or joint employer) under the FLSA’s “economic reality” test, despite TFCI’s direct hiring and management of the workforce.

2. Summary of the Opinion

The First Circuit affirmed summary judgment for FEMA, holding that the uncontroverted record showed the plaintiffs were employees of TFCI, not FEMA, and therefore FEMA had no FLSA wage liability. Applying the circuit’s established “economic reality” factors, the court emphasized that TFCI—rather than FEMA—held the essential powers and performed the essential functions of an employer: hiring/firing authority, supervision and control of schedules and conditions, pay determination, and maintenance of employment records.

The court also rejected (1) plaintiffs’ attempts to recharacterize the record with largely unsupported assertions of FEMA control, (2) reliance on the worksite being a FEMA facility and the fact that salaries depended on FEMA grant funds, (3) a request to reconsider summary judgment based on an affidavit that plaintiffs failed to show was previously unavailable, and (4) an argument for default based on FEMA’s failure to answer the second amended complaint despite actively defending the case.

3. Analysis

3.1. Precedents Cited

Baystate Alt. Staffing, Inc. v. Herman, 163 F.3d 668 (1st Cir. 1998)
Role in the decision: This is the controlling framework. The panel applied Baystate’s “economic reality” inquiry and its four-factor articulation: (1) power to hire/fire; (2) supervision/control of schedules or conditions; (3) determination of rate/method of pay; and (4) maintenance of records. The opinion also borrows Baystate’s thematic division between control (first two factors) and economic aspects (last two factors), and reiterates that the analysis depends on the “totality of the circumstances,” not any single fact. The court uses Baystate to draw a line between meaningful operational control and mere program funding/oversight typical of a grantor.
Brox v. Woods Hole, Martha's Vineyard & Nantucket S.S. Auth., 83 F.4th 87 (1st Cir. 2023)
Role in the decision: Supports the appellate waiver ruling. Because the plaintiffs did not “meaningfully challenge” summary judgment for TFCI, the court treated that issue as waived “for lack of development.” This clarifies that appellate review requires developed argumentation, especially when a party seeks to disturb dispositive rulings.
Aguiar-Carrasquillo v. Agosto-Alicea, 445 F.3d 19 (1st Cir. 2006)
Role in the decision: Provides the procedural consequence of failing to dispute a district court’s factfinding on summary judgment: the court accepts the moving party’s properly supported facts as uncontroverted. Here, plaintiffs did not contest the district court’s acceptance of FEMA’s supported statement of facts, so the First Circuit proceeded on that basis.
Taite v. Bridgewater State Univ., 999 F.3d 86 (1st Cir. 2021)
Role in the decision: Sets the review standard for summary judgment—de novo—and reiterates Rule 56’s requirement: summary judgment is proper where there is no genuine dispute of material fact and the movant is entitled to judgment as a matter of law. The court uses Taite to frame the posture: once facts are uncontroverted, the question is legal application of the Baystate test.
Besosa-Noceda v. Torres, 164 F.4th 19 (1st Cir. 2026)
Role in the decision: Reinforces that appellate courts will not credit “claimed discrepancies” in the record without citation support. Plaintiffs alleged FEMA dictated training requirements, pay rates, schedules, and attire, but—with the exception of a single email about attire— did not substantiate these assertions. The citation serves as a warning: factual challenges to summary judgment must be anchored in the record.
Biltcliffe v. CitiMortgage, Inc., 772 F.3d 925 (1st Cir. 2014)
Role in the decision: Controls the “new evidence” reconsideration request. The court relied on Biltcliffe’s principle that a district court may, in its discretion, deny reconsideration where the purported new evidence could have been presented before summary judgment. Plaintiffs failed to explain why the affidavit from TFCI’s former finance manager was unavailable earlier; no abuse of discretion was found.

3.2. Legal Reasoning

A. The “economic reality” test remained focused on employer functions, not program context

The plaintiffs’ theory effectively attempted to convert FEMA’s role as a disaster-response grantor and program administrator into an employer role. The court declined to expand the FLSA’s concept of “employer” to encompass an agency that: (i) funded a nonprofit’s staffing through a grant program, (ii) interacted with the nonprofit through a cooperation agreement, and (iii) may have set some program parameters or offered limited guidance.

Instead, applying Baystate, the court treated the employer inquiry as a functional one: who actually exercised the principal incidents of employment? On the uncontroverted record, the answer was TFCI.

B. Application of Baystate’s four factors to the undisputed facts

Hiring and firing power: The court found TFCI—not FEMA—had authority to hire and terminate the plaintiffs. This factor strongly pointed away from FEMA being an employer.
Supervision and control of schedules/conditions: TFCI controlled day-to-day working conditions through training, work assignments, identification cards, and computers. Even if some work was done in a FEMA-run facility, the court treated “location” as a contextual detail, not a substitute for managerial control.
Rate and method of payment: TFCI determined how plaintiffs were paid. FEMA’s provision of grant funds did not equate to setting pay terms in an employment sense; it reflected the funding mechanism of a grant recipient.
Employment records: TFCI maintained employment records, again signaling that TFCI served the employer function.

C. Why plaintiffs’ “control” arguments failed

Plaintiffs asserted FEMA determined training requirements, maximum average pay rates, work schedules, and dress attire. The court’s response was twofold:

Record-insufficiency: beyond one email about attire, plaintiffs did not substantiate these claims with record citations, so the court would not treat them as creating a genuine issue for trial.
Conceptual mismatch: even assuming some FEMA guidance existed, the court treated it as consistent with grant administration and program standards, not the “considerable control over the nature and structure of the relationship” associated with an employment relationship under Baystate.

D. Procedural holdings reinforcing disciplined summary-judgment practice

Reconsideration (“new evidence”): The district court could deny reconsideration because plaintiffs did not show diligence or prior unavailability. The First Circuit deferred under the abuse-of-discretion standard.
Default: The court rejected plaintiffs’ Rule 55 theory because FEMA “otherwise defend[ed]” the case—participating in discovery and moving for summary judgment. The failure to answer a second amended complaint that did not materially change claims did not justify default in these circumstances.

3.3. Impact

This decision is likely to be cited in future disputes involving federal (and state) agencies that fund disaster or social-service work through grants to nonprofits. Its practical signal is clear:

Grant funding and program oversight alone—even coupled with use of government facilities—does not transform a grantor into an FLSA employer.
Plaintiffs pursuing FLSA claims against an upstream funder must develop record evidence of employer-type control (hiring/firing, direct supervision, pay-setting, recordkeeping), not merely operational interaction typical of grant compliance.
The opinion may deter “deep pocket” FLSA theories against agencies in grant-funded ecosystems unless plaintiffs can show the agency functionally ran the workforce.

At the same time, the decision does not foreclose joint-employer liability in disaster-response settings; it instead underscores that liability turns on proof of the Baystate factors in the “totality of the circumstances.”

4. Complex Concepts Simplified

FLSA “employer” (29 U.S.C. § 203(d)): Not limited to the entity that signs paychecks. It can include an entity that effectively controls the job. But courts require concrete evidence of control, not just indirect influence.
“Economic reality” test: A practical, real-world inquiry into who actually functions as the employer. Courts look at who hires/fires, supervises, sets pay, and keeps employment records.
Summary judgment (Fed. R. Civ. P. 56): A case can be decided without trial if key facts are not genuinely disputed and the law favors one side. If a party fails to properly dispute the movant’s supported facts, those facts can be treated as admitted for purposes of the motion.
Default (Fed. R. Civ. P. 55): Typically applies when a defendant does nothing to defend the lawsuit. If the defendant is actively litigating (discovery, motions), default is generally inappropriate even if a pleading step is imperfect.
Reconsideration based on “new evidence”: Courts usually require that the evidence truly could not have been obtained earlier with reasonable diligence. Evidence that was available (or could have been obtained) before summary judgment usually will not reopen the case.

5. Conclusion

Vernaliz Meredith Perez v. FEMA reaffirms a disciplined, evidence-driven application of the First Circuit’s Baystate “economic reality” framework: FEMA’s role as a disaster-response grantor and facility operator did not make it the plaintiffs’ employer where the nonprofit grantee hired, supervised, paid, and recorded the workforce.

The opinion’s broader significance lies in its boundary-setting for FLSA liability in grant-funded public-service programs: money, monitoring, and coordination are not enough; plaintiffs must show the funder exercised the core incidents of employment.