Claims for $18 million in back wages for nursing home workers fail

by Kris B. Mamula

Nine bankrupt nursing homes are being sold in the Pittsburgh area free and clear of all claims, leaving 5,595 hourly workers out millions of dollars in back pay they are owed.

U.S. Bankruptcy Court Judge Carlota Bohm approved selling the for-profit nursing homes, owned by South Hills Operations LLC, to Palmyra, Pa.-based Kadima Healthcare for $53 million. The deal is expected to close by Oct. 31.

Last month, the U.S. Department of Justice entered a judgment in bankruptcy court for $35.8 million in back wages and penalties against South Hills Operations LLC, which filed for voluntary protection from creditors May 17 under Chapter 11 of the U.S. Bankruptcy Code. The amount includes nearly $18 million in back wages alone.

But the sales agreement approved by Judge Bohm Sept. 30 freed the new owners from all claims, which bankruptcy law typically allows.

Department of Justice attorney Cortney R. Robinson wrote in a court filing that the debtors were “jointly and severally liable” for the claim. She declined to comment further.

In July, U.S. District Court for the Western District of Pennsylvania Judge William S. Stickman ruled that the nursing home owners had violated labor law by systematically shorting wages for thousands of workers at 15 area nursing homes, including the nine facilities sold to Kadima.

Previously, the U.S. Department of Labor argued that a proposed sale of the nursing homes was intended to “opportunistically offload” company assets to frustrate the government’s efforts to recover the wages owed to employees.

The nursing homes being sold are: The Grove at Greenville, Mercer County; The Grove at New Wilmington, Lawrence County; the Grove at North Huntingdon, Westmoreland County; The Grove at New Castle, Lawrence County; the Grove at Washington, Washington County; The Grove at Harmony, Butler County; The Grove at Latrobe, Westmoreland County; Cheswick Rehabilitation and Wellness Center, Allegheny County; and North Strabane Rehabilitation & Wellness Center, Washington County. The facilities have a total of 930 beds.

“The buyers and new operators shall not be liable for any claims the United States or other federal government authority may have against the debtors,” according to the sales agreement that was hammered out with the new owners. The new operators “are free of any Department of Labor claims.”

In addition to the nine facilities, four other related skilled care centers were sold to Cedarhurst, N.Y-based Wecare Centers in July.

The sale agreement for the nine nursing homes also stipulated that none of the existing labor agreements with SEIU Healthcare Pennsylvania had to be honored. At the same time, SEIU will be recognized as the “exclusive bargaining agent” in negotiating new contracts.

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Claims for $18 million in back wages for nursing home workers fail