Labor & Employment Law Daily $65M settlement approved in au pair FLSA and wage-fixing suit
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Monday, July 22, 2019

$65M settlement approved in au pair FLSA and wage-fixing suit

By Nicole D. Prysby, J.D.

The settlement ends a lawsuit brought on behalf of more than 100,000 au pairs alleging that sponsoring agencies kept wages artificially low and failed to pay minimum wage or overtime.

A federal court in Colorado approved a $65 million settlement between au pairs and sponsoring agencies, settling claims that the agencies colluded to keep the wages paid to the au pairs artificially low. The settlement also included a requirement that the sponsoring companies inform host families and au pairs that their weekly stipend was a minimum and that they were free to agree to higher compensation. The court also approved $22.9 million in attorney fees and $3.3 million for litigation expenses, to come from the settlement fund (Beltran v. Interexchange, Inc., July 18. 2019, Arguello, C.).

Au pairs provide child care services for host families subject to weekly and daily hour limitations, pursue six hours of academic credit during their year in the U.S., and receive in exchange monetary compensation and two weeks paid vacation over the course of the year. Sponsors designated by the State Department conduct the au pair exchange program and are responsible for selecting au pairs and suitable American host families, and placing au pairs with particular host families.

The au pairs alleged that the sponsoring companies colluded to keep their compensation below minimum wage rates, told the au pairs they could not negotiate wages, and prevented them from receiving overtime pay. The au pairs filed a class action lawsuit against sponsoring companies alleging violations of the FLSA, state minimum wage and other state laws, as well as violations of antitrust laws and the Racketeer Influenced and Corrupt Organizations Act.

The litigation featured battles over whether sponsor companies were joint employers with hosting families, insurers’ duty to defend the sponsor companies, trade associations’ duty to produce meeting notes, and a trip to the Tenth Circuit over arbitration, among other issues.

Court refused to compel arbitration. The defendants had filed motions to compel arbitration, as provided in the contracts with the au pairs. The district court found that the contracts were procedurally unconscionable because the au pairs were relatively young at the time they signed the contracts, were foreigners and did not speak English as their primary language, and had no experience with contracts. The court also determined that the arbitration provision was substantively unconscionable because it vested the sponsoring companies with the right to unilaterally select an arbitrator. The court refused to sever any offending clauses and denied the employer’s motion to compel arbitration.

However, the Tenth Circuit ruled that the arbitration agreement contained only one substantively unconscionable clause, and thus, the district court should have severed the offending provision and otherwise enforced the agreement to arbitrate. The parties then reached a settlement.

Settlement approved. The court approved the class and the collective action settlement, and it gave final certification to the FLSA classes that had been conditionally certified. The sponsoring companies will pay $65,500,000 into a settlement fund. Going forward, the sponsoring companies will inform host families and au pairs that the weekly stipend is a minimum and that they are free to agree to higher compensation.

The court also granted the au pairs’ motion for attorney fees and expenses. Class counsel will receive $22,925,000 from the settlement fund (35 percent) and $3,345,535 for litigation expenses and expenses for administration of the settlement and sending of notices.

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