Employment Law Daily Au pairs’ FLSA, state wage, price-fixing claims against ‘joint employer’ sponsors survive
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Friday, April 8, 2016

Au pairs’ FLSA, state wage, price-fixing claims against ‘joint employer’ sponsors survive

By Joy P. Waltemath, J.D., and Edward L. Puzzo, J.D. Adopting nearly every conclusion of a magistrate who had denied several motions to dismiss, a federal district court in Colorado found that au pairs—participants in a "cultural exchange" program who work 45 hours per week and provide child care services to their host families—adequately alleged that various sponsor companies acted as joint employers with host families; that the FLSA applied to their minimum wage, overtime, and unlawful crediting of room and board towards their compensation claims; and that their state law wage claims were not preempted. Allegations that the sponsor organizations conspired to fix their wage stipend below competitive levels adequately stated a price-fixing antitrust claim under the Sherman Act. Fraud claims were also not dismissed (Beltran v. InterExchange, Inc., March 31, 2016, Arguello, C.). Fifteen for-profit and not-for-profit organizations designated by the U.S. Department of State as the exclusive entities (known as sponsors) permitted to recruit and place foreign national au pairs with families in U.S. under the J-1 Visa program were sued by the au pairs. The au pairs claimed that, in spite of federal regulations requiring that au pairs receive "not less than" the applicable minimum wage, the sponsors conspired and agreed to set all of the au pairs’ weekly wages at the purported minimum amount—$195.75 per week plus room and board. They alleged that the sponsors falsely informed au pairs and host families that this wage was the maximum wage au pairs are permitted to receive. After the au pairs filed suit, the sponsor companies moved to dismiss, and the magistrate recommended that most of the au pairs’ claims be allowed to proceed. Joint employer status. Unconvinced by the sponsors’ argument that the magistrate essentially confused the host family’s status as the employer of an au pair with the sponsor’s role as a “visa sponsor,” the court pointed out that official descriptions of the au pair program as an “exchange program” were in no way probative of the sponsors’ status as a joint employer. No legal authority, from joint employment case law or otherwise, suggests that a “visa sponsor” cannot be considered a joint employer, concluded the court, agreeing that the complaint sufficiently alleged joint employer status as to the sponsors. FLSA application. The court did not accept the sponsors’ objections that au pair wages have never been governed by the FLSA, but by a so-called separate “DOS formula” that purportedly “governs calculations of the weekly stipend.” Citing USIA’s amended regulations, which contain no mention of a “formula,” much less a stipend, but instead required that “au pair participants” are “compensated at a weekly rate based upon 45 hours per week and paid in conformance with” FLSA requirements “as interpreted and implemented by” the DOL, which has determined that they must receive federal minimum wage, trumped the sponsors’ objections. As such, the court agreed with the magistrate’s conclusion that the FLSA applied to the au pairs’ claims. FLSA governs room and board. Because the FLSA applied, its provisions governed how the cost of room and board must be treated. Pursuant to 29 C.F.R. Sec. 531.30, an employer may not credit the cost of facilities toward an employee’s wages if the employer is required by law to provide the same. Regulations require that sponsors must secure host family placements who can provide the au pair “with a suitable private bedroom.” Other arguments the sponsors made were similarly unavailing; the court considered them, “at best, red herrings,” given the specific regulation at 29 C.F.R. Sec. 531.30 and the lack of any basis for an exemption here. Overtime compensation. Although the sponsors did not challenge the magistrate’s analysis of the au pairs’ entitlement to federal overtime provisions, the court found that they had stated a viable claim for overtime for any work performed after January 1, 2015, due to a new DOL regulation, recently upheld by the D.C. Circuit, that “[T]hird party employers of employees engaged in live-in domestic service employment [] may not avail themselves of the overtime exemption provided by [29 U.S.C. § 213(b)(21)], even if the employee is jointly employed by the individual or member of the family or household using the services.” State wage law preemption. Arguing the au pairs’ state wage claims were preempted, the sponsors urged that state minimum wage laws eliminated any uniformity in the wage calculation. But the court agreed that state wage laws are not preempted by “some kind of amorphous “federal framework” in the au pair program. First, the regulations implemented by the USIA expressly provided that the au pair program must conform with the FLSA, without exception; the FLSA, in turn, explicitly provides that, if a state sets a higher minimum wage than that mandated by the FLSA, employees within that state are entitled to receive that higher wage. Colorado, New York. Noting that au pairs are covered by the FLSA’s minimum wage provisions, the magistrate had concluded that the au pairs fell within the Colorado Minimum Wage Order 31 enumerated categories, and thus, the state’s domestic employee exemption did not apply. But “some restrictions and exemptions may apply,” notes the minimum wage order’s preamble, and the parties’ existing briefing was incomplete. As a result, the court neither adopted nor rejected the magistrate’s determination on this issue, and denied the motion to dismiss without prejudice with respect to the wage claims under Colorado state law. But the court accepted the magistrate’s recommendation that a fact sheet from the New York DOL was not determinative as to whether au pairs were exempted from New York state labor law coverage. Price-fixing. As for the au pairs’ antitrust claim, the sponsors urged the court to recognize the impermissibility of inferring anticompetitive conspiracy from parallel conduct where there was an independent business rationale for their actions. But here more than mere parallel behavior had been alleged: The au pairs said several sponsors explicitly admitted that the sponsors had agreed among themselves to keep au pair wages at the lowest possible level by paying au pairs the same weekly wage stipend. This was direct evidence of price-fixing, not mere parallel conduct, in the form of admissions by employees of the conspirators that officials had met and agreed explicitly on the terms of a price conspiracy. Because the au pairs sued every single sponsor in the au pair market, there was no doubt as to which competitors were included in the conspiracy. They also specifically alleged that every sponsor had conspired and agreed to pay wages no higher than a set weekly amount. These allegations were sufficient to indicate that there may have been a direct agreement among sponsors to take collective action, the court stated.

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