Labor & Employment Law Daily Sponsor companies ready to pay $65.5M to settle hard-fought au pair litigation
Monday, January 14, 2019

Sponsor companies ready to pay $65.5M to settle hard-fought au pair litigation

By Pamela Wolf, J.D.

A proposed $65.5 million deal has been reached that, if approved by the court, would finally bring to conclusion hard-fought litigation that began in November 2014, when au pairs and former au pairs sued sponsor companies in federal district court alleging violations of the Sherman Antitrust Act, the Racketeer Influenced and Corrupt Organizations Act (RICO), the Fair Labor Standards Act (FLSA), federal and state minimum wage laws, and other state laws.

The case featured battles over issues such as 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 Court of Appeals over arbitration, among other things.

The potential number of class members is quite large. In February 2018, the au pairs were granted conditional certification of a Rule 23 class of more than 91,000 members.

Cultural exchange program. The plaintiffs in the underlying suit were au pairs participating in a “cultural exchange” program, working 45 hours per week and providing childcare to host families. They sued the sponsor agencies who placed them with families under the J-1 visa program, claiming that in spite of federal regulations requiring that they receive “not less than” the applicable minimum wage, the agencies conspired and agreed to set all of their weekly wages at the purported minimum amount: $195.75 per week plus room and board. The au pairs also claimed the agencies falsely informed au pairs and host families that this weekly salary was the non-negotiable, maximum wage au pairs could receive.

Class members. Under the proposed agreement, there are several classes and subclasses of potential class members: 11 classes or subclasses certified in the court’s Second Amended Order Granting Motion for Conditional Collective Action Certification; and 18 classes or subclasses certified in the Order Granting in Part and Denying in Part Plaintiffs’ Motion for Rule 23 Class Certification and Appointment of Class Counsel (and subject to Court’s Order on Statute of Limitations).

Deductions from settlement fund. The total settlement under the proposed deal is $65,500,000. Class counsel are expected to seek 35 percent of that amount in attorneys’ fees and, in addition, costs of the litigation. The parties anticipate that after legal fees and administrative costs are paid, about $40,000,000 will remain available to distribute to class and collective action members.

Participation bonuses. Au pairs who have personally participated in the lawsuit will receive participation bonuses: $5,000 to each of the 11 class representatives (who attended depositions, provided documents, and assisted class counsel in preparing the case); $1,000 to each collective action member who participated in a deposition; and $100 for every au pair who opted-in to the collective action. These bonuses will be awarded in addition to any recovery to which those au pairs may otherwise be entitled as class members.

Distribution. The remaining funds of about $39,500,000 will be distributed to au pairs who submit valid claim forms. A claims administrator will weight the total claim for each class member as 100 percent for “primary” claims, 80 percent for “training” claims, 40 percent for “state” claims “Class A,” and 20 percent for “state” claims “Class B.” Based upon this weighting, funds will be distributed on a pro-rata basis.

“When I was in Colombia, InterExchange told me that being an au pair would be wonderful and that I would explore another life, language, family, culture, and that if anything bad happened to me they would be there to help,” Johana Paola Beltran, one of the named plaintiffs from Columbia who worked as an au pair in Colorado and New Jersey, said in a statement. “Instead, my host family treated me like a maid. When I asked InterExchange for help, they did nothing.”

The plaintiffs filed their lawsuit, Beltran v. InterExchange, in the District of Colorado; the case is No. 14-cv-03074-CMA-KMT.

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