US Department of Labor Sues Staffing Firm and its CEO for Overreaching Employment Agreements

The US Department of labor has filed an enforcement action against Advanced Care Staffing, a Brooklyn, NY firm that focuses on healthcare staffing. The lawsuit, filed in the U.S. District Court for the Eastern District of New York, also names Advance Care's CEO, Sam Klein, as defendant.

The lawsuit (attached below) alleges that Advanced Care violated the Fair Labor Standards Act when it recruited nurses from the Philippines and required them to sign 3-year employment contracts with punitive consequences if the nurses resigned before the contract term expired. Specifically:  

In flagrant disregard of the FLSA’s requirements, Defendant Advanced Care Staffing, LLC (“ACS”) has entered into contracts purporting to require employees to complete at least three years of full-time work for ACS in order to retain their wages. The contracts warn employees that if they leave ACS’s employ before three years’ time, they will face ACS and its lawyers in an arbitration behind closed doors, where ACS will demand that employees kick back much of their hard-earned wages—including wages to which they are entitled under federal law. Under this scheme, the pay that ACS promises its employees may be converted into nothing more than a loan that employees must repay with interest and fees, leaving some employees with no compensation at all, much less the wages required by the FLSA. The FLSA prohibits an employer from holding employees’ wages hostage, allowing employees to keep their wages free and clear only if employees remain in the service of their employer.

The Complaint goes on to tell the story of Benzor Shem Vidal, who was recruited from the Philippines to work for Advance care in Brooklyn. Before coming to the United States, Vidal was required to sign a three-year employment agreement. The agreement allowed Advance Care to pursue damages for lost profits if Vidal resigned without cause during the three-year term, and called for all disputes to be determined by commercial arbitration. When Vidal resigned because of unsafe working conditions at a facility, Advance Care filed an arbitration case against her seeking lost profits, attorneys’ fees, cost of arbitration, and interest. The amount sought equaled or exceeded Vidal's total compensation while employed by Advance Care, according to the DOL.  

Vidal retained counsel who filed a state court lawsuit and successfully challenged the enforceability of the arbitration agreement, likely because it required arbitration under very expensive commercial arbitration rules rather than the employment arbitration rules.  Then the Department of Labor then took up the cause and filed its suit, stating: "[Advance Care's] demands, including in arbitration, that employees pay ACS’s anticipated future profits and associated arbitration costs and attorneys’ fees, are an illegal request that employees kick back wages to ACS that would bring employees’ pay below the FLSA minimum, and/or are a failure to pay employees, finally and unconditionally or free and clear, at least the minimum wage guaranteed by the Act for all hours worked."

The Department's suit seeks injunctive relief, payment of wages and overtime to all employees who were required to sign the contract, and attorney's fees.  One of the things that the defendants will discover in this matter is that the Department of Labor is backed by the unlimited resources of the United States and will generally will not settle a case until it obtains what it deems to be full relief for the employees.

Lesson to be learned

The lesson here is obvious. Employees cannot be treated as though they were commercial entities or indentured servants obligated to earn their freedom. This is particularly true when the employees are in a vulnerable position, as are foreign nurses anxious to make a new life for themselves and their families in the United States.

Editorial opinion

As a hardened and somewhat cynical employment defense lawyer, I am generally not quick to sympathize with the employee's side of a case. But here I must say that here I am rooting for the nurses. The tried-and-true way for an employer to maintain loyalty and retain the services of their personnel is to treat them respectfully and provide a decent working environment, not threaten them with financial ruin if they leave.

Contact Bill Josey:  wjosey@staffinglaw.com