Foreign Workers May Proceed With FLSA Claims Seeking Reimbursement For Their Recruitment, Visa And Transportation Expenses, Court Rules

April 30, 2011 | Appeals | Insurance Coverage

Between 2004 and 2009, Trugreen Landcare LLC, which provides lawn and landscape services in the United States to approximately two million customers, obtained permission from the United States government to hire temporary foreign workers pursuant to the federal H-2B visa program. The plaintiffs in this case were individuals who resided outside of the United States and who worked for Trugreen in the U.S. pursuant to the H-2B program during 2007, 2008 and 2009. Trugreen recruited the plaintiffs for temporary employment through the H-2B program, apparently using a third party recruiter. The plaintiffs paid their own expenses, including the cost of traveling from their home countries to the U.S., the cost of obtaining an H-2B visa and recruiting fees. Trugreen did not reimburse the plaintiffs for the recruitment, visa or transportation expenses.

The plaintiffs’ lawsuit against Trugreen alleged that Trugreen’s failure to reimburse these expenses violated the federal Fair Labor Standards Act because the expenses were primarily for Trugreen’s benefit and because such expenses in effect caused the plaintiffs’ wages to fall below the minimum wage standards established by law. Trugreen asked the court to dismiss the lawsuit.

In its decision denying Trugreen’s motion to dismiss the claims, the federal district court decided that the visa and transportation costs of Trugreen’s H-2B employees were “unique costs of doing business,” primarily benefitting Trugreen, that it could not pass on to employees either directly or indirectly, if doing so reduced the employees’ wages below minimum wage. The court gave considerable weight to the U.S. Department of Labor’s “longstanding view” that employers should bear the visa and transportation costs for remotely-hired temporary workers. The court also adopted the view expressed in a Department of Labor “Field Assistance Bulletin” that provided that employers are liable for recruiting fees paid to recruiters whom they retained. [Teoba v. Trugreen Landcare LLC, 10-CV-6132 CJS (W.D.N.Y. Feb. 15, 2011)]

Comment: Courts are divided on whether employers must pay the recruiting, visa and transportation expenses of H-2B visa guest workers. In Arriaga v. Florida Pacific Farms, LLC, the U.S. Court of Appeals for the Eleventh Circuit held, in the context of H-2A visas, that employers were required to reimburse employees for their pre-employment visa and transportation expenses. In that regard, the Eleventh Circuit concluded that the costs primarily benefitted the employers, and that the costs were in effect shifted onto the employees, thereby bringing their wages below the minimum wage. Subsequently, in Morante-Navarro v. T&Y Pine Straw, Inc., the Eleventh Circuit applied the same reasoning in a case involving H-2B guest workers, citing Arriaga for the proposition that recruiting/agent fees, visa costs and transportation fees “cannot lawfully be credited against the employer’s minimum wage obligations to the workers,” which is the same result reached in the Trugreen case. However, the U.S. Court of Appeals for the Fifth Circuit, in Castellanos-Contreras v. Decatur Hotels, LLC, reached the opposite conclusion of Arriaga.

Failure To Notify Employer Of Anticipated Duration Of Unforeseeable Leave “As Soon As Practicable” Dooms Employee’s FMLA Claim

The plaintiff in this case was employed as a sales representative for SMC Corporation in the company’s office in Aurora, Illinois. While at a mandatory training seminar in Indianapolis, he learned that his elderly mother had gone into a diabetic coma. He left the seminar and returned to Illinois to assess his mother’s situation. The next day, he e-mailed his supervisor to explain that he needed “the next couple days off” to make arrangements for his mother’s care; he said in his e-mail that he had vacation time available or “could apply for the family care act, which I do not want to do at this time.” The plaintiff’s supervisor then made 15 phone calls to the plaintiff over the course of a week to clarify his request for leave. The plaintiff had apparently turned his cell phone off and did not return these calls or otherwise contact his employer even though the emergency had abated and his mother’s condition had stabilized. When he finally returned to work nine days after leaving the training session, he was fired for violating SMC’s leave policy.

The plaintiff sued SMC and his supervisor, alleging violations of the Family and Medical Leave Act. The district court entered summary judgment for the defendants, deciding among other things that even assuming the plaintiff’s e-mail had invoked the FMLA, he had failed to notify SMC of his anticipated return-to-work date, as required by company policy and applicable FMLA regulations, and he had ignored his supervisor’s repeated phone calls seeking more information about his leave request. The plaintiff appealed to the U.S. Court of Appeals for the Seventh Circuit.

In its decision affirming summary judgment in favor of SMC, the circuit court noted that FMLA regulations place the burden on the employee to notify the employer of the anticipated duration of unforeseeable leave “as soon as practicable.” Moreover, an employer is entitled to enforce compliance with its “usual and customary notice and procedural requirements” regarding FMLA leave. Because the plaintiff failed to comply with the applicable regulatory requirements and SMC’s own requirements for family leave (which required employees to obtain prior approval from a supervisor before taking leave and which stated that a “[f]ailure to report for work for two (2) consecutive days without notifying your supervisor” was grounds for termination), the circuit court found that the plaintiff’s termination did not violate the FMLA. The circuit court noted that even when the need for leave was unforeseeable, and the employee did not know exactly how much leave would be needed, “the employee must at least communicate this fact to the employer, together with an estimate of the likely duration of the requested leave.” Here, the plaintiff had made “no effort whatsoever to keep SMC apprised of his fluid situation and was absent and out of touch with his supervisor for more than a week.” The circuit court concluded that the plaintiff’s failure to follow the applicable regulatory and workplace requirements for notifying SMC of the expected duration of his leave foreclosed his FMLA interference claim. [Righi v. SMC Corp. of America, 2011 U.S. App. Lexis 2822 (7th Cir. Feb. 14, 2011).]

Each Failure To Pay Overtime As Required By FLSA Began New Statute Of Limitations, Circuit Court Decides

The plaintiffs in this case, police officers of the District of Columbia Metropolitan Police Department (MPD), sued the MPD under the Fair Labor Standards Act (FLSA), alleging that the MPD had failed to calculate their overtime based on enhanced pay owed to detective sergeants under the District of Columbia Code. After the district court dismissed the claims as barred by the statute of limitations, the plaintiffs appealed to the U.S. Court of Appeals for the District of Columbia Circuit. The plaintiffs argued that each time they received a paycheck without proper overtime compensation, “a new cause of action accrued under the FLSA.”

The circuit court agreed, finding that the plaintiffs were not alleging one continuing violation of the FLSA, but rather that there had been “a series of repeated violations of an identical nature.” Because each violation gave rise to a new cause of action, each failure to pay overtime began a new statute of limitations period as to that particular event, the circuit court concluded. [Figueroa v. District of Columbia Metropolitan Police Dept., 2011 U.S. App. Lexis 3168 (D.C. Cir. Feb. 11, 2011).]

Courts Rejects “Undue Influence” And Mental Incompetency Claims; Orders Life Insurance Proceeds Paid To Widow

In 1998, Bruce Bradway named one of his daughters as the sole beneficiary of a $300,000 life insurance policy. In early 2007, he began dating Felicia Vaughn, a nurse who worked at the same hospital at which he worked. Bradway and Felicia moved into a shared apartment in April 2007 and became engaged later that year. On May 27, 2008, Bradway executed a designation of beneficiary before two witnesses naming Felicia as the sole beneficiary of the $300,000 life insurance policy. Bradway, who suffered from chronic back pain for which he took Oxycodone, was diagnosed with terminal liver cancer on September 19, 2008. Following his cancer diagnosis, Bradway and Felicia were married on October 8, 2008. He was hospitalized in November but was discharged. However, Bradway died on March 3, 2009.

Felicia completed and submitted a claim for the policy benefits. The daughter who had been named the beneficiary of the policy in 1998 argued that she was entitled to the policy benefits because Felicia had exercised “undue influence” over Bradway and because Bradway was not mentally competent at the time he signed the forms naming her the beneficiary.

The federal district court, applying New York law, in ruling on the dispute explained that, to prove undue influence, a party must show: “(1) the existence and exertion of an influence; (2) the effective operation of such influence as to subvert the mind at the time the transaction occurred; and (3) the execution of the transaction that, but for undue influence, would not have happened.” The perpetrator’s behavior must amount to “‘moral coercion'” sufficient to “‘restrain[] independent action and destroy[] free agency or … constrain[] the [victim] to do that which was against his free will and desire, but which he was unable to refuse or too weak to resist.'”

As the court noted, Bradway’s daughter argued that her father had been the subject of undue influence because of the 30 year age difference between him and Felicia, the fact that Felicia allegedly had proposed to the “terminally ill” Bradway, Felicia’s alleged attempts to isolate Bradway from his other family following his cancer diagnosis, and Felicia’s alleged failure to provide Bradway with proper medical care following his cancer diagnosis. The daughter also argued that because her father had maintained her as the beneficiary of the policy from 1998 until 2008 despite having had multiple serious relationships with other women during that period, his decision to change his beneficiary to Felicia in 2008 was suspicious. Finally, she believed that her father’s decision to change his policy beneficiary was the result of undue influence because “I knew my father…. And he wouldn’t just knock me out of the box. It’s not like him.”

The court stated that even assuming all of these asserted facts to be true, they were insufficient to make out a claim of undue influence under New York law. The court reasoned that some of the alleged acts occurred after May 27, 2008, when Bradway signed the designation of beneficiary form naming Felicia as the policy’s sole beneficiary, and therefore were not relevant to the validity of that document. The remaining allegations – the 30 year age

difference between the spouses, Felicia’s alleged marriage proposal, Bradway’s failure to name any of his prior partners as beneficiaries of the policy, and his daughter’s belief that her father wanted her to be his policy beneficiary – were “utterly insufficient” to conclude that Bradway’s mind was “subverted” or his free will “destroyed” at the time the May 27, 2008 designation of beneficiary form was executed, according to the court.

The court then examined the daughter’s “mental competency” argument. It noted that under New York Law, an individual’s mental competency is measured by a stringent cognitive test: whether the person’s mind was so affected as to render the person wholly and absolutely incompetent to comprehend and understand the nature of the transaction. Illness or disability is insufficient to undermine the transaction unless it is shown “to have destroyed the individual’s competency at the moment the transaction occurred,” the court explained.

The court noted that Bradway’s daughter identified only one fact that, if true, might have impacted her father’s competency at the time he executed the May 27, 2008 designation of beneficiary: she pointed to his chronic back pain and the Oxycodone he sometimes took to treat it. However, the court found, there was no evidence anywhere in the record that Bradway’s mental competency was affected by his back pain or any related treatments. It noted that Bradway’s daughter asserted that her father’s back pain impeded his ability to drive, walk and stand; however, the court pointed out, she nowhere stated that it undermined his comprehension or mental acuity. The court acknowledged that it was true that, in rare cases, Oxycodone could cause confusion and hallucinations, but found that there was no evidence that Bradway’s functioning was impeded by his ingestion of the drug, particularly prior to his cancer diagnosis.

The court therefore determined that Felicia was entitled to the proceeds of the policy. [Metropolitan Life Insurance v. Felecia Bradway, 10 Civ. 0254 (Jcf) (S.D.N.Y. Feb. 24, 2011).]

Pro Se Plaintiff’s Failure To Assert “Non-Conclusory” Facts Dooms ADA Claim

The plaintiff in this case was 42 years old in September 2006 when she was hired as a bank teller for Citibank. Her performance apparently fell below Citi’s standards. For example, on October 11, 2007, her supervisors issued her an informal Corrective Action Warning (CAW) informing her that on a dozen occasions since October 30, 2006, the cash in her teller drawer did not match the amount of the recorded transactions (“cash differences”). The CAW also reprimanded the plaintiff for repeated absences and warned her that she had to improve to avoid termination. On December 24, 2007, the plaintiff received an unsatisfactory appraisal under the Mystery Shop Program, whereby a third party posing as a customer evaluated the branch and its employees based upon his or her experience. On January 14, 2008, Citi issued a formal CAW to the plaintiff advising her of her continued deficient performance and warning her of possible termination. Nonetheless, the plaintiff failed another Mystery Shop Program appraisal on February 11, 2008. Then, on April 21, 2008, citing continued absences and cash differences, Citi issued the plaintiff a final warning and the bank branch manager recommended termination to the plaintiff’s supervisor.

On September 16, 2008, the plaintiff debited and credited the same account with $9,540 instead of crediting the account of another customer as the transaction required. Prior to Citi discovering this error, the plaintiff suffered a broken wrist after falling in her apartment; she took short term disability (STD) leave starting on October 25, 2008. In November 2008, the customer who had not received the expected deposit notified the branch. Upon investigation, Citi determined that the plaintiff was at fault, but did not terminate her immediately due to a bank policy prohibiting the termination of employees on STD leave. Upon the plaintiff’s return to work on January 26, 2009, Citi terminated her employment due to the September 16, 2008 error.

The plaintiff brought suit against the bank, alleging employment discrimination in violation of the Americans with Disabilities Act (ADA), and the bank moved to dismiss. The federal district court granted the bank’s motion.

The court found that the plaintiff had offered no non-conclusory facts that supported her claim that she was terminated because of the injury she sustained in October 2008. The court noted that the plaintiff had simply asserted: “I believe that Citibank is using this supposed [September 16, 2008] transaction as an excuse to terminate me because of my disability.” In support of this conclusion, the court said that the plaintiff had cited only a single fact, that she had been a teller at different banks since 1989 – and at Citi since 2006 – and was never fired for cause.

According to the court, accepting that assertion as true did not make Citi’s liability any more plausible. The court stated that even conceding “the doubtful inference” that the plaintiff was otherwise qualified for her position, she had not alleged any facts related to Citi’s decision to terminate her employment in January 2009. The simple fact that past employers had not terminated her did not support the inference that Citi terminated her because of her alleged disability, the court opined. Thus, the court concluded, the plaintiff had failed to state a claim under the ADA, and it granted Citi’s motion to dismiss. [Maysonet v. Citi Group, Inc., 2011 U.S. Dist. Lexis 12700 (S.D.N.Y. Feb. 9, 2011).]

Employee’s Social Security Benefits Application – And His Receipt Of Benefits – Doom ADA Claim

The plaintiff in this case, the Equal Employment Opportunity Commission (EEOC), brought an action in Maryland federal district court for disability discrimination under the Americans with Disabilities Act on behalf of a former employee of the Greater Baltimore Medical Center, Inc. (GBMC). GBMC moved for summary judgment, arguing that the EEOC was barred from bringing the action because the employee’s Social Security Disability Insurance (SSDI) application, which stated that the employee was disabled and unable to work, and his continuing receipt of benefits based upon this application, contradicted the EEOC’s claim in this case that the employee was able to work without restrictions.

The court granted GBMC’s motion, finding that the EEOC had not sufficiently explained how the employee’s statement in his SSDI application that he was unable to work and his continuing receipt of benefits could be reconciled with the employee’s later statements that he was able to work at GBMC without reasonable accommodations.

As the court explained, the SSDI program provides benefits to a person with a disability so severe that the person is unable to do his or her previous work and “cannot . . . engage in any other kind of substantial gainful work.” The court found that the employee’s SSDI application and continuing receipt of benefits contradicted the EEOC’s claim that he could perform the essential functions of his prior position at GBMC. The court then analyzed the EEOC’s argument that the employee’s statements in his SSDI application were true when he made them, but that he had recovered and had become able to perform the necessary functions of his prior position – or even other positions at GBMC – with or without a reasonable accommodation.

The court noted that the SSDI application required that the employee inform the Social Security Administration (SSA) if his medical condition improved such that he was able to return to work, even if he had not yet returned to work. Though the employee had improved so significantly that he and his personal physician believed he was able to return to work without restrictions, and though he had applied for numerous jobs at GBMC both before and after his termination, the employee had never informed the SSA that he was able to return to work. As long as the employee was receiving SSDI benefits, he was continuing to represent to the SSA that he still was disabled and unable to work at all or without a reasonable accommodation. This representation therefore conflicted with the employee’s claim in this case that he was able to work without any accommodations at all.

The court rejected the EEOC’s argument that the employee was not deceiving the SSA by continuing to receive benefits because he was actively participating in the SSA’s Ticket to Work Program, noting that the employee had not enrolled in that program until three years after he had told GBMC he was able to return to work part-time, and more than two-and-one-half years after the employee had informed GBMC that he was able to return to work without any restrictions.

The court concluded that the employee had taken inconsistent positions – one to receive SSDI benefits and another in an attempt to get his job back. Because the EEOC had not provided an explanation for these inconsistencies that was sufficient to warrant a reasonable juror’s concluding that the employee was able to perform the essential functions of his job with or without accommodations, the court found that the employee was not a qualified individual with a disability, and it dismissed the EEOC’s ADA claims. [Equal Employment Opportunity Commission v. Greater Baltimore Medical Center, Inc., 2011 U.S. Dist. Lexis 6076 (D. Md. Jan. 21, 2011).]

Employees Who Leave Work Because Business Is Closing Have Not Voluntarily Departed For WARN Act Purposes, Circuit Court Decides

The federal Worker Adjustment and Retraining Notification (WARN) Act provides that an employer “shall not order a plant closing or mass layoff until the end of a 60-day period after the employer serves written notice of such an order . . . to each affected employee.” The 60-days’ notice requirement, however, applies only “if the shutdown results in an employment loss at the single site of employment during any 30-day period for 50 or more employees.” The term “employment loss” does not include an employee’s voluntary departure.

Recently, the U.S Court of Appeals for the Ninth Circuit considered whether employees who left their jobs because the business was closing had “voluntarily departed” within the meaning of the WARN Act. The appellate court ruled that employee in that position had not voluntarily departed but, instead, had suffered an “employment loss.” To hold otherwise, the circuit court declared, would be “inconsistent” with the WARN Act’s general structure and its overall purpose. [Collins v. Gee West Seattle LLC, 2011 U.S. App. Lexis 1169 (9th Cir. Jan. 21, 2011).]

Comment: Struggling businesses often face difficult issues such as whether to give WARN Act notice at all because closure may not be certain, and because giving notice may hasten the business decline or impair efforts for a sale. Recognizing these difficulties, the WARN Act provides that an employer who is actively seeking capital or business to avoid or postpone a shutdown may give only such notice “as is practicable” if giving 60-days’ notice would “preclude[ ] the employer from obtaining the needed capital or business.” This provision of the WARN Act is known as the “faltering business” exception.

Reprinted with permission from the May 2011 issue of the Employee Benefit Plan Review – From the Courts.  All rights reserved.

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