On May 8, 2024, a court affirmed the U.S. Department of Labor's ability to sue two Brooklyn-based staffing agencies that allegedly violated the Fair Labor Standards Act (FLSA). The employers, Advanced Care Staffing LLC and Priority Care Staffing LLC, along with their CEO Sam Klein, were accused of making employees sign contracts that would force them to work for the company for three years or repay rightfully earned wages.
The Department of Labor filed suit against these employers on March 20, 2023. The department requested the court to prohibit the employers from reducing employees’ wages below federal minimums by enforcing such contracts. On July 20, 2023, Priority Care Staffing LLC was added as a defendant in the amended complaint. The employers responded by filing a motion to dismiss the department’s suit on Sept. 28, 2023.
U.S. District Judge Nina R. Morrison denied this motion on May 8, 2024. She stated that the department had sufficiently alleged that the employers violated the FLSA by pursuing arbitrations against former employees who resigned before their contract ended in an effort to claw back wages to satisfy anticipated lost profits, arbitration costs and attorneys’ fees.
The court agreed with the department's assertion that such demands are “categorically for defendants’ benefit” and constitute illegal kickbacks if they bring employees below the FLSA’s protected wage minimums.
“The U.S. Department of Labor will not stand by while employers use coercive contract provisions to claw back workers’ hard-earned wages," said Solicitor of Labor Seema Nanda in response to the ruling. "The court has upheld the department’s ability to vindicate the rights of workers whose employers require an unlawful choice: work for at least three years or repay rightfully earned wages."
Nanda further stated that her department is committed to safeguarding workers from coercive contract provisions and warned employers that they cannot pursue damages to recoup lost profits, arbitration costs and attorneys’ fees from workers without risking violation of federal law.
The litigation continues in the U.S. District Court for the Eastern District of New York under docket number 1:23-cv-02119-NRM-MMH.
