News Release

Court affirms Department of Labor’s ability to sue Brooklyn staffing agency that demanded workers stay 3 years or repay wages

Employer arbitration demands for lost profits, costs can constitute illegal kick-backs

Date of action:                       May 8, 2024

Type of action:                      Denial of employer’s motion to dismiss

Employers:                            Advanced Care Staffing LLC, Brooklyn, New York

                                                Priority Care Staffing LLC, New York, New York

                                               CEO Sam Klein 

Background:                          The U.S. Department of Labor filed suit on March 20, 2023, against the employers, alleging they violated the Fair Labor Standards Act by making employees sign contracts that would force them to work for the company for three years or repay rightfully earned wages. The department asked the court to forbid the employers from reducing employees’ wages below federal minimums, either by demanding they enter into such contracts or by enforcing them. On July 20, 2023, the department amended the complaint to add Priority Care Staffing LLC as a defendant. On Sept. 28, 2023, the employers filed a motion to dismiss the department’s suit. 

Resolution:                            On May 8, 2024, U.S. District Judge Nina R. Morrison denied the employers’ motion, saying that the department 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 the employers’ anticipated lost profits, arbitration costs and attorneys’ fees. Specifically, the court agreed such demands are “categorically for defendants’ benefit” and illegal kickbacks to the extent the demands would bring employees below the FLSA’s protected wage minimums. The litigation continues. View the memorandum and order

Court:                                     U.S. District Court for the Eastern District of New York

Docket Number:                    1:23-cv-02119-NRM-MMH

Quote:                                    The U.S. Department of Labor will not stand by while employers use coercive contract provisions to claw back workers’ hard-earned wages. 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. The department is committed to safeguarding workers from coercive contract provisions, and employers should be on notice that they cannot pursue damages to recoup lost profits, arbitration costs and attorneys’ fees from workers without risk of violating federal law,” said Solicitor of Labor Seema Nanda.

Office of the Solicitor
May 15, 2024
Release Number
Media Contact: Ted Fitzgerald
Media Contact: James C. Lally
Phone Number
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