Feds have filed a lawsuit to stop a staffing provider from using workers to ‘unconditionally guarantee future profit streams.’
The U.S. Department of Labor is seeking to stop a Brooklyn, New York, healthcare staffing provider from allegedly requiring employees to sign ironclad three-year contracts or repay rightfully earned wages.
The labor department filed suit Monday in the U.S. District Court for the Eastern District of New York by the department’s Office of the Solicitor against Advanced Care Staffing LLC (ACS) and its CEO, Sam Klein. The complaint alleges that the contracts led some employees to earn less than the federal minimum wage—a violation of the Fair Labor Standards Act.
ACS is a staffing agency that recruits and places healthcare workers in patient care positions in New York, New Jersey, and Connecticut nursing and healthcare facilities, including at facilities owned or partly owned by one or more of ACS’s part owners.
“Federal law forbids employers from clawing back wages earned by employees, for employers’ own benefit,” said Seema Nanda, solicitor of labor. “Employers cannot use workers as insurance policies to unconditionally guarantee future profit streams. Nor can employers use arbitration agreements to shield unlawful practices.”
The department’s complaint seeks an injunction forbidding ACS and Klein from reducing employees’ wages below federal minimums, whether by demanding employees enter into contracts requiring them to cover ACS’ future profits, attorneys’ fees or costs associated with arbitration, or by enforcing such contracts.
In addition, the department is seeking back wages and liquidated damages for affected employees.
One employee’s story
One of those affected employees is an RN whom ACS recruited from the Philippines. On January 4, 2022, shortly before the RN was to move to the U.S. to work for ACS, Klein sent a letter presenting him with a new contract that superseded an earlier contract that contained a $20,000 liquidated damages clause in the event the RN stopped working for ACS prior to the end of a three-year contract term.
“On information and belief, ACS amended its prior form contract because it understood there was a significant risk that a court would determine the liquidated damages clause to be unenforceable, including under the Trafficking Victim Protections Act,” the lawsuit states.
The RN had been waiting since 2019 to begin working for ACS and at the time he received Klein’s new contract, he had recently left his job in anticipation of soon moving to the United States. Believing that he had no choice, the RN signed the 2022 contract, which stated that ACS intended to recover “loss of anticipated profits” from the RN if he left prior to the end of a three-year contract term, subject to an exception for a departure for “Good Reason.”
ACS, however, defined “Good Reason” only as a material failure by ACS of its contractual obligation to pursue an employment-based visa or failure to pay required wages. An employee’s good-faith concern that working conditions presented a risk of serious harm to patients or employees was not a “Good Reason” for resignation.
The contract also stated that as “a condition of” employment, nearly any dispute between ACS and the RN “shall be resolved by arbitration,” and stated that the RN waived his right to sue in court and have a jury trial.
The RN began to work for ACS at Downtown Brooklyn Nursing and Rehabilitation Center, which is owned in part by one of Advanced Care’s managing members, about the first week of March 2022.
The RN registered complaints about safety, both to ACS and to Downtown Brooklyn Nursing and Rehabilitation Center and soon “grew deeply concerned that he could not meet his ethical and professional responsibilities under ACS’s working conditions,” including a heavy patient load that he believed did not permit him to provide adequate patient care, according to the lawsuit.
Following repeated bouts of illness working under grueling conditions, the RN notified ACS on June 15, 2022 of his intent to resign effective June 29 because of working conditions and adverse physical and mental health effects he believed he suffered from working under those conditions.
ACS’s outside legal counsel responded by sending a letter to the RN demanding that he continue to work for ACS so “they could continue profiting from his labor,” the lawsuit says. The letter also threatened that if the RN stopped working, ACS would initiate an arbitration, begin to incur arbitration costs and attorneys’ fees, and seek to recover these amounts, and more, from the RN.
ACS’s letter warned that it would seek, in future profits alone, more than $9,000 per year from the RN through March 2026—a total of more than $24,000.
Disregarding federal law
The complaint details how Advanced Care Staffing entered into contracts that disregarded federal law by requiring employees to complete at least three years of full-time employment to keep their earned wages. The contracts would—and allegedly did—force employees who left before the contracts expired into private arbitrations, and require them to pay ACS’ future profits, plus attorneys’ fees and arbitration costs. These demands allegedly led to employees being paid less than the federal minimum wage, the complaint said.
The complaint also alleges that the employer violated the FLSA by pursuing arbitration to demand that the RN pay the company more than he ever earned to subsidize ACS’ future profits. The complaint further alleges that ACS’s contracts and arbitration demands have a chilling effect on employees’ ability to exercise their rights, including the protection to be free from an unsafe or hazardous workplace, and to obtain the wages they are owed.
“Employers cannot use workers as insurance policies to unconditionally guarantee future profit streams. Nor can employers use arbitration agreements to shield unlawful practices.”
— Seema Nanda, solicitor, U.S. Department of Labor
Carol Davis is the Nursing Editor at HealthLeaders, an HCPro brand.
Advanced Care Staffing LLC (ACS) allegedly required employees to sign ironclad three-year contracts or repay rightfully earned wages.
Federal law forbids employers from clawing back wages earned by employees, for the employers’ own benefit.
The U.S. Department of Labor has filed suit against ACS and alleges it violated the FLSA.