In early January, Denver legal nonprofit Towards Justice and Boies Schiller Flexner announced they reached a $65.5 million settlement in a class action lawsuit filed on behalf of U.S. au pairs. According to Towards Justice, the settlement could end up being one of the largest class action settlements ever for minimum wage workers.
The lawsuit, Beltran v. Interexchange, Inc. was filed in November 2014, with allegations that 15 au pair sponsor companies had colluded to pay au pairs less than the legal minimum wage and to mislead au pairs about the wages they were entitled to receive under federal and state law. The settlement will provide restitution to the au pairs and impose requirements that the companies inform au pairs of their rights to negotiate wages but leaves some legal questions unanswered.
The case originated in 2014 when Johana Beltran came to Towards Justice to complain about low wages and unfair treatment from the agency that had recruited her to come to the U.S. and work as an au pair. Towards Justice found that the issue was systemic in the au pair industry.
The 15 defendant parties named in the suit were exclusively authorized by the U.S. State Department to sponsor individuals to participate in the au pair program and to receive J-1 visas. The visas were created for the purpose of cultural exchange between countries, but the lawsuit alleged the program was instead operated as a cheap source of child care. The au pair participants were paid less than minimum wage — typically $4.35 an hour — and as foreign nationals, were typically unaware that their wages were a minimum, rather than a government-set pay rate, and thus negotiable.
According to the original complaint, the companies conspired to fix wages at that rate and lied about the ability to negotiate a higher wage. Au pairs’ wages are typically reduced by the cost of room and board, and sponsor agencies charge fees to both au pairs and host families. According to a statement from Boies Schiller, one sponsor charged host families an $8,245 “Program Fee Annual” plus a $400 “Match Fee” — which meant the agency made almost as much money in fees as the au pairs were paid for their labor.
The class of 100,000 au pairs was certified in the District of Colorado, and the case was scheduled to proceed to trial on Feb. 25.
“It remains to be seen whether there will be changes beyond what’s required in the settlement agreement,” said Boise Schiller partner Peter Skinner. “This addresses one of the primary claims: that au pairs were being misled about what their wages could and should be and didn’t understand they had the ability to negotiate for higher wages.”
However, the settlement does leave some legal questions unanswered. Skinner said the plaintiffs alleged the au pair agencies weren’t calculating the minimum wage correctly in accordance with the Fair Labor Standards Act and that the room and board deduction was wrong. Additionally, the sponsor agencies took the position that federal law preempts state law regarding state minimum wage for au pairs. Skinner said it remains to be seen whether those issues get resolved with future litigation or any other changes within the industry.
“I do think the other aspects of the lawsuit … should be less of an issue, if at all, going forward due to the obligation that they have to tell people they can negotiate,” Skinner said. “That should take care of the fraud issue.”
Skinner said that the plaintiffs’ decision to settle came largely from the value of the settlement and the risk of losing a trial. Some of the class’ plaintiffs were living on limited means or had insurance set to expire, he said. They made the assessment that settling for money that the plaintiffs needed was more important than proceeding with years of litigation.
“Our perspective was that we thought we had strong aspects of our case, but we were ultimately persuaded to settle out of the fact that there’s always litigation risk,” Skinner said. “We also were persuaded in considering financial information that ultimately even if we won at trial, we had a serious risk of being able to collect as much as we’re able to get in settlement right now.” The settlement is subject to approval by the district court.
“Millions of domestic workers in this country confront entrenched, systemic injustices that far too frequently keep them trapped in horrid working conditions for unfair pay,” said David Seligman, director of Towards Justice, said in a statement. “That’s still true. But this settlement represents an important step in the right direction.”
— Tony Flesor