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May 13, 2009
Did Employer Owe Workers Their Expenses?
After Hurricane Katrina, a New Orleans area hotel chain found that only 1 out of 6 of its workers was available. It put out a call for help, a call that was answered by a personnel agency specializing in guest workers from foreign countries. Having worked for the chain for some time, a group of the foreign workers sued, claiming the chain owed them for their visa and relocation expenses.

What happened. Decatur hotels was left with only about 110 of its usual staff of 650 following the storm. Desperate for maintenance, housekeeping, and front-desk employees, it accepted the services of Accent Personnel to find and recruit workers entering the country on H-2B visas. Accent prepared visa applications, advertised openings, and arranged transportation; Decatur paid $300 for each position filled.

Workers from Bolivia, Peru, and the Dominican Republic later testified that they had each paid between $3,000 and $5,000 to enter the United States before being paid anything by Decatur. When they sued a year after Katrina, they charged that the Fair Labor Standards Act (FLSA) required Decatur to reimburse their expenses. Without such payments, they said, they failed to earn even minimum wage for their first few weeks of work. A judge in federal district court agreed with them, but Decatur appealed to the 5th Circuit, which covers Louisiana, Mississippi, and Texas.

What the court said. The district judge asked appellate judges only “whether nonagricultural H-2B guest workers are entitled to the protections of the FLSA.” Judges promptly answered affirmatively but moved on to the question of whether such protection included reimbursement for recruitment, transportation, or visa expenses—a trickier issue. Judges also learned that Accent owned another company that conducted the recruitment—and was paid $900 by each of the 270 guest workers that Decatur hired.

Judges asked whether the workers’ expenses had been for Decatur’s benefit and decided, consulting Department of Labor regulations, that they were not. In fact, Decatur wasn’t even aware of the payments to foreign recruiters. So the workers’ case was dismissed. Castellanos-Contreras et al. v. Decatur Hotels, U.S. Court of Appeals for the 5th Circuit, No. 07-30942 (2009).

Point to remember: After these workers filed suit in 2006, the rules changed: Effective January 18, 2009, the Department of Labor requires employers that hire H-2B visa holders to forbid foreign recruiters from demanding fees from prospective workers. Further, the Department of Homeland security now bars employers and employment services from collecting placement fees from applicants as conditions of their H-2B job offers.

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