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January 10, 2011
Were Workers’ Expenses ‘Tools of the Trade’?

Three Latin American workers who obtained H-2B visas to work temporarily at New Orleans hotels in the wake of Hurricane Katrina sued their employer, charging that it illegally required them to pay their own transportation, visa, and recruiting fees. Their lawsuit was eventually joined by 97 other plaintiffs, and it has spent considerable time in the courts.

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What happened. Decatur Hotels LLC found after the flooding that many of its own workers had left New Orleans, presumably because they’d lost their homes. But several tourist areas of the city were undamaged, and hotel business was brisk. So, using two staffing firms, the chain hired at least 100 temporary workers from abroad. Both the workers and the chain incurred visa and recruiting expenses. But the workers charged that having their transport and share of other costs effectively deducted from their first paychecks put them below minimum wage for that work period, a violation of the Fair Labor Standards Act (FLSA).

A federal district court judge initially ruled partly for the workers and partly for Decatur, saying the workers were definitely covered by FLSA but that he couldn’t determine whether their expenses should have been reimbursed. On first appeal to the 5th Circuit, which covers Louisiana, Mississippi, and Texas, appellate judges ruled entirely for Decatur. The workers again appealed, and the circuit agreed to rehear the case en banc, meaning that all judges, rather than a panel of three, participated.

What the court said. As it turned out, 14 judges heard this case. And, they split, 8 to 6. They received a “friend-of-the-court” brief from the U.S. Department of Labor (DOL), and reviewed several new and older DOL regulations interpreting FLSA. Most of that material supported the plaintiffs’ case, but the majority still ruled in favor of Decatur, saying that the workers’ expenses were not for the benefit of the employer and not “tools of the trade.” The 6 dissenting judges strongly disagreed with this reasoning. They especially emphasized that the Supreme Court in several rulings has called for far more deference to DOL regulations, and that newer DOL interpretations make it even clearer that the workers’ expenses should have been reimbursed. Castellanos-Contreras et al. v. Decatur Hotels, U.S. Court of Appeals for the 5th Circuit, No. 07-30942 (2010).

Point to remember: Dissenting judges pointed out that the 11th Circuit (AL, FL, GA) made the opposite decision in 2002 regarding foreign workers using a very similar visa for temporary agricultural work. They also felt the workers’ expenses had been primarily for the benefit of Decatur.

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