812 F.3d 614
8th Cir.2015Background
- Nineteen foreign workers employed by Deggeller Attractions under H-2B visas sued as a class, alleging underpayment relative to Department of Labor prevailing wages and Arkansas minimum wage, and fraudulent under-reporting of wages on W-2s.
- Deggeller obtained H-2B labor-certifications that required the employer to pay at least the prevailing wage for the job/location; workers allege Deggeller instead paid flat weekly amounts, withheld overtime, and charged excessive housing fees.
- Plaintiffs pleaded three claims: (1) breach of employment contracts (state law) by failing to pay the prevailing wage; (2) statutory claim under 26 U.S.C. § 7434 for willfully filing fraudulent information returns (W-2s); (3) Arkansas minimum-wage statute violation.
- District court dismissed the breach-of-contract and § 7434 claims under Rule 12(b)(6) and, having dismissed federal claims, declined to exercise supplemental jurisdiction over the Arkansas wage claim; it also denied leave to amend.
- The Eighth Circuit reviews de novo and considered whether the DOL-mandated prevailing-wage term could be read into the workers’ contracts under Arkansas law and whether statutory damages under § 7434 are available absent alleged actual damages.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether workers pleaded existence of enforceable employment contracts that included the DOL prevailing-wage term | The H-2B labor-certifications and recruitment created employment contracts; DOL-required wage terms are part of the contracts | No state-law contract existed because federal H-2B regulations lack an H-2A-style clause making the application a contract | Reversed: under Arkansas law, the law and DOL-required wage terms in the certification are incorporated into the employment contracts as a matter of law; pleadings sufficiently alleged a contractual relationship |
| Whether plaintiffs adequately alleged breach of contract by failure to pay prevailing wage | Alleged payment practices (flat weekly pay, no overtime, housing deductions) breached the included prevailing-wage term | Deggeller argued absence of a contract term or enforceability; district court found no contract term | Held that the complaint sufficiently alleged breach because the prevailing-wage obligation is part of the contract under Arkansas law |
| Whether § 7434 claim requires pleading actual damages to recover statutory damages | Plaintiffs alleged willful filing of fraudulent W-2s and seek statutory damages under § 7434(b) without alleging actual damages | District court dismissed, concluding plaintiffs failed to allege actual damages and thus § 7434 claim failed | Reversed: following Hammer, statutory damages under § 7434 are available without alleging actual damages; injury and redressability satisfied by Congress’s creation of the statutory right |
| Whether district court properly declined supplemental jurisdiction over state minimum-wage claim after dismissal of federal claims | Plaintiffs argued federal claims should not have been dismissed, so supplemental jurisdiction decision is premature | District court declined to exercise supplemental jurisdiction after dismissing federal claims | Court vacated the decision to decline supplemental jurisdiction because dismissal of federal claims was in error (contract and § 7434 claims revived) |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (establishes plausibility standard for Rule 12(b)(6) pleadings)
- Hammer v. Sam’s E., Inc., 754 F.3d 492 (statutory damages alone can satisfy Article III injury and redressability)
- Woodend v. Southland Racing Corp., 337 Ark. 380 (Arkansas principle that law in effect when contract made forms part of contract)
- Salazar-Calderon v. Presidio Valley Farmers Ass’n, 765 F.2d 1334 (federal H-2 regulations’ terms can be enforced as part of employment contracts)
- Ultracuts Ltd. v. Wal-Mart Stores, Inc., 343 Ark. 224 (elements required to plead breach of contract under Arkansas law)