124 F. Supp. 3d 711
D.S.C.2015Background
- Defendant, a Kiawah Island resort, recruited Jamaican H-2B workers via an agent; Plaintiffs allege they paid pre-employment costs (travel to Kingston for medical processing and visa interview, visa fees, travel to U.S.) and incurred employer-arranged housing and transportation costs in the U.S. that were deducted from wages.
- Plaintiffs claim those deductions and unreimbursed pre-employment expenses reduced first-week and other wages below the federal minimum wage and the H-2B prevailing wage, asserting FLSA, South Carolina Payment of Wages Act (SCPWA), and breach-of-contract (and alternative third-party beneficiary) claims.
- In 2013 DOL issued supplemental prevailing-wage determinations after revising its wage methodology; Defendant received but did not implement higher wages for Plaintiffs during part of the 2013 season.
- Defendant moved to dismiss FLSA claims premised on pre-employment expenses and the 2013 supplemental prevailing-wage theory, and moved to dismiss all state-law claims and certain contract/third-party beneficiary theories.
- The Court evaluated whether (1) visa, inbound travel, and related pre-employment costs are "primarily for the benefit of the employer" under FLSA rules and (2) whether DOL’s 2013 supplemental wage determinations or administrative decisions (e.g., BALCA’s Island Holdings) bar Plaintiffs’ overtime claim; it also addressed preemption and contract/third-party beneficiary doctrines.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Reimbursement of inbound travel and visa costs under FLSA | Travel and visa costs are incident to H-2B employment and primarily benefit employer, so must be reimbursed to the extent they reduce first-week wages below minimum | H-2B regs didn’t require reimbursement at the time; Arriaga (H-2A) reasoning should not apply to H-2B | Denied dismissal: court follows Arriaga line — visa/inbound travel costs plausibly "primarily for employer benefit" for H-2B and survive 12(b)(6) challenge |
| Reimbursement of medical-processing fees under FLSA | Medical testing was required by recruiting process and embassy, so primarily benefitted employer and must be reimbursed if wages fall below minimum | Medical exams not required by U.S. law for H-2B, so costs not employer-benefit | Denied dismissal: as pleaded, medical-processing fees plausibly primarily benefitted employer and survive |
| Overtime claim based on DOL 2013 supplemental prevailing-wage determinations | Supplemental PWDs increased the "regular rate" (prevailing wage) so failure to pay creates FLSA overtime liability | BALCA’s Island Holdings and related administrative challenges mean supplemental PWDs lack force; Plaintiffs’ claim depends on DOL action | Denied dismissal: court declines to resolve Island Holdings or DOL authority now and finds Plaintiffs stated a plausible overtime claim |
| State-law claims and contract/third-party beneficiary theories | State claims seek prevailing-wage and notice remedies not duplicative of FLSA; contract claim incorporates H-2B regulations as terms; alternatively third-party beneficiary of DOL contract | Argues FLSA preempts overlapping claims; contract claims based on promises to DOL (not to workers) and third-party beneficiary suit impermissible under Astra | Preemption: partial grant — where state claims merely duplicate FLSA (federal minimum or overtime weeks) they are preempted, but non-duplicative prevailing-wage and notice claims survive. Contract: claims based on promises to DOL dismissed, but claims that incorporate existing H-2B law/regulations survive. Third-party beneficiary claim dismissed under Astra |
Key Cases Cited
- Arriaga v. Florida Pac. Farms, L.L.C., 305 F.3d 1228 (11th Cir. 2002) (one-way travel and visa costs for temporary foreign workers are incident to employment and primarily for employer’s benefit under FLSA)
- Rivera v. Peri & Sons Farms, Inc., 735 F.3d 892 (9th Cir. 2013) (applies Arriaga reasoning; inbound travel for temporary agricultural workers primarily benefits employer)
- Castellanos-Contreras v. Decatur Hotels, LLC, 622 F.3d 393 (5th Cir. 2010) (en banc majority declined to apply Arriaga to H-2B context; noted dissent disagreed)
- Astra USA, Inc. v. Santa Clara County, 563 U.S. 110 (2011) (third-party beneficiary suits that effectively enforce a statute or regulatory scheme incorporated into a government contract are not cognizable)