Last week, on June 15, 2017, a California Court of Appeal reaffirmed the principle that individuals performing work for the direct benefit of an employer are entitled to wage and hour protections under the Federal Labor Standards Act ("FLSA") and California law regardless of immigration or work authorization status. In this case, Plaintiff, a Taiwanese National, arrived in the United States on a tourist visa and performed services for Defendant, a company that specializes in bus tours for Chinese-speaking travelers, pending the approval of his H-1B work visa. During this 11-month period, Plaintiff did not have authorization to work in the United States.
Plaintiff sued Defendant and its owners, alleging a failure to pay proper wages and overtime pay before and after he received his H1-B visa, among other claims. In rendering its decision, the Court of Appeal made clear that the fact that Plaintiff did not have authorization to work while awaiting approval of his H-1B visa was of no consequence. Instead, the Court of Appeal focused on whether Plaintiff met the definition of an "employee" under the FLSA and California law. Ultimately the Court of Appeal applied applicable wage and hour laws, rejected the Defendants' arguments that Plaintiff was a "trainee," and remanded the case to the trial court to assess damages.
Facts
In 2008, Plaintiff began working for Defendant as a tour organizer in China. In early 2009, Plaintiff was invited to work for Defendant in its Millbrae, California location. Defendant promised to sponsor Plaintiff's H-1B work visa.
In March 2009, Plaintiff arrived in the United States on a tourist visa and moved into the home of the owners in California. Plaintiff initially worked on website management, but those duties soon expanded to include sales calls and travel brochure distribution. Plaintiff received a monthly payment of $1,700, which represented a gross amount of $2,500 minus an $800 rent deduction. In February 2010, Plaintiff received his H-1B visa. Shortly thereafter, he was included on the company payroll and signed a one-paragraph work agreement. In January 2011, Defendant demoted Plaintiff to non-manager status. Around May 25, 2011, Plaintiff's employment was terminated.
Trial Court
Plaintiff filed suit alleging, among other things, violations of various federal and state wage and hour statutes. Plaintiff further alleged a breach of contract based on the theory that he was a third-party beneficiary to the H-1B visa application and entitled to the hourly rate stated in the application. Defendants maintained that Plaintiff was not an employee while awaiting his H-1B visa and, therefore, was not entitled to wage and hour protections.
The trial court agreed, in part, holding that Plaintiff was a "non-employee guest" before he received his H-1B visa and not entitled to the same wage and hour protections of an employee. The trial court also rejected Plaintiff's breach of contract claim based on the fact that the application was a "petition" between Defendant and the government and could not be relied upon as an employment contract. However, the trial court acknowledged the fact that Plaintiff worked an amount in excess of the amount included in the work agreement and awarded Plaintiff an amount for unpaid labor under the theory of quantum meruit. Both parties appealed.
Appellate Decision
The Court of Appeal reversed the trial court's decision and held that Plaintiff was a non-exempt employee and entitled to compensation under federal and state wage and hour statutes. The Court reiterated the fact that undocumented workers are protected under the FLSA, making Plaintiff's initial lack of a work permit irrelevant. The Court further pointed out the broad definitions of "employee" under both the FLSA and California law. Specifically, pursuant to the FLSA, an employee is defined as "any individual employed by an employer" and encompasses "all workers not specifically excepted." Under California law, an employee is "any person employed by an employer," an employer is one who "employs or exercises control over the wages, hours, or working conditions of any person" and "employ" means "to engage, suffer, or permit to work." In contrast, a non-employee trainee is "a person receiving training but no salary and whose work serves only his or her own interest."
Based on these definitions, the Court noted that Plaintiff worked the same hours as hired office staff and performed many of the same tasks, including sales calls, travel brochure distribution, and website management for 11 months prior to obtaining his H-1B visa. The Court detailed that these tasks were not educational in nature, but rather were commercial tasks for the primary benefit of Defendant. Further, the Court noted that Plaintiff was invited to the United States by Defendant on the promise of a job and a salary, and testimony from the company's CFO confirmed that the payments made to him were substantial and recorded as Plaintiff's salary.
Accordingly, the Court concluded that Plaintiff was not a trainee but an employee who was entitled to all applicable federal and state wage and hour laws. As such, among other violations, the Court concluded that Defendant failed to pay Plaintiff his correct wages and overtime pay for the 11-month period prior to receiving his H-1B visa.
In Practice
This decision provides an important reminder that courts will apply the same wage and hour protections under federal and state law to anyone performing work for the benefit of an employer regardless of immigration or work authorization status. Accordingly, it is important for employers to ensure that, in addition to properly verifying the identity and employment authorization of job applicants, employees are properly categorized and compensated. Your Lewis Brisbois employment attorney is available to assist with any uncertainties that may exist as to the verification and classification of employees as reiterated by this decision.
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