Magtoles v. United Staffing Registry, Inc.
Filipino Nurses Ask a Federal Judge to Certify a Class Action Against United Staffing Registry for Breach of Contract and Illegal "Buy Out" Fees
Read the Nurses' Brief Here
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF NEW YORK
1:21 Civ. 1850 (KAM) (PK)
MARY GRACE MAGTOLES, AIRA C. TAN, ANA MYRENE ESPINOSA, and ANA MERVINE ESPINOSA, individually and on behalf of all others similarly situated, Plaintiffs,
UNITED STAFFING REGISTRY, INC. d/b/a United Home Care, and BENJAMIN H. SANTOS, Defendants.
PLAINTIFFS’ MEMORANDUM OF LAW IN SUPPORT OF THEIR MOTION FOR CLASS CERTIFICATION
Plaintiffs Mary Grace Magtoles, Aira C. Tan, and Ana Myrene Espinosa submit this memorandum of law in support of their motion for an Order: (a) certifying this action as a class action, pursuant to Rules 23(b)(3) and 23(b)(2) of the Federal Rules of Civil Procedure, on behalf of all nurses from the Philippines who were employed by the defendants under their standard employment contracts at any time since April 5, 2011; (b) appointing plaintiffs’ attorneys to represent the class; and (c) granting such other relief as this Court deems just.
This is an action for damages and injunctive relief for violations of the Trafficking Victims Protection Act (“TVPA”), 18 U.S.C. § 1589, et seq., for a declaratory judgment, and for breach of contract under New York law.
Defendants are foreign labor recruiters who have recruited more than 100 Filipino nurses to work for them and their clients in this District under contracts of indentured servitude.
The contracts require that the nurses be paid the prevailing wage for a Registered Nurse in the location where she is assigned to work. Once the nurses begin working, however, the defendants fail to pay the prevailing wage and deduct one-half hour per day from the nurses’ compensation for breaks that are not permitted or taken.
To keep the nurses from leaving, the defendants include a so-called “liquidated damages” clause in their standard employment contracts. This clause requires the nurses to pay or work off a $90,000 indenture at $15 per hour. The contracts also contain a non-compete clause that prohibits the nurses from practicing their profession anywhere in the United States for a period of three years, and a threat of possible deportation, if they stop working for the defendants without satisfying the indenture.
Plaintiffs contend that the “liquidated damages” clause, nationwide non-compete clause, and threat of deportation constitute threats of serious harm designed to keep the Filipino nurses working for the defendants in violation of the following sections of the TVPA: 18 U.S.C. §§ 1589(a), 1589(b), 1590(a), and 1594. They assert the TVPA and breach of contract claims on behalf of themselves and all other Filipino nurses who worked under the defendants’ standard contracts. They seek: (a) compensatory and punitive damages for violations of the TVPA; (b) compensatory damages for breach of contract; (c) a declaration that the “liquidated damages” and non-compete clauses are invalid and unenforceable under the TVPA, the Anti-Peonage Law (42 U.S.C. § 1994), the 13th Amendment to the U.S. Constitution, and New York law; (d) a permanent injunction prohibiting the defendants from enforcing or threatening to enforce the “liquidated damages” and non-compete clauses; (e) an award of reasonable attorneys’ fees and costs; and (f) such other relief as the Court deems just and proper.
As described below, class certification is appropriate because the core factual and legal issues are common for all members of the proposed class, capable of class-wide resolution, and predominate over any individual issues. Indeed, courts in this District and elsewhere have certified class actions to pursue virtually identical TVPA and breach of contract claims. See, e.g., Paguirigan v. Prompt Nursing Empl. Agency LLC, 17 Civ. 1302 (NG), 2018 WL 4347799 (E.D.N.Y. Sept. 12, 2018) (certifying a class of Filipino nurses to pursue TVPA and breach of contract claims); Tanedo v. East Baton Rouge Parish School Board, 10 Civ. 1172, 2011 WL 7095434 (C.D. Cal. Dec. 12. 2011) (certifying a class of Filipino teachers to pursue TVPA and breach of contract claims).
Statement of Facts
Defendant United Staffing Registry, Inc. (“United Staffing”) is in the business of recruiting foreign healthcare professionals to work for the defendants and their nursing home clients in New York City and on Long Island. Deposition of United Staffing Registry, Inc. (“United Staffing Dep.”) at 17-19 (Howley Decl., Exh. J). Defendant Benjamin H. Santos is the company’s founder and sole owner. Id. at 19. Over the past 10 years, defendants have recruited more than 100 nurses and other healthcare professionals from the Philippines to work for them in New York. See id. at 78.
Plaintiffs Mary Grace Magtoles, Aira C. Tan, and Ana Myrene Espinosa are nurses from the Philippines who were recruited by the defendants to work for their nursing home clients in New York. Each nurse signed the defendants’ standard employment contract, which provides for them to be employed by the defendants as Registered Nurses. Each contract was counter-signed by defendant Santos. Magtoles Decl. ¶ 4 & Exh. A; Tan Decl. ¶ 4 & Exh. D; Espinosa Decl. ¶ 4 & Exh. G.
Defendants have produced identical employment contracts signed by 56 nurses between 2017 and 2019. Howley Decl., Exh. K. Defendants admit that they signed additional contracts with approximately 15 to 20 nurses each year between 2013 and 2016, but they claim that pre-2017 contracts were lost in a flood. United Staffing Dep. at 24, 27, 41-42.
A. The Agreement to Pay Prevailing Wages
The employment contracts provide that the nurses will be paid the prevailing wage for a Registered Nurse based on the location of the healthcare facility where the nurse is assigned. Id. ¶ 22. The defendants did not always pay the prevailing wage and sometimes paid less than half the prevailing wage rates. (Magtoles Decl. ¶ 9 & Exh. B; Tan Decl. ¶ 9 & Exh. E; Espinosa Decl. ¶ 9 & Exh. H).
Each nurse submitted time sheets to the defendants showing the times she started and ended work each day. The defendants subtracted one-half hour per day from the timesheets when calculating the number of hours for which the nurse would be paid. The deduction allegedly was for a half-hour break every day, but the nurses were not given and did not take such breaks. Magtoles Decl. ¶¶ 10-12 & Exh. C; Tan Decl. ¶¶ 10-12 & Exh. F; Espinosa Decl. ¶¶ 10-12 & Exh. I.
B. The So-Called “Liquidated Damages” Clause
The employment contracts contain a so-called “liquidated damages” clause that requires each nurse to work a total of 6,000 hours. If a nurse wants to leave before completing 6,000 hours of work, the contract requires her to pay the defendants “$15.00 for each hour not performed of the required 6,000 hours.” Defendants’ Memorandum of Law in Support of Their Motion to Dismiss the Complaint (“Def. Mem.”), at 6 [ECF No. 29].
The exact language of the liquidated damages clause in each contract is:
“In the event of a breach by the EMPLOYEE, the EMPLOYEE hereby agrees and binds her/himself to pay the EMPLOYER FIFTEEN DOLLARS ($15.00) for each hour or part of an hour not performed of the requirement of SIX THOUSAND (6,000) HOURS of work as a reasonable estimate of the damages suffered by the EMPLOYER.”
Employment Contract, Article I, § 3(b) (Magtoles Decl., Exh. A).
In other words, each nurse begins her employment with a $90,000.00 debt (6,000 hours x $15.00 per hour = $90,000.00). She has to satisfy that debt, either by working it off over 6,000 hours or by paying it off at the rate of $15.00 per hour, before she may end her employment relationship with the defendants. After one year, assuming the nurse worked 2,000 hours, she would still owe the defendants $60,000.00 (4,000 hours x $15.00 per hour = $60,000.00). After two years, assuming the nurse worked another 2,000 hours, she would still owe the defendants $30,000.00 (2,000 hours x $15.00 per hour = $30,000.00).
The amount of the debt is disproportionate to the nurse’s compensation. At $33.49 per hour (the prevailing wage during much of the relevant time period), a nurse who worked 2,000 hours during the first year would earn gross compensation of $66,980.00. See Howley Decl., Exh. L. After deducting for income taxes, food, shelter, and clothing, the nurse would not earn enough to buy her freedom from the contract after the first year of employment.
The amount of the debt is also disproportionate to any costs incurred by the defendants. The nurses paid all expenses related to their immigration applications and travel to the United States. Magtoles Decl. ¶ 5; Tan Decl. ¶ 5; Espinosa Decl. ¶ 5. The defendants did not give the nurses anything or incur any expenses on their behalf that would justify the $90,000.00 debt. See United Staffing Dep. at 28-29 (when a nurse arrives in the United States, United Staffing provides them with a place to live for two months, a mattress, bed, linens, and “a couple of days groceries”). To the extent the defendants might suffer any damages at all from an early termination of the contracts, those damages were readily ascertainable. See id.
Plaintiffs were aware of the “liquidated damages” provision in their contracts and were told by other nurses that they had to “buy out” their contracts if they wanted to stop working for the defendants. They were not aware that the provision might be unenforceable. They feared that they would be sued for tens of thousands of dollars if they stopped working for the defendants. Magtoles Decl. ¶ 14-18; Tan Decl. ¶ 14-18; Espinosa Decl. ¶ 14-18.
C. The Three-Year, Nationwide Non-Compete Clause
The employment contracts include a non-compete clause that becomes effective only if the nurse breaches the contract by leaving before paying or working off the $90,000.00 debt. Employment Contract, Article I, § 3(c) (Magtoles Decl., Exh. A). In that event, the contract purports to prohibit the nurse from working as a nurse, practicing nursing, working as a physician assistant, or otherwise practicing the art or science of nursing anywhere in the United States for a period of three years. Id.
The exact language of the non-compete clause in each contract is:
“(c) In addition to the stated liquidated damages, the EMPLOYEE agrees to NOT:
1. In any manner whatsoever, directly or indirectly, work as a nurse, practice nursing, work as a physician’s assistant, or otherwise practice the art of/science of nursing; or
2. Directly or indirectly operate, own, lease (as landlord or tenant), engage or participate in as an owner, partner, employee, joint venturer, shareholder, director, assignor, seller, transferor, or as sales or marketing agent or otherwise, in, for or in connection with any business which competes with EMPLOYER within the United States for a period of THREE (3) YEARS after the EMPLOYEE severs his/her relationship with the EMPLOYER.” Id.
Defendants admit that they do not have any clients and have never placed any nurses at any healthcare facilities outside New York City or Nassau County. United Staffing Dep. at 19. Yet, their non-compete clause effectively prevents the nurses from practicing their profession anywhere in the United States for a period of three years if they fail to pay or work off the $90,000.00 debt.
Plaintiffs did not know that this non-compete clause might be unenforceable. They continued working for the defendants because they feared that the defendants would sue them if they tried to practice their profession with any other employer in the United States. Magtoles Decl. ¶¶ 13-18; Tan Decl. ¶¶ 13-18; Espinosa Decl. ¶¶ 13-18.
D. The Threat of Possible Deportation
The contracts contain a section entitled “Termination of Permanent Resident Card/Deportation.” Employment Contract, Article I, § 5 (Magtoles Decl., Exh. A). This section warns the nurses that a breach of the contract “may lead to the termination of the Permanent Resident Card (Green Card) and deportation of EMPLOYEE from the United States.” Id.
Defendant Santos testified that ending the employment relationship without completing 6,000 hours of employment would constitute a breach of the contract. United Staffing Dep. at 49. Santos also admitted that a breach of contract does not result in a loss of immigration status or deportation. Id. at 49-50. The nurses, however, did not know this. They were not aware that this threat of possible deportation for breaching a contract was misleading, or that deportation was only a possibility if they engaged in immigration fraud or other wrongful conduct. They kept working for the defendants because they feared that the defendants would take actions that could result in them being deported. Magtoles Decl. ¶¶ 16-18; Tan Decl. ¶¶ 16-18; Espinosa Decl. ¶¶ 16-18.