Massachusetts Federal Court Rules on Employee Status Under the Fair Labor Standards Act

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In a decision recently issued in the case of Maldonado et al. v. Cultural Care, Inc. et al., a group of "local childcare consultants" ("LCCs") brought a class action suit against Cultural Care, a company that places foreign au pairs with host families located in the United States. The plaintiffs alleged that Cultural Care and its officers violated the Fair Labor Standards Act ("FLSA") by misclassifying them as independent contractors and paying them less than the minimum wage required by both the FLSA and state law in Massachusetts, New York, and California. Cultural Care moved to dismiss the plaintiffs' claims based on a lack of subject matter jurisdiction and failure to state a claim upon which relief could be granted.

The primary basis for Cultural Care's Motion to Dismiss was its argument that the plaintiffs could not demonstrate with plausibility that they were "employees" of Cultural Care, as opposed to independent contractors, who are not protected by the FLSA.

The plaintiffs were the "primary contacts" of Culture Care for the au pairs and host families. The LCCs provided support to the families and au pairs, hosted meetings, interviewed families, welcomed au pairs to the community (including hosting orientations) and promoted the program. They were trained by, reported to and took direction from Culture Care and had to account for their day-to-day activities to Culture Care. They were required to refer certain matters to supervisors who made decisions about those matters and they were required to maintain notes of their activity in a Salesforce database. Culture Care unilaterally set the LCC's rate of pay and method of payment; for the services they provided to Culture Care, they were paid a flat monthly fee, regardless of how many hours they worked.

In a Memorandum and Order on Defendant's Motion to Dismiss, the United States District Court for the District of Massachusetts applied a four-factor test established by the First Circuit to determine whether the plaintiffs had sufficiently pled that an employee-employer relationship existed between themselves and Cultural Care. Specifically, the Court looked at "whether the alleged employer (1) had the power to hire and fire the employees; (2) supervised and controlled employee work schedules or conditions of employment; (3) determined the rate and method of payment; and (4) maintained employment records." After applying this test, the District Court held in favor of the plaintiffs based on its findings that, among other things, Cultural Care had the power to hire or fire the plaintiffs; mandated and supervised their training; required them to report regularly to their supervisors, who "controlled the decision-making process;" and required them to account for their time worked in a database. The District Court therefore held that the plaintiffs' claim should not be dismissed because they had "shown with sufficient plausibility that they are employees of Cultural Care within the meaning of the FLSA."

With respect to the plaintiffs' claims that Culture Care failed to pay them minimum wage Culture Care contended that it satisfied the minimum wage requirements of the FLSA. However, its calculation was based on the average hourly rate of each plaintiff across the duration of their employment with the FLSA, in contrast to the plaintiffs' calculation, which was performed on a monthly basis. The Court rejected Culture Care's method of calculation and held that the plaintiffs had adequately plead their claim so as to defeat the motion to dismiss.

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