Ninth Circuit: Employers Must Reimburse Guest Workers’ Travel and Immigration-Related Expenses in First Week on Job

Ninth Circuit: Employers Must Reimburse Guest Workers’ Travel and Immigration-Related Expenses in First Week on Job

In Rivera v. Peri & Sons Farms, Inc., No. 11-17365, 2013 WL 5992255 (Nov. 13, 2013), the Ninth Circuit ruled that employers of agricultural guest workers participating in the H-2A visa program must reimburse most travel, recruitment, and immigration-related expenses to H-2A workers in their first week on the job, deepening a circuit split on the issue. The Ninth Circuit’s reasoning suggests that it’s ruling also applies to employers of nonagricultural guest workers participating in the H-2B visa program.

The Mexican guest worker plaintiffs in Rivera alleged that they incurred at least $400 to $900 each in travel, immigration, and recruitment expenses prior to arriving at their place of employment in Nevada. This is not unusual. According to a Southern Poverty Law Center report, low-skilled foreign workers participating in H-2 visa programs typically incur between $500 and $10,000 in travel, immigration, and recruitment expenses prior to arriving at their job sites. Guest workers are seldom able to pay these expenses in cash and often are forced to take out high-interest loans that are impossible to repay from their low wages. In some cases, indebtedness enables extreme forms of exploitation, up to and including human trafficking. See, e.g., United States v. Orian, et al., No. 10-576 (D. Haw.). By permitting workers to repay their debts quickly, up-front reimbursement of guest workers’ travel, immigration, and recruitment expenditures reduces the risk of exploitation by employers and lenders.

Fair Labor Standards Act

An H-2A employer’s obligation to reimburse travel, recruitment, and immigration-related expenses incurred by agricultural guest workers is governed by both the specific regulations related to the H-2A program and the more general Fair Labor Standards Act (FLSA) regulations. The FLSA requires employers to pay at least the federal minimum wage, and its regulations provide that the minimum wage requirement is not satisfied unless the compensation paid is “free and clear.” 29 C.F.R. § 531.35. That is, an employer may not require employees to “kickback” part of their compensation to the employer, or to another person for the employer’s benefit if the kickback brings the employee’s compensation below the minimum wage. Id. While an employer may require its employee to bear the reasonable cost of “board, lodging, or other facilities,” it may not require an employee to pay expenses that are “primarily for the benefit or convenience of the employer” if the deduction of such expenses lowers the employee’s compensation below the minimum wage. 29 U.S.C. § 203(m); 29 C.F.R. § 531.3(d)(1).

Reimbursement Timing

At issue in Rivera was the timing of the required reimbursement. Under the FLSA regulations, employers are required to reimburse expenses incurred “primarily for the benefit and convenience of the employer” within the first week of employment to the extent that, accounting for such expenses, the worker’s compensation is below the minimum wage. Id. By contrast, the H-2A regulations only obligate employers to reimburse travel expenses to an employee who “completes 50 percent of the work contract period.” 20 C.F.R. § 655.122(h)(1).

In Rivera, the employer first argued that it was not bound by the FLSA regulations in light of the more specific H-2A regulations. The court rejected this contention, holding that the DOL’s determination that “the FLSA applies independently of the H-2A requirements and imposes obligations on employers regarding payment of wages” was entitled to deference. 20 C.F.R. § 655.122(h)(1).

Turning to the timing of reimbursement, the court deferred to DOL guidance interpreting the FLSA regulations to require employers to reimburse H-2A workers’ inbound travel, immigration, and recruitment expenses in their first workweek. The court’s reasoning suggests that this ruling also applies to the H-2B nonagricultural guest worker program, as the guidance to which the court deferred was a regulatory preamble providing that employers must reimburse travel and immigration-related costs and recruitment fees in the first workweek if subtracting the costs from the first week’s paycheck would bring the employee’s compensation below the minimum wage. The preamble upon which the court relied incorporated by reference the reasoning of a DOL field assistance bulletin pertaining to H-2B workers and stated that the bulletin’s reasoning applied with equal force to H-2A and H-2B workers.

Thus, the court in Rivera delivered a significant victory to H-2 guest workers by reducing their financial dependence on their employers. Under Rivera, employers bringing H-2A or H-2B workers into the United States to work in a state or territory within the Ninth Circuit (Arizona, California, Hawai’i, Idaho, Montana, Nevada, Oregon, Washington, Guam, and the Northern Mariana Islands) must reimburse the workers for their inbound travel expenses, immigration-related costs, and any recruitment fees during the first workweek to the extent that these expenses bring the employees’ first week of compensation below the minimum wage.

A Deepening Divide Between Circuits

The Rivera ruling deepens a circuit split. In Arriaga v. Florida Pacific FarmsLLC, 305 F.3d 1228 (11th Cir. 2002), the Eleventh Circuit held that that transportation and visa fees of H-2A workers are primarily for the benefit or convenience of the employer and, therefore, that the FLSA requires employers to reimburse such fees in the first workweek to the extent necessary to raise the employees’ wages up to the minimum wage. In the eleven years following the Arriaga decision, numerous courts have come to the same conclusion in both H-2A and H-2B cases. Seee.g., Morante-Navarro v. T & Y Pine StrawInc., 350 F.3d 1163, 1166 n.2 (11th Cir. 2003) (H-2B); Salazar-Martinez v. Fowler BrothersInc., 781 F. Supp. 2d 183 (W.D.N.Y. 2011) (H-2A); Gaxiola v. Williams Seafood of ArapahoeInc., 776 F. Supp. 2d 117 (E.D.N.C. 2011) (H-2B); Teoba v. Trugreen Landcare LLC, 769 F. Supp. 2d 175 (W.D.N.Y. 2011) (H-2B); Perez-Benites v. Candy BrandLLC, No. 1:07-CV-1048, 2011 WL 1978414 (W.D. Ark. May 20, 2011) (H-2A); Rosales v. Hispanic Employee Leasing Program, No. 1:06-CV-877, 2008 WL 363479 (W.D. Mich. Feb. 11, 2008) (H-2B); Rivera v. Brickman Group, No. 05-1518, 2008 WL 81570 (E.D. Pa. Jan. 7, 2008) (H-2B); Martinez-Bautista v. D & S Produce, 447 F. Supp. 2d 954 (E.D. Ark. 2006) (H-2A); DeLuna-Guerrero v. North Carolina Grower’s Ass’nInc., 338 F. Supp. 2d 649 (E.D.N.C. 2004) (H-2A). However, in 2010, the Fifth Circuit, sitting en banc, came to the opposite conclusion in an H-2B case, holding that the FLSA does not require employers to reimburse inbound travel, visa, and recruitment expenses. See Castellanos-Contreras v. Decatur Hotels, 622 F.3d 393 (5th Cir. 2010) (en banc, 8-6). While a split of this nature might give rise to speculation that the issue is headed to the Supreme Court, the fact that Rivera was authored by strongly conservative Judge Diarmuid O’Scannlain suggests instead that the Fifth Circuit’s en banc decision in Castellanos-Contreras, which did not consider the DOL guidance to which the Rivera court deferred, could simply be headed for obsolescence.