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Moodie v. Kiawah Island Inn Co., LLC

United States District Court, D. South Carolina, Charleston Division

August 4, 2015

Elvis Moodie, Rayon Fisher, Desmond Ellis, and Keisha Collins-Ennis, on behalf of themselves and all others similarly situated, Plaintiffs,
v.
Kiawah Island Inn Company, LLC, d/b/a Kiawah Island Golf Resort, Defendant

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[Copyrighted Material Omitted]

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          For Elvis Moodie, Rayon Fisher, Desmond Ellis, Keisha Collins-Ennis, on behalf of themselves and all others similarly situated, Plaintiffs: James M Knoepp, Sarah Marion Rich, LEAD ATTORNEYS, PRO HAC VICE, Southern Poverty Law Center, Atlanta, GA; Lucy Clark Sanders, Nancy Bloodgood, LEAD ATTORNEYS, Foster Law Firm, Daniel Island, SC; Michelle Rose Lapointe, LEAD ATTORNEY, PRO HAC VICE, Southern Poverty Law Center (GA), Atlanta, GA.

         For Kiawah Island Inn Company LLC, doing business as Kiawah Island Golf Resort, Defendant: Cherie Wilson Blackburn, Mary Hughes Cherry, LEAD ATTORNEYS, Nexsen Pruet (Chas), Charleston, SC; David John Garrett, LEAD ATTORNEY, PRO HAC VICE, Nexsen Pruet (Raleigh), Raleigh, NC; James B Hood, LEAD ATTORNEY, Hood Law Firm, Charleston, SC.

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         ORDER

         Richard Mark Gergel, United States District Judge.

         This matter is before the Court On Defendant's partial motion to dismiss, (Dkt. No. 12). For the reasons stated below, the motion is GRANTED IN PART AND DENIED IN PART.

         I. FACTS[1]

         Defendant operates a resort on Kiawah Island, South Carolina. (Dkt. No. 1 at ¶ 17). Defendant applied for temporary labor certifications with the U.S. Department of Labor (DOL) to employ foreign workers at its resort in 2012, 2013, and 2014. ( Id. at ¶ 22). In doing so, Defendant attested that it would abide by applicable regulatory requirements pertaining to the H-2B temporary worker program and federal and state laws, including the requirement that Defendant pay its H-2B workers at least the H-2B prevailing wage. ( Id. at ¶ 23). DOL approved these applications, allowing Defendant to import H-2B workers for the 2012-2015 seasons. ( Id. at ¶ 24). Plaintiffs are Jamaican residents imported by Defendant under the H-2B program.

         A. Pre-employment Expenses

         Defendant contracted with Florida East Coast Travel Services, Inc. (FLECTS) to act as its agent and to assist in obtaining H-2B workers from Jamaica, including Plaintiffs. ( Id. at ¶ 30). FLECTS and the Jamaican Ministry of Labour and Social Security (" Ministry of Labour" ) organize and administer the process by which prospective H-2B workers for Defendant are hired and obtain H-2B visas. ( Id. at ¶ 31), Prospective H-2B workers first interview with Defendant personnel in Jamaica. ( Id. at ¶ 32). Plaintiffs interviewed in Montego Bay, Jamaica. ( Id. ). Defendant then notifies the Ministry of Labour which individuals it would like to hire for the season and which individuals it would like to re-hire from prior seasons. ( Id. at ¶ 33).

         The Ministry of Labour notified Plaintiffs that they had been hired or re-hired and had to travel to Kingston, Jamaica to undergo medical processing as a condition of obtaining their H-2B visas. ( Id. at ¶ 34). Plaintiffs paid for the round-trip transportation from their homes to Kingston and were not reimbursed by Defendant for these expenses. ( Id. at ¶ 35). Those that passed medical testing, including Plaintiffs, were then required to travel to Kingston again for their H-2B visa interviews at the U.S. Embassy, a prerequisite to beginning work for Defendant. ( Id. at ¶ 36). Plaintiffs were not reimbursed by Defendant for this second round trip to Kingston. ( Id. at ¶ 36).

         Plaintiffs were then required to pay approximately $200-$250 a year for their H-2B visas, another cost not reimbursed by Defendant. ( Id. at ¶ 37). Finally, once their H-2B visas were approved, Plaintiffs paid approximately $420 per person to travel from their homes in Jamaica to Defendant's job site in South Carolina. ( Id. at ¶ 38). This one-way travel expense to Kiawah was also not reimbursed by Defendant. ( Id. at ¶ 38). Plaintiffs allege that these expenses were de facto deductions

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from their wages and that at the time of hiring, Plaintiffs were not informed in writing of the above-listed deductions. ( Id. at ¶ 44).

         Plaintiffs allege that each of the expenses listed above were primarily for the benefit of the Defendant and operated as de facto involuntary deductions from, and/or a kickback of, Plaintiffs' first workweek's wages, resulting in Plaintiffs' wages failing below the federal minimum wage and below the federal prevailing wage mandated under the H-2B program. ( Id. at ¶ 40-43). Plaintiffs allege violations of the Fair Labor Standards Act (FLSA) for Defendant's failure to pay at least $7.25, the federal minimum wage, for each hour of work during the first workweek. ( Id. at ¶ ¶ 76-77). Plaintiffs also allege that Defendant violated the South Carolina Payment of Wages Act (SCPWA) by failing to pay the agreed wages due (i.e., the prevailing wage[2] under the H-2B program) and by failing to provide written notice to Plaintiffs at the time of hiring of these de facto deductions that would be taken from their wages. ( Id. at ¶ ¶ 82-87, 89, 91-92). Plaintiffs also allege a breach of contract claim and, in the alternative, a third-party beneficiary breach of contract claim, for failure to pay the H-2B prevailing wage. ( Id. at 21-23).

         B. Housing and Transportation Costs

         While working for Defendant, Plaintiffs lived in an apartment complex in the West Ashley area of Charleston, approximately one hour from the worksite at Kiawah Island. ( Id. at ¶ 52). Defendant located, arranged for, and controlled the housing for Plaintiffs and other H-2B workers. ( Id. ). Plaintiffs shared apartments with other H-2B workers employed by Defendant. ( Id. at ¶ 53). Two-bedroom apartments were shared by four Defendant H-2B workers, and three-bedroom apartments were shared by six Kiawah H-2B workers. ( Id. ). Defendant managed specific details of the Plaintiffs' housing, including assigning them to live in specific apartments and distributing keys to those apartments. ( Id ).

         Defendant deducted approximately $165 per person every two weeks from Plaintiffs' paychecks for housing. ( Id. at ¶ 55). This $165 deduction was made from every paycheck, regardless of how many individuals lived in the apartment and regardless of the number of paychecks received in a given month. ( Id. ). The amount deducted from Plaintiffs' paychecks for housing was approximately twice the market value of such housing. ( Id. at ¶ 56).

         Defendant also arranged for a bus to transport H-2B workers between the apartment complex and the Kiawah Island worksite at specific times every day. ( Id. at ¶ 54). There are no public transportation options to travel between Kiawah Island and Charleston. ( Id. ). Defendant deducted approximately $36 per person every two weeks from Plaintiffs' paychecks for transportation. ( Id. at ¶ 57). At the time of hiring Plaintiffs, Defendant did not notify them in writing of these housing and transportation deductions. ( Id. at ¶ 60).

         Plaintiffs allege that the amounts Defendant deducted for housing and transportation were primarily for the benefit of Defendant and were unreasonable. ( Id. at ¶ ¶ 57-58). Plaintiffs allege that these deductions caused Plaintiffs' wages to fall below the federal minimum wage and the federal prevailing wage mandated under the H-2B program. ( Id. at ¶ 59). Again, Plaintiffs allege violations of FLSA for Defendant's failure to pay at least $7.25 per hour due to these deductions and violations of SCPWA for Defendant's failure to pay agreed wages (i.e. the prevailing wage

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under the H-2B program) and failure to provide written notice of these deductions at the time of hiring. ( Id. at ¶ ¶ 76, 78, 82-88, 91-92). Plaintiffs also allege a breach of contract claim and, in the alternative, a third-party beneficiary breach of contract claim, for failure to pay the H-2B prevailing wage. ( Id. at 21-23).

         C. 2013 Supplemental Prevailing Wage

         When employers obtain temporary labor certifications from the DOL allowing them to hire H-2B workers, they are required to pay the H-2B workers at least the applicable prevailing wage during the entire period of the labor certification. ( Id. at ¶ 45). On April 24, 2013, the U.S. Department of Homeland Security and DOL jointly published an Interim Final Rule that revised the methodology by which the DOL calculates the prevailing wages for the H-2B program, ( Id. at ¶ 46). In June or July of 2013, DOL sent Defendant letters informing it of new prevailing wages applicable to the job categories for which Defendant had requested H-2B workers. ( Id. at ¶ 47). Under the DOL notifications, the prevailing wage increased for each category of workers. ( Id. at ¶ 48). After receiving these notifications, Defendant did not increase Plaintiffs' wages. ( Id. at ¶ 51).

         Plaintiffs allege that Defendant's failure to increase Plaintiffs' wages to the prevailing wage under the DOL notifications resulted in a failure to pay the proper overtime rate required by federal law. ( Id. at ¶ 79). Thus, Plaintiffs allege that Defendant violated FLSA by failing to pay the proper overtime for this portion of the 2013 season. ( Id. at ¶ 79). Plaintiffs also allege violations of SCPWA and breach of contract claims for failure to pay the H-2B prevailing wage during this period of time. ( Id. at ¶ ¶ 82-85, 90-92, 93-107).

         Defendant moves to dismiss Plaintiffs' FLSA claims based on (1) the failure to reimburse pre-employment expenses and (2) the DOL notification regarding an increase in the prevailing wage rate but does not move to dismiss Plaintiffs' FLSA claims based on the alleged unreasonable deductions for housing and transportation. (Dkt. No. 12). Defendant also moves to dismiss all of Plaintiffs' state law claims. ( Id. ).

         II. LEGAL STANDARD

         The purpose of a Rule 12(b)(6) motion is to test the sufficiency of the complaint. Id. " To survive a motion to dismiss, a complaint must contain sufficient factual matter, accepted as true, to 'state a claim to relief that is plausible on its face.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009)). Thus, " a formulaic recitation of the elements of a cause of action will not do." Bell A. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). Rather, a plaintiff must allege facts " sufficient to state all the elements of her claim," Bass v. E.I. Dupont de Nemours & Co., 324 F.3d 761, 765 (4th Cir. 2003), and sufficient to " raise a right to relief above the speculative level." Twombly, 550 U.S. at 555. In other words, the well-pleaded facts must allow " the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Iqbal, 556 U.S. at 678.

         In considering a motion to dismiss, the Court must accept as true facts alleged in the complaint and " draw all reasonable inferences in favor of the plaintiff." Kensington Volunteer Fire Dept., Inc. v. Montgomery County, Md., 684 F.3d 462, 467 (4th Cir. 2012). However, the Court is not required to accept as true " allegations that are merely conclusory, unwarranted deductions of fact, or unreasonable inferences" or " allegations that contradict matters

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properly subject to judicial notice or by exhibit." Veney v. Wyche, 293 F.3d 726, 730 (4th Cir. 2002). The Court is also not required to accept as true the legal conclusions set forth in a plaintiff's complaint. Iqbal, 556 U.S. at 678; Sec'y of State for Defence v. Trimble Navigation Ltd., 484 F.3d 700, 705 (4th Cir. 2007). In considering a Rule 12(b)(6) motion, the Court may also " properly take judicial notice of matters of public record," " consider documents attached to the complaint," and consider documents attached to the motion to dismiss " so long as they are integral to the complaint and authentic." Trimble, 484 F.3d at 705.

         III. DISCUSSION

         A. FLSA Claims Based on Pre-employment Expenses

         The FLSA requires that employers pay its employees a wage of at least $7.25 an hour. 29 U.S.C. § 206(a). An employee's wages must be " free and clear," and an employer violates the FLSA where kickbacks " directly or indirectly to the employer or to another person for the employer's benefit" reduce the employee's compensation below the minimum wage. 29 C.F.R. § 531.35. An employer may charge its employees for the reasonable cost of providing them " board, lodging, or other facilities." 29 U.S.C. § 203(m). Because such charges are not kickbacks, they can be included in the wage calculation. See id. However, facilities " primarily for the benefit or convenience of the employer will not be recognized as reasonable and may not therefore be included in computing wages." 29 C.F.R. § § 531.3(d)(1), 531.32.

         In other words, employers must pay the minimum wage in addition to any expenses that they pay that are primarily for the benefit or convenience of themselves. " [F]ailing to reimburse plaintiffs for their expenditures is equivalent to the employer paying for these expenses and then improperly deducting them from the employees' pay for the first workweek." Gaxiola v. Williams Seafood of Arapahoe, Inc., 776 F.Supp.2d 117, 125 (E.D.N.C. 2011). Thus, under the FLSA, employers must reimburse costs that are " primarily for the benefit and convenience of the employer" to the extent that having the employee pay them causes wages to fall below the minimum wage for the first week of work. See Arriaga v. Florida Pac. Farms, L.L.C., 305 F.3d 1228, 1236 (11th Cir. 2002).

         The question before the Court is whether the pre-employment expenses at issue here are " primarily for the benefit and convenience of the employer" such that they must reimbursed to the extent that they cause wages to drop below the minimum wage. See Rivera v. Peri & Sons Farms, Inc., 735 F.3d 892, 897 (9th Cir. 2013), cert. denied, 134 S.Ct. 2819, 189 L.Ed.2d 785 (2014); Castellanos-Contreras v. Decatur Hotels, LLC, 622 F.3d 393, 399 (5th Cir. 2010).

         1. Inbound Travel and Visa Costs

         This Court is not the first to pass on this question, at least as to travel and visa costs. In Arriaga v. Florida Pac. Farms, L.L.C., 305 F.3d 1228 (11th Cir. 2002), the Eleventh Circuit analyzed Section 206(a) and applicable FLSA regulations in the context of H-2A employees.[3] Under FLSA regulations " transportation charges where such transportation is an ...


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