Au Pair Class Action Could Upend Decades-Old Program

Au Pair Class Action Could Upend Decades-Old Program

By: Josh Eidelson

Bloomberg Businessweek

The lawsuit, brought on behalf of 90,000 plaintiffs, claims sponsor agencies have conspired to keep wages low.

A newly certified class, estimated to total more than 90,000 foreign workers, is alleging that a wage-fixing conspiracy artificially depressed earnings in the U.S. Au Pair program. The lawsuit, one of a number of efforts by plaintiffs’ lawyers to use antitrust laws to target treatment of employees, represents a challenge to the Au Pair program overseen by the U.S. Department of State.

Colorado-based federal district judge Christine Arguello certified the class on Feb. 2, allowing the lawsuit to proceed on behalf of current and former au pairs. The plaintiffs are suing 15 private agencies authorized by the State Department to administer the program, which allows foreign workers under the age of 27 to enter the U.S. on J-1 cultural exchange visas to provide live-in child care to host families. “They control the entire market for au pair labor,” says attorney Nina DiSalvo, executive director of Towards Justice, a Denver-based legal nonprofit representing the au pairs. The law firm Boies Schiller Flexner has joined with Towards Justice to represent the plaintiffs.

Along with fraud and wage-and-hour allegations, the suit contends that the agencies have violated the 1890 Sherman Antitrust Act by colluding to keep au pairs’ wages low and discouraging families from paying more. According to the plaintiffs, agencies allegedly told au pairs they will receive the exact same rate regardless of who they work for and falsely claimed that the government set their maximum weekly wage at $195.75. The agencies and their trade association, the Alliance for International Educational and Cultural Exchange, declined to comment on the lawsuit or did not respond to requests for comment. The State Department declined to comment, citing the ongoing litigation, and provided a link to its au pair program compensation requirements.

Defendants have until Feb. 16 to notify the court if they will appeal the class certification. In court filings, the sponsors deny any wrongdoing, saying the stipend amount is set by the State Department. One agency, InterExchange Inc., wrote that “the central element of the au pair program is not work, but rather the cultural knowledge and experience gained” by the au pair. “The program facilitates cultural exchange through a careful balance of give-and-take; host families must be willing to welcome a stranger into their homes and families, and in exchange, those strangers become de facto family members, providing limited childcare and continuing their education.”

Another defendant, Cultural Care Inc., said the allegations demonstrate, at best, “an inexcusable ignorance of basic governmental immunity principles,” because the agencies were simply “acting at the direction of the federal government.”

That argument was rejected by a U.S. magistrate judge, who wrote in 2016 that it was “wholly without merit” to claim the sponsors were immune from antitrust law. “There is no evidence that the federal government ‘directs,’ or in any other way mandates, that an au pair’s wages are set at $195.75,” the judge wrote, saying a 2007 State Department memo cited by the defendants does not prevent families from paying a higher rate.

The lawsuit is one of many controversies surrounding the State Department’s half-century-old J visa, which has been dogged for decades by allegations that through initiatives such as the Au Pair and Summer Work Travel programs it fosters underpaid, underregulated guest-worker labor under a veneer of cultural exchange. The Au Pair program began as a pilot in 1986 in response to a proposal from the American Institute for Foreign Study. Duringcongressional debate in 1989, AIFS argued against limiting au pairs’ workweek to 45 hours, citing the tremendous need for affordable child care as more women entered the workforce. At the same time, it argued that regulating the au pair program as a labor program would “strangle the special relationship” between au pairs and their hosts.

In 1990, when J-1 visas were still overseen by the now-defunct U.S. Information Agency, the General Accounting Office issued a report finding that the program lacked adequate oversight and that the handling of visas, including those for au pairs, contradicted congressional intent. In 2011 participants in the J-1 Summer Work Travel program went on strike at a Hershey’s chocolate factory, alleging that they were being threatened with deportation if they spoke up about exploitative conditions. At the time, Hershey’s said the plant was being operated by a logistics contractor, who in turn said participants were provided through a staffing company. “We don’t have a lot of influence over some of those issues that they’ve raised,” the contractor told the New York Timesin 2011. In 2013, J-1 participants working for a McDonald’s franchisee walked off the job, claimingthat the owner was making them work 20-plus-hour shifts, withholding wages, and charging participants exorbitant rent to live in crammed basements. Amid the protests, McDonald’s issued a statement saying that the franchisee had “agreed to leave the McDonald’s system,” and said that it was “also working on connecting with the guest workers on an individual basis to most effectively address this situation.” The franchisee had said that authorities had looked into the situation and “there is no violation.”

As a candidate, Donald Trump pledged to replace J-1 visas with an inner-city youth jobs program.

The stipend for au pairs is far lower than the prevailing wage for domestic workers in the U.S., says American University law professor Janie Chuang. “Host families and the State Department, and certainly the sponsoring au pair agencies, resist the idea that this is a labor program, because if it were treated as such, it would no longer be affordable for a lot of these families,” she says.

One former au pair who came to the U.S. from Germany and is a plaintiff in the suit says that before starting the program she was told by her sponsor that all participants in the U.S. received the same rate of $195.75 per week and that the rate was set by the government. The au pair claims she regularly was told to work more than the 45-hour limit. The experience did not match the way the program was initially promoted by the agency.

Anticompetitive behavior by employers, including price-fixing conspiracies, noncompete clauses banning staff from departing for similar jobs, and no-poaching agreements, like those alleged in Silicon Valley that led to a $415 million settlement in 2015, have broader labor-market consequences, say economists. “It’s quite plausible that this is part of the reason why we’re seeing sluggish wage growth,” says Princeton University’s Alan Krueger, who chaired the Council of Economic Advisers under President Obama and recently conducted research that found the majority of big franchise chains banned franchisees from hiring away each other’s workers.

“If the agencies were truly competing against each other in recruiting au pairs, there would be more of a race to the top,” says University of San Diego law professor Orly Lobel. “There is no reason that each au pair, regardless of her prior experience and education level, would all just work for minimum wage.”