J-1 Sponsors Paid 65.5 Million Dollars in Au Pair Class Action Lawsuit

In 2014, was filed a case on behalf of a nationwide class of tens of thousands of childcare workers who worked in the US on J-1 au pair visas. They brought claims of price fixing, racketeering, and wage theft against fifteen US Department of State-designated “cultural exchange” sponsor organizations. Plaintiffs charged that these sponsors acted as a cartel to illegally set au pair wages far below the market rate and that some sponsors fraudulently misled potential au pairs in violation of racketeering and consumer protection laws. The plaintiffs prevailed on several threshold legal issues and certified a class of tens of thousands. Plaintiffs brought claims against sponsors for violations of the Racketeering Influenced and Corrupt Organizations Act (“RICO”), breach of fiduciary duty, negligent misrepresentation, constructive fraud, and the violation of state consumer protection laws.
The complaint among other things stated that:

  1. Sponsors’ “lies” violated racketeering, tort, and consumer protection laws.
  2. Sponsors colluded and illegally conspired not to compete on wage terms in au pair recruitment.
  3. Sponsors manipulated the program by fixing au pair wages at prices below federal and state minimum wage.
  4. Sponsors cheated au pairs out of even minimum wage.
  5. Many of the sponsors go to great lengths to deceive the young workers. These lies not only deprive au pairs of market wages, but also intentionally confuse them about their rights.
  6. Sponsors conspired to set au pair wages as an illegal cartel, to the detriment of au pairs and the relevant labor markets, in violation of state and federal labor laws dictating higher wages.
  7. Sponsors violated antitrust laws.
  8. Sponsors made false statements to deceive au pairs and prospective au pairs.
  9. Sponsors engaged in a pattern of racketeering activity by committing multiple, continuing, and related acts of fraud for the benefit of their respective Enterprises over a period of years
  10. Sponsors engaged in schemes and artifices to defraud au pairs and prospective au pairs, through multiple fraudulent acts intended to deprive au pairs and prospective au pairs of wages, including by using electronic communications, such as internet publications, and by recruiting au pairs abroad by using materially false statements.
  11. Sponsors lied to au pairs and prospective au pairs.
  12. Sponsors for many years deceived foreigners to increase their profits.
  13. Au pairs reasonably relied on misstatements of facts and suffered damages when they paid fees to the sponsors and the sponsors’ agents in their home countries.
  14. In deceiving and/or misleading au pairs, sponsors violated the au pairs’ rights as consumers.
  15. Au pairs, young adults often with limited English understanding or sophistication, put their utmost trust into the Sponsors to tell them the truth and justifiably relied on the sponsors statements when purchasing their services, and by traveling to the United States. This conduct was unfair and deceptive because au pairs had placed their full trust in the Sponsors’ representations that the Sponsors would watch out for the au pairs’ interests. Because of the differences in sophistication and bargaining power, and the seriousness of the commitment, the misrepresentations were unconscionable.
  16. Because of unfair and deceptive actions, au pairs have suffered damages including the money the au pairs paid the sponsors.
  17. The sponsors’ deception constitutes an unfair trade practice in violation of the consumer protection acts of the several states and the District of Columbia.
  18. The au pairs were consumers of the sponsors’ services. The sponsors tricked the au pairs to sign up for their programs based on false and misleading representations about the wage. The sponsors knew or recklessly disregarded the falsity of their statements in order to induce the au pairs to trust them pay for their services in return for suppressed wages, and because of the differences in sophistication the misrepresentations were unconscionable.
  19. In deceiving and/or misleading au pairs, sponsors breached fiduciary duties to, made negligent misrepresentations to, and/or engaged in constructive fraud against au pairs.

On the eve of trial, the plaintiffs announced that they had entered into a settlement with the defendants that would require the payment of $65.6 million in damages and several changes in the industry. In 2019, after 5 years of litigation, US court gave final approval to the $65.5 million deal according to which each au pair received about $3,500. The settlement indirectly proved the validity of allegations brought by plaintiffs. The settlement also suggests that the sponsors tacitly admitted their guilt.

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