On October 1, 2010, the U.S. Court of Appeals for the Fifth Circuit decided Castellanos-Contreras v. Decatur Hotels LLC, No. 07-30942 (5th Cir. Oct. 1, 2010)(en banc). In an 8-6 decision, the Fifth Circuit held that foreigners working as temporary guestworkers at New Orleans hotels under the H-2B program are covered by the Fair Labor Standards Act ("FLSA"), but that the FLSA does not require these employers to reimburse the workers for recruitment, visa, and travel expenses in determining whether the employee is receiving the FLSA-mandated minimum wage.
In reaching this conclusion, the Fifth Circuit declined to enforce retroactively a 2009 DOL interpretive bulletin that indicated that the FLSA covers visa and travel expenses. The Fifth Circuit noted that the DOL bulletin was issued in 2009, long after the events in question occurred in 2005-2006, and found that it had to follow the general rule not to apply changes in the law retroactively. In the Fifth Circuit's decision, Judge Catharina Hayes wrote, "Whatever deference may be due to the [DOL]'s informally promulgated bulletin in the future, it does not itself in any way purport to apply retroactively. Accordingly, we decline to apply it to the situation here."
The Castellanos-Contreras case arose from an FLSA collective action filed by H-2B workers hired by Decatur Hotels in New Orleans in 2005 after Hurricane Katrina. The H-2B workers' hourly pay rates exceeded the federal minimum wage. The workers argued, however, that the money they paid to obtain employment in the United States, including visa, transportation, and recruitment costs, must be reduced from their pay when calculating whether Decatur was actually paying them the minimum wage required by the FLSA. If this were not done, the workers argued, it would have the effect of cutting their wages to less than the FLSA-mandated minimum wage for the relevant pay periods.
The DOL's proposed rule on calculating wages for the H-2B guest worker program, coupled with the Fifth Circuit's decision in Castellanos-Contreras, should serve to remind employers in industries that use temporary or seasonal H-2B guest workers, such as the recreational, construction, and hospitality industries, that they must be careful about the wages they pay to avoid what are clearly renewed efforts by the DOL to regulate wages and working conditions in this area.