Starwood paid Giant Labor Services, a staffing agency, $5.00 to clean each room. The staffing agency paid its workers $3.50 a room. Plaintiff cleaned 122 rooms over 2 weeks and received nothing. The agency’s principals were convicted of labor racketeering when they deducted the balance of plaintiff's wages after paying taxes for an illegal 'visa' fee. The worker then went after Starwood for his lost wages and restitution of $3150 and sued under the minimum wage law alleging the hotel was liable for basing rate on the volume of rooms cleaned and for illegal visa deductions.
The hotel argued that the plaintiff was an employee only for the agency, the compensation scheme was reasonable, and the were not responsible because the agency committed illegal deductions. The circuit court agreed that the compensation was reasonable and the chain was not responsible for illegal deductions. The Supreme Court reversed and found summary judgment improper because there remained material facts in dispute.The court noted that summary judgment on the factual issue of joint employment is improper and indicates the facts could support a finding that the hotel was a joint employer. There were material issues in dispute to the extent the hotel controlled the plaintiff and that the hotel maintained control regarding the method of compensation by paying per room rather than hourly. Plaintiff asserts that the hotel controlled his performance standards because it fired him within two weeks.
The Supreme Court indicated that the minimum wage law imposed an independent duty to pay minimum wage and they were not absolved by paying minimum wage to an agency if the agency failed to pay the wages. The risk of non-payment falls on the business and not on the worker, according to Justice Tietelman. Although the hotel was not 'responsible' for illegal deductions if they were a joint employer they were responsible that plaintiff received at least was a minimum wage which in the end produced the same result.
Several issues are important.
The hotel now has potential liability if it is found to be a joint employer for the company it keeps if its staffing agency underpays workers. This case is not just a contract claim about 2 weeks of wages but a class action. The only deep pocket left is the hotel itself. The claim involves practices from 8 years ago. Like many class actions, this fight may be more about attorney's fees than anything else.The minimum wage law requires workers to earn at least minimum wage and that any entity that controls employment activity could not delegate that responsibility.
There may be more to this story. Starwood in January 2008 began cooperating with federal officials in an investigation of the agency for human trafficking and continued to work with the federal agency for another two years. The plaintiff worked at the hotel in April 2008 for only two weeks. The hotel knew it was dealing with an agency under investigation before plaintiff ever cleaned a room at their facility. Starwood has an astute control of its national brand image. It is not clear why Starwood did not abandon its relationship with the agency in January 2008 once it became aware of the investigation for practices if proven true would damage their image or why it was still working with the agency in April 2008 when the plaintiff first reported to clean rooms. This case could the product of paying the price of staying with a questionable vendor. There is another possibility too. Maybe the feds encouraged Starwood to continue the relationship while the feds sorted things out.