Hello, Eve. This is a particularly blatant form of worker abuse. I hate to say it, but typically it’s only illegal workers who are exploited this way. However, some H-1B visas have been accused of serious labor exploitation, threatening workers with being sent home (and losing the pay they and their families will need) if they don’t accept sweatshop conditions, resulting in a reduction in their hourly wage. Reports of this abuse were spiking even before the Trump administration’s H-1B visa “reforms,” but we warned back then that tech companies could easily transition to using L-1B visas.
Kudos to the Department of Justice for going after what appear to be some very bad actors, even though they are not very well known and the amounts at stake are not that large. See the Department of Justice report. press release and Filing.
By Claudia Irizarry Aponte. First edition July 17, 2024 at THE CITY
A Virginia-based IT staffing firm has been accused of “trapping” employees in their workplaces and demanding payments of up to $30,000 if they quit before completing 4,000 hours of work. According to the lawsuit: The lawsuit was filed last week by the U.S. Department of Labor in the Eastern District of New York.
On its website, SmoothStack promises to train and place tech workers at federal agencies and prestigious Fortune 500 companies such as Morgan Stanley, Verizon, and Bloomberg.
The company and co-founder Boris Kiuper are accused of forcing employees to sign predatory training repayment agreements (TRAPs) that forced them to pay tens of thousands of dollars if they tried to quit or were fired, as well as retaliating against whistleblowers.
SmoothStack, based in Alexandria, Virginia, employs significant numbers of people in Brooklyn, Queens, Staten Island and Manhattan, according to the complaint. Several of the company’s major clients, who are not parties to the lawsuit, are also headquartered in New York.
SmoothStack did not respond to TheCity’s request for comment. Morgan Stanley, Verizon and Bloomberg also did not respond to TheCity’s requests for comment.
As of April 2024, Smoothstack is Over $90 million The company is a subcontractor with Accenture, which is supporting the work on behalf of the U.S. Department of Education’s Office of Federal Student Aid. The Department of Education did not immediately respond to the city’s request for comment.
The Department of Labor is seeking an injunction to bar SmoothStack and Kuiper from continuing to require employees to reimburse them for training costs. The lawsuit claims the workers are paid less than the federal minimum wage, in a system that “resembles modern-day indentured servitude,” according to the lawsuit. It also seeks to bar the companies from retaliating against employees who blow the whistle.
Labour lawyer Seema Nanda said in a statement that SmoothStack had “created a system to trap workers in their workplace through outrageous and illegal contracts, in a blatant disregard for the law.”
According to the lawsuit, SmoothStack hires skilled workers in three two-year instalments: first as unpaid trainees for two to three weeks, then as apprentices earning the minimum wage in their state, and finally as salaried employees assigned to SmoothStack’s clients earning $60,000 to $70,000 per year.
According to the lawsuit, SmoothStack requires recruits to sign agreements to proceed through each stage of employment, but does not disclose the TRAP agreements until employees accept an offer of full-time, paid employment from a client.
Employees who leave a company before meeting the 4,000-hour billable commitment period (approximately two years) will be liable to the company for between $24,000 and $30,000 depending on the length of employment. TRAP is triggered if an employee resigns or is fired before meeting the 4,000-hour requirement, or breaches any other part of the commitment.
The Department of Labor also accused SmoothStack of not paying overtime to trainees for working as many as 84 hours a week, and instructed employees not to log more than 40 hours a week while working at minimum wage.
This is the second consecutive year that a lawsuit has been filed alleging that Smooth Stack violated federal minimum wage standards. A former Colorado employee said: A class action lawsuit was filed The company filed a lawsuit last year in federal court in Alexandria, Virginia, alleging that the company was underpaying its trainees and continuing to underpay them even after they began working for its clients.
The former employee, Justin O’Brien of Colorado, is being represented by attorneys from the Student Loan Borrower Protection Center (SBPC) and Towards Justice.
SBPC General Counsel Winston Berkman Breen applauded the Department of Labor’s lawsuit, saying it reaffirms the Department of Labor’s position that “it is illegal to lure low-wage workers with false promises of rigorous training and future employment at Fortune 500 companies, lock them into coercive contracts, and threaten lawsuits of up to $30,000 if they try to leave for any reason.”
