Sunday, January 17, 2016
A pretty interesting, and pro-employee, case out of the Eighth Circuit. Cuellar-Aguilar v. Deggeller Attractions, Inc. reversed a district court's dismissal of two claims against the employer -- a traveling carnival. One was that it failed to pay the workers, who were in the country on H-2B visas, the prevailing wage rate and the second was that it misreported on federal tax forms the wages it did pay.
The first claim was treated as a state contract claim and, although the workers lacked a formal contract so providing, federal regulations conditioned issuance of visas on the employer's paying the prevailing US wage rate for the region. For the court, hiring foreign workers was sufficient to find a contract under Arkansas law and the terms of that contract can be influenced by the law in effect at the time of formation, in this case the prevailing wage rate. The court even cited an Arkansas case that suggested that such background laws might trump an express agreement to the contrary, although that seems doubtful from a pure contracts perspective.
Even more interesting -- because potentially more broadly applicable -- was the second claim that the employer had underreported their income, presumably to reduce business and FICA liabilities.
The tax laws, 20 USC 7434, provide a cause of action against "any person willfully files a fraudulent information return with respect to payments purported to be made to any other person," and set liability as " an amount equal to the greater of $ 5,000 or the sum of actual damages," costs and attorneys fees (emphasis added).
While plaintiff apparently did not argue any actual harm, the court found a claim stated for the statutory damages. A little research suggests that this is a growing theory: although the cases asserting such claims are still relatively few, most have arisen in the last few years. And, while the claim in Deggeller was that the employer sought to avoid FICA by reporting less than it in fact paid, other 7434 suits have challenged the employer's issuance of a 1099 instead of a W-2, thus suggesting that the employee/independent contractor distinction can arise in yet another civil liability setting.