Federal Judge Halts Weaponized Arbitration Proceeding Involving Employer-Driven Debt

Arbitration threatened worker, a nurse from the Philippines, with tens of thousands of dollars of debt as punishment for leaving his job

Kakalec Law

PRESS RELEASE – February 27, 2023

On Friday, a federal judge in the Federal District Court for the Eastern District of New York issued a preliminary injunction halting an arbitration proceeding brought by a healthcare staffing company called Advanced Care Staffing against its former nurse from the Philippines, Benzor Shem Vidal because he left his job before the end of a three-year commitment period. The pervasive use of employer-driven debt—including predatory stay-or-pay contracts, that require workers to pay large sums if they leave their jobs before the end of contractual commitment period—have received increased scrutiny from courts and regulators, including the Federal Trade Commission, which recently proposed a rule that would ban non-compete agreements and many forms of de facto non-compete agreements, including some stay-or-pay contracts. This appears to be the first recent case, however, to address the alleged weaponization of arbitration by employers to collect on a stay-or-pay contract. 

Advanced Care Staffing employs migrant nurses and staffs them in nursing homes, including in New York City. When Mr. Vidal left his job working for the company due to what he alleges were dangerous and unsafe staffing ratios that threatened his nursing license—around one nurse for every forty patients—Advanced Care Staffing weaponized the arbitration requirement in its employment contract and attempted to coerce him to return to work or face an arbitration that could bury him in $20,000 or more in damages and potentially tens of thousands in fees and arbitration costs. When Mr. Vidal declined to return to work, the company filed an arbitration against him with the American Arbitration Association. 

For many months, Mr. Vidal attempted to persuade the American Arbitration Association to pause his arbitration so that he could challenge the arbitration in court based on his allegations that ACS violated his rights under federal trafficking laws, among other things. The Office of the Attorney General of New York also wrote to the American Arbitration Association urging it to pause or decline to administer the arbitration because Advanced Care Staffing’s employment contract likely amounts to forced labor. The American Arbitration Association refused, and the arbitration barrelled forward. The preliminary injunction orders the American Arbitration to stop. The Court’s order concludes, among other things, that Mr. Vidal has established a likelihood of success on the merits of his argument that his former employer’s arbitration requirement violates his rights under federal trafficking laws. 

“I am grateful that the federal judge stepped in when my former employer and the arbitrator refused to even pause the arbitration that could destroy me financially just because I decided to leave a dangerous, stressful, and low-paying job,” said Benzor Shem Vidal, the Plaintiff in this case.

“We’re hopeful that the Court’s order, which highlights how arbitrations like the one confronting our client may violate important legal protections, including under federal trafficking laws, may cause the American Arbitration Association to reconsider administering arbitrations like this one,” said David Seligman, Executive Director of Towards Justice. “For several years, the AAA has had a moratorium against arbitrations where corporations try to collect debts against consumers because of potential due process concerns. Even more serious concerns arise when workers are sued by their bosses for leaving their jobs, especially where the arbitration threatens to bury the worker in fees and arbitration costs.”

“As the Supreme Court has recognized, arbitration provisions are to be treated like any other contract, and contracts for illegal purposes are not enforceable,” said Hugh Baran, counsel for Mr. Vidal at the Brooklyn workers’ rights firm Kakalec Law PLLC. “We are grateful that the Court has recognized that the serious questions raised by the arbitration provision at issue–which attempts to punish our client for leaving unsafe working conditions by saddling him with tens of thousands of dollars in the company’s attorneys fees’ and costs of arbitration–require that the arbitration proceedings here be paused. And we applaud Mr. Vidal’s courage in standing up to this aggressive and unconscionable use of arbitration to perpetuate forced labor, here in Brooklyn and around the country.”

To read Plaintiff Benzor Vidal’s Complaint, click here

Press Contacts:
Hugh Baran, hugh@kakaleclaw.com, 212-705-8730
David Seligman, david@towardsjustice.org, (720) 248-8426