Employees’ Civil RICO Claim Did Not Allege Wage Fraud by Healthcare Providers

This posting was written by Mark Engstrom, Editor of CCH RICO Business Disputes Guide.

RICO claims predicated on wire fraud and forced labor could not proceed against a health care consortium that allegedly engaged in a scheme to obtain free labor and services from employees by cheating them out of their wages and overtime pay, the federal district court in Central Islip, New York, has ruled. The employees failed to sufficiently allege the predicate acts of mail and wire fraud.

Wire Fraud

Employees of the consortium’s health care facilities alleged that their paychecks were wired to them and that the wirings included false representations stating that they were properly compensated for all of the time they worked. According to the employees, the wire payments “actually represented an amount less than the full amount of wages” they earned. Nevertheless, the employees were fully aware of the number of hours they had worked. The wire payments thus would not have furthered the consortium’s scheme, the court concluded. Rather, the payments would have put the employees on notice of the scheme by revealing their employers’ failure to fully compensate them for the hours they had worked. The employees’ wire fraud claim was therefore unavailing.

Forced Labor

The employees alleged that their employers threatened “serious financial harm” by telling them that their employment would be in jeopardy if they failed to complete all of their assigned tasks. They further alleged that they were forced to work, “out of fear of losing their jobs,” during meal breaks, before and after scheduled shifts, and during training sessions. Finally, the employees alleged that they feared “reputational harm” for failing to perform the required labor and services.

To the extent that their forced labor claims were premised on coercive conduct that forced the employees to work overtime without pay, the claims were clearly subsumed within their Fair Labor Standards Act claim and thus were preempted. To the extent that the claims were predicated on conclusory allegations that the employers had procured their labor by threatening to fire them, or by berating them in public for not finishing their work, the allegations did not state a claim under the forced labor statute, according to the court.

The employees failed to cite a single case that supported the novel theory that threatening to fire an at-will employee or berating an employee in public constituted “forced labor.”

The decision is DeSilva v. North Shore-Long Island Jewish Health System, Inc., CCH RICO Business Disputes Guide ¶12,183.