AAIHR statement on Paguirigan v Prompt Nursing Employment Agency (Sentosa)
There has been significant interest by members of the American Association of International Healthcare Recruitment in the decision against Sentosa and related parties by the U.S. District Court for the Eastern District of New York warranting a statement regarding the status of that case and its effect on AAIHR members.
The case at issue, Paguirigan v. Prompt Nursing Employment Agency, is still pending in both the U.S. District Court for the Eastern District of New York and the Second Circuit Court of Appeals. The trial court, the Eastern District of New York, held that the Defendants, including Sentosa, a company that recruited foreign educated nurses, violated the Trafficking Victims Protection Act (“TVPA”).
The trial court’s decision discussed numerous actions taken by the Defendants against foreign educated licensed nurses who were recruited and employed by the Defendants and entered the U.S. with EB-3 skilled worker visas.
In the decision, the trial court centered much of its discussion around the use of an employment agreement containing a liquidated damages provision. This was, in part, because there was a separate breach of employment agreement claim brought by Paguirigan, a foreign educated licensed nurse, against the Defendants. Addressing the breach of employment agreement claim, the trial court found the liquidated damages provision to be unenforceable under New York state law. Separately, the trial court determined that the Defendants’ actions, including but not limited to, their use of an unenforceable liquidated damages provision, violated the TVPA. The trial court did not hold that the use of liquidated damages is always prohibited in employment agreements with foreign nationals working in the U.S. The trial court did not issue an injunction preventing all employers from using liquidated damages provisions in employment agreements with foreign nationals. The trial court issued an injunction only against the Defendants and only preventing the Defendants from using their particular liquidated damages provision.
This decision by the Eastern District of New York has been appealed by the Defendants to the Second Circuit Court of Appeals. While this appeal is pending, other jurisdictions across the country are not required to adopt the legal findings of the Eastern District of New York on the applicability of the TVPA to liquidated damages provisions. Moreover, other trial courts in New York are not required to adopt the legal findings of the Eastern District of New York until, and unless, the Second Circuit Court of Appeals adopts the same legal findings. Finally, courts outside of New York will apply the facts and circumstances before them to their applicable state law on liquidated damages to determine whether any particular liquidated damages provision is enforceable.
Even so, the language used by the trial court in the Eastern District of New York creates some uncertainty that has been used by some employees in New York to apply the TVPA to the mere use of liquidated damages provisions in an employment agreement. AAIHR filed a brief with the Second Circuit Court of Appeals in the Paguirigan case, not on behalf of any party, but rather to educate the court of appeals about the international healthcare recruitment industry and the need for a clear decision that does not improperly chill the ability of professional international recruiters to enter into contracts, including good faith liquidated damages clauses, in order to successfully recruit educated healthcare professionals for employment in the United States. It may take a year or more before the court of appeals enters a decision in Paguirigan v. Prompt Nursing Employment Agency. In the meantime, members are encouraged to follow the AAIHR Code of Ethics and the state and federal law applicable to your company.