Smoothstack Lawsuit: A Breach of the FLSA

The tech company Smoothstack is no stranger to controversies. The Smoothstack lawsuit has drawn attention to the company yet again. In this detailed article, we’ll discuss the lawsuit, providing a complete analysis of the facts and discovering the potential impact it may have for the wider industry.

So, what is a Smoothstack lawsuit? What happened in Smoothstack?

Introduction and Case Overview

To completely understand the Smoothstack lawsuit, we must first find its roots.

Smoothstack is a tech training and employee-staffing agency located in Virginia, U.S. The agency recruits individuals interested in starting their careers in information technology or IT-related roles. Smoothstack attracts people by offering a six-month training program and placement options with the company's clients, which include Fortune 500 companies.

The lawsuit was filed by Justin O’Brien under case No. 1-23-cv-00491. It is pending before the Honorable Rossie D. Alston, Jr., a United States District Judge in the Eastern District of Virginia, U.S.

So, what is the objective of the Smoothstack lawsuit? There are reports that the lawsuit seeks unpaid wages and damages for minimum wages, overtime wages, unlawful payoffs on wages, and the violation of the FLSA’s requirement that employers pay their worker incentives 'cost-less and clear.’

Attorney Hannah Cole-Chu says, “Smoothstack traps its workers at the start of their employment.” 

Smoothstack binds the employees into workbenches that they don’t control for huge periods of time for low wages, the Smoothstack lawsuit alleges. There are reports that Smoothstack blocks individuals from leaving for higher-paying jobs unless they pay a hefty amount.

Justice attorney Rachel Dempsey said, “This case alleges that behind Smoothstack’s shiny tech facade, Smoothstack’s business model bundles together a wage theft operation with a predatory for-profit training program."

Unboxing the Allegations in the Smoothstack Lawsuit

The Smoothstack lawsuit's essence is the Training Repayment Agreement Provision (TRAP), which allegedly binds participants with the agency for a period of two years. If they leave within this time period, they must pay a massive fee, which is allegedly around $23,875.

The other claims in the Smoothstack lawsuit are as follows:

1. Unpaid training sessions: Members who were in the training period allegedly received no compensation for the first three weeks.
2. Overtime offenses: The agency allegedly fails to compensate tutors for working overtime.
3. Predatory Targeting: The Smoothstack lawsuit indicates that the company targets vulnerable job seekers, such as recent graduates and those who’re seeking career transitions.
4. Restricted Job Placements: Professionals are allegedly restricted in their jobs.

TRAP and FSLA

In April 2023, a former employee initiated an advisory class and collective action against Smoothstack Inc. over assumed offenses of the Fair Labor Standards Act (FLSA).

The agency has come under fire for its controversial Training Repayment Agreement Provision (TRAP). The TRAP is a promised clause that requires tutors to stay with the agency for a set period (currently, two years). If they leave before this period, they must pay a hefty sum, allegedly around $23,875.

The Smoothstack lawsuit claims that under the FLSA, the company is required to settle payments to employees for all the hours worked and time-and-a-half wages for all hours worked past 40 each week.

If they approve the agreement, recruits will be paid minimum wage during the last five months of their program until they are made consultants. Once they become consultants, they can start working with Smoothstack’s clients for $26 to $31 per hour.

Smoothstack is accused of “trapping” its employees in their jobs and levying heavy penalties if they leave before completing 4,000 hours of work, according to a Smoothstack lawsuit filed by the U.S. Department of Labor in the Eastern District of New York.

The case was filed by lawyers of the Student Borrower Protection Center, an advocacy team. The federal court is in a U.S. district court of law for the Eastern District of Virginia, where the class action lawsuit was filed. The Smoothstack lawsuit complaint claims violations of both state and federal law, with multiple of the major allegations aimed at apparent constraints of the FLSA.

Smoothstack Lawsuit: Nook and Corners

Justin O'Brien, a former Smoothstack recruit and advisor, is the direct plaintiff in the Smoothstack lawsuit. He represents himself and all current and previous employees of Smoothstack. O’Brien began training sessions with Smoothstack and worked for up to 80 hours a week, the 43-page complaint alleges.

For three weeks, he wasn’t paid for his work, and then at the mid-end of that period, Smoothstack agency asked O’Brien to sign an agreement that made him liable to pay $23,895 if he wanted to leave within two years. O’Brien signed the agreement because he “really needed the job,” according to the complaint, and at that point, he had already worked for the agency for nearly three weeks without pay.

O’Brien continued Smoothstack’s training sessions for the next few months. According to the complaint, members of the training sessions tackled assignments that commonly involved writing code for various software programs. As the training sessions progressed, the skills and time needed to complete the assessments increased. The participants of the sessions were often given tight deadlines—sometimes as fast as 24 hours or over the weekend—to complete assessments.

According to the Smoothstack lawsuit, during the training session, the company only paid recruits for up to 40 hours of work per week, even though they repeatedly worked more hours. During this period, recruits were paid minimal wages.

Latest Updates On The Smoothstack Lawsuit

The Smoothstack lawsuit was filed in April 2023. In May 2023, the primary plaintiff agreed to drop three claims from his lawsuit. Smoothstack approved the waiving of the 4,000-hour specification for Mr. O'Brien, who agreed, in turn, to dismiss related claims in the lawsuit under Virginia and Federal law.

Smoothstack filed a motion to suspend the lawsuit on May 12, 2023. The primal plaintiff filed an amended complaint on May 25, 2023, and Smoothstack, in turn, filed another motion to suspend on June 6.

If the Smoothstack lawsuit continues, more legal fighting will likely result. A hearing regarding the motion to dismiss was set for August 2, 2023. Arguments over whether the court should approve class certification are another primal legal fight.

The lawsuit could also be resolved through a final settlement, should the sides ever come to a deal. This is the most common outcome for lawsuits in the U.S., as per the statistics.

The case is currently in progress, and the potential outcomes include dismissal, moving to a larger class-action suit (Smoothstack lawsuit), or a settlement.

As of November 2023, the Smoothstack lawsuit is progressing through the legal system. Pre-trial motions, discovery processes, and hearings are underway, shaping the case's narrative.

Conclusion

The Smoothstack lawsuit reminds us that even in the vastly advancing world of technology, legitimate challenges can arise. This makes careful examination of contractual obligations, ethical hands-on assessments, and maintaining organization standards mandatory.

As the case progresses, shareholders, including students, clients, and industry specialists, should stay informed about the advancements and potential results. The Smoothstack lawsuit could lead to changes in how tech companies handle training programs, sessions, and agreements regarding employee compensation.

To join the Smoothstack lawsuit, you may have to provide information related to your employment or otherwise participate in the action while the lawsuit is pending. Consider reading, signing, and promptly submitting your concern and consent to be a part of the Smoothstack lawsuit. The signed Consent to Join Form must be submitted or validated by July 23, 2024.