Smoothstack Lawsuit Filed Over Allegedly Unlawful Wage Scheme

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A former employee has filed a proposed class and collective action against Smoothstack Inc. over alleged Fair Labor Standards Act (FLSA) abuses.

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The 43-page lawsuit more specifically claims that Smoothstack, a staffing company that promises to help “launch” the careers of aspiring IT professionals through training and work assignments with its Fortune 500 clients, offers a six-month training program in which recruits are regularly required to work more than 80 hours in a workweek. According to the case, Smoothstack fails to pay recruits for the first three weeks of the program and, during the remaining five months of training, fails to pay recruits for any hours worked over 40 in a workweek.

Under the FLSA, Smoothstack is required to pay employees at least minimum wage for all hours worked and time-and-a-half wages for every hour worked past 40 each week, the suit charges.

What’s more, recruits are asked three weeks into their training period to sign a training repayment agreement provision (TRAP) stating that they will pay a $23,875 penalty should they resign or be terminated “for cause” before completing 4,000 hours of client work, which is “the equivalent of approximately two years of fulltime employment,” the filing says.

Should they accept the agreement, recruits are paid minimum wage during the last five months of their training program until they are promoted to consultants and can begin working with Smoothstack’s clients for $26 to $31 per hour, the case relays.

At this point, the suit says, Smoothstack once again presents its employees with an “all-or-nothing” employment agreement that states consultants cannot resign or get fired before billing 4,000 hours to Smoothstack clients. According to the suit, consultants are forced to either sign the employment agreement or resign and violate the TRAP they had already agreed to in the training agreement.

“Specifically, the TRAP in the Training Agreement cannot be performed until after the Training Program is complete, at which point the Consultant can begin counting hours towards the 4,000 Service Commitment Period,” the case reads. “In fact, if Consultants refuse to sign the Employment Agreement, they would be in violation of the Training Agreement and forced to pay the $23,895 penalty in the Training Agreement.”

The complaint goes on to explain that if a consultant’s assignment with a client ends, Smoothstack “benches” the employee. Benched consultants are paid minimum wage, and their hours no longer count toward the 4,000-hour service commitment period, but they cannot quit due to the TRAP, the filing contends. 

“If a Consultant on Bench Status has not yet fulfilled their Service Commitment Period, they are functionally tied to a minimum wage position with Smoothstack indefinitely – because the only way for the Consultant to enter the job market is to put themself at risk of paying the TRAP penalty, which can have the economically devastating effect of undoing months or years of careful savings,” the complaint states, adding that it is unlawful under the FLSA to pay employees on the condition that they do not quit.

The TRAP is also considered an “illegal kickback of wages” to Smoothstack and thus prohibited under the FLSA, given that employees who leave their jobs before the service commitment period is complete and must pay the company $23,875 end up receiving wages well below the minimum wage and even into the negative numbers, the suit alleges.

Per the complaint, Smoothstack has taken former employees to court in order to enforce the TRAP, although a Virginia state court reportedly found that the agreement is “unconscionable” under state law.

The plaintiff, who began working for Smoothstack in the spring of 2020, says he “immediately” recognized the potential consequences of signing the training contract but felt that he had no choice but to agree. The complaint notes that the agreement was presented as an “all or nothing” offer that the man had to accept to continue his employment at Smoothstack, and he “desperately” needed the job to support himself, especially after working three weeks without pay, the case says.

Per the suit, the “Plaintiff is one of hundreds of Smoothstack employees who worked grueling hours at minimum wage, or no pay at all, and with no overtime wages, but was unable to seek out a better opportunity because of the TRAP.”

The case relays that the plaintiff, who signed Smoothstack’s employment agreement in October 2020, sought counsel and alerted the company to its FLSA violations in November 2022. The plaintiff attempted to negotiate a class-wide settlement on behalf of himself and similarly situated employees, but Smoothstack’s counsel repeatedly ignored the man’s communications, the suit alleges.

In January 2023, Smoothstack’s chief operating officer, Boris Kuiper, called the plaintiff to discuss his wage claims against the company in an attempt to either “intimidate and harass” the man or “pressure” him into conceding certain facts relating to his claim, the complaint says. 

According to the suit, the plaintiff told Smoothstack on April 4 that he planned to file a class action lawsuit after he was demoted to bench status the month prior. Three days later, the company terminated his employment in an alleged act of retaliation, the case contends.

The lawsuit looks to represent anyone who has participated in Smoothstack’s training program and/or signed TRAPs since April 13, 2020.

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