Former employees are claiming that LifeStance Health Group (Nasdaq: LFST) established payment arrangements with providers requiring them to pay the company, potentially violating U.S. labor law.

The Scottsdale, Arizona-based outpatient mental health giant is facing a pair of lawsuits in federal courts brought by current and former employees seeking class-action status for what they claim amounts to violations of the Fair Labor Standards Act and 13th Amendment rights.

LifeStance denies any wrongdoing.

Between the two lawsuits, 15 former LifeStance Health clinicians allege LifeStance Health forced them to receive salary advances that the employees would have to pay back to the company for the work done during their first six to 12 months of employment if they failed to meet productivity standards.

The suits, which are both represented by the Florida-based law firm éclat Law, allege that this practice of clawing back wages amounts to LifeStance Health failing to pay providers a minimum wage, failing to pay at all for services rendered and failing to pay overtime where relevant. The suits are filed in the U.S. District Court for the Middle District of Florida and the U.S. District Court for the District Court of Arizona.

“LifeStance made a concerted effort to increase the number of providers by offering plaintiffs and those similarly situated collective and class members what appeared to be a lucrative and beneficial employment opportunity, which turned out to be an operose indentured servitude from whence the employee could not escape,” one of the suits states.

LifeStance has filed motions to have these cases dismissed.

In the Arizona case, LifeStance Health says “plaintiffs’ claims are short on factual allegations and legal support.”

“We consistently evaluate our compensation packages to ensure that they are attractive relative to industry peers,” a LifeStance representative told Behavioral Health Business. “We believe the current claims to be without merit and intend to vigorously defend them. We otherwise will not comment on active litigation.”

LifeStance Health disclosed in its first quarterly earnings call that clinician turnover and onboarding presented major financial challenges and a barrier to growth for the company. That concern continued for months, and management discussed its efforts to find and retain clinicians.

Management has said several times on earnings calls that it can take six months for new clinicians to be productive enough to benefit the company financially. 

The lawsuits also claim that the alleged practice of clawing back was developed “because LifeStance knew that it would not recognize profit from employing these newly hired clinicians for several months; LifeStance basically passes its overhead associated with the employee onto the employee to bear the risk of accepting employment.”

The suits state that there was a surge in clinician resignations leading into the company’s 2021 IPO. This was caused, the suits allege, by administrative mismanagement and unmet expectations for reimbursement or patient volumes, a key to clinicians’ ability to get paid and to meet productivity standards.

The loan-in-place-of-wages paid over the first six to 12 months of a clinician’s time at LifeStance Health was “systemically” concealed by management and was to be repaid even if the clinician left the company, the suits allege.

The company also allegedly made it difficult for clinicians to attain the appropriate credentials required to meet its performance standards and created administrative hurdles through shoddy business systems, e.g., telephone and records systems. The suit claims LifeStance Health knew about the challenges and didn’t address them.

The suit also alleges that the company leverages its requirement that clinicians provide 30 to 60 days notice before leaving a role to prevent departing clinicians from earning any money during that period of transition.

LifeStance Health is the largest provider of outpatient mental health services in the U.S. It employed 6,132 as of the end of the second quarter of 2023, according to the company’s latest earnings disclosure. That’s 17% more clinicians than it employed during the same time in 2022.