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Economic Reality Applied to FLSA Claims

Prisoners' struggle to be paid the minimum wage for their labor has met yet another setback. Nevada statute § 209.461(1)(b) requires all state prisoners, not in segregation or with a medical excuse, to work or go to school forty hours a week. Walter Morgan is a Nevada state prisoner employed in the prison's education center as a computer trouble shooter. The prison contracts with the White Pine County School Board to operate the prison's education center. The two entities then allow prisoners to perform various jobs there in exchange for a nominal salary well below minimum wage.

Morgan filed suit under the Federal Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq. seeking to be paid minimum wage for his school labor. The district court dismissed his suit for failing to state a claim upon which relief could be granted. The court of appeals for the ninth circuit affirmed.

The court began its analysis by noting that Hale v. Arizona, 993 F 2d 1387 (9th Cir. 1993) (en banc) [See PLN, Vol. 4, No. 10] did not categorically exclude prisoners from its coverage but it did significantly narrow the class of prisoners even potentially covered by federal minimum wage standards. The court in that case held that prisoners cannot be deemed "employees" under the FLSA when they work for prison run industries and are statutorily required to work as a part of their confinement. The court concluded that the economic reality was that prisoners' labor belongs to the state.

The court noted that Hale provided only broad outlines of the "economic reality" test to be used to determine whether prisoners are "employed" in the relevant sense for a FLSA standard to apply. The court relied on the Nevada statute requiring all prisoners to work to conclude "Morgan was in no sense free to bargain with would-be employers for the sale of his labor; his work at the prison was merely an incident of his incarceration." The court held that Morgan did not have a true employment relationship with his employer, it was "penological, not pecuniary," thus he was not an "employee" under FLSA.

Morgan sought to distinguish his case from Hale because unlike the hard labor performed by the prisoners in that case, his work as a computer trouble shooter required a high degree of skill and training. The court rejected this. "Not so. Our holding in Hale did not turn on the fact that the prisoners there were engaged in hard labor or purely menial tasks. In fact, we noted that one of the plaintiffs worked as a bookkeeper and office manager,... hardly the sort of work normally thought of as hard labor. Determinative in Hale was the fact that the inmates' work in prison-run programs stemmed primarily from their status as incarcerated criminals.... This is no less true of the labor Morgan performed."

In the alternative, Morgan argued that the compelled labor in Hale was a form of punishment, while the labor he performed was solely for educational and rehabilitative purposes. The court again disagreed. "We did not base our holding in Hale on the view that the prisoners' work constituted punishment. The plaintiff in Hale who worked as a bookkeeper and office manager did so as part of a program that allowed inmates to run their own businesses while incarcerated. Work of this nature clearly doesn't promote the punitive objectives of the criminal justice system. Rather, as we acknowledged in Hale, prison programs of this sort serve primarily rehabilitative goals: They 'occupy idle prisoners, reduce disciplinary problems, nurture a sense of responsibility, and provide valuable skills and job training.' Thus, nothing in Hale suggests that a prisoner's status under the FLSA turns on the precise penological purpose for which his work is performed. So long as the economic reality of the employment relationship suggests that the prisoner's labor essentially belongs to the prison, the FLSA is inapplicable." See: Morgan v. MacDonald, 41 F.3d 1291 (9th Cir. 1994).

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Related legal case

Morgan v. MacDonald

Morgan v. MacDonald, 41 F.3d 1291 (9th Cir. 12/02/1994)

[1] UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT


[2] No. 92-16643


[4] filed: December 2, 1994.


[5] WALTER DAVID MORGAN, PLAINTIFF-APPELLANT,
v.
F. T. MACDONALD; WHITE PINE COUNTY SCHOOL BOARD; R. ANGELONE; GEORGE DEEDS; S. GODINEZ; C. WOLFF; W. REID, DEFENDANTS-APPELLEES.


[6] Appeal from the United States District Court for the District of Nevada. D.C. No. CV-91-00408-ECR. Edward C. Reed, Jr., District Judge, Presiding.


[7] Lisa Duncanson, Certified Law Student, Professor Samuel Frizell, Western State University College of Law, Fullerton, California; Walter David Morgan, pro se, Ely, Nevada, for the plaintiff-appellant.


[8] Thomas J. Ray, Louis Ling, Paul G. Yohey, Deputy Attorneys General, Carson City, Nevada; Janice J. Brown, Las Vegas, Nevada, for the defendants-appellees.


[9] Before: Wilfred Feinberg,*fn* Mary M. Schroeder and Alex Kozinski, Circuit Judges. Opinion by Judge Kozinski.


[10] Author: Kozinski


[11] KOZINSKI, Circuit Judge.


[12] We decide whether a Nevada state prison inmate is an "employee" under the Fair Labor Standards Act (FLSA), 29 U.S.C. § 201 et seq.


[13] I


[14] Walter Morgan is an inmate at Ely State Prison in Nevada. From October 1989 to September 1990, he worked at the Ely State Prison Education Center. Like all other inmates, Morgan was required under Nevada law to work or receive vocational training for 40 hours each week.*fn1 Morgan chose to fulfill this requirement by working at the Education Center as a computer "trouble-shooter."


[15] The Education Center is located on the grounds of Ely State Prison, and provides general education and training for the prison's inmates. The prison contracted with the White Pine County School Board to operate the Education Center; the two entities then agreed to let inmates perform various jobs there. The inmates are paid a nominal salary each week, at a rate below the minimum wage established by the FLSA.


[16] On October 22, 1991, Morgan filed a complaint alleging, among other things, violation of the FLSA's minimum wage requirement. See 29 U.S.C. § 216(b) (conferring private right of action on employees for violations of the FLSA).*fn2 After the defendants filed motions pursuant to Fed. R. Civ. P. 12(b)(6), the district court dismissed Morgan's complaint.


[17] II


[18] A. To determine whether Morgan was an "employee" under the FLSA, we must begin with our recent decision in Hale v. Arizona, 993 F.2d 1387 (9th Cir. 1993) (en banc). Though we declined to hold there that prisoners are "categorically excluded from the FLSA," id. at 1389, we significantly narrowed the class of inmates even potentially covered by federal minimum wage standards. We held that inmates cannot be deemed employees under the FLSA when they work for prison-run industries and are statutorily required to work as a term of their confinement.*fn3 Under these circumstances, we concluded, "the economic reality is that [the prisoners'] labor belongs to the institution." Id. at 1395. Moreover, we noted that the primary policy concern of the FLSA - ensuring a minimum standard of living for all workers - is simply inapplicable to prisoners "for whom clothing, shelter, and food are provided by the prison." Id. at 1396.*fn4


[19] In dismissing the inmates' claims, we adhered to the "economic reality" standard long used to determine whether an employer-employee relationship exists under the FLSA. See Goldberg v. Whitaker House Coop., Inc., 366 U.S. 28, 33, 6 L. Ed. 2d 100, 81 S. Ct. 933 (1961). But we declined to apply the four-factor test from Bonnette v. California Health and Welfare Agency, 704 F.2d 1465, 1470 (9th Cir. 1983), which had previously been used to flesh out the contours of the economic reality doctrine. The Bonnette factors are properly applied when an individual is clearly employed by one of several entities and the only question is which one. They are of no help, however, in deciding the more fundamental question present here: whether the inmates are "employed" in the relevant sense at all. Hale, 993 F.2d at 1394. Left without a concrete test to apply when analyzing inmate FLSA claims, we rely on the broad principles enunciated in Hale.


[20] [1] B. After examining the economic reality of Morgan's relationship with Ely State Prison, we conclude that he cannot be considered an employee under the FLSA. Like the inmates in Hale, Morgan worked for a program established by the prison and operated under the direction of prison officials.*fn5 In addition, Morgan worked pursuant to a statutory requirement materially similar to the one we considered in Hale : Under Nev. Rev. Stat. § 209.461, all inmates are required to work or receive training for 40 hours each week. Compare nn. 1 & 3 supra. Thus, Morgan was in no sense free to bargain with would-be employers for the sale of his labor; his work at the prison was merely an incident of his incarceration. See Vanskike, 974 F.2d at 809 (prisoner's employment with prison didn't "stem from any remunerative relationship or bargained-for exchange of labor for consideration, but from incarceration itself"). Morgan and the prison didn't contract with one another for mutual economic gain, as would be the case in a true employment relationship; their affiliation was "penological, not pecuniary." Hale, 993 F.2d at 1395. Because the economic reality of Morgan's work at the prison clearly indicates that his labor "belonged to the institution," id. at 1395, he cannot be deemed an employee under the FLSA.


[21] Morgan attempts to distinguish Hale on two grounds. First, he contends that unlike the "hard labor" performed by the prisoners in Hale, his work as a computer "trouble-shooter" called for the exercise of a high degree of skill and training. In his view, prisoners who engage in low-skill, menial tasks are different for FLSA purposes than inmates who bestow the fruits of a specialized education or training on the prison. Not so. Our holding in Hale did not turn on the fact that the prisoners there were engaged in hard labor or purely menial tasks. In fact, we noted that one of the plaintiffs worked as a bookkeeper and office manager, id. at 1390 - hardly the sort of work normally thought of as hard labor. Determinative in Hale was the fact that the inmates' work in prison-run programs stemmed primarily from their status as incarcerated criminals. See id. at 1395. This is no less true of the labor Morgan performed.


[22] Alternatively, Morgan attempts to distinguish Hale by suggesting that the inmates' compelled labor there was a form of punishment, while the labor he performed was purely for educational and rehabilitative purposes. We did not base our holding in Hale on the view that the prisoners' work constituted punishment. The plaintiff in Hale who worked as a bookkeeper and office manager did so as part of a program that allowed inmates to run their own businesses while incarcerated. Work of this nature clearly doesn't promote the punitive objectives of the criminal Justice system. Rather, as we acknowledged in Hale, prison programs of this sort serve primarily rehabilitative goals: They "occupy idle prisoners, reduce disciplinary problems, nurture a sense of responsibility, and provide valuable skills and job training." Id. at 1398. Thus, nothing in Hale suggests that a prisoner's status under the FLSA turns on the precise penological purpose for which his work is performed. So long as the economic reality of the employment relationship suggests that the prisoner's labor essentially belongs to the prison, the FLSA is inapplicable.


[23] III


[24] Morgan claims he was subjected to cruel and unusual punishment when the director of the Education Center stated that Morgan's co-workers would have to be fired if his FLSA claim proved successful. Morgan argues that the director should have realized this statement was likely to cause other inmates to retaliate against him. Morgan's complaint contains no allegations that he was ever subjected to retaliation at the hands of his fellow inmates, nor does it provide any basis for inferring Reid was aware that his actions exposed Morgan to a substantial risk of serious harm. Morgan thus failed to state a claim for damages under the Eighth Amendment. See Farmer v. Brennan, 128 L. Ed. 2d 811, 114 S. Ct. 1970, 1979 (1994).


[25] We have addressed each of Morgan's remaining contentions in a separate unpublished Disposition filed on this date. The district court properly dismissed Morgan's complaint in its entirety.


[26] AFFIRMED.



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Judges Footnotes

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[27] *fn* The Honorable Wilfred Feinberg, Senior Circuit Judge, United States Court of Appeals for the Second Circuit, sitting by designation.



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Opinion Footnotes

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[28] *fn1 Nev. Rev. Stat. § 209.461(1)(b) provides: "The director [of the Nevada Department of Prisons] shall . . . to the extent practicable, require each offender, except those whose behavior is found by the director to preclude participation, to spend 40 hours each week in vocational training or employment, unless excused for a medical reason."


[29] *fn2 Morgan named as defendants the Nevada Labor Commissioner, the White Pine County School Board, the Director of the Nevada Department of Prisons, and various Ely State Prison officials.


[30] *fn3 The applicable statute in Hale provided: "The director has the authority to require that each able-bodied prisoner under commitment to the state department of corrections engage in hard labor for not less than forty hours per week, except that not more than twenty hours per week of participation in an educational, training or treatment program may be substituted for an equivalent number of hours of hard labor . . . ." Ariz. Rev. Stat. § 31-251(A).


[31] *fn4 Every other circuit to address this issue has reached the same Conclusion. See, e.g., Harker v. State Use Indus., 990 F.2d 131, 133 (4th Cir. 1993); Vanskike v. Peters, 974 F.2d 806, 809-10 (7th Cir. 1992); Miller v. Dukakis, 961 F.2d 7, 9 (1st Cir. 1992).


[32] *fn5 That the prison contracted with another public agency to oversee day-to-day operations of the Education Center does not change the reality that this was a "prison structured" program, as was the program in Hale.



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