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California Prisons' Joint-Venture Program Under Statewide Court Injunction

by John E. Dannenberg

On February 17, 2004, the Superior Court of San Diego County entered a two-year injunction against the State of California and its state prison Joint Venture prison-labor contractors, requiring compliance with the California Labor Code as to employer record-keeping and payroll data, as well as to the comparable wage provisions of California Penal Code (PC) § 2717.8. The California Department of Corrections (CDC) was ordered to amend its administrative regulations (California Code of Regulations, Title 15) and operations manual (DOM) to comport with the wage-related provisions of Proposition 139, the voter Initiative Act that authorized the Joint Venture program. Back wages from underpayment were also ordered.

The Joint Venture program authorizing private contractors to set up businesses that employ prisoners on state prison grounds was enacted by California voters in 1990 as a "win-win" concept that would provide contractors with lower operating costs while giving prisoners a chance to gain work ethics, skills and real-world wages during their sentences. Prisoners' wages are to be parceled out in equal portions that offset their incarceration costs and that are paid into victim restitution funds, paid into their prison trust accounts, paid to support their families, and put into untouchable savings accounts. But this program, which became a national model, has withered to less than half its size of several years ago, and is today a shambles. As of July, 2004, only 150 of California's 163,000 prisoners, at six of the thirty-three prisons, participate.

Blame for the program's poor performance ranges from a declining economy, to a dearth of available space on prison grounds to house such ventures, to competition from more business-friendly states and neglect by top state officials. Although the claimed 15% recidivism rate of Joint Venture parolees is a great improvement over the 60% overall rate for CDC parolees, operating problems have overtaken visible benefits.

One contractor, CMT Blues, made T-shirts for No Fear and other hip brands. Today it is seeking $7 million in damages against CDC, accusing it of destroying the company through misguided promises of cheap prison labor. CMT Blues, operating at San Diego's R.J. Donovan State Prison, was becoming a multi-million dollar business, when trouble struck. A "sweetheart" provision in their CDC contract permitted prisoner trainees to work without wages as long as they did not produce products for sale. The California labor commissioner disapproved this practice and ordered back wage payments. (See: Vasquez v. State of California, 105 Cal.App.4th 849 (2003); PLN, Oct. `03, p.26.) The CDC Joint Venture program chief, Jessica Blonien, said CDC followed federal rules for such programs assuming incorrectly that state labor laws did not apply.

Then prisoner workers alleged that they were required to sew "Made in U.S.A." labels into shirts imported from Honduras. Those prisoners were placed in solitary confinement. The publicity surrounding this event brought in the textile workers union (Union of Needletrades, Industrial & Textile Employees, AFL-CIO) to sue CMT Blues and CDC. (See: Irvin v. Ratelle, San Diego Superior Court Case No. GIC-740832; PLN, Dec. 2002, p.16.) On the first day of the trial in 2002, Superior Court Judge William C. Pate ordered CMT Blues to pay back wages of $840,000 plus attorney fees of $500,000. CMT Blues shut down its Donovan operation and counter-sued for $7 million.

The prisoners and textile workers union formed an alliance, seeking an injunction to enforce state labor laws against CMT Blues and other Joint Venture operators. CDC acceded to the February injunction placing the entire Joint Venture program under Judge Pate's supervision for two years. It is believed that other Joint Venture contractors, in violation of PC § 2717.8, may owe their prison laborers back wages of millions of dollars from underpayment.

The injunction provides for the development of Wage Plans and Duty Statements. These must be similar to those of the employers' outside factories or be based upon similar work in the locale of the prison, taking into account seniority, work performance and skill levels. Wage scales shall comport with PC § 2717.8. Wage record-keeping shall be instigated, and must comply with standards of the California Labor Code and the Industrial Welfare Commission. Payroll data must be provided to the defendants' counsel every 90 days.

CDC must amend its DOM and Title 15 administrative regulations to include compliance with the requirements of Proposition 139. All Joint Venture prison workers shall be notified of their rights under the injunction. Alleged reprisals for filing of prisoner grievances are to be immediately investigated. All Joint Venture employers shall post a bond in the amount of two months wages. Joint Venture employers Western Mfg. and Pub Brewery are expressly ordered to review past wage payments and to correct any underpayments. Attorney fees shall be ordered by the court. (Plaintiffs are represented by Thomas Clifton and Colin Munro of Walnut Creek, California.)

But on August 19, 2004, an angry Judge Pate gave a scathing six-month review of the failure of CDC and its Joint Venture contractors to obey the injunction. The court noted that Western Manufacturing was still paying only the minimum wage of $6.75 per hour, versus the median prevailing wage of between $8.37 and $13.55. Moreover, Western had fired six prisoners at its operation at Calipatria State Prison which the court concluded was retaliatory for filing wage grievances. Additionally, CDC had failed to amend its regulations. The judge ordered the parties, along with officials of the state Division of Labor Standards Enforcement, to report back in two weeks. He is considering appointing a Special Master to oversee the program.

Notwithstanding the program's troubles, many prisoners have benefited from their Joint Venture experience. Youth and Adult Corrections Secretary Roderick Q. Hickman lauds the program as "provid[ing] parolees with a means of success in the community." Hickman did not indicate how much state money was spent subsidizing the program. PLN has previously reported that prison industries typically depend on government subsidies to survive. But Bob Marinaccio, executive director of the Crime Victims Fund near San Diego, lamented that Joint Venture used to provide them $100,000 per year enough to help 600 to 700 victims. Today it generates only about one third of that, due to the program's slowdown.

Source: Sacramento Bee.

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