Texas Prison Authority OK’s Illegal Use of Prison Labor, but PIE Contract Not Renewed
by Gary Hunter
Even though a Texas legislator found the practice illegal, and even though it cost sixty people their jobs, the Private Sector Prison Oversight Authority of the Texas Dept. of Criminal Justice (TDCJ) announced in June 2008 that it would not cancel a contract that used prison labor to build flatbed trailers for commercial use. Despite that decision, the TDCJ later decided not to renew the contract after facing strong criticism.
The controversy arose in 2007 when Texas-based Lufkin Industries received notice that a competitor was selling similar flatbed trailers for considerably less money. Lufkin personnel did some digging, and learned their competitor was a company called Direct Trailer and Equipment Company (DTEC), which imported cheaper components from China and used Texas state prisoners at the Michaels Unit for the assembly process. [See: PLN, Nov. 2008, p.12].
Following that discovery, Lufkin filed a complaint with the Private Sector Prison Oversight Authority. Initially, the Oversight Authority announced in April 2008 that it would decertify the contract between the state and DTEC within 90 days if it was found to be in violation of state and federal law.
DTEC’s contract originated under the Prison Industry Enhancement (PIE) program. The company paid only $1 a year to lease factory space at the Michaels Unit, and advertised it could sell its products for less by using prison labor. Under state and federal law, such contracts are permissible only if they do not create unfair competition with freeworld businesses.
By the time Lufkin discovered they were competing against DTEC, it was too late to reverse the financial damage. Lufkin closed its trailer division in January 2008 and moved 90 employees to other jobs within the company. About 60 others were let go.
On June 12, 2008, the Oversight Authority reversed its earlier decision and stated it would not take action to end DTEC’s prison industry contract.
Paul Perez, Lufkin’s general counsel, commented on the Oversight Authority’s reversal. “I guess I am surprised and disappointed, not just for Lufkin Industries because we have already been affected, but it’s not a good decision for the state of Texas and I’d be very interested in the rationale behind that decision,” he said. “We’ve adjusted, but there are other manufacturers who are going to be unfairly impacted by that decision, competing with prison labor and products.”
The decision also surprised state Sen. Robert Nichols. “I am disappointed in today’s action by the Authority,” he remarked. “It is difficult to understand how this state can allow a contract to continue illegally.”
Sen. Nichols was not alone in his objections. State Agriculture Commissioner Todd Staples and state Rep. Jim McReynolds also called for an end to DTEC’s contract.
In spite of the Oversight Authority’s decision, and facing criticism from both lawmakers and the Texas Workforce Commission, the TDCJ announced on December 10, 2008 that it would not renew DTEC’s contract under the PIE program, which expired on March 1, 2009.
Sen. Nichols applauded the TDCJ’s action. “It’s the right thing to do,” he said. “Hard-working citizens shouldn’t have to compete for jobs with cheap prison labor and facilities paid for by taxpayers.” Nichols also noted that “What’s at stake is not just the jobs lost but also the jobs not created because employers feared the competition from companies using prison labor.”
Sources: Lufkin Daily News, Press release from Sen. Robert Nichols (Dec. 12, 2008)
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