Forced Labor Allegations Among Court-Ordered Recovery Centers: Analyzing Fochtman v. DARP, Inc.

Photo by NeONBRAND on Unsplash

Margo McGehee, Associate Member, University of Cincinnati Law Review

I. Introduction

Throughout the U.S., many courts are sending nonviolent drug offenders to addiction treatment facilities in lieu of prison.[1] Studies show that these centers offer a more positive outcome of rehabilitation while also helping to alleviate the problem of overcrowding in prisons.[2] But what many offenders thought would be a welcomed and productive alternative to serving prison sentences has ended up being a nightmare scenario.

Recently, several of these treatment centers are under intense scrutiny as hundreds of former residents have filed multiple class action lawsuits alleging forced and uncompensated labor.[3] Instead of receiving the rehabilitating treatment they anticipated, class members allege that the centers farmed them out to private, for-profit companies to work for no pay while the centers collected wages on their behalf.[4] All class members seek unpaid minimum wages and overtime compensation, and several suits raise claims of involuntary servitude and human trafficking.[5]

Although most suits are still in the early phases of litigation, the Western District of Arkansas recently decided the first of these cases in favor of the Plaintiffs, classifying the class members as employees and the Defendants as joint employers under state and federal law.[6] This article will examine the court’s decision in Fochtman v. DARP, Inc. and explain why residents of court-ordered recovery centers should be entitled to minimum wage and overtime compensation.

II. Background

A. Fochtman v. DARP, Inc.

The Drug and Alcohol Recovery Program (“DARP”) is a non-profit recovery center located in Decatur, Arkansas.[7] Each DARP resident chooses to participate in the recovery program as an alternative to serving a prison sentence.[8] In order to fund its operations, DARP contracted with the for-profit company Hendren Plastics, Inc. (“Hendren”) and agreed to transport its residents to Hendren for daily shifts at a flat, hourly rate with the possibility of overtime compensation.[9] Hendren does not pay the workers directly, but instead pays DARP a lump-sum for the total work completed by the residents.[10]

Upon entering the program, residents are required to sign an “Admission Agreement,” which states that they are not considered employees and will not be paid wages for their work.[11] In exchange for their labor, residents receive a bed space, meals, clothing, basic hygiene supplies, and optional Alcoholics Anonymous (“AA”) or Narcotics Anonymous (“NA”) meetings.[12] The Agreement also states that residents will face the possibility of prison time if they do not complete DARP’s program requirements.[13]

In 2018, a class of former DARP residents brought suit against DARP and Hendren seeking back pay for unpaid minimum wages and overtime compensation.[14] The Plaintiffs claimed to be employees of both DARP and Hendren and sought compensation for their labor.[15] In defense, DARP and Hendren argued that the residents were not employees because the work they performed was part of their rehabilitation treatment.[16] Further, the defendants claimed that residents waived any rights to employee protections by signing the Admission Agreement.[17]

The Fochtman court relied on the Fair Labor and Standards Act (“FLSA”) and the Arkansas Minimum Wage Act (“AMWA”) to determine whether an employee/employer relationship existed between the class members, DARP, and Hendren.[18] The FLSA, as well as its state counterparts, protects qualifying employees by mandating minimum wage and overtime compensation.[19] Both the FLSA and AMWA define “employee” as “any individual employed by an employer,”[20] and the Supreme Court has instructed lower courts to broadly interpret the FLSA’s definition.[21]

The court also relied on the FLSA and AMWA’s definition of “employer,” which includes anyone “acting directly or indirectly in the interest of an employer in relation to an employee,”[22] and the court considered whether DARP and Hendren had control over the hiring and firing of employees, the manner in which work is performed, and the setting of employees’ wages.[23] Further, the Acts define “joint-employer” as two employers who are dependent on each other and receive simultaneous benefits from the same employee.[24]

Finally, the court adopted the Supreme Court’s test in Tony and Susan Alamo Foundation v. Secretary of Labor to determine whether workers who waive their right to “employee” status are nevertheless considered employees under the law due to the economic reality of their situation.[25] The Alamo court concluded that “[i]f the worker expected to receive compensation in the form of in-kind benefits in exchange for their work, then the worker was an employee under the law, regardless of the worker’s subjective expectation of cash wages.”[26] The court considered in-kind benefits as “wages in another form,” such as food, shelter, clothing, transportation and medical benefits.[27]

Under the FLSA and AWMA definitions, as well as the Alamo test, the Fochtman court concluded that the class members were employees of both DARP and Hendren and were entitled to minimum-wage and overtime compensation.[28] The court determined that DARP residents expected to receive in-kind benefits in exchange for their work at Hendren, making them employees under Alamo.[29] Additionally, the court concluded that the class members did not waive their employee protections when they signed the DARP Admission Agreement.[30]

Fochtman is currently on appeal in the 8th Circuit.[31]

B. Future Cases

On the horizon are several more class action suits against similar recovery centers, including Christian Alcoholics & Addicts in Recovery (“CAAIR”), an addiction treatment center based in Jay, Oklahoma.[32] Similar to DARP, CAAIR contracted with Simmons Food, Inc. (“Simmons”), a for-profit chicken processing service, and provided its residents as workers.[33] In their complaint, the class members allege that they were required to sign an agreement upon entering the program stating that they were not employees and were not entitled to cash wages.[34] These residents allege that they were forced to work well over 40 hours per week in dangerous conditions for no pay, suffered significant work-related injuries, were under constant threat of incarceration, and did not receive any sort of drug rehabilitation treatment.[35] Like the class members in Fochtman, the class members at CAAIR seek minimum-wage and overtime compensation under the FLSA.[36]

III. Discussion

The Fochtman court reached the right result in finding that DARP residents are employees protected by the FLSA’s minimum wage and overtime compensation requirements, and the district courts deciding the upcoming class action suits should follow its reasoning.

Residents of drug recovery programs such as DARP and CAAIR should be considered employees under the FLSA. Congress passed the FLSA in order to protect vulnerable workers, and residents of these programs are in a uniquely vulnerable position—they are required to sign away their employment rights upon entering the program, work without pay, and threatened with prison if they do not comply. As the Supreme Court requires lower courts to interpret the FLSA’s definition of “employee” broadly, the district courts in these cases should find that the class members were employees.[37]

Additionally, the Supreme Court’s test set forth in Alamo, which states that workers must be considered employees if they expect to receive in-kind benefits for their work,[38] should lead courts to find that the class members are employees under the FLSA. Residents of these programs know that they will not receive cash wages for their labor, but they do expect to receive certain in-kind benefits as compensation, such as food, shelter, personal hygiene items, medical care, and, most importantly, drug rehabilitation treatment. Since residents expect to receive these in-kind benefits, courts should consider the residents employees under the FLSA’s protection, regardless of their expectations about receiving cash wages.

Courts should also find that recovery centers and the private companies with which they contract are joint employers of the residents under the FLSA. The recovery centers and the private companies are mutually dependent upon the residents’ labor, and both receive benefits from the same group of workers. The private companies benefit from the consistency and reliability of the workforce provided by the recovery centers, and the centers benefit from the steady flow of income based on their residents’ labor. Further, the recovery centers and the private companies mutually agree upon the residents’ hourly and overtime rates of pay, the shifts they work, the training they receive, and when residents can be hired or fired. The actions of both the recovery centers and the private companies fall squarely within the FLSA’s definition of joint employer.[39]

Like the defendants in Fochtman, the defendants in the upcoming class action suits argue that the class members effectively waived entitlement to employee protections when they signed agreements to enter their programs.[40] However, like the Fochtman court, these courts should reject this argument and find that the FLSA’s protections are not waivable. Under the Alamo test, a worker’s expectations about wages and her employment status are immaterial in determining her status under the FLSA.[41] The Act applies to all workers who fit the definition of “employee,” “even those who would decline its protections.”[42] Even though the residents knew that they were signing away their employee status and had no expectations of receiving wages for their labor, they are still protected by the FLSA’s minimum wage and overtime compensation requirements.

Additionally, the court in Fochtman addressed another important reason why the admissions agreements are non-binding on residents regarding their employee status—the recovery programs exerted superior bargaining power over its residents when deciding the terms, rendering the agreements unconscionable.[43] When nonviolent drug offenders find themselves at the doors of DARP, CAAIR, or a similar recovery center, they have two options: either participate in the recovery program, or go to prison. Offenders do not have a meaningful choice, as prison is generally seen as the much less desirable and potentially harmful option. Even if residents disagree with terms of the admission agreement, they do not have the bargaining power to challenge its terms. The programs are aware of their power over the residents, as former residents of both DARP and CAAIR claim their program directors continuously used threats of imprisonment as a means to coerce the class members into working, even when injured or ill.[44] Due to the unequal bargaining power in creation of the agreements and the threats used against residents to carry out its terms, the courts in these cases should find any such agreements non-binding on the residents.

The defendants in Fochtman also argued that residents should not be considered employees because the work they performed was part of their rehabilitation treatment. Like the Fochtman court, other district courts should reject this argument. Alamo noted that any work performed solely for personal purpose or pleasure, without the expectation of compensation, is outside the sweep of the FLSA.[45] However, as described above, residents of these programs do not work without expectation of compensation—they expect to receive in-kind benefits for their labor. Even if residents receive rehabilitative treatment from their labor, the recovery programs still must comply with the FLSA’s minimum wage and overtime compensation requirements.

Finally, although Fochtman and the other upcoming cases do not raise the issue of licensing and regulating requirements for these recovery programs, a key takeaway of this wave of litigation is that more must be done to regulate the actual treatment residents receive. Drug rehabilitation and treatment centers, when properly conducted, offer nonviolent drug offenders a productive alternative to prison that has been proven to decrease the likelihood of serving future jail time.[46] However, the problem with centers like DARP and CAAIR is that they are classified as “recovery” programs and are not subject to the same strict licensing requirements as “rehabilitation” and “treatment” centers.[47] DARP and CAAIR are not licensed to offer actual drug treatment to residents—they may only offer AA and NA meetings led by the residents themselves. In practice, these recovery centers do little, if anything, to rehabilitate its residents and instead function as unpaid labor programs.[48] Classifying residents of these programs as employees under the FLSA is a positive step toward regulating these centers, but more must be done to regulate the actual rehabilitation treatment they need and expect.

IV. Conclusion

Reflecting on his experience at DARP, Plaintiff Mark Fochtman stated, “Recovery is not a business. You’re doomed to fail if you try to turn recovery into a business, and that’s what happened with this.”[49] DARP, CAAIR, and other recovery centers involved in the upcoming lawsuits made recovery their business when they contracted with private companies to fund their operations. However, each center ultimately failed to rehabilitate its residents and pay them the appropriate wages required by law. Based on the language of the FLSA and its interpretation by the Supreme Court, the courts deciding these class action suits should find that the class members were employees of both the recovery centers and the private companies, and find that they are entitled to compensation for their labor.

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[1] Jack Karp, All Work And No Pay: How Rehab Can Mean Forced Labor, Law 360 (Sept. 27, 2020), https://www.law360.com/access-to-justice/articles/1311467/all-work-and-no-pay-how-rehab-can-mean-forced-labor.

[2] Rehabilitation vs. Incarceration: Rehabilitation in the Criminal Justice System, Oxford Treatment Center (May 26, 2020), https://www.oxfordtreatment.com/rehab-vs-prison/.

[3] Karp, supra note 1.

[4] Id.

[5] Id.

[6] Fochtman v. DARP, Inc., No. 5:18-CV-5047, 2019 WL 4740510 (W.D. Ark. Sept. 27, 2019).

[7] Id. at *1.

[8] Id. at *2.

[9] Id.

[10] Id.

[11] Id.

[12] Id. at *2, *22.

[13] Id. at *2.

[14] Id. at *1.

[15] Id. at *3.

[16] Karp, supra note 1.

[17] Fochtman, 2019 WL 4740510 at *4.

[18] Id. at *3.

[19] Wages and the Fair Labor Standards Act, U.S. Department of Labor (last visited Oct. 24, 2020), https://www.dol.gov/agencies/whd/flsa. The FLSA is codified at 29 U.S.C. §§ 201 et seq.

[20] 29 U.S.C. § 203; Ark. Code Ann. § 11-4-203.

[21] See Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 326 (1992).

[22] 29 U.S.C. § 203; Ark. Code Ann. § 11-4-203.

[23] Dole v. Cont’l Cuisine, Inc., 751 F. Supp. 799, 802–03 (E.D. Ark. 1990) (citing Wirtz v. Pure Ice Co., 322 F.2d 259 (8th Cir. 1963)).

[24] Ark. Code R. § 14.1-110(A); 29 C.F.R. § 791.2(a).

[25] Fochtman, 2019 WL 4740510 at *5 (citing Tony and Susan Alamo Foundation v. Secretary of Labor, 471 U.S. 290, 295 (1985)).

[26] Id.

[27] Id.

[28] Id. at *13.

[29] Id. at *5-6.

[30] Id. at *9.

[31] Karp, supra note 1.

[32] Id.

[33] Complaint at 7, Copeland v. C.A.A.I.R., Inc., No. 17-CV-564-TCK (N.D. Okla. filed Oct. 10, 2017), https://casetext.com/case/copeland-v-caair-inc.

[34] Id. at 8.

[35] Id. at 4, 8-12, 36.

[36] Id. at 5-6.

[37] See Nationwide Mut. Ins. Co. v. Darden, 503 U.S. 318, 326 (1992).

[38] Alamo, 471 U.S. at 295.

[39] See Ark. Code R. § 14.1-110(A); 29 C.F.R. § 791.2(a).

[40]  Karp, supra note 1.

[41] Alamo, 471 U.S. at 302.

[42] Id.

[43] Fochtman, 2019 WL 4740510 at *8.

[44] Karp, supra note 1.

[45] Fochtman, 2019 WL 4740510 at *5.

[46] Oxford Treatment Center, supra note 2.

[47] Karp, supra note 1.

[48] Id.

[49] Id.