Gilbreath v. Cutter Biological, Inc.

931 F.2d 1320, 1991 WL 58485

• Court: Court of Appeals for the Ninth Circuit
• Decided: April 22, 1991
• Docket: Nos. 87-2831, 88-15466 and 89-15658
• Status: Published

Opinions

TROTT, Circuit Judge:

SUMMARY

Appellants, inmates in an Arizona penitentiary, appeal the dismissal of their action seeking damages, alleging the state did not pay them minimum wages for work in prison industry. They claim wage protection under the Fair Labor Standards Act (“FLSA”), 29 U.S.C. §§ 201-219 (1989), and Arizona law. They also claim they have been denied without due process their property interest in the funds due them under state law, in violation of 42 U.S.C. § 1983. The district court’s judgment is affirmed.

FACTS

Plaintiffs are incarcerated in the Arizona State Prison at Florence, Arizona. During their incarceration, they worked in various capacities at a “plasma center" located at the institution and operated by defendant Cutter Biological (“Cutter”), a division of Scripps Miles Laboratory, pursuant to a contract between Cutter and the Arizona Department of Corrections (“Department”). Cutter operated at the institution for approximately twenty-one years.¹

Under the contract, the Department assigned prisoners to the plasma center to act as assistants to Cutter’s technical staff. All inmates so assigned were approved for that work at the direction and discretion of the Department. The plasma center was required to pay the Department twelve dollars per week for each prisoner who worked at the center. This compensation for services was paid directly to the Inmates’ Account Office of the Department. Pursuant to Arizona law, the Department retained control over the disposition of all compensation paid by Cutter to the Inmates’ Accounts Office. No oral or written agreement existed between the plasma center and the inmates regarding compensation or conditions of employment.

Cutter did not have the power to hire and fire inmates, although it did request some prisoner assignments and removals over the years covered by the contracts. Nor did Cutter maintain employment records for the inmates. Cutter did have day-today supervision of the inmates’ work responsibilities. The Department maintained control over the inmate workers to the extent it determined which inmates were eligible to work. It also maintained security over them as it did over all other inmates in its care and custody. State law requires that inmates work and be paid for their labor. Ariz.Rev.Stat.Ann. § 31-251(A) (1989).

Plaintiffs filed a complaint in district court against the state defendants and Cutter, alleging they had been denied minimum wages for their work performed at Cutter, in violation of state and federal law. First, plaintiffs complained they were not granted the minimum wage required by the FLSA, alleging (1) they were “employees” as defined by section 203(e)(1) and (2) defendants were “employers” as defined by section 203(d) of that statute. Second, plaintiffs sought relief under Arizona statutes, Ariz.Rev.Stat.Ann. §§ 31-254(A) and 41-1624.01 (1989), alleging these and related statutes require that inmates engaged in correctional industries programs pursuant to sections 41-1621 through 41-1629 receive the minimum wage.

Plaintiffs also sought relief under 42 U.S.C. section 1983, alleging that the Department’s failure to provide minimum wages mandated by Arizona statutes for inmates working for private parties under contract with the Department resulted in the inmates being deprived of a liberty interest without due process of law.

The district court granted summary judgment against plaintiffs on their FLSA claims, finding that defendants were not employers as contemplated by the FLSA. 694 F.Supp. 651. The court also granted summary judgment in favor of defendants on plaintiffs’ state law claims, finding that the Eleventh Amendment acted as a bar to plaintiffs’ claims against Arizona for the back-pay relief requested.

The court granted summary judgment to Cutter on plaintiffs’ section 1983 claim. With reference to the state defendants, the court granted partial summary judgment in their favor, reasoning that although it lacked subject matter jurisdiction to hear the underlying state law claims, it could retain jurisdiction to hear the section 1983 suit against the state defendants. The court held that if plaintiffs were to prevail on the remaining section 1983 claims, the court could grant prospective relief that would not violate the Eleventh Amendment.

ANALYSIS

I

Notice of Appeal

Appellees argue that appellants have failed to comply with Rule 3(c) of the Federal Rules of Appellate Procedure. Rule 3(c) provides in pertinent part:

The notice of appeal shall specify the party or parties taking the appeal ... The Notice of Appeal reads: “Come now plaintiffs, as consolidated into this cause and do hereby appeal the judgment of this court_” As appellees note, the Supreme Court has held that “although a court may construe the Rules liberally in determining whether they have been complied with, it may not waive the jurisdictional requirements of Rules 3 and 4, even for ‘good cause shown’ under Rule 2, if it finds that they have not been met.” Torres v. Oakland Scavenger Co., 487 U.S. 312, 317, 108 S.Ct. 2405, 101 L.Ed.2d 285 (1988). The instant case, however, is distinguishable from Torres. In Torres, one party in a multiparty suit was missing from the notice of appeal due to a clerical error. Under that circumstance, there was no reason for opposing counsel to believe the unnamed party would be a party to the appeal. By contrast, appellants in this case accurately listed the parties to the appeal by describing them as all plaintiffs consolidated below. There was no need for appellants to list each party individually, since appellees could have covered their identities by referring to records of the lower court proceedings. The policy behind Rule 3(c) thus was adequately served.

II

The FLSA Claim

A. Eleventh Amendment Immunity

Appellants argue that the FLSA mandates minimum wage for their hours worked in prison industry. To decide this issue, we must first determine if the FLSA pierces all the states’ Eleventh Amendment immunity, and second, whether these prisoners enjoyed with the state an “employee-employer” relationship as that relationship is understood by the FLSA.

The FLSA was enacted in 1938. It requires employers to pay employees a minimum hourly wage and overtime pay. 29 U.S.C. §§ 201-219 (1988). Its essential purpose is to provide for workers a “minimum standard of all living necessary for health, efficiency, and general well-being of workers.” 29 U.S.C. § 202. Originally, states and their political subdivisions were expressly excluded from the coverage of the FLSA. 29 U.S.C. § 203(d) (1958) (current version at 29 U.S.C. § 203(d) (1988)). In 1966, Congress amended the FLSA to extend coverage to employees of state schools, hospitals, and nursing homes. 29 U.S.C. § 203(d), (s)(4) (1970) (current version at 29 U.S.C. § 203(d) (1988)). In Employees of the Dept. of Pub. Health & Welfare v. Dept. of Pub. Health & Welfare, 411 U.S. 279, 93 S.Ct. 1614, 36 L.Ed.2d 251 (1973), the Supreme Court held that although the FLSA had been extended to some state employees by the 1966 amendments, the state itself was immune from suits brought by its employees because the Eleventh Amendment precluded such suits. The Court stated:

[W]e have found not a word in the history of the 1966 amendments to indicate a purpose of Congress to make it possible for a citizen of that State or another State to sue the State in federal courts.... It would also be surprising in the present case to infer that Congress deprived Missouri of her constitutional immunity without changing the old § 16(b) under which she could not be sued or indicating in some way by clear language that the constitutional immunity was swept away.

Id. at 285, 93 S.Ct. at 1618. While the employees could not bring an action against the state, however, they were not totally without a remedy as the Secretary of Labor could bring an action against the state for unpaid minimum wages or unpaid overtime violations on their behalf. Id. at 285-86, 93 S.Ct. at 1618-19.

The history of whether state employees fall within the coverage of the FLSA is marked by considerable interplay between various branches of government. In 1974, Congress amended the FLSA, extending its protections to almost all state employees. 29 U.S.C. § 203(d), (x) (1976) (current version in 29 U.S.C. § 203(d) (1988)). Then, in National League of Cities v. Usery, 426 U.S. 833, 852, 96 S.Ct. 2465, 49 L.Ed.2d 245 (1976), the Supreme Court ruled that Congress was without authority to extend FLSA coverage to state employees in “areas of traditional governmental functions.” In 1985, however, the Supreme Court reversed field and overruled National League of Cities in Garcia v. San Antonio Metro. Transit Auth., 469 U.S. 528, 105 S.Ct. 1005, 83 L.Ed.2d 1016 (1985), holding that, “[w]e therefore now reject, as unsound in principal and unworkable in practice, a rule of state immunity from federal regulation that turns on a judicial appraisal of whether a particular governmental function is ‘integral’ or ‘traditional.’ ” 469 U.S. at 546-47, 105 S.Ct. at 1015-1016. The result of Garcia was to bring all employees of the states and their political subdivisions within the full coverage of the FLSA. Ackinclose v. Palm Beach County, 845 F.2d 931, 933 (11th Cir.1988).

In 1985, Congress amended the FLSA to alleviate temporarily the financial burden on states caused by Garcia. The states were given until April 15, 1986 to conform their procedures to the FLSA. Pub.L. No. 99-150, 99 Stat. 787 § 2(c)(1) (1985), 29 U.S.C. § 216 (historical note) (1988). Contrary to appellees’ arguments, it is clear that the FLSA’s protection now extends to state employees.

B. The Employer-Employee Relationship

Appellants argue that they enjoy an employee-employer relationship with the State of Arizona, and that Cutter Biological and the state were “joint employers.” Under the FLSA, an employer “include[sj any person acting directly or indirectly in the interest of an employer in relation to an employee and includes a public agency....” 29 U.S.C. § 203(d) (1988). “In the case of an individual employed by a public agency, such term means ... any individual employed by a State_” 29 U.S.C. § 203(e)(2)(C) (1988).

The Supreme Court, in a non-prisoner case, has articulated an “economic reality test” to be considered in deciding if an employee-employer relationship exists. In Goldberg v. Whitaker House Coop., 366 U.S. 28, 33, 81 S.Ct. 933, 936, 6 L.Ed.2d 100 (1961), the court held that a determination under the FLSA of whether an employment relationship exists should be based on the “economic reality” of the employment situation. The Court did not specify the factors to be weighed in this evaluation.

This circuit, in deciding if an employer-employee relationship exists, has applied an “economic reality” test which identifies four factors:

whether the alleged employer (1) had the power to hire and fire the employees, (2) supervised and controlled employee work schedules or conditions of employment, (3) determined the rate and method of payment, and (4) maintained employment records.

Bonnette v. California Health & Welfare Agency, 704 F.2d 1465, 1470 (9th Cir.1983).² However, these particular factors are merely guidelines; “they are not etched in stone and will not be blindly applied.” Id. “The determination of whether an employer-employee relationship exists does not depend on ‘isolated factors but rather upon the circumstances of the whole activity.’ ” Id. at 1469 (quoting Rutherford Food Corp. v. McComb, 331 U.S. 722, 730, 67 S.Ct. 1473, 1477, 91 L.Ed. 1772 (1947)).

Appellees argue that we should not reach the economic reality issue, claiming the FLSA does not apply to prison inmates as a class. I believe this argument has merit. A review of the FLSA in the light of its evident purpose and legislative history, conducted with an eye guided by common sense and common intelligence, leads me to the inescapable conclusion that it is highly implausible that Congress intended the FLSA’s minimum wage protection be extended to felons serving time in prison. This is a category of persons — convicted murderers, rapists, burglars, armed robbers, swindlers, thieves, and the like— whose civil rights are subject to suspension and whose work in prison could be accurately characterized in an economic sense as involuntary servitude, peonage, or indeed slavery — all of which are prohibited by law — were it not for the exceptions carved out by the courts from these prohibitions for persons “duly tried, convicted, sentenced and imprisoned for crime in accordance with law.” Draper v. Rhay, 315 F.2d 193, 197 (9th Cir.), cert. denied, 375 U.S. 915, 84 S.Ct. 214, 11 L.Ed.2d 153 (1963) (citing Lindsey v. Leavy, 149 F.2d 899, 901-02 (9th Cir.), cert. denied, 326 U.S. 783, 66 S.Ct. 331, 90 L.Ed. 474 (1946)). Not a word can be found anywhere in the relevant statutes or authorities indicating an intent by Congress to include such a distinctive class of “workers” in the FLSA. It is true as observed by the Second Circuit in Carter v. Dutchess Community College, 735 F.2d 8, 13 (2d Cir.1984), that prisoners are not explicitly excepted in the statutes from FLSA coverage, but I find singularly unconvincing the Second Circuit’s argument that the statutory scheme’s failure to include “prisoners” on what it terms “an extensive list”³ of workers who are excepted expressly from FLSA coverage provides somehow a rationale to bring them within the statute’s mandate. This argument begs the question. It presupposes an affirmative answer to the key underlying question of whether prisoners who work are workers within the meaning of the statutory scheme at issue.⁴ It is equally plausible, indeed more so, that in view of the manifest purpose of Congress in enacting the FLSA, it did not cross any member’s mind — even for a moment — that felons serving hard time in prison and working in the process would be covered by this economic protection. I reject as almost whimsical the notion that Congress could have intended such a radical result as bringing prisoners within the FLSA without expressly so stating. There are obvious policy considerations in such a result that should be openly addressed by Congress, not the courts.

My conclusion is bolstered when I apply to this unique situation the economic realities test. The results of such application reveal why the FLSA itself cannot be said to cover prison labor and why no employer-employee relationship can be found to exist between Arizona and inmates who worked in Cutter’s lab.

The proper starting point in such an analysis is the state’s complete control over Arizona’s inmates. Not only does the state provide the inmates’ food, shelter, and clothing, but it is only with the state’s permission that prisoners are allowed the privilege of working. The state’s absolute power over appellants is a power that is not a characteristic of — and indeed is inconsistent with — the bargained-for exchange of labor which occurs in a true employer-employee relationship. Arizona’s prisoners have no economic need for the FLSA, none.

My judgment in this respect is informed by the law of Arizona concerning the status of prisoners working in ARCOR, an acronym for Arizona Correctional Enterprises. Ariz.Rev.Stat.Ann. § 31-251A (1989) declares that: “Each able-bodied prisoner under commitment to the state department of corrections shall engage in hard labor for not less than forty hours per week ...” (emphasis added); and section 31-251E states bluntly that

“notwithstanding any other law, no prisoner given a work assignment or required to perform any labor by the department of corrections shall be considered an employee or to be employed by the state or the department of corrections, regardless of whether the prisoner is compensated or not, nor shall an employee-employer relationship exist between the prisoner and the department of corrections or the state for any purpose and none of the rights or privileges otherwise accorded to employees by law shall accrue to such prisoners.”

ARCOR enterprises was established in 1969. It currently provides for “industries [and] enterprises” to be “conducted for the employment of prisoners in the manufacture, or production of such articles, or products as may be needed for the construction, operation, maintenance or use of any office, department, institution or agency supported in whole or in part by a state or its political subdivisions or for sale to the public.” Ariz.Rev.Stat.Ann. § 41-1622 (1989).

The stated purposes of correctional industries established pursuant to section 41-1622 are to:

“1. Make available within the state correctional institution opportunities for employment of inmates in jobs which combat idleness or develop good working habits.

2. Provide training and work experience that will assist inmates in eventually securing and holding gainful employment outside the correctional institution.

3. Reduce the cost to society of maintaining an inmate through the sale of inmate products and services and by requiring and enabling inmates to pay some portion of their room and board costs.

4. Require and enable inmates to make restitution to the victims of their offenses, so as to assist the inmates in accepting responsibility for the consequences of their acts.

5. Require and enable inmates to provide assistance to their dependents, thus tending to strengthen family ties.

6. Require and enable the inmate to accumulate savings for his eventual return to the community.”

Ariz.Rev.Stat.Ann. § 41-1622 (1989) (historical note) (quoting 1978 Ariz.Sess.Laws, Ch. 164, § 29) (emphasis added).

The relevant law goes on to provide “compensatpon] [to] prisoners for their services,” Ariz.Rev.Stat.Ann. § 41-1624.01(A) (1989), but it does so by specifying that all monies derived from contract services from either private or public sources are to be placed in a “specially designated revolving fund” that is then used in part to compensate prisoners. Ariz.Rev.Stat.Ann. § 41-1624(B) (1989). The law establishing the revolving fund explicitly states: “No state appropriated funds may be utilized for payment of prisoner wages or benefits.” Ariz.Rev.Stat.Ann. § 41-1624(A)(2) (1989). Arizona has the right and the power to force prisoners to work. It also has the right to compensate working prisoners for their labor. I suppose also that it could adopt the FLSA, but it has not done so.

Given this arrangement, and given Arizona’s Criminal Code’s stated public policy of imposing “just and deserved punishment” on those convicted of crime, Ariz. Rev.Stat.Ann. § 13-101 (1989), it thus comes as no surprise that Arizona law explicitly rejects the idea that prisoners are employees of the state.

In summary, when the economic reality of the relationship in this case together with Arizona’s view of prisoners vis-a-vis their prison labor situation are viewed in the light of the express purpose of the FLSA, i.e., to provide for workers “a minimum standard of living necessary for health, efficiency and [their] general well-being ...” 29 U.S.C. § 202 (1988), the conclusion that the FLSA does not apply to the prisoners in this case becomes readily apparent. I now come to Cutter Biological’s relationship with these prisoners. Considering the factors listed in Bonnette, appellants did not raise a triable issue of fact here either. Under its contract with the Department of Corrections, Cutter did not have the power to hire or fire the inmate workers. Although it supervised the inmates in their daily activities, the state held the ultimate supervisory authority. The contract provided that the Department of Corrections had the authority to approve inmate assignments, and the responsibility to determine the rate and method of payment. Finally, appellants did not controvert the appellees’ affidavits showing that Cutter Biological did not keep employment records for the inmates. The economic reality, therefore, is that Cutter Biological was not appellants’ employer.

Thus, appellants have not raised a triable issue of fact under the economic reality test as to the existence of an employment relationship with either Cutter Biological or the State of Arizona, or for that matter with both of them if viewed in this venture as operating jointly.

Ill

The State Law Claims

The district court found it was without subject matter jurisdiction to entertain appellants’ state law claims. Appellants’ state law claims arise out of Ariz.Rev.Stat. Ann. § 41-1624.01, which requires the Director to compensate prisoners for their services pursuant to Ariz.Rev.Stat.Ann. § 31-254. That section provides, in pertinent part:

A. Each prisoner who is engaged in productive work in any state prison or institution under the jurisdiction of the department of corrections as a part of the prison industries program shall receive for his work such compensation as the director of the department of corrections shall determine. Such compensation shall be in accordance with a graduated schedule based on quantity and quality of work performed and skill required for its performance, but in no event shall such compensation exceed fifty cents per hour unless the prisoner is employed in an ARCOR enterprise pursuant to title 41, chapter 11, article 3. If the director enters into a contract pursuant to § 41-1624.01 with a private person, firm, corporation or association the compensation shall be as prescribed by the person, firm, corporation or association but shall not be below the minimum wage.

Id. (footnote omitted).

Pennhurst State School & Hosp. v. Halderman, 465 U.S. 89, 104 S.Ct. 900, 79 L.Ed.2d 67 (1984), held that the Eleventh Amendment deprives federal courts jurisdiction to order state actors to comply with state law. As the Court stated, “[i]t is difficult to think of a greater intrusion on state sovereignty than when a federal court instructs state officials on how to conform their conduct to state law.” 465 U.S. at 106, 104 S.Ct. at 911. Thus, the district court correctly dismissed the state law claims.

IV

The Section 1983 Claim

To survive summary judgment in their section 1983 claim, appellants must have a property right to wages from their work at the plasma center and the parties sued must not be protected by the Eleventh Amendment and must qualify as persons under section 1983.

Appellants argue that they have a property right to wages because they meet the requirement of Arizona law for receiving minimum wages. In Piatt v. MacDougall, 773 F.2d 1032 (9th Cir.1985), this circuit recognized this property interest. The court held that if a prisoner meets the requirements of an Arizona statute mandating wages for prisoners who perform work for private parties, then the state cannot deprive the prisoner of this property interest without due process of law. Id. at 1036.

Along with a property interest, appellants must show that section 1983 provides a federal forum against the named defendants. Appellant’s section 1983 action was filed against state officials, the Department of Corrections and the state of Arizona. The district court correctly dismissed the section 1983 action against the state of Arizona because a state is not a “person” for purposes of section 1983. Will v. Department of State Police, 491 U.S. 58, 71, 109 S.Ct. 2304, 2308, 105 L.Ed.2d 45 (1989). Likewise “arms of the State” such as the Arizona Department of Corrections are not “persons” under section 1983. Id. at 70, 109 S.Ct. at 2311; Mt. Healthy City School Dist. Bd. of Educ. v. Doyle, 429 U.S. 274, 280, 97 S.Ct. 568, 572, 50 L.Ed.2d 471 (1977).

We also affirm the district court’s decision that it had jurisdiction to award prospective relief under section 1983 against the state officials in their official capacities. See Quern v. Jordan, 440 U.S. 332, 337, 99 S.Ct. 1139, 1143, 59 L.Ed.2d (1979); Edelman v. Jordan, 415 U.S. 651, 668, 94 S.Ct. 1347, 1358, 39 L.Ed.2d 662 (1974).

CONCLUSION

We find that the Eleventh Amendment is not a bar to the FLSA action. We hold, however, that state prisoners are not employees of the state or Cutter Biological. We also hold that the district court is without jurisdiction to order state officials to comply with state law, and that appellants’ remedy for the section 1983 action may be limited to prospective injunctive relief. The district court’s judgment is

AFFIRMED.

1 . The plasma center has been closed since September of 1987.

2 . Other courts in prisoner cases have also looked to these factors in determining whether an employment relationship exists. See Carter v. Dutchess Community College, 735 F.2d 8, 12 (2d Cir.1984); Alexander v. Sara, Inc., 559 F.Supp. 42, 43-44 (M.D.La.), aff’d, 721 F.2d 149 (5th Cir.1983); Sims v. Parke Davis & Co., 334 F.Supp. 774, 787 (E.D.Mich.), aff’d, 453 F.2d 1259 (6th Cir.1971), cert. denied, 405 U.S. 978, 92 S.Ct. 1196, 31 L.Ed.2d 254 (1972); Hudgins v. Hart, 323 F.Supp. 898, 899 (E.D.La.1971).

3 . Carter, 735 F.2d at 13 (discussing 29 U.S.C. § 213 (1982)).

4 . We find distinguishable and thus inapplicable Baker v. McNeil Island Corrections Center, 859 F.2d 124 (9th Cir.1988), which deals with Title VII discrimination. It does not cover an economic relationship, and it does not discuss the FLSA.