Temporary Workers in Waste and Recycling: Baltimore's Case with Incarcerated Workers

To be (an employee) or not to be (an employee).  That is the question prominent these days in college sports and in the traditional workforce.  By no means does it compare to the distress Hamlet suffers, asking himself whether it is better to face life’s hardships or avoid them by dying.

In May, the National Collegiate Athletic Association reached a nearly $2.8 billion antitrust settlement with college athletes that still leaves unresolved other legal challenges over players’ employment status.  Besides the antitrust settlement, pending federal court cases and National Labor Relations Board proceedings will decide whether college athletes should be classified as employees and thus entitled to unionize, earn a minimum wage, and receive other employment rights.

Earlier this year, the U.S. Department of Labor issued a final rule, updating its guidance to employers on whether a worker is an employee or independent contractor under the Fair Labor Standards Act (FLSA).  “Proper classification of employees and independent contractors results in workers who are employees under the FLSA receiving the hard-earned wages and protections they’re legally entitled to, while also ensuring that independent businesses continue to thrive,” said the department in announcing the rule.

Baltimore County partly encircles but does not include the independent city of Baltimore. Through its Department of Public Works (DPW), the County operates its own processing center where residential recyclables from throughout the County are sorted and baled.  

Until 2020, materials were handled by two types of workers. The first group were temporary workers provided by a staffing agency. They were paid at least the statutory minimum wage, as well as overtime compensation for hours worked in excess of 40 hours per week.  The second group came from the County Department of Corrections (DOC) Detention Center's community corrections program.

The community corrections unit managed two related programs: work release and work detail. Detainees in work release were employed in jobs that they had prior to incarceration or that they secured through “workforce development job sources.”  By contrast, detainees in work detail were assigned to various County operations, including the animal shelter and the recycling center.  Unlike the temporary workers, the incarcerated workers were paid $20 per day despite regularly working nine-to-ten-hour shifts.

Michael Scott worked at the recycling center while serving a short sentence at the detention center. In 2021, he filed a class-action lawsuit against the County in federal district court arguing he was owed "unpaid statutory minimum wages and overtime compensation" for his work and other damages.  The complaint asserted that his work and the work of others at the detention center was covered by the FLSA and two related Maryland wage and hour laws.

Following the parties’ initial gathering of information, both sides filed motions for summary judgment. The district court granted the County's motion and dismissed Scott's suit. The court concluded that Scott's claims were legally deficient because neither he nor the people he represented were "employees" under the FLSA or its state law equivalents.

On appeal, the U.S. Court of Appeals for the Fourth Circuit overturned the district court ruling and sent the case back for consideration of several unanswered, disputed key matters. “Courts – including this one – are generally skeptical of [FLSA] claims brought by incarcerated workers,” the three-judge appellate panel wrote. “But there is no categorical rule that such workers cannot be covered by the Act when they work outside their detention facility's walls and for someone other than their immediate detainer.”

By its terms, the FLSA is no help in deciding whether recycling center workers are “employees.”  The Act defines “employee” as “any individual employed by an employer.”  With no guidance from the text, courts examine the “economic realities” of the relationship between the worker and the putative employer in deciding who is a covered employee. Considering the “totality of the circumstances . . . allows for flexible application to the myriad different working relationships that exist in the national economy," the panel noted.  

The Fourth Circuit has declined to apply the Act to work performed at a workshop located within a penal facility.  However, the court, until Scott’s case, had not yet analyzed whether it applies to off-site inmate work.  The recycling center presented a different scenario: it was neither prison-operated nor did it exist to serve the prison itself.

The County acknowledged that some incarcerated workers fall within the Act's coverage. Detainees participating in work release leave the County's detention center to perform jobs, returning to the detention center at the end of the workday.  For workers at McDonald's, for example. the County admitted those individuals are "employees," and thus McDonald's must pay them the minimum wage and whatever overtime is due under the Act. That concession, said the appeals court, is nothing more than “commonsense.”

According to the panel, three aspects determine whether the detained workers are covered by the Act: (1) Does the relationship between the workers and their putative employer

resemble a true employer-employee relationship? (2) Do the purposes of the Act call for its application? and (3) Does the putative employer have a rehabilitative, rather than pecuniary, interest in the plaintiffs' labor?

Where detainees have the opportunity to work “solely at the prerogative of the custodian" they "do not deal at arms' length" with their putative employer like the typical worker in the national economy, the appeals court explained. “Such workers have not made the bargained-for exchange of labor for mutual economic gain that occurs in a true employer-employee relationship" and the custodian "wields virtually absolute control over them to a degree simply not found in the free labor situation of true employment."

However, the evidence produced in the lower court suggested that the recycling center exercised the kind of control typical in an employment relationship.  “Although officers from the detention center were present during work detail shifts, it was recycling center staff – not . . . [corrections] officer[s] – who assigned the incarcerated workers' workstations, set the work schedule, provided safety and work equipment, and kept attendance records,” the panel wrote.  “Such facts are consistent with the level of control exercised by a typical employer. * * *  The County argues that corrections officers also had some supervisory role over work detail participants. But at this stage we must accept Scott's characterization of ‘unarmed, retired’ corrections officers who ‘spent their time feeding birds as opposed to supervising inmates during bathroom breaks.’"

The Act deals with not only individual workers who claim coverage, such as Scott and the inmates he represents, but also with how the work they do affects the general well-being of other workers and businesses.  With respect to the latter, it does so by, among other things, thwarting unfair competition, which happens when employers who pay the minimum wage must compete against those who do not. 

County officials acknowledged that "third part[ies] like [W]aste [M]anagement" that do not use incarcerated labor provide the same kind of services the County was providing for itself at the recycling center. Indeed, the record showed it was cheaper for the County to run the recycling center itself than it would have been to engage Waste Management.  That the County, with its artificially low labor costs, also sorted recyclables for two other counties and was endeavoring to gain business from four more only confirmed the potential competitive difficulties faced by private providers.

 “The record contains evidence that the County sought to ‘get rid of the temp workers’ at the recycling center – thereby eliminating what would have been at least minimum wage paying jobs – and thus ‘decrease costs’ by getting ‘more consistent inmate[] numbers’ to do the work instead,” the panel noted.  “Perhaps the best proof that the use of incarcerated workers kept other workers from getting these jobs is that after the County stopped using incarcerated workers at the onset of the COVID-19 pandemic (and this lawsuit), it hired more temporary workers for the recycling center and paid them the minimum wage.”

The final consideration is whether the inmates perform work to turn profits for their supposed employer or rather as a means of rehabilitation and job training.  The answer depends on  who Scott's supposed employer is and thus whose "interest" in Scott's labor matters.

For its part, the County argued that there is no such thing as DPW or DOC and thus the appeals court must consider the interests of Scott's "custodian" – the County as an entity.  In contrast, Scott asserted that it is DPW's interests in using inmate labor that matter here.  Citing a

controlling Fourth Circuit precedent, the appeals court concluded that Scott had the better argument.Scott v. Baltimore County, No. 23-1731, 4th Circ., May 8, 2024.

 “[T]he relevant question is why DPW was using inmate labor, not why DOC was allowing it to happen,” said the panel.  “The County asserts, and the district court concluded, that Scott's claims fail because DOC (or the County via DOC) had a rehabilitative purpose in sending the incarcerated workers to the recycling center,” the panel continued. “But if that argument is right, it is hard to see why people on work release are covered by the Act. DOC does not allow work release participants to go to McDonald's to make McDonald's more profitable; it does so to ‘prepare the inmates for reentry into the community.’ If DOC's rehabilitative aim was enough to evade coverage under the Act, work release participants at McDonald's would seemingly not be covered, either.”

The appeals court next addressed the extent DPW must have been motivated by rehabilitative aims (rather than economic goals) in deciding to use incarcerated workers. The County repeatedly suggested that even tidbits of genuine rehabilitative purpose take Scott and his fellow detained workers outside the Act.  Scott disagreed, arguing that the court should focus on the "primary" purpose during the relevant period.

“Here too, we agree with Scott,” said the panel.  “[T]he question . . . is whether DPW's principal or primary purpose for using incarcerated workers at the recycling center during the time frame at issue was for ‘rehabilitation and job training.’ If the answer is no, this factor cuts strongly in Scott's favor.”

The appeals court decision is not an outright win for Scott and the class. “We do not hold every incarcerated person who works outside the four walls of their prison is covered by the Act, nor do we hold that every incarcerated person doing a job outside the prison walls that could be done by a free worker at a higher wage is covered,” the panel clarified.  “[W]e hold only that the district court applied the wrong legal standards in granting summary judgment to the County.”

Are they covered employees or aren’t they?  With the relevant criteria ostensibly clarified, the plaintiffs must answer the question back in the district court where their chances of success are now considerably better.