Child pecan gathers were employees, not volunteers; company violated oppressive child labor

By Kathleen Kapusta, J.D. — Children who gathered fallen pecans from a grove, ostensibly to donate to their church, were employees and not volunteers, the Tenth Circuit declared, finding that instead of working for their own personal purpose or pleasure, they were coerced.

Moreover, they were employees of a company that contracted with the grove owner to manage the grove, and not of the church or an “independent contractor” hired by the company to fulfill the contract. Accordingly, the court affirmed the district court’s conclusion that the company and its president violated a 2007 injunction prohibiting the use of oppressive child labor. The court also affirmed the district court’s order requiring the defendants to pay $200,000 into a fund to compensate the children but reversed the appointment of a special master to monitor compliance with the injunction (Acosta v. Paragon Contractors Corp., March 13, 2018, Bacharach, R.).

Through 2007, a pecan ranch that owned over 100 acres of pecan trees allowed a church to send community members, mostly children, to gather pecans that had fallen to the ground after the ranch harvested pecans from the trees. The children gave half of the fallen pecans to the church and half to the ranch.

In 2008, the ranch entered into a series of year-long contracts with Paragon Contractors pursuant to which Paragon operated the grove in return for 70 percent of the proceeds from the sale of the pecans. Paragon hired an individual (the representative) to fulfill this contract, and the church continued to send children to harvest the fallen pecans. This representative participated in organizing and managing the church’s efforts.

DOL investigation. In 2012, the Department of Labor investigated Paragon and its president and found that they had violated the FLSA’s child-labor provisions. As a result, the DOL concluded that Paragon violated a 2007 injunction prohibiting it and its president from engaging in oppressive child labor. The DOL procured a contempt citation, and the district court found Paragon and its president violated the injunction by employing the children to harvest the pecans. The court then sanctioned the defendants by appointing a special master to oversee Paragon’s ongoing compliance with the injunction and ordering it to pay $200,000 into a fund for the children.

Volunteers? On appeal, the Tenth Circuit first addressed whether the children were volunteers rather than employees. The defendants contended that the children were not covered by the FLSA based on the Supreme Court’s decision in Tony and Susan Alamo Foundation v. Secretary of Labor, which discussed the FLSA’s coverage of employees and stated that “employee” does not include “[a]n individual who, ‘without promise or expectation of compensation, but solely for his personal purpose or pleasure, worked in activities carried on by other persons.’”

Coerced. While the defendants argued that the children worked solely for their own personal purpose or pleasure and freely chose to gather pecans, the court noted evidence that their participation was mandatory. The church closed the schools when it was time to harvest, parents sent their children to harvest because of pressure from the church, and one father expressed fear that his family would be separated if he disobeyed. Concluding that the district court’s finding of coercion was not clearly erroneous, the appeals court determined that the children worked because of coercion.

Even if the children had been coerced, the defendants argued that it came from the church. But Alamo Foundation states only that individuals working for their own “personal purpose or pleasure” are not covered by the FLSA, said the court, noting that under this standard, the children were not gathering pecans solely for their own personal purpose or pleasure and therefore, Alamo Foundation did not support reversal.

Employees. Nor did the “food-bank exception,” which precludes consideration as “employees” when workers “volunteer their services solely for humanitarian purposes to private non-profit food banks and… receive from the food banks groceries” apply, again because the children did not volunteer their services. Accordingly, the court found the children were employees, subjecting their employer to the requirements of the FLSA.

But who employed them? Arguing that they did not employ the children, the defendants pointed to their contract with the ranch, which they claimed did not extend to the gathering of pecans from the ground. Turning to the relevant contract provisions, the court noted that by assigning costs to Paragon for both harvesting and gathering, the contract suggested that Paragon bore responsibility for both activities. Further, the defendants did not identify anything in the contract that would restrict Paragon’s obligations to harvesting pecans from trees, or disclaim responsibility to gather pecans from the ground. In addition, a ranch representative testified that the contract obligated Paragon to gather the pecans from the ground and ended the ranch’s informal arrangement with the church. Thus, said the appeals court, the district court did not clearly err in finding that the parties understood the contract to include harvesting of fallen pecans.

Moreover, Paragon profited from the ground pecans; they were comingled with the other pecans and sold together. Thus, the district court could reasonably find that the children had been helping the defendants’ representative through his status with Paragon to fulfill Paragon’s contractual obligations.

Independent contractor? But, the defendants next argued, the representative was an independent contractor, making his employment of the children his responsibility. Applying the six-factor economic realities test, the appeals court found that while a couple of the factors pointed toward independent contractor status, under the totality of the circumstances, the representative depended economically on Paragon’s business for the opportunity to render service and was not in business for himself. Therefore, he was an employee, not an independent contractor, of Paragon.

Defendants employed the children. Because the representative was employed by Paragon, the court found the children would also be considered employees of Paragon. Accordingly, said the court, Paragon had employed the children, and the district court correctly concluded that the defendants had violated the 2007 injunction by employing the children.

Sanctions. Turning to the issue of sanctions, the appeals court found the court below exceeded its authority by appointing a special master. Although the district court based this sanction on the risk the defendants might again employ children, there was no evidence regarding Paragon’s employment of children at the time of the sanction, as Paragon had ended its relationship with the ranch years earlier. And because there was no evidence of child labor at the time of the sanction, there was nothing the defendants could do to bring themselves into compliance, said the court, observing that a coercive sanction cannot be imposed on a party that is currently in compliance just to ensure future compliance.

As to the compensatory sanction, the court found that the unpaid wages were the direct result of the child-labor violation, as the violation of the injunction—employment of child labor under oppressive conditions—was the “but for” cause of the children’s unpaid labor. In this case, “the children’s unpaid labor resulted directly from employment of the children; accordingly, the ‘actual losses sustained as a result of the [child-labor violation]’ include the value of the children’s uncompensated work.” Thus the district court acted within its discretion in ordering the defendants to pay into a fund to compensate the children for their work.

Source: http://www.employmentlawdaily.com/index.php/news/child-pecan-gathers-were-employees-company-violated-injunction-against-oppressive-child-labor/