Labor & Employment Law Daily Wrap Up, STATE-LAW CLAIMS—9th Cir.: Civil detainees entitled to minimum wage under Washington law, (Jan 17, 2025)

By Ronald Miller, J.D.

There is nothing in GEO’s contract with the federal government that prevents it from paying Washington’s minimum wage to its civil detainees who perform work for the benefit of GEO.

The Ninth Circuit, in a 2-1 decision, held that the application of Washington’s Minimum Wage Act to civil detainees held in GEO’s privately operated federal detention center did not violate the doctrine of intergovernmental immunity. Further, the appeals court held that the fact that the MWA applies to civil detainees working in an immigration detention center operated by a private for-profit company does not transform it into a law that has more than an incidental effect on immigration. Therefore, the appeals court applied the presumption against preemption “when a state regulates in an area of historic state power.” Judge Bennett filed a separate dissenting opinion (Nwauzor v. The GEO Group, Inc., Nos. 21-35026, 21-36024, 21-36025, and 21-36027 (9th Cir. Jan 16, 2025)).

The GEO Group is a private, for-profit corporation that operates detention and prison facilities. Since 2005, it has operated an immigration detention center in Tacoma, Washington. GEO operates the facility under contract with United States Immigration and Customs Enforcement (ICE).

Voluntary work program. During the period relevant to this appeal, GEO had a voluntary work program at the facility. Every day, hundreds of civil detainees at the facility worked for GEO, performing tasks essential to the operation of the facility. GEO usually paid these workers $1 per day, the minimum compensation mandated by ICE. GEO occasionally paid them up to $5 per day when necessary to attract sufficient workers. Because of the labor provided by the detainees, GEO operated the facility with just a handful of full-time staff hired from the local area, thereby saving millions of dollars that it would otherwise have spent on payroll.

In 2017, a class of detainees and Washington State each sued GEO in federal court for violations of Washington’s Minimum Wage Act (MWA). A jury awarded the detainees $17,287,063.05 in back pay damages. After a bench trial, the court awarded $5,950,340.00 in unjust enrichment to Washington State and enjoined GEO from employing detainees without paying Washington’s minimum wage. GEO appealed to the Ninth Circuit.

The Ninth Circuit certified three questions to the Washington Supreme Court. The Ninth Circuit has now received the answers to those questions.

GEO’s contract with ICE requires GEO to comply with “all applicable federal, state, and local laws and standards,” including “labor laws and codes.” The contract does not exclude state minimum wage laws from the definition of state “labor laws and codes.” Further, the contract provides that if “a conflict exist[s] between [federal and local] standards, the most stringent standard shall apply.”

Reliance on detainee labor. Under ICE’s standards, private contractors operating detention facilities may offer a Voluntary Work Program (VWP). The VWP is to provide detainees “opportunities to work and earn money while confined, subject to the number of work opportunities available and within the constraints of the safety, security and good order of the facility.” It also requires contractors to compensate detainees at a rate of “at least $1.00 (USD) per day.” Nothing in GEO’s contract with ICE prohibits it from compensating civil detainees at rates higher than $1.00 per day.

ICE played no role in the development or management of the VWP at the facility. GEO created job roles and descriptions, set work schedules, provided training, supervised detained workers, and managed payroll. The number of daily participants in the VWP has ranged from 200 to 470 detainees.

GEO relied heavily on the labor of the detainees to fulfill its contractual duties of keeping the facility clean and free of pests, dispose of waste appropriately, provide clean linens and blankets, and serve detainees three nutritious meals daily.

Certified questions. The Washington Supreme Court concluded that the detainees employed by GEO in its VWP program were employees within the meaning of the MWA, and that the MWA required GEO to pay Washington’s minimum wage to those detainees. With regard to the second question, it concluded that the MWA government institutions exception “does not apply to detained workers in private detention facilities regardless of whether the private entity that owns and operates the facility contracts with the state or federal government.” As to the third question, it concluded that GEO may be held liable to the state for unjust enrichment when detainees employed in the VWP program are paid less than Washington’s minimum wage.

Intergovernmental immunity. In this appeal, the Ninth Circuit concluded that Washington’s MWA did not violate the doctrine of intergovernmental immunity. GEO is a private for-profit employer that operates the facility for its shareholders’ economic gain. The MWA applies equally to all private employers, including GEO. In this case, the MWA neither controls federal operations nor dictates the terms of the contract between ICE and GEO. It requires no action by federal officials. Nor does it determine the work that detainees may perform.

In its contract with GEO, the federal government has chosen to control only some aspects of GEO’s operations at the facility. Critically, it made a deliberate choice not to dictate to GEO a maximum rate at which it may pay the detainees. Washington’s MWA did not interfere with or dictate federal decisions. There is nothing—either in federal law or in GEO’s contract with the federal government—that prevents GEO from paying Washington’s minimum wage to its civil detainees who perform work for the benefit of GEO.

Thus, the appeals court agreed with the district court’s conclusion that, even if the government ultimately pays more under future contracts with GEO as a result of GEO’s compliance with the MWA, such indirect effect would not violate the principle of intergovernmental immunity.

Discriminatory regulation. GEO and the federal government point to Wash. Rev. Code § 49.46.010(3)(k), which exempts “resident, inmate, or patient” employees of Washington government institutions from coverage under the MWA. The statute contains no comparable exemption for residents, inmates, or patients in federally operated institutions. GEO and the government argued that Washington’s MWA discriminates because it treats the federal government differently from the state government.

Here, the federal government does not operate the facility, nor did it employ the civil detainees at the facility. Thus, the question is whether the MWA treats private facilities operated under contract with the federal government differently from private facilities operated under contract with the state government. The Washington Supreme Court wrote that the exemption from coverage under the MWA does not apply to detained workers in private facilities operating under contract with either the state or federal government. Thus, the Washington high court made clear that the MWA treats equally the employees of state and federal government institutions.

Preemption. Federal law preempts state law when a party cannot comply with both federal and state law, or when state law poses an “obstacle to the accomplishment and execution of the full purposes and objectives of Congress.” As relevant here, the states’ historic police powers include “[t]he power to regulate wages and employment conditions.”

The MWA falls squarely within the states’ historic police powers to establish and require payment of a minimum wage. The fact that the MWA applies to civil detainees working in an immigration detention center operated by a private for-profit company does not transform it into a law that has more than an incidental effect on immigration. Accordingly, the Ninth Circuit held that Washington’s MWA was not preempted by federal law.

Derivative sovereign immunity. Derivative sovereign immunity protects a private entity that has contracted with the federal government, provided that the government acted within its constitutional authority and that the government has specifically authorized the contractor’s actions at issue.

Here, GEO’s argument that it was entitled to derivative sovereign immunity failed on two grounds. First, GEO’s contract with ICE did not forbid the company to comply with Washington’s MWA. Rather, GEO’s contract with ICE required it to comply with “all applicable federal, state, and local laws and standards,” including “labor laws and codes.” Thus, the appeals court concluded that the plain language of the contract requires GEO to pay its civil detainees Washington’s minimum wage so long as the MWA is “applicable.”

Second, even if the contract did not require GEO to pay its detainees in accordance with Washington’s MWA, there is nothing in the contract that would forbid GEO to do so. While the contract sets a minimum compensation of $1 per day, GEO has chosen to exceed that amount by paying up to $5 per day whenever necessary to persuade detainees to participate in the VWP. Thus, GEO could equally well have chosen, consistent with the contract, to exceed that amount by paying workers Washington’s minimum wage.

Dissent. In a dissenting opinion, Judge Bennett would hold that Washington’s Minimum Wage Act violates the Supremacy Clause because the state grants preferential treatment to its own detention facilities while holding the facility here to a more onerous standard just because GEO is a federal contractor. The MWA expressly exempts “[a]ny resident, inmate, or patient of a state, county, or municipal correctional, detention, treatment or rehabilitative institution.” Thus, the dissent argued that the MWA facially treats the federal government differently because it does not include federal facilities in its list of exemptions. Plus, the dissent argued that applying the MWA to GEO impermissibly frustrates Congress’s ability to effectuate its immigration policy and the VWP.

The cases are Nos. 21-35026, 21-36024, 21-36025, and 21-36027.

Judge: Fletcher, W.

Attorneys: Jennifer D. Bennett (Gupta Wessler) for Ugochukwu Goodluck Nwauzor. Marsha J. Chien, Office of Washington Attorney General for State of Washington. Michael W. Kirk (Cooper & Kirk) for The GEO Group, Inc.

Companies: The GEO Group, Inc.

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