A federal appeals court has ruled in favor of Arkansas rotational molder Hendren Plastics Inc. in a long-running labor dispute over the company's use of workers from a drug treatment prison diversion program.
The Aug. 25 ruling from the U.S. Court of Appeals in St. Louis said the company did not violate state minimum wage laws in employing the workers, who were sent to the plastics firm in six-month stretches as an alternative to prison time.
The appeals court decision reverses a 2019 ruling from a federal district court that found Hendren and other employers liable for $1.2 million in back pay.
The case began in 2017 when workers had sued Hendren, the drug treatment agency and other companies where they were sent, alleging it was a "human trafficking and forced labor" scheme because they were not paid properly and did not receive appropriate drug treatment.
Hendren Plastics strongly pushed back against those claims, and CEO Jim Hendren praised the appellate court decision, saying on social media that his company wanted to support people in recovery from addiction.
The Gravette, Ark., company rotomolds dock floats and sells them under the Eagle Floats brand name at Home Depot and elsewhere.
Hendren said his company paid the treatment agency above minimum wage for workers' time and that he had checked with a judge in the state's drug court to verify that the program complied with laws and was beneficial.
"I've always believed that drug courts and rehabilitation programs are better alternatives than prison for those struggling with addictions," Hendren said. "While the program and some of the participants presented some challenges for our company, I saw the value — lives changed — addiction cycles broken — job skills developed."
But in their initial lawsuit and in one filed by the American Civil Liberties Union, employees had complained that the treatment agency, DARP Inc., did not pay them for the work they did for the companies and they were not receiving the treatment they expected.
In 2019, U.S. District Judge Timothy Brooks in Fayetteville had sided with the people in the treatment program, ruling that 172 of them were employees of the companies and under state laws they were owed nearly $1.2 million in back wages.
"They were businesses that manipulated the labor market and skirted compliance with the labor laws for their own private ends," Brooks wrote, adding that "businesses that profit from the labor of nonincarcerated drug addicts must still comply with the [Arkansas Minimum Wage Act's] strict requirements."
But a three-judge panel for the U.S. Court of Appeals for the Eighth Circuit Court disagreed, saying that workers were not employees of the companies.
Instead, it said, they entered the DARP program as an alternative to jail and were provided with room, board and transportation to the job site. In return, the companies paid DARP, the court said.
The appeals court ruling said that Hendren paid DARP $9 per hour for each workers' time when the minimum wage was $6.25 per hour, and then $9.20 when the minimum wage was raised to $8.50 in 2015.
Typically, people participated in the DARP program for six months, although it could stretch to one year, the court said. The payments DARP collected from companies were its only source of revenue, the court said.
"The overriding consideration is that the DARP participants undertook the recovery program for their own purposes to avoid imprisonment, and they had no reason to expect compensation from Hendren," the appeals court said. "There was no implied compensation agreement with Hendren, and the company provided no in-kind benefits."
ACLU of Oklahoma, which brought one of the original lawsuits, declined to comment.
Hendren said he was "glad to see that the justice system worked."
"The lies and slander about my company were just disgusting," he said. "Even more disappointing was the district court's initial ruling that implied this was some intentional scheme by my company to avoid paying minimum wage."
Hendren is a well-known political figure in Arkansas, serving in the state Senate since 2012, where he had been majority leader for four years, and the state House before that. But Hendren left the Republican Party after the Jan. 6, 2021, riots at the U.S. Capitol, criticizing his former party and former President Donald Trump in a CNN interview and YouTube video and reregistering as an independent.
He comes from a prominent political family. His uncle Asa Hutchinson is the current governor of the state and another uncle, Tim Hutchinson, is a former U.S. senator.