A federal judge in Arkansas has ruled that rotational molder Hendren Plastics Inc. violated minimum wage laws for its role hiring participants in a local drug rehabilitation program that was offered as an alternative to possible prison time.
U.S. District Judge Timothy Brooks in Fayetteville ruled Sept. 27 that Hendren and the drug treatment agency violated the Arkansas Minimum Wage Act for not paying the program participants, who had been charged with drug crimes but not convicted.
"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 non-incarcerated drug addicts must still comply with the AMWA's strict requirements."
Hendren's case was one of several filed in 2017 against two drug treatment agencies and other businesses in Arkansas and Oklahoma. They attracted widespread media coverage at the time and drew lawsuits from the American Civil Liberties Union.
Hendren CEO Jim Hendren did not respond to a request for comment but told the Arkansas Times that he was disappointed in the judge's ruling and would appeal.
"We will be appealing this decision not only because our attorneys have told us it is clear that it conflicts with the law and with numerous precedents across the country, but also because I continue to believe that rehabilitation and recovery efforts are preferable to filling our prisons with nonviolent drug and alcohol offenders," Hendren said.
In a 2017 interview with Plastics News, Hendren said his company paid the treatment agency, the Drug and Alcohol Recovery Program, $9.25 per hour for each worker. But he said he did not know what arrangements DARP had with the people that the courts put in its custody.
He said at the time that he ended his company's multi-year involvement in the program in October 2017, after the lawsuits were filed.
But the judge wrote that Hendren did not demonstrate a good faith effort to comply with wage laws.
"While the Court accepts at face value the notion that Hendren had altruistic reasons for partnering with DARP in support of its mission, the Court believes that Hendren was also motivated by its own economic interests –– including less expensive hourly labor rates and avoidance of payroll taxes and worker's compensation premiums," Brooks wrote. "The Court therefore finds that Hendren's payments to DARP in exchange for a supply of laborers does not sufficiently demonstrate a good faith and reasonable basis for believing that it was complying with Arkansas's wage and hour laws."
The judge wrote that DARP provided the program participants with room, board, transportation to work and other expenses.
Brooks wrote that people referred by courts to DARP were not charged for participating in the treatment program but were required to sign documents indicating they would be expected to work and not be paid for that work.
Brooks wrote that DARP staff testified they would negotiate different charges with different local companies for supplying workers and would note that employers would potentially save payroll tax and worker compensation costs.
Hendren told the Arkansas Times he believed he would win the appeal.
"I do not regret trying to help when asked by Arkansas [c]ourts to provide people a second chance for people who want to turn their lives around," he said. "It is undisputed that Hendren Plastics paid more than minimum wage for every hour worked. I do regret that our justice system has been so abused. However we are confident justice will prevail in the end."
The Arkansas paper said the company faces a penalty potentially as high as $636,000 in unpaid wages and an equal amount in damages. Brooks asked for more legal briefs on potential damages.
Hendren Plastics rotomolds dock floats and sells them under the Eagle Floats brand in Home Depot and other stores.
Hendren is also a prominent state politician, serving as the current president of the Arkansas state senate. He's the nephew of both current Arkansas Gov. Asa Hutchinson and former U.S. Senator Tim Hutchinson.