Tony and Susan Alamo Foundation v. Secretary of Labor – Case Brief Summary (U.S. Supreme Court)

Tony and Susan Alamo Foundation v. Secretary of Labor - Case Brief Summary (U.S. Supreme Court)

In Tony and Susan Alamo Foundation v. Secretary of Labor, 471 U.S. 290, 105 S.Ct. 1953, 85 L.Ed.2d 278 (1985), the Supreme Court held that the district court did not clearly err by finding that "associates" of the Foundation were "employees" under the Fair Labor Standards Act ("FLSA"). Id. at 301, 105 S.Ct. at 1961.

The Foundation, a nonprofit religious organization, was incorporated "to care for the fatherless and to rescue the fallen, and generally to do those things needful for the promotion of Christian faith, virtue, and charity." Id. at 292, 105 S.Ct. at 1956.

The Foundation derived income from a number of businesses including service stations, retail stores, hog farms, construction companies, and a motel. Id.

The businesses were staffed largely by "associates" who were drug addicts, derelicts, or criminals before their conversion at the Foundation. Id.

The associates received no cash salary, but were provided with food, clothing and shelter. Id.

Former associates testified that they had been "fined" for poor job performance, worked on a "commission" basis, and were prohibited from obtaining food if they were absent from work, even where the absence was due to illness. Id. at 301 n. 22, 105 S.Ct. at 1961 n. 22.

The Supreme Court held that the district court did not clearly err by finding that the associates were employees. Id. at 301, 105 S.Ct. at 1961.

The Court noted that the associates were dependent upon the Foundation for long periods, and in some cases several years. Id.

Noting that the test for employment is one of "economic reality," the Court concluded that "the district court's finding that the associates must have expected to receive in-kind benefits--and expected them in exchange for their services--is certainly not clearly erroneous." Id.

The Court reached this holding despite testimony from some associates that they performed their work voluntarily and did not want a minimum wage. Id. at 302, 105 S.Ct. at 1962.

In Tony & Susan Alamo Found. v. Sec’y of Labor, 471 U.S. 290 , 301 (1985), the Supreme Court’s most recent discussion of the economic realities test in the employment context, the Department of Labor (“DOL”) sued a non-profit religious foundation for violating the minimum, overtime, and record-keeping provisions of the FLSA. 471 U.S. at 291-92.

The religious foundation ran several commercial businesses, including service stations, clothing and grocery stores, hog farms, a motel, construction companies, candy companies, and record-keeping companies. Id. at 292.

Staffing the foundation’s businesses were “volunteers,” who were former drug addicts, derelicts, or criminals that the foundation had converted and rehabilitated. Id.

In exchange for their services, the volunteers received food, clothing, shelter, and other benefits from the foundation, but no cash salaries. Id.

The Court held that the “volunteers” were actually employees under the economic realities test. Id. at 301, 306.

Two factors were particularly significant.

First, the volunteers were entirely dependent economically upon the foundation for long periods of time, and in some cases several years. Id. at 301.

Second, the volunteers expected to receive in-kind non-cash benefits in exchange for their services, which amounted to “wages in another form.” Id.

Because the volunteers “worked in contemplation of compensation,” they were employees under the FLSA. Id. at 306.

The Court looked to the economic reality of the situation and held it involved work for compensation and hence employment.