By Christopher DeGroff and Michael A. Wahlander

In EEOC v. Hill Country Farms, Inc., No. 3-11-CV-41 (S.D. Iowa Sept. 18, 2012), the Commission secured summary judgment this past week on its claims that an employer discriminated against intellectually disabled workers by paying them lower wages than non-disabled persons. The ruling awarded a group of 32 employees over $1.3 million. The next day, the EEOC issued a press release touting the ruling. This case contains some important lessons for employers faced with investigations by multiple government agencies.

Background

The employer, Hill County Farms, Inc. (“HCF”), ran a turkey processing plant in Iowa. At that plant, it employed several intellectually disabled individuals. The employer paid them $65 per month, and provided them with “room and board” in a converted schoolhouse they referred to as the “Bunkhouse.” Id. at 2-4. The employer also employed non-disabled persons to do the same work. However, the employer did not pay the intellectually disabled men the same wages as the non-disabled persons, even though the disabled individuals performed the work just as well.  HCF sought to justify the lower wages by claiming credits under the FLSA for providing the disabled men room and board. HCF continued this practice for over thirty years until the State of Iowa shut down the “Bunkhouse.”  The State found that it was unsafe for occupancy due to substandard construction, a leaky roof, and insect infestation.

Before the EEOC filed suit in this case, HCF had been the subject of several investigations by the U.S. Department of Labor’s Wage and Hour Division (“DOL”). In 2003, the DOL found that HCF violated minimum wage laws and was not entitled to claim credits under the FLSA to justify the lower wages paid to the disabled men. Although HCF agreed to comply with the wage laws, it never changed its pay practices. 

Subsequently, the DOL again investigated HCF’s pay practices. HCF claimed that it was allowed to pay modified wages based on lower worker productivity under the FLSA. Once again, the DOL found that HCF’s pay practices were unlawful and denied HCF’s claims that it was entitled to credits. 

In addition to the DOL investigations, two courts had also already concluded that HCF’s practices were unlawful – one federal district court and one state court. Both cases were affirmed on appeal. See Solis v. Hill County Farms, 808 F.Supp.2d 1105 (S.D. Iowa 2011), aff’d, No. 11-3069, 2012 WL 16774176 (8th Cir. 2012), and Henry, et. al. v. Iowa Dep’t of Workforce Dev., No. CV-8615 (Dist. Ct. Sept. 9, 2011) (affirmed by the Iowa Court of Appeals).

With this history, the EEOC sued HCF alleging that HCF discriminated against the intellectually disabled individuals by subjecting them to harassment, discrimination, and discriminatory wages under the Americans With Disabilities Act. After discovery, the EEOC filed a motion for partial summary judgment as to the wage claims only. Significantly, HCF did not file any opposition to the EEOC’s motion.

The Court’s Ruling

The Court granted the EEOC’s motion. Since HCF did not dispute any of the facts or evidence submitted by the EEOC, the Court adopted the EEOC’s version of the facts. The Court also adopted the EEOC’s calculations of damages.

In coming to its ruling, the Court found that HCF engaged in unlawful and discriminatory pay practices in violation of the American With Disabilities Act. The Court also expressly found that HCF had no justification for paying the disabled employees lower wages under the FLSA. The Court concluded that the disabled persons were entitled to damages based on a comparable market wage rate equivalent to the rate earned by non-disabled employees. 

Ultimately, the Court awarded damages in the amount of $1,374,266.53. The Court also instructed the Commission to submit an additional calculation of prejudgment interest.  Unfortunately for HCF, the Court’s order did not resolve the entire case. HCF still faces trial on the EEOC’s remaining claims in March of 2013.

Implications for Employers

The EEOC does not often secure seven figure judgments without years of hard fought litigation. The judgment is one of the most significant nailed down by the EEOC in 2012.

While this is certainly an extreme case, employers can take away several lessons. First, the case underscores the importance of compliance with state and federal laws regarding wages and discrimination. The case also shows that employers should not ignore problems found by government agencies, especially since it displays that the EEOC is willing to pursue claims for violations of discrimination laws based on the same facts giving rise to violations of wage and hour laws. In addition to the rulings in the previous cases, HCF got hit with another judgment for over $1 million in this case (including interest) and faces trial on other claims. These are expensive lessons to learn for employers.

Readers can also find this post on our EEOC Countdown blog here.