Tony and Susan Alamo Foundation v. Secretary of Labor, 83-1935

• Decision Date: 23 April 1985
• Docket Number: No. 83-1935,83-1935
• Citation: Tony and Susan Alamo Foundation v. Secretary of Labor, 471 U.S. 290, 105 S.Ct. 1953, 85 L.Ed.2d 278 (1985)
• Parties: TONY AND SUSAN ALAMO FOUNDATION, et al., Petitioners v. SECRETARY OF LABOR
• Court: U.S. Supreme Court

471 U.S. 290

105 S.Ct. 1953

85 L.Ed.2d 278

TONY AND SUSAN ALAMO FOUNDATION, et al., Petitioners

v SECRETARY OF LABOR.

No. 83-1935.

Argued March 25, 1985.

Decided April 23, 1985.

Syllabus

Petitioner Foundation is a nonprofit religious organization that derives its income largely from the operation of commercial businesses staffed by the Foundation's "associates," most of whom were drug addicts, derelicts, or criminals before their rehabilitation by the Foundation. These workers receive no cash salaries, but the Foundation provides them with food, clothing, shelter, and other benefits. The Secretary of Labor filed an action in Federal District Court against the Foundation and petitioner officers thereof, alleging violations of the minimum wage, overtime, and recordkeeping provisions of the Fair Labor Standards Act (Act). The District Court held that the Foundation was an "enterprise" within the meaning of 29 U.S.C. § 203(r), which defines that term as "the related activities performed . . . by any person or persons for a common business purpose," that the Foundation's businesses serve the general public in competition with ordinary commercial enterprises, and that under the "economic reality" test of employment the associates were "employees" of the Foundation protected by the Act. The court rejected petitioners' arguments that application of the Act to the Foundation violated the Free Exercise and Establishment Clauses of the First Amendment. The Court of Appeals affirmed as to liability.

Held:

1. The Foundation's businesses constitute an "enterprise" within the meaning of the Act and are not beyond the Act's reach because of the Foundation's religious character. This Court has consistently construed the Act liberally in recognition that broad coverage is essential to accomplish the goal of outlawing from interstate commerce goods produced under conditions that fall below minimum standards of decency. The Act contains no express or implied exception for commercial activities conducted by religious or other nonprofit organizations, and the Labor Department has consistently interpreted the Act to reach such businesses. And this interpretation is supported by the legislative history. Pp. 295-299.

2. The Foundation's associates are "employees" within the meaning of the Act, because they work in contemplation of compensation. Walling v. Portland Terminal Co., 330 U.S. 148, 67 S.Ct. 639, 91 L.Ed. 809, distinguished. The fact that the associates themselves protest coverage under the Act is not dispositive, since the test of employment under the Act is one of "economic reality." And the fact that the compensation is primarily in the form of benefits rather than cash is immaterial in this context, such benefits simply being wages in another form. Pp. 299-303.

3. Application of the Act to the Foundation does not infringe on rights protected by the Religion Clauses of the First Amendment. The Free Exercise Clause does not require an exemption from a governmental program unless, at a minimum, inclusion in the program actually burdens the claimant's freedom to exercise religious rights. Here, since the Act does not require the payment of cash wages and the associates received wages in the form of benefits in exchange for working in the Foundation's businesses, application of the Act works little or no change in the associates' situation; they may simply continue to be paid in the form of benefits. But even if they were paid in cash and their religious beliefs precluded them from accepting the statutory amount, there is nothing in the Act to prevent them from voluntarily returning the amounts to the Foundation. And since the Act's recordkeeping requirements apply only to commercial activities undertaken with a "business purpose," they would have no impact on petitioners' own evangelical activities or on individuals engaged in volunteer work for other religious organizations. Pp. 303-306.

722 F.2d 397 (CA8 1983), affirmed.

Roy R. Gean, Jr., Fort Smith, Ark., for petitioners.

Charles Fried, Cambridge, Mass., for respondent.

Justice WHITE delivered the opinion of the Court.

The threshold question in this case is whether the minimum wage, overtime, and recordkeeping requirements of the Fair Labor Standards Act, 52 Stat. 1060, as amended, 29 U.S.C. § 201 et seq., apply to workers engaged in the com- mercial activities of a religious foundation, regardless of whether those workers consider themselves "employees." A secondary question is whether application of the Act in this context violates the Religion Clauses of the First Amendment.

I

The Tony and Susan Alamo Foundation is a nonprofit religious organization incorporated under the laws of California. Among its primary purposes, as stated in its Articles of Incorporation, are to "establish, conduct and maintain an Evangelistic Church; to conduct religious services, to minister to the sick and needy, 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." ¹ The Foundation does not solicit contributions from the public. It derives its income largely from the operation of a number of commercial businesses, which include service stations, retail clothing and grocery outlets, hog farms, roofing and electrical construction companies, a recordkeeping company, a motel, and companies engaged in the production and distribution of candy.² These activities have been supervised by petitioners Tony and Susan Alamo, president and secretary-treasurer of the Foundation, respectively.³ The businesses are staffed largely by the Foundation's "associates," most of whom were drug addicts, derelicts, or criminals before their conversion and rehabilitation by the Foundation. These workers receive no cash salaries, but the Foundation provides them with food, clothing, shelter, and other benefits.

In 1977, the Secretary of Labor filed an action against the Foundation, the Alamos, and Larry La Roche, who was then the Foundation's vice president, alleging violations of the minimum wage, overtime, and recordkeeping provisions of the Fair Labor Standards Act, 29 U.S.C. §§ 206(b), 207(a), 211(c), 215(a)(2), (a)(5), with respect to approximately 300 associates.⁴ The United States District Court for the Western District of Arkansas held that the Foundation was an "enterprise" within the meaning of 29 U.S.C. § 203(r), which defines that term as "the related activities performed . . . by any person or persons for a common business purpose." 567 F.Supp. 556 (1983). The District Court found that despite the Foundation's incorporation as a nonprofit religious organization, its businesses were "engaged in ordinary commercial activities in competition with other commercial businesses." Id., at 573.

The District Court further ruled that the associates who worked in these businesses were "employees" of the Alamos and of the Foundation within the meaning of the Act. The associates who had testified at trial had vigorously protested the payment of wages, asserting that they considered themselves volunteers who were working only for religious and evangelical reasons. Nevertheless, the District Court found that the associates were "entirely dependent upon the Foundation for long periods." Although they did not expect compensation in the form of ordinary wages, the District Court found, they did expect the Foundation to provide them "food, shelter, clothing, transportation and medical benefits." Id., at 562. These benefits were simply wages in another form, and under the "economic reality" test of employment, see Goldberg v. Whitaker House Cooperative, Inc., 366 U.S. 28 33, 81 S.Ct. 933, 936, 6 L.Ed.2d 100 (1961),⁵ the associates were employees. The District Court also rejected petitioners' arguments that application of the Act to the Foundation violated the Free Exercise and Establishment Clauses of the First Amendment, and the court found no evidence that the Secretary had engaged in unconstitutional discrimination against petitioners in bringing this suit.⁶

The Court of Appeals for the Eighth Circuit affirmed the District Court's holding as to liability, but vacated and remanded as to the appropriate remedy. 722 F.2d 397 (1984).⁷ The Court of Appeals emphasized that the businesses operated by the Foundation serve the general public, in competition with other entrepreneurs. Under the "economic reality" test, the court held,

"it would be difficult to conclude that the extensive commercial enterprise operated and controlled by the foundation was nothing but a religious liturgy engaged in bringing good news to a pagan world. By entering the economic arena and trafficking in the marketplace, the foundation has subjected itself to the standards Congress has prescribed for the benefit of employees. The requirements of the Fair Labor Standards Act apply to its laborers." Id., at 400.

Like the District Court, the Court of Appeals also rejected petitioners' constitutional claims. We granted certiorari, 469 U.S. 915, 105 S.Ct. 290, 83 L.Ed.2d 226 (1984), and now affirm.

II

In order for the Foundation's commercial activities to be subject to the Fair Labor Standards Act, two conditions must be satisfied. First, the Foundation's businesses must constitute an "[e]nterprise engaged in commerce or in the production of goods for commerce." 29 U.S.C. § 203(s).⁸ Second, the associates must be "employees" within the meaning of the Act. While the statutory definition is exceedingly broad, see United States v. Rosenwasser, 323 U.S. 360, 362-363, 65 S.Ct. 295, 296, 89 L.Ed. 301 (1945), it does have its limits. An individual who, "without promise or expectation of compensation, but solely for his personal purpose or pleasure, worked in activities carried on by other persons either for their pleasure or profit," is outside the sweep of the Act. Walling v. Portland Terminal Co., 330 U.S. 148, 152, 67 S.Ct. 639, 641, 91 L.Ed....