Quarter-Billion-Dollar Employment Verdict Carries Lessons for All Employers

On May 1, 2013, the Equal Employment Opportunity Commission (“EEOC”) won a verdict of more than $240 million on behalf of 32 intellectually-disabled men after convincing a federal jury that their employer had violated the Americans with Disabilities Act by subjecting the group to systematic discrimination, harassment, and abuse over the course of several decades.

Hill Country Farms began a program housing and employing a group of intellectually-disabled men in the late 1960s to work alongside non-disabled employees at a turkey processing plant in West Liberty, Iowa.  The EEOC described the case as a product of good intentions gone terribly wrong: the case is “a story of the loss of human dignity that may well have been borne of better intentions in the 1960s, but which has devolved over the years into a morass of unfathomable and discriminatory, and exploitative conduct.” 

The company housed the men in a dilapidated schoolhouse referred to as "the Bunkhouse," and paid them $65 a month for working at least 35 hours a week -- about 46 cents an hour -- eviscerating turkeys.    In addition, the company took $487 from each man’s monthly social security check to cover expenses.  The EEOC also showed at trial that supervisors called the workers "retarded," "dumb ass" and "stupid," and kicked, hit and in at least one case handcuffed them.  In 2009, the Iowa Fire Marshall shut down “the Bunkhouse” for unsafe and unsanitary conditions.  The EEOC filed suit in 2011. 

The company unsuccessfully argued that the pay constituted a minimum wage under the Fair Labor Standards Act (“FLSA”) when room and board and in-kind care were considered.  The company also argued that it did not technically employ the men because it contracted with the turkey processing plant to provide the labor (Hill Country Farms did not own the turkey processing plant).   The Court rejected both arguments. The Court found that Hill Country Farms was the “employer” because it supervised the workers, determined their job assignments, set their rate of pay, issued paychecks, and was listed as the employer on the workers' W-2 forms.

The court awarded the group $1.3 million for unlawful disability-based wage discrimination; the jury awarded each man $5.5 million in compensatory damages and $2 million in punitive damages. 

Although such blatant discrimination and violation of federal wage laws is rare today, this case reminds all employers of federal employment principles.  Employers cannot necessarily consider non-monetary compensation (such as room and board) when calculating an employee’s rate of pay for purposes of compliance with the FLSA.   

Courts will find an employment relationship -- and all the rights and obligations that come with it -- where the facts support one, regardless of the supposed “contractual” arrangement between the parties.

The EEOC and other government agencies will aggressively pursue cases where it believes employers are committing systematic violations of federal statutes.   

For more information regarding employment compliance matters, please contact Mary Elizabeth Davis.


Spotts Fain publications are provided as an educational service and are not meant to be and should not be construed as legal advice. Readers with particular needs on specific issues should retain the services of competent counsel.