                    United States Court of Appeals
                          FOR THE EIGHTH CIRCUIT
                                   ___________

                                   No. 98-3625
                                   ___________

Matthew W. Barnett,                     *
                                        *
            Appellant,                  *
                                        * Appeal from the United States
       v.                               * District Court for the
                                        * Western District of Missouri.
Young Men’s Christian Association,      *
Inc.; George Hartsfield, Director,      * (UNPUBLISHED)
                                        *
            Appellees.                  *
                                   ___________

                         Submitted: February 25, 1999
                             Filed: March 4, 1999
                                  ___________

Before FAGG, HANSEN, and MORRIS SHEPPARD ARNOLD, Circuit Judges.
                           ___________

PER CURIAM.

      Missouri inmate Matthew W. Barnett appeals from the district court’s dismissal
under 28 U.S.C. § 1915 of his action under the Fair Labor Standards Act (FLSA), 29
U.S.C. §§ 201-219, and state law. We reverse.

      Barnett filed this action against Young Men’s Christian Association, Inc.
(YMCA), and George Hartsfield, a general manager employed by YMCA, seeking
punitive and compensatory damages, and to proceed in forma pauperis (IFP). In
relevant part, Barnett alleged that he worked at a YMCA as part of a work-release
furlough program. YMCA employees would pick up Barnett at the prison and take
him to the YMCA where he worked forty hours a week, essentially as a maintenance
worker. Prison officials did not supervise or make “spot checks” of Barnett at the
YMCA, and Hartsfield, who maintained employment records, had the power to hire
and fire Barnett, and to control his schedule, conditions of employment, and rate of
pay. Barnett “freely contracted with the YMCA” to sell his labor for which YMCA
directly paid him $1.00 an hour. Barnett claimed that he was thus an “employee”
under the FLSA, and was entitled to be paid at the minimum wage. Barnett also
asserted state law claims arising from YMCA’s failure to pay him the minimum wage,
and from his discharge after he voiced his opinions about the inadequacy of his wage.

       Under 28 U.S.C. § 1915(e)(2), district courts “shall dismiss” cases filed IFP “at
any time if the court determines” that the action “is frivolous or malicious” or “fails
to state a claim on which relief may be granted.” We conclude Barnett’s complaint
neither is frivolous nor fails to state a claim.

       The FLSA provides that “[e]very employer shall pay to each of his employees”
not less than the minimum wage. See 29 U.S.C. § 206(a). An “employee” is defined
as “any individual employed by an employer,” 29 U.S.C. § 203(e)(1); and “employer”
is defined as “any person acting directly or indirectly in the interest of an employer
in relation to an employee,” 29 U.S.C. § 203(d). The Supreme Court has suggested
that “employee” is expansively defined under the FLSA, see Nationwide Mut. Ins.
Co. v. Darden, 503 U.S. 318, 325-26 (1992), and has stated that courts should
determine whether an individual is an “employee” in light of the “economic reality”
of the situation under the totality of the circumstances, rather than rely on technical
labels, see Goldberg v. Whitaker House Co-op., Inc., 366 U.S. 28, 33 (1961).

      Circuit courts have consistently rejected the notion that all prisoners are
categorically excluded from coverage under the FLSA. See Danneskjold v. Hausrath,
82 F.3d 37, 40-41 (2d Cir. 1996) (rejecting per se rule that prisoners may never be

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considered “employees”); Henthorn v. Department of Navy, 29 F.3d 682, 685 (D.C.
Cir. 1994) (“most courts refuse to hold that prisoners are categorically barred from
ever being %employees&”); Hale v. Arizona, 993 F.2d. 1387, 1393 (9th Cir.) (en banc)
(finding that FLSA may be applicable to prisoners under certain circumstances), cert.
denied, 510 U.S. 946 (1993); Vanskike v. Peters, 974 F.2d 806, 808 (7th Cir. 1992)
(“prisoners are not categorically excluded from the FLSA’s coverage simply because
they are prisoners”), cert. denied, 507 U.S. 928 (1993); Watson v. Graves, 909 F.2d
1549, 1554 (5th Cir. 1990) (holding that status as inmate does not foreclose inquiry
into FLSA coverage).

        Two circuit courts have held that a prisoner may be an employee for purposes
of the FLSA when the prisoner voluntarily works outside the prison for a private
company that supervises and directly pays the prisoner. See Watson, 909 F.2d at
1554-56 (finding that inmates participating in work-release program were
“employees” of private construction company where inmates had not been sentenced
to hard labor, law enforcement officers did not make routine or “spot” checks of job
sites, and company paid inmates directly); Carter v. Dutchess Community College,
735 F.2d 8, 15 (2d Cir. 1984) (holding that college might have “employed” inmates
as tutors where college made proposal to employ inmates, suggested wage, developed
eligibility criteria, recommended particular inmates for positions, was not required
to take inmates it did not want, decided hours inmates worked, and sent compensation
directly to inmates’ accounts). Other circuit courts have made statements consistent
with the holdings in Watson and Carter. See, e.g., Villarreal v. Woodham, 113 F.3d
202, 206-07 (11th Cir. 1997) (“the more indicia of traditional, free-market
employment the relationship between the prisoner and his putative ‘employer’ bears,
the more likely it is that the FLSA will govern the employment relationship” (internal
quotation and citation omitted)); Danneskjold, 82 F.3d at 44 (holding that FLSA
applies where prisoner’s labor “for a private employer in the local or national
economy would tend to undermine the FLSA wage scale”); Reimonenq v. Foti, 72
F.3d 472, 476 (5th Cir. 1996) (finding that although sheriff-custodian was not subject

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to FLSA liability for inmate on work-release, inmate’s “free-world employer” was
bound by the statute and subject to FLSA liability); Henthorn, 29 F.3d at 686 (holding
that FLSA may apply where prisoner voluntarily sells labor in exchange for wage
paid by alleged employer other than prison itself).

      In deciding that Barnett was not covered by the FLSA, the district court relied
on McMaster v. Minnesota, 30 F.3d 976 (8th Cir. 1994), cert. denied, 513 U.S. 1157
(1995). In McMaster, we held that inmates “who are required to work as part of their
sentences and perform labor within a correctional facility as part of a state-run prison
industries program are not %employees&” under the FLSA. Id. at 980. We noted that
the primary purpose of the FLSA–providing minimum standards of living for
workers--had no application in the prison context, and that the second purpose of the
FLSA--protecting competition--was addressed by the Ashurst-Sumners Act, 18
U.S.C. §§ 1761, 1762 (criminalizing transport in interstate commerce of any goods
produced by prisoner). See id. McMaster does not control here for two reasons.

        First, we note that the FLSA’s goal of protecting competition is not served by
denying coverage to Barnett because the Ashurst-Sumners Act would not apply to
preserve competition here: Barnett did not make goods to be sold in interstate
commerce--he provided maintenance services. Second, this suit presents materially
different facts than those before us in McMaster. This case is factually much closer
to Watson or Carter, both of which we distinguished in McMaster. See id. at 979-80
(finding Watson distinguishable because inmates did not work in jail, were picked up
at jail by private contractor, were left unguarded, were not assigned to work as part
of their sentences but volunteered, and were paid directly; finding Carter
distinguishable because inmates there sought relief against private company rather
than prison, and because inmates were not required to work as part of their
sentences). This suit was brought against a private entity, as was the case in both
Watson and Carter, and not against a branch or representative of the county, state, or
federal government, or against the prison or prison industries--where courts have

                                          -4-
denied FLSA coverage to prisoners. Cf., e.g., Villarreal, 113 F.3d at 204; Nicastro
v. Reno, 84 F.3d 1446, 1447 (D.C. Cir. 1996) (per curiam); Reimonenq, 72 F.3d at
474; Franks v. Oklahoma State Indus., 7 F.3d 971, 972 (10th Cir. 1993); Hale, 993
F.2d. at 1389; Harker v. State Use Indus., 990 F.2d 131, 132 (4th Cir. 1993);
Vanskike, 974 F.2d at 806; Miller v. Dukakis, 961 F.2d 7, 8 (1st Cir.) (per curiam),
cert. denied, 506 U.S. 1024 (1992).

       Although the district court suggested YMCA’s status as a nonprofit
organization formed for a public purpose--rather than a private company--
distinguished the present case from Watson, we see no reason why this status should
immunize YMCA from the requirements of the FLSA in the present case. See Dole
v. Tony & Susan Alamo Foundation, 915 F.2d 349, 352 (8th Cir. 1990) (holding that
FLSA contains no exceptions for commercial activities conducted by religious or
other nonprofit organizations; citing Tony & Susan Alamo v. Secretary of Labor, 471
U.S. 290, 297 (1985)).

      Thus, treating Barnett’s allegations as true, we conclude he has stated a claim
under the FLSA. Accordingly, we reverse and remand for further proceedings
consistent with this opinion.

      A true copy.

             Attest:

                     CLERK, U.S. COURT OF APPEALS, EIGHTH CIRCUIT.




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