The Matter of Walter E. Carver v. State of New York
23 N.Y.S.3d 79
NY2015Background
- Petitioner Walter Carver, a longtime public-assistance recipient, was required by NYC's Work Experience Program (WEP) to perform ~35 hours/week of unpaid/low-paid work (mailroom, ferry terminal duties) to receive cash assistance and food stamps from 1993–2000.
- Carver received biweekly cash (~$176) plus food stamps; combined value equaled federal/state minimum wage for his hours; benefits were reduced if he missed work.
- In 2007 Carver won $10,000 lottery; state law (Social Services Law §131-r) authorized recoupment of half of prizes over $600 to reimburse public assistance paid in prior 10 years; OTDA sought $5,000 and refused refund.
- Carver challenged recoupment in an Article 78 proceeding, arguing that if benefits he received were wages under the FLSA, state recoupment would retroactively reduce his pay below the federal minimum wage.
- Lower courts: Supreme Court (Kings Cty) dismissed; Appellate Division reinstated FLSA claim and found WEP participants are employees under the FLSA; on remand the trial court ordered return of $5,000 and parties settled; Court of Appeals granted review of the Appellate Division order.
- Court of Appeals majority held Carver was an "employee" under the FLSA under the economic-reality test, so his WEP compensation qualified as wages protected by the FLSA, making the state recoupment impermissible as to minimum-wage entitlements.
Issues
| Issue | Plaintiff's Argument (Carver) | Defendant's Argument (State/OTDA) | Held |
|---|---|---|---|
| Whether WEP participants are "employees" under the FLSA | Carver: WEP work was required for benefits; cash + food stamps functioned as compensation; economic reality shows City exercised control and was employer | State: Benefits are assistance (not wages); program goals are training/transition, not employment; statutory scheme and tax/treatment differ from employment | Held: Yes — applying the economic-reality test, WEP participants like Carver are employees under the FLSA |
| Whether Department of Labor guidance and federal precedents support FLSA coverage for welfare work programs | Carver: DOL guidance and Second Circuit decisions support treating welfare recipients as employees for worker-protection laws | State: DOL guidance is nonbinding and unpersuasive versus statutory text and PRWORA; Tenth Circuit precedent to contrary | Held: Court gives considerable weight to DOL guidance and Second Circuit authority; treats it as persuasive in applying economic-reality analysis |
| Whether state law characterizations (and formula tying hours to minimum wage) preclude FLSA coverage | Carver: State formula reflects that benefits operate as compensation; state labels cannot override federal FLSA | State: State regulations expressly declare grants are not wages; state law controls treatment and purpose is not to create employment | Held: Federal FLSA preempts contrary state or local characterizations; labeling in state law does not control FLSA analysis |
| Whether finding coverage would conflict with PRWORA and Congress’s intent | State: PRWORA and FLSA text/history show Congress did not intend to make workfare recipients federal employees; doing so undermines welfare policy | Carver: PRWORA and FLSA do not expressly exempt workfare; protecting minimum wage furthers FLSA purposes and prevents unfair competition | Held: Court rejects argument that PRWORA forecloses FLSA coverage here; economic-reality factors control and support coverage |
Key Cases Cited
- Rutherford Food Corp. v. McComb, 331 U.S. 722 (Sup. Ct.) (explains FLSA purposes and breadth)
- Goldberg v. Whitaker House Cooperative, Inc., 366 U.S. 28 (Sup. Ct.) (advocates economic-reality approach over technical labels)
- Tony & Susan Alamo Foundation v. Secretary of Labor, 471 U.S. 290 (Sup. Ct.) (associates receiving in-kind benefits are employees under economic-reality test)
- Nationwide Mutual Ins. Co. v. Darden, 503 U.S. 318 (Sup. Ct.) (FLSA’s definition of employee is broad and may diverge from agency/agency-law labels)
- Herman v. RSR Sec. Servs. Ltd., 172 F.3d 132 (2d Cir. 1999) (sets multifactor economic-reality test factors)
- United States v. City of New York, 359 F.3d 83 (2d Cir. 2004) (held WEP participants were employees for Title VII; discussed DOL rejection of Johns approach)
- Johns v. Stewart, 57 F.3d 1544 (10th Cir. 1995) (held workfare participants not employees under economic-reality test — cited by dissent)
- Brukhman v. Giuliani, 94 N.Y.2d 387 (N.Y.) (New York Court of Appeals decision that WEP participants are not employees under state prevailing-wage provision; distinguished by majority)