Scott Pilutik's Analysis of Marc Headley vs CSI

Scott Pilutik's Analysis of Marc Headley vs CSI

Scott Pilutik's analysis of the Marc Headley lawsuit on his blog reality based community is so excellent and important I am taking the liberty of posting the full text here.

Marc Headley v. Church of Scientology International


A potentially devastating lawsuit [PDF] was filed by Marc Headley in Los Angeles County Court on January 5 against the Church of Scientology International (CSI), alleging that CSI violated California labor law by failing to pay Headley, and others similarly situated, minimum wage or for the overtime he routinely worked as an employee of Golden Era Productions, an unincorporated entity which is chiefly responsible for producing and selling Scientology's promotional videos and materials. Headley estimates that he was paid approximately 39 cents an hour for the time he worked at Golden Era between 1989 to 2005, during which time he sometimes worked 100+ hour, 7 day weeks uncompensated for his overtime.

Headley also alleges that he was forced by Scientology to sign various documents, under duress, acknowledging that he had no rights as an employee, and that he was not given copies of these documents.

Headley's claims are hardly shocking to anyone even vaguely familiar with Scientology, who could tell you that the working conditions for a Scientology staff member are routinely reported to be atrocious by ex-members. What is surprising is that someone has finally seen fit to address it, given the extreme hurdles facing anyone who chooses to sue Scientology.

The complaint anticipates Scientology's likely legal response--in short, that it is a religious organization exempt from ordinary labor laws. The suit's response to this anticipated defense is that religious organizations are not exempt in all instances from labor laws relating to minimum wage and relies heavily on the US Supreme Court case Alamo Found'n v. Secy. of Labor, 471 US 290 (1985) in support of its argument, which I'll now briefly describe below.

The Secretary of Labor brought suit against Tony Alamo's fundamentalist Christian church, alleging that it operated numerous commercial entities and in doing so violated minimum wage, overtime, and recordkeeping provisions of the Fair Labor Standards Act (FLSA). The Alamos operated "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," and staffed these businesses with "drug addicts, derelicts, or criminals before their conversion and rehabilitation." The Court found that the Alamos were subject to ordinary labor laws because (1) the church was, under the FLSA (specifically 29 USC sec. 203(s)), "an enterprise engaged in commerce or in the production of goods for commerce"; and (2) its workers were "employees" within the meaning of the Act.

The Court rejected the Alamos' argument that it was not en enterprise within the meaning of the Act because it was a 501(c)(3) tax exempt organization, noting that religious and non-profit organizations are not exempted by FLSA. The Code of Federal Regulations specifically states that

"where [religious or non-profit] organizations engage in ordinary commercial activities, such as operating a printing and publishing plant, the business activities will be treated under the Act the same as when they are performed by the ordinary business enterprise."

The Alamos further argued that their church should be exempt because its commercial activities are "infused with a religious purpose," but the Court noted that the lower courts had correctly disposed of this argument too, where it found that the Alamos' "businesses serve the general public in competition with ordinary commercial enterprises," and thus permitting the organization to pay substandard wages would give it an unfair advantage over competitors.

Scientology's Golden Era Productions shares some similarities with the Alamos' commercial enterprises but also some differences. It's not clear whether those differences will lead a court to distinguish Headley's suit from Alamo. It's also not clear whether the fact that Headley is not suing under the FLSA but instead makes an unfair competition claim under California's Business & Professional Code (sec. 17203), and California Labor Law will permit the Court to treat this case differently than similar cases, most/all of which fall under the FLSA (and thus Alamo). From my limited research, there is some interplay between California labor law (which is often described as "complex") and the FLSA. (I presume that the absence of a FLSA claim is indicative of Headley's lawyer's desire to keep the case in California state court as opposed to federal court.)

As to the similarities between Golden Era Productions and Alamo, they both drastically underpaid and overworked their employees while providing them with housing and every other amenity imaginable. However, the individual businesses in Alamo operated in secular spheres--that is, their service stations, retail clothing stores, and motels directly and unfairly competed with corresponding secular entities, for whom the option to underpay its workers did not exist. Scientology will no doubt argue that Golden Era is engaged in promotional activities as opposed to commercial, and there is therefore no risk of unfair competition--it does not compete because it is the only entity that produces in L Ron Hubbard videos, and its adherents the only targeted class, unlike, say, a motel, which would target every demographic.

The response to this, I would think, is to note that the type of work Headley was engaged in at Golden Era--video production--is work also typically performed by secular entities, who otherwise might benefit from being contracted by Scientology for this work, and are thus in fact harmed in an unfair competition sense. The issue is not the content of the business's output or the output's target audience, in other words, but rather the type of business and whether there is a secular analogue capable and available to perform the same work.

This notion has some legal precedent too--In Mitchell v. Pilgrim Holiness Church Corp., 210 F.2d 879 (7th Cir. 1954), a religious organization operated and staffed a printing press, from which it printed "pamphlets, leaflets, magazines and other printed material most of which is of a religious nature," and argued because religious message was not commerce, it should be exempt from the FLSA. The Fifth Circuit concluded that the religious content of the pamphlets was of no consequence, and that "[there is no] intimation that the minimum standard of living as fixed by the Act is not just as necessary to the health and well-being of the defendant's employees as it is to the health and well-being of the employees of any other printing establishment."

Mitchell is almost perfectly analogous to Golden Era, which too is a publisher of religious material utilizing underpaid labor. California is not bound to follow a federal Fifth Circuit decision, of course, but with so little case law speaking directly to this issue, it seems likely that the Court will at least confront Mitchell, if not be persuaded by it.

On Scientology's side, there is little support in case law for the argument they will inevitably make, should the case proceed to trial. Mitchell has been distinguished but once, by McClure v. The Salvation Army, 460 F.2d 553, 558 (5th Cir.), cert. denied, 409 U.S. 896 (1972). McClure did not concern minimum wage provisions, however, but was rather a wrongful termination claim brought by a fired a church minister. The Fifth Circuit determined that the minister was not an employee under Title VII of the Civil Rights Act, and further, that finding that the minister was wrongfully terminated would necessitate an impermissible encroachment into the Salvation Army's right to free exercise or religion. McLure was followed by Werft v. Desert Southwest Annual Conf. of United Methodist Church, 377 F.3d 1099, 1100 n.1 (9th Cir. 2004). The ministerial exception established in McLure was just recently extended to FLSA scenarios by the Seventh Circuit in Schleicher v. Salvation Army, 2007 U.S. Dist. LEXIS 2836 (7th Cir. 2007), but Schleicher concerned the wages of a minister, and thus not an employee under the FLSA.

Alamo has been distinguished many times, but never again in the context of a religious group seeking to evade labor laws, so the penultimate battle at trial will chiefly be over whether to follow or distinguish Alamo, as I describe above.

Before trial, of course, there will be a slew of motions and creative lawyering by Scientology to delay this trial until the end of time. There is undoubtedly the most serious legal challenge they've faced in years and they almost certainly realize it and will act accordingly. One especiallly intriguing pretrial question is whether Scientology will challenge Headley on the basis of the numerous releases and waivers Headley signed. Headley speaks of the releases in his complaint, alleging that they are invalid for lack of consideration and unconscionable, an assertion which is likely correct. Although Headley doesn't include the releases in his complaint, and I thus have no actual knowledge of them, I have reviewed many other Scientology releases and have noted prior occasions their telltale signs--they all inevitably lack consideration and usually contain unconscionable terms. Headley adds that his were signed under duress, an assertion which I have little trouble believing. Will Scientology actually produce Headley's signed releases as evidence of his relinquishing the right to sue? A loss on this front would be a minor devastation as Scientology has relied on these unconscionable releases for years (and although they've never really been tested, the releases likely "work" in that many ex-members are probably intimidated into not bringing a suit against Scientology because they assume the release is valid; invalid or not, the releases possess a deterrent quality).

I will be keeping a close eye on this lawsuit as it progresses and write about it as time allows. posted by scott pilutik at January 9, 2009 01:59 AM

Re: Scott Pilutik's Analysis of Marc Headley vs CSI

Between Golden Era and COS productions they have produced and/or distributed nearly a hundred films. I'm going to go out on a limb a guess that the Co$ doesn't give these DVD's away for free. I believe it safe to say they require a fee (donation) to view the ones that are used in their courses. I'll go furthur a suggest that they charge a boatload for the DVD's they sell.

Doesn't that make it a "commercial enterprise" and somewhat emasculate their possible "promotional activities" argument?

Re: Scott Pilutik's Analysis of Marc Headley vs CSI

I've no specific legal knowledge, but the analysis, if accurate, bodes well for us. And I'm glad someone not involved in the suit is assessing it and offering feedback.

Re: Scott Pilutik's Analysis of Marc Headley vs CSI

OK, Thanks to the work of other anon's, I located a DVD produced by Golden Era productions that is for sale commercially on Amazon, the U.N. bookstore and BennetBooks Ltd amoung many others. It's titled "Youth for Human Rights".
I found this one in just a few minutes on the web. There are probably many more. "Youth for Human Rights International" is a Co$ front group claiming to be purely secular. Therefore, I submit that the possible defense referred to above:
"Scientology will no doubt argue that Golden Era is engaged in promotional activities as opposed to commercial, and there is therefore no risk of unfair competition--it does not compete because it is the only entity that produces in L Ron Hubbard videos, and its adherents the only targeted class, unlike, say, a motel, which would target every demographic." Can be disarmed, at least in part, as a result of these Golden Era produced videos being for sale commercially and to the general public.
Any claim that CSI makes stating that work produced by Golden Era is strictly promotional and spiritual in nature can be proven false.