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How a Charlotte Rehab Center Is Bypassing Labor Laws in the Name of ‘Work Therapy

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July 17, 2021

For six months, Prince Foster III woke up at 6 a.m. every day and hung clothes at a red-bricked Salvation Army warehouse in Charlotte, N.C. He spent 40 hours a week working — but instead of receiving the North Carolina minimum wage, he earned a tiny weekly stipend worth far less.

The rest of Foster’s pay went to his room and board at the Salvation Army Adult Rehabilitation Center (ARC) in Charlotte, North Carolina. From May to November 2020, Foster, 37, was a patient at the Charlotte ARC’s program, recovering from a cocaine addiction he’s faced since his early twenties.

Foster declined to specify how much he was paid, but Richard New, an administrator at the Charlotte ARC, said patients receive a $26/week gratuity. The Fair Labor Standards Act requires a nationwide minimum wage of $7.25 per hour. With the ARC’s $26 weekly allowance, participants who work 40-hour weeks receive approximately 65 cents per hour.

Across the country, The Salvation Army of California is now facing a class action lawsuit for alleged labor violations. In Spillman v. Salvation Army, the Superior Court of California ruled that the organization must pay damages to participants including unpaid overtime, minimum wage compensation and rest period compensation.

In that case, plaintiffs claimed to receive anywhere between $1-$25 a week in “canteen cards” and wages, often working more than 40 hours.

Considering the FLSA and legal precedent from the Supreme Court case Tony and Susan Alamo Foundation vs. Secretary of Labor, the Salvation Army’s type of work-based therapy program is almost certainly illegal.

Yet an ongoing lack of oversight and jurisdiction from both federal and state agencies enables rehabs like the Charlotte ARC to skirt around labor law and pay recovering addicts next to nothing for their long hours of work.

About the program

The Salvation Army, a Christian organization known for its thrift stores and charity work, has 101 rehabilitation centers across the country. The centers are notorious for their use of “work therapy,” where participants in recovery work full-time jobs for little to no pay: a process some have called “slave labor.”

. . .

Lawyer D. Michael Hancock, former assistant administrator for the U.S. Department of Labor’s Wage and Hour Division, wrote an NBC guest column about work therapy rehab programs. Hancock said The Salvation Army makes an immense amount of money from its thrift stores.

In 2019, the Salvation Army’s North and South Carolina branch received over $115 million in revenue. Of this, thrift stores provided $26 million and donations provided another $59 million.

There’s a thrift store adjacent to the Charlotte ARC, and two others in the area that ARC participants help support.

“All of this sort of behind-the-scenes work—a lot of that’s being done by these residents, and it’s resulting in a massive amount of revenue,” Hancock said.

. . .

A lack of oversight and impact

The Charlotte ARC isn’t licensed. Charles Epstein, legal communications specialist for the North Carolina Department of Health and Human Services (NCDHHS), said the agency does not license or inspect the ARC due to a religious exemption.

Murphy said part of the reason the center is unlicensed is that “the services provided at the program are not clinical in nature.”

In addition, no state or federal labor organizations oversee or regulate the Charlotte ARC.

In 1990, the U.S. Department of Labor ruled that the Salvation Army must pay its workers minimum wage, according to reporting from The Charlotte Observer. Charlotte Salvation Army representatives said work therapy programs would be difficult to operate if the beneficiaries received wages.

Salvation Army officials said the organization didn’t intend to comply with the minimum wage requirement. And three decades later, they still aren’t.

In response to the 1990 investigation, the Salvation Army filed a lawsuit and lobbied lawmakers, refusing to pay rehab participants. The Department of Labor quickly backed off, suspending its investigation of the Salvation Army.

The Department even added new rules to its field operations handbook that said investigators had to get approval before investigating the Salvation Army’s rehabilitation centers, according to a 2020 report by Reveal.

“One of the things that you’ll find in the field operations handbook is a statement that says they’re not to bring cases against the Salvation Army,” Hancock said. “But it also makes it clear that the Salvation Army is still covered by the Act, and that the workers have the right to bring their own lawsuit to recoup whatever wages they’re not being paid.”

. . .

What’s next for these programs?

The Charlotte ARC isn’t the only rehabilitation facility in the state accused of unethical practices in work therapy programs. Despite efforts to expose these work therapy programs for labor violations, facilities continue offering programs due to an unwavering demand for drug rehab programs in North Carolina.

Recently, concerns about the legality of work-based programs flouting fair wage standards have reached members of Congress.

In November 2020, U.S. Senators Elizabeth Warren (MA) and Tammy Baldwin (WI) sent a letter to the Government Accountability Office, requesting that it begin investigating federally funded facilities.

“Requiring individuals to work without compensation is a violation of the Fair Labor Standards Act (FLSA),” the senators wrote in the letter. Further, they said, federal funding dedicated to supporting individuals with substance use disorder must be used in facilities of evidence-based treatment.

Also mentioned in the letter was the apparent lack of evidence supporting the idea that work therapy programs are beneficial to addiction treatment.

More than 20 years ago, the federal Substance Abuse and Mental Health Services Administration also expressed concern in work-based rehab programs. Their 2000 findings revealed that these programs do not help participants advance from low-skilled work into higher-paying job opportunities. They noted that basic education and sufficient training procedures for low-skilled labor are more helpful.

As concerns about work-based programs continue to reach government agencies and public officials, the future of these programs is in question.

Recent developments in the legal battle with The Salvation Army may be the beginning of the end for the organization’s countless attempts to stave off action from the Department of Labor.

On May 14, a New York-based law firm filed a national class action lawsuit against The Salvation Army. The firm accused it of violating anti-discrimination laws after the Boston ARC barred Mark Tassinari from its facility for using buprenorphine, a drug that helps individuals with opioid-use disorder manage their addictions.

The Salvation Army’s policy against medications violates the American Disabilities Act, the Rehabilitation Act and the Fair Housing Act.

The Charlotte ARC’s program has proven ineffective for the vast majority of its participants. But the few success stories that emerge keep it up and running.

. . .

Graduation rates for government-run programs—like the Walter B. Jones Center in Greenville and the Julian F. Keith Alcohol and Drug Abuse Treatment Center in Black Mountain—generally hover around 70 to 90%.

Meanwhile, at many work-based rehabs, the graduation rate is 30% or less. But that’s not the case for the Charlotte ARC. Not even close.

It’s 12%.

Read How a Charlotte Rehab Center Is Bypassing Labor Laws in the Name of ‘Work Therapy.