Wednesday, October 20, 2010

What happens when a workfare recipient wins the lottery?

Under New York law, anyone who received public assistance over the last 10 years has to give some of his lottery winnings to the state as reimbursement for these benefits. I know there are many New Yorkers who think this is a good idea. But this case exposes a potential flaw in the process.

The case is Carver v. City of New York, decided on September 23. Carver was in the workfare program, which means he had to work various jobs for the City from 1993 through 2000. He was paid the equivalent of minimum wage in cash and public assistance. When he won the lottery, the State intercepted some of his winnings (in the amount of $5,000) and sent the money to New York City. This money was credited against the public assistance that Carter received in the workfare program.

Can you spot the flaw in the lottery payback law? Carter sued, claiming that the law violated the Fair Labor Standards Act, which says you have to be paid minimum wage for your work. If the state takes some of the lottery winnings to recoup what it paid you in workfare benefits, then, minus the lottery take-back, you actually worked for less than minimum wage during the workfare period. Interesting lawsuit, but we do not know for the moment if the lottery take-back law violates FLSA. The Court of Appeals sends the case back to the trial court for that issue after ruling that Carter has standing to bring the lawsuit.

Standing issues are not as interesting as the clash between FLSA minimum wage and the lottery take-back law. But without standing to bring the case, Carter will never get an answer to the more interesting question. Although (for some reason) Carter did not sue New York State in this case, instead only suing the City of New York which was reimbursed through the intercepted lottery winnings, over a dissent from Judge Winter, the Second Circuit (Jacobs, Walker) rules that the City is a proper defendant because he Carver claims the City was supposed to pay him minimum wage during workfare and that the City violated minimum wage laws in requiring him to pay back some of the wages in the event he won the lottery. "On this theory, Carver was directly injured by the City's alleged failure to abide by state and federal labor when compensating him for this work." In addition, since the City indirectly caused the interception of Carver's lottery prize in requiring him to pay back part of his benefits if he won the lottery. However tangentially, the City is at least partly on the hook for this potential minimum wage violation, which allows Carver to proceed against the City in this lawsuit.

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