The GEO Group Comments on Ruling by the 9th Circuit Court of Appeals in the Nwauzor Case

Rhea-AI Summary

The GEO Group (NYSE: GEO) has responded to a ruling by the U.S. Court of Appeals for the Ninth Circuit regarding the Nwauzor case. The company maintains that participants in the federally mandated Voluntary Work Program (VWP) at the Tacoma ICE Facility are not GEO employees. The United States Department of Justice supported GEO's position, arguing that applying state minimum wage laws is precluded by federal preemption and violates intergovernmental immunity principles.

GEO contends that the State of Washington has unconstitutionally violated the Supremacy Clause of the United States Constitution. The company has expressed strong disagreement with the court's decision and plans to pursue all available appeals.

Positive

• Department of Justice support for GEO's legal position

Negative

• Unfavorable ruling in the Nwauzor case regarding worker compensation
• Potential financial impact if required to pay state minimum wage to VWP participants
• Ongoing legal uncertainty and associated costs from appeals process

Insights

Legal Expert

The 9th Circuit Court's ruling in the Nwauzor case represents a critical legal challenge to GEO Group's business model regarding immigration detention facilities. The core issue revolves around whether detainees participating in the Voluntary Work Program (VWP) should be classified as employees entitled to state minimum wage - a precedent that could substantially increase operational costs across GEO's facilities.

The Department of Justice's support of GEO's position, citing federal preemption and intergovernmental immunity, highlights the complex interplay between federal immigration enforcement and state labor laws. The Supremacy Clause argument is particularly compelling, as it questions whether state minimum wage laws can override federal detention facility operations and regulations.

If upheld through subsequent appeals, this ruling could have significant financial implications, potentially requiring GEO to pay state minimum wages retroactively and adjust future compensation structures. For context, Washington's minimum wage is substantially higher than the $1 per day typically paid under the VWP, which could materially impact GEO's profit margins and operational model in detention facilities.

Financial Analyst

This legal development poses substantial financial risks to GEO Group's business model and profitability. If the ruling stands, it could force a significant increase in labor costs at the Tacoma facility and potentially set a precedent for other facilities nationwide. The immediate impact would include both retroactive wage payments and ongoing higher operational expenses.

The financial exposure extends beyond direct wage costs to include potential modifications in facility operations, compliance measures and legal expenses for continued appeals. With GEO's current market cap of $4.83 billion, investors should monitor this case closely as it could materially affect the company's cost structure and future earnings potential.

The broader implications for the private detention facility industry could be substantial, potentially leading to revised contract pricing with federal agencies to account for higher operational costs. This could trigger a fundamental reassessment of the industry's profitability model and valuation metrics.

BOCA RATON, Fla.--(BUSINESS WIRE)-- The GEO Group, Inc. (NYSE: GEO) (“GEO” or the “Company”) commented today on a ruling by the U.S. Court of Appeals for the Ninth Circuit in relation to the Nwauzor v. The GEO Group case (the “Nwauzor Case”).

GEO is currently reviewing today’s decision in the Nwauzor Case. GEO remains steadfast in its position that participants in the federally mandated Voluntary Work Program (VWP) at the Tacoma ICE Facility are not GEO employees. The United States Department of Justice supported GEO in requesting that the lower court judgment be reversed, stating that the application of the state minimum wage is precluded by principles of federal preemption and violates principles of intergovernmental immunity. Simply put, we believe the State of Washington has unconstitutionally violated the Supremacy Clause of the United States Constitution. GEO strongly disagrees with this decision and will continue to vigorously pursue all available appeals of this ruling.

About The GEO Group

The GEO Group, Inc. (NYSE: GEO) is a leading diversified government service provider, specializing in design, financing, development, and support services for secure facilities, processing centers, and community reentry centers in the United States, Australia, South Africa, and the United Kingdom. GEO’s diversified services include enhanced in-custody rehabilitation and post-release support through the award-winning GEO Continuum of Care®, secure transportation, electronic monitoring, community-based programs, and correctional health and mental health care. GEO’s worldwide operations include the ownership and/or delivery of support services for 99 facilities totaling approximately 80,000 beds, including idle facilities and projects under development, with a workforce of up to approximately 18,000 employees.

Use of forward-looking statements

This news release may contain “forward-looking statements” within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, and the U.S. Private Securities Litigation Reform Act of 1995. Readers are cautioned not to place undue reliance on these forward-looking statements and any such forward-looking statements are qualified in their entirety by reference to the cautionary statements and risk factors contained in GEO's filings with the U.S. Securities and Exchange Commission including its Form 10-K, 10-Q and 8-K reports. All forward-looking statements speak only as of the date of this news release and are based on current expectations and involve a number of assumptions, risks and uncertainties that could cause the actual results to differ materially from such forward-looking statements. Readers are strongly encouraged to read the full cautionary statements and risk factors contained in GEO’s filings with the U.S. Securities and Exchange Commission, including those referenced above. GEO disclaims any obligation to update or revise any forward-looking statements, except as required by law.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250116486284/en/

Pablo E. Paez (866) 301 4436

Executive Vice President, Corporate Relations

Source: The GEO Group, Inc.

FAQ

What is the Nwauzor case ruling against GEO Group about?

The Nwauzor case involves a dispute over whether participants in GEO's Voluntary Work Program at the Tacoma ICE Facility should be considered employees and paid state minimum wage. GEO maintains they are not employees, but the 9th Circuit Court of Appeals has ruled against this position.

How is the Department of Justice involved in GEO Group's Nwauzor case?

The U.S. Department of Justice supported GEO's position, arguing that applying state minimum wage laws is precluded by federal preemption and violates principles of intergovernmental immunity.

What legal grounds is GEO using to appeal the Nwauzor case ruling?

GEO argues that the State of Washington has unconstitutionally violated the Supremacy Clause of the United States Constitution and plans to pursue all available appeals of the ruling.

What is GEO Group's Voluntary Work Program (VWP) at the Tacoma ICE Facility?

The Voluntary Work Program is a federally mandated program at GEO's Tacoma ICE Facility. GEO maintains that participants in this program are not GEO employees and therefore not subject to state minimum wage requirements.