GEO Group Inc. lost another bid to drop a lawsuit accusing it of violating minimum wage laws by requiring immigrant detainees to work for only $1 a day.

A federal judge in Washington state Dec. 10 said the private prison operator can’t rely on a doctrine that prevents the states from discriminating against the federal government or otherwise interfering in the federal government’s ability to function. GEO Group contracts with Immigration and Customs Enforcement to run the Northwest Detention Center, a 1,575-bed facility that houses immigrants awaiting resolution of matters such as removal proceedings.

But the Washington Minimum Wage Act...