Goodwill pays some disabled workers far less than the minimum wage, while some executives earn hundreds of thousands of dollars. It's all perfectly legal, according to the Fair Labor Standards Act. Rock Center's Harry Smith goes behind the scenes at Goodwill to investigate.
A national charity whose executives earn six-figure salaries used a legal loophole to pay disabled workers as little as three and four cents an hour, according to documents obtained exclusively by NBC News.
An NBC News investigation recently revealed that Goodwill Industries, which is among the non-profit groups permitted to pay disabled workers far less than minimum wage because of a federal law known as Section 14 (c), had paid workers as little as 22 cents an hour.
Now newly obtained federal documents show that at least 13 Goodwill franchises in 10 states paid 140 workers even less.
According to Department of Labor filings acquired via the Freedom of Information Act, two Goodwill franchises in Fort Worth, Texas paid 51 employees less than 10 cents an hour in 2011, with 14 earning just four cents an hour for tasks described as “assembly.”
Franchises in Michigan, Maryland, Pennsylvania, North Carolina, Ohio, Florida, Wisconsin, Oklahoma, Virginia also paid employees 21 cents or less between 2008 and 2011, according to the documents. One franchise in Fairfield, Ohio paid a worker just three cents an hour for hanging clothes in 2008.
“The results of your FOIA request reinforce that people with disabilities are devalued in this situation and the operators of these programs are not keeping pace with the times,” said Clyde Terry of the National Council on Disability, an independent federal agency that advises the White House and Congress on disability policy.
“This may have been appropriate in the 1930s,” said Terry, “but in this day and age with the advances of technology, health care and education, is this the best we can do?”
A spokesperson for Goodwill International Industries countered that it was "misleading" to "cherrypick" low wages, calling them "extraordinary situations."
Section 14 (c) of the Fair Labor Standards Act, which was passed in 1938, allows employers to obtain special minimum wage certificates from the Department of Labor. The certificates give employers the right to pay disabled workers according to their abilities, with no bottom limit to the wage.
Most, but not all, special wage certificates are held by non-profit organizations like Goodwill that then set up their own so-called "sheltered workshops" for disabled employees, where participants typically perform manual tasks like hanging clothes.
The non-profits use “time studies” to calculate the salaries of Section 14 (c) workers. With a stopwatch, staff members time how long it takes a disabled worker to complete a task. That time is compared with how long it would take a person without a disability to do the same task. The non-profit then applies a formula to calculate a rate of pay, which may be equal to or less than minimum wage. The tests are repeated every six months, and wages can rise or fall.
The non-profit certificate holders can also place employees in outside, for-profit workplaces including restaurants, retail stores, hospitals and even Internal Revenue Service centers. Between the sheltered workshops and the outside businesses, more than 216,000 workers are eligible to earn less than minimum wage because of Section 14 (c), though many end up earning the full federal minimum wage of $7.25 or more.
Goodwill’s figures show that the non-profit currently has 69 local franchises employing 7,300 workers eligible to be paid less than minimum wage. NBC News obtained a range of filings from 2008 to 2012 for 89 different franchises.
According to Goodwill’s figures, nationally the average hourly wage for those Section 14 (c) employees is $7.47 an hour.
"The low wages you have referenced are extraordinary situations," said Goodwill Industries International spokesperson Lauren Lawson. “For example, sometimes an employee will work for a few minutes but then stop producing for the rest of the shift because of an emotional or behavioral issue. Unlike a typical employer, Goodwill does not dismiss an employee in such situations.”
Dan Buron, executive director of Goodwill Industries of Southeastern Michigan, which paid a worker six cents an hour in 2010, said the organization’s work program is meant to “provid[e] the most significantly disabled individuals in our community with work that will either lead to competitive employment; or for those where this may not be possible, to enjoy the many personal, social and economic benefits of working.”
Buron also said that in January 2013, Goodwill Industries of Southeastern Michigan “established a floor wage of $1.85 for all participants” in its program.
A spokesperson for Goodwill of Northern Wisconsin and Upper Michigan, which paid one worker in Marinette, Wisc. 16 cents an hour and another 19 cents in 2010, said the organization currently has one program participant “with significant and multiple disabilities” who makes 19 cents per hour.
“The person attends very few hours and cannot work without close, one-on-one supervision from staff to complete any task,” said the spokesperson, who noted that some participants earn more than the minimum wage, including one who is paid $9.38 per hour.
The CEO of the Hagerstown, Maryland Goodwill, which paid a “hand packager” 15 cents in 2011, said the wage was appropriate. “For the person in question, the pay rate was accurate for his/her productivity on the work we were doing then and for the amount of it that we had,” said Craig MacLean in an emailed statement. “The same rationale applies to the person on the same document … who was being compensated for his/her production at $8.24 because of vastly greater skill and dexterity.”
The National Council on Disability’s Terry said he was unsurprised by the wages revealed in the documents, and called for an end to the “sheltered workshops” that pay subminimum wages.
“We want to support people with disabilities to find integrated employment so they can fully participate in community life, contribute to their company’s bottom line, and have a full life,” said Terry, who chairs the council’s Subminimum Wage and Supported Employment committee. “It’s time these sheltered workshops be phased out.”
In an earlier interview with NBC News, Goodwill International CEO Jim Gibbons defended time studies and the Section 14 (c) approach. He said that for many people who make less than minimum wage, the experience of work is more important than the pay.
“It’s typically not about their livelihood. It’s about their fulfillment. It’s about being a part of something. And it’s probably a small part of the overall program,” he said.
In the same interview, Gibbons also defended the compensation earned by some Goodwill executives. His salary and deferred compensation totaled $729,000 in 2011, while the CEO of Goodwill Industries of Southern California earned $1.1 million and the top executive in Portland, Oregon earned more than $500,000.
“These leaders are having a great impact in terms of new solutions, in terms of innovation, and in terms of job creation,“ said Gibbons.
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