Disabled people in Iowa being paid less than minimum wage to work at state-run homes

From the Des Moines Register:

More than 300 mentally retarded people are being paid less than the minimum wage to work at the state-run Woodward and Glenwood homes for the disabled.

State records obtained by The Des Moines Register under the Iowa open-records law show that 74 of the mentally retarded workers are paid an average wage of about 60 cents an hour. One averages 11 cents an hour working for a company owned by one of the world's richest private equity firms, the Carlyle Group.

Those wages are legal under a 71-year-old federal law that enables employers to pay the disabled less than the minimum wage. The law has always been controversial, but the alleged exploitation of mentally retarded employees by Henry's Turkey Service in Atalissa has rekindled the national debate on subminimum wages.

The federal law is intended to ensure that jobs are available for people who cannot perform at the same level as people without disabilities. It has proved divisive even among the disabled, their families and mental health advocates.

Citing the situation in Atalissa, the Association for Persons in Supported Employment is calling for a gradual phaseout of the minimum wage exemption. The organization says the exemption leads to a segregated work force and advances the notion that a disabled worker is not as deserving of base-line, minimum wage protections.

"The disabled is the only class of people we look at and say, 'We'll pay you based on your productivity,' " said association executive director Laura Owens.

"I don't do that when I hire a woman or an African American or a Native American. When we hire other people, we say we're going to pay them according to their value to the company," she said.

But others say the exemption creates meaningful job opportunities for the disabled that wouldn't otherwise exist. Woodward Superintendent Jim Finch said the residents there benefit from not just the pay but from the work itself.

"It is part of a person's self-esteem," he said. "Oftentimes, I'll go down to the payroll office when our clients come in and start picking up their checks on payday, on Friday. And, you know, whether it's 50 cents or $300, they are just so excited. They want to show you their checks and show you that they get paid for doing work. It's a big morale booster."

Owens said, "That's a very demeaning way of looking at this. Eleven cents an hour is almost an insult. This is a civil rights issue."

According to the Iowa Department of Human Services, which runs the Woodward and Glenwood centers, 314 residents of the two facilities are paid less than the Iowa minimum wage of $7.25 an hour.

Department records also show:

- At Glenwood, there are 173 residents being paid subminimum wages, and the workers collect an average of $3.31 an hour. One resident is paid an average of 11 cents an hour, and there are 18 workers averaging less than the 40 cents an hour that was paid by Henry's Turkey Service.

The disabled Glenwood residents assist with food service, custodial work, laundry, delivery services and recycling. Some of the work is done on behalf of churches, the city of Glenwood and the Glenwood Chamber of Commerce.

- At Woodward, there are 141 disabled residents receiving less than the minimum wage, and the average pay is $3.09 an hour. There are 43 residents averaging 50 cents an hour, which is the lowest reported average hourly wage at Woodward.

The residents help with salvage labor, assembly of parts, delivery services, grounds maintenance and laundry. Some of the work is done on behalf of nonprofit agencies, state offices and for-profit companies.

Sylvia Piper of Iowa Protection and Advocacy said her concern is that with wages as low as 11 cents an hour, some workers' full potential is not being realized.

"Eleven cents an hour does seem low," she said. "Is there something else, some other job, these people could do that would be of greater value to them and to the employer?"

Department of Human Services spokesman Roger Munns said the Glenwood resident who averages 11 cents an hour is packaging items, labeling boxes and sealing bags for the Oriental Trading Co. That's a for-profit company owned by the Carlyle Group, a global private equity firm with $87 billion in assets.

Munns said some of the workers, including the person who averages 11 cents an hour, are being paid on a piece-rate basis, not the time spent on a task.

Many of the residents at Woodward and Glenwood are profoundly disabled, but Owens said people who are capable of working are entitled to a fair wage.

"I hear this argument all the time, that we are dealing with people with really significant disabilities," Owens said.

"I work with folks taken from institutions, and I have one woman who is deaf, blind and supposedly has significantly intellectual disabilities. She has been working for 15 years in the community and is now making $11 an hour - not 11 cents," Owens said.

Curt Decker of the National Disability Rights Network said the nation's minimum wage exemption is an "outmoded concept" that dates to a time when there were no support services or devices to improve the productivity of the disabled.

"It is inappropriate to single out and stigmatize workers with disabilities," he said.

The Department of Labor reports that nationally, there are about 425,000 disabled people working for more than 3,200 nonprofits, government agencies and for-profit companies authorized to pay less than the minimum wage.

The vast majority of these people work in so-called sheltered workshops made up exclusively of disabled workers. More than half of them are paid less than $2.50 per hour, with 23 percent earning less than $1 per hour.

People on both sides of the minimum wage issue agree that if disabled workers are to be protected from exploitation, the federal government needs to improve its oversight of employers.

The process of determining a worker's rate of pay involves a calculation of the prevailing wage paid to able-bodied workers. That is coupled with a detailed assessment of the impact that each worker's disability has on his productivity in a specific job.

Those calculations are made by the employers who are paying the wages, not by an independent third party or a worker advocate. The calculations are detailed in written reports the employers send to the Department of Labor for review and approval.

But some of those reports receive little or no scrutiny. John McKeon, deputy director of the department's Wage and Hour Division, said there are only three federal employees reviewing the 2,000 reports submitted each year for approval.

At Woodward, officials acknowledged that when they calculated the prevailing wage for the position of a "cleaner," they mistakenly factored in a $1.22 hourly pay rate for an able-bodied worker at Woodward.

It was a simple - but obvious - mathematical error that reduced the prevailing wage for that job from $9.25 to $7.58, yet no one caught the mistake before the report was finished and sent to the Department of Labor for approval.

Finch said the mistake had no adverse effect on any Woodward residents because the calculations were included in a report filed just three weeks ago and have yet to take effect.

McKeon said many employers who pay the disabled less than the minimum wage "have never seen a wage-and-hour investigator." In March, he said, there were about 740 investigators at the agency, compared with 1,500 in 1975.

Even when investigations take place and violations are found, penalties are rarely imposed.

In the case of Henry's Turkey Service, Department of Labor investigators repeatedly called on the company to reimburse workers for unpaid wages but never imposed an additional penalty.

"I hate to put it this way," said James Leonard, a former Department of Labor lawyer, "but there's almost a financial incentive to take a chance that you won't be caught, because even if you are caught you'll only have to pay back wages."

Between 1987 and 2007, the number of lawsuits in which the Department of Labor took enforcement action and accused companies of violating payroll laws dropped from 705 per year to 151.

That reduction forced workers to hire their own attorneys to seek enforcement of the law. Between 1987 and 2007, the number of lawsuits filed by workers and their private lawyers increased from 773 per year to 7,159.

Leonard said the enforcement system has left all workers - not just the disabled - to fend for themselves.

The Government Accountability Office and the Labor Department's Office of Inspector General reached similar conclusions as a result of investigations several years ago.

Since then, the department has revised its policies and protocols, but Decker told a U.S. Senate committee early this year that "Henry's Turkey Service lingers as an ugly reminder that more is still required."

President Barack Obama has since proposed spending $30 million to hire an additional 288 investigators at the Labor Department.

Decker wants to see stiffer penalties for violators, more public disclosure related to employers' payroll practices and increased enforcement efforts that include a partnership with protection-and-advocacy agencies located in each state.

Advocates for the disabled point out that Atalissa is not the only case of worker exploitation.

In New Hampshire last month, state officials alleged that a nonprofit organization committed 260 violations of the minimum wage law. Community Partners allegedly used mentally disabled clients to perform yardwork and paid them less than the minimum wage without the required approval from the Department of Labor.