In Depth

Goodwill places some workers with below minimum wage jobs

On the factory floor at Goodwill Industries of South Florida, cerebral palsy doesn’t stop Donnie Williams from stitching one button hole after another into the military trousers the Miami non-profit makes for the Pentagon.

But workplace productivity calculations did conclude the disability prevents the 58-year-old from stitching as many button holes as would someone without the condition. As a result, Williams earns $4.22 an hour, according to a Goodwill supervisor, about 45 percent below Florida’s minimum hourly wage of $7.79.

The gap is allowed under a federal program designed to create jobs for people with significant disabilities, both as a way to train them for a spot in the workforce and to help them lead more active lives. Disclosure forms show Goodwill in recent years paid some workers in Miami and Fort Lauderdale less than 40 cents an hour, while the average wage hit $4.76 for nearly 300 garment workers like Williams in the program.

Williams started at Goodwill nine years ago, and said the job treats him well. “I like working here,” he said during a brief interview at his sewing station. “I enjoy the people.” As for his paycheck, the Miami Gardens resident said part of it goes to pay rent and that he puts some of it away when he can. “I try to save it a little bit,” he said.

About 3,000 organizations across the country use the program, which has come under national scrutiny this summer on the heels of a critical NBC News report and a revived effort by advocacy groups to end the practice. A congressman in Mississippi with an adult son with a disability has introduced legislation to end the program. Critics contend the low wages help sustain charity executives’ six-figure salaries, and discourage the organizations from trying harder to move disabled workers into regular jobs

“Even a person with a significant disability can do one thing and do it well,” said Anil Lewis, director of advocacy for the National Federation of the Blind. “Goodwill says they train people with disabilities. But if they’re still getting sub-minimum wages, how is that training?”

South Florida Goodwill executives note only about 400 of their 2,500 workers earn the sub-minimum wages allowed by the federal program, and that the lower payroll costs allow them to employ far more people with disabilities than they could otherwise afford.

“Could we operate with people earning 100 percent” of a regular wage, asked Dennis Pastrana, president of Goodwill of South Florida’s since 1979. “Yes. But we would have to eliminate the people who have limited abilities ... Many of them will not be employable anywhere.”

South Florida Goodwill reported serving more than 4,000 people last year, with revenues topping $93 million. The non-profit and other organizations using the program say the low wages make easy targets but that critics ignore the steep challenge of finding productive jobs for people with significant disabilities. “It’s really easy to say, ‘Oh, my gosh, they’re not paying the minimum wage,’ ” said Michael Messer, president of Miami’s the Arc of South Florida, which runs a packing center that employs people with disabilities and is not affiliated with Goodwill. “But I want as many people as possible to be in the program.”

This summer’s negative publicity has caused some fundraising concerns at the local Goodwill operation and helped fuel criticism from competitors of its latest venture: a $14 million healthcare laundry that has already prompted one existing facility to announce layoffs over contracts lost to the charity.

Goodwill is pledging to forgo the federal program and pay all 200 workers at its new laundry near Liberty City at least $9 an hour. The non-profit sees the modern facility as meeting a need for South Florida’s expanding healthcare industry. Goodwill laundry facilities in Colorado and Virginia do use the federal program to pay less, and the practice has brought accusations of unfair competition.

“We feel on a level playing field we can compete with any of the players out there,” said Christian Luneburg, vice president of Florida Linen Services in Pompano Beach, which plans to dismiss 20 workers once the University of Miami hospital system shifts its business to the cheaper price offered at the Goodwill facility.

“We know that if Goodwill is able to have lower labor costs it allows them to charge significantly less per pound,” Luneburg said. “That is something we won’t be able to compete with.”

Pastrana said the efficiency of a modern, largely computer-automated system will make the Goodwill laundry competitive even while paying well above minimum wage. He noted that other Goodwill enterprises, including the one that runs the advertising-insert operation for Miami Herald Media Company, operate without using the minimum-wage waiver for disabled workers.

Goodwill holds janitorial contracts with Miami-Dade County, and its workers with disabilities who clean buses and office buildings are covered by the county’s living-wage ordinance. If Goodwill can wrest the Jackson Health System account from Florida Linen, its laundry workers would be covered by the same law. Goodwill says the janitorial teams they send into federal buildings in the Miami area also earn at least the minimum wage.

Why can Goodwill run some operations with disabled workers who are productive enough to earn at least minimum wage, while paying an average hourly rate below $5 for so many manufacturing workers?

Federal records show a range of disabilities and pay on the garment-factory floor, including $1.01 an hour for someone with mental retardation and $6.47 for someone with a depressive disorder and hypertension.

Goodwill executives say the manufacturing operation is better suited for people with more extensive disabilities, because the non-profit can make space for a worker to perform even the most rote tasks (such as marking a button hole with a pen). The divisions paying at least minimum wage, the executives said, generally require skills or productivity that make it too difficult to employ people with the kind of disabilities that would have them qualify for lower pay.

At the commercial laundry, workers will unload trucks packed with sheets, gowns and blankets, sort them by type on a conveyor belt, and feed dry linens into automatic ironing and folding machines. “This is perfect for what we do at Goodwill,” general manager David Graumlich said while standing beside one of the folding machines. “It’s repetitive. It’s stationary. It’s ergonomic.”

While about 75 percent of the laundry staff will have some disability, Goodwill executives said they can’t provide the support and supervision available on the manufacturing floor and keep pace with washing 10,000 pounds of linen every hour .

“We’re not going to have counselors here,” vice president of marketing Lourdes Little said during a tour. “We’re not going to be set up to handle the severe disabilities.”

Financial records show Goodwill has depended heavily on the manufacturing arm and its corps of workers earning less than the minimum wage.

Of the $40 million earned from Goodwill’s four income-producing divisions between 2009 and 2012, manufacturing generated 42 percent of the net income — about $17 million. The arm that includes the janitorial service earned just $2.3 million in four years, while the newspaper and document-destruction division posted an overall loss of $3.3 million, according to a review of financial statements posted on Goodwill’s website and provided by the charity.

Only Goodwill’s well-known chain of thrift stores selling donated goods contributed more money to Goodwill’s operations: $21 million over four years, or 52 percent of the total.

In the last four years, Goodwill has paid about $11 million for rehabilitation services, according to financial statements, and says its workers are enrolled in programs aimed at moving them into regular employment.

Workers like Williams get paid by the number of “pieces” they can complete during a shift — such as trousers with stitched button holes. Many private-sector factories pay a “piece rate,” but workers are guaranteed a minimum wage. Goodwill doesn’t have to abide by that rule, and a supervisor said Williams’ recent hourly wage amounted to $4.22, based on his output.

For those not paid by the piece, federal law requires organizations to test each worker’s ability to complete a task, such as stitching button holes, against the ability of someone without a disability. If there is a gap, the wage of the worker with a disability is reduced in proportion to what the non-disabled worker would earn.

Regulations allow the test to be as short as 20 minutes, and critics say it doesn’t account for the impatience a person without disabilities would eventually have toward monotonous tasks that may be engaging for a person with a disability.

“It’s mind numbing,” said Lewis, of the blind advocacy program. “The nature of the disability [can make] it very comfortable for them to do these mundane tasks again and again.”

A bill in Congress would end the federal program allowing workers to earn less than the minimum wage. Alcee Hastings, a Democratic congressman representing parts of Broward County, signed up as a co-sponsor in part because the gap between the low pay for workers and the high pay for non-profit executives.

“If you’re making $300,000 or $500,000, give up a little bit to pay more,’’ Hastings said. “Work carries with it dignity. To pay them paltry sums, like $3 and $4 an hour, in some respects is sort of degrading.”

For Pastrana, who earned about $570,000 in total compensation in Goodwill’s most recent tax return, the criticism on the minimum-wage issue misses the main mission of the charity’s income-producing efforts.

Inside a mostly silent room in Goodwill’s sprawling NW 21st Street headquarters, about 50 people sit at folding tables for the day’s shift. One group fills plastic jars with cinnamon sticks for the Badia spice company. Others have white pieces of paper taped in front of them, each with six or eight squares drawn in black marker. Their job: count out replacement buttons onto the squares. The buttons will then be put into packets for sale on shelves.

Severe mental disabilities were evident for many, and conversation did not come easily as a visiting reporter introduced himself. It is this division that has the majority of Goodwill workers paid well below the minimum wage. In 2011, Goodwill reported wages for this division of as low as 13 cents for someone identified as both blind and having mental retardation and $1.24 for someone with autism.

“The activity here is not about work,” Pastrana said during the tour. “They have no other place to go. It’s about the ability to socialize, the ability to gain skills.”

Pastrana launched the manufacturing arm in the early 1990s with two sewing machines in order to make aprons for Goodwill stores in Florida. It grew after winning contracts for combat uniforms and U.S. flags used in military funerals. He recalled creating a mock assembly line as a make-work program before it had so many business ventures to offer paying jobs for people with disabilities. One line assembled bike brakes, and another line took them apart. The process repeated all day.

“The idea is for them to overcome barriers to employment so that at some point in the future they can become self-supporting individuals,” Pastrana said.

Last year Goodwill reported placing 714 of its workers into jobs with other employers, which Pastrana describes as the ultimate measure of success. But he describes that as an uphill task given the extent of the disabilities.

With healthcare workers, supervisors trained to deal with mental disorders and other support, Goodwill can provide the kind of workplace that accommodates the issues that come with workers dealing with mental and developmental issues. A documentary Goodwill commissioned in 2011, For Once in My Life, shows a Goodwill employee breaking up a brief physical confrontation between two workers, and a counselor talking through the appropriate way to handle anger after another worker hit someone.

Nancy Spagnolo, 59, works four days week on Goodwill’s garment-factory floor. She uses a white marker to highlight the outline of pockets of military fatigues. She brought a tin of canned mandarin oranges for a snack. Her work week ends on Thursday, but Spagnolo comes back every Friday to sing in the 28-member company band.

“I like the work,” she said, “and I like the choir.”

But not all workers endorse the low pay. One Goodwill worker contacted by the Herald said a recent paycheck showed an hourly wage of just under $3.40. The garment worker, who asked not to be identified out of concern of negative consequences at Goodwill, said the non-profit is not rewarding quality work.

“I know I’m not as fast. But I take the time to make sure it is done right,” the worker said. “I should be taking home more.”

The worker said the $9-an-hour laundry jobs sound appealing but may not be possible. “I can’t be on my feet,” the worker said.

While federal set-aside rules say that 75 percent of Goodwill’s front-line workers must be classified as disabled, financial reports show about 45 percent of the non-profit’s overall $44 million payroll goes to people with disabilities. Pastrana’s total compensation package came in at about $570,000 in 2011, according to the organization’s most recent tax return, and his six senior executives together earned just under $1 million that year. Pastrana’s base salary and bonus equaled $353,000 for the year.

Using the 293 hourly manufacturing wages listed in Goodwill’s 2011 disclosure form to the U.S. Labor Department, the numbers show Goodwill would have to spend an additional $742 an hour to pay each worker Florida’s minimum wage that year of $7.31. Assuming a 40-hour work week and a manufacturing floor active 52 weeks a year, the additional cost for 2011 would have been $1.5 million.

The cost would have kept the manufacturing profitable most years — it recorded peak sales of $61 million in 2010 and cleared between $3 million and $8 million between 2009 and 2011. But as the military pulled back orders amid cutbacks and the winding down of two wars, Goodwill saw its manufacturing arm post a loss of about $600,000 in 2012.

The drop pushed the entire operation into three months of losses during the summer of 2012, and left Goodwill in violation of its loan agreements with banks. The banks granted Goodwill waivers on their loan agreements and internal figures show 10 straight months of operating gains through June. But Pastrana also said the crisis illustrated the unique employment model Goodwill presents people with disabilities.

While manufacturing sales dropped 30 percent in 2012, its payroll paid to disabled workers in that division dropped just 2 percent, while non-disabled payroll dropped by 8 percent.

“A regular for-profit business simply would not have hesitated to lay off 800 people; it probably would not have experienced such a large loss as Goodwill had,” Pastrana wrote in an e-mail. “However, Goodwill is a business with a social mission — a social enterprise.”

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