Disabled Workers Can be Paid Less Than the Minimum wage. Some States Want to End That

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By Kevin Hardy
Stateline.org
(TNS)

Overland Park, Kansas (Stateline.org) — High-fives, fist-bumps and hugs come with the ice cream at the Golden Scoop. online news

Tucked into a shopping center in suburban Kansas City, the shop employs 15 people with developmental disabilities. While customers first come for the sweet treats, many are drawn in by the Golden Scoop’s mission and friendly environment.

“It just brings you so much joy,” said Lindsay Krumbholz, who opened the shop with her sister in 2021. “We’ve even had customers that come in and say, ‘I’ve had a bad day, I just had to come to the Golden Scoop.’”

The nonprofit shop could have sought federal approval to pay workers below the $7.25 federal minimum wage. But each of the store’s “Super Scoopers” earns at least $15 per hour plus tips.

They include 32-year-old Jack Murphy, whom customers know by his nickname of “Mayor.” He enjoys connecting with them, the managers and the job coaches who support him during his shifts.

“I love coming to work,” he said. “If I wasn’t working, I would be crying.”

Everything at the Golden Scoop was designed to set workers up for success: The menu has been pared down for simplicity. Employees pre-scoop and package the ice cream to streamline service. Binders with big pictures show step-by-step directions on mixing batches of ice cream. And baked goods are prepared elsewhere.

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“They provide customized employment. They’re providing the right accommodations for individuals that work there in order to succeed,” Sara Hart Weir, executive director of the Kansas Council on Developmental Disabilities, said of the shop’s managers.

Weir, who also serves on the board of the Golden Scoop, hopes to see more Kansas employers follow the ice cream shop’s model after a state law this year provided grant money for organizations to pay workers with disabilities above minimum wage. The law, for the first time, also made a special tax credit available only to employers paying at least minimum wage.

Since 1938, when Franklin D. Roosevelt was president, federal law has allowed some employers to pay people considered less productive because of a physical or mental disability well below the federal minimum wage. While the law was originally intended to provide opportunities for those with little access to work, policymakers in a growing number of states are trying to move away from the practice.

With federal authorization, the employers pay pennies or a few dollars per hour in “sheltered workshops” that contract with companies and hire workers to perform menial tasks such as shredding paper, attaching product labels or packaging consumer goods in group settings that are segregated from mainstream employees.

While most workers have intellectual disabilities that can include cerebral palsy or Down syndrome, federal regulations list blindness, alcoholism and drug addiction as qualifying disabilities for lower pay.

At least 16 states have eliminated the subminimum wage, according to the National Conference of State Legislatures. Others, including Kansas and Minnesota, have agreed on a middle ground: creating funds to help employers make the change themselves.

The move comes at a time of increased scrutiny of Section 14(c) of the Fair Labor Standards Act, the federal law authorizing the lower pay, and follows decades of efforts to fully integrate people with developmental disabilities into their communities.

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Congress has failed multiple times to ban the practice: A bipartisan group of lawmakers from both chambers of Congress introduced such legislation last year, but it has not advanced. It followed the U.S. Department of Labor announcement of a “comprehensive review” of the federal program. In a 2020 report, the U.S. Commission on Civil Rights found “persistent failures in regulation and oversight” of employers by the federal Labor and Justice departments.

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While many disability advocates see moving away from subminimum wage as a basic issue of fairness, others worry that raising pay could affect social service benefits for disabled workers or put some operations employing disabled workers out of business altogether.

A report from the U.S. Government Accountability Office last year found about 120,000 workers were employed under the program, with half earning less than $3.50 an hour.

But the program’s use has been declining for years, as more disabled employees have moved away from sheltered workshops into mainstream work settings such as the Golden Scoop.

In 2010, more than 3,100 employers across the country participated in the federal subminimum wage program. By 2019, that number had dropped by nearly half, with 1,567 employers participating, according to the GAO.

“What this program has become over the decades is a very niche program for individuals with significant intellectual disabilities and mental health issues,” said Kit Brewer, executive director of Project CU, a sheltered workshop in St. Louis that employs about 100 people with developmental disabilities.

Brewer said many workers don’t have the capacity to produce at the rate needed to compete in mainstream work environments, meaning subminimum wage work might be their only option. And, he said, the economics just don’t bear higher pay. Like other workshops, Project CU competes with for-profit companies.

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A large share of those who work on shrink-wrapping, labeling and packaging materials at his facility, Brewer said, would struggle with mainstream employment — even those who have the right skill sets.

“They don’t have the comfort level, because of their anxiety, because of their disability, possibly because of some of their behavioral needs,” he said. “And throwing money at a changeover doesn’t fix any of that.”
‘Everything is about choice’

In Minnesota, disability advocates have been working for years to phase out the subminimum wage. Last year, lawmakers embraced most of the recommendations from a state task force. In an omnibus spending bill, they provided funds for technical assistance, case management and training for those employers transitioning to the minimum wage.

Last week, a House committee approved a bill that would abolish the subminimum wage.

Sheltered workshops are as antiquated as the state institutions that formerly housed many people with disabilities, argued Jillian Nelson, a member of the task force and the community resource and policy advocate at the Autism Society of Minnesota.

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“We would never do that now,” she said. “We saw when we brought people out of institutions, they thrive. When we brought people out of institutions, our communities became more diverse. … And this is very much the same thing.”

Nelson, who has autism, said she struggled for years with mainstream employment. She said she was not attuned to office politics and bounced around among entry-level jobs, but then found an employer that supported her.

“It’s changed my sense of self-worth. It’s changed my value of myself,” she said. “It’s hard to want more for your life when you’re making $4 an hour. It’s hard to see value in yourself when you’re being told you’re worth $3 an hour.”

But ending the subminimum wage could remove options for some families by causing the closure of workshops, said Minnesota Republican state Sen. Jim Abeler.

“For me, everything is about choice,” said Abeler, who opposes abolishing the subminimum wage. “Nobody should be trapped, and so if they want to be independent, we should try to support them in that.”

Abeler said he supports efforts to help workers with disabilities move to competitive employment — if they choose. But, he said, that’s not an option for everyone.

Of the 3,200 Minnesotans who work for subminimum wages, he said, a few hundred may be able to find mainstream work.

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“So at least 2,500 people would find themselves sitting at home, trying to work on a puzzle or watch TV or something,” he said.
Impacts of closures

In the fall of 2021, Colleen Stuart said a change in Pennsylvania state reimbursement rates for job coaching services pushed her to close a sheltered workshop where rural workers had prepared mailings and packaged goods for 25 years.

Employees lost their friendships and paychecks, but the closure also rippled through their families: Some parents said they would need to quit their jobs to take care of their newly unemployed adult children.

“The individuals said, ‘Colleen, you’re breaking up our family,’” she said. “It broke my heart.”

Stuart is the president of the national Coalition for the Preservation of Employment Choice, which advocates for the federal program allowing employers to pay below minimum wage.

She’s also the chief executive of Venango Training and Development Center, which provides mental health and employment services in Northwest Pennsylvania.

While her training center’s 2021 closure of a sheltered workshop was not related to wage issues, she said its effects show what could happen to employees of other workshops if they’re forced to pay above minimum wage.

“To this day, there’s one person out of all the individuals that got employment,” she said. “The rest still don’t have services and are sitting at home. And that is our biggest concern.”

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Similar concerns this January helped sink Utah legislation that would have abolished the subminimum wage, said Nate Crippes, the public affairs supervising attorney at the Disability Law Center of Utah. Utah’s 45-day legislative session made it hard to have a substantive debate on the issue, he said.

“I think it needs to be a longer discussion than just, ‘Oh, these places would go out of business and people would have nowhere to go,’” he said. “Because I don’t think that would happen.”

Crippes said day programs and other services for those with disabilities will persist even if sheltered workshops are required to pay minimum wage.

“My struggle is that our minimum wage is pretty low and it is not a living wage to begin with,” he said. “Just getting people to $7.25 shouldn’t be out of the realm of possibility.”

Georgia state Rep. Scott Hilton views the issue through the lens of his 14-year-old son, who has Down syndrome.

“My goal for my child is for him to be a taxpayer and in return be a net positive, a net benefit back to that system that’s paid so much into his life to make him a happy, healthy, productive citizen,” he said.

Hilton, a Republican, co-sponsored a bill this session that would force the state’s eight remaining workshops to pay the federal minimum wage. The bill was approved by the state House and is pending in the state Senate.

“Work brings joy to a lot of us,” Hilton said. “And that’s what we’d want for any of our kids — meaningful work and a fair wage.”

Stateline is part of States Newsroom, a national nonprofit news organization focused on state policy.