By John Hrabe | Special to Florida Watchdog
TALLAHASSEE — Top executives for three Florida-based Goodwill charities take home six-figure salaries while simultaneously paying some employees less than the federal minimum wage, a Florida Watchdog investigation has found.
And the practice of paying employees as little as 22-cents an hour is perfectly legal, thanks to an obscure Depression-era labor loophole.
Under Section 14 (c) of the Fair Labor Standards Act of 1938, employers can apply for a special wage certificate that allows them to hire people with disabilities at a sub-minimum wage.
Three Goodwill Florida affiliates — Goodwill Industries of Central Florida, Inc., Goodwill Industries of South Florida, Inc. and Goodwill Industries of the Suncoast, Inc. — have taken advantage of the obscure law and applied for the exemption.
Goodwill’s nonprofit charitable tax exemption is premised on their programs to help people with physical or mental limitations “achieve their full potential through the dignity and power of work.” The Florida affiliates of the secondhand clothing syndicate referred questions about the exemption to the organization’s national headquarters.
Brad Turner-Little, director of mission strategy at Goodwill International, Inc., defended the practice as one of Goodwill’s “tools” to help the disabled. Nationally, the organization uses the special minimum wage exemption for approximately 7,300 of its 105,000 employees.
“With 80 percent of working-age adults with disabilities in our country not participating in the workforce currently, we believe that it’s important to explore more types of opportunities,” Turner-Little told Florida Watchdog. “The special minimum wage certificate is a tool to create employment for people with disabilities. It’s not the only tool.”
That’s not how advocates for people with disabilities see it.
“Goodwill Industries is one of the most well-known charitable organizations in the United States, but most members of the general public are unaware that Goodwill exploits people with disabilities,” said Marc Maurer, president of the National Federation of the Blind, which has organized a nationwide protest of offending Goodwill organizations. “We are conducting informational protests to make the public aware of this practice that, although sadly still legal, is unfair, discriminatory, and immoral.”
These Goodwill organizations that pinch pennies with disabled employees simultaneously spend big money on lucrative compensation packages for top executives.
Goodwill-Suncoast: CEO pay topped $637k in 2010
In 2011, Goodwill Industries-Suncoast Inc., paid its president and CEO, R. Lee Waits, a compensation package worth $440,197. The generous benefits included $308,015 in base pay, $79,768 in bonuses, $31,907 in retirement benefits and $20,456 in other nontaxable perks. In place of Waits’ compensation package, Goodwill could have hired more than 30 employees for a year and paid each the federal minimum wage.
Shockingly, Waits took a pay cut in 2011. The prior year he collected more than $637,452 in total compensation, according to the organization’s federal tax forms for 2010.
The Suncoast branch, which listed “vocational training for disabled/disadvantaged” as its only mission, spent more than $1.3 million in compensation for officers, directors and key employees, $1.2 million on travel expenses and $26,000 in lobbying expenses in 2011. It didn’t have the money to pay all of its employees just $14,500, the annual salary of a minimum wage employee.
Goodwill Industries of South Florida: $1 million in travel expenses
Goodwill Industries of South Florida, Inc., which collected $737,672 in government grants in 2010, paid its CEO Dennis Pastrana$316,685 in total compensation. His base salary was nearly 21 times greater than the federal wage floor, which Goodwill Industries of South Florida refuses to pay its workers.
In addition to Pastrana’s executive compensation package, five other high-ranking executives earned six-figure salaries in 2010, the most recent year for which tax documents were publicly available. The organization spent more than $1million in travel-related expenses and $63,000 in lobbying fees.
Goodwill Industries of Central Florida, Inc., the smallest of the three Goodwill organizationss, pays its president, William G. Oakley, the lowest salary. Last year, he lived on a meager $206,287 in total compensation. Oakley’s predecessor fared much better.
In 2010, when Goodwill Industries of Central Florida, Inc. accepted $628,476 in government grants, outgoing president and CEO Richard L. Coleman walked away with $393,001 in total compensation.
Florida Goodwill tight-lipped about executive pay
Florida Watchdog asked the three Goodwill organizations to justify paying their top executives six-figure salaries, while simultaneously paying some workers less than the minimum wage. Goodwill Industries-Suncoast did not respond to emails.
Lourdes de la Mata-Little, vice president of marketing for Goodwill Industries of South Florida, referred questions to a national spokesperson. Goodwill Industries of Central Florida was the only Florida organization to respond to questions about its executive compensation.
“I cannot answer your question about Mr. Coleman’s compensation as I was not an employee of Goodwill Industries of Central Florida at the time,” Oakley, president and CEO of Goodwill Industries of Central Florida, Inc. wrote in an email. “The board and I reached an agreement for my services.”
Even Oakley wouldn’t respond to questions about the sub-minimum wage policy.
“As you have been in touch with Goodwill Industries International, our organization is in harmony with respect to Section 14c with Goodwill Industries International,” he said.
Goodwill International defends CEO pay
The Florida affiliates in question seem to have taken the lucrative executive compensation playbook straight from Goodwill Industries International, the parent company. In 2010, the organization paid its president and CEO James Gibbons more than half a million dollars.
“Goodwill’s core mission is to help people reach their full employment potential, regardless of what that level might be,” said Tommy A. Moore, Jr., Goodwill Industries International’s board chair. “The board goes through a rigorous process to determine his compensation based on the impact of his leadership, strategic goals and performance.”
Moore, who also serves as chairman and CEO of First Investors Financial Services Group Inc., said “The president and CEO received a favorable review based on his results and his service to the Goodwill network, including the more than 4 million people with disabilities and disadvantages that Goodwill serves in the United States and Canada as well as 14 other countries.”
A spokeswoman for Goodwill said that the top executive’s performance review is conducted on an annual basis.
Sub-minimum wage employees review process more intensive than CEOs
While the president of Goodwill International is reviewed on an annual basis, employees who are paid pennies an hour must go through an extensive review process every six months, and sometimes even more frequently.
“It’s a fairly lengthy process,” Turner-Little said of the sub-minimum-wage employee review process. “Every six months, an individual who is paid under a special wage certificate, their productivity has to be assessed at least every six months. Often times, employers will do it more frequently than that. And all that has to be documented and made available to the Department (of Labor) if they need to see it.”
The employee evaluations are just one component of a lengthy administrative process required by the Department of Labor in order for an organization to maintain its minimum wage exemption.
After Goodwill has surveyed at least three companies for comparable wage information data, the organization must evaluate individual employees.
“They have to outline their individual productivity assessment process for the jobs that are going to be paid under the special minimum wage certificate and that has to be done both for service-type jobs as well as piece rate work- so hand assembly type work, making a product as well as providing a service,” Turner-Little said. “Then, (they) have to outline what their time-study process is going to be, all of that is contained in the application process.”
Work center certificates, the type Goodwill says it uses, can only remain in effect for two years. Then, the process starts over again, but not without adding all the previous data to the new Department of Labor application.
“Prior to the certificate running out, then they have to go through a reapplication process, with all of that information again, as well as all the data. If they have had the certificate in the past, the use of that certificate, the number of employees, the types of jobs that were performed, and provide evidence to the department that they have implemented the certificate in compliance with expected regulations,” Turner-Little said.
Goodwill’s description of the lengthy federal exemption process is confirmed by an expert in disability law. In opposition to the federal minimum-wage exemption loophole, Peter Blanck, a law professor at Syracuse University and chairman of the Burton Blatt Institute, a civic organization dedicated to advancing the lives of the disabled, wrote, “The section incorporates substantial procedures that must be met by the rehabilitation agency before subminimum wage payments are authorized.”
Which begs the question, why is Goodwill spending so much time and money on paperwork in order to obtain federal permission to pay its workers pennies an hour?
Goodwill wouldn’t answer that question or tell Florida Watchdog whether pricey lawyers tackled the bureaucratic nightmare. The organization stuck to its talking points defending the exemption certificate.
Stearns’ bill would end “deplorable” practice
Disability advocates have support on Capitol Hill from U.S. Rep. Cliff Stearns, R-Ocala, who has introduced legislation to stop the “deplorable” practice.
“It is deplorable and wrong in America that these not-for-profit centers would hire people with disabilities, including the visually impaired, and pay them less than $1 an hour,” said Stearns, R- Ocala, when he introduced H.R. 3086 last year with his primary co-author, U.S. Rep. Tim Bishop, D-New York.
Eighty-one members of Congress have signed on as co-authors, but the bill has stalled in the House Education and the Workforce Committee, chaired by U.S. Rep. John Kline, R-Minn. Unless it is taken up soon, Stearns’ office says it will have to be reintroduced in the next Congress.
“I offered H.R. 3086, the Fair Wages Act, with bipartisan support to phase out the provision in the Fair Labor Standards Act that allows sub-minimum wage for disabled workers,” Stearns wrote to Florida Watchdog via email. “However, since the number of days in which the House will be in session is dwindling, if a hearing is not scheduled early this fall, the measure will likely be re-introduced in the new Congress.”
Businesses hold all the cards
Samuel R. Bagenstos, a professor of law at the University of Michigan Law School and a former deputy attorney general for civil rights, has written a case study for repealing the federal law.
“This situation is an invitation to paying individuals with disabilities in sheltered workshops less than they deserve under the law, and significantly less than they produce for their managers,” he wrote in “The Case Against the Section 14(c) Subminimum Wage Program.”
“Where basically all of the relevant information is in the hands of the sheltered workshop manager, the statutory appeals process can provide little counterweight. And the process itself is fatally flawed — because it does not provide for attorney’s fees or opt-out classes — and is therefore rarely invoked.”
According to its federal charitable documents, Goodwill’s mission, its justification for tax exempt status, is to end employment barriers, “Goodwill Industries International enhances the dignity and quality of life of individuals, families, and communities by eliminating barriers to opportunity and helping people in need reach their fullest potential through the power of work.”
John Hrabe can be reached [email protected]