New compensation rules for disabled workers worry local organizations

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New compensation rules for disabled workers worry local organizations

cover In his 38 years at the helm of Haywood Vocational Opportunities, George Marshall has seen his share of change in the regulations and trends surrounding the intersection of worlds in which HVO deals.

HVO, a not-for-profit social enterprise that produces medical supplies, is Haywood County’s fifth largest employer and the nation’s largest producer of custom medical drapes.

But HVO is about more than manufacturing. Roughly half the people who work there have some kind of disability, and HVO provides education, training and enrichment to equip them for eventual employment in the competitive market. The organization bridges the space between business, education and humanitarian mission, so the swirl of regulation and oversight to which it’s subject is a constantly changing landscape. But there’s one change on the horizon that has Marshall especially worried.

“This has the potential to impact services to persons with disabilities greater than anything I’ve seen in all my tenure,” he said. “I truly believe as is, it would set services — both vocational and employment services — back by four decades at least.”

The “it” in question? The federal Workforce Innovation and Opportunity Act, which President Barack Obama signed into law in July 2014. More specifically, Marshall is referring to the rules the U.S. Department of Labor crafted to implement the law, currently set to take effect July 22, 2016.

“The act itself is a good act,” Marshall said. “However, as it affects our industry, our business and those services we offer to persons with disabilities, it falls short and I think had unintended consequences.”

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A problem of pay

The crux of the issue has to do with the subminimum wage certificate that HVO, as well as the similar Webster Enterprises in Jackson County, holds to navigate compensation for people who simply can’t produce at the same rate as a person without a disability.

The certificate basically allows employers to pay people with disabilities a wage based on productivity rather than purely on hours worked. The system’s intent is to make it possible for employers to hire people with disabilities without having to eat the difference between that person’s production and what would be expected of the average employee.

At HVO, Marshall said, people entering the training program go through an assessment period to see how fast they work. That rate is compared to the industry standard rate, and the wage is pro-rated against the full per-hour rate. For example, if the market standard was $10 per hour to produce 10 items per hour and the person under evaluation could produce only five per hour, that person would earn $5 per hour. At HVO, the average wage for experienced workers is $13 per hour with starting wages around $10 per hour — ahead of the typical $9 per hour for similar work in the area.

“If we were to be required to pay them minimum wage or higher and they could only work at 50 percent productivity, then actually we couldn’t stay in business,” Marshall said. “But for all these years it has allowed us and programs throughout the nation to be able to perform their vocational development services for persons with disabilities, and it’s paid them fairly commensurate with the wages in their community.”

But if the proposed implementation rules for WIOA are adopted as is, organizations like HVO will no longer be able to hold a subminimum wage certificate. That, Marshall said, would basically mean that HVO couldn’t employ people with serious disabilities at all.

“We could not permit them to engage in any paid work,” he said. “Where’s the money going to come from? We could not do that.”

Marshall isn’t going so far as to say that the rules would cause HVO to shut down. The company has about 350 regular employees who make between $8 and $17 per hour, plus benefits, with about 100 people in the training program who are paid based on the subminimum wage certificate.

“Would it close HVO? No, but it would severely hurt us from the standpoint of how we deliver services,” Marshall said. “It would restrict the services we did deliver. It would also without question restrict the numbers that we could serve annually.”

The effect on Webster Enterprises would be more drastic than that, said Gene Robinson, the nonprofit’s executive director. Like HVO, Webster Enterprises employs people with and without disabilities to produce medical devices and sewn materials for sale, but it’s a much smaller enterprise, employing about 65 people.

“If we can’t utilize the exemption certificate to pay people (based on) what they actually make, then we’re out of business because there is no government money coming in here to pay that salary that they don’t earn,” Robinson said.

Robinson, 77, has spent his entire career and then some advocating for people with disabilities, and he’s acutely aware that, even with Webster Enterprises intact, there are way too many people in the organization’s service area of Jackson, Macon and Swain counties that aren’t being served.

“That’s a pittance of the number of people out there that need help,” Robinson said of the 65 he employs. “There are almost 10,000 people in our service area of the working age that have a disability.”

“Disability” is a wide classification that includes everything from Attention Deficit Disorder to having spent time in prison to low IQ, but “let’s say half of those are severely hindered in some way from being able to go to work. That’s still 5,000 people,” Robinson said.

Statistically, Robinson said, about 75 percent of people with disabilities are unemployed, and he’s certain that the WIOA rules will only cause that number to go up.

“It would be drastic,” he said.

Opposing viewpoints

Clearly, though, enough people support the law and its rules to have allowed it to get this far. Vicki Smith, executive director of Disability Rights N.C., is one of those people. She has nothing but good things to say about HVO, Webster Enterprises and their leaders, calling them “outstanding facilities” that have done “an amazing amount of work” on behalf of people with disabilities. But not all organizations are so responsible, she said.

“There are people who do exploit individuals with disabilities and pay them some subminimum wage, and those individuals may in fact deserve to be paid a higher wage,” she said.

Disability Rights has long been concerned, Smith said, that not everyone who holds a subminimum wage certificate has the best interest of their employees at heart.

“The law came into existence because people with disabilities had been exploited or people earning subminimum wage had been exploited, and this law is designed to protect people from this,” Smith said.

But the outcome, both Robinson and Marshall said, is likely to be a drop in employment for people currently employed on subminimum wage, or at least a drop in the percentage of those people finding fulltime work. And if a disabled adult is suddenly without a 40-hour-per-week occupation, what will the family’s choices be? Either, Robinson said, someone will have to stay home from work to be with them, or that person will go to an institution.

“There’s no doubt in my mind if this act were implemented today, there would be many lawsuits that will come out of this by parents, by guardians,” Marshall said.

Robinson contends that people who support the new rules aren’t living in reality, where at the end of the day, a business — regardless of humanitarian intent — must at least balance the budget.

“They’re thinking, ‘Well, everyone can just go into competitive employment and be able to work and everything’s going to be wonderful,’” Robinson said. “Well, there are a lot of people who can’t go into competitive employment.”

What about, for example, the person with Downs syndrome who can produce only 30 percent of what an unimpaired person would make per hour? Why would an employer in the competitive market hire that person over another applicant who could do more than three times the amount of work for the same hourly rate?

But there are plenty of people in private sector jobs across the country, Smith said, who would be making less than minimum wage if they were being paid according to the subminimum wage process. Why should people with disabilities be singled out for productivity testing?

“We don’t test people without disabilities to see whether or not they can work at a higher rate routinely,” Smith said. “If every single worker in the United States was tested to see their level of productivity and paid accordingly, there would be a lot of people without disabilities who would be getting paid less, but that’s not what the law allows.”

Smith said she’d hope to see HVO and Webster Enterprises — and organizations like them — come up with “creative ways” to figure out how to keep their workers and pay them what the law requires. “If anyone can do it, someone like George (Marshall) can. He can figure this out.”

Not just a job

Marshall and Robinson, however, point out that the law won’t just impact work at their respective organizations. It will impact their clients’ future after HVO and Webster Enterprises.

“It’s a training program,” Robinson said. “It’s not a job. It’s a training program.”

The goal of the program is to allow people to advance up to the “standard” production speed, teach them the soft skills they’ll need to find success in competitive employment and give them access to resources that include everything from classes on healthy eating to field trips around the area.

“I’ve seen it take as much as two years to get them to a production rate, but they did it. Even my trainers were saying they’re never going to make it, but they kept working with them and they kept seeing smaller increments of progress,” Robinson said. “If the implementation of this law goes through, it’s going to take away opportunities for those individuals.”

In the meantime, Marshall added, having a full-time job, working hard and bringing home a paycheck is a source of pride for the people in HVO’s training program.

“It’s not the amount of money they receive but the fact that they go to work like other normal human beings,” Marshall said. “They earn a paycheck, they’re with their friends, they have social interaction with others.”

Charlie Robinson, a worker at Webster Enterprises since March, has nothing but good things to say about his experiences there. He moved to Sylva from Greenville, South Carolina earlier this year and is taking advantage of classes in cooking and nutrition as well as the work training. Having previously done electrician work, he’s looking to get into something different, something that will be easier on his back than his previous jobs.

“Everybody’s nice. They’ll help you in any way,” he said of the folks at Webster Enterprises. “I think it’s a very good program.”

Of the pay, he said, “It ain’t enough but a little is better than none. I look at it like this: They’re learning me something I haven’t done before.”

There’s another issue with the proposed rules, Marshall and Gene Robinson said. Currently, when they’re able to place someone from their training programs into competitive employment, their organizations receive payment from N.C. Vocational Rehabilitation. Under the new rules, they wouldn’t receive that money if the job the person were placed in was a full-time position at HVO or Webster Enterprises. Those places would be termed “congregate work sites” — not sufficient to be considered a successful job placement.

What both Gene Robinson and Marshall are hoping for is an extension of the timeline. The comment period for the rules ended this June, and they’re slated to go into effect July 22, 2016. But neither one believes enough research has been done into what the implications of the rules, as drafted, might be.

What MARC — the coalition of social enterprises for people with disabilities that both HVO and Webster Enterprises belong to — is asking for is a 24-month moratorium on implementation, allowing more time for people to comment on the rules and data to be gathered. Because, Gene Robinson said, sometimes when you try to fix what’s not broken, you wind up breaking what was working just fine.

“This is a model that works. It has worked for the last 30-some years,” he said. “It’s worked very successfully.”

Learn more

For more information about the Workforce Innovation and Opportunity Act, visit www.doleta.gov/wioa.

Comments on the implementation rules as a whole are closed, though some items relating to the rules are still open for comment, listed on the website.

For general comments related to the rules or the timeline of implementation, write U.S. Congressman Mark Meadows or Senators Richard Burr and Tom Tillis. Contact information is listed at www.contactingthecongress.org.

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