Goodwill Pays Its Executives High Six Figure Salaries While Paying Disabled Workers as Little as 22 Cents an Hour

I've written several articles criticizing non-profits who use their tax-free status to line the pockets of their executives with cushy six figure salaries and benefits.  This is especially troubling when the non-profit is a charity that takes misuses the money of good-hearted donors.  A reader alerted me to this NBC report on Goodwill Industries:

One of the nation's best-known charities is paying disabled workers as little as 22 cents an hour, thanks to a 75-year-old legal loophole that critics say needs to be closed.

Goodwill Industries, a multibillion-dollar company whose executives make six-figure salaries, is among the nonprofit groups permitted to pay thousands of disabled workers far less than minimum wage because of a federal law known as Section 14 (c). Labor Department records show that some Goodwill workers in Pennsylvania earned wages as low as 22, 38 and 41 cents per hour in 2009.

"If they really do pay the CEO of Goodwill three-quarters of a million dollars, they certainly can pay me more than they're paying," said Harold Leigland, who is legally blind and hangs clothes at a Goodwill in Great Falls, Montana for less than minimum wage.
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Section 14 (c) of the Fair Labor Standards Act, which was passed in 1938, allows employers to obtain special minimum wage certificates from the Department of Labor. The certificates give employers the right to pay disabled workers according to their abilities, with no bottom limit to the wage.

Most, but not all, special wage certificates are held by nonprofit organizations like Goodwill that then set up their own so-called "sheltered workshops" for disabled employees, where employees typically perform manual tasks like hanging clothes.

The non-profit certificate holders can also place employees in outside, for-profit workplaces including restaurants, retail stores, hospitals and even Internal Revenue Service centers. Between the sheltered workshops and the outside businesses, more than 216,000 workers are eligible to earn less than minimum wage because of Section 14 (c), though many end up earning the full federal minimum wage of $7.25.

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When a non-profit provides Section 14 (c) workers to an outside business, it sets the salary and pays the wages. For example, the Helen Keller National Center, a New York school for the blind and deaf, has a special wage certificate and has placed students in a Westbury, N.Y., Applebee's franchise. The employees' pay ranged from $3.97 per hour to $5.96 per hour in 2010. The franchise told NBC News it has also hired workers at minimum wage from Helen Keller. A spokesperson for Applebee's declined to comment on Section 14 (c).

Helen Keller also placed several students at a Barnes & Noble bookstore in Manhasset, N.Y., in 2010, where they earned $3.80 and $4.85 an hour. A Barnes & Noble spokeswoman defended the Section 14 (c) program as providing jobs to "people who would otherwise not have [the opportunity to work]."

Most Section 14 (c) workers are employed directly by nonprofits. In 2001, the most recent year for which numbers are available, the GAO estimated that more than 90 percent of Section 14 (c) workers were employed at nonprofit work centers.

Critics of Section 14 (c) have focused much of their ire on the nonprofits, where wages can be just pennies an hour even as some of the groups receive funding from the government. At one workplace in Florida run by a nonprofit, some employees earned one cent per hour in 2011.

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I am no fan of the federal minimum wage which sets an artificial floor on wages that inevitably causes unemployment especially among those people whose work might not be worth $7.25 an hour end up unemployed.  The "loophole" in the law tries to fix that instead of taking the better approach of eliminating the minimum wage law altogether.  That actually would probably end up helping disabled achieve better wages than is the case now.

What I find ironic though is that a charity like Goodwill has no problem paying its executives outrageous six figure salaries while being less than charitable when it comes to its own workforce.  In 2009, I penned an article titled: "The Not So Good Will of Goodwill of Central Indiana" in which I examined salaries of the local branch of the charity:

Today I examine Goodwill Industries of Central Indiana, Inc. According to the company's 2008 tax return, $33,947,162 was spent on salaries and benefits for officers and employees. This was out of a total revenue of $58,142,665. Thus, over 58% of the revenue received by Goodwill Industries goes to income and benefits for officers and employees. That's not even counting other administrative expenses. James McClelland, President and CEO of Goodwill pulls down $393,990 according to the company's 2008 report. Other officers/top employees' compensation include Daniel J. Riley $199,240, Keith Reissaus $167,316, Kent Kramer $190,132, Cindy Graham $154,084, James Humphrey, $169,529, and Linda Brimmer $166,275.

Goodwill Industries of Central Indiana has stashed away $20,800,485 in assets according to the company's 2008 tax return.