Five Calif. Goodwill charities pay employees less than minimum wage

Oct. 3, 2012

By John Hrabe

Five California-based Goodwill charities pay hundreds of employees less than minimum wage, while providing lucrative compensation packages to top executives, a CalWatchDog.com investigation has found.

In 2010, the five CEOs of Goodwill Industries of Sacramento Valley & Northern Nevada, Goodwill of Silicon Valley, Goodwill Industries of Orange County, Goodwill Industries of San Diego County and Goodwill Southern California earned a combined $1.78 million in total compensation. The average executive took home nearly $30,000 per month in pay and benefits. It would take a minimum wage employee more than 23 months to earn the same amount. But, some Goodwill employees don’t even earn the minimum wage.

The practice of paying sub-minimum wages is legal thanks to a little-known loophole in federal labor law.

“Section 14(c) of the Fair Labor Standards Act authorizes employers, after receiving a certificate from the Wage and Hour Division, to pay special minimum wages — wages less than the Federal minimum wage — to workers who have disabilities for the work being performed,” the Department of Labor explains on its website.

Goodwill justifies the practice as a tool to hire people with severe disabilities, who would otherwise be unable to find work.

“The Special Minimum Wage Certificate allows employers to pay a commensurate wage to people whose disabilities significantly impair their ability to obtain remunerative work,” said Katherine Ransom, senior director of marketing and communications for Goodwill of Orange County, the only local organization to comment on the practice. “At the heart of this commensurate wage provision is the idea of providing people with significant disabilities the opportunity to earn a comparable wage based on productivity — using the benchmark of a person performing the same duties, who does not have a disability.”

Disabled Groups Call Policy “Appalling”

Disability advocates and labor leaders don’t think that should make any difference.

“It is appalling that organizations that purport to assist workers with disabilities in job training, would hold them back by circumventing the standard of living that minimum wage provides other American workers,” Andy Voss, president of the Autistic Self Advocacy Network of Sacramento, explained to me via email.

In August, Voss’ group organized a protest of Goodwill Industries of Sacramento Valley & Northern Nevada, which according to its most recent tax returns, paid its CEO Joseph Mendez $376,317 in total compensation. A dozen people from the Autistic Self Advocacy Network of Sacramento, Capitol People First, South Area People First and the Supported Life Institute took part in the Sacramento protest, which was a part of a nationwide campaign sponsored by the National Federation of the Blind.

Noticeably absent from the Goodwill protests were any members of the state’s powerful labor unions, which routinely condemn private companies for excessive executive compensation. One influential labor leader said that she simply had “no idea” that Goodwill paid its employees less than minimum wage.

“Goodwill Industries has a noble mission; but, by undercutting the value of differently abled workers, they are doing a disservice to the very people they claim to be helping,” said Lorena Gonzalez, secretary-treasurer of the San Diego-Imperial Counties Labor Council, who was unaware of a San Diego area protest of Goodwill. “Anyone who believes that all work is dignified and all workers deserve fair treatment, has to be outraged by these practices.”

Goodwill Industries International Inc., the parent organization for all of North America’s charitable affiliates, confirmed that 7,300 employees nationwide are employed under the special minimum wage program. It is unclear how many Californians are subjected to Goodwill’s low-wage policy because most of the offending nonprofits did not respond to CalWatchDog.com’s email requests.

Goodwill of Orange County: $4.65 Average Hourly Wage for 595 Goodwill Employees

In Orange County, 595 Goodwill employees work an average of 20-30 hours per week for less than minimum wage, a spokeswoman confirmed.

“Our average commensurate wages is $4.65 per hour,” Ransom said, referring to the Department of Labor’s far-more innocuous phrase. “And again, this tool is used primarily for individuals facing multiple, significant disabilities.”

Based on Goodwill’s figures, it would cost between $2-3 million to pay all of its employees a minimum wage. That comes out to about 3 percent of the charity’s $90 million in annual revenue. Goodwill of Orange County, according to its mission statement, “provides services for people with disabilities and other barriers in the local community.”

In 2010, the organization paid its president and CEO Dan Rogers $265,388 in total compensation, the lowest of the five California Goodwill entities that pay sub-minimum wages. According to tax returns for the same year, the charity also spent $1.4 million in overall executive compensation for key employees and managers, another $1.4 million in travel expenses and $338,059 in expenses for conferences, conventions and meetings.

“We ensure that we are able to attract and retain talented and experienced managers who can effectively lead a $90 million organization,” Ransom, Goodwill of Orange County’s spokeswoman, said in defense of the group’s executive compensation.

Goodwill of Southern California: CEO Pay More Than $500k in 2010

Just a few miles up the freeway, Goodwill of Southern California similarly pays some workers pennies and executives top dollar. Sasha Itzikman, vice president of marketing & community relations for Goodwill Southern California, was unable to confirm how many employees are subject to the special sub-minimum wage program. However, Itzikman said that she was working with the charity’s HR department to “recover accurate data.”

In 2010, the $130 million nonprofit organization accepted more than $9 million in government funds and paid executives more than $2.7 million in compensation. Then-president and CEO Doug Barr, who retired in July 2012, was the highest paid Goodwill executive in California. He earned $507,898 in total compensation in 2010. The same year, the charity spent $1.86 million in travel expenses, $358,452 in conferences, conventions and meetings, and $23,412 in lobbying fees.

On its federal tax-exempt forms, Goodwill of Southern California explains its charitable mission is “transforming lives through the power of work.”

Goodwill Industries of San Diego and Santa Clara Counties

Goodwill Industries of San Diego County did not respond to CalWatchDog.com’s request for comment. However, the North County Times’ Morgan Cook reported last month that 81 of the charity’s employees are paid less than minimum wage. “The lowest-paid worker in the county made $3.32 an hour, at a recycling center in San Diego,” the North County Times reported.

It is unclear how much it would cost the San Diego charity to pay its entire workforce a minimum wage. Assuming all 81 sub-minimum wage employees worked full-time at the $3.32 hourly rate, the amount would not exceed three quarters of a million dollars, which is less than the charity’s executive compensation and travel expenses.

In 2010, CEO Michael Rowan’s hourly compensation was 42 times more than the pay of the lowest-paid employee. His $282,295 in total compensation, which included a $50,000 bonus, was part of the $838,478 the charity paid out in executive compensation. The nonprofit spent $1.28 million in travel expenses that year.

Goodwill of Santa Clara County, which also goes by Goodwill of Silicon Valley, did not respond to CalWatchDog.com’s request for information on its exploitation of its disabled employees. In 2010, CEO Michael Fox earned $241,031 in base pay and another $80,000 in bonuses. His total compensation package was worth $344,754, according to the organization’s most recent tax return.