This might be illegal. We might be over reacting.

August 1, 2013 6:55 AM

Help us determine if we're over reacting to a company paying at-risk adults below minimum wage because they can.

A friend of mine has a family member in a group home in a mid-western state. She knows that almost everyone that lives in the group home gets social security. The group home charges each person nearly their entire social security check to live there (it covers room, board, etc). Each resident gets a stipend (typical scenario: SS check is $700, rent is $650 so the resident gets $50 each month for spending money). None of the residents have jobs.

The facility has decided to 'hire' a couple of the residents as part time workers in the low-wage positions (think janitorial). They work 1-2 days a week for below minimum wage and they are paid in rent stipend. The residents that have this deal love it (instead of $50/mo cash stipend, they get $250 (or so)!) because their income doesn't get reported to social security. The company loves it because they get cheap labor. Everybody appears to be winning.

My friend is horrified at this situation because the facility is paying the residents below minimum wage ($5/hr) for a job that they pay other people $8-$9/hr for. After thinking about it and discussing it with her, we're not sure about the legality of the situation at all... the group home (a non profit) isn't paying employment taxes or anything else for these workers.

The worst thing that could happen would be for these residents to lose their 'job opportunity' so I'm not sure she's willing to make a stink. We're wondering if we're over reacting.

Questions:
1) Is this situation legal?
2) Is this situation ethical/moral?
3) Everyone appears to be winning. Are we wrong to think this company is taking advantage of at-risk adults?

posted by anonymous to Law & Government (27 answers total)

Goodwill Minimum Wage Loophole Will Shock You
posted by phunniemee at 6:57 AM on August 1, 2013 [4 favorites]

If they are disabled, they may be exempt under section 14(c) of the Fair Labor Standards Act.

On a more general note, everyone seems to be winning, so why get involved? Let's have as much respect for people's private business transactions as we would like for their private transactions inside the bedroom.
posted by Tanizaki at 7:00 AM on August 1, 2013 [10 favorites]

Are they paying them in cash, under the table? Or are they using the thing phunniemee and Tanizaki cited? If it is the former, there's a good chance they're making over minimum wage as they're not paying taxes on that income (unless the minimum wage where you are is particularly high, five bucks an hour cash almost always beats minimum wage on the books.) Now, that may be ethically/legally fraught but, honestly, considering how little money we're talking about, it's really not that different from a high-school kid working in a hardware store and getting paid in cash.

If it is the latter, and they have their ducks in a row, it's straight-up legal.
posted by A god with hooves, a god with horns at 7:12 AM on August 1, 2013 [2 favorites]

(1) As Tanizaki notes, it's quite likely legal.

(2) and (3) Yes, this is ethical. And yes, you are wrong to think that the company is acting improperly.

As you say yourself, everyone is winning. The reason that the 14(c) exemption exists is that it would be hard for people in these positions to get any job, if employers were required to pay them minimum wage.
posted by ewiar at 7:13 AM on August 1, 2013 [1 favorite]

The thing is that there are a lot of people with severe cognitive/developmental disabilities or mental health problems for whom work is something that helps them (in terms of keeping them busy, interacting with others, getting to take on responsibilities) more than it really helps the employer. If you have to supervise the work much more heavily, it takes considerably longer, etc, and those people are explicitly taken care of by public programs so it's not a matter of needing to pay them a living wage to keep a roof over their heads like most people? I don't know, I don't see it as an ethical problem.

There are limitations on how much money you can earn while you're on disability, but this doesn't seem to be even close to these amounts. It might be shady in an under the table tax evasion kinda way, but I'm not sure I'd worry too much about that part. I think it's worth keeping an eye on, but probably not worth objecting unless your friend's family sees signs that their family member is being actually exploited or treated poorly.
posted by Sequence at 7:15 AM on August 1, 2013

Yes, this is ethical.

That is dubious. They have no problem paying more money, assuming that the phrase "they pay other people $8-$9/hr" isn't hypothetical/rhetorical. They would simply prefer not to and exploit a legal loophole to do so.
posted by deanc at 7:16 AM on August 1, 2013 [4 favorites]

They have no problem paying more money, assuming that the phrase "they pay other people $8-$9/hr" isn't hypothetical/rhetorical. They would simply prefer not to and exploit a legal loophole to do so.

Well, the 'loophole' exists in order to employ and keep active and social people who aren't capable of doing minimum-wage quality work, in the sense that someone without their disabilities/difficulties would inherently be hired over them, every time. So they're putting $5/hr into the pockets of the people in the group home instead of $8/hr into the pocket of a new employee. The law exists because they wouldn't be able to justify paying $8/hr to the people in the group home when the work would be sub-par compared to hiring a new person for the same wage.
posted by A god with hooves, a god with horns at 7:20 AM on August 1, 2013 [6 favorites]

the work would be sub-par compared to hiring a new person for the same wage.

There's no evidence that the work would be sub-par.
posted by bearette at 7:35 AM on August 1, 2013 [6 favorites]

I feel like this is a derail and I'm not terribly comfortable revealing my past work history, but I've worked with populations of disabled and at-risk people who were working for below minimum wage.

The prediction that the work will be sub-par comes from the disability or reason the person is at-risk. For instance, a person with an intellectual disability (apologies if that is offensive, I have no idea what the accepted phrase for that is anymore, it's been a while) or a recovering addict has to overcome a number of obstacles to be able to follow directions as a person who is not disadvantaged in such a way.

People who are disabled or at-risk will not be hired if a person without such disadvantages is available, which, when you consider how large the pool of unemployed minimum-wage workers is, is always and will always be the case. Frank who has an IQ of 40 cannot reasonably compete for the same minimum wage job as Steve who has an IQ of 100. Even if they could work at the same quality, Steve will always be the safer bet because he has the cognitive ability to follow more complex directions, be more self-reliant, and make better choices. Frank's difficulty with all those things is the essence of his disability. When money is taken out of the equation (i.e. they're competing for minimum wage), Frank will not get the job. That is why, sometimes, it is necessary to pay under minimum wage to keep disabled and disadvantaged people active members of society.
posted by A god with hooves, a god with horns at 7:48 AM on August 1, 2013 [17 favorites]

What agwh² said; I've worked jobs like that as well.
posted by Halloween Jack at 7:53 AM on August 1, 2013

There is a good chance it is legal. if you really want the correct answer look up and contact your state Sec of State office.

It is also a tossup as to if it is strictly "ethical" though. If these individuals are high functioning enough to provide comparable services I would argue strongly that paying almost 1/2 of Min wage is NOT ethical. If they need a fair bit of support while working that can get into greyer areas.

FWIW, I work for a similar company. We pay our folks for things like lawn mowing/snow shoveling etc and we pay a little over Min Wage. One of my guys also does janitorial work for the company, he is capable enough, and he gets paid the same as any other employee we hire.
posted by edgeways at 7:58 AM on August 1, 2013 [1 favorite]

Mod note: Folks please stick to answering the question.
posted by jessamyn (staff) at 8:03 AM on August 1, 2013

Tanizaki said: On a more general note, everyone seems to be winning, so why get involved?

The OP clearly stated who wasn't winning. It may be legal but it is clearly unethical.

"My friend is horrified at this situation because the facility is paying the residents below minimum wage ($5/hr) for a job that they pay other people $8-$9/hr for. "

I would think it may worth checking with the state labor commission.
posted by JJ86 at 8:04 AM on August 1, 2013

This is the part that surprises me, that the residents without jobs (most of them) have so little discretionary spending from their SS checks

Only the people with direct experience for the group home know for sure, but the issue isn't the SS checks being so low-- if they were higher, the group home would likely charge more for rent. Some of these group homes are viewed as business opportunities by those who run them, and they will always be looking for additional ways to skim off the top. If the janitorial staffing is part of an overall pattern of nickel-and-diming everything to their advantage, then I can understand why the OP would be concerned.
posted by deanc at 8:09 AM on August 1, 2013 [3 favorites]

...the group home (a non profit) isn't paying employment taxes or anything else for these workers.

A little addenda to my answer above. If there is some illegality happening, it may be in this area, depending on how much the company is relying on said services. If the clients are performing regular work and not receiving W2s or other tax information then it might be something the employer could get nailed on. Again, contact the Sec of State for where you live for better answers. (knowing what state this was occurring may solicit better answers)
posted by edgeways at 8:28 AM on August 1, 2013

It could be considered therapeutic, giving the residents a reward for participating.
posted by Gungho at 8:29 AM on August 1, 2013

Is it a good group home with compassionate, reasonable staff who take good care of the residents and keep them mentally stimulated? It's my understanding that supported living environments can often be shitty and/or expensive. If these people have a good place to live for less than their monthly SS check, I might be inclined to leave it alone.
posted by needs more cowbell at 8:34 AM on August 1, 2013 [1 favorite]

The OP clearly stated who wasn't winning.

Please forgive me, but the OP clearly said "Everybody appears to be winning". Also, "The residents that have this deal love it".

Like I said, the residents love it, so I do not see why OP's friend wants to get involved. If OP's friend wants to get involved, OP's friend first needs to have a conversation with her in-home relative to the tune of, "I am going to interfere in an attempt to end the deal that you love because it pays you extra spending money. The reason is _____."
posted by Tanizaki at 8:38 AM on August 1, 2013 [1 favorite]

This seems more of a symptom more than anything else. There may be other conditions in the facility that imply something is up. A person who says, "well, legally I HAVE to pay outside janitorial staff $8-$9/hr, but if I retain the people who live here, I only have to pay $5!" might also figure that it doesn't matter if the heat or air conditioning only "sort of" works or that just "a bit" of mold or just "a few" mice in the building aren't that big of a deal, and so on. This is highly context-dependent.

If they're being paid under-the-table, sure we, as taxpayers, technically lose but it sounds like everyone is better off. If people are being screwed/exploited/poorly treated by caretakers trying to squeeze every last time out of their clients' checks, it's an issue. If it's merely about paying people under-the-table, I'd let it go.
posted by deanc at 9:01 AM on August 1, 2013

Are they paying them in cash, under the table? Or are they using the thing phunniemee and Tanizaki cited? If it is the former, there's a good chance they're making over minimum wage as they're not paying taxes on that income (unless the minimum wage where you are is particularly high, five bucks an hour cash almost always beats minimum wage on the books.)

OP I'd just like to point out that arguments like this saying that people making less than minimum wage are somehow getting a financial advantage are faulty. If they are working as little as you say they are, they are likely exempt from federal income tax. And if they're getting paid under the table, they can't fill out an income tax return that entitles them to significant tax credits, such as the Earned Income Tax Credit, worth several thousand dollars.
posted by ultraviolet catastrophe at 9:10 AM on August 1, 2013

Mod note: Please stick to answering the question from this point forward.
posted by jessamyn (staff) at 9:14 AM on August 1, 2013

Note: I work for an organization that could take advantage of this program but does not. That is just a decision we made in the past.

Questions:
1) Is this situation legal?
2) Is this situation ethical/moral?
3) Everyone appears to be winning. Are we wrong to think this company is taking advantage of at-risk adults?

1. Yes.

2. Yes. This covers it. While initially it seems as if it's exploitative, keep in mind that these persons with disabilities cannot work at a regular pace. It is just not possible. And indeed, the expectation isn't that they will. It is to allow them to provide value to society and meaning to their own lives. Many people who do this (my organization does not participate in the program) find it extremely satisfying as they're allowed to demonstrate value for the first time in their lives. This is not sweat shop labor.

3. You're not wrong to look closely at it, as again initially it seems sketchy as hell. But please think about how marginalized people with disabilities can be... just sent off to a home and now allowed to provide anything of substance even if they are capable in small ways. Personally, I take a lot of pride in my work and do not want it taken away from me.
posted by OnTheLastCastle at 9:57 AM on August 1, 2013 [3 favorites]

The general idea is that the worker can't perform the job at the same level as a person who is not disabled, and/or needs additional supervision/coaching. The worker should be paid according to the percentage of work they can accomplish, i.e., if Chris can do the work in twice the time as a person who is not disabled, Chris can be paid 50% of minimum wage. I'll bet some of the more disabled residents would like the chance to get paid 40% of minimum wage, and I think the ethical response would be to give everyone the option. Some residents might need a heck of a lot of supervision, and that supervision/ coaching can be a lot of work.

My disabled family member is able to work a minimum wage job 10 - 12 hours a week. Many employers are delighted to find that people with disabilities can be very reliable and diligent, and will do work that a lot of other people don't want to do. In this economy, not many employers take that risk.
posted by theora55 at 11:06 AM on August 1, 2013

Here in Iowa, we recently (2009, some legal issues may still be in court) had a situation where 32 disabled men were forced to live in horrible conditions and work for tiny wages at Henry's Turkey Plant in Atalissa, IA. They also suffered abuse (verbal and physical) from coworkers and supervisors. People apparently started reporting concerns at least as far back as 2001, but nothing was done for another eight years. If you have concerns, call your local DHS office and ask. Best-case scenarios, either they tell you this is legal and why, your friend tells you that her family member is happy and productive, everyone's a winner OR you stop an abusive practice from occurring and help a number of individuals and families in the process.
posted by epj at 11:40 AM on August 1, 2013

I lived in a non-profit student coop for several years, and I was elected to various managerial positions there. I was "paid" for my time and effort with a rent credit rather than an actual paycheck, which meant that it didn't count as income, didn't have to be reported, etc. So it could be something like that.
posted by number9dream at 11:48 AM on August 1, 2013

I worked for an agency that alternated between this type of service and a professional cleaning crew. The pro crew was 2 guys and they cleaned the entire building - lobby, bathrooms, therapy room, staff kitchen and offices - in about 3-4 hours. We used the pro crew a few times a year to do a deep clean. The crew from Goodwill had 4 workers and 2 staff/supervisors. It took them longer and they did a less thorough job, but certainly passable for routine office cleaning.

Things to consider - additional workers (both cleaners and staff), longer hours than a pro crew and providing transportation.

You asked if it was ethical. In the time I worked there, I never saw anything that made me question the treatment of those workers. They seemed happy to working and proud of what they did. The supervisors varied in compassion, but seemed to do an acceptable job.
posted by 26.2 at 4:41 PM on August 1, 2013

Frankly, as the first link indicates, this is an issue where (2) is increasingly debated. The paternalistic approach of years ago dictated that it was a kindness to give the disabled work to do and pay them very modestly. Today, many disability rights advocates think that the pay should be the same for the same job, or at least minimum wage, or (failing that) adjusted by an objective productivity standard.

I have three special-needs relatives. One of them works for one of these companies, but unlike the "supported" workers, makes minimum wage (as a dishwasher). He also holds down a stocking job at a large, notoriously worker-hostile chain, but likely can't improve things for himself due to limited literacy. Two are eligible for the state disabled-worker placement program, supplemented by federal dollars but only when that money is available. Of the two, only one has a job right now, and that's four hours one day a week. I have thoughts that lie on both sides of this issue.

I don't think you're overreacting by being concerned, but you are probably being led astray to think there are legal violations here. Despite widespread abuses, this is a highly-regulated industry. Your state probably has a help/reporting line that you could bring this up with.
posted by dhartung at 6:35 PM on August 1, 2013