Closing Sheltered Workshops – A US Case Study of Conflicting Interests

25 April 2019

By Catia Malaquias

The proposed removal of the legal exemption for US sheltered workshops to pay sub-minimum wages to workers with disabilities shows a clear conflict in view between, on the one hand, disability rights groups and disability organisations representing people with disability, and on the other hand, disability service providers operating sheltered workshops paying sub-minimum wages.

To many in our society, including politicians, it is simply assumed that the interests of people with disability and the interests of disability service providers are aligned – or conflated.  This perception is no doubt heavily contributed to by the medical and charity models of disability – so firmly reinforced over many decades around fund raising work by “telethons” (television marathons) that many disability rights activists strongly assert that “telethons” are counter-productive in undermining the socio-economic inclusion of people with disability and the realisation of human rights of people with disability.  A leading US disability activist, Mike Ervin stated in 2015:

“As a person with muscular dystrophy, I’m relieved to know that this will be the first Labor Day weekend of my adult life without a muscular dystrophy telethon.

I spent my past Labor Day weekends joining other people with disabilities protesting the telethon.  We protested because we objected to the damaging telethon narrative that depicted disabled people as nothing more than helpless victims.  It implied that as long as we remained disabled, we had nothing to offer or contribute and our only hope is cure.  The telethon put forth the false and simplistic notion that the best way to serve disabled people is to contribute to behemoth charities that claim they will cure us.

I found this message to be not only insulting, but also destructive.  By pandering to pity, the telethon nurtured the very stigma of helplessness in which disability discrimination is rooted. It undermined the hard work of disability rights activists who have fought for decades to debunk that oppressive stigma.”

Disability service providers are painted by the charitable brush – and the interests of people with disability, when portrayed as the recipients of charity – are envisaged as being “at one” with their benevolent disability service providers.

However, the issue of sub-minimum wages for people with disability working in segregated sheltered workshops provides a case study.

On 30 January 2019, the Transformation to Competitive Employment Bill (TCE Bill) was introduced as a bipartisan Bill into the US Senate and Congress.

The Bill builds upon a number of reports, including the National Council on Disability’s 2018 report “From the New Deal to the Real Deal” (NCD Report).

The TCE Bill is designed to dramatically increase “competitive integrated employment” (the US term used to refer to employment in the open market) for people with disabilities in the US by:

  • removing the capacity for people with disability to be paid sub-minimum wages by immediately freezing the issuance of new exemption certificates (known as “14(c) certificates”) and phasing out the use of existing exemption certificates;
  • making grants available to US states to transition sheltered workshops currently operating under 14(c) certificates to competitive integrated employment business models;
  • establishing a national technical assistance centre to assist sheltered workshops in making the transition by providing best practice information;  and
  • requiring more stringent reporting and evaluation requirements.

In contrast to work in segregated workshops or enclaves, competitive integrated employment or assisted open employment means employment:

  • at or above the minimum wage (and not less than the customary rate paid to employees without disabilities for similar work);
  • in integrated or open workplaces where individuals interact with individuals without disabilities to the same extent as others in comparable positions; and
  • that provides opportunities for advancement similar to non-disabled individuals in similar positions.

The TCE Bill is drafted against a background where a number of US states have already progressively closed sheltered workshops paying sub-minimum wages and moved to competitive integrated (ie. open market) employment models for people with disability.  To understand why disability rights groups and disability representative organisations support the TCE Bill, one must understand the transformational experience in those states.

The first US state to close sheltered workshops and end sub-minimum wages was Vermont.  In her article “Pennies an Hour” [Vol.48 Texas Tech Law Review], Theresa Golde summarises Vermont’s path and experience:

“Vermont achieved the elimination of the subminimum wage program through a reduction and reallocation of state funds.  Starting in 1999, Vermont started to gradually restrict the use of state funds to sheltered workshops under the 14(c) program.  With this reduction in funds, the state worked alongside the providers to stimulate a conversion from sheltered workshops to individualized support. This individualized support prevented the disabled, who transitioned out of a sheltered workshop, from being sent home with no alternative opportunity.  …

Vermont’s 1999 plan – reducing funding to sheltered workshops – helped prevent their subminimum wage system from growing.  By not providing resources to the workshops, the state’s idea was that no new individuals would enter into workshop employment; therefore the state could focus on transitioning out those who were already employed.  The state’s push to phase out the subminimum wage program in the 1999 legislative plan was further delineated through the 2002 legislative plan.  The 2002 plan went beyond the 1999 plan by incorporating group employment settings, including [smaller] enclaves or work crews.  This plan stopped state funds being used to increase employment capacity in such [segregated] environments.  By 2005, all sheltered workshops were successfully closed. Vermont had a system in place for most of the disabled community to receive one-on-one day supports (i.e. individualized support) for employment and other activities.

Individualized support provides a number of beneficial services.  With regard to employment, the services include employment assessment, employer and job development, job training, and ongoing support to maintain employment. … The transition to a system of individualized support enhanced one’s ability to manage life skills, increased autonomy, and proved to be a successful model for employment.”

In terms of outcomes for people with disability, the Vermont experience can only be described as an outstanding success.  Theresa Golde states:

“Within three years after the last sheltered workshop closed, about 80% of the workshop’s employees found jobs.   The individuals that did not find jobs received other community-based services. … ‘[T]he employment rate of people with developmental disabilities … is twice the national average.’ … Reported from 2013, supported employees made … $0.50 above Vermont’s minimum wage and $2 above the national minimum wage. This shift away from sheltered workshops to earning a real wage shows how ‘the attitude of the state and its business community’ can change when the law sets it in the right direction.”

ACCSES, the “Voice of Disability Service Providers”, notwithstanding the successful example of Vermont and other states and contrary to the position of leading US disability rights and representative groups, opposes the TCE Bill, and particularly the removal of sub-minimum wages.  ACCSES’ website provides the following pro-forma submission to be sent to US federal politicians:

“Section 14(c) of the Fair Labor Standards Act provides work opportunities for people with the most significant disabilities.  It is vitally important that these opportunities remain. Language … seeking to phase out 14(c) certificates would eviscerate opportunities for people with disabilities who are thriving in their jobs and want to keep their jobs.  Do not let this happen.  … We cannot overstate the importance of protecting the rights of people with disabilities to keep their jobs. … .”

But what lies the assertion of ACCESS on behalf of disability service providers?

The NCD Report notes that “[o]pponents of eliminating the use of 14(c) certificates frequently argue that 14(c) employers would not be able to employ the people with disabilities that they do at minimum wages or above without going out of business”.

However, the NCD Report counters that many of the larger disability service providers operating sheltered workshops can afford to pay minimum wages – but do not:

“IRS Form 990 tax documents reveal that the combined total annual revenue of the top 10 CRPs, by number of subminimum wage workers, is nearly $523 million.  The top employer on this list, Social Vocational Services Inc, a sheltered workshop in California, has annual revenue of nearly $105 million from recycling operations, and its CEO has an annual salary of over $1.1 million yet it continues to pay 1,790 workers subminimum wages.”

Further the NCD Report notes that national experts and employment providers state that the disability service provider position that they cannot afford to pay minimum wages is really a more troubling and terminal acknowledgement that:

“[even with significant government funding] the workshop business model is largely unsustainable unless people are paid sub-minimum wages.   Or, plainly stated, sub-minimum wage is not a bug of the workshop model, it is a primary feature.

In the experts’ judgement, the sheltered workshop business model, itself, rather than the impact of disability on productivity, incentivizes low wages and correspondingly disincentivizes reasonable accommodations, better job matches, and more integrated employment services.”

A key structural limitation of the sheltered workshop business model is that it remains stuck in its manufacturing sector past – based on the provision of goods and services using menial manual labour and low and now increasingly out-dated and superseded technology.   In essence, the need to modernise and adapt to changing markets and technologies was a key reason why many sheltered workshop operators willingly participated in US state transitioning programs in favour of competitive integrated employment.

Another structural reason was that students with disabilities, increasingly being educated in mainstream education settings, were far less willing than previous generations to work in segregated sheltered workshops.  This factor is evident in the significant reduction in 14(c) certificates being sought in relation to students for “work experience” – a reflection of the gradual closing of the life-long segregating “special school to sheltered workshop pipeline”.  The NCD Report states:

“As of July 1, 2018, WHD issued … [School Work Experience Program] certificates to 31 school districts, schools or school programs to pay subminimum wages to approximately 2,000 students with disabilities.  … Students in SWEP programs often perform piece-rate work on contracts for private companies during the school day in exchange for sub-minimum wages.  During the prior year, as of July 1, 2017, there were approximately 105 SWEPs nationwide, and between approximately 3,000 and 7,000 students with disabilities paid subminimum wages.  While this represents a marked decline, it is somewhat surprising that the program continues to exist at all, given the requirements of federal law … .”

The writing for sheltered workshops – and for their rebranded incarnations around the world – appears to be at least stencilled on the wall – from economic, social and human rights perspectives. Yet many governments continue to take the easier and more convenient default option of maintaining (and in some cases increasing) the financial life-support for sheltered workshops while allowing them to mask their financial exploitation of their workers by cloaking sub-minimum wages with the apparent legitimacy of legislative exemptions.

The TCE Bill, if passed substantially intact, will represent a significant step forward in US disability-rights and sound a wake-up call for the broader snoozing international community.

Although now somewhat historic in time – but perhaps not that historic in its currency – Theresa Golde recounts the following story –  that illustrates the scale of potential trapped by a culture of low (or no) expectations and the denial of the most basic opportunity in the stunted business model that harbours sheltered workshops:

“Kendra Kerbow provides a humbling perspective on what happens when someone is given that chance.  In 1984, the year following her graduation from high school, Ms Kerbow was placed in to a sheltered workshop. For about the next eight years, she made anywhere from one cent an hour to five cents an hour.  Much of her work involved using greasy material that Ms Kerbow described as making ‘a big mess all over [her] clothes’.  After years of dealing with this material and earning pennies an hour, Ms Kerbow became frustrated.  She explained that she was bored.  Her job at the sheltered workshop was not challenging her; it was not matching her potential.  As a result, she ran away because she was unhappy.  After being told by the staff at the group home where she resided that she must go back to the workshop, the workshop supervisors attempted to aid her frustration.  They gave her the ‘opportunity’ at the end of the day to work in an integrated setting.  This opportunity, however only gave her about fifteen minutes at the end of the day to work with the receptionist, and it was not even an opportunity she got every day.  In the early 1990s, Ms Kerbow was finally able to transition to a real job.  Through the help of a job coach, she was able to get a job working as a self-advocate at MHMR of Tarrant County.  Now, with over seventeen years at this organisation, making above minimum wage, she can positively say: ‘I feel happy. I love what I’m doing.’”

Read more from Starting With Julius:

“Ethical Supply Chains, Disability, Sheltered Workshops, Segregation and Exploitation”

“Time to Stop Defending the Low Ground – Moving from Segregated to Open Employment”

[Cover photo © Riley Farabaugh]

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