ORC: Employees with disabilities were paid less than $1 an hour

Workers with disabilities at La Crosse-based nonprofit ORC Industries were sometimes paid $1 or less an hour, according to two former employees.

ORC is allowed by the government to pay workers with disabilities a subminimum wage, although the former employees raised questions about how the system worked at the nonprofit. Employees with disabilities were paid through a piece rate system, which means they were compensated per item completed in an hour.

“Some folks would be making less than 50 cents an hour, because they were completing very few pieces within that hour,” said one of the former employees. “Other folks may get closer to $7.25 an hour; on average it was probably $2 to $3 dollars.”

ORC, a tax-exempt charity, makes various items for the U.S. Department of Defense, including ponchos, tents and tarps. The nonprofit also has a commercial laundry business, owns a company that makes snowshoes, operates Holtan House, a group home in Onalaska, and has facilities in La Crosse, Westby, Arcadia and Texas.

Although the former employees were not able to speak to current conditions at ORC, the nonprofit still had 61 workers being paid a subminimum wage as of Jan. 1 of this year, according to the U.S. Department of Labor. The former ORC employees spoke on condition of anonymity for fear of retaliation.

In 2018, ORC had over $200 million in assets and revenue of $12.9 million. The nonprofit’s assets included $142 million in stocks, mutual funds and bonds plus $40 million in cash savings, according to public records. As president of ORC, Barb Barnard received compensation of $804,000 in 2018, those records also show. On top of that, ORC rented a building from Barnard for $68,000. Barnard did not return a call for comment on this article. She had also previously declined to discuss internal procedures at ORC with The La Crosse Independent. 

Working Against the Clock

To determine pay levels for workers with disabilities, an ORC employee who does not have a disability would complete a time study, the former employees said. However many units that employee would finish in an hour would be set as the maximum rate, which meant the minimum wage of $7.25 an hour. This meant that if the rate set in the time study was 100 units in an hour, and the worker with disabilities completed 50, they would be paid $3.62 an hour. Similar systems are used at other sheltered workshops around the country.

According to one of the former ORC employees, the fastest workers would be selected to conduct time studies. They noted that the system, although completely legal, was unfair as employees completing a time study would do so when they were fresh and ready to work as quickly as possible. The employees were also allowed to set up their work station before the study began, helping them move efficiently once the clock started. 

A third former ORC worker interviewed by The La Crosse Independent, who also asked not to be identified, said many of ORC’s employees with disabilities enjoyed the social aspect of working there and other perks like parties and the use of the company’s wellness center. 

“If it wasn’t for ORC, some of them would have just been sitting in a group home,” the former employee said.

An outdated system

ORC uses a Section 14 (c) license to employ workers with disabilities and pay some less than the minimum wage. The provision is part of the Fair Labor Standards Act of 1938 and was designed to give people with disabilities who were considered to be at a competitive disadvantage a chance of securing employment and independence.

Many now think the law and the mode of thinking behind its origin are outdated and that all workers should have minimum wage protection. Washington, Alaska, New Hampshire, Vermont and Maryland have already banned subminimum wages, and workers with disabilities have also attempted to challenge the law in court. In 2014, President Obama issued an executive order that set a minimum wage of $10.10 for employees on certain federal contracts, including workers with disabilities. Last year, Democrats in the U.S. House passed a bill that would have raised the minimum wage to $15 an hour and eliminated the loophole that allows workers with disabilities to be paid less than the minimum. President Trump threatened to veto the bill, but it has not made it to his desk due to opposition in the Republican-controlled U.S. Senate.

“It’s kind of odd that Section 14(c) still exists,” Neil Romano, chairman of the National Council on Disability, told FairWarning, an investigative news website, last year. “There has been the Civil Rights Act, gay rights and women’s rights legislation. But for some reason, people with disabilities are subject to legalized discrimination.”

As of Jan. 1, 2020, there was an estimated 100,000 workers with disabilities making less than minimum wage in the country, according to the U.S. Department of Labor (ORC is not the only nonprofit in La Crosse that has a Section 14 (c) license – more on that in an upcoming story).

One of the justifications sometimes used for subminimum wages is that it allows workers with disabilities to retain their social security disability benefits while making some additional money. However, one of the former ORC employees noted that the government has allowed workers to make over $1,000 a month and still keep their benefits for many years. For 2020, workers with disabilities can make up to $1,260 a month and retain their disability benefits.

Diminishing returns

ORC’s revenue has been falling for years, in part because of declining government contracts. The nonprofit had 184 employees and $12.9 million in revenue in 2018, according to its form 990 for that year. Ten years before, in 2008, ORC reported having 1,116 employees and $52 million in revenue.

Barnard, who has been with ORC for decades, was paid $388,000 by ORC in 2008, compared to the compensation of $804,000 she received in 2018, which is the most recent year for which public records are available. ORC’s assets stood at $206 million in 2018. When fixed assets like land, buildings, and equipment are subtracted, that means ORC is sitting on more than 18 years of its annual expenses, based on 2018 reporting.

Notes: We interviewed three former ORC employees for this story, all of whom asked not to be identified because of concerns of possible retaliation. Two of the three had direct knowledge of the pay system for workers with disabilities at ORC. All worked for the organization within the last decade.

By Eric Timmons. Email questions or story ideas to lacrosseindependent@gmail.com.

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