Why a Kalamazoo nonprofit is ending subminimum wages for workers with disabilities

MRC Industries has been providing employment for people with developmental or intellectual disabilities for more than 50 years. But the Kalamazoo County nonprofit knows it can do more.

In September, MRC waived its federal certification that allowed it to pay its workers less than minimum wage. That is another step toward MRC’s goal — helping its clients thrive outside its programs and in the general workforce.
Dan Pontius, MRC Industries CEO
"We've developed what we're calling the MRC Pathway,” says CEO Dan Pontius, “which is an intentional approach to build skills and progress individuals ... into community employment and closure, where they don't need us anymore.”

The most recent step on that pathway has been to drop MRC’s 14(c) certification. That waiver, part of the 1938 federal Fair Labor Standards Act, allows businesses and organizations to pay people with disabilities less than the minimum wage.  It was meant to provide an incentive to hire people with disabilities during the Great Depression. But it leads to little pay for people often stuck in sheltered workshops doing repetitive piecework. In some cases, the waiver leads to exploitative and abusive situations.

MRC’s change reflects a growing disability rights movement to end subminimum wages. Illinois is considering a bill to end 14(c) in that state, and 15 other states have banned paying subminimum wage to employees with disabilities. 

Ending 14(c) in Michigan is part of the $15 minimum wage proposal that proponents want to get on Michigan's 2024 ballot, but two members of the Board of State Canvassers have blocked the initiative, citing language changes in the petition. The matter now is headed to court.

‘We  needed to treat them fairly’

Regardless of legislation or ballot issues, Pontius says MRC has an obligation to pay workers at least minimum wage. 

"If we were going to be an organization that was going to be an advocate for community employment, and really a leader in advocating and employing individuals in the community, we needed to move away from that subminimum wage certificate,” Pontius says. “We needed to treat them fairly within our organization ourselves.”

MRC signs contracts with businesses to provide work opportunities for its clients, who do work like simple auto parts assembly or product packaging. Some contracts were for hourly wages, while some were piece-rate. 

Now the work will all be hourly, and contracts will be renegotiated to help MRC pay minimum wage.

MRC was established to create employment for its clients, with the goal of preparing them to be integrated into the workforce outside of MRC. Pontius says that goal was rarely met.

"Previously, it was not unusual for individuals to spend 20 years (working at MRC) under the belief that them coming here every day was their job," Pontius says. But, he says, "it was day programming" — something to keep adults with disabilities occupied.

Now, the focus is on helping workers get employed outside of MRC, "to not keep them here and in that program for long periods of time," Pontius says.

"It will vary by individual because some individuals will be ready to progress into community employment in six months or a year. Other individuals, it's possible they may be in skill-building for a couple of years. It depends on what their abilities are." 

An evaluation process is being created to determine whether a client’s skills have grown after joining MRC.  

"Ultimately, our goal is to get them community-employed. We're providing minimum wage while they're here building skills. This isn't their ultimate job, and this isn't where they're going to land." 

Addressing fears of families, employers

When Pontius joined MRC in May 2022, he says, its relationship with the Disability Network of Southwest Michigan was “strained," mainly because MRC was still operating under the 14(c) certificate.

The Disability Network holds the position that paying people with disabilities fairly is a human rights issue. It works to advance "justice, access, and inclusion for the Disability Community," its website states.

It also provides resources and information for people with disabilities and their families.

There are questions and fears swirling around the ending of 14(c) and the effort to integrate people with disabilities into the wider workforce. 

For example, could a person lose disability benefits if they are employed and make minimum wage?
Allison Leece, the communications and outreach coordinator for the Disability Network of Southwest Michigan
"The Social Security Administration does not want to discourage people from trying out employment, whether that's for the first time or returning to employment after they become eligible for disability benefits," says Allison Leece, the communications and outreach coordinator for the Disability Network of Southwest Michigan and its counselor on Social Security matters. 

If a person reaches a level of income where benefits are cut, Leece says, it's easy to return to those benefits if needed, much easier than for the initial application.

Employers might have concerns about hiring people with disabilities. But, "there are tax incentives to employers for hiring people with disabilities," she says.

Yvonne Fleener, president and CEO of Disability Network of Southwest Michigan, says that while employers might worry about accommodations, "the data out there show that over half of accommodations are zero cost." Also, Social Security provides resources to help provide employee assistance, such as in the hiring of a job coach or sign language interpreter. 
Yvonne Fleener, president and CEO of Disability Network of Southwest Michigan.
Fleener says studies show that "the retention rates are higher when you hire a person with a disability. They're finding they have less work injuries than people without disabilities. Their productivity is equal to people without disabilities. 

"Not only is this the right thing to do, but it's beneficial to our workforce. It's filling a gap that we aren't utilizing now."

Leece says, "We look at it as it's the right thing to do. It's a human rights issue to include people with disabilities in the workforce, in an integrated setting."

Extreme cases of exploitation

Sheltered workshops could fall into exploitation. Leece says she used to work with a school system where a group of young adults with disabilities sat in a classroom for part of the day assembling fishing lures in "a pennies-on-the-dollar" contract with a manufacturer. 

"They were not at all in a realistic work setting, where they were actually building skills that would equip them to be successful in the future," Leece says. "The teachers who were involved said, 'Well, at least they're making a couple of bucks at the end of the day.' " 

Pontius told of a worse example. In 2007-2009, a turkey farm in Texas employed adults with intellectual impairments to work the evisceration line at $65 a month. The cost of provided housing was deducted from their pay. 

"The 'bunkhouse' — from which the men were later evacuated — was closed down by the state fire marshal as unsafe. Its heating was inadequate, the bug-infested building had rodent problems, and the roof was in such disrepair that buckets were put out to catch water pouring in," according to the federal government’ announcement of  the $1.3 million Americans with Disabilities Act award for the workers. 

Most sheltered workshops and 14(c) operations are not as exploitative. They are audited often. Workers and their families often see them as safe, protected environments, and they have legitimate worries about the push to get these workers into the broader workforce, Fleener and Leece say.

"Allison and I both have siblings with disabilities who need a lot of care and support,” Fleener says. “So I understand why parents of adults with disabilities feel like, ‘My adult child is safe in this system, and they love it and this is social for them.’ ... Those are all really real (feelings).” 

Fleener says MRC’s decision to not renew its 14(c) waiver is “a milestone moment.”

“We need to celebrate that. But it's not the end. So now what? How do we continue to create a community where people, their parents, feel like their adult child with a disability is safe in the community, and is part of a workforce, and goes to a job where they feel like they belong?... This is certainly a means to an end, but it isn't the end."

She says concerned family members should reach out to Disability Network of Southwest Michigan, which will help them navigate their fears. 

Paying more is worth it for one small business

MRC is a nonprofit that receives funding from many sources. 

Community mental health provider Integrated Services of Kalamazoo provides much of MRC's funding. ISK Senior Executive Officer Kathy Lentz praised its decision to end 14(c).

“MRC’s work to eliminate the wage disparity demonstrates its commitment to individual, inclusive employment for all, including people with disabilities,” Lentz says. “ISK is proud to work with partners like MRC who are committed to the principles of Employment First for individuals with disabilities."

But while outside funding helps, MRC now has to ask for more when renegotiating contracts with businesses.

Author Cara Hill contracts with the nonprofit MRC Industries to create the packaging for her book.
Cara Hill, local author and illustrator of "The Giving Bag Book," has contracted with MRC to have her book put into special packaging for the holidays.

Does getting this work done now cost her more?

"It does, but that is OK," she says.

"My book teaches children about the importance of giving," she says. So the extra expense for putting it in its own "giving bag" is worth it to her. 

"They are learning skills, and I think that is wonderful. Having an uncle who went to MRC to learn skills, I am very familiar with the pay he received. Now that they are receiving more, it is wonderful."

This article is a part of the multi-year series Disability Inclusion, exploring the state of West Michigan’s growing disability community. The series is made possible through a partnership with Centers for Independent Living organizations across West Michigan.
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