Disabled Workers Sue Oscars Swag Bag Company for Wage Theft

(Bloomberg) -- A New Mexico non-profit that's assembled gift bags for the Oscars and Grammys is facing a class action lawsuit brought by disabled employees who say it pays as little as 18 cents an hour.

The suit is the latest to challenge a little-known—but often legal—practice of segregating disabled workers and paying them less than the federal minimum wage. In it, current and former employees accuse the Adelante Development Center of underpaying its developmentally disabled employees in violation of Albuquerque and New Mexico wage laws.

“Plaintiffs and their coworkers perform rote, repetitive tasks in a setting where they are isolated and entirely segregated from the broader community,” alleges the complaint filed by the advocacy group Disability Rights New Mexico and the legal non-profits Towards Justice and Public Justice. “Adelante offers dead-end sweatshop jobs with few chances for advancement or transition to better employment.”

Adelante says it’s in full compliance with employment law. “Adelante has had a mission to support people with disabilities for over 40 years in New Mexico,” the organization’s vice president Jill Beets said in an email Monday. “We place a priority on community employment, and finding jobs for people with community businesses.”

Ever since Congress created a national minimum wage in 1938, the federal government has encouraged companies to hire disabled workers by letting them pay at rates below the minimum. As long as an employer can show that a worker’s disability slows him or her down, they can ask the U.S. Department of Labor for permission to pay that employee a “sub-minimum” wage. More than 150,000 workers were covered by such waivers last year.

State and local wage laws still apply, but many jurisdictions have a similar process for exemptions. The lawsuit alleges Adelante didn’t get the required state approval to pay some staff hourly rates as low as $0.18 or $1.82.

According to the organization’s website, Adelante “helps people push past social barriers and stereotypes, set goals, and move forward in their lives.” Workers in the facility do jobs like scanning, shredding and driving around documents. They packaged and shipped lipsticks for celebrity swag bags at 2018’s Grammy Awards and Oscar’s, according to a press release.

The lawsuit alleges that Adelante “profits tremendously” by underpaying its staff, while also receiving money from the state for each hour it helps them “participate as active members of their communities” by employing them, as well as other subsidies paid to Adelante by supportive living facilities where its employees live. In some cases, the complaint alleges, Adelante itself is paid more per hour in subsidies for an employee's work than the amount that Adelante is actually paying that person. 

“We’re just here so Adelante can get paid,” said plaintiff Tammy Duggan in an email.  She’s worked at the organization for 17 years, and yet, “No one gives me more responsibility or more challenging work to do."

The practice of paying disabled workers less than the minimum is increasingly controversial. When President Obama signed an executive order requiring federal contractors to pay staff at least $10.10 an hour, he notably declined to include an exception for disabled workers. Since 2015, New Hampshire, Maryland, and Alaska have abolished disability exceptions to their state wage floors. In a letter last year, seven U.S. senators including 2020 presidential candidates Elizabeth Warren and Bernie Sanders condemned sub-minimum wage exemptions as an “inherently discriminatory” practice that should be phased out.

The Department of Labor last year announced it was revoking a company’s authorization to pay around 250 employees a sub-minimum wage, following an investigation that found it had concealed information from investigators and paid some employees with gift cards rather than money. In 2012 and 2013, a judge ordered Texas company Hill County Farms to pay $1.3 million for disability-based wage discriminationand in a related case, a jury awarded a record $240 million to the plaintiffs for discrimination and abuse. (A judge eventually shrunk the award.) 

“The sub-minimum wage for people with disabilities is really a relic—it entered the law in the 1930’s at a time when we didn’t have a sense that people with disabilities could work in the competitive economy,” said University of Michigan law professor Sam Bagenstos, who served in the Department of Justice’s Civil Rights Division under President Obama. “It really sticks out like a sore thumb these days.”

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