Some Employers Pay Minimum Wage Of $16 Per Hour Or More. But Many Workers Are Left Out.

Nov 4, 2019

  There’s been good news on the Charlotte wage front in the past couple of years: Some of the city’s largest employers have announced significant minimum wage increases – as much as $17 an hour at Bank of America and $16 for city of Charlotte employees.

But the increases often come with a caveat: They don’t apply to outsourced people laboring for these same employers – lower-paid workers such as janitors, security guards, landscapers and cafeteria workers. A state law actually forbids the city or county from requiring vendors to pay more than North Carolina’s $7.25 minimum wage.

At the Charlotte-Mecklenburg Government Center, for instance, where city employees make at least $16 an hour, the janitors who vacuum, scrub floors, empty trash and clean toilets earn substantially less. One janitor interviewed for this story said some employees make $9.25 an hour. He declined to give his name for fear of losing his job.

For decades, U.S. companies have relied on outsourcing to keep costs down. But as low-wage workers struggle to afford housing and other necessities, some employers are rethinking the practice. Last year, both Durham Public Schools and Charlotte’s Blumenthal Performing Arts opted to stop outsourcing janitorial services and employ their own custodians with better compensation.

While council members recently raised city employees’ minimum wage from $15 to $16 an hour, the fact that many outsourced positions don’t offer near that minimum strikes some as hypocrisy.

City Council member Braxton Winston says he favors making these low-paid workers city employees. He elaborated on his position in a June 2019 email to colleagues. While council members should be proud of their 2020 budget, he wrote, “we should not use it as a façade for the role that our organization plays in perpetuating the same inequities that we are trying to lead in ending.”

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For this story, the city, county and four other major local employers were asked if their outsourced workers receive the same higher minimum wages they’ve announced for their employees. No one said yes.

At Bank of America, where $17 minimum wages will rise to $20 by 2021, spokesperson Liz Wright said contractors aren’t required to meet that minimum wage, but “we are working hard with vendors and contractors to pay competitively.” Wells Fargo, which has a $15 minimum wage, didn’t answer questions about pay for contracted workers.

In statements, both Atrium Health and Novant Health, which pay minimums of $12.50, said they were making efforts to increase outsourced worker pay. Novant says the company works with contractors “to develop and implement a plan to bring the same wage increases to their employees,” but doesn’t audit its contractors. Atrium Health said it works closely with large vendors, “like those that we contract with for Food & Nutrition, to meet our Atrium Health minimum wage.”

Mecklenburg County, which pushed its minimum wage for full-time employees from $11.65 to $15 an hour in early 2019, also outsources workers. Its three largest contracts for outsourced workers provide temporary staffing, according to a county spokesperson.

Employers don’t always know what their contractors pay. The janitors cleaning the Charlotte-Mecklenburg Government Center, for instance, work for ISS Facility Services, an international company based in San Antonio. The city’s contract with ISS shows that Charlotte pays ISS about $39,000 a month to provide janitorial services to the Charlotte-Mecklenburg Government Center and Old City Hall. But it includes no information about employee wages. If private employers are willing to pay enough, they can ask contractors to match their minimum wages.

The city and county lost that authority, however, when the N.C. legislature, in the wake of its HB2 bathroom bill fight with Charlotte, passed a 2013 law forbidding cities and counties from requiring contractors to pay more than the state’s minimum wage. It also prohibits them from requiring paid sick leave.

This leaves local elected leaders with few options if they’re trying to ensure that their outsourced workers earn enough to afford housing and other necessities.

[RELATED: Finding Home: Affordability Is Only Part Of The Housing Problem. Wages Matter, Too]

In May, Charlotte City Attorney Patrick Baker, previously Durham’s city attorney, told council members that Durham tried to encourage its contractors to pay better by citing the city’s minimum wage – now $15.46 – in contracting documents. By including that information, he said, the city communicates an aspiration that “this is what we hold as a high esteem for our community.”

Another option is to stop outsourcing low-paid workers and make them employees entitled to higher minimum wages and benefits. This typically costs more. In May, the city was paying nine janitorial companies a total of $2.6 million annually. It would need at least $2.3 million more annually to make janitors city employees, according to city staff estimates.

Some employers have taken that route. Last year, Blumenthal Performing Arts brought its building services staff back in house after outsourcing the work in 2016. Those workers now receive at least $11 an hour and other benefits, including paid time off, health insurance with employer-paid premiums and a retirement program with employer contributions.

Blumenthal’s goals included higher employee wages, but leaders also wanted more committed employees who can help advance the nonprofit’s mission, Blumenthal Chief Financial Officer Steve Brace says. Now, “it’s a very motivated team because they feel a connection to the organization,” he says. “You just don’t have that with a contract.”

Durham Public Schools made the same move last year, with school board members opting to spend an additional $1.1 million to bring janitorial workers in-house. As contracted workers, many had been part-time, paid $8 or $9 an hour with no benefits. The school system worked to switch many to full time, with sick leave, holidays and starting pay at more than $13 an hour.

“You walk into a school, and the custodians say ‘Thank you,’” Durham school board member Steve Unruhe says. But he says he wishes the school board could have done more. “We need people to be able to afford to live here. And the only way to do that is to pay people close to a reasonable salary.”

The Charlotte City Council’s Winston, who’s been outspoken on wages, says he’s particularly concerned about janitorial contracts and contracts that provide security officers at light rail stations. He acknowledges the pay issue is complex and that changes may carry unintended consequences. Bringing workers in-house, for instance, could mean cutting contracts with some minority-owned businesses.

He also acknowledges the higher costs. But he points out that when low-paid workers can’t afford necessities, communities pay in other ways. “If you have a bunch of people who are unable to pay their bills or are unable to be with their kids because they’re working multiple jobs,” he says, “we’re paying for that somewhere.”

Pam Kelley, a Charlotte journalist, is the author of “Money Rock: A Family’s Story of Cocaine, Race, and Ambition in the New South.” This story was produced by the Charlotte Journalism Collaborative, a partnership of six media companies working together in an effort started by the Solutions Journalism Network and funded by The Knight Foundation.