By Don McIntosh, Associate Editor

On Oct. 9, the largest solar array in the Pacific Northwest will have its grand opening — atop a brand-new 114,000-square-foot industrial building at Northeast 148th and Marine Drive in Portland. The giant manufacturing facility, which will be used in part to make solar energy components, belongs to a tax-exempt non-profit organization, the Portland Habilitation Center (PHC).

It could make PHC a formidable competitor in the fast-growing solar market. Not only does PHC pay no state or federal corporate income tax, but its new building was paid for in part by the Energy Trust of Oregon (which gets its money from a 3 percent charge on PGE and Pacificorp electric bills) and by private investors who get a tax credit for their investment. And if school districts or state, county, or municipal governments in Oregon want to buy solar equipment, they would have to buy from PHC instead of from a private company like Machinist Union-represented Solarworld in Vancouver.

That’s because PHC is considered a “Qualified Rehabilitation Facility,” under Oregon’s 1977 Products of Disabled Individuals Law. Under the law, public agencies in the state are required to buy products and services from QRFs before they can seek competitive bids from private companies. In providing the products or services, QRFs are supposed to employ disabled individuals. And a “disabled individual,” according to that law, is someone “who, because of the nature of disabilities, is not able to participate fully in competitive employment, and for whom specialized employment opportunities must be provided.”

But the experience of PHC at Portland Public Schools — and revelations from a related class-action lawsuit — raise serious doubts about how disabled its employees are. And that prompted one state representative, Clatskanie Democrat Brad Witt, to push for closer oversight of the growing QRF program.

PHC was already Oregon’s largest QRF in October 2001 when PHC managers wrote to then-Portland Public Schools superintendent Jim Scherzinger suggesting the school district could save millions and help relieve its budget crunch by replacing district custodians with PHC janitors.

But a couple things were curious about the bid PHC put forward in the spring of 2002. First, PHC’s proposal said that with an equal number of disabled workers, it would be able to clean the schools twice as often as the districts’ non-disabled workers (and they’d be paid one-third less than the district employees.) In other words, PHC’s disabled workers could outcompete the district’s non-disabled workers.

Second, since PHC couldn’t expect overnight to find hundreds more disabled individuals to employ, it said it would have to “phase in” disabled workers over time. That meant that it was going to be out of compliance with state regulations, which require that at least 75 percent of a QRF’s contracted work hours be performed by the disabled.

To long-time trial attorney Charlie Williamson of the Kell, Alterman, & Runstein law firm, those two facts alone were a tipoff that something wasn’t right.

Williamson, who was elected president of the Oregon State Bar Association the same year, agreed in 2002 to represent the district’s fired custodians in a class action lawsuit against PHC.

“We believe PHC hires people who are not disabled within the meaning of the law, but classifies them as disabled and thereby gets government contracts that are not open to public bidding,” Williamson told the Labor Press. “We believe they are cheating.”

The fired custodians may have had hunches, but as their attorney, Williamson had the power to depose witnesses and compel testimony. And a lot of information came out in deposition.

For example, by PHC’s own admission, eight months into the contract with PPS, only 25 percent of PHC’s workers there were classified as disabled. In its report to the State of Oregon for fiscal year 2002-2003, PHC estimated 64.32 percent of its labor hours organization-wide were disabled workers — well below the 75 percent legal requirement. PHC met the requirement in subsequent years.

Williamson hired disability expert Scott Stipe to review the personnel files of 70 workers PHC said were disabled. Stipe concluded 56 of them were probably not disabled, at least within the meaning of the law. Many had been working at private-sector jobs when they were hired by PHC — jobs they’d gotten in a competitive labor market without any accommodation under the Americans with Disabilities Act. Several had been laid off because of factory closure and had “depression” listed as their disability. Ten had been hired by PHC initially as non-disabled, and were later reclassified as disabled.

In the Portland Public Schools case, it wasn’t that PHC had hundreds of disabled clients that it needed to find a contract for. Rather, PHC had a contract that it needed to find hundreds of disabled clients for. The PPS contract increased PHC employment by over 300, to 1,100.

“Were you in special education when you went to school?” PHC recruitment materials asked potential hires. “Do you experience long-term depression, have an anxiety disorder, or take a prescription drug to help you cope with life’s struggles?” “With documentation you may be eligible for PHC’s employment and training.”

Mary Botkin, longtime lobbyist for American Federation of State, County and Municipal Employees Oregon Council 75, doesn’t think that’s what state lawmakers had in mind when they passed the Products of Disabled Individuals Law.

“I am sympathetic to legitimate programs that provide work for long-term disabled individuals who need assistance. I think the definition of what is considered a disability needs to be revisited,” Botkin said.

Earlier this year, Botkin joined forces with her longtime colleague Mari Anne Gest, a contract lobbyist working for the Oregon School Employees Association, which has a history of opposing efforts to outsource public worker jobs.

In 2004, PHC’s experience at Portland Public Schools earned it “runner-up” status in “Outsourcing Journal’s” annual Outsourcing Excellence Awards.

“We’re seeing the writing on the wall,” Gest said. “They’re putting union workers and family-waged jobs out of business,” Gest said, “and they’re certainly not paying family-wage jobs to the disabled.”

Botkin and Gest found an unlikely ally in the National Federation of Independent Business, a conservative small-business group that is normally on the opposite side of organized labor.

NFIB’s one-time state board member Jerry Egger has made reforming the QRF program a long-time personal crusade. Egger, who owns the Salem mailing services company Mid-Valley Presort, says his company isn’t able to compete for any state contracts because he’s pre-empted by a QRF competitor that gets no-bid contracts.

But Eggers says what burns him up more than the lost business is his conviction that a law intended to help the truly disabled is being abused. Egger said his competitors have disabled workers operating $60,000 inserter machines and $700,000 mail sorting machines.

“At what point do you classify someone as not being able to compete when they’re on a riding lawnmower riding around school grounds?” Egger asks.

At the Eugene airport, a QRF got a contract to provide security, displacing a security firm that employed former police officers.

At Powder River Correctional Facility, a QRF used inmates with substance abuse problems to refill printer ink cartridges for state agencies, resulting in job loss for a small nonunion business in Baker City.

Botkin, Gest, and Egger found their champion in Witt, the Clatskanie House rep. Witt, former secretary-treasurer of the Oregon AFL-CIO, introduced two bills meant to rein in QRFs. One would tighten up the definition of disabled. The other would create an independent board to oversee the QRF industry. As many as 45 non-profits are officially recognized as QRFs.

“When you have $50 million worth of non-compete contracts that are awarding the public’s money,” Witt said, “it begs for both sunshine and public accountability.”

At an April 6 hearing on the bills, Oregon AFL-CIO President Tom Chamberlain said the state labor federation supports the intent of the law.

“But as the law is being carried out now, family-wage jobs are often lost to individuals recruited by QRFs who are paid a lower wage with less benefits, and who are able to compete in the workplace,” Chamberlain said.

QRFs also has defenders, Witt discovered. Former state representative Gary Hansen, now a lobbyist for PHC, testified against the bills. [Hansen is a member of Plumbers and Fitters Local 290 with longtime ties to labor.] Also testifying were freshman State Rep. Sara Gelser, the mother of a disabled child, and Service Employees (SEIU) Local 49 political director Felisa Hagin. Local 49 represents PHC workers, and union officials there describe PHC as a good union employer, paying wages above the area janitorial agreement. [About 35 PHC groundskeepers are also union, members of Laborers Local 483.]

The Oregon Rehabilitation Association, the QRF industry group, brought 150 disabled workers to testify and rally outside the Capitol.

There’s nothing broken, argued QRF defenders, so why try to fix it? Several state employees in the Department of Administrative Services provide effective oversight of the QRF program. The disabled have few enough options as it is.

Witt was able to get a watered down version of his commission bill passed out of his own committee. But that was the end of it. It went to the Joint Ways and Means Committee, and there it died without a hearing.

“I put my heart and soul into this issue,” says Gest, who won’t be returning next session as an OSEA lobbyist. “It was almost like a fight with corporate America, but they’re non-profits.”

The class-action lawsuit against PHC was dismissed by Multnomah County Circuit Court Judge Edward Jones in April 2005 before a jury got to hear it. Jones sided with PHC, which had argued that “the union — not PHC — was the sole cause of plaintiffs’ lost jobs.” Whether or not PHC knowingly misrepresented itself in its bid to Portland Public Schools didn’t matter, Jones ruled. Before the custodians were fired by the district, their union (a different local of SEIU than the one representing PHC employees) had a chance to match PHC’s bid by agreeing to a $5 million compensation cut. Union leaders thought the district would compromise. “That error in judgment cost the plaintiffs their jobs,” Jones wrote.

Williamson and his clients appealed the dismissal to the Oregon Court of Appeals, which heard the case last October, but hasn’t decided yet whether the case can go forward.