There is an unusual labor slowdown going on these days at Assured Security Document Destruction, a little known Kyrene Corridor business near Guadalupe and Kyrene roads.

A few volunteers keep the machines running, methodically emptying boxes of old documents onto a conveyer belt that leads into the paper shredder and guiding the shredded paper along a second conveyer into the hydraulic press that crushes the waste paper into compact bales.

Management at Assured Security is intent on fulfilling the company’s contracts with the Internal Revenue Service, state of Arizona and several hundred other clients that want old paper files destroyed in a secure environment.

The real workforce sits outside the fenced-off work area, however, attending impromptu classes aimed at helping them get along in a world where they don’t quite fit in.

The 40 or so workers at ASDD are developmentally disabled—what used to be called “handicapped” in the early days when Assured Security’s parent corporation, The Centers for Habilitation, was called Tempe Center for the Handicapped, or TCH.

On a normal workday, these developmentally disabled men and women would spend two or perhaps four hours working along the conveyers, meticulously sorting the types of paper being fed into the noisy shredding machine.

It seems simple work, pulling out any colored paper mixed in with the white and removing staples before the paper reaches the shredder, but it is about as challenging as these workers can handle.

They are paid – make that were paid – a salary based on their productivity, with the more skilled earning minimum wage or above while most earn less than minimum wage.

Minimum wage is at the core of the current labor slowdown. TCH is unwilling – unable, according to TCH President and CEO Dave Cutty – to pay these developmentally disabled workers the new state-mandated minimum wage of $6.75 per hour.

When Arizona voters approved Proposition 202 in November to set the state’s minimum wage at $6.75 per hour, the new law did not include an exemption for developmentally disabled workers. Before Prop. 202, Arizona wages were controlled by the federally mandated minimum wage of $5.15 per hour and there was an exemption that allowed a lower hourly rate to be paid to workers of diminished productivity.

The “vast majority” of TCH’s workers “produce at 25-30 percent of the ‘norm’,” Cutty noted. Some work only two hours each day while others would require a full-time attendant if they worked in other businesses.

Cutty says TCH can neither afford to pay its workers the new minimum wage of $6.75 per hour nor risk being sued in civil court for continuing to pay less than the state minimum wage. Arizona Attorney General Terry Goddard recently concluded that disabled workers are subject to the new state minimum-wage law under prop. 202, he noted.

“Please don’t get me wrong. I think it would be wonderful to pay all these people $6.75 per hour,” Cutty said. “I just don’t have it. I don’t have a discretionary half-million dollars to subsidize payroll.”

Cutty produced records that suggest from July through December 2006, the TCH Employment Development Work Center (which includes the Assured Security Document Destruction business) had total income of $697,131 and expenses of $696,627 for a net margin, i.e. profit, of only $504. The single biggest expense was wages and employee related expenses at $493,535.

Cutty estimates raising all workers to minimum wage would cost TCH $425,000-$450,000 per year.

Assured Security is “locked in” to its contracts and cannot simply pass the added expense along to its clients, he noted.

Cutty says his insurance company already has cautioned that TCH and its Assured Security division would be unprotected if they are sued for violating the new Arizona minimum wage law.

“We’ve already checked with our insurance carrier and they will not cover us for a violation of law,” he said. “We are not in a position to pay (out of pocket) for legal protection.”

So Cutty and the TCH Board have decided to temporarily stop using the development disabled workers who come to TCH for education, meals, day care and – sometimes – a chance at a job.

Dave Cutty, 55, has spent 35 years working for TCH, which was founded in 1967. Long enough that in 2000, when TCH sold some land it no longer needed and used the income to fund a foundation, the foundation was named the Cutty Legacy Foundation.

Cutty was born in Massachusetts and spent the first five years of his life in Paris before coming to Arizona in the mid-1950s. He earned a bachelors degree from Arizona State University in 1973 and a master’s in 1978, both in education.

He is an educational psychologist by training, and an administrator by the fruits of TCH’s success.

TCH outgrew its original name several times over the decades. It started as the Tempe Preschool for Retarded Children before becoming the Tempe Center for the Handicapped in about 1967. It became a United Way provider agency in 1978 and opened its first facility, at 250 W. First St. in Tempe, in the early 1980s.

TCH became known as Tempe Center for Habilitation in the 1980s and 1985, TCH was hired by America West Airlines to refurbish entertainment headsets for passengers’ in-flight music and movies. Through 2002, TCH workers worked on more than 1 million headsets a year.

When the America West contract went away, TCH in 2003 opened TCH Enterprises, now Assured Security Document Destruction, with its first customer, the IRS.

What used to be a Tempe-only business expanded to Tucson and other parts of Arizona and was eventually renamed The Centers for Habilitation to keep the TCH acronym intact.

In the 1990s, TCH built a new headquarters on a 7-acre plot at 215 W. Lodge Drive in the Kyrene Corridor. TCH also acquired additional group homes throughout the Valley and Tucson.

Today, TCH has about 670 people on its payroll and a yearly budget of about $19 million, according to Cutty. It serves about 1,000 clients at about 40 facilities statewide. Most of the facilities are group homes, Cutty said.

“It is a ‘cradle-to-grave’ operation,” Cutty noted. Infants with disabilities are brought to TCH before they are old enough to attend school, then the young men and women often return to TCH when their schooling is finished.

These days, TCH’s clients who report to work are not allowed to work because of the ongoing wage dispute. Counselors instead conduct impromptu classes for the 40-50 workers just outside the fenced-off work area of Assured Security Document Destruction.

They are not paid to sit in class. They are no longer paid to sort through scrap paper.

“I think we got too focused on the money, on the financial side of this issue,” Cutty said. The real issue is simply holding a job, he said.

“TCH has always been an employment option of last resort for people who have not been successful in the workforce. It’s a safety net, a job they can fall back on when all else fails. We don’t fire people here,” Cutty said.

Until the minimum wage issue is resolved, they don’t employ people either.