This is dbrier's wife, former household hazardous waste program manager with many years of battery collections under my belt.
To my knowledge, the batteries are disassembled in some way (probably crushed) and then the metal and plastic components are reclaimed or disposed as appropriate.
From the Rechargeable Battery Recycling Corporation's website,
RBRC, there is a lesson plan with this bit of information:
[ QUOTE ]
The rechargeable batteries collected in this
program are recycled at the International Metals
Reclamation Company (INMETCO), a major North
American recycling facility of metal wastes. The facility
is located in Ellwood City, Pennsylvania. Cadmium is
recovered in a special high-temperature metal recovery
process with no by-products being sent to a landfill.
The recovered cadmium is purified before being used
once again to make new rechargeable batteries. The
recycled nickel and iron go back to the steel industry
to be used in making stainless steel products. Cobalt
and lead are also extracted through a high temperature
process. The plastic cases that have been separated from
the cells prior to processing are used as a fuel in a
special furnace.
[/ QUOTE ]
RBRC is a national program that many retailers participate in. Radio Shack is one of the founding participants. RBRC accepts NiCds, NiMH, Li-Ion and sealed lead acid batteries that weigh less than 2 lbs.
As to who sorts the batteries, it depends. If you recycle your batteries through an RBRC bin, INMETCO workers sort the batteries. If you recycle them through a local recycling program, program employees probably sort them (it's less expensive than paying the battery recycling companies to do it.) Once you've sorted 50-100 pounds of batteries (one or two five-gallon buckets worth) you can pretty readily recognize what's what.
Alkaline batteries that are made in the US are essentially non-toxic these days and quite safe to go in the trash. The figures I've heard are that about 50% of an alkaline battery is reclaimable material, and the cost is at least $0.37 per pound to recycle them - pretty expensive for a non-haz material.