This is the first in a series of articles about exceptions to the Fair Labor Standards Act's minimum wage rule. This article discusses permissible subminimum wages for workers with disabilities. Read the second article here and the third article here.
T
hough federal law permits employers to pay workers with disabilities less than the $7.25 minimum wage, there have been recent efforts at both the federal and state levels to eliminate such practices.
The subminimum-wage law for workers with disabilities was enacted as part of the Fair Labor Standards Act (FLSA) in 1938, before
the civil rights era and long before the Americans with Disabilities Act of 1990, explained Dawn Collins, an attorney with Barnes & Thornburg in Los Angeles. The Depression-era law was meant to give employers a financial incentive to hire workers with physical and mental impairments.
Views about the effect of subminimum-wage laws on the workforce will vary depending on who you ask, noted Libby Henninger, an attorney with Littler in Washington, D.C. "Some say that they impede a competitive workforce and disadvantage persons with disabilities, particularly those who work in segregated workshops. Others argue that the law benefits persons with disabilities who may otherwise be excluded from the workforce."
The overall impact is the lack of real integration of employees with disabilities into the workforce, Collins noted. This runs counter to the notion of workplace inclusion, fails to promote independence for employees with disabilities and, in many cases, cuts them off from opportunities in the mainstream labor market, she said.
Commensurate Wage
Over the years, requirements under FLSA Section 14(c) have been modified, Henninger said. In 1938, employers had to pay workers with disabilities at least 75 percent of the minimum wage. In 1966, the amount was adjusted to 50 percent.
Most recently, in 1986, the law was amended to eliminate any statutory wage floor for people with disabilities. Employers that wish to pay a subminimum wage must first obtain an authorizing certificate from the U.S. Department of Labor's Wage and Hour Division covering either the employee or a facility. A supervised facility for workers with disabilities is known as a "sheltered workshop," Henninger noted.
Instead of a wage scale, the regulations require that covered workers be paid at a rate based on comparative productivity—such as the type, quality and quantity of work—that should be proportional to the rate paid to workers without disabilities performing the same work.
For example, if a worker without a disability produces 50 widgets in an hour, and a worker with a disability produces 25, the worker with the disability might receive half the pay of the former.
So under the law, an employer can pay an employee with a disability as low as $2 or $3 per hour, which is a fraction of the current federal minimum wage and an even smaller fraction of many state minimum wages, which currently run between $8 to $11 per hour, Collins said.
Federal Action
There have been recent efforts at the federal level targeting the ability of employers to pay a subminimum wage, Henninger said. Executive Order 13658, which was signed in 2014 by President Barack Obama, established the $10.10 minimum-wage rate (currently $10.35) for workers on government contracts, and that includes workers with disabilities under FLSA Section 14(c).
In 2016, the Workforce Innovation and Opportunity Act (WIOA), which imposes additional vocational rehabilitation and training requirements on employers that pay a subminimum wage to people with disabilities, was passed. It also prevents employers from hiring workers with disabilities who are age 24 or younger, unless the employer obtains, verifies and maintains documents proving that these workers have completed specific requirements designed to improve their access to competitive integrated employment.
In April, seven senators—including Bernie Sanders, I-Vt., and Elizabeth Warren, D-Mass.—wrote a letter to Secretary of Labor Alexander Acosta requesting information about the DOL's oversight of employer minimum-wage waivers under FLSA Section 14(c).
"These waivers are inherently discriminatory and should be phased out in a responsible way," the senators wrote. "While the [DOL] continues to issue these waivers, however, we are concerned by past abuses of the program and hope to better understand the extent to which the department is able to prevent employers' mistreatment of and discrimination against workers with disabilities."
State Action
Although federal law and many state laws still allow employers to pay lower wages, some states have banned—or are considering banning—the practice.
Most recently, in February 2018, Alaska eliminated subminimum wages for workers with disabilities.
"Workers who experience disabilities are valued members of Alaska's workforce," said Greg Cashen, Alaska's Department of Labor and Workforce Development acting commissioner, in a press statement. "They deserve minimum-wage protections as much as any other Alaskan worker."
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Maryland and New Hampshire have passed similar laws in recent years, and Vermont eliminated sheltered workshops in 2003. More states and cities—such as Hawaii, New York and Seattle—are currently considering changing subminimum-wage laws for their residents with disabilities.
Declining Trend
The number of people being paid subminimum wages has steadily declined over the past 15 years, Collins said. "The law is seen by many as antiquated and contrary to the spirit of the Americans with Disabilities Act."
Disability activists are increasingly challenging subminimum-wage laws and the segregation of people with disabilities that results from such different treatment, she added. "In many ways these challenges have become part of the larger trend for pay equity in the workplace."
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