U.S. Department of Labor Moves to End Subminimum Wage for Workers with Disabilities

Historic Proposal Aims to Phase Out 85-Year-Old Practice, Empowering Tens of Thousands

In a landmark move reflecting the changing tides of disability rights and employment opportunities, the U.S. Department of Labor has unveiled a sweeping proposal to eliminate the longstanding practice of allowing employers to pay workers with disabilities less than the federal minimum wage.

The agency's proposed rule, announced this week, seeks to phase out the use of what's known as 14(c) certificates. Established under a provision of the Fair Labor Standards Act (FLSA) of 1938, these certificates permit employers to compensate workers with disabilities at rates below the federal minimum wage of $7.25 per hour. If the rule is finalized, the Department would cease issuing new certificates immediately, granting existing certificate holders a three-year window to transition and cease paying subminimum wages.

A Sea Change Decades in the Making

“In the decades since Section 14(c) was included in the Fair Labor Standards Act, there have been significant legal and policy developments that have dramatically expanded employment opportunities and rights for individuals with disabilities,” said Acting Secretary of Labor Julie Su. “With this proposal, the department expects that many workers currently paid subminimum wages under Section 14(c) will move into jobs that pay full wages, which will improve their economic well-being and strengthen inclusion for people with disabilities in the workforce.”

The Department's proposal comes after a comprehensive year-long review, during which officials gathered feedback from a broad spectrum of stakeholders—including workers with disabilities, their families, advocacy groups, employers holding 14(c) certificates, and disability service providers.

The Labor Department's analysis highlighted that nearly half of the workers employed under 14(c) certificates earn $3.50 per hour or less, with approximately 10% making $1 or less per hour. As of May, 801 employers held these certificates, employing about 40,000 individuals—a stark decrease from the more than 120,000 workers employed under the model in 2019.

“Employment opportunities for individuals with disabilities have vastly expanded in recent decades, in part due to significant legal and policy developments,” according to the proposed rule. “Based on that evidence, the department has tentatively concluded that subminimum wages are no longer necessary to prevent the curtailment of employment opportunities for individuals with disabilities and thus proposes to phase out the issuance of section 14(c) certificates.”

Advocates Applaud, Some Voice Concerns

“For too long, sheltered workshops in many states have kept people with significant disabilities segregated from the wider community, paid pennies on the dollar for their work,” said Zoe Gross, director of advocacy for the nonprofit. “In states that have already eliminated sheltered workshops, we have seen an increase in employment rates for disabled workers. Ending 14(c) will have the same effect nationwide.”

However, not everyone is in full agreement. Hugo Dwyer, executive director of VOR—a national organization advocating for individuals with intellectual and developmental disabilities—expressed reservations. 

“It’s difficult to place an individual who has frequent epileptic episodes or who has the potential for self-injurious or aggressive behaviors when they are upset into most work environments. It’s hard to ask co-workers to learn how to toilet folks with (intellectual disabilities and autism) or to change an adult diaper,” Hugo Dwyer said. “Sheltered workshops are able to accommodate these individuals.”

Legal and Legislative Hurdles Ahead

The proposed rule is open for public comment until January 17, 2024. While the Labor Department will review feedback as it comes in, the final decision may face challenges. Some lawmakers have already questioned the Department's authority to eliminate 14(c) without Congressional action, suggesting potential legal battles ahead.

Recognizing these hurdles, advocacy groups like the Autistic Self Advocacy Network are urging Congress to pass the Transformation to Competitive Integrated Employment Act. This bipartisan bill would not only phase out 14(c) certificates but also allocate funding and technical assistance to help transition workers with disabilities into competitive, integrated employment settings.

Historical Context Meets Modern Realities

The original intent of Section 14(c) was to prevent the curtailment of employment opportunities for individuals with disabilities at a time when workplace accommodations and supports were virtually nonexistent. The Supreme Court, in a 1947 decision, emphasized that the provision aimed to ensure that people with disabilities weren't deprived of "all opportunity to secure work."

Fast forward to today, and the landscape has shifted dramatically. The passage of the Americans with Disabilities Act (ADA) in 1990, technological advancements, increased societal awareness, and a robust framework of legal protections have expanded employment possibilities for individuals with disabilities. Employers now have greater resources and incentives to hire and retain workers with disabilities at competitive wages.

"Given the enhanced opportunities and supports available, the reliance on subminimum wages is no longer justifiable," the Department stated in its proposal. "An increasing number of states and localities have already taken steps to prohibit or limit the payment of subminimum wages, reflecting a growing consensus on the issue."

“Section 14(c), subminimum wage, and segregated employment are antiquated concepts, said Maria Town, President and CEO of the American Association of People with Disabilities.

What Happens Next?

Should the rule be adopted, existing certificate holders would have up to three years to adjust. The Department is also considering whether to grant extensions for employers who demonstrate a specific need, seeking public input on the potential scope and duration of such extensions.

Importantly, the proposed rule does not mandate that workers leave their current employment settings or require employers to change the nature of services provided. The focus is solely on ensuring that workers with disabilities receive wages commensurate with their contributions.

A Call to Action

As the nation grapples with questions of equity and inclusion, the Department of Labor's proposal represents a significant step toward rectifying longstanding disparities. Advocates urge the public to engage in the comment process and for legislators to support complementary measures that facilitate a smooth transition.

How to Participate

Members of the public can submit comments on the proposed rule until January 17, 2024. Feedback can be provided through the Federal eRulemaking Portal at www.regulations.gov, referencing the rule's docket number.