Dive Brief:
- The issuance of certificates that allow employers to pay subminimum wages to certain workers with disabilities would be phased out under a three-year process, per a new proposed rule the U.S. Department of Labor announced Tuesday. DOL will consider comments on the proposed rule through Jan. 17.
- The Fair Labor Standards Act currently allows employers to apply for subminimum wage certificates, but “only when necessary to prevent the curtailment of opportunities for employment.” According to DOL, due to advancements in employment opportunities, subminimum wages are “no longer necessary” to prevent such curtailment.
- “Employers today have more resources and training available to recruit, hire and retain workers with disabilities in employment at or above the full minimum wage, and this proposed rule aligns with that reality,” DOL Wage and Hour Administrator Jessica Looman said in a statement.
Dive Insight:
The FLSA allows employers to obtain subminimum wage certificates under Section 14(c), which stipulates that workers with disabilities may be paid below minimum wage if their disabilities affect their earning or productive capacity.
Such disabilities may include blindness, mental illness, developmental disabilities, cerebral palsy, alcoholism and drug addiction, DOL specified in a fact sheet. However, these disabilities must “actually” impair the worker’s capacity; “the fact that a worker may have a disability is not in and of itself sufficient to warrant the payment of a subminimum wage,” DOL noted.
The agency first promulgated regulations pertaining to the issuance of these permits in 1938 and last substantively updated them in 1989, DOL said, noting that in the past 35 years, with the help of the disability rights movement and evolving social and cultural norms, “opportunities for employment have dramatically changed for individuals with disabilities.”
DOL noted in the summary of its proposed rule that nearly half of states and many localities have already prohibited or limited the payment of subminimum wages. More employers are also voluntarily opting out of paying subminimum wages; the number of section 14(c) certificate holders has “substantially declined in recent years” — dropping nearly 86% since 2001, the agency said.
The vast majority of subminimum wage workers — roughly 90%, as of 2021 — have an intellectual or developmental disability, per a Government Accountability Office report. Nearly half make less than $3.50 per hour, according to DOL; 14% make $1 or less per hour.
Under the proposed rule, the Wage and Hour Division would stop issuing new subminimum wage certificates after the effective date of the final rule. For current certificate holders wishing to renew, DOL would continue to grant renewal applications for a period of three years, with all renewals expiring no later than three years from the effective date of the final rule.
The multi-year phaseout would allow employers to make changes to their operations and funding models and transition to the payment of minimum wage, DOL said, while giving workers with disabilities time to explore new workplace accommodations, participate in additional job training and receive counseling on public benefits and income.
DOL’s proposed rule follows a September 2023 department announcement that it would review the Section 14(c) program. The agency also held a series of stakeholder engagement sessions to gather feedback from workers with disabilities and their families, disability rights advocates, service providers and certificate holders.
