What the Proposed Rule to End Subminimum Wage Means for Workers with Disabilities

Back in March, Kate Jackson and Ellice Switzer wrote a piece for the CAROW Policy Lab on subminimum wages for people with disabilities. Since then, the USDOL has proposed a rule that will phase out the program (known as 14c) that permits employers to pay people with disabilities less than minimum wages. CAROW reached out to Ellice to get her opinion on the proposed rule.

Q. How did the 14c categorization come about? And what has been the evolution in thinking on best practices for employing people with disabilities?

Section 14(c) of the Fair Labor Standards Act was enacted in 1938. It allows employers to pay less than minimum wage to workers with disabilities, when the employer is issued a special certificate by the U.S. Department of Labor. Throughout the 20th Century, there was a great expansion of subminimum wage work under this act. Most took place in segregated settings know as sheltered workshops or work activity centers. However, since the 1990’s, there has been a gradual shift in thinking about employment of people with significant disabilities. Specifically, that all people who want to work should have the opportunity for competitive employment and receive a fair wage in a regular (not segregated) workplace.

The exact number of people working for subminimum wage in the U.S. isn’t known. That is because enforcement and oversight in sheltered workshops has been insufficient for decades. The GAO has produced several reports supporting that assertion.

Researchers have estimated that there are close to 38,000 people nationally, and about 1,400 people in New York earning less than the minimum wage. Most of those people have intellectual and developmental disabilities, though not all. Historically, people with all types of disabilities ended up in these settings. Many older people who are there would have been able to work competitively for a higher wage if those service options had existed for them when they left high school. But because the transition rate out of 14c work into regular employment is estimated to be around 2%, most people who work for subminimum wage do so for life.

Q. How do you think the proposed rule will be received?

Many people have been advocating for the end of the 14(c) program for decades. For them, this change is well received. However, there is a vocal contingent of agencies operating workshops, some workers, and their families who do not want to see an end to 14c. As a result, there are likely to be legal challenges. The recent Supreme Court decision, which overruled the Chevron Deference Doctrine, will make it easier to challenge rules issued by federal agencies.

It remains to be seen whether the rule would be blocked by the incoming presidential administration. Historically, Republicans favor programs that lead to work and a reduced reliance on public benefits. So, from that perspective, a conservative position might be to support competitive integrated employment.

Because several states have voluntarily ended 14c programs, we can look to them to understand potential implications. Results in states like Vermont and Washington have seen a marked increase in the rate of employment for people with intellectual and developmental disabilities. Still, the concerns of 14c workers and their families must be considered. For some families, the workshops provide a structured safe place for their adult children. This allows those parents to go to work or to receive needed respite and supports. Careful consideration needs to be given to what happens next for people as workshops close. My greatest concern is that people will transition to facility-based non-work programs, like day habilitation centers, without being offered the opportunity to pursue a job in the community.

Q. What recommendations would you have for policymakers as they plan for this transition away from 14(c)?

The rule will be a good first step toward ending subminimum wage. But passing legislation like the Transformation to Competitive Integrated Employment Act is still necessary, because it would include funding for systems transformation activities, like training and technical assistance.

Another important step policymakers can take is to support and enact state Employment First policy agendas. In New York, Governor Hochul renewed commitment to Employment First policies in a recent executive order which outlines several actions the state will take to ensure that all people with disabilities have the opportunity to pursue competitive integrated employment.

Q. What are the next steps in the process?

The notice of proposed rulemaking begins the formal comment period, allowing anyone to provide comment in support of or against the proposed rule. Within current leadership at DOL, there is strong support. However, the comment period does not end until January 17th, 2025. So, we can’t say with confidence when or if the rule will be promulgated under a new administration.

If you want to get involved or find out more about this rulemaking process, the Department of Labor has issued an announcement, including links to more information and instruction for providing comment https://www.dol.gov/agencies/whd/workers-with-disabilities/nprm-employment-of-workers-with-disabilities-14c .

Find out more about projects at the Yang-Tan institute that support Competitive Integrated Employment of people with disabilities:

Subminimum Wage to Competitive Integrated Employment https://www.ilr.cornell.edu/yti/work/subminimum-wage-competitive-integrated-employment-swtcie

Employer Assistance and Resource Network on Disability Inclusion https://www.ilr.cornell.edu/yti/work/employer-assistance-and-resource-network-disability-inclusion-earn

Center for Advancing Policy on Employment for Youth https://www.ilr.cornell.edu/yti/work/center-advancing-policy-employment-youth-cape-youth

The Northeast ADA Center https://www.ilr.cornell.edu/yti/work/northeast-ada-center

NYS Consortium for Advancing and Supporting Employment (NYS CASE) https://www.ilr.cornell.edu/yti/work/nys-consortium-advancing-and-supporting-employment-nys-case

Photo credit: Andrii Dodonov