Subminimum Wage for People with Disabilities

Section 14(c) of the Fair Labor Standards Act (FLSA) permits paying people with disabilities wages below the statutory minimum.

Congress passed the FLSA in 1938 as a part of the New Deal, and Section 14c initially sought to provide employment opportunities for disabled soldiers. The law has since moved away from veterans but remains a legal way to pay people with disabilities less than the minimum wage.

Although the statute initially included a “wage floor” (75% of the minimum wage), legislators reduced and eventually eliminated it, resulting in some people with disabilities legally getting paid pennies per hour.

Businesses paying subminimum wages to people with disabilities must receive a 14c certificate that is approved by the Department of Labor (DOL). 14c certificate holders can be private businesses but are often nonprofit agencies or organizations providing rehabilitation and skills training to people with disabilities. The DOL oversees regulatory compliance for 14c holders to guard against exploitation.

Historically, people with disabilities performed subminimum wage work in segregated worksites known as “sheltered workshops” or “work activity centers.” Due to changes in Medicaid regulations, people today often earn subminimum wages outside these segregated worksites through contracted employment (e.g., janitorial work).

Policies and Progress

In the 86 years since the FLSA was passed, significant policy changes have transformed the employment landscape for people with disabilities: The Rehabilitation Act of 1973; the Workforce Innovation and Opportunity Act in 2014; the Individuals with Disabilities Education Act of 2004; and the Americans with Disabilities Act as amended in 2008.

These policy changes coincided with advances in accessibility and inclusion , including assistive technologies, access to education and training, and businesses that include disability in their diversity and inclusion efforts.

Although people with disabilities still lag behind their non-disabled peers in employment, these policy shifts and initiatives have achieved notable progress in recent years. Many states have adopted Employment First initiatives to encourage competitive, integrated employment of people with disabilities.

Subminimum wage for people with disabilities is still legal under federal law, although states can make their own policies regarding the type of employment service systems they create and promote. To date, 13 states have eliminated the use of 14c certificates by passing laws against subminimum wages for people with disabilities. However, paying subminimum wage is still prevalent in many other states.

The Ethics of Subminimum Wage

Disability rights advocates have questioned the ethics of subminimum wage employment and segregated employment settings for many years. Two fundamental issues include the approach to determining the subminimum pay rate and its implications for the value of disabled workers.

Several events in recent decades have underscored the potential exploitation of subminimum wages, such as limiting access to opportunities for integrated employment at competitive wages. In 2009, horrible abuses were uncovered in a poultry processing factory in Iowa. The U.S. Department of Justice has taken legal action against states whose sheltered, subminimum wage employment systems violate disabled citizens’ rights.

Some people advocate for the continuation of subminimum wage employment and segregated settings. Those efforts are often led by the parents of adults with disabilities who are concerned about the loss of safe, structured vocational activities. Many parents also worry about the loss of Social Security benefits if earnings are too high, a concern that illustrates the lack of good information about work incentives for people with disabilities. Additionally, some nonprofit agencies with 14c certificates advocate that subminimum wage employment is a choice that people with disabilities should be allowed to make.

The Efficacy of Subminimum Wage

The efficacy of subminimum wage policies is the subject of ongoing exploration. Research suggests the practice perpetuates economic inequality and hinders workers’ ability to meet basic living standards.

A person earning a subminimum wage will never be truly independent; a subminimum wage will never allow a person to afford basic necessities without the assistance of government programs or other means of support (e.g., family). A U.S. Government Accountability (GAO) report published in 2023 found that since 2019, 50% of 14c workers earned less than $3.50 an hour and worked less than 20 hours per week.

Despite efforts to promote and sustain subminimum wage employment, it has proven ineffective as a vocational training tool. Decades of research, including multiple reports from the GAO, have shown that regulations are poorly enforced, and people rarely transition from subminimum wage employment to a competitive job in the community.

The Future of Subminimum Wage: A Policy Perspective

As mentioned, 13 states have eliminated 14c while many others reexamine and redesign their service systems. In fact, there are efforts at the federal level to phase out the use of 14c entirely. In 2014, President Obama signed Executive Order 13658, which ended subminimum wage use for federal contractors.

In 2023, the House and the Senate introduced bills that would amend the FLSA to phase out 14c. The bills include funding for states to develop new models of employment support for people with significant vocational needs. Additionally, the bills aim to provide technical assistance and evaluate the effectiveness of the new models.

Nevertheless, activity continues at the federal level to explore the viability of subminimum wage employment. The GAO reviewed the 14c program and published a report in 2020 which identified 32 factors that help or hinder the transition from subminimum wage to competitive employment. In 2023, the DOL announced a comprehensive review of the 14c program and hosted multiple stakeholder listening sessions.

In 2022, the U.S. Department of Education’s Rehabilitation Services Administration (RSA) awarded 14 state vocational rehabilitation agencies grants to decrease the use of subminimum wages and increase access to competitive integrated employment for people with disabilities. New York was one of the 14 states to receive this award, and the ILR School’s Yang-Tan Institute on Employment and Disability serves as New York’s program evaluator. The resulting evaluations from the 14 state demonstration projects will inform federal efforts toward a responsible redesign of vocational supports for people with disabilities. This new system should allow more significant opportunities to obtain a competitive job and earn a fair wage.