Nothing Less Than the Minimum: People with Disabilities Should Not Earn Less Than Minimum Wage

Photo by Josh Appel on Unsplash

Stephen Stafford, Associate Member, University of Cincinnati Law Review

I. Introduction

Answer this question: Should anyone able to work earn less than minimum wage? The answer should be no. However, there are thousands of people with disabilities working right now under that reality. People with disabilities are people first and should be treated that way. Unfortunately, a subminimum wage focuses on a person’s disability instead of the person. As of October, there are 67,288 individuals earning a subminimum wage under active 14(c) certificates held by community rehabilitation providers.[1] These employers are commonly known as “sheltered workshops” and perpetuate discrimination against people with disabilities. At a workplace in Virginia, workers earn an average of $5.46 per hour.[2] One employee has been working at the same workplace in Virginia for 28 years and earning less than minimum wage.[3] Across the country, people are working at sheltered workshops, stuck in a segregated work environment and in a cycle of poverty.[4]

Fortunately, states and the federal government are taking steps to bring an end to the subminimum wage for people with disabilities. At stake are the lives of thousands of people earning less than the minimum wage. Furthermore, the existence of sheltered workshops and their ability to employ people with disabilities hangs in the balance. An idea once thought of as a progressive way to create jobs and curtail unemployment is now an antiquated and discriminatory practice.[5]

This article will provide a background on subminimum wage for people with disabilities and how it originated. Next, recent developments in Illinois and Congress could foreshadow the end of the subminimum wage. However, there is still a current split among states on how the subminimum wage is treated. Finally, this article will provide guidance and offer suggestions on how to make the subminimum wage a practice of the past.

II. Background

According to the Fair Labor Standard Act, employers may pay a subminimum wage to people with disabilities.[6] Special certificates are issued to employers that allow them to pay individuals whose earning or productive capacity is impaired less than the minimum wage.[7] The subminimum wage must be commensurate with wages paid to nonhandicapped workers and related to the individual’s productivity.[8] The individual’s wage must be reviewed once every 6 months and be adjusted once a year to reflect the prevailing wage paid to nonhandicapped workers.[9] This program’s intent was not necessarily malicious and was created to incentivize job creation for persons with disabilities.[10] However, since 1938, employees have been making less than minimum wage, and the practice is completely legal.

These certificates are often, although not exclusively, used by employers known as “sheltered workshops.”[11] A sheltered workshop is a not-for-profit employer that provides employment for people with disabilities.[12] People with disabilities work in a segregated work environment earning less than minimum wage.[13] Employees are often tasked with busy work such as folding newspapers and other work that does not help develop skills transferrable to the competitive labor market.[14] Employees at a workplace in Virginia assemble screw kits and are paid based on the amount of kits they complete each day.[15] Sheltered workshops are either categorized as transitional or extended.[16] Transitional workshops attempt to prepare the individuals for competitive community employment.[17] Extended workshops provide employment for people that are deemed unable to compete in the open labor market.[18]

On October 4th, 2021, the Governor of Illinois issued an executive order that prohibited the state from contracting with vendors who paid less than minimum wage to people with disabilities.[19] Illinois utilizes their “State Use Program” to employ persons with significant disabilities at not-for-profit agencies including federally certified work centers, otherwise known as sheltered workshops.[20] The State Use Program encouraged Illinois agencies to purchase products produced or provided by the not-for-profit agencies that employ people with disabilities.[21] The executive order states that the State Use Program currently perpetuates inequity, because the state enters into contracts with agencies that pay less than minimum wage to people with disabilities.[22] Therefore, the Governor ordered that all agencies participating in the State Use Program pay no less than the applicable minimum wage.[23] To safeguard the employment of people with disabilities, the State of Illinois was granted price adjustment authority to amend the contracts with those vendors.[24] Price adjustments are meant to reflect the increased cost of maintaining the current employment status of those employed.[25]

As of October 2021, ten states have enacted legislation to eliminate subminimum wage for persons with disabilities.[26] Most recently, Minnesota established a task force to phase out the subminimum wage by 2025.[27] Additionally, Minnesota will provide $14.1 million in grants to help disability service providers with the transition.[28] To phase out the subminimum wage, many of the ten states are prohibiting new 14(c) certificates to be issued and phasing out the certificates in place.[29] Illinois joined Texas as the only other state to eliminate the subminimum wage related to state use contracts.[30] Multiple other states have introduced similar legislation, but the legislation died in committee or chamber.[31] Vermont does not have any specific legislation prohibiting 14(c) certificates, but the state does not support center- based or group supported employment services.[32] Therefore, there are no active 14(c) certificates in Vermont.[33] That leaves a majority of states continuing to issue 14(c) certificates and honoring current certificates which allow vendors to pay less than minimum wage to people with disabilities. For example, the Ohio Revised Code is nearly identical to the FLSA.[34] In Ohio, subject to having an issued certificate, vendors can pay people with disabilities less than minimum wage.[35] However, Ohio made some positive steps. Ohio encouraged a state policy that employment services for people with disabilities be directed at community employment.[36] Community employment means competitive employment in an integrated setting, and all individuals with disabilities is presumed capable of community employment.[37] Many states approach this issue differently, some more proactive than others.

At the federal level, a proposal to phase out subminimum wage for people with disabilities was included in the most recent tax and social spending framework.[38] The package, currently under negotiation, would provide federal grants to states to support employers while they transition to paying their employees minimum wage.[39] This legislation would not require employers to exit the subminimum wage pay arrangement but instead would provide states with grants in exchange for ending the current practice.[40] Additionally, the bill would provide grants to help workers find employment in competitive integrated settings while earning a minimum wage.[41]

III. Discussion

All states should follow Illinois and refuse to contract with any vendor that pays a subminimum wage to people with disabilities. Previously, Illinois utilized state use money to purchase products from these vendors that paid the subminimum wage.[42] Not only did the state authorize these vendors to pay this wage, but they also promoted it by buying their products with state use money.[43] The practice openly promoted discrimination against people with disabilities by encouraging state agencies to purchase products from these vendors. States should cease using state use money to buy products from employers that pay less than minimum wage and require these employers to adhere to state minimum wages.

Government entities should not use money to purchase products made by people making a subminimum wage and should stop issuing special certificates allowing employers to pay this wage. Maine is a perfect example of a state ending the subminimum wage. The relevant Maine statute clearly states that an employer may not pay less than the minimum wage because of the person’s mental or physical disability, and any certificate authorizing such wage is ineffective.[44] In contrast, Minnesota established a plan to phase out the certificates and provided a grant to employers.[45] Ending subminimum wage without government grants could be troublesome for the employees and there must be protections for the employees during the transition. Minnesota reported that there were 60 certificates serving 5,877 individuals making a subminimum wage.[46] Rendering the certificates ineffective without any grant money could put those individuals’ jobs in jeopardy. Similar to Minnesota, Congress’ proposal includes a grant to assist the possible transition.[47] Grants may be necessary in the short term to protect individual’s jobs but should be short lived; no business should be operating if it cannot pay people with disabilities the minimum wage.

Even with government grants and a minimum wage requirement, segregated sheltered workshops should not exist. Without the minimum wage requirement, sheltered workshops segregate their workers and trap them in a cycle of poverty. With the minimum wage requirement, sheltered workshops are still a segregated workplace and don’t allow for advancement. The solution is to transition people with disabilities into competitive integrated employment (CIE). CIE is employment where the individual is paid at or higher than the minimum wage, works in an integrated setting, and works among other people with or without disabilities.[48] Ohio’s plan to focus on community employment is positive step, but the state does not go far enough because it still allows individuals to make less than minimum wage. Community or integrated employment must be coupled with the requirement to pay minimum wage. Continuing to provide 14(c) certificates to pay less than minimum wage and provide public funding to sheltered workshops contributes to the problem for people with disabilities. In a Government Accountability Office’s study, a main concern for employers was that CIE services, like job coaching, are funded less than services in sheltered workshops. Government should shift funding from the previous sheltered workshop model into a CIE model.

The Supreme Court’s decision in Olmstead v. L.C. held that unjustified isolation and segregation of people with disabilities constitutes a form of discrimination.[49] Olmstead affirmed the American Disability Act’s requirement that people with disabilities must receive integrated services that are appropriate to them.[50] The decision reasoned that institutional confinement of people with disabilities severely diminished the everyday life of those individuals.[51] This should influence the decision making concerning sheltered workshops and all employment of people with disabilities. For example, previously, Illinois used state money to purchase products from and fund sheltered workshops. This practice is in conflict with the spirit of Olmstead and the ADA. Government entities should not fund, promote, or issue special certificates to workplaces that unjustifiably isolate and segregate people with disabilities.

The original purpose of 14(c) certificates and allowing employers to pay people with disabilities less than minimum wage was to curtail unemployment and create opportunities. There is a steady decline in certificate and individuals earning less than minimum wage. A valid concern is that employment rates among people with disabilities will decrease. However, the employment rate for people with any disability has risen in New Hampshire and Maryland since the recent legislation prohibiting subminimum wages was enacted.[52] This data is a positive sign that the increase in wage will not cause employment rates to decrease. However, more time is needed because many states are still phasing out the subminimum wage or providing grants to employers to help with the transition.

IV. Conclusion

States should no longer issue special certificates allowing employers to pay less than minimum wage and should not continue to fund segregated workplaces. Many states have prohibited employers from paying less than minimum wage, and a similar plan is included in the next federal tax plan. These are huge steps to securing equal pay for people with disabilities and ensuring that they are treated as people first. Anyone with the ability to work should earn nothing less than minimum wage. The time is now to invest in competitive integrated employment and have workers with disabilities working alongside people with or without disabilities.

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[1] Association of People Supporting Employment First, https://apse.org/wp-content/uploads/2021/10/10_20_21-APSE-14c-Update-REV.pdf (last visited Nov. 5, 2021).

[2] Paige Smith, ‘Subminimum’ Pay for Disabled Workers Moves Closer to Extinction, Bloomberg Law (Oct. 12, 2021).

[3] Id.

[4] Melia Preedy, Subminimum or Subpar? A Note in Favor of Repealing the Fair Labor Standards Act’s Subminimum Wage Program, 37 Seattle U. L. Rev. 1097, 1106 (2014).

[5] Id. at 1110.

[6] Id. at 1103.

[7] Fair Labor Standards Act, 29 U.S.C. § 214(c).

[8] Id.

[9] Id.

[10] Preedy, supra note 4, at 1103.

[11] Id. at 1107.

[12] Illinois Department of Central Management Services, https://www2.illinois.gov/cms/agency/stateuse/Pages/default.aspx (last visited Nov. 5, 2021).

[13] Preedy, supra note 4, at 1108.

[14] Id. at 1114.

[15] Smith, supra note 2.

[16] Id. at 1107.

[17] Id. at 1107-1108.

[18] Id. at 1108.

[19] Ill. Exec. Order No. 2021-26 (Oct. 4, 2021), https://www.illinois.gov/government/executive-orders/executive-order.executive-order-number-26.2021.html.

[20] Illinois Department of Central Management Services, https://www2.illinois.gov/cms/agency/stateuse/Pages/default.aspx (last visited Nov. 5, 2021).

[21] Id.

[22] Ill. Exec. Order No. 2021-26 (Oct. 4, 2021), https://www.illinois.gov/government/executive-orders/executive-order.executive-order-number-26.2021.html.

[23] Id.

[24] Id.

[25] Id.

[26] Association of People Supporting Employment First, https://apse.org/wp-content/uploads/2021/10/10_20_21-APSE-14c-Update-REV.pdf (last visited Nov. 5, 2021).

[27] Id.

[28] Id

[29] Id.

[30] Id.

[31] Id.

[32] Association of People Supporting Employment First, https://apse.org/wp-content/uploads/2021/10/10_20_21-APSE-14c-Update-REV.pdf (last visited Nov. 5, 2021).

[33] Id.

[34] Ohio Rev. Code Ann. § 4111.06.

[35] Id.

[36] Ohio Rev. Code Ann. § 5123.022.

[37] Id.

[38] Paige Smith, Subminimum Pay for Disabled Workers Targeted in Budget Bill, Bloomberg Law (Oct. 29, 2021), https://www.bloomberglaw.com/bloomberglawnews/social-justice/X4EMRDDS000000?bna_news_filter=social-justice#jcite.

[39] Id.

[40] Id.

[41] Id.

[42] Ill. Exec. Order No. 2021-26 (Oct. 4, 2021), https://www.illinois.gov/government/executive-orders/executive-order.executive-order-number-26.2021.html.

[43] Id.

[44] Association of People Supporting Employment, https://apse.org/wp-content/uploads/2021/10/10_20_21-APSE-14c-Update-REV.pdf (last visited Nov. 5, 2021).

[45] Id.

[46] Id.

[47] Smith, supra note 38.

[48] Subminimum Wage Program: Factors Influencing the Transition of Individuals with Disabilities to Competitive Integrated Employment, Government Accountability Office (Mar. 4, 2021), https://www.gao.gov/products/gao-21-260.

[49] Preedy, supra note 4, at 1102-1103.

[50] Id. at 1103.

[51] Id.

[52] Association of People Supporting Employment First, https://apse.org/wp-content/uploads/2021/10/10_20_21-APSE-14c-Update-REV.pdf (last visited Nov. 5, 2021).