On Dec. 3, 2024, the U.S. Department of Labor (DOL) announced a proposed rule that would end employers’ ability to pay workers with disabilities less than the federal minimum wage.
Based on a program dating back to 1938, under Section 14(c) of the Fair Labor Standards Act, employers may obtain certificates from the DOL’s Wage and Hour Division to pay workers with disabilities below the federal minimum wage, currently $7.25 per hour. The proposed rule seeks to:
- stop the DOL from issuing new section 14(c) certificates to employers submitting an initial application on or after a final rule’s effective date, and
- permit existing section 14(c) certificate holders, assuming they meet all legal requirements, to continue operating under section 14(c) certificate authority for up to three years after a final rule’s effective date.
As of May 1, 2024, 801 employers had certificates either issued or pending review. If finalized, the new rule would not require employees with disabilities to leave their current employment, as DOL expects many employees with disabilities would be able to transition to full-wage employment. Current section 14(c) certificate holders would not be required to modify the types of services they provide or modify the settings where employees perform their work. The short-term effect of this rule is there will be no new issuances of 14(c) certificates, with the long-term impact of phasing out the use of current section 14(c) certificates over a three-year period as DOL proposes that subminimum wages are no longer necessary for job opportunities for workers with disabilities. The initial rationale for the 1938 program was to facilitate employment of employees with disabilities who otherwise may face employment barriers because their disabilities hinder productivity.
Under the current program, an employer can obtain a certificate from the Wage and Hour Division allowing it to pay less than the federal minimum wage if an employee’s physical or mental disability reduces their “productive capacity” and only if such certificates are necessary to prevent the curtailment of opportunities for employment. Section 14(c) certificates are issued to business establishments, community rehabilitation programs (CRPs), hospitals/patient worker facilities, and school-work experience programs (SWEPs). The DOL defines CRPs as “not-for-profit agencies that provide rehabilitation and employment for people with disabilities.”
DOL reasons that employment opportunities for individuals with disabilities have expanded since section 14(c) regulations were first promulgated in 1938 and last updated in 1989. DOL expects the recent trend to continue. Several states have prohibited or restricted paying employees with disabilities below the minimum wage, including Alaska, California, Colorado, Delaware, Hawaii, Illinois, Kansas, Maine, Maryland, Minnesota, Nevada, New Hampshire, New York, Oregon, Rhode Island, and Washington.
DOL is seeking comments on the proposed new rule. All comments must be received by 11:59 p.m. EST on Jan. 17, 2025, for consideration in this rulemaking.