Rule2022-15561
Prohibition on the Payment of Subminimum Wages Under 14(c) Certificates as a Qualification for Participation as a Nonprofit Agency Under the Javits Wagner O'Day Act
Primary source
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Published
July 21, 2022
Effective
October 19, 2022
Issuing agencies
Committee for Purchase From People Who Are Blind or Severely Disabled
Abstract
The Committee for Purchase From People Who Are Blind or Severely Disabled, operating as the U.S. AbilityOne Commission ("Commission"), is publishing a final rule implementing a new requirement that a nonprofit agency (NPA) seeking both initial and continuing qualification under the Javits Wagner O'Day Act (JWOD Act) to participate in the AbilityOne Program must certify that it will not use certificates authorized under section 14(c) of the Fair Labor Standards Act of 1938 ("14(c) certificates") to pay employees on its AbilityOne contracts. Pursuant to the rule, individuals with significant disabilities and those who are blind employed by participating NPAs, and working on AbilityOne contracts, will earn at least the Federal minimum wage, the applicable local or state minimum wage if higher than the Federal minimum wage, or the applicable prevailing wage for contracts subject to the McNamara-O'Hara Service Contract Act, whichever is highest.
Full Text
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<title>Federal Register, Volume 87 Issue 139 (Thursday, July 21, 2022)</title>
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[Federal Register Volume 87, Number 139 (Thursday, July 21, 2022)]
[Rules and Regulations]
[Pages 43427-43433]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-15561]
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COMMITTEE FOR PURCHASE FROM PEOPLE WHO ARE BLIND OR SEVERELY DISABLED
41 CFR Part 51-4
RIN 3037-AA16
Prohibition on the Payment of Subminimum Wages Under 14(c)
Certificates as a Qualification for Participation as a Nonprofit Agency
Under the Javits Wagner O'Day Act
AGENCY: Committee for Purchase From People Who Are Blind or Severely
Disabled.
ACTION: Final rule.
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SUMMARY: The Committee for Purchase From People Who Are Blind or
Severely Disabled, operating as the U.S. AbilityOne Commission
(``Commission''), is publishing a final rule implementing a new
requirement that a nonprofit agency (NPA) seeking both initial and
continuing qualification under the Javits Wagner O'Day Act (JWOD Act)
to participate in the AbilityOne Program must certify that it will not
use certificates authorized under section 14(c) of the Fair Labor
Standards Act of 1938 (``14(c) certificates'') to pay employees on its
AbilityOne contracts. Pursuant to the rule, individuals with
significant disabilities and those who are blind employed by
participating NPAs, and working on AbilityOne contracts, will earn at
least the Federal minimum wage, the applicable local or state minimum
wage if higher than the Federal minimum wage, or the applicable
prevailing wage for contracts subject to the McNamara-O'Hara Service
Contract Act, whichever is highest.
DATES: This final rule is effective October 19, 2022.
FOR FURTHER INFORMATION CONTACT: Shelly Hammond, Director of
Contracting and Policy, by telephone (571) 457-9468 or by email at
<a href="/cdn-cgi/l/email-protection#3f4c575e525250515b7f5e5d56534b4650515a11585049"><span class="__cf_email__" data-cfemail="196a7178747476777d59787b70756d6076777c377e766f">[email protected]</span></a>.
SUPPLEMENTARY INFORMATION:
I. Background
A. The JWOD Act and Implementing Regulations
The JWOD Act leverages the purchasing power of the Federal
Government to create employment opportunities through the AbilityOne
Program for individuals who are blind or have significant disabilities.
The Program is administered by the 15-member, presidentially appointed
Commission that, as an independent Federal agency, maintains a
Procurement List of products and services that Federal agencies must
purchase from participating NPAs who employ individuals who are blind
or have significant disabilities. See 41 U.S.C. 8503 and 8504. Central
nonprofit agencies (CNAs) are responsible for distributing orders to
Commission-approved NPAs to provide products and services to Federal
agencies. See CFR 51-2.4(a)(3) & 51-3.4. NPAs must meet initial
qualification requirements and maintain those qualifications throughout
their participation in the
[[Page 43428]]
AbilityOne Program. See 41 CFR 51-4.2 and 51-4.3.
The Commission has five roles stated in the JWOD Act. First, the
Commission decides on the addition or removal of products and services
on the Procurement List. See 41 U.S.C 8503(a). Second, the Commission
sets the fair market price that the Federal Government will pay for the
products or services. See 41 U.S.C. 8503(b). Third, the Commission
designates nonprofit agencies to be the CNAs, who are responsible for
``facilitating the distribution of orders'' for products or services
among participating NPAs. See 41 U.S.C. 8503(c). Fourth, the Commission
promulgates regulations ``on other matters as necessary'' to carry out
the JWOD Act. See 41 U.S.C. 8503(d)(1). Fifth, the Commission engages
in a ``continuing study and evaluation of its activities'' to ensure
effective administration of the JWOD Act. See 41 U.S.C. 8503(e).
To date, pursuant to the JWOD Act, the Commission has designated
National Industries for the Blind (NIB) and SourceAmerica as the CNAs
responsible for distributing orders to participating NPAs. See 41 CFR
51-1.3 (definition of CNA); see also 41 CFR 51-3.2 (describing duties
of a CNA). The CNAs provide information as needed by the Commission and
otherwise assist the Commission in implementing the Commission's
regulations. NPAs associated with NIB primarily employ blind and
visually impaired individuals; NPAs associated with SourceAmerica
primarily employ individuals with significant disabilities, including
intellectual and developmental disabilities (IDD). As of April 2022,
NIB represented 58 NPAs participating in the AbilityOne Program, and
SourceAmerica represented 391 NPAs.
In making its determination on whether to add a product or service
to the Procurement List, the Commission assesses four suitability
criteria. See 41 CFR 51-2.4. First, the Commission considers whether
there is the potential for the NPA to employ enough individuals who are
blind or have significant disabilities as needed to carry out the
contract. Second, the Commission determines that the NPA meets all the
qualification requirements set forth in 41 CFR part 51-4. Third, the
Commission assesses the capability of the NPA to provide the product or
service, including the required labor operations, Government quality
standards, and delivery schedules. Finally, if there is a current
contractor providing the product or service the Commission determines
the level of impact on that contractor.
B. Notice of Proposed Rulemaking
On October 12, 2021, the Commission issued a notice of proposed
rulemaking (NPRM) in the Federal Register. The proposed rule required
an NPA seeking initial qualification for the Program to provide
certification that it would not pay subminimum or sub-prevailing wages
(where applicable) by using wage certificates authorized under section
14(c) of the Fair Labor Standards Act of 1938 (FLSA) to employees on
any new contract or subcontract awarded under the Program, or any
renewal or extension of such contract. See 29 U.S.C. 214(c). The NPRM
required the same certification on an annual basis for NPAs to maintain
their qualification under the Program.
The NPRM invited comments through November 12, 2021. See 86 FR
56679 (Oct. 12, 2021). After requests, the Commission extended the
comment period through December 12, 2021. See 86 FR 62768 (Nov. 12,
2021). The NPRM requested comments and supporting data on several
specific questions. The Commission asked whether the rule should apply
to new contracts, extensions and renewals of existing contracts once
they expire, and the exercise of contract options. The Commission asked
how much time, if any, would be necessary for NPAs to come into
compliance with the rule. Finally, the Commission asked what impact, if
any, the rule would have on the receipt by AbilityOne employees of
Supplemental Security Income (SSI) or Social Security Disability
Insurance (SSDI) and attendant Government benefits such as Medicare and
Medicaid.
The Commission received 183 total comments to the NPRM. Of this
total, nearly 60 comments were from disability rights and advocacy
organizations, seven comments were from the two CNAs (SourceAmerica and
NIB) and five NPAs; more than 100 comments were from private
individuals (commenters who did not assert or self-identify
organizational membership); one comment was from a labor organization,
one from a Fortune 500 company, and one from a Member of Congress.
The Commission carefully considered and analyzed each comment but
did not address technical and other minor changes requested by
commenters.
C. Changes From the Proposed Rule
The final rule applies the certification requirement to the
exercise of options on existing contracts, as well as to new contracts
and extensions and renewals of contracts. The final rule is effective
90 days after publication in the Federal Register. However, an NPA may
apply for an extension for up to 12-months in order to come into
compliance if it can provide evidence for why it cannot make the wage
adjustments by the effective date (due to budgetary limitations,
because doing so will necessarily harm employees, or for other good
cause) and if it provides a corrective action plan describing the steps
it intends to take to achieve compliance within the approved extension
period.
II. Analysis of Comments and Changes
A. Utility of the Rule
1. Comments
Of the 183 comments received, the overwhelming majority of both
individual and organizational commenters supported the utility and
appropriateness of the rule. Numerous organizational commenters
supported the rule as a means of ensuring access to economic
independence and self-sufficiency for individuals with disabilities.
Individuals with disabilities similarly claimed their right to earn
equal wages for equal work and to be able to afford life's necessities,
including housing. Several commenters noted that evolutions in
disability rights law, modernizations and advancements in the business
marketplace and available community supports rendered section 14(c)
certificates no longer necessary or acceptable.
Only five commenters opposed the rule in its entirety. These
commenters predicted that increasing wages for individuals with
disabilities would result in the loss of government assistance and
attendant benefits, resulting in significant adverse impacts on
individuals with disabilities. One NPA stated that the impact on
employees with disabilities would be devastating, especially for those
working on product contracts. Two commenters stated that the
justification for 14(c) certificates remained as valid now as it had
been in 1938, given the inability of some individuals with disabilities
to work as productively as individuals without disabilities doing the
same job.
2. Discussion
Ending the payment of subminimum or sub-prevailing wages in the
AbilityOne Program is designed to help break cycles of poverty and
dependence and assist in moving individuals with disabilities to
careers of meaningful employment, increased economic independence,
greater dignity, enhanced self-worth, self-determination,
[[Page 43429]]
and self-sufficiency. Ending wage disparities between employees based
solely on disability places the economic power of individuals with
disabilities on par with their work colleagues who do not have
disabilities and paying the same wage to individuals with disabilities
and those without conveys a message of equality and a commitment to
inclusion.
Changes in societal expectations of people with disabilities,
together with the availability of reasonable accommodations and
employment supports, have significantly changed the employment
landscape for individuals with disabilities. The assumptions that
existed in 1938 regarding the inability of individuals with
disabilities to work as productively as individuals without
disabilities doing the same job are not supported by existing data.
As discussed in greater detail below, there are Federal and state
programs that can mitigate the adverse effects that increased wages may
have on an employee's receipt of government benefits. Moreover, the
Commission believes that any possible adverse effects in this area are
outweighed by the benefits of the rule.
3. Change
The Commission has made no change to this section of the rule.
B. Scope of the Rule's Application: New Contracts, Renewals, Extensions
and Options
1. Comments
The Commission requested comment on whether the rule should apply
to new contracts, extensions, and renewals of contracts and/or the
exercise of options on contracts. Twenty-two commenters, primarily from
disability advocacy organizations and NPAs, supported application of
the rule to new contracts, extensions and renewals of contracts, and
the exercise of options. These commenters noted that AbilityOne Program
contracts tend to be long term contracts with a base year and an
additional four to nine option years. If option years were not
included, an NPA could avoid applying the proposed rule for an
additional five to ten years after the effective date. Additionally,
some commenters stated that since more states are prohibiting the
payment of 14(c) wages by requiring adherence to state minimum wage
laws, there was no reason to delay application until a contract was
ready for renewal or extension. A major corporation and two large
AbilityOne NPAs commented that ending section 14(c) wages should apply
universally, including options, and a labor union commented that not
including options would introduce new inequities in the Program given
the likelihood that contracts contain multiple option years.
The two CNAs did not directly comment on the rule's application to
new contracts, extensions, or options, but both CNAs supported the
rule. However, SourceAmerica noted that ``it is critical that the final
regulatory change include language that clarifies that at the time when
a contract is up for renewal, the NPA will need to certify that they
will not pay subminimum wages for that specific contract.'' This final
rule does, in fact, clarify that NPAs must certify it will not use a
14(c) certificate after the effective date on any AbilityOne existing
contract at the point of renewing a contract renewal, executing an
extension, or exercising an option.
Once again, five commenters opposed the rule, but, of those, two
commenters stated that, if implemented, the rule should only apply to
either new contracts or contract renewals, and the remainder did not
address the issue.
2. Discussion
The purpose of the rule is to ensure that individuals with
disabilities are paid equally for the work they perform as are
individuals without disabilities performing the same or similar work.
Applying the rule to extensions and renewals of contracts, as well as
to options, avoids a piecemeal application of the rule. Given the
variety and timing of contracts currently being performed, and their
respective expiration or renewal dates, there is a possibility NPAs
with more than one contract could potentially pay the Federal or higher
state minimum wage, or prevailing wage, on new contracts, but a lower
wage on existing contracts that were renewed or extended. Differences
in contract timing could improperly incentivize NPAs to selectively
assign employees to those AbilityOne contracts that are not yet subject
to the rule.\1\ In addition, by including contract options, the
Commission is more closely aligned with the Department of Labor (DOL)
rule, implementing Executive Order 14026.\2\ That rule generally
requires Federal contractors to pay employees workers performing on or
in connection with covered Federal contracts at least the Executive
order minimum wage (currently $15.00 per hour); that rule applies to
new contracts entered into on or after January 30, 2022, and also
covers existing contracts that are renewed or extended (pursuant to an
exercised option or otherwise) on or after January 30, 2022, on Federal
contracts, including options. The DOL rule generally covers employees
working on AbilityOne service contracts.
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\1\ This rule does not preclude an NPA from transferring
employees to its non AbilityOne contracts and using 14(c)
certificates to pay those employees. We address that issue below.
\2\ See 86 FR 67126 (Nov. 24, 2021).
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3. Change
The Commission has retained application of the rule to new
contracts and to extensions and renewals. The Commission has changed
the rule to apply its requirement to the exercise of options on
contracts.
C. Effective Date of the Rule
1. Comments
The proposed rule did not include an effective date. The Commission
requested comment on how much time, if any, would be necessary for NPAs
to comply with the new wage requirement.
One commenter stated that the rule should be effective immediately,
another stated the rule should be effective 90 days following
publication, and two commenters felt the rule should be effective six
months following publication. Two NPAs with experience eliminating the
use of section 14(c) certificates noted that a two- or three-year phase
in period might be appropriate.
The primary reason provided for immediate coverage, as well as for
short implementation time periods, was that NPAs had been given
sufficient notice and lead time on eliminating the use of subminimum
wages under section 14(c) certificates, in light of a statement made by
the Commission in 2019 that NPAs should not be using 14(c) certificates
on AbilityOne contracts. These commenters stated that the transition
process away from subminimum wages should therefore be well underway at
all NPAs.
A coalition of more than 100 national disability organizations
recommended the Commission adopt the timeline recommendation set forth
in the report issued by the National Council on Disability (NCD) in
2012. In that report, NCD recommended that individuals with
disabilities in a certificate setting for ten years or less be
transitioned within two years, those in the setting from ten to 20
years be transitioned in four years, and those in a certificate setting
longer than 20 years be transitioned within six years.\3\ The
[[Page 43430]]
recommendations of the NCD report applied to the elimination of all
14(c) certificates. The commenters did not specifically explain why the
same timeline should apply to the smaller number of affected
individuals in the AbilityOne Program.
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\3\ <a href="https://ncd.gov/publications/2012/August232012/recommendations">https://ncd.gov/publications/2012/August232012/recommendations</a> (last viewed June 2022).
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One commenter observed that NPAs employing individuals with
disabilities are as different as their respective employees. This
commenter suggested an individualized approach, recommending that the
Commission establish different timelines based on factors such as an
NPA's size, number and types of contracts and number of employees,
geography and access to transportation, and an NPA's ability to recruit
new employees.
Twenty commenters, including many organizational commenters,
recommended a one-year implementation period, others recommended a two-
year implementation period, and nearly ten commenters recommended a two
to three-year implementation period, with a possible one-time
extension. The rationale for implementation periods of one to three
years was that NPAs would need significant time to adapt to the new
wage requirement, including restructuring contracts and budgets. The
rationale also included a need for NPAs to acquire or add services such
as benefits counseling for their employees to ensure that any adverse
impact on receipt of benefits by their employees would be mitigated.
2. Discussion
In 2019, the Commission sent a letter to SourceAmerica stating that
the use of 14(c) certificates on AbilityOne contracts was inappropriate
and that the time had come to pay all AbilityOne employees the Federal
minimum wage or the state minimum wage if higher. The Commission
charged SourceAmerica with developing a strategic plan for assisting
affiliated NPAs with transitioning from the use of 14(c) certificates.
The letter stated as its goal that all AbilityOne NPAs would be paying
the Federal minimum wage or the state minimum wage if higher within
three years (February 2022) and the prevailing wage within six years
(February 2025).\4\
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\4\ Letter from Mr. Thomas Robertson, Chair of the AbilityOne
Commission to Mr. Norman Lentz, Chair of the Board of SourceAmerica
(February 19, 2019). <a href="https://www.abilityone.gov/media_room/documents/Commission%20Ltr%20to%20SourceAmerica%20-%20Subminimum%20Wage%20-%2020190219.pdf">https://www.abilityone.gov/media_room/documents/Commission%20Ltr%20to%20SourceAmerica%20-%20Subminimum%20Wage%20-%2020190219.pdf</a>.
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In response to the Commission's letter, SourceAmerica initiated a
``14(c) Transition Program.'' The program provided interested NPAs with
financial and technical assistance in eliminating their use of 14(c)
certificates. Since October 2019, SourceAmerica has provided
consultation services to 86 NPAs, enrolled 35 NPAs in at least one
program support, and awarded NPAs more than $600,000 in transition
support grants.\5\
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\5\ SourceAmerica, 14(c) Transition Program Update, AbilityOne
Public Meeting, October 7, 2021, Slides 15-17. <a href="https://www.abilityone.gov/commission/documents/US%20AbilityOne%20Commission%20Public%20Meeting%207Oct2021%20Advance%20Slides%20Post.pdf">https://www.abilityone.gov/commission/documents/US%20AbilityOne%20Commission%20Public%20Meeting%207Oct2021%20Advance%20Slides%20Post.pdf</a>.
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According to SourceAmerica, the program has been quite successful.
The number of employees paid under 14(c) certificates by its affiliated
NPAs has declined from 9,654 employees in mid-2018 to 2,900 employees
as of the first quarter of fiscal year (FY) 2022. Of this number, 1,750
employees were working on services contracts subject to Executive Order
14026, which took effect in January 2022. Employees working on such
contracts are required to be paid at least the Executive order minimum
wage of (currently $15.00 per hour,), but under a section 14(c)
certificate can be paid less than the prevailing wage. Data self-
reported to SourceAmerica by associated NPAs shows approximately 770
employees being paid at least the Federal minimum wage but less than
the prevailing wage.
The remaining approximately 1,200 employees work primarily on
product contracts and are clustered within approximately 24 NPAs. Data
collected by the Commission indicates that the average wage paid such
employees is $5.11 per hour.
As noted above, SourceAmerica has invested significant resources
toward transitioning its associated NPAs from using 14(c) certificates
since 2019, and it has pledged to continue to do so after this rule has
been formally implemented. Given the fact that NPAs have been on notice
since 2019 of the Commission's position on phasing out use of 14(c)
certificates, and the availability of CNA support to do so, the
Commission believes that a 90-day implementation period is sufficient
time to allow the remaining NPAs to effectuate the necessary change.
For this reason, the Commission also does not adopt the lengthy
implementation dates set force in the NCD report that applies to use of
14(c) certificates nationwide.
The Commission recognizes that some NPAs have not taken advantage
of SourceAmerica's transition program or are still in the process of
transitioning from use of 14(c) certificates. For that reason, the
Commission will accept applications from NPAs for an extension of up to
12 additional months to come into compliance with the rule. The
Commission will use its existing authority under 41 CFR 51-4.5 to grant
such extensions. The NPA must provide evidence for why it cannot make
the wage adjustments by the effective date (due to budgetary
limitations, because doing so will necessarily harm employees, or for
other good cause) and must have a corrective action plan in place that
the NPA will follow to come into compliance with the rule. Requests for
an extension must be submitted no later than 30 days prior to the
effective date of the rule. If an extension is granted, the Commission
will not award any new Procurement List additions to that NPA during
the extension period, absent exigent circumstances, and a written
request from the Federal customer.
3. Change
The Commission includes an effective date of 90 days after the
publication date of the final rule, with the possibility of a one-time
extension of up to 12 months.
D. Impact on Receipt of Government Benefits
1. Comments
The Commission sought comment on what impact, if any, the proposed
rule would have on the receipt of social security benefits, such as
Supplemental Security Income (SSI) or Social Security Disability
Insurance (SSDI) and attendant government health insurance, such as
Medicare and Medicaid, by employees with disabilities, and requested
recommendations on how to address any adverse impacts that were
identified.
Several commenters, including a Member of Congress, stated that
increased wages for individuals with disabilities could adversely
impact the receipt of government income and health care by individuals
with disabilities. However, the comments did not discuss Federal or
state programs employees could utilize to mitigate a reduction or loss
of benefits due to increased earnings. The commenters also did not
describe any efforts to ensure their employees had access to benefits
counseling or training to raise awareness about their eligibility for
additional or alternative benefits. Finally, the commenters did not
include data substantiating the adverse impact they predicted.
Many organizational commenters acknowledged the reduction or loss
of government benefits was a concern for some employees once their
wages
[[Page 43431]]
increased. However, these organizations, as well as NPAs that
successfully transitioned their employees from 14(c) certificates,
highlighted the various government programs designed to assist
employees with disabilities who are concerned that increased wages may
adversely impact their benefits. These include assistance through a
Medicaid Buy-In option in many states, the Ticket to Work program under
the Social Security Act, and establishment of Achieving a Better Life
Experience Act (ABLE) accounts (which are tax-favored accounts enabling
individuals with disabilities to save money for disability-related
expenses including education, housing, transportation, employment
training and support, assistive technology and personal support
services, health care prevention and wellness services, and financial
management). A number of commenters also stated there was evidence that
NPAs could pay above the minimum wage, and also provide healthcare and
other important benefits for their employees, so that employees would
not need to rely on government health care.
Several commenters stated that an essential component of mitigating
any adverse impact on continued receipt of government benefits was for
employees to have access to professional benefits counseling. Some
commenters recommended that the Commission require NPAs to offer such
services as a qualification for participation in the Program; other
commenters recommended that the CNAs be required to provide such
services to the NPAs; and some commenters called for NPAs to educate
their employees that a benefits reduction was not an inevitable outcome
of a wage increase.
Ultimately, these commenters stated that any potential loss of
benefits was not a legitimate reason to scale back or not implement the
proposed rule. They argued that the overall benefit the proposed rule
would provide for AbilityOne NPA employees with disabilities on
AbilityOne contracts outweighed the benefit reduction risk that some
employees might face. These commenters also observed that reductions or
loss of benefits was not a problem specific to the AbilityOne Program,
but rather a broader issue about how the nation's system to assist
individuals with disabilities can limit full employment. One NPA that
noted this point stated that the focus should be on advocating for
legislative efforts aimed at benefits reform.
2. Discussion
The Commission has been concerned from the outset that the
elimination of subminimum and sub-prevailing wages could harm
individuals with disabilities who rely on government income and health
benefits. As the comments indicate, however, there is a wide range of
Federal and state government programs designed to mitigate the impact
and fear of benefits reduction. The Commission has also determined that
the potential loss of government benefits for some employees is not a
sufficient basis to abandon a rule that will provide significant
financial benefits to a large number of individuals.
It is beyond the scope of this rule for the Commission to mandate
that all NPAs have professional benefits counselors on staff or for the
CNAs to provide such resources. However, SourceAmerica's ``14(c)
Transition Program'' has already provided such resources to
participating NPAs and can continue to do so for additional NPAs. The
AbilityOne Commission will also develop a list of resources that NPAs
can access and will make that list available on its website. Finally,
the Commission observes that concerns regarding benefit reductions
because of increased wages is a larger issue that requires engagement
beyond the AbilityOne Program. The Commission will share the relevant
comments with the Department of Health and Human Services, the Social
Security Administration, and other agencies with cognizance over these
topics.
3. Change
The Commission has made no change to this section of the rule.
E. Concerns Regarding Reduced Working Hours and Job Losses
1. Comments
One NPA stated that its budget could not absorb the increased
salary expenses that the rule would require. This commenter stated they
would need to reduce working hours for their employees with
disabilities or, in some cases, terminate their employment. The
commenter did not provide specific data to substantiate the anticipated
adverse impact on employment or hours worked by employees with
disabilities.
Two NPAs shared their success in transitioning away from section
14(c) certificates without dramatic adverse impacts on their employees
in terms of working hours or jobs. Each of these NPAs described how
they were able to pay their workers fair wages and benefits within
their existing contracts.
2. Discussion
The Commission recognizes that NPAs vary in size and budget and
will thus experience different budget constraints in increasing wages.
The allowance of a request for an extension of up to 12 months is
designed to provide NPAs a more individualized approach to plan for
change in a way that benefits its workforce without causing an adverse
impact on the delivery of products and services to Federal customers.
3. Change
The Commission has made no change to this section of the rule.
F. Expansion of the Current Rule
1. Comments
Several commenters asked the Commission to expand the rule and
prohibit NPAs, as a matter of Program qualification, from using 14(c)
certificates at all, whether their employees were working on an
AbilityOne contract or not. The commenters observed that since the 75
percent direct labor hour ratio requirement extended to the entire NPA,
and not simply to its AbilityOne contracts, the prohibition on use of
section 14(c) certificates should similarly apply to the entire NPA.
Several commenters applauded the rule as significant progress in
advancing the rights of individuals with disabilities. However, they
noted that more needed to be done to achieve competitive, integrated
employment for people who are blind or have significant disabilities.
Commenters offered a range of ideas for how the Commission could
achieve such changes in the Program, including requirements for NPAs to
help their employees move to employment outside of AbilityOne jobs.
2. Discussion
The Commission appreciates the argument that to be qualified to
participate in the AbilityOne program, NPAs should be precluded from
using 14(c) certificates anywhere in their workforce. However, such a
requirement would be a significant change from the proposed rule and
the Commission believes it should provide an opportunity for separate
notice and comment if it decides such a requirement is appropriate.
This rule is a foundational step for ensuring that all AbilityOne
NPA employees with disabilities on AbilityOne contracts receive
competitive wages for the work they perform. The Commission also agrees
that additional steps must be taken to
[[Page 43432]]
modernize the AbilityOne Program, but those changes are beyond the
scope of this rule.
3. Change
The Commission has made no change to this section of the rule.
Regulatory Procedures
Executive Orders 12866 (Regulatory Planning and Review) and 13563
(Improving Regulation and Regulatory Review)
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives. E.O. 13563
directs agencies to propose or adopt a regulation only upon a reasoned
determination that its benefits justify its costs; tailor the
regulation to impose the least burden on society, consistent with
achieving the regulatory objectives; and in choosing among alternative
regulatory approaches, select those approaches that maximize net
benefits (including potential economic, environmental, public health
and safety, and other advantages). E.O. 13563 emphasizes the importance
of quantifying both costs and benefits, of reducing costs, of
harmonizing rules, and promoting flexibility. E.O. 13563 further
recognizes that some benefits are difficult to quantify and provided
that, where appropriate and permitted by law, agencies may consider and
discuss qualitative values that are difficult or impossible to
quantify, including equity, human dignity, fairness, and distributive
impacts. The Office of Information and Regulatory Affairs in the Office
of Management and Budget has determined that this is a significant
regulatory action and, therefore, was subject to review under Section
6(b) of E.O. 12866, Regulatory Planning and Review, dated September 30,
1993.
A. Costs of Prohibiting the Use of Section 14(c) Certificates as a
Qualification for Participation in the AbilityOne Program
The Commission believes the costs of requiring all new NPAs seeking
initial qualification to participate in the Program, and participating
NPAs wishing to maintain Program qualification, to certify they will
not pay subminimum or sub-prevailing wages under a 14(c) certificate on
AbilityOne contracts are not substantial and are outweighed by the
benefits of the rule.
No NIB-associated NPA uses 14(c) certificates to pay its employees
on AbilityOne contracts. Those NPAs will not be affected by this rule.
SourceAmerica-associated NPAs performing services contracts are
generally subject to Executive Order 14026 and its implementing DOL
regulation. Under that regulation, the covered NPAs must pay at least
the Executive order minimum wage (currently $15.00 per hour and will be
subject to inflationary increases in future years) for work on or in
connection with covered Federal contracts. This rule will therefore not
have an impact on those NPAs covered by Executive Order 14026 and DOL's
implementing rule, except where the prevailing wage is higher than the
Executive order minimum wage (currently $15.00 per hour).
The NPAs who will be affected by this rule are those who hold
product contracts with the Federal Government and use 14(c)
certificates to pay their employees below the federal or state minimum
wage. Given the concerted efforts by NPAs, supported by SourceAmerica,
to reduce their use of 14(c) certificates, 120 of the 449 participating
NPAs still use such certificates on some AbilityOne contracts. Those
workers are clustered within 24 of the 120 NPAs. In terms of absolute
numbers, this translates into approximately 1,200 employees, or
approximately 3% of the AbilityOne workforce.
Based on first quarter (Q1) FY 2022 data collected by AbilityOne,
there are also approximately 550-750 employees working on services
contracts who earn at least the Federal minimum wage but less than the
prevailing wage. To the extent that the prevailing wage is higher than
the Executive order minimum wage (currently $15.00 per hour), this rule
will result in increased wages for those employees. Those commenters
who stated they could not absorb the increased costs did not provide
the Commission with any specific budget numbers for such increases or
details on why they could not manage those costs.
The Commission recognizes that increased wages may trigger benefit
reductions for some individuals with disabilities depending on their
individual circumstances. However, as described in this SUPPLEMENTARY
INFORMATION, there are various Federal and state programs designed to
mitigate this risk.
With regard to benefits of the rule, paying individuals with
disabilities the same hourly wage as individuals without disabilities
performing same or similar work provides both tangible and intangible
benefits. Individuals with disabilities earning subminimum or sub-
prevailing wages will now earn the Federal minimum wage, state minimum
wage or prevailing wage. The tangible benefits to these individuals are
identical to any worker experiencing a wage increase, including
increased personal wealth and economic independence, and an increased
ability to improve aspects of daily life requiring a higher level of
financial resources.
The intangible benefits are harder to quantify, but these benefits
accrue to individuals with disabilities as well as our larger society.
Paying individuals with disabilities wages equal to the legal wage
requirements for individuals without disabilities performing same or
similar work sends a clear message of equity and fairness that work
should be valued equally. Removing subminimum or sub-prevailing wages
helps further a culture of inclusion and enhances the dignity and life
experiences of individuals with disabilities. Opportunities to earn
higher wages leads to increased levels of self-sufficiency and less
dependence on services or government assistance.
Final Regulatory Flexibility Analysis
This final rule was reviewed under the Regulatory Flexibility Act
(RFA), 5 U.S.C. 601 et seq., which requires preparation of an initial
regulatory flexibility analysis for any rule that must be proposed for
public comment and is likely to have a significant economic impact on a
substantial number of small entities. The RFA also requires preparation
of a final regulatory flexibility analysis, or a certification by the
head of the agency that the rule, if promulgated, will not have a
significant economic impact on a substantial number of small entities
and a factual statement supporting the certification.
The rule only imposes a burden on NPAs still paying subminimum or
sub-prevailing wages under section 14(c) certificates. When the NPRM
was published, the Commission stated that SourceAmerica's available
data revealed 142 associated NPAs were utilizing section 14(c)
certificates. Following publication, SourceAmerica provided updated
data from first quarter FY 2022 showing 120 NPAs still paying either
subminimum or sub-prevailing wages to just over 2,900 individuals with
disabilities, which is slightly higher than ten percent of the total
SourceAmerica AbilityOne work force of approximately 28,000 employees.
Of this number, 1,750 employees were working on services contracts
that would be governed by the provisions of the DOL rule implementing
E.O. 14026, which took effect January 2022. Employees working on or in
connection with such contracts would therefore be paid at least the new
Executive order minimum wage (currently $15.00 per hour) for work on or
in connection with
[[Page 43433]]
covered contracts as required by the rule. However, if such employees
are being paid pursuant to a section 14(c) certificate, they can still
be paid less than the prevailing wage. Data self-reported to
SourceAmerica by associated NPAs shows approximately 550-750 employees
being paid at least the Executive order minimum wage but less than the
prevailing wage. After the effective date of this rule, those employees
will be required to be paid the prevailing wage.
The remaining approximately 1,200 employees work primarily on
product contracts and are clustered within a handful of NPAs
(approximately 24) relative to the overall number of just under 450
participating NPAs. After the effective date of this rule, these
employees will be paid at least the Federal minimum wage or the higher
state minimum wage.
Accordingly, the Commission certifies this rule will not have a
significant economic impact on a substantial number of small entities,
and, therefore, no final regulatory flexibility analysis has been
prepared.
Paperwork Reduction Act
The final rule requires the Commission to collect information
within its Annual Representations and Certifications regarding the
certification not to pay subminimum wages under 14(c) certificates to
employees. The Commission collects similar information (overall wages)
but does not currently or specifically collect a certification not to
pay subminimum or sub-prevailing wages under section 14(c) certificates
to employees.
A more complete discussion of the need for this final rule is
located throughout the Supplementary Information. In summary, the
Commission has determined that payment of subminimum or sub-prevailing
wages under 14(c) certificates to individuals with disabilities working
in the AbilityOne Program is not consistent with modern disability
policy. Paying individuals with disabilities less than individuals
without disabilities performing same or similar work continues wage
disparity in the Program.
For the reasons set forth above, the Commission is adding a new
requirement for NPAs to initially qualify and maintain qualification in
the Program. Pursuant to this rule, NPAs must certify that after the
effective date, on all new AbilityOne contracts awarded, after the
effective date, on options exercised on existing contracts, and on
contract extensions or renewals, the NPA will not pay individuals with
disabilities subminimum or sub-prevailing wages under a 14(c)
certificate. The Commission will collect information regarding
compliance with this new requirement through documentation submitted
for initial qualification, and on the Annual Representations and
Certifications form.
Unfunded Mandates Reform Act of 1995
The final rule does not include any Federal mandate that may result
in increased expenditures by State, local, and tribal governments,
taken together, of $100 million or more, or in increased expenditures
by the private sector of $100 million or more.
Authority: 41 U.S.C. 8503(d).
List of Subjects in 41 CFR Part 51-4
Government procurement, Individuals with disabilities, Reporting
and recordkeeping requirements.
For the reasons set forth in the SUPPLEMENTARY INFORMATION, the
Commission amends 41 CFR part 51-4 as follows:
PART 51-4-NONPROFIT AGENCIES
0
1. The authority citation for part 51-4 continues to read as follows:
Authority: 41 U.S.C. 46-48c.
0
2. Amend Sec. 51-4.2 by adding paragraph (a)(1)(iv) and revising
paragraph (b) to read as follows:
Sec. 51-4.2 Initial qualification.
(a) * * *
(1) * * *
(iv) A certification that the nonprofit agency will not use wage
certificates authorized under section 14(c) of the Fair Labor Standards
Act of 1938 (29 U.S.C. 214(c)) to employees on any contract or
subcontract awarded under the AbilityOne Program.
* * * * *
(b) The Committee shall review the documents submitted and, if they
are acceptable, notify the nonprofit agency by letter, with a copy to
its central nonprofit agency, that the Committee has verified its
nonprofit status and certification under paragraph (a)(1)(iv) of this
section under the under the Javits-Wagner-O'Day Act.
* * * * *
0
3. Amend Sec. 51-4.3 by adding paragraph (b)(10) to read as follows:
Sec. 51-4.3 Maintaining qualification.
* * * * *
(b) * * *
(10) Certify the nonprofit agency will not use wage certificates
authorized under section 14(c) of the Fair Labor Standards Act of 1938
(29 U.S.C. 214(c)) to employees on any contract or subcontract under
the AbilityOne Program.
* * * * *
Michael R. Jurkowski,
Acting Director, Business Operations.
[FR Doc. 2022-15561 Filed 7-20-22; 8:45 am]
BILLING CODE 6353-01-P
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