Proposed Rule2024-27880
Employment of Workers With Disabilities Under Section 14(c) of the Fair Labor Standards Act
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
December 4, 2024
Issuing agencies
Labor DepartmentWage and Hour Division
Abstract
The Fair Labor Standards Act (FLSA or Act) authorizes the Secretary of Labor to issue certificates allowing employers to pay productivity-based subminimum wages to workers with disabilities, but only where such certificates are necessary to prevent the curtailment of opportunities for employment. Employment opportunities for individuals with disabilities have vastly expanded in recent decades, in part due to significant legal and policy developments. Based on that evidence, the Department has tentatively concluded that subminimum wages are no longer necessary to prevent the curtailment of employment opportunities for individuals with disabilities and thus proposes to phase out the issuance of section 14(c) certificates.
Full Text
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<title>Federal Register, Volume 89 Issue 233 (Wednesday, December 4, 2024)</title>
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[Federal Register Volume 89, Number 233 (Wednesday, December 4, 2024)]
[Proposed Rules]
[Pages 96466-96511]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-27880]
[[Page 96465]]
Vol. 89
Wednesday,
No. 233
December 4, 2024
Part III
Department of Labor
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Wage and Hour Division
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29 CFR Part 525
Employment of Workers With Disabilities Under Section 14(c) of the Fair
Labor Standards Act; Proposed Rule
Federal Register / Vol. 89 , No. 233 / Wednesday, December 4, 2024 /
Proposed Rules
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DEPARTMENT OF LABOR
Wage and Hour Division
29 CFR Part 525
RIN 1235-AA14
Employment of Workers With Disabilities Under Section 14(c) of
the Fair Labor Standards Act
AGENCY: Wage and Hour Division, Department of Labor.
ACTION: Notice of proposed rulemaking.
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SUMMARY: The Fair Labor Standards Act (FLSA or Act) authorizes the
Secretary of Labor to issue certificates allowing employers to pay
productivity-based subminimum wages to workers with disabilities, but
only where such certificates are necessary to prevent the curtailment
of opportunities for employment. Employment opportunities for
individuals with disabilities have vastly expanded in recent decades,
in part due to significant legal and policy developments. Based on that
evidence, the Department has tentatively concluded that subminimum
wages are no longer necessary to prevent the curtailment of employment
opportunities for individuals with disabilities and thus proposes to
phase out the issuance of section 14(c) certificates.
DATES: Interested persons are invited to submit written comments on
this notice of proposed rulemaking (NPRM) on or before January 17,
2025.
ADDRESSES: You may submit comments, identified by Regulatory
Information Number (RIN) 1235-AA14, by either of the following methods:
<bullet> Electronic Comments: Submit comments through the Federal
eRulemaking Portal at <a href="https://www.regulations.gov">https://www.regulations.gov</a>. Follow the
instructions for submitting comments.
<bullet> Mail: Address written submissions to: Division of
Regulations, Legislation, and Interpretation, Wage and Hour Division,
U.S. Department of Labor, Room S-3502, 200 Constitution Avenue NW,
Washington, DC 20210.
Instructions: Response to this NPRM is voluntary. The Department
requests that no business proprietary information, copyrighted
information, or personally identifiable information be submitted in
response to this NPRM. Commenters submitting file attachments on
<a href="https://www.regulations.gov">https://www.regulations.gov</a> are advised that uploading text-recognized
documents--i.e., documents in a native file format or documents which
have undergone optical character recognition (OCR)--enable staff at the
Department to more easily search and retrieve specific content included
in your comment for consideration.
Anyone who submits a comment (including duplicate comments) should
understand and expect that the comment, including any personal
information provided, will become a matter of public record and will be
posted without change to <a href="https://www.regulations.gov">https://www.regulations.gov</a>. The Department
posts comments gathered and submitted by a third-party organization as
a group under a single document ID number on <a href="https://www.regulations.gov">https://www.regulations.gov</a>. All comments must be received by 11:59 p.m. ET on
January 17, 2025, for consideration in this rulemaking; comments
received after the comment period closes will not be considered.
The Department recommends that commenters submit their comments
electronically via <a href="https://www.regulations.gov">https://www.regulations.gov</a> to ensure timely receipt
prior to the close of the comment period. Please submit only one copy
of your comments by only one method.
Docket: For access to the docket to read background documents or
comments, go to the Federal eRulemaking Portal at <a href="https://www.regulations.gov">https://www.regulations.gov</a>. In accordance with 5 U.S.C. 553(b)(4), a summary
of this rule may also be found at <a href="https://www.regulations.gov">https://www.regulations.gov</a>.
FOR FURTHER INFORMATION CONTACT: Daniel Navarrete, Director, Division
of Regulations, Legislation, and Interpretation, Wage and Hour Division
(WHD), U.S. Department of Labor, Room S-3502, 200 Constitution Avenue
NW, Washington, DC 20210; telephone: (202) 693-0406 (this is not a
toll-free number). Alternative formats are available upon request by
calling 1-866-487-9243. If you are deaf, hard of hearing, or have a
speech disability, please dial 7-1-1 to access telecommunications relay
services.
Questions of interpretation or enforcement of the agency's existing
regulations may be directed to the nearest WHD district office. Locate
the nearest office by calling the WHD's toll-free help line at (866)
4US-WAGE ((866) 487-9243) between 8 a.m. and 5 p.m. in your local time
zone, or log onto WHD's website at <a href="https://www.dol.gov/agencies/whd/contact/local-offices">https://www.dol.gov/agencies/whd/contact/local-offices</a> for a nationwide listing of WHD district and area
offices.
SUPPLEMENTARY INFORMATION:
I. Executive Summary
The FLSA generally requires that employees be paid at least the
Federal minimum wage, currently $7.25 per hour, for every hour worked
and at least one and one-half times their regular rate of pay for each
hour worked over 40 in a single workweek. 29 U.S.C. 206(a), 207(a).
Since its enactment in 1938 through today, section 14 of the FLSA has
included a provision authorizing the Department to issue certificates
permitting employers to pay workers at wage rates below the Federal
minimum wage when the worker's disabilities impair their earning or
productive capacity. The section 14 statutory provision, however, has
always provided that such certificates may only be issued to the extent
``necessary to prevent curtailment of opportunities for employment.''
\1\ As the Supreme Court explained in 1947, the language and
legislative history of the section show that its purpose is to prevent
the imposition of a full minimum wage from depriving those with
``physical handicaps'' of ``all opportunity to secure work.'' \2\
However, as the Court emphasized, ``to have written a blanket exemption
of all [such workers] from the Act's provisions might have left open a
way for wholesale evasions. Flexibility of wage rates for them was
therefore provided under the safeguard of administrative permits.'' \3\
Hence, section 14(c) authorizes the Secretary to issue certificates
allowing payment of subminimum wages to individuals with disabilities
only when conditions make it ``necessary'' to do so.
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\1\ 29 U.S.C. 214(c)(1).
\2\ Walling v. Portland Terminal Co., 330 U.S. 148, 151 (1947).
The Department notes that some terminology used in this NPRM
reflects the terms used in the statute and regulations at the time
of their issuance or quotations from various sources. Quotations are
attributable to the sources indicated and do not necessarily reflect
the current views or terminology of the Department. Since the early
1990s, the government has replaced outdated and offensive terms like
``the handicapped'' with more respectful, person-first terminology,
such as ``individuals with disabilities.'' Throughout this NPRM, the
Department references outdated terms only when necessary to
accurately reflect quoted sources or to illustrate changes that have
occurred.
\3\ Id.
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The Department first promulgated regulations governing the issuance
of these ``administrative permits'' in 1938, and last substantively
updated them in 1989, more than 35 years ago. Since 1989 (and
profoundly more so since the time the statutory provision was enacted
and its implementing regulations were promulgated nearly 85 years ago),
opportunities for employment have dramatically changed for individuals
with disabilities. Fueled by the disability rights movement, societal
and cultural assumptions, beliefs and expectations regarding the
employment of individuals with disabilities have evolved, and
opportunities for individuals with disabilities have
[[Page 96467]]
dramatically expanded. Federal legislation and judicial precedent have
established and enshrined fundamental legal protections requiring equal
access, opportunities, and respect for individuals with disabilities in
both education and employment. Of these legislative and judicial
developments, the landmark Americans with Disabilities Act (ADA) of
1990,\4\ enacted the year after the section 14(c) regulations were last
substantively updated, has had a profound impact on employment
opportunities for individuals with disabilities. In addition, the
President and executive agencies have taken steps to end the payment of
subminimum wages to workers with disabilities on certain government
contracts. Numerous States and localities have prohibited or limited
the payment of subminimum wages to workers with disabilities within
their jurisdictions. In short, employment opportunities for individuals
with disabilities have advanced significantly since the FLSA's
enactment in 1938, when it was much more difficult for individuals with
disabilities to secure employment at the full minimum wage.\5\
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\4\ The ADA was subsequently amended by the ADA Amendments Act
of 2008, 42 U.S.C. 12111 et seq. As discussed in section III.B, the
ADA mandates equal employment opportunity for individuals with
disabilities by prohibiting discrimination and requiring reasonable
accommodation.
\5\ Id.
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Although it is widely acknowledged that individuals with
disabilities continue to face challenges in obtaining equal opportunity
and treatment, the extent of legal protections, opportunities,
resources, training, technological advancements, and supports has
dramatically expanded since 1989, when the Department's regulation was
last substantively updated, to assist individuals with disabilities
both in obtaining and maintaining employment at or above the full
minimum wage.\6\ Employers similarly have substantially more resources
and training available to recruit, hire, and retain workers with
disabilities in employment at or above the full minimum wage. This
comprehensive system of new approaches has rendered it unnecessary to
depend upon subminimum wages to secure employment opportunities for
individuals with disabilities and, given the enhanced opportunities for
employment since the Department last substantively updated its
regulations in 1989, vastly more individuals with disabilities--
including intellectual or development disabilities (I/DD)--work at
full-wage employment than work under section 14(c) certificates.
Recognizing the expansion of full-wage employment options for
individuals with disabilities, an increasing number of oversight and
advisory reports, such as those published by the U.S. Commission on
Civil Rights (USCCR) and the National Council on Disability (NCD), have
vigorously called for a ``phase out'' of section 14(c) certificates. As
another indication that subminimum wages are not necessary to prevent
the curtailment of employment opportunities, an increasing number of
States and localities, including many jurisdictions with higher minimum
wages than the FLSA minimum wage, have prohibited or limited the
payment of subminimum wages in their respective jurisdictions, and an
increasing number of employers themselves are voluntarily opting out of
paying subminimum wages, as is reflected in the rate at which the
number of section 14(c) certificate holders has substantially declined
in recent years.
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\6\ This expansion of employment opportunities, resources,
training, and supports is applicable for all individuals with
disabilities, including individuals with intellectual and
developmental disabilities who comprised about 90 percent of the
workers with disabilities still being paid subminimum wages as of
August 2021. See U.S. Gov't Accountability Office, GAO-23-105116,
``Subminimum Wage Program: DOL Could Do More to Ensure Timely
Oversight'' (2023) (2023 GAO Report), at 24, <a href="https://www.gao.gov/products/gao-23-105116">https://www.gao.gov/products/gao-23-105116</a>.
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Against this backdrop, the Department must fulfill its statutory
mandate of assessing whether section 14(c) certificates continue to be
necessary in order to prevent the curtailment of employment
opportunities for individuals with disabilities. After careful review,
consideration of input from stakeholders with a wide variety of
viewpoints, and for the reasons discussed in this notice of proposed
rulemaking, the Department preliminarily concludes that section 14(c)
certificates that allow employers to pay subminimum wages to workers
with disabilities are no longer necessary and thus proposes to amend 29
CFR part 525 to phase out the issuance of such certificates.
Accordingly, the Department proposes to stop issuance of new
section 14(c) certificates and to phase out existing certificates over
several years. At the conclusion of the phaseout period, this proposal
would require only that subminimum wages no longer be paid to workers
with disabilities. This proposed rule would not require workers to
leave their current places of employment, where they often also receive
a number of services, such as rehabilitation and training, nor would it
require current section 14(c) certificate holders to amend the type of
services that they currently provide or to modify the settings in which
work is performed.\7\
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\7\ For example, if an employer currently employs a worker with
disabilities to perform an assembly line job for 2 hours per day and
then provides rehabilitation services to that same individual for 6
hours per day, this proposed rule would require only that the
employer pay at least the full Federal minimum wage for the 2 hours
of work performed by the worker. This proposed rule would not
require any changes be made to the setting or rehabilitation
services offered.
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The Department specifically proposes to cease issuance of new
section 14(c) certificates to employers submitting an initial
application on or after the effective date of a final rule and permit
existing section 14(c) certificate holders, assuming all legal
requirements are met, to continue to operate under section 14(c)
certificate authority for up to 3 years after the effective date of a
final rule. The Department is also requesting comment as to whether, if
this proposed rule is finalized, it would be appropriate to grant an
extension for existing section 14(c) certificate holders who
demonstrate a need and seeks comments on the need for such an extension
period, and, if needed, its scope, structure and length.
II. Background
A. Introduction
The FLSA provides basic labor protections including Federal minimum
wage and overtime compensation requirements. Section 6 of the FLSA
establishes that the Federal minimum wage for covered employees is
currently $7.25 per hour, ``except as otherwise provided'' in the
Act.\8\ Since its enactment in 1938, the FLSA has authorized the
Department to issue certificates permitting the employment of certain
workers with disabilities at wage rates lower than the otherwise
applicable Federal minimum wage ``to the extent necessary to prevent
curtailment of opportunities for employment.'' \9\ To provide
appropriate contextual information about section 14(c), this section of
the proposed rule provides a high-level summary of the Department's
legal authority regarding the issuance of section 14(c) certificates,
the relevant statutory and regulatory history pertaining to FLSA
section 14(c), an overview of how the Department's Wage and Hour
Division (WHD) administers section 14(c) certificates and enforces the
section 14(c) provisions, and a description of how
[[Page 96468]]
employers are currently using certificates. The Department then
discusses its recent review of section 14(c) and addresses the current
need for rulemaking.
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\8\ 29 U.S.C. 206.
\9\ 29 U.S.C. 214(c)(1).
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B. Statutory Authority
Section 14(c)(1) of the FLSA provides that the ``Secretary, to the
extent necessary to prevent curtailment of opportunities for
employment, shall by regulation or order provide for the employment,
under special certificates, of individuals . . . whose earning or
productive capacity is impaired by age or physical or mental
deficiency'' at productivity-based subminimum wages.\10\ The FLSA
explicitly authorizes the Secretary to issue regulations governing the
issuance of subminimum wage certificates.
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\10\ 29 U.S.C. 214(c)(1).
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In authorizing the Secretary to issue certificates allowing
employers to pay subminimum wages, Congress included a significant
statutory limitation by permitting the issuance of certificates only
``to the extent necessary to prevent curtailment of opportunities for
employment.'' At the same time, Congress determined that the Secretary
``shall by regulation or order'' provide for subminimum wage
certificates, thereby conferring authority upon the Department to
determine whether that standard has been met and under what
circumstances subminimum wages should be paid. To best implement the
statute at this point in time, the Department proposes to exercise its
authority to find that subminimum wages are no longer necessary to
prevent the curtailment of employment opportunities for workers with
disabilities and to phase out the issuance of section 14(c)
certificates.\11\
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\11\ WHD has legal authority to require payment of the full
Federal minimum wage for all hours worked by covered, non-exempt
employees. As previously noted, this proposed rule would not require
workers to leave their current places of employment, nor would it
require current section 14(c) certificate holders to amend the type
of services that they currently provide or to modify the settings in
which work is performed.
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The Secretary's issuance of certificates prior to permitting
employers to pay a subminimum wage acts as a ``safeguard'' against
widespread abuse.\12\ Section 14(c) requires the curtailment clause
determination to be made by the Secretary prior to permitting employers
to pay a subminimum wage because the right to a minimum wage under the
FLSA is not waivable. The provision places this obligation on the
Secretary to safeguard the program against abuse and ensure that no
individual employer or employee can effect a waiver of their rights,
contrary to the FLSA.
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\12\ Portland Terminal, 330 U.S. at 151.
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It is a fundamental principle of FLSA jurisprudence that the Act's
rights, including the right to the Federal minimum wage, cannot be
waived. The Supreme Court's ``decisions interpreting the FLSA have
frequently emphasized the nonwaivable nature of an individual
employee's right[s] . . . under the Act'' and ``have held that FLSA
rights cannot be abridged by contract or otherwise waived.'' \13\ The
Supreme Court has identified at least three reasons for this nonwaiver
rule. First, the Court has determined that the Act constituted ``a
recognition of the fact that due to the unequal bargaining power as
between employer and employee, certain segments of the population
required federal compulsory legislation to prevent private contracts on
their part which endangered national health and efficiency.'' \14\
According to the Court, the protective purposes of the Act thus
``require that it be applied even to those who would decline its
protections''; otherwise, ``employers might be able to use superior
bargaining power to coerce employees to . . . waive their protections
under the Act.'' \15\ Second, the FLSA sought to establish a ``uniform
national policy of guaranteeing compensation for all work'' performed
by covered employees.\16\ Third, the Court has held that permitting
employees to waive their FLSA rights is inconsistent with the explicit
purpose of the Act to protect employers against unfair methods of
competition.\17\
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\13\ Barrentine v. Arkansas-Best Freight Sys., Inc., 450 U.S.
728, 740 (1981) (listing cases).
\14\ Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697, 706 (1945).
\15\ Tony & Susan Alamo Found. v. Sec'y of Labor, 471 U.S. 290,
302 (1985) (citing Barrentine, 450 U.S. 728 and Brooklyn Sav., 324
U.S. 697).
\16\ Jewell Ridge Coal Corp. v. Local No. 6167, UMWA, 325 U.S.
161, 167 (1945).
\17\ See 29 U.S.C. 202(a); Brooklyn Sav., 324 U.S. at 710.
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Accordingly, just as employees cannot choose to forego overtime
compensation due, employees cannot choose to be paid subminimum wages.
Rather, an employer may only pay subminimum wages to workers with
disabilities after obtaining a certificate from the Secretary. In turn,
the Secretary may only issue such certificates when the threshold
statutory requirement is met, that is, the Secretary determines that
such certificates are necessary to prevent the curtailment of
employment opportunities.
Recognizing the uniqueness of the certificate process for
subminimum wages, the Supreme Court has observed that in enacting the
FLSA, Congress wished to increase opportunities for gainful employment,
and not impose requirements that would deprive any worker of ``all
opportunity to secure work.'' \18\ The Court further recognized,
however, that a ``blanket exemption'' of workers with disabilities from
the minimum wage could have invited ``wholesale evasions'' and
accordingly subminimum wages could only be paid under the very specific
``safeguard of administrative permits.'' \19\ Thus, the Secretary
continues to be responsible for monitoring the payment of subminimum
wages and ensuring that the statutory prerequisites for both
certificate issuance and use of such certificates have been met.
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\18\ See Walling v. Portland Terminal, 330 U.S. at 151-52.
\19\ Portland Terminal, 330 U.S. at 151-52.
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The FLSA expressly confers authority to the Department to make the
determination under the curtailment clause that certificates are
necessary to prevent the curtailment of employment opportunities prior
to issuing certificates.\20\ The most logical reading of the statutory
phrase ``opportunities for employment'' is that the term
``opportunities'' refers to ``a time or place favorable for executing a
purpose'' or ``a suitable combination of conditions.'' \21\ Thus, the
statutory language does not require a particular employment outcome for
a worker with a disability being paid subminimum wages pursuant to a
section 14(c) certificate. Rather, the statute requires the Department
to evaluate the necessity of issuing section 14(c) certificates to
prevent the curtailment of employment opportunities. In other words,
the Department must consider whether the payment of subminimum wages is
necessary to prevent the curtailment of ``a suitable combination of
conditions,'' for employment opportunities, advancement, or progress
broadly, not whether all workers attain a particular employment
outcome, or a specific worker attains a particular job in a particular
setting.
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\20\ The Secretary has exercised this authority in various ways.
Although the statutory language states that a certificate for
subminimum wages may be issued when productive capacity is impaired
by ``age, physical or mental deficiency, or injury,'' the granting
of certificates has historically focused on disability, and today
employers are paying subminimum wages almost exclusively to workers
with I/DD. As an example of the Department's exercise of its
authority, the Department promulgated regulations in 1939 which
stated that workers with ``temporary, or readily correctible,
disabilities,'' and those ``where age alone is cited as a disability
for a worker under 65,'' would be ineligible for a certificate. 29
CFR 524.7(a), (c) (1939).
\21\ See ``Opportunity,'' Webster's New International Dictionary
1709 (1938 ed.).
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[[Page 96469]]
The statute gives the Department discretion to determine whether
the curtailment standard has been met, and the Department proposes
that, at this time, the issuance of certificates does not appear to be
necessary to prevent the curtailment of employment opportunities for
individuals with disabilities. Today, the Department is proposing to
find that, due to the legal, social, and technological changes since
that determination was made in 1989, subminimum wage certificates are
unnecessary to prevent employment curtailment. This proposed rule
considers the framework that the Department's current section 14(c)
regulations, last substantively revised in 1989, uses to determine
whether subminimum wages are necessary to prevent curtailment of
employment opportunities. The current regulations (explained in more
detail below) presume, without further analysis, that subminimum wages
are necessary to prevent the curtailment of employment opportunities
provided that (i) an individual has a disability that impacts their
productivity in performing a particular job offered by a single
certificate-holding employer and (ii) the employer can demonstrate it
has calculated a productivity-based wage rate in accordance with the
regulations for that particular job. In adopting this approach, the
1989 regulations collapse the statutory curtailment clause requirement
into the statutory requirement that any commensurate wage for a
particular job must be ``related to the individual's productivity'' at
that job. The regulatory framework from 1989 thus rests on an implicit
assumption that the two statutory requirements are the same, that
disability-related impacts on an individual's productivity at a
particular task means that a subminimum wage was necessary in order to
prevent the curtailment of employment opportunities. Given the
substantial developments in law and policy that have occurred since the
regulations were last updated nearly 35 years ago and the expansion of
opportunities now available to individuals with disabilities, the
Department proposes to take into account the current scope of those
employment opportunities instead of assuming that certificates are
necessary to prevent the curtailment of employment opportunities for
individuals with disabilities.
Given this, the proposed rule proposes to fulfill the curtailment
clause requirement by assessing whether subminimum wages are still
necessary based on a comprehensive consideration of how employment
opportunities are both curtailed and created across the employment
market. In assessing the statutory curtailment clause requirement, the
Department today has more tools at its disposal than ever before--such
as, for example, information from the nearly half of States that have
prohibited or limited the use of subminimum wages--to make a
preliminary determination that the payment of subminimum wages is not
necessary to prevent the curtailment of employment opportunities.
Particularly in view of the substantial social, structural, and legal
changes that have occurred since 1989 to systemically reshape
employment opportunities for individuals with disabilities (also
discussed in detail below), the Department proposes herein that this
comprehensive approach better fulfills the Secretary's statutory
obligation to provide for the issuance of certificates only when
``necessary.''
C. Overview of Statutory and Regulatory History of FLSA Section 14(c)
The FLSA provision allowing the payment of subminimum wages to
certain workers with disabilities became effective when the FLSA was
signed into law on June 25, 1938. As passed in 1938, section 14 of the
FLSA instructed that the WHD Administrator, ``to the extent necessary
in order to prevent curtailment of opportunities for employment, shall
by regulations or by orders provide for . . . the employment of
individuals whose earning capacity is impaired by age or physical or
mental deficiency or injury, under special certificates issued by the
Administrator, at such wages lower than the minimum wage applicable
under section 6 [of the FLSA] and for such period as shall be fixed in
such certificates.'' \22\ As is plain from the statutory text, the
precondition that certificates may only be issued to the extent
necessary to prevent the curtailment of employment opportunities has
been an essential part of the section 14 provision since enactment.
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\22\ Fair Labor Standards Act of 1938, Public Law 75-718, 52
Stat. 1060 (1938) (codified at 29 U.S.C. 214). The original version
of the FLSA also provided for subminimum wage rates for learners,
apprentices, and messengers. 29 U.S.C. 214(1).
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The legislative history shows that Congress intended to limit the
circumstances under which subminimum wage certificates could be issued
so as to avoid undermining the larger purposes of the FLSA and granted
the Department authority to administer these limits. The initial
legislative history of the Act includes statements from the joint
Congressional hearings on the enactment of the FLSA in 1938 which
addressed the purposes of establishing a Federal minimum wage and the
Department's discretion in applying that standard under section 14.
Congress explained that the Act ``provides a floor below which the
hourly wage ought not to fall and a limit beyond which the working week
should not be stretched. These are the rudimentary standards of human
decency at which the relatively automatic provisions of the bill are
directed.'' \23\ Regarding the clause limiting the issuance of
certificates to circumstances where they are ``necessary in order to
prevent curtailment of opportunities for employment'' (the
``curtailment clause''), Congress further explained that ``even in the
application of these rudimentary standards, a certain discretion is
given to the enforcement agency so that it can protect the earning
power of the workers and their opportunities for employment from
unreasonable curtailment.'' \24\ Additionally, Congress advised that,
in considering subminimum wages, the Department was to give ``due
consideration to the maintenance of the minimum standard of living, the
health, efficiency, and well-being of the employees, and the avoidance
of unreasonable curtailment of opportunities for employment and the
earning power of the employees.'' \25\
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\23\ Fair Labor Standards Act of 1937: Joint Hearings on S. 2475
and H.R. 7200 Before the Senate Comm. on Educ. and Labor, and House
Comm. on Labor, 75th Cong. 1st Sess. Part 1, p. 55 (June 2-5, 1937).
\24\ Id.
\25\ Id. at 57.
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The Department has exercised the authority Congress gave it to
evaluate the curtailment clause throughout the history of its
administration of section 14. As a reflection of the determination that
payment of subminimum wages was, at that time, necessary under certain
circumstances to prevent the curtailment of employment opportunities,
the Department promulgated its initial regulations implementing section
14 in 1938. Among other matters, the initial regulations established
procedures whereby certificates were issued on an individual basis, set
a general wage floor at 75 percent of the FLSA section 6 minimum wage,
and allowed for a lower wage rate if an investigation showed that it
was justified.\26\ The Department amended its regulations in 1939,
exercising its ``curtailment clause'' authority to limit the issuance
of certificates by specifying that, for
[[Page 96470]]
example, certain groups of workers, including those with ``temporary,
or readily correctible, disabilities,'' those ``where age alone is
cited as a disability for a worker under 65,'' and those ``whose
piecework earnings are generally equal to or above the statutory
minimum [wage],'' would be ineligible for a certificate.\27\ The
Department also amended its regulations in 1940 to provide specific
requirements governing the payment of subminimum wages to individuals
with disabilities working in ``sheltered workshops.'' \28\ The
Department made a number of changes to its regulations implementing
section 14 of the FLSA over the next 25 years, changing how
certificates were issued and how wages were determined for workers.
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\26\ 29 CFR 524.5 (1938).
\27\ 29 CFR 524.7(a), (c), and (d) (1939).
\28\ 5 FR 655 (Feb. 13, 1940) (defining ``sheltered workshop''
as ``a charitable organization or institution conducted not for
profit, but for the purpose of carrying out a recognized program of
rehabilitation for individuals whose earning capacity is impaired by
age or physical or mental deficiency or injury, and to provide such
individuals with remunerative employment or other occupational
rehabilitating activity of an educational or therapeutic nature.'');
see also 29 CFR 525.1 (1940).
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In 1966, Congress amended the FLSA to, in relevant part, establish
a wage floor for persons with disabilities in both general employment
and in certain sheltered workshops at not less than 50 percent of the
FLSA minimum wage.\29\ The 1966 statutory amendments also created three
special categories of certificates for workers who were not subject to
the wage floor \30\ and extended FLSA coverage to hospitals and other
institutions as employers.\31\ The statutory language limiting the
issuance of certificates to only circumstances where subminimum wages
were necessary to prevent the curtailment of opportunities for
employment was not changed by these amendments. The 1966 FLSA
amendments also required the Secretary to submit a study to Congress
``of wage payments to handicapped clients of sheltered workshops and of
the feasibility of raising existing wage standards in such workshops.''
\32\
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\29\ Public Law 89-601, 80 Stat. 830, 843-44 (1966) (29 U.S.C.
214(d)(1)).
\30\ Id. (29 U.S.C. 214(d)(2)(A)-(B), 214(d)(3)). The three
categories of certificates for workers who were not subject to the
wage floor established by the 1966 FLSA amendments included, in
certain specified circumstances, ``handicapped workers engaged in
work which is incidental to training or evaluation programs,''
``multihandicapped individuals and other individuals whose earning
capacity is so severely impaired that they are unable to engage in
competitive employment,'' and ``handicapped clients in work
activities centers.'' Id.
\31\ Id. at 831-32 (29 U.S.C. 203(r), (s)).
\32\ See id. at 845.
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The 1966 amendments demonstrated Congress' continued intent to give
the Department discretion to issue section 14 certificates based on a
determination of need. In 1967, the Department updated its regulations
based on the 1966 statutory amendments. That same year, the Department
submitted its report to Congress, recognizing that the Congressional
intent of the 1966 FLSA amendments was ``aimed at `improving the
economic circumstances of handicapped workers, speeding their movement
into fully productive private employment, and assuring that such
workers are not exploited through low wages.' '' \33\ Reflecting the
rapidly shifting views on the employment of individuals with
disabilities since the FLSA was passed 28 years earlier, the report
continued by noting that ``it is now clearly the intent of the Congress
that handicapped workers' wages be raised to at least the minimum wage
as soon as feasible.'' \34\
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\33\ U.S. Dep't of Labor, ``Sheltered Workshop Report of the
Secretary of Labor and Technical Report on Wage Payments to
Handicapped Clients in Sheltered Workshops'' (1967) (1967 DOL
Report) at 1 (quoting Senate Report No. 1487, August 23, 1966, at
23).
\34\ 1967 DOL Report at 1. The report did not explicitly address
the curtailment clause regarding certificate issuance. However, as
evidenced by the quoted passage, lawmakers' understanding of the
potential employment of individuals with disabilities rapidly
evolved since the 1938 passage of the FLSA. In 1938, Congressional
documents were replete with references to individuals with
disabilities as ``subnormal'' and, in contrast to the 1967 report
cited herein, often assumed, without discussion, they were ``unable
to compete with their fellow workers.'' See, e.g., Fair Labor
Standards Act of 1937: Joint Hearings on S. 2475 and H.R. 7200
before the Senate Comm. On Educ. And Labor; House Comm. On Labor,
75th Cong. 1st Sess. Part 1, p. 38 (June 2-5, 1937) (statement of
Robert H. Jackson, Assistant Attorney General, U.S. Dep't of
Justice); Cong. Rec. Vol. 83, Part 6, 75th Cong. 3d Sess. P. 7134
(May 19, 1938).
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The Department's report made additional observations about
subminimum wage employment and made recommendations on changes needed
to support movement at that time from section 14(c) employment to full
wage employment. In describing sheltered workshops, the Department
observed that while individuals with disabilities being paid subminimum
wages by the workshops (described as ``clients'' in the report) may be
limited in their ability to produce, they were also limited by ``the
frequently obsolete methods of organization and production of the
workshop.'' \35\ The report concluded that ``[t]o measure the `worth'
of a handicapped client by his `productivity' while making him work
with outmoded equipment, or on jobs long ago automated, or with modern
equipment which is not adapted to the individual's needs is to foredoom
the great majority of handicapped clients to subminimum wages.'' \36\
Additionally, of particular note, the Department reported about the
demographics of workers receiving subminimum wages in sheltered
workshops, including by disability. The Department observed that, in
1967, workers with I/DD comprised approximately one-third of all
workshop clients and were paid the lowest wages of any group of workers
with disabilities employed under certificates.\37\
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\35\ 1967 DOL Report at 2.
\36\ Id.
\37\ Id. at 21.
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In 1971, the Department again amended its regulations to include,
in part, the introduction of a new 25-50 percent wage floor for
``multi-handicapped and other workers whose earning capacity is
severely impaired'' working under the sponsorship of a public
rehabilitation agency.\38\ In 1974, Congress amended the FLSA by moving
the subminimum wage provision for workers with disabilities to section
14(c) of the Act but yet again left the substantive requirements,
including the statutory ``curtailment clause,'' unchanged.\39\ At this
juncture, Congress's maintenance of the Department's authority, through
the ``curtailment clause,'' to determine the extent to which subminimum
wage certificates were necessary is especially notable in light of the
Department's 1967 report seven years earlier, which, as discussed
above, emphasized the Department's understanding that Congress sought
to have individuals with disabilities earn full minimum wages ``as soon
as feasible.'' \40\
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\38\ See 36 FR 50-51 (Jan. 5, 1971) (29 CFR 524.1(c)).
\39\ See Public Law 93-259,88 Stat. 55, 72 (1974).
\40\ See n. 34, above.
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In 1986, Congress amended the FLSA to eliminate the specific types
of certificates and wage floors that previously applied to section
14(c) employment.\41\ These revisions again retained the ``curtailment
clause'' standard as a precondition governing the issuance of
certificates. While the revised statute retained the basic requirement
that workers with disabilities employed under section 14(c)
certificates be paid commensurate wages, it added a requirement that
the wages be ``related to the individual's productivity.'' In full,
section 14(c)(1), which remains in effect today, provides that ``[t]he
Secretary, to the extent necessary to prevent curtailment of
opportunities for employment, shall by regulation or order provide for
the
[[Page 96471]]
employment, under special certificates, of individuals (including
individuals employed in agriculture) whose earning or productive
capacity is impaired by age, physical or mental deficiency, or injury,
at wages which are: (A) lower than the minimum wage applicable under
section 206 of this title, (B) commensurate with those paid to
nonhandicapped workers, employed in the vicinity in which the
individuals under the certificates are employed, for essentially the
same type, quality, and quantity of work, and (C) related to the
individual's productivity.'' \42\ The 1986 statutory amendments also
required that employers provide ``written assurances'' that wages for
hourly workers be reviewed at least every 6 months, and that wages for
all employees be adjusted at least once a year to reflect changes in
the prevailing wages in the locality.\43\ Additionally, the new
language set forth a ``wage petition'' procedure by which an employee
or their parent or guardian can ``petition the Secretary to obtain a
review of'' the subminimum wage rate paid by the employer.\44\ The
revised statute also requires that the appeal process include a hearing
before an Administrative Law Judge (ALJ), placing the burden on the
employer to prove that the subminimum ``wage rate is justified as
necessary in order to prevent curtailment of opportunities for
employment.'' \45\ Since these 1986 amendments, Congress has not
directly amended the statutory text of section 14(c), but, as discussed
in more detail below, Congress has passed several significant laws that
impact employment opportunities for individuals with disabilities.
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\41\ See Pub. L. 99-486, 100 Stat. 1229 (1986) (29 U.S.C. 214).
\42\ Id. (29 U.S.C. 214(c)(1)).
\43\ Id. (29 U.S.C. 214(c)(2)(A), (B)).
\44\ Id. (29 U.S.C. 214(c)(5)(A)).
\45\ Id. (29 U.S.C. 214(c)(5)(B)-(G)).
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The Department's section 14(c) regulations have remained
substantively untouched for the last 35 years.\46\ In 1989, the last
time the Department made significant regulatory updates regarding
section 14(c), the Department among other things, amended and
consolidated regulations governing the section 14(c) provisions to 29
CFR part 525 (the regulations had previously existed in three parts:
parts 524, 525, and 529), addressed the 1986 amendments to the FLSA,
and made other administrative changes.\47\ In its 1989 regulations, the
Department defined a ``worker with a disability'' as ``an individual
whose earning or productive capacity is impaired by a physical or
mental disability . . . for the work to be performed,'' and cautioned
that ``a disability which may affect earning or productive capacity for
one type of work may not affect such capacity for another.'' \48\ The
regulations also provide that ``[a]n individual whose earning or
productive capacity is not impaired for the work being performed cannot
be employed under a certificate issued pursuant to this part and must
be paid at least the applicable minimum wage.'' \49\
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\46\ Since 1989, the only revisions to the section 14(c)
regulations were technical corrections to the recordkeeping
regulation at 29 CFR 525.16. See 82 FR 2221 (Jan. 9, 2017), and non-
substantive updates to the regulation governing the administrative
appeal process at 29 CFR 525.22. See 82 FR at 2228; 86 FR 1772 (Jan.
11, 2021).
\47\ 54 FR 32920 (Aug. 10, 1989) (1989 final rule).
\48\ Id. (29 CFR 525.3(d)).
\49\ Id. (29 CFR 525.5(a). See also 29 CFR 525.12(b) (noting
that a subminimum wage certificate applies only to such workers who
``are in fact disabled for the work they are to perform'')).
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The Department's 1989 regulations also state that the Department
will consider four criteria in determining whether subminimum wage
rates are necessary in order to prevent curtailment of opportunities
for employment. As set out in the 1989 rule, these criteria, still in
effect today, examine the impact of the worker's disability on their
productivity compared to the earnings and productivity of experienced
workers without disability doing essentially the same type of work and
employed in the vicinity; as previously noted, the criteria do not
include an assessment of the general scope of employment opportunities
available to individuals with disabilities. The specific criteria are:
(1) the nature and extent of the disabilities of the individuals
employed as these disabilities relate to the individuals' productivity;
(2) the prevailing wages of experienced employees not disabled for the
job who are employed in the vicinity in industry engaged in work
comparable to that performed at subminimum wage rates; (3) the
productivity of the workers with disabilities compared to the norm
established for nondisabled workers through the use of a verifiable
work measurement method or the productivity of experienced nondisabled
workers employed in the vicinity on comparable work; and (4) the wage
rates to be paid to the workers with disabilities for work comparable
to that performed by experienced nondisabled workers.\50\ To determine
whether these criteria are met, the Department's regulations also
provide guidance on determining the prevailing wage in a vicinity using
different methods, instructions on establishing piece rates and hourly
rates for workers with disabilities, and procedures to be used in
deciding petitions for review of a subminimum wage rate under section
14(c).\51\ In determining whether subminimum wages are necessary to
prevent curtailment of employment opportunities for individuals with
disabilities, the 1989 regulations do not consider the opportunities
generated by the employment market as a whole, do not contemplate
structural measures such as pre-employment training and skill-matching
job placement services, and, notably, were published a year prior to
the 1990 passage of the original ADA, and thus do not take into account
the fundamental anti-discrimination and reasonable accommodation
protections of the ADA.
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\50\ Id. (29 CFR 525.9(a)).
\51\ Id.
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D. Administration, Use, and Enforcement of Section 14(c) Certificates
Today
1. Administration and Enforcement of Certificates
The Department's WHD administers and enforces the section 14(c)
provisions.\52\ The administration, use, and enforcement of section
14(c) certificates is governed by the FLSA and WHD's current
regulations at 29 CFR part 525, as explained above. Specifically, the
current Sec. 525.9 identifies the criteria that the Department
considers in determining whether to issue a section 14(c) certificate.
In effect, the current regulation conditions the issuance of a
certificate on satisfaction of the standards set forth in other
regulatory provisions governing the proper computation and payment of
subminimum wages. Section 525.11 likewise provides that ``[u]pon
consideration of the criteria cited in these regulations, a special
certificate may be issued.'' The regulations also outline procedures,
further elaborated upon in subregulatory guidance, that WHD generally
must use to deny or revoke certificates as well as appellate procedures
for stakeholders who may be ``aggrieved'' by any WHD certificate
action.\53\ Employees and their parents or guardians also have the
ability to
[[Page 96472]]
petition for review of their subminimum wage rates.\54\
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\52\ The Secretary has delegated authority to WHD to issue
regulations governing FLSA section 14(c), as well as to administer
and enforce the section 14(c) provisions. See Sec'y of Labor's Order
No. 01-2014, Delegation of Authority and Assignment of
Responsibility to the Administrator, Wage and Hour Division, 79 FR
77527 (Dec. 24, 2014) (Secretary's Order No. 01-2014).
\53\ 29 CFR 525.11(b) and 525.13 (certificate denials), 525.17
(certificate revocations), and 525.18 (administrative review
process).
\54\ 29 U.S.C. 214(c)(5), and 29 CFR 525.22.
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If an employer applies for and is issued a section 14(c)
certificate, the certificate allows the employer to pay individualized
subminimum wage rates to workers with disabilities whose disabilities
impact their productivity on the work being performed that are
``commensurate'' with the rates paid to workers without a disability
performing the same type of work in the vicinity.\55\ Generally, to
determine the proper commensurate wage rate, an employer must: (1)
identify the prevailing wage rate paid to experienced workers without
disabilities performing essentially the same type, quality, and
quantity of work in the vicinity where the worker with a disability is
employed, often by conducting a prevailing wage survey; (2) determine
the productivity standard for experienced workers without disabilities
(the ``standard setter'') against which the productivity of the worker
with disabilities must be measured; and (3) assess the quality and
quantity of the productivity of the worker with a disability.\56\
Employers generally determine the productivity of both the standard
setter and the worker with a disability on a particular job by
performing an observational stopwatch time study (``time study'').\57\
Employers holding a section 14(c) certificate must also maintain
adequate documentation of each worker's disability that impairs their
productivity for the work performed, each required step that the
employer took in determining the relevant commensurate wage, and time
and pay records. Employers must also conduct periodic evaluations and
make appropriate updates to the wage rates.\58\
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\55\ Although the term ``subminimum wages'' typically refers to
wage rates that are less than the Federal minimum wage, section
14(c) certificates also allow the payment of wages that are less
than the required prevailing wage to workers who have disabilities
for the work being performed on Federal contracts subject to the
McNamara-O'Hara Service Contract Act (SCA) and the Walsh-Healey
Public Contracts Act. See 41 U.S.C. 6701 et seq., 6501 et seq. The
SCA's implementing regulations generally incorporate the
``conditions and procedures'' governing section 14(c) employment set
forth in 29 CFR 525. 29 CFR 4.6(o).
\56\ See 29 CFR 525.10; 29 CFR 525.12; WHD Field Operations
Handbook (FOH) 64g05, <a href="https://www.dol.gov/agencies/whd/field-operations-handbook/Chapter-64">https://www.dol.gov/agencies/whd/field-operations-handbook/Chapter-64</a>.
\57\ See FOH 64g06.
\58\ 29 CFR 525.16.
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In 2014, the Workforce Innovation and Opportunity Act (WIOA)
established new limitations on the payment of a subminimum wage in
section 511 of the Rehabilitation Act of 1973 (Rehabilitation Act or
section 511), which became effective in 2016.\59\ As discussed further
in section III.B. below, section 511 prohibits an employer who holds a
section 14(c) certificate from paying a subminimum wage to a worker
with a disability unless the worker receives certain services and
information prior to, and/or during, as applicable, their employment at
subminimum wages.\60\ The Secretary has authority to enforce the terms
under which individuals are employed at a subminimum wage, including
the section 511 provisions, and WHD has issued guidance providing
detailed instructions on the requirements.\61\
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\59\ 29 U.S.C. 794g.
\60\ Section 511 generally requires that youth with disabilities
who are age 24 or younger complete certain activities, including
pre-employment transition services under section 113 of the
Rehabilitation Act or transition services under the Individuals with
Disabilities Education Act (IDEA) (to the extent either of these
services are available to them), an application for vocational
rehabilitation services, and career counseling, information and
referrals, to enable them to explore, discover, experience, and
attain competitive integrated employment before they are employed at
subminimum wage rates. See 29 U.S.C. 794g. Section 511 also requires
that all workers with disabilities who are paid subminimum wages,
regardless of their age, receive regular career counseling
information and referrals and information about self-advocacy, self-
determination, and peer mentoring training opportunities in their
local area, every 6 months during the first year of employment and
annually thereafter. Id.
\61\ See U.S. Dep't of Labor, ``Materials for Employers with
Section 14(c) Certificates,'' April 2024, <a href="https://www.dol.gov/agencies/whd/workers-with-disabilities/employers">https://www.dol.gov/agencies/whd/workers-with-disabilities/employers</a>.
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As previously discussed, an employer must obtain an authorizing
certificate from WHD as a prerequisite to paying subminimum wages to
workers with disabilities. The certificate application requires
employers to provide WHD information about themselves and a snapshot of
information about the way they use or seek to use the subminimum wage
certificate.\62\ WHD reviews each application to determine whether to
issue or deny a certificate. Having an active section 14(c) certificate
does not provide the employer with a good faith defense should
violations of section 14(c) or other provisions of applicable law be
found during an investigation of the employer.
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\62\ See U.S. Dep't of Labor, ``14(c) Certificate Application,''
April 2024, <a href="https://www.dol.gov/agencies/whd/workers-with-disabilities/section-14c/apply">https://www.dol.gov/agencies/whd/workers-with-disabilities/section-14c/apply</a>.
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Certificates issued to employers by WHD have both an effective date
and an expiration date and are generally valid for either 1 or 2 years,
depending on the employer type (discussed in more detail below). To
remain authorized to pay subminimum wages, the employer must properly
and timely file an application for renewal with WHD before the
expiration of its certificate.\63\ Employers submit applications to
renew certificate authority in the same manner as when seeking an
initial application but are required to provide additional information,
including a snapshot of information about the applicant's workforce
paid a subminimum wage during their last completed fiscal quarter. If
an application for renewal has been properly and timely filed with WHD,
the employer's existing subminimum wage certificate remains in effect
and its authority to pay subminimum wages continues while the
application for renewal is under review.\64\
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\63\ 29 CFR 525.13(b).
\64\ Id.
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Each year, WHD investigates a number of section 14(c) certificate
holders to determine their compliance with all the provisions and
requirements of section 14(c) as well as their compliance with section
511.\65\ WHD may initiate these cases due to a complaint or based upon
agency selection. In fiscal year 2023, WHD concluded 89 investigations
of employers holding section 14(c) certificates, found violations in
approximately 88 percent of cases, and recovered more than $2 million
in back wages for nearly 3,000 workers.\66\ WHD checks for compliance
with the section 511 requirements in every investigation of an employer
holding a section 14(c) certificate and, since 2016, has identified
violations of these provisions in more than 250 investigations. If WHD
discovers a violation of the section 14(c) or section 511 requirements
during the course of an investigation, WHD can assess back wages in
addition to seeking action by the employer to ensure future compliance
with the applicable laws. In certain circumstances, WHD can also assess
liquidated damages and civil monetary penalties and can also revoke the
employer's section 14(c) certificate.\67\ Certificate revocation is an
enforcement tool that WHD uses in certain circumstances such as
misrepresentations or false statements made in obtaining the
certificate or egregious violations of statutory requirements. In cases
where employers
[[Page 96473]]
do not voluntarily agree to pay back wages and come into compliance,
WHD can also file suit in Federal court to resolve violations of the
law.
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\65\ Enforcement data collected by the Department's enforcement
agencies can be found at: <a href="https://enforcedata.dol.gov/views/data_catalogs.php">https://enforcedata.dol.gov/views/data_catalogs.php</a>. The ``Wage and Hour Compliance Action Data''
dataset contains all concluded WHD compliance actions since fiscal
year 2005. The dataset includes whether any violations were found,
the back wage amount, number of employees due back wages, and civil
money penalties assessed.
\66\ Id.
\67\ 29 U.S.C. 214(c), 216(c); 29 CFR 525.17.
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2. Use of Section 14(c) Certificates
In recent decades, the estimated number of workers with
disabilities paid subminimum wages has dramatically declined, as has
the number of employers holding section 14(c) certificates. In 2001,
the U.S. Government Accountability Office (GAO) estimated that
approximately 424,000 workers with disabilities were paid subminimum
wages while working for 5,612 employers holding section 14(c)
certificates.\68\ As of May 1, 2024, the Department's data shows there
were 801 employers with either an issued certificate or a pending
certificate application.\69\ Employers with an issued certificate
reported paying approximately 40,579 workers at subminimum wages in
their previously completed fiscal quarter.\70\ The number of employers
holding or pursuing a section 14(c) certificate as of May 1, 2024, had
dropped by nearly 86 percent from those in 2001. Further, there were
roughly one-tenth the number of workers being paid subminimum wages
under section 14(c) certificates as there were in 2001--approximately a
90 percent reduction over that 23-year period.\71\ Additionally, very
few employers seek new section 14(c) certificates; over 97 percent of
certificate applications received annually seek renewal of an existing
section 14(c) certificate.\72\
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\68\ U.S. Gov't Accountability Off., GAO-01-886, ``Special
Minimum Wage Program: Centers Offer Employment and Support Services
to Workers With Disabilities, But Labor Should Improve Oversight''
10, 18 (2001) (2001 GAO Report).
\69\ See U.S. Dep't of Labor, ``14(c) Archive,'' June 2024,
<a href="https://www.dol.gov/agencies/whd/workers-with-disabilities/section-14c/certificate-holders/archive">https://www.dol.gov/agencies/whd/workers-with-disabilities/section-14c/certificate-holders/archive</a>.
\70\ Id. The Department notes that data collected by the
Department from section 14(c) applications is not census data. Data
is derived from information received by WHD during the certificate
application process, which is used for the purposes of determining
whether to issue a certificate. The application requires the
employer to provide a snapshot of its operations and workforce that
is paid a subminimum wage during its most recently completed fiscal
quarter at the time of its renewal application, and the submission
date varies per applicant. Because certificates are issued to the
employer, not individuals employed at subminimum wages, the specific
number of employees may change over the duration of the certificate.
The certificate application data is self-reported by employers and
is not independently verified by WHD. Additionally, the data
provided reflects active certificates as of the date that the
Department's website list was revised and does not include the
number of employees on ``pending'' 14(c) certificates.
\71\ The Department notes that the May 1, 2024, employee count
(40,579) does not reflect any employment changes an employer may
have made subsequent to the data provided to WHD in its certificate
application nor does it reflect the workers with disabilities paid
under pending renewal certificates. Notwithstanding, the Department
believes this data comparison remains valid and would be little
changed with these additional data points.
\72\ This statistic is compiled from WHD's listing of 14(c)
certificate holders between October 1, 2020, and April 1, 2024. WHD
maintains a listing of employers who hold or have applied for 14(c)
certificates at <a href="https://www.dol.gov/agencies/whd/workers-with-disabilities/section-14c/certificate-holders">https://www.dol.gov/agencies/whd/workers-with-disabilities/section-14c/certificate-holders</a>.
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WHD issues section 14(c) certificates to business establishments,
community rehabilitation programs (CRPs), hospitals/patient worker
facilities, and school-work experience programs (SWEPs). The
overwhelming majority of current certificate holders are CRPs,
representing approximately 93 percent of current certificate holders in
2023.\73\ In the context of section 14(c), WHD defines CRPs as ``not-
for-profit agencies that provide rehabilitation and employment for
people with disabilities.'' \74\ Such establishments are sometimes
referred to as ``sheltered workshops'' \75\ as they typically are
facility-based and often serve workers with disabilities in sheltered,
or segregated, settings. Only a small number of private-sector, for-
profit businesses hold certificates for the payment of subminimum
wages, as reflected by the fact that only approximately 4 percent of
current section 14(c) certificate holders are
businesses.<SUP>76 77</SUP>
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\73\ WHD listing of certificate holders from October 1, 2023,
indicating that approximately 93 percent of certificate holders are
CRPs, <a href="https://www.dol.gov/agencies/whd/workers-with-disabilities/reports-to-congress">https://www.dol.gov/agencies/whd/workers-with-disabilities/reports-to-congress</a>.
\74\ FOH 64k00.
\75\ FOH 64b00.
\76\ WHD listing of certificate holders from October 1, 2023,
<a href="https://www.dol.gov/agencies/whd/workers-with-disabilities/reports-to-congress">https://www.dol.gov/agencies/whd/workers-with-disabilities/reports-to-congress</a>.
\77\ Currently, the small number of private sector businesses
amongst section 14(c) certificate holders is a marked contrast to
the Congressional understanding of how such certificates would be
used at the time of the original enactment of section 14 in 1938.
During the debate preceding the passage of the FLSA, members of
Congress focused on the provision as being intended for employment
in the private sector, discussing the impact on ``industry,''
``manufacturers,'' and ``small businessmen.'' 82 Cong. Rec., 88-89
(1937).
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Many CRPs provide both employment and other services, such as
rehabilitation and training, and receive public funding. GAO has noted
that many employers holding a section 14(c) certificate pay their
operating costs through a mix of public funding and public and private
contracts for goods or services.\78\ Specifically, GAO noted in a 2021
report that Medicaid is the largest source of Federal funds for day and
employment services (such as those provided by CRPs) for individuals
with developmental disabilities.\79\ Likewise, in a 2020 report, the
USCCR found that ``the majority of community rehabilitation programs
which provide supports and services for people with intellectual and
developmental disabilities to obtain a job are funded by the vocational
rehabilitation [program].'' \80\ As the USCCR explained, in addition to
Medicaid funding noted by GAO, the vocational rehabilitation funding
includes U.S. Department of Education program grants under the
Rehabilitation Act, in addition to State and local funding used for
match purposes under the Vocational Rehabilitation program.\81\
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\78\ See 2001 GAO Report at 14; see also U.S. Gov't
Accountability Office, GAO-21-260, ``Subminimum Wage Program:
Factors Influencing the Transition of Individuals with Disabilities
to Competitive Integrated Employment'' (2021), at 6, <a href="https://www.gao.gov/products/gao-21-260">https://www.gao.gov/products/gao-21-260</a> (``2021 GAO Report'').
\79\ Id. at 6, n.19.
\80\ U.S. Comm'n on Civ. Rts., ``Subminimum Wages: Impacts on
the Civil Rights of People with Disabilities,'' <a href="https://www.usccr.gov/files/2020/2020-09-17-Subminimum-Wages-Report.pdf">https://www.usccr.gov/files/2020/2020-09-17-Subminimum-Wages-Report.pdf</a>, at
6 n.101 (2020) (``USCCR Report'').
\81\ See, for example, USCCR Report at 9 (explaining that in
Vermont, sites that have transitioned from subminimum wage
employment use Federal and State funding to provide employment and
non-work services for individuals with disabilities).
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As noted above, Congress removed any wage floor for section 14(c)
employment nearly 40 years ago. As summarized in the table below, in a
2023 report, the GAO analyzed section 14(c) data for 62 percent of
renewal certificates for the period covering 2019 to 2021 and found
that more than 50 percent of workers in the data analyzed were paid
less than $3.50 per hour, while approximately 14 percent were paid at
or above the current Federal minimum wage of $7.25 per hour.\82\ Nearly
5 percent of workers were paid 25 cents per hour or less. Approximately
14 percent were paid $1.00 per hour or less. GAO observed that higher-
paid workers under section 14(c) certificates were more likely to be
paid by the hour, while lower-paid workers were more likely to be paid
on a piece rate basis \83\ (a piece rate fixes a wage payment on each
completed unit of work).\84\ Using WHD's administrative data of issued
certificates that were valid in the first two quarters of fiscal year
2024 (between October 2023 and
[[Page 96474]]
March 2024), WHD found that approximately 16 percent of workers were
reported by the employer on their most recent application (reflecting
average hourly wages from their prior fiscal quarter) to have been paid
at least the current Federal minimum wage of $7.25 per hour while
nearly 49 percent made less than $3.50 per hour. Based on WHD's
administrative data, approximately 10 percent made $1.00 per hour or
less and nearly 2 percent made 25 cents per hour or less.
---------------------------------------------------------------------------
\82\ See 2023 GAO Report at 16. A worker employed under a
section 14(c) certificate may be paid more than the Federal hourly
minimum wage of $7.25 if the prevailing wage upon which their
productivity-based commensurate wage is based exceeds the Federal
minimum wage.
\83\ Id. at 18-19.
\84\ FOH 64g06(a)(1).
------------------------------------------------------------------------
GAO's 2019 to 2021 WHD's October 2023
analysis to March 2024
-------------------- analysis
Scope of data studied -------------------
62 percent of administrative
renewal data of issued
certificates certificates
------------------------------------------------------------------------
Workers paid 25 cents or less Nearly 5 percent.. Nearly 2 percent.
per hour.
Workers paid $1.00 or less per Approximately 14 Approximately 10
hour. percent. percent.
Workers paid less than $3.50 per More than 50 Nearly 49 percent.
hour. percent.
Workers paid at or above the Approximately 14 Approximately 16
current Federal minimum wage of percent. percent.
$7.25 per hour.
------------------------------------------------------------------------
Most workers currently employed under section 14(c) certificates
have I/DD as their primary disability. In the years immediately after
section 14(c) was enacted, it was assumed that workers with a wide
range of disabilities, including physical disabilities, might be paid
subminimum wages. Over time, however, subminimum wage payments to all
groups other than individuals with I/DD substantially diminished. As
noted above, in 1967, one-third of workers in sheltered workshops were
individuals with I/DD.\86\ In 2001, GAO estimated that three-quarters
of workers employed under a section 14(c) certificate experienced some
form of I/DD.\87\ By 2021, GAO estimated approximately 90 percent of
workers employed under a section 14(c) certificate experienced I/
DD.\88\
---------------------------------------------------------------------------
\86\ 1967 DOL Report at 21.
\87\ 2001 GAO Report at 19.
\88\ 2023 GAO Report at 24. The Department notes that GAO's
findings in this area generally match the Department's internal
data, derived from the information self-reported by certificate
holders; the Department cites to the GAO herein as an independent
source. From WHD's listing of section 14(c) certificate holders
between October 2020, and April 2024, the percentage of workers
identified by their employers on their certificate applications as
having I/DD as their primary disability was 91 percent.
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E. Comprehensive Review of Section 14(c)
On September 26, 2023, Acting Secretary Julie Su announced that the
Department would conduct a comprehensive review of the section 14(c)
program. As part of this review, between October 20, 2023, and November
20, 2023, the Department held a series of stakeholder engagement
sessions to hear diverse views on section 14(c) from members of the
public, including workers with disabilities and their family members,
disability rights advocates, service providers, and section 14(c)
certificate holders.
In holding these listening sessions, the Department received wide-
ranging feedback about section 14(c), including viewpoints regarding
the impacts of potentially ceasing to issue 14(c) certificates in the
future. Approximately 2,000 individuals participated in these sessions.
During these listening sessions, the Department heard from individuals
and groups that oppose permitting employers to pay subminimum wages
under section 14(c); those stakeholders emphasized, among other points,
that the payment of subminimum wages is outdated, discriminatory, and
no longer needed to provide employment opportunities for individuals
with disabilities. The Department also heard from individuals and
groups in support of the continued payment of subminimum wages who
focused, among other things, on the importance of individuals with
disabilities, and their families, being able to choose whether to
remain in their subminimum wage jobs and on the benefits that they have
experienced in such employment. The Department deeply valued those
listening sessions and it greatly appreciates and has considered the
wide-ranging and diverse input gathered from them in the formulation of
this proposed rule. The Department also welcomes comments from the
general public, including any individuals or entities who participated
in these earlier listening sessions, on its proposed rule.
The Department has included the section 14(c) regulations on its
long-term Regulatory Agenda for many years and has carefully reviewed
the history of section 14(c) and its current operations. In crafting
this proposal, the Department consulted with other Federal agencies to
better understand how their programs may intersect with the employment
of workers under section 14(c) as well as to discuss any foreseeable
impacts to those programs if changes were to be made to the section
14(c) regulations. In addition, the Department has extensively reviewed
numerous oversight reports, existing data, and information concerning
relevant trends in the availability of supports for employment
opportunities for workers with disabilities. The Department has also
reviewed numerous examples of legislative, policy, and executive
actions at all levels of government and analyzed their effect on the
employment of workers with disabilities. The Department summarizes this
research and analysis, and presents its conclusions based on this
comprehensive review, below.
III. Need for Rulemaking
A. Introduction
Since 1938, the FLSA has authorized the Secretary to issue
certificates to employers permitting them to pay workers whose
disabilities impair their earning or productive capacity at wage rates
below the Federal minimum wage rate.\89\ WHD is responsible for
administering the issuance of certificates and enforcing the provisions
of section 14(c). The Department issued its most recent substantive
revisions to the regulations pertaining to the issuance of section
14(c) certificates in 1989, more than 35 years ago. Since 1989, and
even more so since 1938, employment opportunities have changed
dramatically for workers with disabilities. In stark contrast to the
New Deal era in which section 14(c) was enacted, disability rights are
now enshrined in Federal civil rights laws and enforced by the Federal
government.\90\ Through the disability rights movement, advocates,
including self-advocates, have worked to ensure that individuals with
disabilities have the same access to employment and
[[Page 96475]]
other opportunities as others and that individuals with disabilities
are not subject to segregation and discrimination on the basis of a
disability.\91\ This access includes the legal right to reasonable
accommodation and prohibitions on discrimination in the workplace.
During this time, largely due to the efforts of self-advocates and
their allies, society's views about what it means to live and work with
a disability have evolved. In contrast to historical approaches that
may have viewed disability as a deficiency that needed to be ``fixed''
or ``cured'' or as a tragic condition, current understandings emphasize
the social model of disability, which identifies structural and social
barriers as the primary reason that individuals with disabilities
experience limitations on full engagement in all aspects of community
life, focuses on removing those barriers to facilitate full engagement,
and recognizes disability as a natural part of the human
experience.\92\ Thus, there has been a striking and consistent movement
away from the medical \93\ and charitable \94\ models of disability,
toward a social model of disability focused on various barriers which
may hinder full and effective participation in society.\95\
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\89\ See 29 U.S.C. 214(c).
\90\ See, e.g., U.S. Dep't of Justice, Civil Rights Div., ``The
Americans with Disabilities Act (ADA) protects people with
disabilities from discrimination,'' <a href="https://www.ada.gov/">https://www.ada.gov/</a>; U.S. Equal
Emp't Opportunity Comm'n, ``What Laws Does EEOC Enforce?,'' <a href="https://www.eeoc.gov/statutes/laws-enforced-eeoc">https://www.eeoc.gov/statutes/laws-enforced-eeoc</a>; 42 U.S.C. 12101 et seq.
(1990); 29 CFR part 1630.
\91\ See, e.g., Nicole LeBlanc, ``Why Employment Matters: A
Resource Guide by and for Self-Advocates Interested in Pursuing
Competitive, Integrated Employment,'' Administration on Disability
Employment Technical Assistance Center, September 2021, <a href="https://aoddisabilityemploymenttacenter.com/wp-content/uploads/2021/10/DETAC-2021-GEN-3_Final_508.pdf">https://aoddisabilityemploymenttacenter.com/wp-content/uploads/2021/10/DETAC-2021-GEN-3_Final_508.pdf</a>.
\92\ Arlene S. Kanter, ``The Law: What's Disability Studies Got
To Do With It or an Introduction to Disability Legal Studies,'' 42
Columbia Human Rights Law Review 403, 410 (2011) (``2011 Kanter
Paper'').
\93\ The medical model generally views disability as some
deficiency to be ``fixed'' or ``cured.'' ``As a result of viewing
disability through a medical lens, societies have erected large
institutions to protect and exclude people with disabilities from
society.'' 2011 Kanter Paper at 420; see also Samuel R. Bagenstos,
``Subordination, Stigma, and `Disability' '', 86 Va. L. Rev. 397,
427 (2000) (``2000 Bagenstos Paper'') (citations omitted) (``Indeed,
virtually the entire ideology of the modern disability rights
movement can be seen as a reaction to that `medical/pathological
paradigm' of disability.'').
\94\ ``People who work with blind, deaf, autistic,
developmentally disabled, and/or physically disabled individuals
often see their clients' or patients' impairment as a great personal
tragedy. Yet, people with disabilities do not necessarily see their
own lives that way.'' 2011 Kanter Paper at 412, 414.
\95\ See, e.g., World Health Organization Policy on Disability
(2021), <a href="https://iris.who.int/bitstream/handle/10665/341079/9789240020627-eng.pdf?sequence=1">https://iris.who.int/bitstream/handle/10665/341079/9789240020627-eng.pdf?sequence=1</a>. ``By relying on the social model
of disability, it is impossible to say that any person is `unable'
or `unqualified' to exercise rights or to participate fully in
society. Instead, it is affirmatively the obligation of society to
change or adapt its services, programs, facilities, systems, and
other entities, so that all people can exercise their rights to the
best of their ability, regardless of their particular impairment.''
2011 Kanter Paper at 427-28.; see also 2000 Bagenstos Paper at 427-
28.
---------------------------------------------------------------------------
The successes of the disability rights movement and the changing
views regarding disability have been reflected in legislative, legal,
policy, and programmatic changes that have broadly influenced available
employment options for individuals with disabilities today. As
described below, there have been several significant pieces of Federal
legislation that have vastly expanded opportunities for individuals
with disabilities, requiring better access and accommodations in
educational, work, and community settings.\96\ Supreme Court and other
judicial precedent has amplified the impacts of this legislation, most
notably by requiring that individuals with disabilities be able to
live, work, and play in the most integrated setting appropriate to
their needs.\97\ As part of this movement, various non-partisan
entities, including the USCCR and the National Council on Disability
(NCD), along with a number of non-profit advocacy organizations, have
published detailed reports urging the cessation of subminimum wage
payments to individuals with disabilities.\98\ Multiple States and
localities have prohibited or are in the process of phasing out the
payment of subminimum wages, and, as discussed below, for nearly a
decade, the Federal government has maintained a wage floor above the
FLSA's Federal minimum wage for certain government contracts that fully
applies to workers with disabilities who work on or in connection with
those contracts. Simultaneously, numerous Federal, State, and local
programs have emerged to increase access to opportunities for
competitive integrated employment (CIE) \99\ for workers with
disabilities.\100\ Amidst these advancements, the employment
experiences of workers with many types of disabilities indicate that
subminimum wages are unnecessary to safeguard their employment
opportunities. In 2023, the unemployment rate for individuals with
disabilities was as low as has ever been recorded.\101\
---------------------------------------------------------------------------
\96\ For example, legislation such as the Americans with
Disabilities Act, 42 U.S.C. 12101 et seq, and the Workforce
Innovation and Opportunity Act, 29 U.S.C. 3101 et seq, are discussed
in detail later in this section.
\97\ See Olmstead v. L.C. ex rel. Zimring, 527 U.S. 581 (1999);
see also Tennessee v. Lane, 541 U.S. 509 (2004); Toyota Motor
Manufacturing, Kentucky, Inc. v. Williams, 534 U.S. 184 (2002);
Sutton v. United Air Lines, Inc., 527 U.S. 471 (1999); Cedar Rapids
Community School District v. Garret F., 526 U.S. 66 (1999).
\98\ See, for example, USCCR Report; National Council on
Disability (NCD), ``Has the Promise Been Kept? Federal Enforcement
of Disability Rights Laws (Part 1),'' (October 2018), <a href="https://www.ncd.gov/report/has-the-promise-been-kept-federal-enforcement-of-disability-rights-laws-part-1-october-2018/">https://www.ncd.gov/report/has-the-promise-been-kept-federal-enforcement-of-disability-rights-laws-part-1-october-2018/</a>(``2018 NCD Progress
Report''); NCD, ``Report on Subminimum Wage and Supported
Employment'' (2012), <a href="https://www.ncd.gov/report/national-council-on-disability-report-on-subminimum-wage-and-supported-employment/">https://www.ncd.gov/report/national-council-on-disability-report-on-subminimum-wage-and-supported-employment/</a>
(``2012 NCD Report'').
\99\ The term ``competitive integrated employment'' (CIE) is
defined at 29 U.S.C. 705(5), and in the Department of Education's
regulations at 34 CFR 361.5(c)(9). Those regulations define CIE as
work that is performed on a full-time or part-time basis for which
an individual is: compensated at or above minimum wage and
comparable to the customary rate paid by the employer to employees
without disabilities performing similar duties and with similar
training and experience; receiving the same level of benefits
provided to other employees without disabilities in similar
positions; at a location where the employee interacts with other
individuals without disabilities; and presented opportunities for
advancement similar to other employees without disabilities in
similar positions. See also <a href="https://www.dol.gov/agencies/odep/program-areas/cie">https://www.dol.gov/agencies/odep/program-areas/cie</a>.
\100\ The Department of Education amended regulations at 34 CFR
parts 361 and 363, and established new part 397, in response to the
WIOA amendments to the Rehabilitation Act. These amended and new
regulations govern the State Vocational Rehabilitation Services
program and the State Supported Employment Services program, and
placed greater emphasis on the achievement of CIE. See U.S. Dep't of
Education, State Vocational Rehabilitation Services Program; State
Supported Employment Services Program; Limitations on Use of
Subminimum Wage, Final Regulations, 81 FR 55630 (Aug. 19, 2016).
\101\ See U.S. Dep't of Labor, Bureau of Labor Statistics,
``Economic News Release: Persons with a Disability: Labor Force
Characteristics Summary,'' Feb. 22, 2024, <a href="https://www.bls.gov/news.release/pdf/disabl.pdf">https://www.bls.gov/news.release/pdf/disabl.pdf</a> (noting that the unemployment rate for
individuals with a disability was 7.2 percent in 2023, and also
stating that ``[i]n 2023, 22.5 percent of people with a disability
were employed--the highest recorded ratio since comparable data were
first collected in 2008'' and that such rate reflected a 1.2
percentage point increase from 2022); see also U.S. Dep't of Labor,
Bureau of Labor Statistics, ``Data Retrieval: Labor Force Statistics
(CPS)'', <a href="https://www.bls.gov/webapps/legacy/cpsatab6.htm">https://www.bls.gov/webapps/legacy/cpsatab6.htm</a> (making
available historical data on unemployment and employment rates).
---------------------------------------------------------------------------
As a result of these changes, today, subminimum wage employment
under section 14(c) certificates is no longer the most common form of
employment for individuals with disabilities. It bears emphasizing
that, currently, only a miniscule fraction of those working individuals
with disabilities are employed by section 14(c) certificate holders; in
the present day, millions of individuals with disabilities who are
working are doing so without section 14(c) certificates.\102\ Also, as
the number
[[Page 96476]]
of workers being paid subminimum wages under section 14(c) certificates
has continued to shrink,\103\ available data indicates that the numbers
of individuals with I/DD (who, as discussed above, comprise
approximately 90 percent of the workers paid subminimum wages by
section 14(c) certificate holders today), working for full Federal
minimum wages (or higher) has continued to grow.\104\ Specifically, as
shown by a 2023 Thinkwork Report, there are now many more individuals
with I/DD who are being paid full wages than who are being paid
subminimum wages; the Department has preliminarily assessed that the
total number of working individuals with I/DD is at least twice the
total number of individuals working under section 14(c)
certificates.\105\ In other words, the existing data--though limited--
shows that, by a significant margin, most workers with I/DD do not rely
on subminimum wages to gain employment opportunities and have
demonstrated therein that section 14(c) certificates are no longer
necessary for them to do so. The Department welcomes comments on this
data and the Department's preliminary analysis.\106\
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\102\ As discussed above, as of May 1, 2024, employers with an
issued certificate reported to the Department that they paid
approximately 40,579 workers at subminimum wages in their previously
completed fiscal quarter. This is a tiny fraction of the total
number of individuals with disabilities working today, as in each
month in the first half of 2024, over 7 million individuals 16 years
and over with a disability were employed in the civilian labor
force. See U.S. Dep't of Labor, Bureau of Labor Statistics, ``Data
Retrieval: Labor Force Statistics (CPS)'' <a href="https://data.bls.gov/pdq/SurveyOutputServlet">https://data.bls.gov/pdq/SurveyOutputServlet</a>. Additionally, cross-referencing these data
points, the Department estimates that, nationwide, there are only
approximately 4,000 individuals with disabilities other than I/DD
who are paid subminimum wages.
\103\ See section II.C.2, above, reflecting the decline in
numbers of employees being paid subminimum wages from approximately
424,000 in 2001 to about 40,579 in 2024.
\104\ See Agnieszka Zalewska, Jean Winsor & John Butterworth,
``Intellectual and Development Disabilities Agencies' Employment and
Day Services,'' Data Note Plus, no. 87 (2023) (``2023 Thinkwork
Report''), at 8-9, <a href="https://www.thinkwork.org/sites/default/files/2024-01/DN_87_R_0.pdf">https://www.thinkwork.org/sites/default/files/2024-01/DN_87_R_0.pdf</a>. This report, supported in part by the
Administration on Disabilities, Administration for Community Living,
U.S. Department of Health and Human Services, builds on annual and
bi-annual surveys of State I/DD agencies spanning several decades
and compiles data from all States (noting some States for which data
is not available). Of particular relevance here, the report includes
a chart depicting that, in 2021, approximately 130,000 clients of
State agencies serving individuals with I/DD worked in integrated
employment, while noting that in 2022, approximately 59,000 total
individuals participated in subminimum wage jobs. While this report,
which focuses on integration, does not directly compare the number
of workers with I/DD being paid full wages to the number of workers
paid subminimum wages (nor does it offer data sets about those
populations from the same year), in publishing this specific data,
it nevertheless supports the conclusion that more individuals with
I/DD now are paid full wages, as the total number of individuals
with I/DD who are reported as working in integrated settings is more
than twice the estimated total number of all individuals working
under section 14(c) certificates. As discussed in previous sections,
the overwhelming majority of section 14(c) certificate holders are
CRPs who typically provide work in non-integrated settings. Most of
the approximately 130,000 reported workers with I/DD in integrated
settings are likely paid at minimum wage or higher rates, compared
to the report's estimates of approximately 59,000 reported workers
paid subminimum wages who are primarily employed by non-integrated
CRPs. Moreover, the ratio of individuals with I/DD working for full
wages to individuals working for subminimum wages is likely far
higher than the estimate reported here because the ThinkWork report
only collects data about those individuals who are tracked by State
I/DD agencies. The report thus does not capture individuals who have
secured full-wage work without the assistance or knowledge of those
agencies. Therefore, the report's identification of approximately
130,000 individuals with I/DD working in integrated settings likely
undercounts the total actual number of individuals with I/DD working
for full wages.
\105\ Id.
\106\ The Department requests comments reflecting any 2022,
2023, and 2024 updates on similar reporting from State I/DD agencies
about the numbers of their clients working in integrated employment,
as well as any other comments relating to the declining numbers of
individuals working for subminimum wages in comparison to the
growing numbers of individuals with I/DD working for full wages.
---------------------------------------------------------------------------
Cognizant of this changed employment landscape, the Department now
assesses, pursuant to its statutory mandate, whether the issuance of
section 14(c) certificates authorizing the payment of subminimum wages
is necessary to prevent the curtailment of opportunities for employment
for workers with disabilities.
B. Federal Legislation, Regulations, and Supreme Court Precedent
The current section 14(c) regulations were promulgated prior to
having the benefit of nearly all the most significant legislative and
legal developments regarding individuals with disabilities, and thus do
not contemplate the protections, rights, and opportunities created by
these developments. The discussion that follows is intended to
highlight several of the most notable and relevant of these
developments since 1989, and is not intended to provide a comprehensive
survey of all such changes.\107\ The Department requests comments on
the discussion of these developments and the Department's analysis of
them, as well as comments on any other Federal legislative or judicial
development relevant to whether the continued issuance of section 14(c)
certificates is necessary to prevent curtailment of opportunities for
employment of individuals with disabilities.
---------------------------------------------------------------------------
\107\ This section provides only highlights of certain key laws;
however, the Department notes there are numerous pieces of
legislation over the last several decades that have incorporated
ways to enhance career opportunities for workers with disabilities.
For example, when Congress enacted the Rehabilitation Act of 1973,
section 504 of that law required that programs receiving Federal
financial assistance operate without discrimination on the basis of
disability. 29 U.S.C. 794. Modeled after the language of the Civil
Rights Act of 1964, the Rehabilitation Act of 1973, and subsequent
amendments, also prohibited discrimination on the basis of
disability by Federal agencies and contractors in their employment
practices. In enacting and amending the Act, Congress enlisted all
programs receiving Federal funds in an effort ``to share with
handicapped Americans the opportunities for an education,
transportation, housing, health care, and jobs that other Americans
take for granted.'' 123 Cong. Rec. 13,515 (1977) (statement of
Senator Humphrey). The 1998 amendments made to the Rehabilitation
Act stated that among other things, ``[i]t is the policy of the
United States that all programs, projects, and activities receiving
assistance under this Act shall be carried out in a manner
consistent with . . . [the] pursuit of meaningful careers, based on
informed choice, of individuals with disabilities.'' 29 U.S.C.
701(c) (1998). The amendments further stated that workers were to
develop an individualized plan for employment that ``to the maximum
extent appropriate, results in employment in an integrated
setting.'' Id.
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1. The Americans With Disabilities Act and the Supreme Court's Olmstead
Decision
Perhaps the most foundational of these developments was the
enactment of the Americans with Disabilities Act (ADA) in 1990.\108\
The ADA, as amended by the ADAAA, among other things, prohibits
discrimination on the basis of disability in the workplace and in the
provision of public programs, services, and activities. Title I of the
ADA, enforced by the U.S. Equal Employment Opportunity Commission
(EEOC), applies to private employers and State or local governments and
prohibits discrimination ``against a qualified individual on the basis
of disability in regard to job application procedures, the hiring,
advancement, or discharge of employees, employee compensation, job
training, and other terms, conditions, and privileges of
[[Page 96477]]
employment.'' \109\ Title I also requires employers to provide
reasonable accommodations to qualified individuals--an individual who,
with or without reasonable accommodation, can perform the essential
functions of the employment position that they hold or desire.\110\
Under the ADA, the term ``reasonable accommodation'' means: (1)
modifications or adjustments to a job application process that enable a
qualified applicant with a disability to be considered for the position
such qualified applicant desires; (2) modifications or adjustments to
the work environment, or to the manner or circumstances under which the
position held or desired is customarily performed, that enable an
individual with a disability who is qualified to perform the essential
functions of that position; or (3) modifications or adjustments that
enable a covered entity's employee with a disability to enjoy equal
benefits and privileges of employment as are enjoyed by its other
similarly situated employees without disabilities.\111\ A reasonable
accommodation may include, but is not limited to, making existing
facilities used by employees readily accessible to and usable by
individuals with disabilities, job restructuring, part-time or modified
work schedules, acquisition or modification of equipment, appropriate
adjustment or modifications of examinations, training materials, or
policies, and other similar accommodations for individuals with
disabilities.\112\ An employer is required to provide such reasonable
accommodations, unless it ``can demonstrate that the accommodation
would impose an undue hardship on the operation of the business of such
covered entity.\113\ Examples of reasonable accommodations may include
modifying job tasks, improving accessibility in a work area, changing
the presentation of tests or training materials, providing an aid or
service to increase access (such as specialized computer software),
providing alternative formats for feedback (such as verbally instead of
in writing), or job restructuring (such as providing checklists to
ensure task completion).\114\
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\108\ See 42 U.S.C. 12101 (1990). In 2008, Congress passed the
ADA Amendments Act (ADAAA) which made a number of changes to the ADA
definition of ``disability'' to ensure broad coverage, making it
easier for individuals seeking the protection of the ADA to
establish that they have a disability that falls within the meaning
of the statute. See ADA Amendments Act of 2008, Public Law 110-325
(S. 3406), September 25, 2008; see also <a href="https://archive.ada.gov/nprm_adaaa/adaaa-nprm-qa.htm">https://archive.ada.gov/nprm_adaaa/adaaa-nprm-qa.htm</a>. Under the Federal equal employment
opportunity laws that the EEOC enforces, including the ADA, an
employer cannot ask an employee to prospectively waive their rights
to protection. See, e.g., Lester v. O'Rourke, No. 17-cv-1772, 2018
WL 3141796, at *4-6 (N.D. Ill. June 27, 2018). In addition,
employers may not interfere with the protected right of an employee
to file a charge, testify, assist, or participate in any manner in
an investigation, hearing, or proceeding. See, e.g., EEOC,
``Enforcement Guidance on non-waivable employee rights under EEOC
enforced statutes,'' <a href="https://www.eeoc.gov/laws/guidance/enforcement-guidance-non-waivable-employee-rights-under-eeoc-enforced-statutes">https://www.eeoc.gov/laws/guidance/enforcement-guidance-non-waivable-employee-rights-under-eeoc-enforced-statutes</a>.
\109\ 42 U.S.C. 12112(a). An individual with a disability is
defined by the ADA as a person who has a physical or mental
impairment that substantially limits one or more major life
activities, a person who has a history or record of such an
impairment, or a person who is regarded as having such an
impairment. Id. at Sec. 12102(1). To be ``regarded as'' having such
an impairment, an individual must establish that they have been
subjected to a discriminatory action because of an actual or
perceived physical or mental impairment, whether or not the
impairment limits or is perceived to limit a major life activity.
Id. at Sec. 12102(3).
\110\ See 42 U.S.C. 12111.
\111\ 29 CFR 1630.2(o)(1).
\112\ 42 U.S.C. 12111(9).
\113\ The term ``undue hardship'' means an action requiring
significant difficulty or expense when considered in light of
several factors set forth in the ADA statute. 42 U.S.C. 12111(10),
12112(b)(5)(A).
\114\ Many workplace accommodations are no-cost or low-cost, and
resources exist to help individuals with disabilities and their
employers identify accommodations. See, e.g., ADA National Network
Fact Sheet--Reasonable Accommodations in the Workplace (2018),
<a href="https://adata.org/factsheet/reasonable-accommodations-workplace">https://adata.org/factsheet/reasonable-accommodations-workplace</a>; Job
Accommodation Network (JAN), <a href="https://askjan.org/">https://askjan.org/</a>.
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Title II of the ADA, enforced by the U.S. Department of Justice
(DOJ), prohibits discrimination on the basis of disability by State and
local government entities.\115\ It requires that State and local
governments ensure equal access for individuals with disabilities (for
example, in public education, employment, transportation, recreation,
health care, social services, courts, voting, and town meetings).
Additionally, DOJ's Title II regulations require public entities to
``administer services, programs, and activities in the most integrated
setting appropriate to the needs of qualified individuals with
disabilities.'' Appendix B to the regulation implementing Title II
explains that ``the most integrated setting'' is one that ``enables
individuals with disabilities to interact with nondisabled persons to
the fullest extent possible.'' \116\
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\115\ 42 U.S.C. 12131, 12132.
\116\ 28 CFR part 35, app. B, 703 (2023) (addressing 28 CFR
35.130(d)).
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In 1999, in Olmstead v. L.C., the Supreme Court issued a landmark
decision that held that Title II of the ADA prohibits the unjustified
segregation of individuals with disabilities.\117\ The Court held that
public entities are required to provide community-based services to
persons with disabilities when (1) such services are appropriate; (2)
the affected persons do not oppose community-based treatment; and (3)
community-based services can be reasonably accommodated, taking into
account the resources available to the entity and the needs of others
who are receiving disability services from the entity.\118\ The Court
explained that this holding reflected two judgments. First,
``institutional placement of persons who can handle and benefit from
community settings perpetuates unwarranted assumptions that persons so
isolated are incapable or unworthy of participating in community
life.'' \119\ Second, ``confinement in an institution severely
diminishes the everyday life activities of individuals, including
family relations, social contacts, work options, economic independence,
educational advancement, and cultural enrichment.'' \120\
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\117\ See 527 U.S. 581, 583, 597, 602 (1999).
\118\ Id. at 607.
\119\ Id. at 600.
\120\ Id. at 601.
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Under Department of Justice regulations, a public entity may be
found in violation of this integration mandate if it administers
programs in a manner that results in unjustified segregation of persons
with disabilities.\121\ DOJ has explicitly recognized that a public
entity may be found in violation of the ADA's integration mandate if it
plans, administers, operates, funds, or implements employment services
in a way that unjustifiably segregates individuals with
disabilities.\122\ As discussed below, DOJ has taken action to enforce
the integration mandate, with broad impacts to employment opportunities
for workers with disabilities.
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\121\ See 28 CFR 35.130(b)(1) (prohibiting a public entity from
discriminating ``directly or through contractual, licensing or other
arrangements, on the basis of disability''); 28 CFR 35.130(b)(2)
(``A public entity may not deny a qualified individual with a
disability the opportunity to participate in services, programs, or
activities that are not separate or different, despite the existence
of permissibly separate or different programs or activities.'').
\122\ See U.S. Dep't of Justice, Civil Rights Div., ``Questions
and Answers on the Application of the ADA's Integration Mandate and
Olmstead v. L.C. to Employment and Day Services for People with
Disabilities,'' <a href="https://www.ada.gov/assets/pdfs/olmstead-employment-qa.pdf">https://www.ada.gov/assets/pdfs/olmstead-employment-qa.pdf</a> (``DOJ ADA Integration Mandate Q&As'').
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Title III of the ADA, also enforced by DOJ, pertains to public
accommodations. Under Title III, individuals with disabilities cannot
be discriminated against on the basis of disability in the ``full and
equal enjoyment of the goods, services, facilities, privileges,
advantages, or accommodations of any place of public accommodation by
any person who owns, leases (or leases to), or operates a place of
public accommodation.'' \123\ Places of public accommodation may
include, for example, restaurants, retail stores, hotels, movie
theaters, private schools, recreational facilities, and transportation
services run by private entities.
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\123\ 42 U.S.C. 12182(a).
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As DOJ has explained, when workers with disabilities are given
access to employment opportunities pursuant to the ADA and Olmstead
``in the most integrated setting appropriate to their needs, they have
the opportunity to live fuller lives, be more integrated into the
community, and gain financial independence to `move proudly into the
[[Page 96478]]
economic mainstream of American life.' '' \124\ This access fulfills
the goals of the ADA to ``assure equality of opportunity, full
participation, independent living, and economic self-sufficiency.''
\125\ Moreover, EEOC and DOJ have explained that the ADA is fully
applicable to workers with disabilities regardless of the work site or
how much they are paid. For example, ``Title I's coverage can include
individual service provider entities or sheltered workshops in their
capacity as private employers,'' prohibiting discrimination regarding
various terms and conditions of employment.\126\ Additionally, DOJ has
explicitly recognized that a public entity may be found in violation of
the ADA's Title II integration mandate if it plans, administers,
operates, funds, or implements employment services in a way that
unjustifiably segregates individuals with disabilities.\127\ Finally,
under Title III of the ADA, individuals with disabilities cannot be
discriminated against on the basis of disability in a place of public
accommodation, which can include an individual service provider entity
or a sheltered workshop.\128\
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\124\ See DOJ ADA Integration Mandate Q&As, <a href="https://www.ada.gov/assets/pdfs/olmstead-employment-qa.pdf">https://www.ada.gov/assets/pdfs/olmstead-employment-qa.pdf</a> (quoting President George
H.W. Bush, Remarks at the Signing of the Americans with Disabilities
Act, July 26, 1990, <a href="https://perma.cc/VNU4-HR7P">https://perma.cc/VNU4-HR7P</a>).
\125\ See 42 U.S.C. 12101(a)(7); see also DOJ ADA Integration
Mandate Q&As.
\126\ Id.; see also 42 U.S.C. 12112(a).
\127\ See DOJ ADA Integration Mandate Q&As.
\128\ Id.; see also 42 U.S.C. 12181(7)(K).
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The legal protections for individuals with disabilities arising out
of the ADA and the Supreme Court's Olmstead decision have profoundly
impacted the rights and employment opportunities available to
individuals with disabilities. This has resulted in changes to
workforce development and vocational rehabilitation systems to more
fully support individuals with disabilities in achieving and
maintaining CIE, as discussed below. The Department's regulations
implementing section 14(c) were last updated prior to the enactment of
the ADA and therefore do not take into account changes to the
employment landscape for individuals with disabilities in light of the
fundamental anti-discrimination and reasonable accommodation
protections of the ADA, or those protections as later interpreted by
Olmstead. Although many section 14(c) certificate holders are subject
to both the FLSA and the ADA,\129\ the Department's current regulation
addressing the section 14(c) curtailment clause did not, and could not,
have taken into account the changes in employment opportunities that
would arise as a result of the ADA and the plethora of legal and policy
developments that have occurred as a result of this landmark
legislation. For instance, the Department did not consider (and could
not have considered) when it last promulgated its section 14(c)
regulations how the ADA's reasonable accommodation and workplace
modification requirements may affect a worker's productivity, nor did
the Department consider other ADA provisions that have expanded the
employment opportunities available to individuals with disabilities.
Today, the Department's assessment of whether section 14(c)
certificates are necessary cannot ignore the dramatic expansion of
employment opportunities for individuals with disabilities.
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\129\ The Department notes that holding a section 14(c)
certificate does not protect an employer from charges pursuant to
the ADA, see FOH 64a02(c).
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2. Additional Federal Legislation, Executive Orders, and Regulatory
Changes Expanding Opportunities for Workers With Disabilities
A wide range of other significant legislative and executive actions
have had a profound impact on employment opportunities and outcomes for
individuals with disabilities, particularly over the last decade. These
legal and policy developments have fundamentally altered the landscape
in which individuals with disabilities learn and work, beginning from
their earliest educational opportunities and settings.
i. Individuals With Disabilities Education Act
In 1975, Congress passed the Education for All Handicapped Children
Act (EHA), which addressed the rights and educational needs of students
with disabilities. In 1990 EHA was reauthorized and retitled to the
Individuals with Disabilities Education Act (IDEA).\130\ IDEA provides
funding to States, which must provide early intervention services and a
free appropriate public education to eligible infants, toddlers, and
children with disabilities.\131\ IDEA states that ``[a]lmost 30 years
of research and experience has demonstrated that the education of
children with disabilities can be made more effective by having high
expectations for such children and ensuring their access to the general
education curriculum in the regular classroom, to the maximum extent
possible . . . .'' \132\ IDEA further states that this focus on high
expectations and inclusion is intended to meet developmental goals and
challenging expectations, and, as particularly relevant here, that
students with disabilities are ``prepared to lead productive and
independent adult lives, to the maximum extent possible.'' \133\
Notably, the 1990 reauthorization also mandated that as a part of a
student's individualized education program (IEP), an individual
transition plan must be developed to help each student transition to
post-secondary life, including employment opportunities.\134\
Subsequent guidance has been released about the benefits of inclusion,
for example, in 2015, the U.S. Department of Health and Human Services
(HHS) and U.S. Department of Education issued a joint policy statement
about the importance of the inclusion of children with disabilities in
early childhood programs. The Departments updated and reiterated the
statement in 2023.\135\ For nearly 50 years, children with disabilities
have benefited from increased access to high-quality education from
early childhood to high school, providing them with better
[[Page 96479]]
preparation for employment than past generations of students with
disabilities.
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\130\ Educ. of the Handicapped Act Amendments of 1990, Public
Law 101-476, 104 Stat. 1103 (1990) (codified at 20 U.S.C. 1400).
Subsequent reauthorizations included reauthorizations in 1997 and
2004.
\131\ See 20 U.S.C. 1400 et seq. and U.S. Department of
Education, ``About IDEA,'' <a href="https://sites.ed.gov/idea/about-idea">https://sites.ed.gov/idea/about-idea</a>
(recording that early intervention, special education, and related
services were provided to more than 8 million eligible infants,
toddlers, children, and youth with disabilities in school year 2022-
2023).
\132\ 20 U.S.C. 1400(c)(5). A multitude of studies and academic
literature have concluded that students with disabilities make more
progress when educated in integrated, rather than segregated,
settings. See, e.g., Meghan Cosier, Julie Causton-Theoharis, &
George Theoharis, ``Does access matter? Time in general education
and achievement for students with disabilities,'' Remedial and
Special Educ. 34(6)(2013), at 323-332; Rachel Sermier Dessemontet,
Gerard Bless, & D. Morin. ``Effects of inclusion on the academic
achievement and adaptive behaviour of children with intellectual
disabilities,'' Journal of Intellectual Disability Research 56(6)
(2012) at 579-587.
\133\ 20 U.S.C. 1400(c)(5)(A)(ii).
\134\ The term ``individualized education program'' (IEP) means
a written statement for each child with a disability that is
developed, reviewed, and revised in accordance with 20 U.S.C.
1414(d). See 20 U.S.C. 1401(14); see also 34 CFR 300.320.
\135\ See U.S. Dep't of Health and Human Services and U.S. Dep't
of Education, ``Policy Statement on Inclusion of Children with
Disabilities in Early Childhood Programs,'' November 28, 2023,
<a href="https://sites.ed.gov/idea/idea-files/policy-statement-inclusion-of-children-with-disabilities-in-early-childhood-">https://sites.ed.gov/idea/idea-files/policy-statement-inclusion-of-children-with-disabilities-in-early-childhood-</a>; see also Endrew F.
v. Douglas County School Dist., 580 U.S. 386, 399 (2017) (affirming
the promise of IDEA and holding that in order ``[t]o meet its
substantive obligation under the IDEA, a school must offer an IEP
reasonably calculated to enable a child to make progress appropriate
in light of the child's circumstances.'')
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As educational reforms took hold, competitive integrated employment
became the goal of many youths with disabilities, including those with
I/DD. The groundbreaking National Longitudinal Transition Study-2
(NLTS2), funded by the U.S. Department of Education and published in
2005, identified a strong desire among youth with disabilities to
participate in competitive employment. Specifically, the NLTS2 found
that among the 70 percent of secondary school students with
disabilities who identified employment as a goal for the post-school
years, 62 percent had a goal to work in competitive employment, while
only 3 percent wished to work in ``sheltered'' employment.\136\ As
indicated in the NLTS2, students generally preferred competitive
employment rather than employment at a sheltered workshop regardless of
the type of disability experienced.\137\
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\136\ Mary Wagner, Lynn Newman, Renee Cameto, Nicolle Garza, &
Phyllis Levine, ``After High School: A First Look at the Postschool
Experiences of Youth with Disabilities. A Report from the National
Longitudinal Transition Study-2 (NLTS2),'' SRI International, April
2005, pp. 5-3 to 5-4, <a href="http://www.nlts2.org/reports/2005_04/nlts2_report_2005_04_complete.pdf">www.nlts2.org/reports/2005_04/nlts2_report_2005_04_complete.pdf</a>.
\137\ Id.
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ii. Workforce Innovation and Opportunity Act
In 2014, WIOA,\138\ a comprehensive Federal law enacted to improve
workforce development and training services for workers and jobseekers,
including various groups such as youth and workers with disabilities,
amended the Rehabilitation Act to add section 511.\139\ Section 511 of
the Rehabilitation Act limits the ability of employers to pay
subminimum wages to workers with disabilities, even when the employer
holds a section 14(c) certificate. Section 511 requires that
individuals with disabilities who are age 24 or younger complete
requirements designed to enable the individual to explore, discover,
experience, and attain CIE, including receiving pre-employment
transition services under the Vocational Rehabilitation program or
transition services under IDEA (to the extent either of those services
are available to the individual with a disability), applying for
vocational rehabilitation services, and receiving career counseling and
information and referral services, before they are employed at
subminimum wages. Section 511 also requires that all workers with
disabilities who are paid subminimum wages, of any age, receive regular
career counseling, information and referrals, and information about
self-advocacy, self-determination, and peer mentoring training
opportunities in their local area once every 6 months for the first
year of subminimum wage employment and annually thereafter.\140\
Section 511 was intended to help stop the pipeline by which youth with
disabilities were going straight from school to subminimum wage
employment.\141\ This provision was also enacted to ensure that workers
with disabilities who are currently paid subminimum wages are regularly
provided with counseling and information about supports and resources
available to them in their locality that may support them in obtaining
CIE.\142\
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\138\ 29 U.S.C. 794g; also see <a href="https://www.congress.gov/113/bills/hr803/BILLS-113hr803enr.pdf">https://www.congress.gov/113/bills/hr803/BILLS-113hr803enr.pdf</a>.
\139\ The Rehabilitation Act was the first Federal legislation
to address access and equity for individuals with disabilities. This
Act promoted successful employment outcomes by requiring that
programs receiving Federal financial assistance operate without
discrimination on the basis of disability. The Rehabilitation Act
develops and implements comprehensive and coordinated programs of
vocational rehabilitation for individuals with disabilities to
maximize their employability, independence, and integration into the
workplace. See 29 U.S.C. 701.
\140\ 34 CFR part 397.
\141\ Section 113 of the Rehabilitation Act described a specific
set of services, Pre-employment transition services, that are
intended to improve and expand vocational rehabilitation services
for students with disabilities, facilitating their transition from
educational services to postsecondary life. See 29 U.S.C. 733 and 34
CFR 361.65(a)(3). At least 15 percent of each State's federal
funding allotment for vocational rehabilitation services must be
reserved for Pre-employment transition services. See 29 U.S.C.
730(d)(1). Through these provisions, the Rehabilitation Act and its
regulations emphasized the provision of Pre-employment transition
services to students with disabilities, providing new opportunities
for them to explore careers and receive the training and supports to
increase the likelihood of achieving CIE. See 34 CFR 361.48.
\142\ 29 U.S.C. 794g; 34 CFR part 397. Additionally, throughout
WIOA, there are multiple references to ensuring that people with
disabilities have access to the training providers and services and
supports needed to succeed in CIE. Other sections of WIOA provide
funding to States in order to develop programs that support workers
with disabilities.
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iii. Achieving a Better Life Experience Act
In further support of competitive employment for workers with
disabilities, in 2014, Congress enacted the Achieving a Better Life
Experience Act (ABLE Act), which allows individuals with disabilities
to establish tax-advantaged savings accounts, subject to certain
restrictions, without jeopardizing access to public benefits. ABLE
accounts allow individuals with disabilities to maintain resources and
save for expenses while maintaining eligibility for critical public
benefits such as Medicaid and other means-tested programs. In 2020, the
Internal Revenue Service (IRS) released final ABLE regulations.\143\
The regulations noted that in enacting the ABLE Act, ``Congress
recognized the special financial burdens borne by families raising
children with disabilities and the fact that increased financial needs
generally continue throughout the lifetime of an individual with a
disability.'' \144\ Legislation such as the ABLE Act facilitates
workers' transitions from subminimum wage jobs to jobs paying
competitive wages because workers now are able to save more without
jeopardizing access to means-tested public benefits such as health
care.\145\
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\143\ See Guidance Under Section 529A: Qualified ABLE Programs,
85 FR 74010 (Nov. 19, 2020).
\144\ 85 FR 74010.
\145\ ``The ABLE Act states that funds in an ABLE account will
not affect eligibility for federally-funded, means-tested benefits
such as SSI and Medicaid.'' See ABLE National Resource Center,
<a href="https://www.ablenrc.org/what-is-able/debunking-able-myths/">https://www.ablenrc.org/what-is-able/debunking-able-myths/</a>.
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iv. Executive Orders 13658 and 14026
In 2014 and 2021 respectively, Executive Orders 13658 and 14026
directed federal agencies to contract only with entities willing to pay
an hourly minimum wage (raised by Executive Order 14026) for workers
performing on or in connection with covered Federal construction and
service contracts.\146\ Workers covered by the Executive Orders, and
due the full applicable Executive Order minimum wage rates, include
workers with disabilities whose wages are calculated pursuant to
section 14(c) certificates.\147\ Executive Order 13658 stated that
``raising the pay of low-wage workers increases their morale and the
productivity and quality of their work'' and explicitly stated that the
Order applies to workers whose wages are calculated pursuant to section
14(c).\148\
[[Page 96480]]
Executive Order 14026 similarly extended the full Executive Order
minimum wage to workers with disabilities performing on or in
connection with covered Federal contracts, stating, among other
benefits, that raising the minimum wage has the effects of ``boosting
workers' health, morale, and effort.'' \149\
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\146\ On April 27, 2021, President Joseph R. Biden, Jr. issued
Executive Order 14026, ``Increasing the Minimum Wage for Federal
Contractors.'' 86 FR 22835. The order builds on the foundation
established by Executive Order 13658, ``Establishing a Minimum Wage
for Contractors,'' signed by President Barack Obama on February 12,
2014. See 79 FR 9851. The Department notes that, at the time of the
drafting of this NPRM, there are several pending lawsuits
challenging the President's authority to have issued Executive Order
14026. Such cases are not discussed herein because they are beyond
the scope of this proposed rule, which simply highlights the
issuance of the Executive Order as an example of the profound legal
and policy developments that have impacted individuals with
disabilities in recent decades.
\147\ See 86 FR at 22835; 79 FR at 9851.
\148\ 79 FR 9851, Executive Order 13658, ``Establishing a
Minimum Wage for Contractors,'' February 12, 2014, <a href="https://obamawhitehouse.archives.gov/the-press-office/2014/02/12/executive-order-minimum-wage-contractors">https://obamawhitehouse.archives.gov/the-press-office/2014/02/12/executive-order-minimum-wage-contractors</a>.
\149\ 86 FR at 22835.
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v. Home and Community-Based Services ``Settings Rule''
In addition to legislative and presidential action, other Federal
agencies have also promulgated regulations consistent with expanding
CIE opportunities for workers with disabilities. For example, in 2014,
HHS's Centers for Medicare and Medicaid Services (CMS) issued the Home
and Community Based Settings (HCBS) ``Settings Rule'' that focused on
various aspects of residential and employment settings for individuals
with disabilities. The rule emphasized that individuals have free
choice of providers for services in their service plan, including
employment services.\150\ These regulations further stipulate that the
``setting is integrated in and supports full access of individuals
receiving Medicaid HCBS to the greater community, including
opportunities to seek employment and work in competitive integrated
settings . . . to the same degree of access as individuals not
receiving Medicaid HCBS.'' \151\
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\150\ 79 FR 2948 (Jan. 16, 2014).
\151\ 42 CFR 441.530(a)(1)(i).
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vi. U.S. AbilityOne Commission 2022 Final Rule
The AbilityOne Program provides the Federal Government with
services and products procured through a nationwide network of
approximately 450 non-profit entities that employ individuals who are
blind or have significant disabilities.\152\ In 2022, the U.S.
AbilityOne Commission (Commission) issued a final rule prohibiting the
payment of subminimum wages under section 14(c) to employees on
contracts within the AbilityOne Program.\153\ The 2022 AbilityOne final
rule adds a new requirement for non-profit agencies that seek both
initial and continuing qualification to participate in the AbilityOne
Program: namely, such agencies must certify that, when paying workers
on AbilityOne contracts, they will not use section 14(c) certificates.
In its 2022 final rule, the Commission states that ``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.'' \154\ The Commission
explained that ending the payment of subminimum or sub-prevailing wages
on AbilityOne contracts was designed to help break cycles of poverty
and dependence for workers with disabilities, and instead shift the
focus on assisting workers with disabilities to move to careers of
meaningful employment.\155\ The Commission further explained that
societal expectations of people with disabilities had changed and that
the availability of reasonable accommodations and employment supports
had significantly changed the employment landscape for workers with
disabilities.\156\ The final rule was published on July 21, 2022, and
took effect 90 days later on October 19, 2022. Nonprofit agencies
seeking qualification to participate in the AbilityOne program were
allowed to apply for a single extension of up to 12 months if they
provided required support for the need of the extension and a
corrective action plan detailing how they planned to achieve compliance
during the requested extension period.
---------------------------------------------------------------------------
\152\ See AbilityOne Program, FAQs, <a href="https://www.abilityone.gov/abilityone_program/faqs.html#1">https://www.abilityone.gov/abilityone_program/faqs.html#1</a>.
\153\ 87 FR 43427 (July 21, 2022).
\154\ 87 FR 43428-43429.
\155\ 87 FR 43428.
\156\ 87 FR 43429.
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As of September 30, 2023, no employee on an AbilityOne contract was
being paid a subminimum wage.\157\ AbilityOne's final rule prohibiting
the payment of subminimum wages marked a noteworthy step away from the
use of subminimum wage certificates.
---------------------------------------------------------------------------
\157\ See U.S. AbilityOne Commission, ``Fiscal Year 2023
Performance and Accountability Report,'' at 95, <a href="https://www.abilityone.gov/commission/performance.html">https://www.abilityone.gov/commission/performance.html</a>. In fiscal year 2022,
approximately 36,000 people who are blind or have significant
disabilities were employed through the AbilityOne program. Id. at 7.
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In sum, legislation, judicial precedent, and regulatory initiatives
have fundamentally and profoundly altered the rights, protections,
access, and opportunities available to individuals with disabilities.
These evolving changes to the employment landscape have dramatically
altered access to employment opportunities and available supports for
workers with disabilities.
vii. Strategies, Initiatives, and Resources Focused on Increasing
Competitive Integrated Employment Opportunities
Alongside these legislative, executive, and judicial developments
clarifying and expanding the rights and opportunities of individuals
with disabilities, virtually all of which occurred after Congress last
amended section 14(c) and the Department last substantively updated the
section 14(c) regulations, a number of strategies focused on increasing
CIE have also emerged. The proliferation of resources and strategies to
increase CIE since 1989 demonstrates to the Department that there are
numerous alternatives to subminimum wage employment, as well as many
additional pathways to employment at or above the full Federal minimum
wage for individuals with disabilities. The diversity of available
supports, services, and strategies to facilitate the attainment of CIE
for workers with disabilities indicates that subminimum wages are no
longer a strategy that is necessary to prevent curtailment of
opportunities for employment for these workers. One example is
Employment First, which is a national framework centered on the premise
that all individuals, including those individuals with the most
significant disabilities, are capable of full participation in CIE and
community life.\158\ Under Employment First, public systems and States
are urged to align policies, regulatory guidance, and reimbursement
structures to commit to CIE as the priority option with respect to the
use of publicly-financed day and employment services for youth and
adults with significant disabilities.\159\ Many States have formally
committed to the Employment First framework through official executive
proclamation or formal legislative action.\160\ The Association of
People Supporting Employment First (APSE) website reports that, to
date, every State has taken some Employment First action, with 31
States having passed Employment First legislation, 16 States having
issued Employment First executive orders, and 32 States having
administrative policies and/or
[[Page 96481]]
regulations in place in support of the Employment First framework.\161\
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\158\ U.S. Dep't of Labor, Office of Disability Emp't Policy,
``Employment First,'' <a href="https://www.dol.gov/agencies/odep/initiatives/employment-first">https://www.dol.gov/agencies/odep/initiatives/employment-first</a>.
\159\ Id. There are multiple additional initiatives that have
developed from Employment First, including the National Expansion of
Employment Opportunities Network (NEON) and the Advancing State
Policy Integration for Recovery and Employment (ASPIRE) initiatives.
\160\ Id.
\161\ See <a href="https://apse.org/home-v2-2/employment-first/">https://apse.org/home-v2-2/employment-first/</a> for a
state-by-state summary. As of June 2024, all 50 States (as well as
the District of Columbia) are listed on this website, with Idaho
having taken Employment First action other than legislation,
executive order, or administrative policies/regulations. Many States
``have a combination of legislation, Executive action and/or State
Agency policy in place.'' Id.
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The methods of assisting individuals to obtain and maintain
competitive employment have evolved over the past several decades,
further enhancing these CIE programs. For example, research shows that
the development of supported employment, the Individual Placements and
Supports (IPS) model, and customized employment methodologies have been
used to successfully implement CIE for workers with disabilities.\162\
Specifically, the IPS model is designed to assist individuals with
serious mental health conditions and involves a multi-disciplinary team
that employs eight strategies: competitive employment, systematic job
development, rapid job search, integrated services, benefits planning,
time-limited supports, worker preferences, and zero exclusion of
participants.\163\ This coordination of medical care and supported
employment has been described as a standardization of evidence-based
supported employment.\164\
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\162\ See, e.g., Joonas Poutanen, Matti Joensuu, Kirsi Unkila &
Piurjo Juvonen-Posti, ``Sustainable employability in Supported
Employment and IPS interventions in the context of the
characteristics of work and perspectives of the employers: a scoping
review protocol,'' BMJ Open 12(6) (June 17, 2022), <a href="https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9207909/">https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9207909/</a> (``The sustainable
employment outcomes and cost-effectiveness of SE and IPS have been
well reported.'').
\163\ See <a href="https://ipsworks.org/index.php/what-is-ips/">https://ipsworks.org/index.php/what-is-ips/</a>.
\164\ See Gary R. Bond, Robert E. Drake & Deborah R. Becker,
``An update on randomized controlled trials of evidence-based
supported employment.'' Psychiatric Rehabilitation Journal, 31(4)
(April 2008), 280-290, <a href="https://doi.org/10.2975/31.4.2008.280.290">https://doi.org/10.2975/31.4.2008.280.290</a>.
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The Department of Labor's Office of Disability Employment Policy
(ODEP), established in 2001, led the research that built evidence for
customized employment, ``a process for achieving competitive integrated
employment or self-employment through a relationship between employee
and employer that is personalized to meet the needs of both.'' \165\
Customized employment tailors job tasks to fit the individual who will
be performing the work, and this strategy has been shown to be
particularly beneficial for people with disabilities who might not have
been successful in CIE using other training and employment strategies.
In 2014, customized employment was included in Title IV of the WIOA as
a strategy under the definition of supported employment.
---------------------------------------------------------------------------
\165\ See U.S. Dep't of Labor, Office of Disability Emp't
Policy, ``Customized Employment,'' <a href="https://www.dol.gov/agencies/odep/program-areas/customized-employment">https://www.dol.gov/agencies/odep/program-areas/customized-employment</a>.
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Finding these methodologies effective, various Federal agencies
have adopted them, and funded their use, through their programs and
initiatives. For example, supported employment was added to the
Rehabilitation Act in 1986 to help more workers with disabilities
obtain employment. Customized employment emerged first through grant
programs beginning in 2001 and was added to WIOA in 2014. The
development and implementation of these strategies for successful CIE
align with the emergence of the social model of disability as well as
with person-centered planning. Strategies consistent with the social
model of disability that decrease barriers and increase access to
opportunities and focus on the individual needs of each worker have
created new pathways for workers with disabilities to find, and
maintain, the right jobs for them.
ODEP has also led several initiatives focused on promoting CIE and
aiding States and service providers in implementing CIE strategies. For
example, the Campaign for Disability Employment, an ODEP-funded
outreach effort, showcases supportive, inclusive workplaces for all
workers and brings together several leading disability and business
organizations convened by ODEP to work together to address disability
employment, demonstrating the increased collaboration among employers
to advance employment options for workers with disabilities.\166\ The
Disability Employment Initiative (DEI), funded by ODEP and the
Department's Employment and Training Administration, awarded more than
$123 million through the initiative to 49 projects in the public
workforce system in 28 States to improve education, training, and
employment outcomes of youth and adults with disabilities.\167\
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\166\ U.S. Dep't of Labor, Office of Disability Emp't Policy
<a href="https://www.dol.gov/agencies/odep/initiatives/campaign-for-disability-employment">https://www.dol.gov/agencies/odep/initiatives/campaign-for-disability-employment</a>.
\167\ U.S. Dep't of Labor, Office of Disability Emp't Policy
<a href="https://www.dol.gov/newsroom/releases/odep/odep20160914">https://www.dol.gov/newsroom/releases/odep/odep20160914</a>.
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In addition, through the Employment First State Leadership
Mentoring Program, ODEP supported 24 States in their strategic efforts
to increase CIE for individuals with disabilities, including those with
significant disabilities.\168\ ODEP has also established the National
Expansion of Employment Opportunities Network (NEON) to collaborate
with CRPs to extend CIE for the people they serve through provider
transformation. ODEP explains that this process ``realigns'' disability
service provider agencies' business models ``from providing work
opportunities in segregated settings or at subminimum wages to
providing CIE for people with disabilities.'' \169\ This robust level
of programming and State participation allows the refocusing of many
State resources from programs relying on the payment of subminimum
wages to workers with disabilities to programs that support CIE
opportunities. In 2012, ODEP began and actively maintains an Employment
First Community of Practice (COP) of nearly 3,000 State agency and
service provider professionals, researchers, policy makers, workers and
family members, and Federal officials. The COP shares CIE challenges
and solutions, resources, events, and successes. In March 2024, ODEP
launched an online CIE Transformation Hub of practical Federal
resources that support CIE organized by target audience--individuals
with disabilities and family members, employment service providers,
State agencies, and employers.\170\
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\168\ See supra note 159.
\169\ See U.S. Dep't of Labor, Office of Disability Emp't
Policy, ``National Expansion of Employment Opportunities Network
(NEON),'' <a href="https://www.dol.gov/agencies/odep/initiatives/neon">https://www.dol.gov/agencies/odep/initiatives/neon</a>.
\170\ U.S. Dep't of Labor, Office of Disability Emp't Policy,
<a href="https://www.dol.gov/agencies/odep/program-areas/cie/hub">https://www.dol.gov/agencies/odep/program-areas/cie/hub</a>.
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Since 2021, the U.S. Department of Education's Rehabilitation
Services Administration (RSA),\171\ has administered demonstration
programs with discretionary grants through the Disability Innovation
Fund (DIF) to support innovative activities aimed at increasing
CIE.\172\ In 2022, RSA made DIF awards to 14 vocational rehabilitation
agencies to, as the Department of Education has explained, ``decrease
the use of subminimum wages and increase access to competitive
integrated employment for people with disabilities.'' \173\ In recent
[[Page 96482]]
years, DIF grant projects have focused on improving the outcomes of
individuals with disabilities through, for example, (1) career
advancement programs, (2) transition from subminimum wage to CIE
programs, and (3) ``pathways to partnerships programs'' that seek to
support projects that foster the establishment of close ties among
agencies--such as State vocational rehabilitation agencies, State
educational agencies, local educational agencies, and federally funded
Centers for Independent Living--to actively collaborate to support
coordinated transition processes for children and youth with
disabilities.\174\ These 5-year grants are awarded to States as
cooperative agreements to support innovative activities aimed at
increasing CIE for youth and other individuals with disabilities.\175\
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\171\ To assist individuals with disabilities in the pursuit of
gainful employment, RSA administers and manages programs that assist
individuals with disabilities to achieve employment outcomes. One of
these programs, the State Vocational Rehabilitation Services
Program, provides State formula grant programs to vocational
rehabilitation (VR) agencies providing a wide variety of services to
individuals with significant disabilities, including individuals
with the most significant disabilities.
\172\ See Consolidated Appropriations Act, Public Law 117-103,
136 Stat. 49, 479 (2022).
\173\ U.S. Dep't of Educ., ``Education Department Awards $177
Million in New Grants to Increase Competitive Integrated Employment
for People with Disabilities,'' <a href="https://www.ed.gov/news/press-releases/education-department-awards-177-million-new-grants-increase-competitive-employment-people-disabilities">https://www.ed.gov/news/press-releases/education-department-awards-177-million-new-grants-increase-competitive-employment-people-disabilities</a>.
\174\ U.S. Dep't of Educ., Rehabilitation Services
Administration (RSA), ``RSA Programs,'' <a href="https://rsa.ed.gov/about/programs">https://rsa.ed.gov/about/programs</a>.
\175\ See 29 U.S.C. 705(5); see also Dep't of Educ., RSA,
``Disability Innovation Fund,'' <a href="https://rsa.ed.gov/about/programs/disability-innovation-fund-pathways-to-partnerships">https://rsa.ed.gov/about/programs/disability-innovation-fund-pathways-to-partnerships</a>.
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A landmark agreement in Oregon, the Lane v. Brown settlement
agreement, illustrates some of this legal, legislative, and policy
progression. In 2012, a class action complaint was filed in district
court on behalf of individuals with I/DD alleging that by unnecessarily
segregating them and other similar individuals with I/DD in sheltered
workshops receiving public funds, Oregon was in violation of Title II
of the ADA and section 504 of the Rehabilitation Act.\176\ DOJ
intervened in the lawsuit as a plaintiff, and a statewide settlement
agreement was signed in 2015 requiring, among other things, that Oregon
decrease State support of sheltered workshops for individuals with I/DD
and expand access to supported employment services that allow the
opportunity to work in CIE settings. As a result, Oregon implemented a
number of competitive and supported employment strategies to support
individuals with disabilities in the State, including training for
school districts and those providing support services, new grants,
reallocation of funding and technical assistance to support CIE.\177\
These strategies accelerated the transition for workers with
disabilities from employment under the prior sheltered workshop model
to a CIE model within the State, ultimately ending the payment of
subminimum wages to workers with disabilities in Oregon. In 2016, the
year that this settlement was reached and approved by the court, there
were 1,405 people working in sheltered workshops in Oregon.\178\
Through this transition, Oregon placed 1,138 individuals from the class
who had previously worked for subminimum wages into CIE, exceeding the
targets set by the consent judgment. Additionally, by September 2020,
all sheltered workshops except one had converted to providing
supported, full-wage employment opportunities.\179\
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\176\ The Department notes that, on May 9, 2024, HHS published a
final rule which modernized and strengthened the implementing
regulations for section 504 of the Rehabilitation Act, which
prohibits discrimination on the basis of disability in programs and
activities that receive Federal financial assistance. See 89 FR
40066 (May 9, 2024). The rule, among other things, clarifies
obligations to provide services in the most integrated setting,
appropriate to the needs of individuals with disabilities, and
updates existing requirements to make them consistent with the ADA.
See HHS, Section 504 of the Rehabilitation Act of 1973 Part 84 Final
Rule: Fact Sheet, <a href="https://www.hhs.gov/civil-rights/for-individuals/disability/section-504-rehabilitation-act-of-1973/part-84-final-rule-fact-sheet/index.html">https://www.hhs.gov/civil-rights/for-individuals/disability/section-504-rehabilitation-act-of-1973/part-84-final-rule-fact-sheet/index.html</a>. Section 84.76 of HHS's updated section
504 regulations specifically requires all recipients of Federal
financial assistance from HHS to administer their programs and
activities in the most integrated setting appropriate to the needs
of a qualified person with a disability. See 45 CFR 84.76; 89 FR
40066, 40117.
\177\ Oregon Dep't of Human Services, ``Lane v. Brown Settlement
Agreement Report,'' <a href="https://www.oregon.gov/odhs/employment-first/Documents/lane-v-brown-settlement-message-2022-06-21.pdf">https://www.oregon.gov/odhs/employment-first/Documents/lane-v-brown-settlement-message-2022-06-21.pdf</a>.
\178\ Id.
\179\ See Disability Employment TA Center, The Components of
Integrated Employment Service Systems, p.11 (July 2022), <a href="https://aoddisabilityemploymenttacenter.com/wp-content/uploads/2022/07/Components-of-Integrated-Employment-Part-II-FINAL-Final.pdf">https://aoddisabilityemploymenttacenter.com/wp-content/uploads/2022/07/Components-of-Integrated-Employment-Part-II-FINAL-Final.pdf</a>. In
addition to the Oregon settlement, in 2014, DOJ entered into a
statewide settlement agreement in Rhode Island to resolve violations
of the ADA for approximately 3,250 Rhode Islanders with I/DD. See
U.S. Dep't of Justice, ``Department of Justice Reaches Landmark
Americans With Disabilities Act Settlement Agreement With Rhode
Island,'' April 8, 2014, <a href="https://www.justice.gov/usao-ri/pr/department-justice-reaches-landmark-americans-disabilities-act-settlement-agreement-rhode">https://www.justice.gov/usao-ri/pr/department-justice-reaches-landmark-americans-disabilities-act-settlement-agreement-rhode</a>.
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In sum, a wide range of resources and programs have emerged in
recent years that are focused on increasing competitive integrated
employment. These supports and services assist workers in obtaining and
maintaining employment at or above the full Federal minimum wage and
also assist employers in transitioning their business models to
integrated workplaces where the minimum wage is paid to all workers.
Today, subminimum wage employment under section 14(c) certificates is
no longer the most common form of employment for individuals with
disabilities, including individuals with I/DD. As the number of workers
being paid subminimum wages under section 14(c) certificates continues
to shrink, the numbers of workers with disabilities, including workers
with I/DD, working in integrated settings for full wages continues to
grow.\180\
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\180\ See discussion in section III.A.
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C. Third Party Reports Regarding Section 14(c)
In the context of the changes that have taken place over the past
several decades in opportunities for employment for individuals with
disabilities, both public and private entities (including from the
nonprofit, academic, and business sectors) have published relevant
reports and statements regarding subminimum wage employment. Though, as
discussed below, some organizations remain in strong support of the
continuation of section 14(c) certificate issuance, many of these
reports, from governmental and non-governmental organizations alike,
have compiled substantial evidence that subminimum wages are no longer
a necessary method of providing employment opportunities to individuals
with disabilities. In this subsection, the Department reviews key
aspects of these reports, which represent the culmination of years of
findings and conclusions, most of which provide support for the
Department's proposal to end the issuance of section 14(c)
certificates.
1. Government Oversight Reports
In recent years,\181\ a number of Federal government agencies and
committees have studied the payment of subminimum wages to workers with
disabilities and generated oversight reports. These agencies and
committees brought together a wide range of individuals from across
government and the non-profit and business sectors to share their
expertise and experience regarding the payment of subminimum wages to
workers with disabilities and corresponding models of employment. In
general, these oversight entities have sharply criticized the continued
payment of subminimum wages as an outdated method to support workers
with disabilities and reflect a broad consensus that subminimum wages
are not necessary to provide opportunities for employment of
individuals with disabilities, including opportunities for individuals
with I/DD Accordingly, many recommend that a phase out of section 14(c)
certificates should begin immediately. The Department notes that
[[Page 96483]]
there are no equivalent government oversight reports that favor the
continued issuance of section 14(c) certificates (at least beyond a
phaseout period). The Department welcomes comments on its analysis of
the selected reports discussed in this proposed rule as well as
comments on any other reports relevant to whether the continued
issuance of section 14(c) certificates is necessary to prevent the
curtailment of employment opportunities for individuals with
disabilities.
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\181\ This section is not an exhaustive listing of all such
Federal government oversight reports relating to individuals with
disabilities, but rather focuses on recent reports that specifically
consider the role of section 14(c) and subminimum wages in the
employment of those individuals.
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i. U.S. Commission on Civil Rights Report on Subminimum Wages
The USCCR is an independent, bipartisan, fact-finding Federal
agency established in part to study discrimination or denial of equal
protection by reason of race, color, religion, sex, age, disability, or
national origin. In 2020, the USCCR issued a comprehensive 349-page
report entitled ``Subminimum Wages: Impacts on the Civil Rights of
People with Disabilities'' (USCCR Report).\182\ The USCCR concluded
that payment of subminimum wages should be eliminated through a planned
phaseout period that allows for the transition among service providers
and individuals with disabilities.\183\ In making this recommendation,
the USCCR emphasized its finding that ``[p]eople with intellectual and
developmental disabilities who are currently earning subminimum wages
under the 14(c) program are not categorically different in level of
disability from people with intellectual and developmental disabilities
currently working in competitive integrated employment.'' \184\
Especially given the comprehensive nature of the USCCR report, the
Department gives weight to the report's key factual findings and
recommendations in proposing to phase out issuance of section 14(c)
certificates.
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\182\ USCCR Report. The U.S. Commission on Civil Rights was
established by Congress in 1957 and submits reports and
recommendations to the President and Congress based upon their
studies. Two members dissented from the conclusions of the 2020
report.
\183\ Id. at 223.
\184\ Id. at 221.
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To generate the report, the USCCR collected data, reports, and
testimony from ``Members of Congress, Labor and Justice Department
officials, self-advocates and workers with disabilities, family members
of people with disabilities, service providers, current and former
public officials, and experts on disability employment and data
analysis;'' received thousands of public comments both in favor of and
in opposition to the use of section 14(c) certificates; held a public
hearing; and conducted in-person visits to both full-wage and
subminimum wage worksites.\185\
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\185\ Id. at i.
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During the USCCR's hearings, they heard testimony from employers
who provided insight into the impact of phasing out subminimum wages on
their operations. For example, the USCCR heard from some employers who
had transitioned away from the use of subminimum wages that, based on
their experiences, section 14(c) certificates were no longer necessary
to prevent curtailment of employment opportunities for individuals with
disabilities. The Chief Executive Officer (CEO) of Melwood, a non-
profit organization that transitioned their employees to at least the
full minimum wage in 2013 and withdrew its section 14(c) certificate in
2016, testified that phasing out subminimum wages had positively
impacted Melwood's operations, resulting in higher morale and
productivity, and contributed to its ongoing successes.\186\
Additionally, the CEO reflected on what she believed were the negative
impacts of using section 14(c) certificates, testifying that ``time
trials caused our employees to feel extremely anxious and stressed, as
employees knew that their performance could reduce their wages and harm
their ability to live happy independent lives,'' and that ``the average
employee lost five hours of productive time as a result of each time
trial, not including the loss of productivity due to the anxiety
distraction.'' \187\ The USCCR also spoke with employers who employed
individuals with I/DD but who had never held a section 14(c)
certificate, and those employers spoke positively of their
experiences.\188\
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\186\ USCCR Report at 50-51.
\187\ Id. at 50.
\188\ In a briefing to the USCCR, for example, Microsoft
explained that, since 2013, its Supported Employment Program had
placed over 280 individuals with I/DD in full-wage jobs at
Microsoft. Id. at 48 (citing Brian Collins, briefing transcript at
272-73 and 274-75). Microsoft observed that employing workers with
I/DD had added strength to the company because those workers tended
to be longer-term employees (thus reducing recruitment, turnover,
and onboarding costs) and tended to challenge the status quo and
teach colleagues about ``communication, inclusion, and empathy.''
Id. at 49.
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The USCCR also collected extensive testimony from, among others,
individuals with I/DD and their family members, current and former
section 14(c) certificate holders, and employers of individuals with I/
DD. The USCCR found that ``[p]ersons with disabilities who have
transitioned out of 14(c) workshops were adamantly against the
program.'' \189\ For example, the USCCR interviewed a worker in Vermont
who, after that State eliminated the payment of subminimum wages, had
transitioned to working in integrated employment, where he received
more than minimum wage and had opportunities for advancement.\190\
Reflecting on his previous experiences working for subminimum wages
pursuant to a section 14(c) certificate, the worker explained that he
believed that his former employer had been ``using'' his disability
``against'' him, and that he would ``do more and get less than everyone
else.'' \191\
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\189\ Id. at xi.
\190\ Id. at 198.
\191\ Id.
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As another key part of its review, the USCCR conducted intensive
case studies of three States that, at the time of the report's
publication, still permitted payment of subminimum wages (Virginia,
Arizona, and Missouri), and compared those States to three States that
had taken steps to eliminate subminimum wages (Vermont, Maine, and
Oregon). In general, the USCCR's case studies detailed many successful
transitions from subminimum wages to full wages. In terms of data
regarding employment outcomes in those States, the USCCR noted both the
complexity and insufficiency of available statistics. Summarizing its
analysis of state-level employment data collected from those six States
in 2016 and 2017, the USCCR explained that ``contrary to the popular
belief that ending subminimum wages will lead to job losses, the
eradication of subminimum wages correlates with increased employment
for people with disabilities'' in certain States.\192\ The USCCR
expressly noted, however, that ``importing these data over a wider
range of states shows even more complexity.'' \193\ Recognizing that
the results of the then-existing data regarding impact of state-level
legislation prohibiting subminimum wages was ``mixed,'' the USCCR
concluded that ``[t]he success of states like Oregon and Vermont show
that there is a path forward[ ]; moreover, even concerned family
members in those states eventually embraced a supported transition from
14(c) to competitive integrated employment.'' \194\
---------------------------------------------------------------------------
\192\ Id. at 143-45.
\193\ Id.
\194\ Id. at 217.
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In addition to receiving comments urging the elimination of
subminimum wages, however, the USCCR also noted that ``the majority of
the public
[[Page 96484]]
comments the Commission received were from parents who support the
continued operation of 14(c) workshops unchanged.'' \195\ These public
comments included ``family members of persons with disabilities working
in 14(c) workshops . . . who stated it was their `CHOICE' to work there
and that they were against elimination of the 14(c) program.'' As one
family member of a person with a disability wrote to the USCCR, ``We
are NOT concerned with lower pay. We ARE concerned that the rights of
our family member to work in a fulfilling, safe, stable job where he
enjoys being part of a community is at risk due to the wage debate''
(emphasis in original).\196\
---------------------------------------------------------------------------
\195\ Id. at xi.
\196\ Id. at 175.
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The USCCR also found several other notable aspects of subminimum
wage employment. In a chapter of its Report, the USCCR broadly reviewed
the roles of different government agencies in relationship to section
14(c). The USCCR detailed the extensive use of public funds to support
existing sheltered workshops. Among other key points, the USCCR found
that some States have used HHS and Medicaid funding to fund worker
supports necessary for those workers to access employment at the full
minimum wage; this same funding is frequently used to fund non-profit
employers who use section 14(c) certificates in other States.\197\ In
other words, in some instances, funds could be shifted from supporting
subminimum wage employment to supporting full-wage employment. Of note,
the USCCR stated that transition away from subminimum wages could be
``aided by the provision of accommodations such as a job coach, peer
support, or specialized training or other supports that allow persons
with disabilities to effectively work in integrated settings,'' and
that funds once used to fund employment under section 14(c)
certificates (such as at CRPs) could be redirected to these
purposes.\198\ The USCCR explained that ``[s]tate-level phase outs of
the use of the 14(c) program have been developed and designed for State
service providers and other stakeholders to ensure that a competitive
integrated employment model does not result in a loss of critical
services to individuals with disabilities including former 14(c)
program participants.'' \199\
---------------------------------------------------------------------------
\197\ Id. at xiv and 179-80.
\198\ Id. at xi-xii. Similarly, recent non-governmental reports
have also emphasized the role that States' and organizations'
programmatic choices play in determining whether individuals with
disabilities have opportunities for subminimum or full-wage
employment. For example, in 2024, New America released a report
analyzing States' efforts to end payment of subminimum wages. This
report examined the usage of programs that New America deemed to
support successful transitions from subminimum to full wages,
including ``Medicaid expansion, benefits counseling, and tax-
deferred savings accounts.'' The report analyzed States' efforts to
put in place supportive employment policies and programs and noted a
wide disparity of approaches among States in these areas. Among
other conclusions in the report, New America observed that States
that did not seek to limit or eliminate the use of subminimum wages
often also did not engage in as many supportive employment or
financial security initiatives. See New America, ``Pennies on the
Dollar: The Use of Subminimum Wage for Disabled Workers across the
United States: Momentum to Change the Subminimum Wage'' (2024),
<a href="https://www.newamerica.org/education-policy/reports/the-use-of-subminimum-wage-for-disabled-workers-across-the-us/">https://www.newamerica.org/education-policy/reports/the-use-of-subminimum-wage-for-disabled-workers-across-the-us/</a>.
\199\ 2020 USCCR Report at xvi.
---------------------------------------------------------------------------
As part of its review, the USCCR collected and analyzed data about
the use of section 14(c) certificates. Summarizing this analysis, the
USCCR concluded that ``the Department of Labor's enforcement data as
well as several key civil rights cases and testimony from experts show
that with regard to wage disparities, the program is rife with abuse
and difficult to administer without harming employees with
disabilities, as reflected in over 80 percent of cases investigated.''
\200\ The USCCR based this finding in part on WHD enforcement data
that, as discussed above, shows that WHD investigations of section
14(c) certificate holders reveal high rates of FLSA violations. The
USCCR made no analysis of or conclusions about the types or severity of
violations found in WHD investigations. However, the USCCR highlighted
a well-documented case involving egregious civil rights abuses
connected to an employer who had formerly held a section 14(c)
certificate, the Hill Country Farms case.\201\ In that case, both the
Department and the EEOC successfully recovered substantial damages for
the workers based on, respectively, the employer's willful violations
of the FLSA and the employer's severe abuse and discrimination in
violation of the ADA.\202\ In addition to highlighting the
``disability-based harassment, discrimination and abuse'' experienced
by these workers, the USSCR commented that ``[t]his case does not
directly address whether 14(c)'s permitting payment of subminimum wages
violates the ADA, but it does illustrate that Title I ADA violations
are possible under those circumstances.'' \203\
---------------------------------------------------------------------------
\200\ Id. at vi-vii.
\201\ In that case, Hill Country Farms, doing business as
Henry's Turkey Service, employed a group of men with intellectual
disabilities for approximately 20 years at an Iowa turkey processing
plant where the employer subjected the workers to ``abusive verbal
and physical harassment; restricted their freedom of movement; and
imposed other harsh terms and conditions of employment such as
requiring them to live in deplorable and sub-standard living
conditions, and failing to provide adequate medical care when
needed.'' U.S. Equal Emp't Opportunity Comm'n, <a href="https://www.eeoc.gov/eeoc/newsroom/release/5-1-13b.cfm">https://www.eeoc.gov/eeoc/newsroom/release/5-1-13b.cfm</a> (May 1, 2013). The employer also
paid only pennies per hour--$65 a month in cash wages even when
company time sheets reflected that they worked more than 40 hours a
week. U.S. Dep't of Labor, <a href="https://www.dol.gov/newsroom/releases/whd/whd20110427">https://www.dol.gov/newsroom/releases/whd/whd20110427</a> (April 27, 2011).
\202\ Solis v. Hill Country Farms, 808 F. Supp. 2d 1105 (S.D.
Iowa 2011), aff'd, 469 Fed. App'x 498 (8th Cir. 2012); EEOC v. Hill
Country Farms, Inc., 899 F. Supp. 2d 827 (S.D. Iowa 2012), aff'd,
564 Fed. App'x 868 (8th Cir. 2014).
\203\ 2020 USCCR Report at 25.
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In sum, the USCCR's qualitative and quantitative study of the use
and cessation of section 14(c) certificates--encompassing employer,
worker, family, government, and expert perspectives--substantially
aided the Department's review of whether section 14(c) certificates are
still necessary to prevent curtailment of employment opportunities for
workers with disabilities. Furthermore, given this body of evidence,
the Department finds the USCCR's conclusion that subminimum wages are
no longer necessary to be compelling.
ii. National Council on Disability Reports Relevant to Payments of
Subminimum Wages
The National Council on Disability (NCD) is an independent Federal
agency charged with advising Congress, the President, and other
entities on policy related to people with disabilities. NCD has issued
several reports related to section 14(c), including two reports that
specifically favor the cessation of subminimum wages, finding that such
practices are not necessary to prevent curtailment of opportunities for
employment of individuals with disabilities. As with the USCCR report,
the NCD's thorough analysis, spanning nearly a decade, undergirds the
Department's finding that subminimum wages are no longer necessary to
prevent curtailment of employment opportunities for individuals with
disabilities.
In 2012, the NCD issued a report recommending that section 14(c) be
phased out.\204\ In this report, published prior to the passage of
WIOA, NCD recommended many reforms similar to those that were
subsequently enacted, including ``mandatory information sharing to
workers,'' and expansion of supported education and postsecondary
education and training for individuals
[[Page 96485]]
with disabilities.\205\ NCD recommended that section 14(c) ``should be
phased out gradually to provide adequate time for transition to new
alternatives.'' \206\ To facilitate that proposed phaseout, NCD
outlined in their 2012 report a ``comprehensive system of support that
will result in greater opportunities for people with disabilities.''
\207\
---------------------------------------------------------------------------
\204\ 2012 NCD Report.
\205\ Id. at 10.
\206\ Id. at 18.
\207\ Id.
---------------------------------------------------------------------------
Among its key findings, the 2012 NCD report noted that work in
subminimum wage settings generally did not provide a stepping stone to
full-wage work but was instead almost always an end-placement. As NCD
observed citing back to a 2001 GAO report, ``Sheltered workshops are
ineffective at transitioning people with disabilities to integrated
employment. According to the 2001 investigation by [GAO] into the 14(c)
program, only approximately 5 percent of sheltered workshop employees
left to take a job in the community.'' \208\
---------------------------------------------------------------------------
\208\ Id. at 10.
---------------------------------------------------------------------------
In a follow-up 2018 report, NCD again focused on the issue of
whether subminimum wages were necessary to secure employment
opportunities for individuals with disabilities. NCD reiterated its
recommendation to phase out the use of section 14(c) certificates,
labelling continued certificate issuance as ``even more evidently
outdated and ineffective than it was six years ago.'' \209\ NCD termed
the continued issuance of section 14(c) certificates a form of
``economic disenfranchisement'' of ``great significance to the overall
health of our nation's economy and society.'' \210\ The report found
that the ``landscape of law and policy has been considerably expanded''
to allow transitions from sheltered workshops into competitive
integrated employment. NCD found that, despite these advances, those
working under section 14(c) certificates remain ``confined'' to
``sheltered workshops where they perform manual tasks that are often
mismatched with their particular strengths and also with their
preferences and interests as employees . . . even though new
technologies, services, and supports exist that would allow them to
succeed in competitive integrated employment.'' \211\ The NCD report,
echoing the Department's findings discussed above in its report to
Congress nearly 50 years earlier, posited that the ``sheltered workshop
business model, itself, rather than the impact of disability on
productivity, incentivizes low wages and correspondingly
disincentivizes reasonable accommodations, better job matches, and more
integrated employment services.'' \212\
---------------------------------------------------------------------------
\209\ Nat'l Council on Disability, ``National Disability
Employment Policy from the New Deal to the Real Deal: Joining the
Industries of the Future,'' Letter of Transmittal, 2018, <a href="https://www.ncd.gov/report/national-disability-employment-policy-from-the-new-deal-to-the-real-deal-joining-the-industries-of-the-future/">https://www.ncd.gov/report/national-disability-employment-policy-from-the-new-deal-to-the-real-deal-joining-the-industries-of-the-future/</a>
(2018 New Deal NCD Report).
\210\ Id. at 12.
\211\ Id. at 13-14.
\212\ Id. at 53.
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In its 2018 report, NCD described ``successful examples of
transformation from six States [of organizations] where providers have
transitioned services from sheltered workshops that paid 14(c)
subminimum wages to rival models of individualized supported and
customized employment services . . . .'' \213\ In reviewing these
examples, NCD analyzed ``key success factors'' in each of these
organization case studies, including factors such as the presence of
staff versed in ``employment first'' strategies, a strong
organizational commitment to inclusion of individuals with disabilities
in socially valued roles, collaboration with supported employment
organizations, high expectations for outcomes, the fostering of an
incentivizing link between an individual's work performance and ``a
paycheck,'' a business-oriented emphasis on placing employees where
they will meet employers' real needs, and fostering the self-advocacy
skills of individuals with disabilities.\214\
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\213\ Id. at Transmittal Letter.
\214\ Id. at 66, 70, 73-74, 78, 83.
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NCD also made site visits and highlighted the stories of
individuals. In one example, NCD wrote ``[a] person with I/DD who was
accused of being a `slow worker' in the sheltered workshop became `a
raging success' working competitively in a family restaurant. He was
better matched, and therefore performed better, in a job where he could
interact with customers.'' NCD also described, in specific detail, the
methodologies of agencies in several States providing supportive
employment services, such as individualized job matching and community
networking strategies.\215\ NCD noted that ``families' viewpoints often
change from hesitance about working in the community to full support
after they see how successful a family member can be in a typical work
setting, and how that success can run to other domains of life.'' \216\
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\215\ Id.
\216\ Id. at 76.
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Based on its review, NCD made several recommendations in its 2018
report. For example, NCD recommended that disability policy should
focus on ``increased capacity for sustained funding for integrated
supported and customized employment,'' improving technical assistance,
benefits counseling, business engagement strategies, and developing
resources and innovations to allow people with disabilities to do
current and future available jobs.\217\ In conclusion, NCD recommended
current certificate holders should be given time to phase out
subminimum and sub-prevailing wages, while the Department's issuance of
``new'' certificates should immediately cease.\218\
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\217\ Id. at 14.
\218\ Id. at 99-100.
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In an additional 2018 report entitled ``National Disability Policy:
A Progress Report,'' (2018 NCD Progress Report), NCD also extensively
reviewed WHD's administration and enforcement efforts under section
14(c).\219\ Among other findings, NCD noted that WHD had recognized the
need to focus enforcement efforts on areas ``where large numbers of
vulnerable workers are found,'' such as workers employed by holders of
section 14(c) certificates.\220\ As part of this effort, NCD reported
that WHD conducted extensive investigations of such employers between
2008 and 2017. During that period, as also discussed in section II.D.1
(``Administration and Enforcement of Certificates''), NCD ``documented
`a high prevalence' of FLSA and other violations among the 14(c)
certificate holders investigated. In many instances, employers were
unaware of the requirements of Section 14(c) or did not implement the
requirements appropriately.'' \221\
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\219\ 2018 NCD Progress Report.
\220\ Id. at 68-69.
\221\ Id. at 69-70.
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The 2018 NCD Progress Report also highlighted the intersection
between section 14(c) and anti-discrimination civil rights protections.
This report, among many other recommendations, called for more
collaboration between WHD and civil rights enforcement agencies; as an
example of this type of activity, NCD highlighted that as a result of a
WHD investigation of a certificate holder in Rhode Island, WHD made a
referral to DOJ's Civil Rights Division. DOJ then found ``unnecessary
segregation of adults and serious risks of unnecessary segregation of
students in violation of the ADA and the U.S. Supreme Court Olmstead
decision,'' resulting in a court ordered settlement agreement with the
State of Rhode Island and the city of Providence.\222\
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\222\ Id. at 74.
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[[Page 96486]]
The Department considers the NCD reports insightful in analyzing
changed employment opportunities for individuals with disabilities,
especially as the NCD documented the impact of these changes in reports
spanning several years. Furthermore, it is relevant that NCD not only
found that subminimum wage employment is unnecessary given the
alternatives, but also put forward evidence that many employees working
under section 14(c) certificates may, despite positive intentions,
experience negative outcomes.
iii. Report of the Advisory Committee on Increasing Competitive
Integrated Employment for Individuals With Disabilities
In 2014, the Advisory Committee on Increasing Competitive
Integrated Employment for Individuals with Disabilities (Advisory
Committee) was established under section 609 of the Rehabilitation Act,
as amended by section 461 of the WIOA.\223\ The Advisory Committee was
created to advise the Secretary and Congress in three areas: (1) ways
to increase competitive integrated employment opportunities for
individuals with intellectual or developmental disabilities or other
individuals with significant disabilities; (2) the use of the section
14(c) certificate program for the employment of individuals with I/DD
or other individuals with significant disabilities; and (3) ways to
improve oversight of the use of such certificates.\224\ The Advisory
Committee was established according to the provisions of the Federal
Advisory Committee Act, which helps ensure the independent nature of
the Advisory Committee in providing advice and recommendations to the
Secretary. Especially as Congress specifically created the Advisory
Committee to independently study questions closely related to the
Department's charge to determine whether continued issuance of
certificates is necessary, the Department gives weight to the
Committee's relevant findings.
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\223\ 29 U.S.C. 795n.
\224\ Id.
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Members of the Advisory Committee included Federal members,\225\
self-advocates for individuals with I/DD, providers of employment
services, representatives of national disability advocacy organizations
for adults with I/DD, academic experts, representatives from the
employer community or national employer organizations, and other
individuals or representatives with expertise on increase opportunities
for CIE for individuals with disabilities. The Advisory Committee
worked for 2 years on its study of the topics mentioned above. In
evaluating these issues, the Advisory Committee held 10 public meetings
during which individuals and organizations provided testimony and
public comments. The Advisory Committee also received ``more than 2,000
letters, emails and personal video messages from people with
disabilities, and other citizens and organizations across the nation
that helped inform the work of the committee and its final
recommendations.'' \226\
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\225\ The Advisory Committee's Federal membership consisted of
the following agency leaders or their designee: Department of
Labor's Assistant Secretary of ODEP, the Assistant Secretary for
Employment and Training Administration (ETA), and the WHD
Administrator; the HHS Commissioner of the Administration on
Intellectual and Developmental Disabilities; CMS Director; the
Commissioner of the Social Security Administration (SSA) and the
Department of Education's RSA Commissioner.
\226\ Advisory Committee on Increasing Competitive Integrated
Employment for Individuals with Disabilities, ``Final Report,''
2016, at p. iv, <a href="https://www.dol.gov/sites/dolgov/files/odep/topics/pdf/acicieid_final_report_9-8-16.pdf">https://www.dol.gov/sites/dolgov/files/odep/topics/pdf/acicieid_final_report_9-8-16.pdf</a>.
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As the culmination of these efforts, in September 2016, the
Advisory Committee issued a detailed report (Committee Report) that
included six chapters discussing that increasing CIE will require
substantial capacity building, including for youth, in the marketplace,
and within the Federal government itself.\227\ The Advisory Committee,
among other conclusions, recommended that Congress repeal section 14(c)
through a multi-year phaseout.\228\ The Advisory Committee further
recommended that WHD ``engage in stronger enforcement'' of section
14(c) certificates and require both States and individual applicants to
submit more information (including information about States' and
applicants' efforts to work towards alternatives to the payment of
subminimum wages) to show that the issuance of certificates would be
necessary to prevent the curtailment of employment opportunities for
individuals with disabilities.\229\
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\227\ Id. at 1-4.
\228\ Id. at 2.
\229\ Id. at 30.
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The Advisory Committee observed that ``one by-product of subminimum
wage employment is a culture with a low expectation for competitive
integrated employment.'' \230\ The Committee further concluded that the
``current widespread practice of paying workers subminimum wages, based
on assumptions that individuals with disabilities cannot work in
typical jobs, or on assumptions about the unavailability of alternative
work opportunities, is antithetical to the intent of modern federal
policy and law.'' \231\ The Advisory Committee explained that modern
Federal policy and laws are ``based on the assumption that all
individuals with disabilities are capable of, and have a right to,
CIE.'' \232\
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\230\ Id. at 28.
\231\ Id. at 29.
\232\ Id.
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The Advisory Committee further recommended that vocational
rehabilitation services for individuals with disabilities focus more on
practices demonstrated to produce positive outcomes in full-wage
employment. For example, the Advisory Committee explained that research
shows providing experience in community-based workplaces performing
actual work tasks is a superior training strategy compared with
providing ``work readiness training'' in sheltered workshops.\233\
Similarly, the Advisory Committee made recommendations regarding
supportive employment practices based on its finding of the importance
of factors such as ``work experience and [competitive integrated
employment] during secondary school years'' and family expectations
about employment.\234\
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\233\ Id. at 10.
\234\ Id. at 21. The Department notes that in addition to the
agency reports discussed herein, in 2018, the minority staff of the
U.S. Senate Committee on Health, Education, Labor, and Pensions
reached a similar conclusion that the evidence does not support the
continued payment of subminimum wages and the Department should no
longer issue new section 14(c) certificates. Minority Staff of S.
Comm. on Health, Educ., Labor, and Pensions, ``Disability
Employment: Outdated Laws Leave People with Disabilities Behind in
Today's Economy,'' Comm. Print 2018, <a href="https://web.archive.org/web/20181224100838/https://www.murray.senate.gov/public/_cache/files/84084732-e011-470a-b246-1cdab87755c3/staff-report-on-employment-for-people-with-disabilities-10-29-2018-pm-.pdf">https://web.archive.org/web/20181224100838/https://www.murray.senate.gov/public/_cache/files/84084732-e011-470a-b246-1cdab87755c3/staff-report-on-employment-for-people-with-disabilities-10-29-2018-pm-.pdf</a>.
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As with the other government oversight reports discussed above, the
Department finds the thorough conclusions of the Advisory Committee to
be highly relevant to the Department's analysis, and, in particular,
the Department notes the import of the Committee's congressional
mandate. Specifically, the Advisory Committee's conclusions regarding
the availability of alternatives to section 14(c) certificates informed
the development of this proposed rule; the Committee Report provides a
picture of the employment landscape for workers with disabilities that
does not rely upon subminimum wages.
[[Page 96487]]
iv. U.S. Government Accountability Office Reports
Unlike the government agency reports detailed above, GAO has not
directly addressed the question of whether it is still necessary to
permit payment of subminimum wages to promote employment opportunities
for individuals with disabilities. However, GAO has issued multiple
reports addressing various aspects of the use and operation of section
14(c) certificates, and in doing so, has generated significant data and
analysis relevant to this proposed rule.\235\ The Department found this
data and analysis to be helpful in its review of section 14(c) and
development of this NPRM.
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\235\ Additional GAO reports include GAO-81-116519, ``Stronger
Fed. Efforts Needed for Providing Emp't Opportunities and Enforcing
Labor Standards in Sheltered Workshops'' (1981), <a href="https://www.gao.gov/products/hrd-81-99">https://www.gao.gov/products/hrd-81-99</a>; GAO-01-886, ``Special Minimum Wage
Program: Centers Offer Emp't and Support Servs. to Workers with
Disabilities, But Labor Should Improve Oversight'' (2001), <a href="https://www.gao.gov/products/gao-01-886">https://www.gao.gov/products/gao-01-886</a>; and GAO-12-594, ``Students with
Disabilities: Better Fed. Coordination Could Lessen Challenges in
the Transition from High School'' (2012), <a href="https://www.gao.gov/products/gao-12-594">https://www.gao.gov/products/gao-12-594</a>.
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In 2023, GAO issued a report addressing the Department's oversight
of employers using section 14(c) certificates. In this report, in
addition to its primary recommendations regarding section 14(c)
certificate processing, GAO emphasized that participation of employers
using section 14(c) certificates has markedly decreased, tracking a
steady decline over the decade from 2010 to 2019.\236\ GAO attributed
this decline to changing Federal laws and policies, changing State
policies (such as state-level phaseouts of the use of subminimum
wages), and shifts in employer and worker views.\237\
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\236\ See 2023 GAO Report.
\237\ Id. at 14-15.
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In the 2023 report, GAO also published important demographic and
statistical data about employers holding section 14(c) certificates and
the employees they were paying subminimum wages. GAO confirmed that,
currently, CRPs are the ``vast majority of 14(c) employers,'' and that
``almost all 14(c) workers had an intellectual or developmental
disability.'' \238\ GAO estimated that approximately 70 percent of
section 14(c) workers were 25-54 years old, with approximately 26
percent 55 years or older, and only approximately 4 percent 18-24 years
old.\239\ As already noted above, GAO found that the majority of
workers paid under section 14(c) certificates in the data they analyzed
were paid less than $3.50 per hour, approximately 14 percent were paid
less than one dollar per hour, and approximately 5 percent were paid
less than 25 cents per hour.\240\ GAO also found that ``few 14(c)
workers'' engaged in competitive employment, including being paid at
least minimum wage in an integrated work setting.\241\
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\238\ Id. at 2.
\239\ Id. at 26.
\240\ Id at 17.
\241\ Id.
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Additionally, in 2021, GAO issued a report on ``Factors Influencing
the Transition of Individuals with Disabilities to Competitive
Integrated Employment.'' \242\ GAO identified 32 factors that may
influence transitions away from subminimum wages to competitive
integrated employment.\243\ GAO did not find a consensus across the
individuals it interviewed about the most significant factors
influencing ``14(c)-to-CIE transition.'' \244\ Instead, ``each of the
32 factors was identified by at least one interviewee to be among the
most important in influencing an individual's transition to CIE.''
\245\ Additionally, many interviewees emphasized that the factors were
heavily inter-related. GAO also emphasized the potential impact of the
COVID-19 pandemic, noting uncertainty about such impacts at the time of
the report's publication.\246\ As a backdrop to its study of factors
that might influence individuals' transition to CIE, GAO noted
legislative changes--such as WIOA--that promote access to employment at
full wages.\247\ Additionally, GAO highlighted a ``shift in federal and
state priorities'' away from reliance on section 14(c), and noted that
``at least 40 states have adopted legislation or state policy stating
that integrated employment in the community is the first and preferred
option for people with disabilities . . . .'' \248\
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\242\ 2021 GAO Report.
\243\ Id. at 13.
\244\ Id. at 13.
\245\ Id.
\246\ Id. at 2.
\247\ Id. at 1.
\248\ Id. at 1-2.
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GAO's interviews with employees identified several factors that
inhibited transitions to CIE, including the individuals' age, concern
for maintaining benefits, desire for a social community, concern for
safety of non-sheltered working environment, and ``views'' about an
individuals' skills.\249\ Observing that family members' judgments were
often decisive even when differing from the preferences of employees
themselves, GAO recounted that ``one participant told us that family
members may not see the individual's potential for accomplishing work
because they remember times when the person struggled.'' \250\
Interviewees also noted that ``people who have been exposed to CIE,
including through real-world, authentic experiences, almost always
choose CIE . . . because they have a more accurate perception of what
it entails.'' \251\
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\249\ Id. at 14.
\250\ Id. at 19.
\251\ Id.
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Regarding the views of employers, GAO listed factors that might
influence a section 14(c) certificate holder's decision to transition
away from subminimum wages, a process GAO referred to as ``provider
transformation.'' \252\ GAO found that the factors most relevant to
whether section 14(c) holders transitioned from subminimum wages to CIE
were, in addition to resource-related factors, ``14(c) certificate
holder leadership views, 14(c) certificate holder's use of person-
centered approach to employment planning, 14(c) certificate holder's
mission or business model, 14(c) certificate holder's access to
training and technical assistance, and 14(c) certificate holder's
provision of ongoing supports for CIE.'' \253\
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\252\ Id.
\253\ Id. at 20.
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Finally, GAO noted several policy and economic factors that could
influence transition away from subminimum wages. Among these factors,
GAO identified State resources supporting CIE, State policies
``allowing public benefits to continue while working,'' ``federal
support for 14(c) employment versus CIE,'' the overall unemployment
rate, available transportation, and available employment services.\254\
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\254\ Id. at 25-27.
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In sum, while GAO's reports did not directly address whether
section 14(c) certificates were necessary to prevent curtailment of
opportunities for employment, the Department found them relevant in
several ways, as reflected by the information discussed above. In
particular, GAO's 2023 report provided additional insight into the
demographics of the workers with disabilities currently working under
section 14(c) certificates while GAO's 2021 report provided a better
understanding of many of the challenges potentially faced by employers
in transitioning from section 14(c) subminimum wage employment to an
alternative model. The Department's proposed phaseout approach,
discussed in greater detail below, is intended to
[[Page 96488]]
mitigate against such potential transition difficulties.
2. Non-Governmental Assessments of Certificate Issuance Under Section
14(c)
In recent years, not-for-profit, academic, and advocacy
organizations have also issued many reports and shared public comments
on the payment of subminimum wages to individuals with
disabilities.\255\ This proposed rule does not include a complete
survey of these reports and viewpoints. Rather, the reports noted here
are a sampling of non-governmental views on subminimum wage payments
under section 14(c). The Department notes that these reports reflect a
wide range of the views on the use of section 14(c) certificates and
subminimum wage employment of workers with disabilities.
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[…truncated; see source link]Indexed from Federal Register on December 4, 2024.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.