California Law
For decades, California has allowed employers to pay intellectually or developmentally disabled workers a subminimum wage in certain settings. Currently, disabled workers employed through a “sheltered” disability program are paid from $3 to $14 per hour According to the California Labor Commissioner’s Office, the subminimum wage paid to disabled workers is based on “their productivity and wage compared with those of experienced workers who are not disabled but perform essentially the same type, quality, and quantity of work in the same vicinity as the disabled worker.”
In 2021, Governor Newsom signed SB 639 into law, which phases out sheltered workshops with the subminimum wage being completely phased out effective January 1, 2025. Beginning on that date, disabled workers must be paid at least the state’s minimum wage. Proponents of the elimination of the subminimum wage state that sheltered disability programs were meant to provide employment for disabled World War I veterans, but had the unintended effect of creating segregated workplaces.
According to the California Department of General Services, “[t]he shift to the minimum wage may impact local businesses and nonprofits that currently contract with sheltered workshops. The state’s Department of Developmental Services is ramping up funding to help transition workers from subminimum wage workshops to ‘Competitive Integrated Employment’ where they would earn at least minimum wage alongside coworkers who don’t have disabilities.”
Federal Proposal
Federal law currently allows employers to pay wages below the federal minimum wage. Similar to California’s sheltered disability program, federal law requires employers to obtain a section 14(c) certificate from the Department of Labor (DOL) permitting payment of the subminimum wage.
Recently, however, the DOL proposed a rule that would phase out the granting of the certificates to pay a subminimum wage. In support of this proposal, the DOL states that “[e]mployment 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.”
If the proposal is adopted, section 14(c) certificates will not be issued after the effective date of the final rule, and existing holders of the certificate will have up to three years after the effective date of the final rule to continue paying the subminimum wage. Under the proposal, disabled employees will be paid the federal minimum wage ($7.25 per hour).
DOL is accepting comments on the proposed rule until January 17, 2025.
