Understanding Subminimum Wage
The Fair Labor Standards Act of 1938 permits employers, primarily nonprofit community rehabilitation providers, to pay people with disabilities less than the federal minimum wage. To do this, employers must obtain a Section 14(c) certificate from the Department of Labor (DOL). These certificates allow wages to be set based on productivity of the person with the disability as compared to a person who does not identify as disabled performing the same task. Currently, most subminimum wage work takes place in segregated facilities called sheltered workshops.
While some believe this employment model creates opportunities for people with disabilities who might otherwise remain unemployed, disability rights advocates consider the practice discriminatory and outdated. Disability rights advocates point to several concerns:
- Documented cases of abuse
- Extremely low wages (refer to Mid-Minnesota Legal Aid’s October 2022 report Ending the Subminimum Wage in Minnesota [PDF])
- Insufficient focus on competitive integrated employment, where people with disabilities work alongside people without disabilities at or above minimum wage
- Limited transition to community-based employment
Additionally, disability rights advocates emphasize that expectations and support systems for people with disabilities have evolved significantly, creating more pathways to successful competitive employment.
Minnesota’s Response
In 2021, Minnesota established the Task Force to Eliminate Subminimum Wages to address this issue statewide. The Task Force created a comprehensive transition plan (PDF) that recommended:
- Creating a technical assistance center to support transition efforts for employment service providers that use 14 (c) certificates
- Implementing training for waiver case managers
- Collecting employment outcome data
- Providing grants to lead state and county agencies
- Securing transportation funding for people with disabilities to get to work
- Ensuring access to service information for people with disabilities
- Improving employment service reimbursement rates for employment services providers
During the 2023 legislative session, all these recommendations passed except for the sunset date to recommend that the Minnesota State Legislature officially end the use of subminimum wage in Minnesota by August 1, 2025.
Department of Labor’s Proposed Changes
The DOL recently released a Notice of Proposed Rule Making (NPRM) outlining plans to phase out subminimum wages nationally. The proposal includes:
- Stopping new Section 14(c) certificate issuance to employers applying after the final rule’s effective date
- Allowing existing certificate holders who comply with all laws to:
- Continue paying subminimum wages for up to three years after the effective date
- Cease certificate renewal after the three-year period expires
The DOL seeks public input on several aspects of the proposal. First, they want to know whether the three-year transition period should be shortened or extended. They also want feedback on whether to allow one-time extensions for certificate holders who can show a clear reason why they need more time.
The DOL’s decision follows their preliminary finding that subminimum wages are no longer necessary to maintain employment opportunities for people with disabilities. This conclusion stems from:
- Expanded state and federal employment opportunities
- Enhanced civil rights protections
- Successful subminimum wage phase-outs in some jurisdictions
The proposed rule would ensure minimum wage pay for all workers with disabilities while allowing providers to maintain their core services. The DOL anticipates this change will benefit society and increase workforce participation among people with disabilities.
How to Submit Your Comments
The Minnesota disability community’s input on this issue is crucial. Whether sharing personal experiences or policy expertise, your comments can shape the final ruling. For those new to the public comment process, The Arc Minnesota offers guidance and resources.
IMPORTANT: You must submit your public comment by January 17, 2025 at 11:59 pm Eastern Time (10:59 pm Central Time).
Want Assistance Writing Your Comment?
If you would like assistance writing your comment, please email Tina Rucci, Public Policy Director for The Arc Minnesota. Her email is tinarucci@arcminnesota.org.