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Subminimum Wage: Effects of Employment for Individuals with Disabilities – Factsheet

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Key Facts:

Fact 1:

Subminimum wage is a wage paid by an employer to an employee that is less than the minimum wage. Fair Labor Standards Act (FLSA) states that subminimum wages may be paid to: student-learners; full-time students employed by retail or service establishments, agriculture, or institutions of higher education; and physically and mentally disabled persons whose productive capacity is being impaired.

Fact 2:

Section 14(c) of the FLSA authorizes employers, after receiving a certificate from the Wage and Hour Division, to pay subminimum wages to workers who have disabilities for the work being performed. The certificate also allows the payment of wages that are less than the minimum wage to workers who have disabilities for the work being performed on contracts subject to the McNamara-O’Hara Service Contract Act (SCA) and the Walsh-Healey Public Contracts Act (PCA).

Fact 3:

According to the U.S. Department of Labor, the youth minimum wage is authorized by the FLSA, which allows employers to pay employees under 20 years of age a lower wage for 90 calendar days after they are first employed. Any wage rate above $4.25 an hour may be paid to eligible workers during this 90-day period.
Over 200,000 individuals with disabilities in the United States are being paid subminimum wage by their employer through the FLSA section 14(c).

Fact 4:

For people with intellectual and developmental disabilities (I/DD) or other significant disabilities, center-based employment, also called sheltered workshops, have long been used as a place to provide “prevocational” services for people deemed as either unemployable in competitive integrated employment (CIE) (as defined by the Rehabilitation Services Administration - 34 C.F.R. § 361.5(c)(9))or as “needing training” to prepare them for eventual CIE in their communities. However, center-based employment has been shown to rarely result in CIE, and most participants in center-based employment are paid substantially below minimum wage, as is currently allowed under Section 14(c) of the FLSA.

Fact 5:

Section 511 of the Rehabilitation Act prohibits employers using 14(c) subminimum wage certificates from continuing to pay wages below Federal minimum wage to employees with disabilities unless those employees are provided with career counseling and information and referral services by the State vocational rehabilitation (VR) agency that explains what VR can do for them and that there are other employment options available.

Fact 6:

Paying individuals with disabilities at subminimum wage is still a common approach in segregated centers/sheltered workshops. This approach continues to segregate people with disabilities from people without disabilities, preventing the fostering of competitive-integrated employment for all populations.

Recommended Readings:

  • Friedman, C., & Rizzolo, M. C. (2020). Fair-Wages for People With Disabilities: Barriers and Facilitators. Journal of Disability Policy Studies.
  • Kuo, Hung-Jen, & Levine, Allison, & Kosciulek, John. (2020). The Relationship of Quality of Life and Subminimum Wage: Implications of WIOA Section 511. Journal of Rehabilitation. 86. 31-38.
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