Department of Labor Proposes to Phase Out Subminimum Wages for Workers with Disabilities Under the FLSA
Department of Labor Proposes to Phase Out Subminimum Wages for Workers with Disabilities Under the FLSA
Mayowa Gbenro, Associate
On December 3, 2024, the U.S. Department of Labor (“DOL”) announced a proposed rule to phase out the issuance of Section 14(c) certificates under the Fair Labor Standards Act (“FLSA”). Since 1938, these certificates have allowed employers to pay workers with disabilities less than the federal minimum wage based on their productive capacity. The DOL’s proposed rule reflects its conclusion that these certificates are no longer necessary as a result of significant advancements in disability rights, workforce inclusion, and employment opportunities for individuals with disabilities.
Overview of Section 14(c) Certificates
Section 14(c) permits employers to apply for certificates from the DOL’s Wage and Hour Division, authorizing them to pay less than the federal minimum wage to workers whose disabilities impair their productivity. Historically, the provision sought to avail employment opportunities to individuals with disabilities who might otherwise struggle to find work. Certificates have been issued to community rehabilitation programs (“CRPs”), schools, hospitals, and private employers.
The DOL, however, now asserts that the employment landscape has changed significantly since the last substantive update to Section 14(c) regulations in 1989. Advancements in legal protections, such as the Americans with Disabilities Act, combined with improvements in workforce accommodations and training programs, have enabled workers with disabilities to secure competitive-wage employment. The DOL argues that subminimum wages are no longer required to create or maintain employment opportunities for these workers.
Key Provisions of the Proposed Rule
The proposed rule would eliminate the issuance of new Section 14(c) certificates for employers submitting applications after the rule’s effective date.[1] Employers with existing certificates would be permitted to continue paying subminimum wages for up to three years. While the proposed rule does not mandate that disabled workers currently paid under Section 14(c) certificates leave their jobs, the DOL anticipates that many workers will transition into roles paying at least the federal minimum wage.
The DOL cites multiple factors supporting its decision to phase out Section 14(c). Over the past several decades, initiatives have increasingly supported Competitive Integrated Employment (“CIE”) for individuals with disabilities, showing their ability to succeed in minimum-wage or higher-paying roles. Several states, including Colorado[2], have already enacted laws restricting or eliminating subminimum wages for workers with disabilities.
Furthermore, the use of Section 14(c) certificates has declined sharply. As of May 1, 2024, only 801 employers nationwide either had these certificates issued or pending, down from 5,612 in 2001. The DOL also emphasizes that subminimum wages are now widely viewed as outdated and discriminatory, conflicting with contemporary workforce standards of equity and inclusion.
Employer Considerations
For Colorado employers, the proposed rule aligns with the state’s existing efforts to eliminate subminimum wages, which the Colorado General Assembly describes as “an economic justice issue for individuals with disabilities.”[3] As these efforts continue to gain traction nationally, Colorado employers should continue to evaluate their workforce and identify pathways to transition workers with disabilities into roles paying competitive wages. This proposed rule represents a significant step toward equity and inclusivity, and further underscores the importance for Colorado employers to assess its impact and align their practices accordingly, once implemented. Campbell Litigation is available to assist with compliance strategies and to address questions about these and other wage-related developments.
[1] The effective date is yet to be determined as the DOL is still inviting comments from the public, up and until January 17, 2025. See https://www.federalregister.gov/documents/2024/12/04/2024-27880/employment-of-workers-with-disabilities-under-section-14c-of-the-fair-labor-standards-act#footnote-3-p96466
[2] See C.R.S. § 8-6-108.7, effective July 1, 2021. Other states include Alaska, California, Delaware, Hawaii, Illinois, Kansas, Maine, Maryland, Minnesota, Nevada, New Hampshire, New York, Oregon, Rhode Island, and Washington.
[3] Id. at (1)(d)