New Rule Limits FLSA Subminimum Wage Provision in Major Program Designed to Support Disabled Workers

Under a new rule set to take effect this year, employers participating in the federal government’s AbilityOne Program must pay their employees with disabilities the federal minimum wage.

Prior to October 19, 2022, employers in this program were able to pay employees with disabilities wages below the federal minimum.

“The AbilityOne Program is among the largest sources of employment in the U.S. for individuals who are blind or have significant disabilities.” The purchasing arrangement where the federal government buys products and services from participating employers was established in 1938 to help combat pervasive unemployment that disabled people in the U.S. face. Lack of meaningful employment opportunities for people with disabilities stubbornly persists as the unemployment rate for disabled people in 2021 was 10.1%; this number is nearly double the rate of nondisabled people which at the time was 5.1%.

Only 19.1% of disabled people in the United States are employed. And for those that are, a large number aren’t making wages at the federal minimum. Subminimum wages impact “over 100,000 persons with disabilities, although an exact count of the total number of individuals working for subminimum wages is unavailable and other estimates are much higher.”[1] Disabled workers impacted can make as little as $3.34 per hour.

How can that be?

Section 14(c) of the Fair Labor Standards Act (“FLSA”) regulates wages for employers who seek an exemption under the law to pay wages less than the Federal minimum to workers who have a disability that actually impairs the employee’s work productivity.

A disabled worker's productivity is evaluated through the first month of employment. This observation is then compared to nondisabled employees and their productivity. For example, a person without a disability who is paid $8 an hour and makes 80 items of product each hour for a total of 8 hours brings home $64 for that day. If a disabled person only makes 80 products in the same full workday, instead of being paid $8 an hour, this worker will only be paid $8 for the entire workday.

But I thought the Americans with Disabilities Act prohibited this type of differential treatment?

The ADA applies to disabled employees or applicants who are defined as qualified individuals with disabilities. Employers dictate the qualifications used to determine if a worker is “qualified”–– and those with “significant” disabilities most often don’t meet this high threshold (even with accommodations), despite being capable individuals.

Restrictions on Subminimum Wages

Today, over 1162 employers have FLSA exemptions that permit them to pay their employees with disabilities subminimum wages. The new rule is a result of years of advocacy and a recent 2020 report from the National Council on Disability. The Council pointed out that, despite the program’s increase in profitability over the last few years, disabled people continue to receive less pay for their work. And because of the certificates, which exempt employers from FLSA minimum wage standards, the program incentivizes segregation and perpetuates poverty for disabled populations–the exact issues the program was intended to combat. Because the AbilityOne Program wasn’t accomplishing this agenda and furthered the hardships people with disabilities face, something had to change.

Notably, the rule doesn’t eliminate the program’s ability to use 14(c) certificates completely. Instead, only employers utilizing AbilityOne contracts are mandated to pay federal, state, and local minimum wages (whichever is higher). AbilityOne nonprofits can continue to pay subminimum wages.