The U.S. Department of Labor (DOL) has announced a proposed rule to eliminate the subminimum wage provisions under Section 14(c) of the Fair Labor Standards Act (FLSA). If finalized, this rule will fundamentally change wage practices for workers with disabilities. The proposed rule represents a significant shift in wage practices for workers with disabilities, reflecting the growing emphasis on equitable treatment and inclusion in the workplace. While the transition may present challenges for some employers, it also offers an opportunity to adopt innovative workforce practices that benefit both employees and organizations. Here’s what employers need to know and how they can prepare.
Background on Section 14(c)
Enacted in 1938, Section 14(c) of the FLSA allows employers to apply for special certificates to pay workers with disabilities below the federal minimum wage. While intended to expand employment opportunities, many workers under these certificates earn significantly less than minimum wage, with some paid just pennies per hour. Over the decades, civil rights advancements, improved employment support systems, and evolving societal expectations have called into question the necessity and fairness of this provision. Today, many states and employers have moved away from subminimum wages, opting instead for inclusive, equitable pay practices.
Details of the Proposed Rule
The DOL’s proposal includes two key points:
- No New Certificates. Employers would no longer be able to obtain new Section 14(c) certificates to pay subminimum wages.
- Phase-Out Period. Current certificate holders would have three years to transition their wage practices to meet federal minimum wage standards.
The DOL argues that subminimum wages are no longer necessary to provide job opportunities for workers with disabilities, citing successful transitions in states that have already eliminated the practice.
Impact on Employers
If implemented, this rule will require employers who currently use Section 14(c) certificates to:
- Transition all workers with disabilities to roles compensated at or above the federal minimum wage.
- Evaluate and potentially redesign employment models, particularly for sheltered workshops or similar settings.
- Adjust budgets to account for increased wage costs.
Next Steps for Employers
To prepare for the potential elimination of Section 14(c) certificates, employers should consider the following:
- Audit Wage Practices. Identify employees currently paid under a Section 14(c) certificate. Assess the financial impact of transitioning these roles to at least the federal minimum wage.
- Develop Transition Plans. Create a timeline to phase out subminimum wages within the proposed three-year period. Partner with workforce development programs to support employees transitioning to full-wage roles.
- Invest in Training and Support. Provide skill development and job coaching for workers with disabilities to enhance productivity and employability. Train managers and human resource teams on inclusive hiring and pay practices.
- Engage Stakeholders. Provide feedback during the DOL’s public comment period, which closes at 11:59 pm on January 17, 2025. Learn more about how to comment on a notice of proposed rulemaking.
- Check State Law. Some states such as California, Maine, Maryland, New Hampshire, Oregon, and Washington have all successfully passed laws to eliminate provisions exempting employees with disabilities from the minimum wage law. New York has introduced proposed legislation, that has not yet passed. Where federal and state laws differ employers should pay the higher rate.
- Monitor Legal and Policy Updates. Stay informed about developments in the proposed rule and prepare to implement changes if it is finalized.
HR Works will continue to monitor this topic and provide updates as they become available.
