Hoosier orgs pleased with federal proposal to phase out subminimum wage
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The U.S. Department of Labor last week announced a proposal to phase out a program that allows employers to pay certain workers with disabilities less than the minimum wage.
Currently, employers can apply for certificates under section 14(c) of the Fair Labor Standards Act to pay a subminimum wage, but the DOL is proposing to discontinue the issuance of new certificates and phase out existing certificates over a three-year period.
Kim Dodson, CEO of The Arc of Indiana, says the move has been anticipated for some time and is in line with efforts that the state of Indiana has already implemented.
“The state of Indiana has started its own transition away from the use of 14(c)’s over the last couple of years,” Dodson told Inside INdiana Business. “They have a goal to end it by the end of 2027, so just having that Department of Labor push behind all of that is just really encouraging.”
The 14(c) certificate program has allowed employers to pay less than the minimum wage for workers “whose earning or productive capacity is impaired by a physical or mental disability, including those relating to age or injury,” according to the DOL.
But Dodson said over the past few years, increasingly more organizations in Indiana have worked to move away from using the certificates and have seen positive results.
“A lot of people [with disabilities] do want to work in a community setting and want to get out of that segregated workshop,” she said. “So we are seeing a lot of people have success working out in the community. [We] have a lot of people who are making good wages to do the things that they enjoy doing, to go see movies, go out to dinner with friends, have a little bit more independence.”
Dodson said many of the individuals are building up toward working full-time and are able to work enough to utilize health benefits through their employers.
In 2021, Huntington-based nonprofit Pathfinder Services announced it had requested to be withdrawn from future 14(c) certifications.
Pathfinder contracts with area companies through its Outsource Manufacturing division to provide training and work experience. Under the 14(c) certification, those workers were previously paid based on their production output as they learn the skills they need to succeed.
CEO Danielle Tips said the transition away from the certification was very smooth with minimal financial impact. And the response from the workers has been positive as well despite some initial growing pains.
“Just like every employee here, they get PTO. They are eligible for all of the benefits that every employee is eligible for. They take the required trainings,” she said. “But that also means with all of those rights, there also comes responsibilities. So there’s been a learning curve and some education around how do we help support and accommodate?”
Tips said the move away from the 14(c) certifications is the result of advocacy from individuals with disabilities themselves, as well as family members and others who work and support those people.
She added that the transition part of a natural evolution in the workforce.
“I think it’s just an acknowledgement that as time goes on, we know more,” she said. “We have better technology. We just have better knowledge of the human mind and the human capacity and better ways to support people, better ways to accommodate people. It’s just not something that’s needed anymore.”
Tips said the individuals who are now making minimum wage or more are empowered because they feel like an employee.
“They get raises. They get bonuses. They get all of those things just as as everyone else receives them. They look forward to that,” she said. “And we’ve also have some people transition out of the Outsource Manufacturing and into community employment, and that is our goal.”
Tips talked about Indiana’s efforts to help organizations transition away from the subminimum wage.
Dodson said employers have also embraced the change.
“Those employers have been able to see firsthand why hiring people with disabilities is good business and not just good charity, and that has absolutely helped us prove the point that people deserve to get paid a better wage than some minimum,” she said.
Under the DOL proposal, the department would cease issuing new 14(c) certificates upon the approval of the final rule. Also, a three-year period would begin during which employers holding existing certificates to gradually cease paying subminimum wages to workers with disabilities.
“One of the guiding principles of the American workplace is that a hard day’s work deserves a fair day’s pay, and this proposal ensures that principle includes workers with disabilities,” Jessica Looman, administrator of the DOL’s Wage and Hour Division, said in written remarks. “Employers today have more resources and training available to recruit, hire and retain workers with disabilities in employment at or above the full minimum wage, and this proposed rule aligns with that reality.”
Dodson noted that there is some concern of whether the proposal will move forward with a new presidential administration, but she hopes that the government will reach out to learn more about the impact of such a move before making any decisions.
“In a few years from now, this is not where people want to work. They don’t want to be in a subminimum wage environment,” Dodson said. “The kids going into high school now have a whole different mindset, and so do their parents about what their future should look like, and it does not include subminimum wage.”
The DOL is seeking public comments on the proposal through Jan. 17. You can learn more here.