On December 3, 2024, the Department of Labor (DOL) introduced a Final Rule to end an employer’s ability to pay individuals with disabilities subminimum wages under federal law. The current federal minimum wage is $7.25 per hour. Section 14(c) of the Fair Labor Standards Act (FLSA) permits employers to pay employees less than minimum wage only if their “earning or productive capacity is impaired by age, physical or mental deficiency, or injury.” This is a little known section of the FLSA, but it does exist.
Under the current language in this section of the FLSA, an employer can seek a certificate (commonly referred to as a Section 14(c) certificate) from the Secretary of Labor to allow them to pay productivity-based subminimum wages to workers with disabilities, but only where such certificates are necessary to prevent the curtailment of opportunities for employment. In other words, employers cannot simply choose on their own to pay workers with disabilities subminimum wages, they need to seek a Section 14(c) certificate from the Secretary of Labor. Notably, the DOL’s regulations clarify the statute does not permit paying subminimum wages to all disabled individuals, only to those whose earning or productive capacity is – in fact – impaired by their disability. Importantly, the regulations do not define a “worker with a disability” as simply “a worker who has a disability” or a “disabled worker.” Instead, only an individual whose physical or mental disability impairs his, her or their earning or productive capacity “for the work to be performed” can satisfy the definition of a “worker with a disability.”
In short, even when an employer obtains a Section 14(c) certificate, it was not a blanket authorization to pay any worker with a disability a subminimum wage.
This is especially true because employers must also be aware of whether paying subminimum wages would violate other federal mandates or state law. Federal contractors are not permitted to pay subminimum wages, many states have set higher minimum wage requirements, and at least sixteen states ban paying individuals with disabilities subminimum wages.
According to the Final Rule, the allowance for Section 14(c) certificates to pay subminimum wages is no longer necessary due to expanding opportunities for individuals with disabilities in the workforce. The DOL recognizes these opportunities are due, in part, to significant legal and policy developments as well as resources and training available to recruit, hire and retain workers with disabilities which have prevented the curtailment of such opportunities.
In support of the Final Rule, the DOL issued a press release commenting, “[o]ne 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.” To this end, the DOL’s proposed rule would:
- Cease the DOL’s issuance of new Section 14(c) certificates starting on the effective date of a final rule; and,
- Institute a three-year period beginning on the effective date of a final rule for employers holding existing Section 14(c) certificates to gradually cease paying subminimum wages to workers with disabilities.
The Final Rule is open for comments until January 17, 2025. Whether it is adopted, in some form or fashion, remains to be seen, as the new administration will be sworn in just three days later.
As with other employment-related rules and topics, Bricker Graydon’s Labor and Employment attorneys will watch what happens next and are here to help with any questions you may have.
