The Law Allowing Employers to Pay Disabled Workers ‘Pennies an Hour’

When the Fair Labor Standards Act was established in 1938, the United States was in the midst of the worst economic and labor crisis in the nation’s history. Child labor was rampant, workers’ hours frequently reached 100 hours each week, and employers paid meager wages to workers.

President Franklin D. Roosevelt put a stop to this labor rights nightmare by signing this landmark law, which established the standard 40 hour workweek, banned child labor, and set a minimum hourly wage for all workers.

At least, that’s the story we’re told about the FLSA.

In reality, the FLSA has a legal clause that excludes one group of people from the protections of a fair minimum wage: workers with disabilities. And that Depression-era provision of the FLSA still exists to this day.

That means that in 2018, employers can pay workers with disabilities as little as pennies a day, and it’s perfectly legal.

Although the practice has come under fire in recent years, many employers continue to pay out subminimum wages through sheltered workshops. These are non-profit, state, or local government institutions that claim to employ people with disabilities to prepare them for work in the mainstream economy, but many disability advocates argue that these so-called work training programs often task workers with disabilities with unskilled, unfulfilling menial labor that fails to prepare them for the competitive workforce.

And, aside from the occasional headlines about politicians such as Senator Elizabeth Warren championing the end of subminimum wages for workers with disabilities, we hear very little about this controversial practice.

So, what exactly is the clause that allows subminimum wage work, and how does this provision impact workers with disabilities in 2018?

In this article, you will learn more about the history of sheltered workshops and subminimum wages for workers with disabilities and what could be done to help workers with disabilities earn fair wages through meaningful work in an integrated workforce.

The Part of the FLSA That Makes Subminimum Wages Legal

The legal clause that allows employers to pay subminimum wages to workers with disabilities is Section 14 (c) of the FLSA. This provision allows certain employers to pay “special minimum wages” — wages below the federal minimum wage — to workers who have disabilities, provided that the employer has a certificate from the federal Wage and Hour Division. Many of these employers are sheltered workshops, according to NPR.

14 (c) states that employers can determine subminimum wages related to a workers’ productivity, says Christina J. Thomas, a labor and employment attorney who has represented hundreds of workers in cases involving workplace discrimination, employee benefits dispute, unpaid minimum wages, and more.

What that means is that these wages are generally calculated through tests like time/motion studies. For example, if an average worker is determined to be able to make 100 binders in an hour, but the worker with a disability being tested makes 15 binders in that time, that worker could be given a wage that is only 15 percent of the average worker’s wage.

However, time/motion test results can be tampered with, allowing these employers to reduce wages even further with little oversight or recourse. In fact, one investigation into Skills — a Maine nonprofit that accumulated 75 wage violations over misuse of subminimum wages — found that the company made math errors when computing wages, and failed to conduct time/motion studies correctly, according to Bangor Daily News.

“Companies are supposed to review the subminimum wage every six months and change it, but the problem is that it’s not regulated,” Thomas said. “Employers don’t have to report these wages, and the Department of Labor doesn’t go in and check unless someone files a complaint.”

Additionally these tests overlook the fact that there are important attributes people can bring to their workplace — whether they are a worker with a disability or not — that contribute to company success beyond numeric productivity, Thomas said.

“One of the things that I focus on a lot as a labor and employment lawyer, regardless of the type of case it is, is the dynamics in the workplace. We’re not robots. We don’t show up at work and sit at our desk and not talk to others. We have social connections,” says Thomas. “So maybe a worker with a disability won’t be able to work with the same speed and precision on the production line as someone with an average IQ. But can this person bring something else to the environment, something else to the social dynamic that goes on at work?”

Ultimately, Section 14 (c) was borne out of a concern that workers with disabilities would not be hired if there wasn’t a financial incentive.

“Employment at less than the minimum wage is authorized to prevent curtailment of opportunities for employment,” according to the U.S. Department of Labor.

This was the historical justification for this provision, at least. After all, before the Civil Rights Movement and the signing of the Americans with Disabilities Act, people with disabilities were routinely segregated from mainstream society, denied from the workplace, and even placed in “institutions” where they were denied their most basic constitutional rights.

But advocates for workers with disabilities say this provision no longer fits 2018, a time when workers with disabilities have a protected right to earn a fair and livable wage and are empowered to enter integrated, mainstream employment. They want 14 (c) repealed.

There’s a long way to go until that happens, though — there are still 2,065 employers certified to pay subminimum wages by the WHD, and 228,693 workers making subminimum wages, according to the DOL.

If you or someone you love is being underpaid, forced to work off-the-clock, or wrongly denied overtime pay, contact us for a free, no-risk case evaluation.

The History of Sheltered Workshops

The practice of paying workers with disabilities subminimum wages for work via isolated sheltered workshops is often criticized as modern day sweatshop labor that keeps workers with disabilities segregated, in poverty, and without the proper training needed to thrive in a competitive workforce.

Employers who pay subminimum wages and operate sheltered workshops, on the other hand, make the argument that they’re helping people with disabilities, who would otherwise have difficulty finding work, receive an income.

But what are sheltered workshops, exactly, and when did the practice of diverting workers with disabilities into these programs first begin?

The first-known sheltered workshop was the Perkins Institute for the Blind, established in 1840. People who were blind were given permanent jobs that were sheltered from the competition of the mainstream workforce, according to a report by the National Disability Rights Network.

Sheltered workshops were considered a progressive solution for the time, when the model of support for people with disability emphasized charity, as opposed to the current belief in the promotion of independent and integration. But not all good intentions lead to good results.

Criticisms Against Sheltered Workshops

Despite a shift from an industrial economy to one where people with disabilities can pursue greater employment opportunities with the help of assistive technology and occupational training, many workers with disabilities remain in sheltered workshops.

Disability advocates like NDRN say that it’s time for these work environments to be phased out for a number of reasons.

Pay Disparity

Many critics of sheltered workshops point to the disparity in pay between the executives who run these businesses — many of whom earn a six-figure salary — and the workers who supply the labor to these businesses.

Pay inequality and the CEO-to-worker wage gap is a major issue seen in the mainstream workforce as well, but the pay disparity in these cases is especially egregious when you consider that these nonprofits and sheltered workshops that employ people who are paid subminimum wages often receive state and federal funding to support these workers.

Chimes, a sheltered workshop in Baltimore, received $2.7 million in state and federal funding to support 240 workers with disabilities, according to a report by The Washington Post. That said, 25 percent of the company’s employees were reportedly paid under the minimum wage, while the CEO, Marty Lampner, received $453,000 in total compensation in 2013.

The nonprofit organization Goodwill has also come under fire for this practice in recent years. The organization has reportedly paid some workers as little as 22 cents an hour, while many of the company’s executives make as much as six- and seven-figure salaries, according to Forbes.

It’s important to note that not all instances of highly compensated CEOs of companies or organizations who employ subminimum wage workers necessarily point to exploitation. Nevertheless, it can be a red flag when seen among sheltered workshops and nonprofit organizations.

“Some of the larger corporations have a diversity initiative; they want to help out the community by allowing folks to come in and become integrated in the workplace,” explained Thomas. “But if you’re pulling in federal or state money for your nonprofit, and you have five employees, and three of those employees aren’t even being paid minimum wage, and you’re pulling a six-figure salary, which is coming from federal tax dollars… that could be a problem.”

“I think for any company that’s going to employ workers with disabilities and receive federal or state money for doing so, there needs to be strict oversight,” she added.

Workers with Disabilities Deserve Career Choices

Another concern that advocates have is that sheltered workshop workers aren’t given the proper occupational training needed to help them make the choice to pursue a career in the mainstream workforce if they decide to. In the past, many people with disabilities were routed into sheltered workshops straight out of high school. And once they’re in this type of work environment, it’s hard for them to get out.

These sheltered workshop programs are intended to be short-term training for workers with disabilities until they are able to transition into the mainstream workforce with newly learned job skills. However, this rarely ends up being the case.

In reality, subminimum-wage workers with disabilities are generally given monotonous, repetitive tasks to complete for hours on end, such as packing boxes or sorting items. Critics argue that these tasks do not teach workers with disabilities the skills necessary to help them transition into more gainful employment, making their labor in sheltered workshops far from temporary.

Few subminimum wage workers at sheltered workshops ever transfer into integrated employment. One investigation into the 14 (c) by the federal Government Accountability Office found that only five percent of sheltered workshop employees leave to take a job in the community.

The Dangers of Segregated Work

Many workers with disabilities who work at a sheltered workshops perform isolated, unfulfilling labor for years. But in worst case scenarios, this type of segregated work can lead to appalling work conditions and human rights violations that go overlooked for decades, simply because these workers are out of sight from the mainstream public.

In 2013, the U.S. Equal Employment Opportunity Commission won a landmark verdict against Henry’s Turkey Service after it was found that the company was housing subminimum wage workers with intellectual disabilities in squalid, inhumane conditions and paying the workers far below minimum wage, according to The New York Times.

These workers — who were recruited from state institutions as young men — lived in an abandoned, roach- and rat-infested bunkhouse, making as little as $65 a month. At 3 a.m. each morning, the workers would be shuttled to the farm to perform difficult physical labor, such as plucking feathers off turkeys and hanging bloody turkey carcasses to be eviscerated. They did this work day in and day out.

Some of the workers suffered chronic work-related injuries but did not receive appropriate medical care for them. Others were even handcuffed to their beds or beaten for “violating” the rules of the farm, according to The New York Times.

This neglect and abuse spanned from 1974 to 2009, until government officials rescued the workers from the bunkhouse, freeing these men from a life of near-servitude. Despite this occurring in a tiny farm town, the townspeople of Atalissa, IA were unaware that these men lived in such horrific conditions, because they were so segregated from the rest of the public.

Ultimately, the “boys in the bunkhouse” case revealed the dangers of subminimum wages and sheltered workshops, and the potential for unscrupulous businesses to exploit workers through the provision and isolated work conditions.

“Henry’s Turkey Service has challenged us to look more closely at employment institutions,” Eve Hill, a deputy assistant attorney general in the Civil Rights Division of the Department of Justice, said to the The New York Times. “As result, the federal government has expanded its efforts to crack down on unnecessary segregation in employment systems.”

Solutions to Sheltered Workshops

While the government may be cracking down on unnecessary segregation in the form of sheltered workshops, simply shutting down these workplaces may not be the solution. Even those in favor of abolishing sheltered workshops and subminimum wages want to ensure that no workers with disabilities are harmed in the process of transitioning from sheltered workshops to integrated work.

The parents of workers with disabilities share these worries. For many families, the priority is not how much their children earn: it’s the boost in self-esteem their children feel from the work they do, and a regular schedule that gets them out of the house and interacting with their peers. They fear that the end of these type of programs would make it hard for their children to find any work at all.

These are all valid concerns, says Thomas.

“In all things in life, changes need to be incremental so that there’s not a shock. And I think as a society, if we say to ourselves ‘We don’t want these workshops to exist,’ then we need to take steps for incremental change,” Thomas said. “But in order for that goal to be a success, we need to figure out once these workshops close, where are these workers going to go?”

She adds, “Workers with disabilities aren’t going away — they’re part of our society now, and they’ve been part of our society for thousands of years. So how are we going to integrate people into our communities? Who in the community can help find something meaningful and worthwhile for people to do who don’t necessarily fit into our current gig economy?”

Many policymakers and advocates look to Vermont as a potential model for how workers with disabilities can find gainful employment outside of the sheltered workshop system when support systems are put in place that encourage integration and proper training.

Vermont: A Model for Integrated Employment and The End of Sheltered Workshops

In 2002 Vermont closed its last sheltered workshop. This was a major milestone for the state, but it didn’t happen overnight — the process leading up that moment actually began decades earlier.

In the 1980s the University of Vermont received a grant to create programs for integrated employment in partnership with state disability agencies, according to PublicSource. It was at that point that state policymakers decided to take steps to gradually phase out sheltered workshops.

They began by barring new people from entering sheltered workshops, and slowly cutting funding to these workshops. This ensured that younger generations of people with disabilities were not automatically funneled into sheltered workshops from high school, while protecting people who have been working in sheltered workshops for years.

Although this move initially garnered criticism from parents of people with disabilities, who worried that their children wouldn’t be able to find work outside of sheltered workshops, families became supportive of integration once they saw the benefits in hard numbers: 80 percent of workers with disabilities who worked at the last sheltered workshop in the state found integrated work within three years, according to a report by the Star Tribune.

The integrated employment rate of people with disabilities in Vermont is now 38 percent, twice the national average, according to a 2013 report by the University of Massachusetts Boston, Institute for Community Inclusion. Vermont also has the highest rate of community job placements for clients with developmental disabilities, at nearly six times the national average.

The number of workers with disabilities in Vermont who are employed in integrated workplaces continues to climb each year, as more businesses are educated on the value of workers with disabilities. This has created a new landscape full of potential for younger generations of people with disabilities.

“Young parents with high school students ready to graduate don't even know what a sheltered workshop is,” Jennie Masterson, a supported employment services coordinator at the Vermont Developmental Disabilities Services Division, explained to PublicSource. “It’s just typical now that you graduate and you go to college or you go to work.”

Other Legislative Efforts to End Subminimum Wages & Sheltered Workshops

Vermont is not the only place making strides to end subminimum wages and sheltered workshops. Efforts have been made to end the practice of subminimum wages, both on a federal and state level.

In fact, New Hampshire was the first state to repeal the law allowing employers to pay workers with disabilities at a subminimum wage. Governor Maggie Hassan signed a bill into law that prohibits employers from employing individuals with disabilities at an hourly rate lower than the federal minimum wage on May 7, 2015, according to New Hampshire Public Radio.

Maryland followed suit in 2016, signing a bill to repeal subminimum wages as well.

“By passing HB 420 and SB 417, we have upheld Maryland’s highest ideals,” said the bill’s sponsor, Rep. Jeff Waldstreicher. “Marylanders are a compassionate, caring people. We believe in the dignity of every individual, in equal rights.”

And in 2017, Seattle officials announced a proposal to end subminimum wages for people with disabilities in the city, stating that subminimum wages go against the spirit of the city’s historic $15 minimum wage law.

“Subminimum wages are an outdated practice that inherently devalue the employee receiving them,” Councilmember Herbold said in a [press statement]. “With so few subminimum wage certificates issued to employers, now is the perfect time to end this practice and lead the region in ending this discriminatory policy.”

On the federal level, the Obama administration raised the minimum wage for federal contractor workers from $7.25 to $10.10 in 2014 — including workers with disabilities under federal contracts. However, this ruling impacts only a small number of workers with disabilities making subminimum wages, advocates point out.

"We hope… going forward to convince Congress to repeal Section 14 (c) for all disabled workers,” Ari Ne'eman, president of the Autistic Self Advocacy Network, said in a press statement. “Equal rights should apply to everyone — we took a significant step forward on that road today."

Looking to a Future of Integration

There are inevitable growing pains that come with changing any long standing system of employment, and disability advocates must continue to challenge attitudes held by society, such as the belief that some people are just “too disabled” to do meaningful work.

But fair wages and integration in the workplace, many argue, won’t just benefit workers with disabilities — it’ll benefit society as a whole.

“Are we going to have an economy where we value variance in our working class, an economy where only a certain type of human is allowed to enter the workforce?” asks Thomas.

“Being able to integrate workers with disabilities into the workplace is going to help society in that it’s going to allow people to experience a connection with someone who’s different from them, who they may not otherwise have connected with,” said Thomas. “We need to continue to be open minded about what all people can contribute to the workforce, and I think the less we focus on numeric productivity, the more we gain from a human standpoint.”

She adds, “Assuming the worst of people deprives us of the best.”