The U.S. Department of Labor (DOL) recently withdrew its Notice of Proposed Rulemaking that would have phased out the payment of subminimum wages to workers with disabilities. In its withdrawal notice, the DOL justified its decision by noting the more than 17,000 public comments it received after the proposed rule’s publication. The DOL also cited concerns by some members of Congress and others about the statutory authority of DOL to permanently terminate this program, which is specifically authorized by the Fair Labor Standards Act (FLSA).
The Notice of Proposed Rulemaking, which the DOL published in December 2024, sought to amend 29 C.F.R. part 525 by gradually phasing out certificates under Section 14(c) of the FLSA. This provision currently allows employers to get certificates from the DOL to pay individuals with disabilities less than the federal minimum wage of $7.25 per hour. The certificate also allows the payment of subminimum wages to these workers on contracts under the McNamara-O’Hara Service Contract Act and the Walsh-Healey Public Contracts Act.
Most individuals employed under Section 14(c) certificates have intellectual or developmental disabilities. The employers that utilize Section 14(c) certificates are often sheltered workshops where personnel oversee workers who all have disabilities. Many of these employers are nonprofit organizations that also provide workers with the chance to build other skills, such as socialization skills.
In its 2024 Notice of Proposed Rulemaking, the DOL asserted that payment of subminimum wages was no longer necessary to safeguard employment opportunities for workers with disabilities. In recent years, employers have shifted to integrate employees with disabilities into the general workforce, which allows them to work with people without disabilities. Furthermore, advances in technology have increased employment opportunities for workers with disabilities in general. The DOL also pointed to the declining number of Section 14(c) certificates in use. In 2024, close to 40,000 workers were employed under Section 14(c) certificates, as opposed to 424,000 workers in 2001.
The DOL also noted that various states, including the state of Illinois, have phased out the usage of similar subminimum wage provisions. In January 2025, Illinois Governor J.B. Pritzker signed House Bill 793 into law, which will prohibit businesses and residential facilities from paying persons with disabilities less than minimum wage starting in 2030. The Illinois bill creates a transition grant program to allow companies to continue employing people with disabilities, but at a level that at least meets minimum wage standards. Illinois was the 19th state to eliminate subminimum wage for workers with disabilities through state legislation.
The DOL’s withdrawal of the Notice of Proposed Rulemaking leaves the current framework for Section 14(c) certificates intact. As a result, companies in states that have not yet adopted state laws phasing out subminimum wages can still employ workers with disabilities and pay them less than minimum wage.
Frequently Asked Questions
What workers qualify for employment at subminimum wages under Section 14(c) certificates?
The Section 14(c) program applies to workers whose “earning or productive capacity is impaired by a physical or mental disability.” However, companies in select states may not employ workers with disabilities at subminimum wages in some states, including Illinois.
What does a company need to show to get a Section 14(c) certificate?
The DOL must issue certificates under Section 14(c) of the FLSA to the extent “necessary to prevent the curtailment of opportunities for employment.” Therefore, companies generally need to show that they would not be able to afford to employ people with disabilities without paying them subminimum wages.
What additional responsibilities does an employer have if they employ workers with disabilities under Section 14(c) certificates?
Section 511 of the Rehabilitation Act requires that workers with disabilities who receive subminimum wages also must receive regular career counseling and information about self-advocacy, self-determination, and peer monitoring training in their local area. Employers must provide this instruction to workers every six months during their first year of employment, and annually thereafter.
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