Employment of Workers With Disabilities Under Section 14(c) of the Fair Labor Standards Act

Federal RegisterDec 4, 2024

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DEPARTMENT OF LABOR

Wage and Hour Division

29 CFR Part 525

RIN 1235-AA14

Employment of Workers With Disabilities Under Section 14(c) of the Fair Labor Standards Act

AGENCY:

Wage and Hour Division, Department of Labor.

ACTION:

Notice of proposed rulemaking.

SUMMARY:

The Fair Labor Standards Act (FLSA or Act) authorizes the Secretary of Labor to issue certificates allowing employers 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. Employment opportunities for individuals with disabilities have vastly expanded in recent decades, in part due to significant legal and policy developments. Based on that evidence, the Department has tentatively concluded that subminimum wages are no longer necessary to prevent the curtailment of employment opportunities for individuals with disabilities and thus proposes to phase out the issuance of section 14(c) certificates.

DATES:

Interested persons are invited to submit written comments on this notice of proposed rulemaking (NPRM) on or before January 17, 2025.

ADDRESSES:

You may submit comments, identified by Regulatory Information Number (RIN) 1235-AA14, by either of the following methods:

•

Electronic Comments:

Submit comments through the Federal eRulemaking Portal at

https://www.regulations.gov.

Follow the instructions for submitting comments.

•

Mail:

Address written submissions to: Division of Regulations, Legislation, and Interpretation, Wage and Hour Division, U.S. Department of Labor, Room S-3502, 200 Constitution Avenue NW, Washington, DC 20210.

Instructions:

Response to this NPRM is voluntary. The Department requests that no business proprietary information, copyrighted information, or personally identifiable information be submitted in response to this NPRM. Commenters submitting file attachments on

https://www.regulations.gov

are advised that uploading text-recognized documents—

i.e.,

documents in a native file format or documents which have undergone optical character recognition (OCR)—enable staff at the Department to more easily search and retrieve specific content included in your comment for consideration.

Anyone who submits a comment (including duplicate comments) should understand and expect that the comment, including any personal information provided, will become a matter of public record and will be posted without change to

https://www.regulations.gov.

The Department posts comments gathered and submitted by a third-party organization as a group under a single document ID number on

https://www.regulations.gov.

All comments must be received by 11:59 p.m. ET on January 17, 2025, for consideration in this rulemaking; comments received after the comment period closes will not be considered.

The Department recommends that commenters submit their comments electronically via

https://www.regulations.gov

to ensure timely receipt prior to the close of the comment period. Please submit only one copy of your comments by only one method.

Docket:

For access to the docket to read background documents or comments, go to the Federal eRulemaking Portal at

https://www.regulations.gov.

In accordance with 5 U.S.C. 553(b)(4), a summary of this rule may also be found at

https://www.regulations.gov.

FOR FURTHER INFORMATION CONTACT:

Daniel Navarrete, Director, Division of Regulations, Legislation, and Interpretation, Wage and Hour Division (WHD), U.S. Department of Labor, Room S-3502, 200 Constitution Avenue NW, Washington, DC 20210; telephone: (202) 693-0406 (this is not a toll-free number). Alternative formats are available upon request by calling 1-866-487-9243. If you are deaf, hard of hearing, or have a speech disability, please dial 7-1-1 to access telecommunications relay services.

Questions of interpretation or enforcement of the agency's existing regulations may be directed to the nearest WHD district office. Locate the nearest office by calling the WHD's toll-free help line at (866) 4US-WAGE ((866) 487-9243) between 8 a.m. and 5 p.m. in your local time zone, or log onto WHD's website at

https://www.dol.gov/agencies/whd/contact/local-offices

for a nationwide listing of WHD district and area offices.

SUPPLEMENTARY INFORMATION:

I. Executive Summary

The FLSA generally requires that employees be paid at least the Federal minimum wage, currently $7.25 per hour, for every hour worked and at least one and one-half times their regular rate of pay for each hour worked over 40 in a single workweek. 29 U.S.C. 206(a), 207(a). Since its enactment in 1938 through today, section 14 of the FLSA has included a provision authorizing the Department to issue certificates permitting employers to pay workers at wage rates below the Federal minimum wage when the worker's disabilities impair their earning or productive capacity. The section 14 statutory provision, however, has always provided that such certificates may only be issued to the extent “necessary to prevent curtailment of opportunities for employment.”

As the Supreme Court explained in 1947, the language and legislative history of the section show that its purpose is to prevent the imposition of a full minimum wage from depriving those with “physical handicaps” of “all opportunity to secure work.”

However, as the Court emphasized, “to have written a blanket exemption of all [such workers] from the Act's provisions might have left open a way for wholesale evasions. Flexibility of wage rates for them was therefore provided under the safeguard of administrative permits.”

Hence, section 14(c) authorizes the Secretary to issue certificates allowing payment of subminimum wages to individuals with disabilities only when conditions make it “necessary” to do so.

29 U.S.C. 214(c)(1).

Walling

Portland Terminal Co.,

330 U.S. 148, 151 (1947). The Department notes that some terminology used in this NPRM reflects the terms used in the statute and regulations at the time of their issuance or quotations from various sources. Quotations are attributable to the sources indicated and do not necessarily reflect the current views or terminology of the Department. Since the early 1990s, the government has replaced outdated and offensive terms like “the handicapped” with more respectful, person-first terminology, such as “individuals with disabilities.” Throughout this NPRM, the Department references outdated terms only when necessary to accurately reflect quoted sources or to illustrate changes that have occurred.

Id.

The Department first promulgated regulations governing the issuance of these “administrative permits” in 1938, and last substantively updated them in 1989, more than 35 years ago. Since 1989 (and profoundly more so since the time the statutory provision was enacted and its implementing regulations were promulgated nearly 85 years ago), opportunities for employment have dramatically changed for individuals with disabilities. Fueled by the disability rights movement, societal and cultural assumptions, beliefs and expectations regarding the employment of individuals with disabilities have evolved, and opportunities for individuals with disabilities have

dramatically expanded. Federal legislation and judicial precedent have established and enshrined fundamental legal protections requiring equal access, opportunities, and respect for individuals with disabilities in both education and employment. Of these legislative and judicial developments, the landmark Americans with Disabilities Act (ADA) of 1990,

enacted the year after the section 14(c) regulations were last substantively updated, has had a profound impact on employment opportunities for individuals with disabilities. In addition, the President and executive agencies have taken steps to end the payment of subminimum wages to workers with disabilities on certain government contracts. Numerous States and localities have prohibited or limited the payment of subminimum wages to workers with disabilities within their jurisdictions. In short, employment opportunities for individuals with disabilities have advanced significantly since the FLSA's enactment in 1938, when it was much more difficult for individuals with disabilities to secure employment at the full minimum wage.

The ADA was subsequently amended by the ADA Amendments Act of 2008, 42 U.S.C. 12111

et seq.

As discussed in section III.B, the ADA mandates equal employment opportunity for individuals with disabilities by prohibiting discrimination and requiring reasonable accommodation.

Id.

Although it is widely acknowledged that individuals with disabilities continue to face challenges in obtaining equal opportunity and treatment, the extent of legal protections, opportunities, resources, training, technological advancements, and supports has dramatically expanded since 1989, when the Department's regulation was last substantively updated, to assist individuals with disabilities both in obtaining and maintaining employment at or above the full minimum wage.

Employers similarly have substantially more resources and training available to recruit, hire, and retain workers with disabilities in employment at or above the full minimum wage. This comprehensive system of new approaches has rendered it unnecessary to depend upon subminimum wages to secure employment opportunities for individuals with disabilities and, given the enhanced opportunities for employment since the Department last substantively updated its regulations in 1989, vastly more individuals with disabilities—including intellectual or development disabilities (I/DD)—work at full-wage employment than work under section 14(c) certificates. Recognizing the expansion of full-wage employment options for individuals with disabilities, an increasing number of oversight and advisory reports, such as those published by the U.S. Commission on Civil Rights (USCCR) and the National Council on Disability (NCD), have vigorously called for a “phase out” of section 14(c) certificates. As another indication that subminimum wages are not necessary to prevent the curtailment of employment opportunities, an increasing number of States and localities, including many jurisdictions with higher minimum wages than the FLSA minimum wage, have prohibited or limited the payment of subminimum wages in their respective jurisdictions, and an increasing number of employers themselves are voluntarily opting out of paying subminimum wages, as is reflected in the rate at which the number of section 14(c) certificate holders has substantially declined in recent years.

This expansion of employment opportunities, resources, training, and supports is applicable for all individuals with disabilities, including individuals with intellectual and developmental disabilities who comprised about 90 percent of the workers with disabilities still being paid subminimum wages as of August 2021.

See

U.S. Gov't Accountability Office, GAO-23-105116, “Subminimum Wage Program: DOL Could Do More to Ensure Timely Oversight” (2023) (2023 GAO Report), at 24,

https://www.gao.gov/products/gao-23-105116.

Against this backdrop, the Department must fulfill its statutory mandate of assessing whether section 14(c) certificates continue to be necessary in order to prevent the curtailment of employment opportunities for individuals with disabilities. After careful review, consideration of input from stakeholders with a wide variety of viewpoints, and for the reasons discussed in this notice of proposed rulemaking, the Department preliminarily concludes that section 14(c) certificates that allow employers to pay subminimum wages to workers with disabilities are no longer necessary and thus proposes to amend 29 CFR part 525 to phase out the issuance of such certificates.

Accordingly, the Department proposes to stop issuance of new section 14(c) certificates and to phase out existing certificates over several years. At the conclusion of the phaseout period, this proposal would require only that subminimum wages no longer be paid to workers with disabilities. This proposed rule would not require workers to leave their current places of employment, where they often also receive a number of services, such as rehabilitation and training, nor would it require current section 14(c) certificate holders to amend the type of services that they currently provide or to modify the settings in which work is performed.

For example, if an employer currently employs a worker with disabilities to perform an assembly line job for 2 hours per day and then provides rehabilitation services to that same individual for 6 hours per day, this proposed rule would require only that the employer pay at least the full Federal minimum wage for the 2 hours of work performed by the worker. This proposed rule would not require any changes be made to the setting or rehabilitation services offered.

The Department specifically proposes to cease issuance of new section 14(c) certificates to employers submitting an initial application on or after the effective date of a final rule and permit existing section 14(c) certificate holders, assuming all legal requirements are met, to continue to operate under section 14(c) certificate authority for up to 3 years after the effective date of a final rule. The Department is also requesting comment as to whether, if this proposed rule is finalized, it would be appropriate to grant an extension for existing section 14(c) certificate holders who demonstrate a need and seeks comments on the need for such an extension period, and, if needed, its scope, structure and length.

II. Background

A. Introduction

The FLSA provides basic labor protections including Federal minimum wage and overtime compensation requirements. Section 6 of the FLSA establishes that the Federal minimum wage for covered employees is currently $7.25 per hour, “except as otherwise provided” in the Act.

Since its enactment in 1938, the FLSA has authorized the Department to issue certificates permitting the employment of certain workers with disabilities at wage rates lower than the otherwise applicable Federal minimum wage “to the extent necessary to prevent curtailment of opportunities for employment.”

To provide appropriate contextual information about section 14(c), this section of the proposed rule provides a high-level summary of the Department's legal authority regarding the issuance of section 14(c) certificates, the relevant statutory and regulatory history pertaining to FLSA section 14(c), an overview of how the Department's Wage and Hour Division (WHD) administers section 14(c) certificates and enforces the section 14(c) provisions, and a description of how

employers are currently using certificates. The Department then discusses its recent review of section 14(c) and addresses the current need for rulemaking.

29 U.S.C. 206.

29 U.S.C. 214(c)(1).

B. Statutory Authority

Section 14(c)(1) of the FLSA provides that the “Secretary, to the extent necessary to prevent curtailment of opportunities for employment, shall by regulation or order provide for the employment, under special certificates, of individuals . . . whose earning or productive capacity is impaired by age or physical or mental deficiency” at productivity-based subminimum wages.

The FLSA explicitly authorizes the Secretary to issue regulations governing the issuance of subminimum wage certificates.

29 U.S.C. 214(c)(1).

In authorizing the Secretary to issue certificates allowing employers to pay subminimum wages, Congress included a significant statutory limitation by permitting the issuance of certificates only “to the extent necessary to prevent curtailment of opportunities for employment.” At the same time, Congress determined that the Secretary “shall by regulation or order” provide for subminimum wage certificates, thereby conferring authority upon the Department to determine whether that standard has been met and under what circumstances subminimum wages should be paid. To best implement the statute at this point in time, the Department proposes to exercise its authority to find that subminimum wages are no longer necessary to prevent the curtailment of employment opportunities for workers with disabilities and to phase out the issuance of section 14(c) certificates.

WHD has legal authority to require payment of the full Federal minimum wage for all hours worked by covered, non-exempt employees. As previously noted, this proposed rule would not require workers to leave their current places of employment, nor would it require current section 14(c) certificate holders to amend the type of services that they currently provide or to modify the settings in which work is performed.

The Secretary's issuance of certificates prior to permitting employers to pay a subminimum wage acts as a “safeguard” against widespread abuse.

Section 14(c) requires the curtailment clause determination to be made by the Secretary prior to permitting employers to pay a subminimum wage because the right to a minimum wage under the FLSA is not waivable. The provision places this obligation on the Secretary to safeguard the program against abuse and ensure that no individual employer or employee can effect a waiver of their rights, contrary to the FLSA.

Portland Terminal,

330 U.S. at 151.

It is a fundamental principle of FLSA jurisprudence that the Act's rights, including the right to the Federal minimum wage, cannot be waived. The Supreme Court's “decisions interpreting the FLSA have frequently emphasized the nonwaivable nature of an individual employee's right[s] . . . under the Act” and “have held that FLSA rights cannot be abridged by contract or otherwise waived.”

The Supreme Court has identified at least three reasons for this nonwaiver rule. First, the Court has determined that the Act constituted “a recognition of the fact that due to the unequal bargaining power as between employer and employee, certain segments of the population required federal compulsory legislation to prevent private contracts on their part which endangered national health and efficiency.”

According to the Court, the protective purposes of the Act thus “require that it be applied even to those who would decline its protections”; otherwise, “employers might be able to use superior bargaining power to coerce employees to . . . waive their protections under the Act.”

Second, the FLSA sought to establish a “uniform national policy of guaranteeing compensation for all work” performed by covered employees.

Third, the Court has held that permitting employees to waive their FLSA rights is inconsistent with the explicit purpose of the Act to protect employers against unfair methods of competition.

Barrentine

Arkansas-Best Freight Sys., Inc.,

450 U.S. 728, 740 (1981) (listing cases).

Brooklyn Sav. Bank

O'Neil,

324 U.S. 697, 706 (1945).

Tony & Susan Alamo Found.

Sec'y of Labor,

471 U.S. 290, 302 (1985) (citing

Barrentine,

450 U.S. 728 and

Brooklyn Sav.,

324 U.S. 697).

Jewell Ridge Coal Corp.

Local No. 6167, UMWA,

325 U.S. 161, 167 (1945).

See

29 U.S.C. 202(a);

Brooklyn Sav.,

324 U.S. at 710.

Accordingly, just as employees cannot choose to forego overtime compensation due, employees cannot choose to be paid subminimum wages. Rather, an employer may only pay subminimum wages to workers with disabilities after obtaining a certificate from the Secretary. In turn, the Secretary may only issue such certificates when the threshold statutory requirement is met, that is, the Secretary determines that such certificates are necessary to prevent the curtailment of employment opportunities.

Recognizing the uniqueness of the certificate process for subminimum wages, the Supreme Court has observed that in enacting the FLSA, Congress wished to increase opportunities for gainful employment, and not impose requirements that would deprive any worker of “all opportunity to secure work.”

The Court further recognized, however, that a “blanket exemption” of workers with disabilities from the minimum wage could have invited “wholesale evasions” and accordingly subminimum wages could only be paid under the very specific “safeguard of administrative permits.”

Thus, the Secretary continues to be responsible for monitoring the payment of subminimum wages and ensuring that the statutory prerequisites for both certificate issuance and use of such certificates have been met.

See Walling

Portland Terminal,

330 U.S. at 151-52.

Portland Terminal,

330 U.S. at 151-52.

The FLSA expressly confers authority to the Department to make the determination under the curtailment clause that certificates are necessary to prevent the curtailment of employment opportunities prior to issuing certificates.

The most logical reading of the statutory phrase “opportunities for employment” is that the term “opportunities” refers to “a time or place favorable for executing a purpose” or “a suitable combination of conditions.”

Thus, the statutory language does not require a particular employment outcome for a worker with a disability being paid subminimum wages pursuant to a section 14(c) certificate. Rather, the statute requires the Department to evaluate the necessity of issuing section 14(c) certificates to prevent the curtailment of employment opportunities. In other words, the Department must consider whether the payment of subminimum wages is necessary to prevent the curtailment of “a suitable combination of conditions,” for employment opportunities, advancement, or progress broadly, not whether all workers attain a particular employment outcome, or a specific worker attains a particular job in a particular setting.

The Secretary has exercised this authority in various ways. Although the statutory language states that a certificate for subminimum wages may be issued when productive capacity is impaired by “age, physical or mental deficiency, or injury,” the granting of certificates has historically focused on disability, and today employers are paying subminimum wages almost exclusively to workers with I/DD. As an example of the Department's exercise of its authority, the Department promulgated regulations in 1939 which stated that workers with “temporary, or readily correctible, disabilities,” and those “where age alone is cited as a disability for a worker under 65,” would be ineligible for a certificate. 29 CFR 524.7(a), (c) (1939).

See

“Opportunity,” Webster's New International Dictionary 1709 (1938 ed.).

The statute gives the Department discretion to determine whether the curtailment standard has been met, and the Department proposes that, at this time, the issuance of certificates does not appear to be necessary to prevent the curtailment of employment opportunities for individuals with disabilities. Today, the Department is proposing to find that, due to the legal, social, and technological changes since that determination was made in 1989, subminimum wage certificates are unnecessary to prevent employment curtailment. This proposed rule considers the framework that the Department's current section 14(c) regulations, last substantively revised in 1989, uses to determine whether subminimum wages are necessary to prevent curtailment of employment opportunities. The current regulations (explained in more detail below) presume, without further analysis, that subminimum wages are necessary to prevent the curtailment of employment opportunities provided that (i) an individual has a disability that impacts their productivity in performing a particular job offered by a single certificate-holding employer and (ii) the employer can demonstrate it has calculated a productivity-based wage rate in accordance with the regulations for that particular job. In adopting this approach, the 1989 regulations collapse the statutory curtailment clause requirement into the statutory requirement that any commensurate wage for a particular job must be “related to the individual's productivity” at that job. The regulatory framework from 1989 thus rests on an implicit assumption that the two statutory requirements are the same, that disability-related impacts on an individual's productivity at a particular task means that a subminimum wage was necessary in order to prevent the curtailment of employment opportunities. Given the substantial developments in law and policy that have occurred since the regulations were last updated nearly 35 years ago and the expansion of opportunities now available to individuals with disabilities, the Department proposes to take into account the current scope of those employment opportunities instead of assuming that certificates are necessary to prevent the curtailment of employment opportunities for individuals with disabilities.

Given this, the proposed rule proposes to fulfill the curtailment clause requirement by assessing whether subminimum wages are still necessary based on a comprehensive consideration of how employment opportunities are both curtailed and created across the employment market. In assessing the statutory curtailment clause requirement, the Department today has more tools at its disposal than ever before—such as, for example, information from the nearly half of States that have prohibited or limited the use of subminimum wages—to make a preliminary determination that the payment of subminimum wages is not necessary to prevent the curtailment of employment opportunities. Particularly in view of the substantial social, structural, and legal changes that have occurred since 1989 to systemically reshape employment opportunities for individuals with disabilities (also discussed in detail below), the Department proposes herein that this comprehensive approach better fulfills the Secretary's statutory obligation to provide for the issuance of certificates only when “necessary.”

C. Overview of Statutory and Regulatory History of FLSA Section 14(c)

The FLSA provision allowing the payment of subminimum wages to certain workers with disabilities became effective when the FLSA was signed into law on June 25, 1938. As passed in 1938, section 14 of the FLSA instructed that the WHD Administrator, “to the extent necessary in order to prevent curtailment of opportunities for employment, shall by regulations or by orders provide for . . . the employment of individuals whose earning capacity is impaired by age or physical or mental deficiency or injury, under special certificates issued by the Administrator, at such wages lower than the minimum wage applicable under section 6 [of the FLSA] and for such period as shall be fixed in such certificates.”

As is plain from the statutory text, the precondition that certificates may only be issued to the extent necessary to prevent the curtailment of employment opportunities has been an essential part of the section 14 provision since enactment.

Fair Labor Standards Act of 1938, Public Law 75-718, 52 Stat. 1060 (1938) (codified at 29 U.S.C. 214). The original version of the FLSA also provided for subminimum wage rates for learners, apprentices, and messengers. 29 U.S.C. 214(1).

The legislative history shows that Congress intended to limit the circumstances under which subminimum wage certificates could be issued so as to avoid undermining the larger purposes of the FLSA and granted the Department authority to administer these limits. The initial legislative history of the Act includes statements from the joint Congressional hearings on the enactment of the FLSA in 1938 which addressed the purposes of establishing a Federal minimum wage and the Department's discretion in applying that standard under section 14. Congress explained that the Act “provides a floor below which the hourly wage ought not to fall and a limit beyond which the working week should not be stretched. These are the rudimentary standards of human decency at which the relatively automatic provisions of the bill are directed.”

Regarding the clause limiting the issuance of certificates to circumstances where they are “necessary in order to prevent curtailment of opportunities for employment” (the “curtailment clause”), Congress further explained that “even in the application of these rudimentary standards, a certain discretion is given to the enforcement agency so that it can protect the earning power of the workers and their opportunities for employment from unreasonable curtailment.”

Additionally, Congress advised that, in considering subminimum wages, the Department was to give “due consideration to the maintenance of the minimum standard of living, the health, efficiency, and well-being of the employees, and the avoidance of unreasonable curtailment of opportunities for employment and the earning power of the employees.”

Fair Labor Standards Act of 1937: Joint Hearings on S. 2475 and H.R. 7200 Before the Senate Comm. on Educ. and Labor, and House Comm. on Labor, 75th Cong. 1st Sess. Part 1, p. 55 (June 2-5, 1937).

Id.

at 57.

The Department has exercised the authority Congress gave it to evaluate the curtailment clause throughout the history of its administration of section 14. As a reflection of the determination that payment of subminimum wages was, at that time, necessary under certain circumstances to prevent the curtailment of employment opportunities, the Department promulgated its initial regulations implementing section 14 in 1938. Among other matters, the initial regulations established procedures whereby certificates were issued on an individual basis, set a general wage floor at 75 percent of the FLSA section 6 minimum wage, and allowed for a lower wage rate if an investigation showed that it was justified.

The Department amended its regulations in 1939, exercising its “curtailment clause” authority to limit the issuance of certificates by specifying that, for

example, certain groups of workers, including those with “temporary, or readily correctible, disabilities,” those “where age alone is cited as a disability for a worker under 65,” and those “whose piecework earnings are generally equal to or above the statutory minimum [wage],” would be ineligible for a certificate.

The Department also amended its regulations in 1940 to provide specific requirements governing the payment of subminimum wages to individuals with disabilities working in “sheltered workshops.”

The Department made a number of changes to its regulations implementing section 14 of the FLSA over the next 25 years, changing how certificates were issued and how wages were determined for workers.

29 CFR 524.5 (1938).

29 CFR 524.7(a), (c), and (d) (1939).

5 FR 655 (Feb. 13, 1940) (defining “sheltered workshop” as “a charitable organization or institution conducted not for profit, but for the purpose of carrying out a recognized program of rehabilitation for individuals whose earning capacity is impaired by age or physical or mental deficiency or injury, and to provide such individuals with remunerative employment or other occupational rehabilitating activity of an educational or therapeutic nature.”);

see also

29 CFR 525.1 (1940).

In 1966, Congress amended the FLSA to, in relevant part, establish a wage floor for persons with disabilities in both general employment and in certain sheltered workshops at not less than 50 percent of the FLSA minimum wage.

The 1966 statutory amendments also created three special categories of certificates for workers who were not subject to the wage floor

and extended FLSA coverage to hospitals and other institutions as employers.

The statutory language limiting the issuance of certificates to only circumstances where subminimum wages were necessary to prevent the curtailment of opportunities for employment was not changed by these amendments. The 1966 FLSA amendments also required the Secretary to submit a study to Congress “of wage payments to handicapped clients of sheltered workshops and of the feasibility of raising existing wage standards in such workshops.”

Public Law 89-601, 80 Stat. 830, 843-44 (1966) (29 U.S.C. 214(d)(1)).

Id.

(29 U.S.C. 214(d)(2)(A)-(B), 214(d)(3)). The three categories of certificates for workers who were not subject to the wage floor established by the 1966 FLSA amendments included, in certain specified circumstances, “handicapped workers engaged in work which is incidental to training or evaluation programs,” “multihandicapped individuals and other individuals whose earning capacity is so severely impaired that they are unable to engage in competitive employment,” and “handicapped clients in work activities centers.”

Id.

at 831-32 (29 U.S.C. 203(r), (s)).

See id.

at 845.

The 1966 amendments demonstrated Congress' continued intent to give the Department discretion to issue section 14 certificates based on a determination of need. In 1967, the Department updated its regulations based on the 1966 statutory amendments. That same year, the Department submitted its report to Congress, recognizing that the Congressional intent of the 1966 FLSA amendments was “aimed at `improving the economic circumstances of handicapped workers, speeding their movement into fully productive private employment, and assuring that such workers are not exploited through low wages.' ”

Reflecting the rapidly shifting views on the employment of individuals with disabilities since the FLSA was passed 28 years earlier, the report continued by noting that “it is now clearly the intent of the Congress that handicapped workers' wages be raised to at least the minimum wage as soon as feasible.”

U.S. Dep't of Labor, “Sheltered Workshop Report of the Secretary of Labor and Technical Report on Wage Payments to Handicapped Clients in Sheltered Workshops” (1967) (1967 DOL Report) at 1 (quoting Senate Report No. 1487, August 23, 1966, at 23).

1967 DOL Report at 1. The report did not explicitly address the curtailment clause regarding certificate issuance. However, as evidenced by the quoted passage, lawmakers' understanding of the potential employment of individuals with disabilities rapidly evolved since the 1938 passage of the FLSA. In 1938, Congressional documents were replete with references to individuals with disabilities as “subnormal” and, in contrast to the 1967 report cited herein, often assumed, without discussion, they were “unable to compete with their fellow workers.”

See, e.g.,

Fair Labor Standards Act of 1937: Joint Hearings on S. 2475 and H.R. 7200 before the Senate Comm. On Educ. And Labor; House Comm. On Labor, 75th Cong. 1st Sess. Part 1, p. 38 (June 2-5, 1937) (statement of Robert H. Jackson, Assistant Attorney General, U.S. Dep't of Justice); Cong. Rec. Vol. 83, Part 6, 75th Cong. 3d Sess. P. 7134 (May 19, 1938).

The Department's report made additional observations about subminimum wage employment and made recommendations on changes needed to support movement at that time from section 14(c) employment to full wage employment. In describing sheltered workshops, the Department observed that while individuals with disabilities being paid subminimum wages by the workshops (described as “clients” in the report) may be limited in their ability to produce, they were also limited by “the frequently obsolete methods of organization and production of the workshop.”

The report concluded that “[t]o measure the `worth' of a handicapped client by his `productivity' while making him work with outmoded equipment, or on jobs long ago automated, or with modern equipment which is not adapted to the individual's needs is to foredoom the great majority of handicapped clients to subminimum wages.”

Additionally, of particular note, the Department reported about the demographics of workers receiving subminimum wages in sheltered workshops, including by disability. The Department observed that, in 1967, workers with I/DD comprised approximately one-third of all workshop clients and were paid the lowest wages of any group of workers with disabilities employed under certificates.

1967 DOL Report at 2.

Id.

at 21.

In 1971, the Department again amended its regulations to include, in part, the introduction of a new 25-50 percent wage floor for “multi-handicapped and other workers whose earning capacity is severely impaired” working under the sponsorship of a public rehabilitation agency.

In 1974, Congress amended the FLSA by moving the subminimum wage provision for workers with disabilities to section 14(c) of the Act but yet again left the substantive requirements, including the statutory “curtailment clause,” unchanged.

At this juncture, Congress's maintenance of the Department's authority, through the “curtailment clause,” to determine the extent to which subminimum wage certificates were necessary is especially notable in light of the Department's 1967 report seven years earlier, which, as discussed above, emphasized the Department's understanding that Congress sought to have individuals with disabilities earn full minimum wages “as soon as feasible.”

See

36 FR 50-51 (Jan. 5, 1971) (29 CFR 524.1(c)).

See

Public Law 93-259,88 Stat. 55, 72 (1974).

See

n. 34, above.

In 1986, Congress amended the FLSA to eliminate the specific types of certificates and wage floors that previously applied to section 14(c) employment.

These revisions again retained the “curtailment clause” standard as a precondition governing the issuance of certificates. While the revised statute retained the basic requirement that workers with disabilities employed under section 14(c) certificates be paid commensurate wages, it added a requirement that the wages be “related to the individual's productivity.” In full, section 14(c)(1), which remains in effect today, provides that “[t]he Secretary, to the extent necessary to prevent curtailment of opportunities for employment, shall by regulation or order provide for the

employment, under special certificates, of individuals (including individuals employed in agriculture) whose earning or productive capacity is impaired by age, physical or mental deficiency, or injury, at wages which are: (A) lower than the minimum wage applicable under section 206 of this title, (B) commensurate with those paid to nonhandicapped workers, employed in the vicinity in which the individuals under the certificates are employed, for essentially the same type, quality, and quantity of work, and (C) related to the individual's productivity.”

The 1986 statutory amendments also required that employers provide “written assurances” that wages for hourly workers be reviewed at least every 6 months, and that wages for all employees be adjusted at least once a year to reflect changes in the prevailing wages in the locality.

Additionally, the new language set forth a “wage petition” procedure by which an employee or their parent or guardian can “petition the Secretary to obtain a review of” the subminimum wage rate paid by the employer.

The revised statute also requires that the appeal process include a hearing before an Administrative Law Judge (ALJ), placing the burden on the employer to prove that the subminimum “wage rate is justified as necessary in order to prevent curtailment of opportunities for employment.”

Since these 1986 amendments, Congress has not directly amended the statutory text of section 14(c), but, as discussed in more detail below, Congress has passed several significant laws that impact employment opportunities for individuals with disabilities.

See

Pub. L. 99-486, 100 Stat. 1229 (1986) (29 U.S.C. 214).

Id.

(29 U.S.C. 214(c)(1)).

Id.

(29 U.S.C. 214(c)(2)(A), (B)).

Id.

(29 U.S.C. 214(c)(5)(A)).

Id.

(29 U.S.C. 214(c)(5)(B)-(G)).

The Department's section 14(c) regulations have remained substantively untouched for the last 35 years.

In 1989, the last time the Department made significant regulatory updates regarding section 14(c), the Department among other things, amended and consolidated regulations governing the section 14(c) provisions to 29 CFR part 525 (the regulations had previously existed in three parts: parts 524, 525, and 529), addressed the 1986 amendments to the FLSA, and made other administrative changes.

In its 1989 regulations, the Department defined a “worker with a disability” as “an individual whose earning or productive capacity is impaired by a physical or mental disability . . . for the work to be performed,” and cautioned that “a disability which may affect earning or productive capacity for one type of work may not affect such capacity for another.”

The regulations also provide that “[a]n individual whose earning or productive capacity is not impaired for the work being performed cannot be employed under a certificate issued pursuant to this part and must be paid at least the applicable minimum wage.”

Since 1989, the only revisions to the section 14(c) regulations were technical corrections to the recordkeeping regulation at 29 CFR 525.16.

See

82 FR 2221 (Jan. 9, 2017), and non-substantive updates to the regulation governing the administrative appeal process at 29 CFR 525.22.

See

82 FR at 2228; 86 FR 1772 (Jan. 11, 2021).

54 FR 32920 (Aug. 10, 1989) (1989 final rule).

Id.

(29 CFR 525.3(d)).

Id.

(29 CFR 525.5(a).

see also

U.S. Gov't Accountability Office, GAO-21-260, “Subminimum Wage Program: Factors Influencing the Transition of Individuals with Disabilities to Competitive Integrated Employment” (2021), at 6,

https://www.gao.gov/products/gao-21-260

(“2021 GAO Report”).

Id.

at 6, n.19.

U.S. Comm'n on Civ. Rts., “Subminimum Wages: Impacts on the Civil Rights of People with Disabilities,”

https://www.usccr.gov/files/2020/2020-09-17-Subminimum-Wages-Report.pdf,

at 6 n.101 (2020) (“USCCR Report”).

See, for example,

USCCR Report at 9 (explaining that in Vermont, sites that have transitioned from subminimum wage employment use Federal and State funding to provide employment and non-work services for individuals with disabilities).

As noted above, Congress removed any wage floor for section 14(c) employment nearly 40 years ago. As summarized in the table below, in a 2023 report, the GAO analyzed section 14(c) data for 62 percent of renewal certificates for the period covering 2019 to 2021 and found that more than 50 percent of workers in the data analyzed were paid less than $3.50 per hour, while approximately 14 percent were paid at or above the current Federal minimum wage of $7.25 per hour.

Nearly 5 percent of workers were paid 25 cents per hour or less. Approximately 14 percent were paid $1.00 per hour or less. GAO observed that higher-paid workers under section 14(c) certificates were more likely to be paid by the hour, while lower-paid workers were more likely to be paid on a piece rate basis

(a piece rate fixes a wage payment on each completed unit of work).

Using WHD's administrative data of issued certificates that were valid in the first two quarters of fiscal year 2024 (between October 2023 and

March 2024), WHD found that approximately 16 percent of workers were reported by the employer on their most recent application (reflecting average hourly wages from their prior fiscal quarter) to have been paid at least the current Federal minimum wage of $7.25 per hour while nearly 49 percent made less than $3.50 per hour. Based on WHD's administrative data, approximately 10 percent made $1.00 per hour or less and nearly 2 percent made 25 cents per hour or less.

See

2023 GAO Report at 16. A worker employed under a section 14(c) certificate may be paid more than the Federal hourly minimum wage of $7.25 if the prevailing wage upon which their productivity-based commensurate wage is based exceeds the Federal minimum wage.

Id.

at 18-19.

FOH 64g06(a)(1).

Scope of data studied

GAO's

2019 to 2021

analysis

62 percent of renewal certificates

WHD's

October 2023 to March 2024

analysis

administrative data of issued certificates

Workers paid 25 cents or less per hour

Nearly 5 percent

Nearly 2 percent.

Workers paid $1.00 or less per hour

Approximately 14 percent

Approximately 10 percent.

Workers paid less than $3.50 per hour

More than 50 percent

Nearly 49 percent.

Workers paid at or above the current Federal minimum wage of $7.25 per hour

Approximately 14 percent

Approximately 16 percent.

Most workers currently employed under section 14(c) certificates have I/DD as their primary disability. In the years immediately after section 14(c) was enacted, it was assumed that workers with a wide range of disabilities, including physical disabilities, might be paid subminimum wages. Over time, however, subminimum wage payments to all groups other than individuals with I/DD substantially diminished. As noted above, in 1967, one-third of workers in sheltered workshops were individuals with I/DD.

In 2001, GAO estimated that three-quarters of workers employed under a section 14(c) certificate experienced some form of I/DD.

By 2021, GAO estimated approximately 90 percent of workers employed under a section 14(c) certificate experienced I/DD.

1967 DOL Report at 21.

2001 GAO Report at 19.

2023 GAO Report at 24. The Department notes that GAO's findings in this area generally match the Department's internal data, derived from the information self-reported by certificate holders; the Department cites to the GAO herein as an independent source. From WHD's listing of section 14(c) certificate holders between October 2020, and April 2024, the percentage of workers identified by their employers on their certificate applications as having I/DD as their primary disability was 91 percent.

E. Comprehensive Review of Section 14(c)

On September 26, 2023, Acting Secretary Julie Su announced that the Department would conduct a comprehensive review of the section 14(c) program. As part of this review, between October 20, 2023, and November 20, 2023, the Department held a series of stakeholder engagement sessions to hear diverse views on section 14(c) from members of the public, including workers with disabilities and their family members, disability rights advocates, service providers, and section 14(c) certificate holders.

In holding these listening sessions, the Department received wide-ranging feedback about section 14(c), including viewpoints regarding the impacts of potentially ceasing to issue 14(c) certificates in the future. Approximately 2,000 individuals participated in these sessions. During these listening sessions, the Department heard from individuals and groups that oppose permitting employers to pay subminimum wages under section 14(c); those stakeholders emphasized, among other points, that the payment of subminimum wages is outdated, discriminatory, and no longer needed to provide employment opportunities for individuals with disabilities. The Department also heard from individuals and groups in support of the continued payment of subminimum wages who focused, among other things, on the importance of individuals with disabilities, and their families, being able to choose whether to remain in their subminimum wage jobs and on the benefits that they have experienced in such employment. The Department deeply valued those listening sessions and it greatly appreciates and has considered the wide-ranging and diverse input gathered from them in the formulation of this proposed rule. The Department also welcomes comments from the general public, including any individuals or entities who participated in these earlier listening sessions, on its proposed rule.

The Department has included the section 14(c) regulations on its long-term Regulatory Agenda for many years and has carefully reviewed the history of section 14(c) and its current operations. In crafting this proposal, the Department consulted with other Federal agencies to better understand how their programs may intersect with the employment of workers under section 14(c) as well as to discuss any foreseeable impacts to those programs if changes were to be made to the section 14(c) regulations. In addition, the Department has extensively reviewed numerous oversight reports, existing data, and information concerning relevant trends in the availability of supports for employment opportunities for workers with disabilities. The Department has also reviewed numerous examples of legislative, policy, and executive actions at all levels of government and analyzed their effect on the employment of workers with disabilities. The Department summarizes this research and analysis, and presents its conclusions based on this comprehensive review, below.

III. Need for Rulemaking

A. Introduction

Since 1938, the FLSA has authorized the Secretary to issue certificates to employers permitting them to pay workers whose disabilities impair their earning or productive capacity at wage rates below the Federal minimum wage rate.

WHD is responsible for administering the issuance of certificates and enforcing the provisions of section 14(c). The Department issued its most recent substantive revisions to the regulations pertaining to the issuance of section 14(c) certificates in 1989, more than 35 years ago. Since 1989, and even more so since 1938, employment opportunities have changed dramatically for workers with disabilities. In stark contrast to the New Deal era in which section 14(c) was enacted, disability rights are now enshrined in Federal civil rights laws and enforced by the Federal government.

Through the disability rights movement, advocates, including self-advocates, have worked to ensure that individuals with disabilities have the same access to employment and

other opportunities as others and that individuals with disabilities are not subject to segregation and discrimination on the basis of a disability.

This access includes the legal right to reasonable accommodation and prohibitions on discrimination in the workplace. During this time, largely due to the efforts of self-advocates and their allies, society's views about what it means to live and work with a disability have evolved. In contrast to historical approaches that may have viewed disability as a deficiency that needed to be “fixed” or “cured” or as a tragic condition, current understandings emphasize the social model of disability, which identifies structural and social barriers as the primary reason that individuals with disabilities experience limitations on full engagement in all aspects of community life, focuses on removing those barriers to facilitate full engagement, and recognizes disability as a natural part of the human experience.

Thus, there has been a striking and consistent movement away from the medical

and charitable

models of disability, toward a social model of disability focused on various barriers which may hinder full and effective participation in society.

See

29 U.S.C. 214(c).

See, e.g.,

U.S. Dep't of Justice, Civil Rights Div., “The Americans with Disabilities Act (ADA) protects people with disabilities from discrimination,”

https://www.ada.gov/;

U.S. Equal Emp't Opportunity Comm'n, “What Laws Does EEOC Enforce?,”

https://www.eeoc.gov/statutes/laws-enforced-eeoc;

42 U.S.C. 12101

et seq.

(1990); 29 CFR part 1630.

See, e.g.,

Nicole LeBlanc, “Why Employment Matters: A Resource Guide by and for Self-Advocates Interested in Pursuing Competitive, Integrated Employment,” Administration on Disability Employment Technical Assistance Center, September 2021,

https://aoddisabilityemploymenttacenter.com/wp-content/uploads/2021/10/DETAC-2021-GEN-3_Final_508.pdf.

Arlene S. Kanter, “The Law: What's Disability Studies Got To Do With It or an Introduction to Disability Legal Studies,” 42 Columbia Human Rights Law Review 403, 410 (2011) (“2011 Kanter Paper”).

The medical model generally views disability as some deficiency to be “fixed” or “cured.” “As a result of viewing disability through a medical lens, societies have erected large institutions to protect and exclude people with disabilities from society.” 2011 Kanter Paper at 420;

see also

Samuel R. Bagenstos, “Subordination, Stigma, and `Disability' ”, 86 Va. L. Rev. 397, 427 (2000) (“2000 Bagenstos Paper”) (citations omitted) (“Indeed, virtually the entire ideology of the modern disability rights movement can be seen as a reaction to that `medical/pathological paradigm' of disability.”).

“People who work with blind, deaf, autistic, developmentally disabled, and/or physically disabled individuals often see their clients' or patients' impairment as a great personal tragedy. Yet, people with disabilities do not necessarily see their own lives that way.” 2011 Kanter Paper at 412, 414.

See, e.g.,

World Health Organization Policy on Disability (2021),

https://iris.who.int/bitstream/handle/10665/341079/9789240020627-eng.pdf?sequence=1.

“By relying on the social model of disability, it is impossible to say that any person is `unable' or `unqualified' to exercise rights or to participate fully in society. Instead, it is affirmatively the obligation of society to change or adapt its services, programs, facilities, systems, and other entities, so that all people can exercise their rights to the best of their ability, regardless of their particular impairment.” 2011 Kanter Paper at 427-28.;

see also

2000 Bagenstos Paper at 427-28.

The successes of the disability rights movement and the changing views regarding disability have been reflected in legislative, legal, policy, and programmatic changes that have broadly influenced available employment options for individuals with disabilities today. As described below, there have been several significant pieces of Federal legislation that have vastly expanded opportunities for individuals with disabilities, requiring better access and accommodations in educational, work, and community settings.

Supreme Court and other judicial precedent has amplified the impacts of this legislation, most notably by requiring that individuals with disabilities be able to live, work, and play in the most integrated setting appropriate to their needs.

As part of this movement, various non-partisan entities, including the USCCR and the National Council on Disability (NCD), along with a number of non-profit advocacy organizations, have published detailed reports urging the cessation of subminimum wage payments to individuals with disabilities.

Multiple States and localities have prohibited or are in the process of phasing out the payment of subminimum wages, and, as discussed below, for nearly a decade, the Federal government has maintained a wage floor above the FLSA's Federal minimum wage for certain government contracts that fully applies to workers with disabilities who work on or in connection with those contracts. Simultaneously, numerous Federal, State, and local programs have emerged to increase access to opportunities for competitive integrated employment (CIE)

for workers with disabilities.

100

Amidst these advancements, the employment experiences of workers with many types of disabilities indicate that subminimum wages are unnecessary to safeguard their employment opportunities. In 2023, the unemployment rate for individuals with disabilities was as low as has ever been recorded.

101

For example, legislation such as the Americans with Disabilities Act, 42 U.S.C. 12101

et seq,

and the Workforce Innovation and Opportunity Act, 29 U.S.C. 3101 et seq, are discussed in detail later in this section.

See Olmstead

L.C. ex rel. Zimring,

527 U.S. 581 (1999);

see also

U.S. Dep't of Labor, Bureau of Labor Statistics, “Data Retrieval: Labor Force Statistics (CPS)”,

https://www.bls.gov/webapps/legacy/cpsatab6.htm

(making available historical data on unemployment and employment rates).

As a result of these changes, today, subminimum wage employment under section 14(c) certificates is no longer the most common form of employment for individuals with disabilities. It bears emphasizing that, currently, only a miniscule fraction of those working individuals with disabilities are employed by section 14(c) certificate holders; in the present day, millions of individuals with disabilities who are working are doing so without section 14(c) certificates.

102

Also, as the number

of workers being paid subminimum wages under section 14(c) certificates has continued to shrink,

103

available data indicates that the numbers of individuals with I/DD (who, as discussed above, comprise approximately 90 percent of the workers paid subminimum wages by section 14(c) certificate holders today), working for full Federal minimum wages (or higher) has continued to grow.

104

Specifically, as shown by a 2023 Thinkwork Report, there are now many more individuals with I/DD who are being paid full wages than who are being paid subminimum wages; the Department has preliminarily assessed that the total number of working individuals with I/DD is at least twice the total number of individuals working under section 14(c) certificates.

105

In other words, the existing data—though limited—shows that, by a significant margin, most workers with I/DD do not rely on subminimum wages to gain employment opportunities and have demonstrated therein that section 14(c) certificates are no longer necessary for them to do so. The Department welcomes comments on this data and the Department's preliminary analysis.

106

102

As discussed above, as of May 1, 2024, employers with an issued certificate reported to the Department that they paid approximately 40,579 workers at subminimum wages in their previously completed fiscal quarter. This is a tiny fraction of the total number of individuals with disabilities working today, as in each month in the first half

of 2024, over 7 million individuals 16 years and over with a disability were employed in the civilian labor force.

See

U.S. Dep't of Labor, Bureau of Labor Statistics, “Data Retrieval: Labor Force Statistics (CPS)”

https://data.bls.gov/pdq/SurveyOutputServlet.

Additionally, cross-referencing these data points, the Department estimates that, nationwide, there are only approximately 4,000 individuals with disabilities other than I/DD who are paid subminimum wages.

103

See

section II.C.2, above, reflecting the decline in numbers of employees being paid subminimum wages from approximately 424,000 in 2001 to about 40,579 in 2024.

104

See

Agnieszka Zalewska, Jean Winsor & John Butterworth, “Intellectual and Development Disabilities Agencies' Employment and Day Services,” Data Note Plus, no. 87 (2023) (“2023 Thinkwork Report”), at 8-9,

https://www.thinkwork.org/sites/default/files/2024-01/DN_87_R_0.pdf.

This report, supported in part by the Administration on Disabilities, Administration for Community Living, U.S. Department of Health and Human Services, builds on annual and bi-annual surveys of State I/DD agencies spanning several decades and compiles data from all States (noting some States for which data is not available). Of particular relevance here, the report includes a chart depicting that, in 2021, approximately 130,000 clients of State agencies serving individuals with I/DD worked in integrated employment, while noting that in 2022, approximately 59,000 total individuals participated in subminimum wage jobs. While this report, which focuses on integration, does not directly compare the number of workers with I/DD being paid full wages to the number of workers paid subminimum wages (nor does it offer data sets about those populations from the same year), in publishing this specific data, it nevertheless supports the conclusion that more individuals with I/DD now are paid full wages, as the total number of individuals with I/DD who are reported as working in integrated settings is more than twice the estimated total number of all individuals working under section 14(c) certificates. As discussed in previous sections, the overwhelming majority of section 14(c) certificate holders are CRPs who typically provide work in non-integrated settings. Most of the approximately 130,000 reported workers with I/DD in integrated settings are likely paid at minimum wage or higher rates, compared to the report's estimates of approximately 59,000 reported workers paid subminimum wages who are primarily employed by non-integrated CRPs. Moreover, the ratio of individuals with I/DD working for full wages to individuals working for subminimum wages is likely far higher than the estimate reported here because the ThinkWork report only collects data about those individuals who are tracked by State I/DD agencies. The report thus does not capture individuals who have secured full-wage work without the assistance or knowledge of those agencies. Therefore, the report's identification of approximately 130,000 individuals with I/DD working in integrated settings likely undercounts the total actual number of individuals with I/DD working for full wages.

105

Id.

106

The Department requests comments reflecting any 2022, 2023, and 2024 updates on similar reporting from State I/DD agencies about the numbers of their clients working in integrated employment, as well as any other comments relating to the declining numbers of individuals working for subminimum wages in comparison to the growing numbers of individuals with I/DD working for full wages.

Cognizant of this changed employment landscape, the Department now assesses, pursuant to its statutory mandate, whether the issuance of section 14(c) certificates authorizing the payment of subminimum wages is necessary to prevent the curtailment of opportunities for employment for workers with disabilities.

B. Federal Legislation, Regulations, and Supreme Court Precedent

The current section 14(c) regulations were promulgated prior to having the benefit of nearly all the most significant legislative and legal developments regarding individuals with disabilities, and thus do not contemplate the protections, rights, and opportunities created by these developments. The discussion that follows is intended to highlight several of the most notable and relevant of these developments since 1989, and is not intended to provide a comprehensive survey of all such changes.

107

The Department requests comments on the discussion of these developments and the Department's analysis of them, as well as comments on any other Federal legislative or judicial development relevant to whether the continued issuance of section 14(c) certificates is necessary to prevent curtailment of opportunities for employment of individuals with disabilities.

107

This section provides only highlights of certain key laws; however, the Department notes there are numerous pieces of legislation over the last several decades that have incorporated ways to enhance career opportunities for workers with disabilities. For example, when Congress enacted the Rehabilitation Act of 1973, section 504 of that law required that programs receiving Federal financial assistance operate without discrimination on the basis of disability. 29 U.S.C. 794. Modeled after the language of the Civil Rights Act of 1964, the Rehabilitation Act of 1973, and subsequent amendments, also prohibited discrimination on the basis of disability by Federal agencies and contractors in their employment practices. In enacting and amending the Act, Congress enlisted all programs receiving Federal funds in an effort “to share with handicapped Americans the opportunities for an education, transportation, housing, health care, and jobs that other Americans take for granted.” 123 Cong. Rec. 13,515 (1977) (statement of Senator Humphrey). The 1998 amendments made to the Rehabilitation Act stated that among other things, “[i]t is the policy of the United States that all programs, projects, and activities receiving assistance under this Act shall be carried out in a manner consistent with . . . [the] pursuit of meaningful careers, based on informed choice, of individuals with disabilities.” 29 U.S.C. 701(c) (1998). The amendments further stated that workers were to develop an individualized plan for employment that “to the maximum extent appropriate, results in employment in an integrated setting.”

Id.

1. The Americans With Disabilities Act and the Supreme Court's Olmstead Decision

Perhaps the most foundational of these developments was the enactment of the Americans with Disabilities Act (ADA) in 1990.

108

The ADA, as amended by the ADAAA, among other things, prohibits discrimination on the basis of disability in the workplace and in the provision of public programs, services, and activities. Title I of the ADA, enforced by the U.S. Equal Employment Opportunity Commission (EEOC), applies to private employers and State or local governments and prohibits discrimination “against a qualified individual on the basis of disability in regard to job application procedures, the hiring, advancement, or discharge of employees, employee compensation, job training, and other terms, conditions, and privileges of

employment.”

109

Title I also requires employers to provide reasonable accommodations to qualified individuals—an individual who, with or without reasonable accommodation, can perform the essential functions of the employment position that they hold or desire.

110

Under the ADA, the term “reasonable accommodation” means: (1) modifications or adjustments to a job application process that enable a qualified applicant with a disability to be considered for the position such qualified applicant desires; (2) modifications or adjustments to the work environment, or to the manner or circumstances under which the position held or desired is customarily performed, that enable an individual with a disability who is qualified to perform the essential functions of that position; or (3) modifications or adjustments that enable a covered entity's employee with a disability to enjoy equal benefits and privileges of employment as are enjoyed by its other similarly situated employees without disabilities.

111

A reasonable accommodation may include, but is not limited to, making existing facilities used by employees readily accessible to and usable by individuals with disabilities, job restructuring, part-time or modified work schedules, acquisition or modification of equipment, appropriate adjustment or modifications of examinations, training materials, or policies, and other similar accommodations for individuals with disabilities.

112

An employer is required to provide such reasonable accommodations, unless it “can demonstrate that the accommodation would impose an undue hardship on the operation of the business of such covered entity.

113

Examples of reasonable accommodations may include modifying job tasks, improving accessibility in a work area, changing the presentation of tests or training materials, providing an aid or service to increase access (such as specialized computer software), providing alternative formats for feedback (such as verbally instead of in writing), or job restructuring (such as providing checklists to ensure task completion).

114

108

See

42 U.S.C. 12101 (1990). In 2008, Congress passed the ADA Amendments Act (ADAAA) which made a number of changes to the ADA definition of “disability” to ensure broad coverage, making it easier for individuals seeking the protection of the ADA to establish that they have a disability that falls within the meaning of the statute.

See

ADA Amendments Act of 2008, Public Law 110-325 (S. 3406), September 25, 2008

; see also https://archive.ada.gov/nprm_adaaa/adaaa-nprm-qa.htm.

Under the Federal equal employment opportunity laws that the EEOC enforces, including the ADA, an employer cannot ask an employee to prospectively waive their rights to protection.

See, e.g., Lester

O'Rourke,

No. 17-cv-1772, 2018 WL 3141796, at *4-6 (N.D. Ill. June 27, 2018). In addition, employers may not interfere with the protected right of an employee to file a charge, testify, assist, or participate in any manner in an investigation, hearing, or proceeding.

See, e.g.,

EEOC, “Enforcement Guidance on non-waivable employee rights under EEOC enforced statutes,”

https://www.eeoc.gov/laws/guidance/enforcement-guidance-non-waivable-employee-rights-under-eeoc-enforced-statutes.

109

42 U.S.C. 12112(a). An individual with a disability is defined by the ADA as a person who has a physical or mental impairment that substantially limits one or more major life activities, a person who has a history or record of such an impairment, or a person who is regarded as having such an impairment.

Id.

at Sec. 12102(1). To be “regarded as” having such an impairment, an individual must establish that they have been subjected to a discriminatory action because of an actual or perceived physical or mental impairment, whether or not the impairment limits or is perceived to limit a major life activity.

Id.

at Sec. 12102(3).

110

See

42 U.S.C. 12111.

111

29 CFR 1630.2(o)(1).

112

42 U.S.C. 12111(9).

113

The term “undue hardship” means an action requiring significant difficulty or expense when considered in light of several factors set forth in the ADA statute. 42 U.S.C. 12111(10), 12112(b)(5)(A).

114

Many workplace accommodations are no-cost or low-cost, and resources exist to help individuals with disabilities and their employers identify accommodations.

See, e.g.,

ADA National Network Fact Sheet—Reasonable Accommodations in the Workplace (2018),

https://adata.org/factsheet/reasonable-accommodations-workplace;

Job Accommodation Network (JAN),

https://askjan.org/.

Title II of the ADA, enforced by the U.S. Department of Justice (DOJ), prohibits discrimination on the basis of disability by State and local government entities.

115

It requires that State and local governments ensure equal access for individuals with disabilities (for example, in public education, employment, transportation, recreation, health care, social services, courts, voting, and town meetings). Additionally, DOJ's Title II regulations require public entities to “administer services, programs, and activities in the most integrated setting appropriate to the needs of qualified individuals with disabilities.” Appendix B to the regulation implementing Title II explains that “the most integrated setting” is one that “enables individuals with disabilities to interact with nondisabled persons to the fullest extent possible.”

116

115

42 U.S.C. 12131, 12132.

116

28 CFR part 35, app. B, 703 (2023) (addressing 28 CFR 35.130(d)).

In 1999, in

Olmstead

L.C.,

the Supreme Court issued a landmark decision that held that Title II of the ADA prohibits the unjustified segregation of individuals with disabilities.

117

The Court held that public entities are required to provide community-based services to persons with disabilities when (1) such services are appropriate; (2) the affected persons do not oppose community-based treatment; and (3) community-based services can be reasonably accommodated, taking into account the resources available to the entity and the needs of others who are receiving disability services from the entity.

118

The Court explained that this holding reflected two judgments. First, “institutional placement of persons who can handle and benefit from community settings perpetuates unwarranted assumptions that persons so isolated are incapable or unworthy of participating in community life.”

119

Second, “confinement in an institution severely diminishes the everyday life activities of individuals, including family relations, social contacts, work options, economic independence, educational advancement, and cultural enrichment.”

120

117

See

527 U.S. 581, 583, 597, 602 (1999).

118

Id.

at 607.

119

Id.

at 600.

120

Id.

at 601.

Under Department of Justice regulations, a public entity may be found in violation of this integration mandate if it administers programs in a manner that results in unjustified segregation of persons with disabilities.

121

DOJ has explicitly recognized that a public entity may be found in violation of the ADA's integration mandate if it plans, administers, operates, funds, or implements employment services in a way that unjustifiably segregates individuals with disabilities.

122

As discussed below, DOJ has taken action to enforce the integration mandate, with broad impacts to employment opportunities for workers with disabilities.

121

See

28 CFR 35.130(b)(1) (prohibiting a public entity from discriminating “directly or through contractual, licensing or other arrangements, on the basis of disability”); 28 CFR 35.130(b)(2) (“A public entity may not deny a qualified individual with a disability the opportunity to participate in services, programs, or activities that are not separate or different, despite the existence of permissibly separate or different programs or activities.”).

122

See

U.S. Dep't of Justice, Civil Rights Div., “Questions and Answers on the Application of the ADA's Integration Mandate and

Olmstead

L.C.

to Employment and Day Services for People with Disabilities,”

https://www.ada.gov/assets/pdfs/olmstead-employment-qa.pdf (“DOJ ADA Integration Mandate Q&As”).

Title III of the ADA, also enforced by DOJ, pertains to public accommodations. Under Title III, individuals with disabilities cannot be discriminated against on the basis of disability in the “full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of any place of public accommodation by any person who owns, leases (or leases to), or operates a place of public accommodation.”

123

Places of public accommodation may include, for example, restaurants, retail stores, hotels, movie theaters, private schools, recreational facilities, and transportation services run by private entities.

123

42 U.S.C. 12182(a).

As DOJ has explained, when workers with disabilities are given access to employment opportunities pursuant to the ADA and

Olmstead

“in the most integrated setting appropriate to their needs, they have the opportunity to live fuller lives, be more integrated into the community, and gain financial independence to `move proudly into the

economic mainstream of American life.' ”

124

This access fulfills the goals of the ADA to “assure equality of opportunity, full participation, independent living, and economic self-sufficiency.”

125

Moreover, EEOC and DOJ have explained that the ADA is fully applicable to workers with disabilities regardless of the work site or how much they are paid. For example, “Title I's coverage can include individual service provider entities or sheltered workshops in their capacity as private employers,” prohibiting discrimination regarding various terms and conditions of employment.

126

Additionally, DOJ has explicitly recognized that a public entity may be found in violation of the ADA's Title II integration mandate if it plans, administers, operates, funds, or implements employment services in a way that unjustifiably segregates individuals with disabilities.

127

Finally, under Title III of the ADA, individuals with disabilities cannot be discriminated against on the basis of disability in a place of public accommodation, which can include an individual service provider entity or a sheltered workshop.

128

124

See

DOJ ADA Integration Mandate Q&As

, https://www.ada.gov/assets/pdfs/olmstead-employment-qa.pdf

(quoting President George H.W. Bush, Remarks at the Signing of the Americans with Disabilities Act, July 26, 1990,

https://perma.cc/VNU4-HR7P

125

See

42 U.S.C. 12101(a)(7);

see also

DOJ ADA Integration Mandate Q&As.

126

Id.; see also

42 U.S.C. 12112(a).

127

See

DOJ ADA Integration Mandate Q&As.

128

Id.; see also

42 U.S.C. 12181(7)(K).

The legal protections for individuals with disabilities arising out of the ADA and the Supreme Court's

Olmstead

decision have profoundly impacted the rights and employment opportunities available to individuals with disabilities. This has resulted in changes to workforce development and vocational rehabilitation systems to more fully support individuals with disabilities in achieving and maintaining CIE, as discussed below. The Department's regulations implementing section 14(c) were last updated prior to the enactment of the ADA and therefore do not take into account changes to the employment landscape for individuals with disabilities in light of the fundamental anti-discrimination and reasonable accommodation protections of the ADA, or those protections as later interpreted by

Olmstead.

Although many section 14(c) certificate holders are subject to both the FLSA and the ADA,

129

the Department's current regulation addressing the section 14(c) curtailment clause did not, and could not, have taken into account the changes in employment opportunities that would arise as a result of the ADA and the plethora of legal and policy developments that have occurred as a result of this landmark legislation. For instance, the Department did not consider (and could not have considered) when it last promulgated its section 14(c) regulations how the ADA's reasonable accommodation and workplace modification requirements may affect a worker's productivity, nor did the Department consider other ADA provisions that have expanded the employment opportunities available to individuals with disabilities. Today, the Department's assessment of whether section 14(c) certificates are necessary cannot ignore the dramatic expansion of employment opportunities for individuals with disabilities.

129

The Department notes that holding a section 14(c) certificate does not protect an employer from charges pursuant to the ADA,

see

FOH 64a02(c).

2. Additional Federal Legislation, Executive Orders, and Regulatory Changes Expanding Opportunities for Workers With Disabilities

A wide range of other significant legislative and executive actions have had a profound impact on employment opportunities and outcomes for individuals with disabilities, particularly over the last decade. These legal and policy developments have fundamentally altered the landscape in which individuals with disabilities learn and work, beginning from their earliest educational opportunities and settings.

i. Individuals With Disabilities Education Act

In 1975, Congress passed the Education for All Handicapped Children Act (EHA), which addressed the rights and educational needs of students with disabilities. In 1990 EHA was reauthorized and retitled to the Individuals with Disabilities Education Act (IDEA).

130

IDEA provides funding to States, which must provide early intervention services and a free appropriate public education to eligible infants, toddlers, and children with disabilities.

131

IDEA states that “[a]lmost 30 years of research and experience has demonstrated that the education of children with disabilities can be made more effective by having high expectations for such children and ensuring their access to the general education curriculum in the regular classroom, to the maximum extent possible . . . .”

132

IDEA further states that this focus on high expectations and inclusion is intended to meet developmental goals and challenging expectations, and, as particularly relevant here, that students with disabilities are “prepared to lead productive and independent adult lives, to the maximum extent possible.”

133

Notably, the 1990 reauthorization also mandated that as a part of a student's individualized education program (IEP), an individual transition plan must be developed to help each student transition to post-secondary life, including employment opportunities.

134

Subsequent guidance has been released about the benefits of inclusion, for example, in 2015, the U.S. Department of Health and Human Services (HHS) and U.S. Department of Education issued a joint policy statement about the importance of the inclusion of children with disabilities in early childhood programs. The Departments updated and reiterated the statement in 2023.

135

For nearly 50 years, children with disabilities have benefited from increased access to high-quality education from early childhood to high school, providing them with better

preparation for employment than past generations of students with disabilities.

130

Educ. of the Handicapped Act Amendments of 1990, Public Law 101-476, 104 Stat. 1103 (1990) (codified at 20 U.S.C. 1400). Subsequent reauthorizations included reauthorizations in 1997 and 2004.

131

See

20 U.S.C. 1400

et seq.

and U.S. Department of Education, “About IDEA,”

https://sites.ed.gov/idea/about-idea

(recording that early intervention, special education, and related services were provided to more than 8 million eligible infants, toddlers, children, and youth with disabilities in school year 2022-2023).

132

20 U.S.C. 1400(c)(5). A multitude of studies and academic literature have concluded that students with disabilities make more progress when educated in integrated, rather than segregated, settings.

See, e.g.,

Meghan Cosier, Julie Causton-Theoharis, & George Theoharis, “Does access matter? Time in general education and achievement for students with disabilities,” Remedial and Special Educ. 34(6)(2013), at 323-332; Rachel Sermier Dessemontet, Gerard Bless, & D. Morin. “Effects of inclusion on the academic achievement and adaptive behaviour of children with intellectual disabilities,” Journal of Intellectual Disability Research 56(6) (2012) at 579-587.

133

20 U.S.C. 1400(c)(5)(A)(ii).

134

The term “individualized education program” (IEP) means a written statement for each child with a disability that is developed, reviewed, and revised in accordance with 20 U.S.C. 1414(d).

See

20 U.S.C. 1401(14);

see also

34 CFR 300.320.

135

See

U.S. Dep't of Health and Human Services and U.S. Dep't of Education, “Policy Statement on Inclusion of Children with Disabilities in Early Childhood Programs,” November 28, 2023,

https://sites.ed.gov/idea/idea-files/policy-statement-inclusion-of-children-with-disabilities-in-early-childhood-; see also Endrew F.

Douglas County School Dist.,

580 U.S. 386, 399 (2017) (affirming the promise of IDEA and holding that in order “[t]o meet its substantive obligation under the IDEA, a school must offer an IEP reasonably calculated to enable a child to make progress appropriate in light of the child's circumstances.”)

As educational reforms took hold, competitive integrated employment became the goal of many youths with disabilities, including those with I/DD. The groundbreaking National Longitudinal Transition Study-2 (NLTS2), funded by the U.S. Department of Education and published in 2005, identified a strong desire among youth with disabilities to participate in competitive employment. Specifically, the NLTS2 found that among the 70 percent of secondary school students with disabilities who identified employment as a goal for the post-school years, 62 percent had a goal to work in competitive employment, while only 3 percent wished to work in “sheltered” employment.

136

As indicated in the NLTS2, students generally preferred competitive employment rather than employment at a sheltered workshop regardless of the type of disability experienced.

137

136

Mary Wagner, Lynn Newman, Renee Cameto, Nicolle Garza, & Phyllis Levine, “After High School: A First Look at the Postschool Experiences of Youth with Disabilities. A Report from the National Longitudinal Transition Study-2 (NLTS2),” SRI International, April 2005, pp. 5-3 to 5-4,

www.nlts2.org/reports/2005_04/nlts2_report_2005_04_complete.pdf.

137

Id.

ii. Workforce Innovation and Opportunity Act

In 2014, WIOA,

138

a comprehensive Federal law enacted to improve workforce development and training services for workers and jobseekers, including various groups such as youth and workers with disabilities, amended the Rehabilitation Act to add section 511.

139

Section 511 of the Rehabilitation Act limits the ability of employers to pay subminimum wages to workers with disabilities, even when the employer holds a section 14(c) certificate. Section 511 requires that individuals with disabilities who are age 24 or younger complete requirements designed to enable the individual to explore, discover, experience, and attain CIE, including receiving pre-employment transition services under the Vocational Rehabilitation program or transition services under IDEA (to the extent either of those services are available to the individual with a disability), applying for vocational rehabilitation services, and receiving career counseling and information and referral services, before they are employed at subminimum wages. Section 511 also requires that all workers with disabilities who are paid subminimum wages, of any age, receive regular career counseling, information and referrals, and information about self-advocacy, self-determination, and peer mentoring training opportunities in their local area once every 6 months for the first year of subminimum wage employment and annually thereafter.

140

Section 511 was intended to help stop the pipeline by which youth with disabilities were going straight from school to subminimum wage employment.

141

This provision was also enacted to ensure that workers with disabilities who are currently paid subminimum wages are regularly provided with counseling and information about supports and resources available to them in their locality that may support them in obtaining CIE.

142

138

29 U.S.C. 794g;

also see https://www.congress.gov/113/bills/hr803/BILLS-113hr803enr.pdf.

139

The Rehabilitation Act was the first Federal legislation to address access and equity for individuals with disabilities. This Act promoted successful employment outcomes by requiring that programs receiving Federal financial assistance operate without discrimination on the basis of disability. The Rehabilitation Act develops and implements comprehensive and coordinated programs of vocational rehabilitation for individuals with disabilities to maximize their employability, independence, and integration into the workplace.

See

29 U.S.C. 701.

140

34 CFR part 397.

141

Section 113 of the Rehabilitation Act described a specific set of services, Pre-employment transition services, that are intended to improve and expand vocational rehabilitation services for students with disabilities, facilitating their transition from educational services to postsecondary life.

See

29 U.S.C. 733 and 34 CFR 361.65(a)(3). At least 15 percent of each State's federal funding allotment for vocational rehabilitation services must be reserved for Pre-employment transition services.

See

29 U.S.C. 730(d)(1). Through these provisions, the Rehabilitation Act and its regulations emphasized the provision of Pre-employment transition services to students with disabilities, providing new opportunities for them to explore careers and receive the training and supports to increase the likelihood of achieving CIE.

See

34 CFR 361.48.

142

29 U.S.C. 794g; 34 CFR part 397. Additionally, throughout WIOA, there are multiple references to ensuring that people with disabilities have access to the training providers and services and supports needed to succeed in CIE. Other sections of WIOA provide funding to States in order to develop programs that support workers with disabilities.

iii. Achieving a Better Life Experience Act

In further support of competitive employment for workers with disabilities, in 2014, Congress enacted the Achieving a Better Life Experience Act (ABLE Act), which allows individuals with disabilities to establish tax-advantaged savings accounts, subject to certain restrictions, without jeopardizing access to public benefits. ABLE accounts allow individuals with disabilities to maintain resources and save for expenses while maintaining eligibility for critical public benefits such as Medicaid and other means-tested programs. In 2020, the Internal Revenue Service (IRS) released final ABLE regulations.

143

The regulations noted that in enacting the ABLE Act, “Congress recognized the special financial burdens borne by families raising children with disabilities and the fact that increased financial needs generally continue throughout the lifetime of an individual with a disability.”

144

Legislation such as the ABLE Act facilitates workers' transitions from subminimum wage jobs to jobs paying competitive wages because workers now are able to save more without jeopardizing access to means-tested public benefits such as health care.

145

143

See

Guidance Under Section 529A: Qualified ABLE Programs, 85 FR 74010 (Nov. 19, 2020).

144

85 FR 74010.

145

“The ABLE Act states that funds in an ABLE account will not affect eligibility for federally-funded, means-tested benefits such as SSI and Medicaid.”

See

ABLE National Resource Center,

https://www.ablenrc.org/what-is-able/debunking-able-myths/.

iv. Executive Orders 13658 and 14026

In 2014 and 2021 respectively, Executive Orders 13658 and 14026 directed federal agencies to contract only with entities willing to pay an hourly minimum wage (raised by Executive Order 14026) for workers performing on or in connection with covered Federal construction and service contracts.

146

Workers covered by the Executive Orders, and due the full applicable Executive Order minimum wage rates, include workers with disabilities whose wages are calculated pursuant to section 14(c) certificates.

147

Executive Order 13658 stated that “raising the pay of low-wage workers increases their morale and the productivity and quality of their work” and explicitly stated that the Order applies to workers whose wages are calculated pursuant to section 14(c).

148

Executive Order 14026 similarly extended the full Executive Order minimum wage to workers with disabilities performing on or in connection with covered Federal contracts, stating, among other benefits, that raising the minimum wage has the effects of “boosting workers' health, morale, and effort.”

149

146

On April 27, 2021, President Joseph R. Biden, Jr. issued Executive Order 14026, “Increasing the Minimum Wage for Federal Contractors.” 86 FR 22835. The order builds on the foundation established by Executive Order 13658, “Establishing a Minimum Wage for Contractors,” signed by President Barack Obama on February 12, 2014.

See

79 FR 9851. The Department notes that, at the time of the drafting of this NPRM, there are several pending lawsuits challenging the President's authority to have issued Executive Order 14026. Such cases are not discussed herein because they are beyond the scope of this proposed rule, which simply highlights the issuance of the Executive Order as an example of the profound legal and policy developments that have impacted individuals with disabilities in recent decades.

147

See

86 FR at 22835; 79 FR at 9851.

148

79 FR 9851, Executive Order 13658, “Establishing a Minimum Wage for Contractors,” February 12, 2014,

https://

obamawhitehouse.archives.gov/the-press-office/2014/02/12/executive-order-minimum-wage-contractors.

149

86 FR at 22835.

v. Home and Community-Based Services “Settings Rule”

In addition to legislative and presidential action, other Federal agencies have also promulgated regulations consistent with expanding CIE opportunities for workers with disabilities. For example, in 2014, HHS's Centers for Medicare and Medicaid Services (CMS) issued the Home and Community Based Settings (HCBS) “Settings Rule” that focused on various aspects of residential and employment settings for individuals with disabilities. The rule emphasized that individuals have free choice of providers for services in their service plan, including employment services.

150

These regulations further stipulate that the “setting is integrated in and supports full access of individuals receiving Medicaid HCBS to the greater community, including opportunities to seek employment and work in competitive integrated settings . . . to the same degree of access as individuals not receiving Medicaid HCBS.”

151

150

79 FR 2948 (Jan. 16, 2014).

151

42 CFR 441.530(a)(1)(i).

vi. U.S. AbilityOne Commission 2022 Final Rule

The AbilityOne Program provides the Federal Government with services and products procured through a nationwide network of approximately 450 non-profit entities that employ individuals who are blind or have significant disabilities.

152

In 2022, the U.S. AbilityOne Commission (Commission) issued a final rule prohibiting the payment of subminimum wages under section 14(c) to employees on contracts within the AbilityOne Program.

153

The 2022 AbilityOne final rule adds a new requirement for non-profit agencies that seek both initial and continuing qualification to participate in the AbilityOne Program: namely, such agencies must certify that, when paying workers on AbilityOne contracts, they will not use section 14(c) certificates. In its 2022 final rule, the Commission states that “ending wage disparities between employees based solely on disability places the economic power of individuals with disabilities on par with their work colleagues who do not have disabilities and paying the same wage to individuals with disabilities and those without conveys a message of equality and a commitment to inclusion.”

154

The Commission explained that ending the payment of subminimum or sub-prevailing wages on AbilityOne contracts was designed to help break cycles of poverty and dependence for workers with disabilities, and instead shift the focus on assisting workers with disabilities to move to careers of meaningful employment.

155

The Commission further explained that societal expectations of people with disabilities had changed and that the availability of reasonable accommodations and employment supports had significantly changed the employment landscape for workers with disabilities.

156

The final rule was published on July 21, 2022, and took effect 90 days later on October 19, 2022. Nonprofit agencies seeking qualification to participate in the AbilityOne program were allowed to apply for a single extension of up to 12 months if they provided required support for the need of the extension and a corrective action plan detailing how they planned to achieve compliance during the requested extension period.

152

See

AbilityOne Program, FAQs,

https://www.abilityone.gov/abilityone_program/faqs.html#1.

153

87 FR 43427 (July 21, 2022).

154

87 FR 43428-43429.

155

87 FR 43428.

156

87 FR 43429.

As of September 30, 2023, no employee on an AbilityOne contract was being paid a subminimum wage.

157

AbilityOne's final rule prohibiting the payment of subminimum wages marked a noteworthy step away from the use of subminimum wage certificates.

157

See

U.S. AbilityOne Commission, “Fiscal Year 2023 Performance and Accountability Report,” at 95,

https://www.abilityone.gov/commission/performance.html.

In fiscal year 2022, approximately 36,000 people who are blind or have significant disabilities were employed through the AbilityOne program.

Id.

at 7.

In sum, legislation, judicial precedent, and regulatory initiatives have fundamentally and profoundly altered the rights, protections, access, and opportunities available to individuals with disabilities. These evolving changes to the employment landscape have dramatically altered access to employment opportunities and available supports for workers with disabilities.

vii. Strategies, Initiatives, and Resources Focused on Increasing Competitive Integrated Employment Opportunities

Alongside these legislative, executive, and judicial developments clarifying and expanding the rights and opportunities of individuals with disabilities, virtually all of which occurred after Congress last amended section 14(c) and the Department last substantively updated the section 14(c) regulations, a number of strategies focused on increasing CIE have also emerged. The proliferation of resources and strategies to increase CIE since 1989 demonstrates to the Department that there are numerous alternatives to subminimum wage employment, as well as many additional pathways to employment at or above the full Federal minimum wage for individuals with disabilities. The diversity of available supports, services, and strategies to facilitate the attainment of CIE for workers with disabilities indicates that subminimum wages are no longer a strategy that is necessary to prevent curtailment of opportunities for employment for these workers. One example is Employment First, which is a national framework centered on the premise that all individuals, including those individuals with the most significant disabilities, are capable of full participation in CIE and community life.

158

Under Employment First, public systems and States are urged to align policies, regulatory guidance, and reimbursement structures to commit to CIE as the priority option with respect to the use of publicly-financed day and employment services for youth and adults with significant disabilities.

159

Many States have formally committed to the Employment First framework through official executive proclamation or formal legislative action.

160

The Association of People Supporting Employment First (APSE) website reports that, to date, every State has taken some Employment First action, with 31 States having passed Employment First legislation, 16 States having issued Employment First executive orders, and 32 States having administrative policies and/or

regulations in place in support of the Employment First framework.

161

158

U.S. Dep't of Labor, Office of Disability Emp't Policy, “Employment First,”

https://www.dol.gov/agencies/odep/initiatives/employment-first.

159

Id.

There are multiple additional initiatives that have developed from Employment First, including the National Expansion of Employment Opportunities Network (NEON) and the Advancing State Policy Integration for Recovery and Employment (ASPIRE) initiatives.

160

Id.

161

See https://apse.org/home-v2-2/employment-first/

for a state-by-state summary. As of June 2024, all 50 States (as well as the District of Columbia) are listed on this website, with Idaho having taken Employment First action other than legislation, executive order, or administrative policies/regulations. Many States “have a combination of legislation, Executive action and/or State Agency policy in place.”

Id.

The methods of assisting individuals to obtain and maintain competitive employment have evolved over the past several decades, further enhancing these CIE programs. For example, research shows that the development of supported employment, the Individual Placements and Supports (IPS) model, and customized employment methodologies have been used to successfully implement CIE for workers with disabilities.

162

Specifically, the IPS model is designed to assist individuals with serious mental health conditions and involves a multi-disciplinary team that employs eight strategies: competitive employment, systematic job development, rapid job search, integrated services, benefits planning, time-limited supports, worker preferences, and zero exclusion of participants.

163

This coordination of medical care and supported employment has been described as a standardization of evidence-based supported employment.

164

162

See, e.g.,

Joonas Poutanen, Matti Joensuu, Kirsi Unkila & Piurjo Juvonen-Posti, “Sustainable employability in Supported Employment and IPS interventions in the context of the characteristics of work and perspectives of the employers: a scoping review protocol,” BMJ Open 12(6) (June 17, 2022),

https://www.ncbi.nlm.nih.gov/pmc/articles/PMC9207909/

(“The sustainable employment outcomes and cost-effectiveness of SE and IPS have been well reported.”).

163

See https://ipsworks.org/index.php/what-is-ips/.

164

See

Gary R. Bond, Robert E. Drake & Deborah R. Becker, “An update on randomized controlled trials of evidence-based supported employment.” Psychiatric Rehabilitation Journal, 31(4) (April 2008), 280-290,

https://doi.org/10.2975/31.4.2008.280.290.

The Department of Labor's Office of Disability Employment Policy (ODEP), established in 2001, led the research that built evidence for customized employment, “a process for achieving competitive integrated employment or self-employment through a relationship between employee and employer that is personalized to meet the needs of both.”

165

Customized employment tailors job tasks to fit the individual who will be performing the work, and this strategy has been shown to be particularly beneficial for people with disabilities who might not have been successful in CIE using other training and employment strategies. In 2014, customized employment was included in Title IV of the WIOA as a strategy under the definition of supported employment.

165

See

U.S. Dep't of Labor, Office of Disability Emp't Policy, “Customized Employment,”

https://www.dol.gov/agencies/odep/program-areas/customized-employment.

Finding these methodologies effective, various Federal agencies have adopted them, and funded their use, through their programs and initiatives. For example, supported employment was added to the Rehabilitation Act in 1986 to help more workers with disabilities obtain employment. Customized employment emerged first through grant programs beginning in 2001 and was added to WIOA in 2014. The development and implementation of these strategies for successful CIE align with the emergence of the social model of disability as well as with person-centered planning. Strategies consistent with the social model of disability that decrease barriers and increase access to opportunities and focus on the individual needs of each worker have created new pathways for workers with disabilities to find, and maintain, the right jobs for them.

ODEP has also led several initiatives focused on promoting CIE and aiding States and service providers in implementing CIE strategies. For example, the Campaign for Disability Employment, an ODEP-funded outreach effort, showcases supportive, inclusive workplaces for all workers and brings together several leading disability and business organizations convened by ODEP to work together to address disability employment, demonstrating the increased collaboration among employers to advance employment options for workers with disabilities.

166

The Disability Employment Initiative (DEI), funded by ODEP and the Department's Employment and Training Administration, awarded more than $123 million through the initiative to 49 projects in the public workforce system in 28 States to improve education, training, and employment outcomes of youth and adults with disabilities.

167

166

U.S. Dep't of Labor, Office of Disability Emp't Policy

https://www.dol.gov/agencies/odep/initiatives/campaign-for-disability-employment.

167

U.S. Dep't of Labor, Office of Disability Emp't Policy

https://www.dol.gov/newsroom/releases/odep/odep20160914.

In addition, through the Employment First State Leadership Mentoring Program, ODEP supported 24 States in their strategic efforts to increase CIE for individuals with disabilities, including those with significant disabilities.

168

ODEP has also established the National Expansion of Employment Opportunities Network (NEON) to collaborate with CRPs to extend CIE for the people they serve through provider transformation. ODEP explains that this process “realigns” disability service provider agencies' business models “from providing work opportunities in segregated settings or at subminimum wages to providing CIE for people with disabilities.”

169

This robust level of programming and State participation allows the refocusing of many State resources from programs relying on the payment of subminimum wages to workers with disabilities to programs that support CIE opportunities. In 2012, ODEP began and actively maintains an Employment First Community of Practice (COP) of nearly 3,000 State agency and service provider professionals, researchers, policy makers, workers and family members, and Federal officials. The COP shares CIE challenges and solutions, resources, events, and successes. In March 2024, ODEP launched an online CIE Transformation Hub of practical Federal resources that support CIE organized by target audience—individuals with disabilities and family members, employment service providers, State agencies, and employers.

170

168

See supra

note 159.

169

See

U.S. Dep't of Labor, Office of Disability Emp't Policy, “National Expansion of Employment Opportunities Network (NEON),”

https://www.dol.gov/agencies/odep/initiatives/neon.

170

U.S. Dep't of Labor, Office of Disability Emp't Policy,

https://www.dol.gov/agencies/odep/program-areas/cie/hub.

Since 2021, the U.S. Department of Education's Rehabilitation Services Administration (RSA),

171

has administered demonstration programs with discretionary grants through the Disability Innovation Fund (DIF) to support innovative activities aimed at increasing CIE.

172

In 2022, RSA made DIF awards to 14 vocational rehabilitation agencies to, as the Department of Education has explained, “decrease the use of subminimum wages and increase access to competitive integrated employment for people with disabilities.”

173

In recent

years, DIF grant projects have focused on improving the outcomes of individuals with disabilities through, for example, (1) career advancement programs, (2) transition from subminimum wage to CIE programs, and (3) “pathways to partnerships programs” that seek to support projects that foster the establishment of close ties among agencies—such as State vocational rehabilitation agencies, State educational agencies, local educational agencies, and federally funded Centers for Independent Living—to actively collaborate to support coordinated transition processes for children and youth with disabilities.

174

These 5-year grants are awarded to States as cooperative agreements to support innovative activities aimed at increasing CIE for youth and other individuals with disabilities.

175

171

To assist individuals with disabilities in the pursuit of gainful employment, RSA administers and manages programs that assist individuals with disabilities to achieve employment outcomes. One of these programs, the State Vocational Rehabilitation Services Program, provides State formula grant programs to vocational rehabilitation (VR) agencies providing a wide variety of services to individuals with significant disabilities, including individuals with the most significant disabilities.

172

See

Consolidated Appropriations Act, Public Law 117-103, 136 Stat. 49, 479 (2022).

173

U.S. Dep't of Educ., “Education Department Awards $177 Million in New Grants to Increase Competitive Integrated Employment for People with Disabilities,”

https://www.ed.gov/news/press-

releases/education-department-awards-177-million-new-grants-increase-competitive-employment-people-disabilities.

174

U.S. Dep't of Educ., Rehabilitation Services Administration (RSA), “RSA Programs,”

https://rsa.ed.gov/about/programs.

175

See

29 U.S.C. 705(5);

see also

Dep't of Educ., RSA, “Disability Innovation Fund,”

https://rsa.ed.gov/about/programs/disability-innovation-fund-pathways-to-partnerships.

A landmark agreement in Oregon, the

Lane

Brown

settlement agreement, illustrates some of this legal, legislative, and policy progression. In 2012, a class action complaint was filed in district court on behalf of individuals with I/DD alleging that by unnecessarily segregating them and other similar individuals with I/DD in sheltered workshops receiving public funds, Oregon was in violation of Title II of the ADA and section 504 of the Rehabilitation Act.

176

DOJ intervened in the lawsuit as a plaintiff, and a statewide settlement agreement was signed in 2015 requiring, among other things, that Oregon decrease State support of sheltered workshops for individuals with I/DD and expand access to supported employment services that allow the opportunity to work in CIE settings. As a result, Oregon implemented a number of competitive and supported employment strategies to support individuals with disabilities in the State, including training for school districts and those providing support services, new grants, reallocation of funding and technical assistance to support CIE.

177

These strategies accelerated the transition for workers with disabilities from employment under the prior sheltered workshop model to a CIE model within the State, ultimately ending the payment of subminimum wages to workers with disabilities in Oregon. In 2016, the year that this settlement was reached and approved by the court, there were 1,405 people working in sheltered workshops in Oregon.

178

Through this transition, Oregon placed 1,138 individuals from the class who had previously worked for subminimum wages into CIE, exceeding the targets set by the consent judgment. Additionally, by September 2020, all sheltered workshops except one had converted to providing supported, full-wage employment opportunities.

179

176

The Department notes that, on May 9, 2024, HHS published a final rule which modernized and strengthened the implementing regulations for section 504 of the Rehabilitation Act, which prohibits discrimination on the basis of disability in programs and activities that receive Federal financial assistance.

See

89 FR 40066 (May 9, 2024). The rule, among other things, clarifies obligations to provide services in the most integrated setting, appropriate to the needs of individuals with disabilities, and updates existing requirements to make them consistent with the ADA.

See

HHS, Section 504 of the Rehabilitation Act of 1973 Part 84 Final Rule: Fact Sheet,

https://www.hhs.gov/civil-rights/for-individuals/disability/section-504-rehabilitation-act-of-1973/part-84-final-rule-fact-sheet/index.html.

Section 84.76 of HHS's updated section 504 regulations specifically requires all recipients of Federal financial assistance from HHS to administer their programs and activities in the most integrated setting appropriate to the needs of a qualified person with a disability.

See

45 CFR 84.76; 89 FR 40066, 40117.

177

Oregon Dep't of Human Services, “

Lane

Brown

Settlement Agreement Report,”

https://www.oregon.gov/odhs/employment-first/Documents/lane-v-brown-settlement-message-2022-06-21.pdf.

178

Id.

179

See

Disability Employment TA Center, The Components of Integrated Employment Service Systems, p.11 (July 2022),

https://aoddisabilityemploymenttacenter.com/wp-content/uploads/2022/07/Components-of-Integrated-Employment-Part-II-FINAL-Final.pdf.

In addition to the Oregon settlement, in 2014, DOJ entered into a statewide settlement agreement in Rhode Island to resolve violations of the ADA for approximately 3,250 Rhode Islanders with I/DD.

See

U.S. Dep't of Justice, “Department of Justice Reaches Landmark Americans With Disabilities Act Settlement Agreement With Rhode Island,” April 8, 2014,

https://www.justice.gov/usao-ri/pr/department-justice-reaches-landmark-americans-disabilities-act-settlement-agreement-rhode.

In sum, a wide range of resources and programs have emerged in recent years that are focused on increasing competitive integrated employment. These supports and services assist workers in obtaining and maintaining employment at or above the full Federal minimum wage and also assist employers in transitioning their business models to integrated workplaces where the minimum wage is paid to all workers. Today, subminimum wage employment under section 14(c) certificates is no longer the most common form of employment for individuals with disabilities, including individuals with I/DD. As the number of workers being paid subminimum wages under section 14(c) certificates continues to shrink, the numbers of workers with disabilities, including workers with I/DD, working in integrated settings for full wages continues to grow.

180

See

discussion in section III.A.

C. Third Party Reports Regarding Section 14(c)

In the context of the changes that have taken place over the past several decades in opportunities for employment for individuals with disabilities, both public and private entities (including from the nonprofit, academic, and business sectors) have published relevant reports and statements regarding subminimum wage employment. Though, as discussed below, some organizations remain in strong support of the continuation of section 14(c) certificate issuance, many of these reports, from governmental and non-governmental organizations alike, have compiled substantial evidence that subminimum wages are no longer a necessary method of providing employment opportunities to individuals with disabilities. In this subsection, the Department reviews key aspects of these reports, which represent the culmination of years of findings and conclusions, most of which provide support for the Department's proposal to end the issuance of section 14(c) certificates.

1. Government Oversight Reports

In recent years,

181

a number of Federal government agencies and committees have studied the payment of subminimum wages to workers with disabilities and generated oversight reports. These agencies and committees brought together a wide range of individuals from across government and the non-profit and business sectors to share their expertise and experience regarding the payment of subminimum wages to workers with disabilities and corresponding models of employment. In general, these oversight entities have sharply criticized the continued payment of subminimum wages as an outdated method to support workers with disabilities and reflect a broad consensus that subminimum wages are not necessary to provide opportunities for employment of individuals with disabilities, including opportunities for individuals with I/DD Accordingly, many recommend that a phase out of section 14(c) certificates should begin immediately. The Department notes that

there are no equivalent government oversight reports that favor the continued issuance of section 14(c) certificates (at least beyond a phaseout period). The Department welcomes comments on its analysis of the selected reports discussed in this proposed rule as well as comments on any other reports relevant to whether the continued issuance of section 14(c) certificates is necessary to prevent the curtailment of employment opportunities for individuals with disabilities.

181

This section is not an exhaustive listing of all such Federal government oversight reports relating to individuals with disabilities, but rather focuses on recent reports that specifically consider the role of section 14(c) and subminimum wages in the employment of those individuals.

i. U.S. Commission on Civil Rights Report on Subminimum Wages

The USCCR is an independent, bipartisan, fact-finding Federal agency established in part to study discrimination or denial of equal protection by reason of race, color, religion, sex, age, disability, or national origin. In 2020, the USCCR issued a comprehensive 349-page report entitled “Subminimum Wages: Impacts on the Civil Rights of People with Disabilities” (USCCR Report).

182

The USCCR concluded that payment of subminimum wages should be eliminated through a planned phaseout period that allows for the transition among service providers and individuals with disabilities.

183

In making this recommendation, the USCCR emphasized its finding that “[p]eople with intellectual and developmental disabilities who are currently earning subminimum wages under the 14(c) program are not categorically different in level of disability from people with intellectual and developmental disabilities currently working in competitive integrated employment.”

184

Especially given the comprehensive nature of the USCCR report, the Department gives weight to the report's key factual findings and recommendations in proposing to phase out issuance of section 14(c) certificates.

182

USCCR Report. The U.S. Commission on Civil Rights was established by Congress in 1957 and submits reports and recommendations to the President and Congress based upon their studies. Two members dissented from the conclusions of the 2020 report.

183

Id.

at 223.

184

Id.

at 221.

To generate the report, the USCCR collected data, reports, and testimony from “Members of Congress, Labor and Justice Department officials, self-advocates and workers with disabilities, family members of people with disabilities, service providers, current and former public officials, and experts on disability employment and data analysis;” received thousands of public comments both in favor of and in opposition to the use of section 14(c) certificates; held a public hearing; and conducted in-person visits to both full-wage and subminimum wage worksites.

185

Id.

at i.

During the USCCR's hearings, they heard testimony from employers who provided insight into the impact of phasing out subminimum wages on their operations. For example, the USCCR heard from some employers who had transitioned away from the use of subminimum wages that, based on their experiences, section 14(c) certificates were no longer necessary to prevent curtailment of employment opportunities for individuals with disabilities. The Chief Executive Officer (CEO) of Melwood, a non-profit organization that transitioned their employees to at least the full minimum wage in 2013 and withdrew its section 14(c) certificate in 2016, testified that phasing out subminimum wages had positively impacted Melwood's operations, resulting in higher morale and productivity, and contributed to its ongoing successes.

186

Additionally, the CEO reflected on what she believed were the negative impacts of using section 14(c) certificates, testifying that “time trials caused our employees to feel extremely anxious and stressed, as employees knew that their performance could reduce their wages and harm their ability to live happy independent lives,” and that “the average employee lost five hours of productive time as a result of each time trial, not including the loss of productivity due to the anxiety distraction.”

187

The USCCR also spoke with employers who employed individuals with I/DD but who had never held a section 14(c) certificate, and those employers spoke positively of their experiences.

188

186

USCCR Report at 50-51.

187

Id.

at 50.

188

In a briefing to the USCCR, for example, Microsoft explained that, since 2013, its Supported Employment Program had placed over 280 individuals with I/DD in full-wage jobs at Microsoft.

Id.

at 48 (

citing

Brian Collins, briefing transcript at 272-73 and 274-75). Microsoft observed that employing workers with I/DD had added strength to the company because those workers tended to be longer-term employees (thus reducing recruitment, turnover, and onboarding costs) and tended to challenge the status quo and teach colleagues about “communication, inclusion, and empathy.”

Id.

at 49.

The USCCR also collected extensive testimony from, among others, individuals with I/DD and their family members, current and former section 14(c) certificate holders, and employers of individuals with I/DD. The USCCR found that “[p]ersons with disabilities who have transitioned out of 14(c) workshops were adamantly against the program.”

189

For example, the USCCR interviewed a worker in Vermont who, after that State eliminated the payment of subminimum wages, had transitioned to working in integrated employment, where he received more than minimum wage and had opportunities for advancement.

190

Reflecting on his previous experiences working for subminimum wages pursuant to a section 14(c) certificate, the worker explained that he believed that his former employer had been “using” his disability “against” him, and that he would “do more and get less than everyone else.”

191

189

Id.

at xi.

190

Id.

at 198.

191

Id.

As another key part of its review, the USCCR conducted intensive case studies of three States that, at the time of the report's publication, still permitted payment of subminimum wages (Virginia, Arizona, and Missouri), and compared those States to three States that had taken steps to eliminate subminimum wages (Vermont, Maine, and Oregon). In general, the USCCR's case studies detailed many successful transitions from subminimum wages to full wages. In terms of data regarding employment outcomes in those States, the USCCR noted both the complexity and insufficiency of available statistics. Summarizing its analysis of state-level employment data collected from those six States in 2016 and 2017, the USCCR explained that “contrary to the popular belief that ending subminimum wages will lead to job losses, the eradication of subminimum wages correlates with increased employment for people with disabilities” in certain States.

192

The USCCR expressly noted, however, that “importing these data over a wider range of states shows even more complexity.”

193

Recognizing that the results of the then-existing data regarding impact of state-level legislation prohibiting subminimum wages was “mixed,” the USCCR concluded that “[t]he success of states like Oregon and Vermont show that there is a path forward[ ]; moreover, even concerned family members in those states eventually embraced a supported transition from 14(c) to competitive integrated employment.”

194

192

Id.

at 143-45.

193

Id.

194

Id.

at 217.

In addition to receiving comments urging the elimination of subminimum wages, however, the USCCR also noted that “the majority of the public

comments the Commission received were from parents who support the continued operation of 14(c) workshops unchanged.”

195

These public comments included “family members of persons with disabilities working in 14(c) workshops . . . who stated it was their `CHOICE' to work there and that they were against elimination of the 14(c) program.” As one family member of a person with a disability wrote to the USCCR, “We are NOT concerned with lower pay. We ARE concerned that the rights of our family member to work in a fulfilling, safe, stable job where he enjoys being part of a community is at risk due to the wage debate” (emphasis in original).

196

195

Id.

at xi.

196

Id.

at 175.

The USCCR also found several other notable aspects of subminimum wage employment. In a chapter of its Report, the USCCR broadly reviewed the roles of different government agencies in relationship to section 14(c). The USCCR detailed the extensive use of public funds to support existing sheltered workshops. Among other key points, the USCCR found that some States have used HHS and Medicaid funding to fund worker supports necessary for those workers to access employment at the full minimum wage; this same funding is frequently used to fund non-profit employers who use section 14(c) certificates in other States.

197

In other words, in some instances, funds could be shifted from supporting subminimum wage employment to supporting full-wage employment. Of note, the USCCR stated that transition away from subminimum wages could be “aided by the provision of accommodations such as a job coach, peer support, or specialized training or other supports that allow persons with disabilities to effectively work in integrated settings,” and that funds once used to fund employment under section 14(c) certificates (such as at CRPs) could be redirected to these purposes.

198

The USCCR explained that “[s]tate-level phase outs of the use of the 14(c) program have been developed and designed for State service providers and other stakeholders to ensure that a competitive integrated employment model does not result in a loss of critical services to individuals with disabilities including former 14(c) program participants.”

199

197

Id.

at xiv and 179-80.

198

Id.

at xi-xii. Similarly, recent non-governmental reports have also emphasized the role that States' and organizations' programmatic choices play in determining whether individuals with disabilities have opportunities for subminimum or full-wage employment. For example, in 2024, New America released a report analyzing States' efforts to end payment of subminimum wages. This report examined the usage of programs that New America deemed to support successful transitions from subminimum to full wages, including “Medicaid expansion, benefits counseling, and tax-deferred savings accounts.” The report analyzed States' efforts to put in place supportive employment policies and programs and noted a wide disparity of approaches among States in these areas. Among other conclusions in the report, New America observed that States that did not seek to limit or eliminate the use of subminimum wages often also did not engage in as many supportive employment or financial security initiatives.

See

New America, “Pennies on the Dollar: The Use of Subminimum Wage for Disabled Workers across the United States: Momentum to Change the Subminimum Wage” (2024),

https://www.newamerica.org/education-policy/reports/the-use-of-subminimum-wage-for-disabled-workers-across-the-us/.

199

2020 USCCR Report at xvi.

As part of its review, the USCCR collected and analyzed data about the use of section 14(c) certificates. Summarizing this analysis, the USCCR concluded that “the Department of Labor's enforcement data as well as several key civil rights cases and testimony from experts show that with regard to wage disparities, the program is rife with abuse and difficult to administer without harming employees with disabilities, as reflected in over 80 percent of cases investigated.”

200

The USCCR based this finding in part on WHD enforcement data that, as discussed above, shows that WHD investigations of section 14(c) certificate holders reveal high rates of FLSA violations. The USCCR made no analysis of or conclusions about the types or severity of violations found in WHD investigations. However, the USCCR highlighted a well-documented case involving egregious civil rights abuses connected to an employer who had formerly held a section 14(c) certificate, the

Hill Country Farms

case.

201

In that case, both the Department and the EEOC successfully recovered substantial damages for the workers based on, respectively, the employer's willful violations of the FLSA and the employer's severe abuse and discrimination in violation of the ADA.

202

In addition to highlighting the “disability-based harassment, discrimination and abuse” experienced by these workers, the USSCR commented that “[t]his case does not directly address whether 14(c)'s permitting payment of subminimum wages violates the ADA, but it does illustrate that Title I ADA violations are possible under those circumstances.”

203

200

Id.

at vi-vii.

201

In that case, Hill Country Farms, doing business as Henry's Turkey Service, employed a group of men with intellectual disabilities for approximately 20 years at an Iowa turkey processing plant where the employer subjected the workers to “abusive verbal and physical harassment; restricted their freedom of movement; and imposed other harsh terms and conditions of employment such as requiring them to live in deplorable and sub-standard living conditions, and failing to provide adequate medical care when needed.” U.S. Equal Emp't Opportunity Comm'n,

https://www.eeoc.gov/eeoc/newsroom/release/5-1-13b.cfm

(May 1, 2013). The employer also paid only pennies per hour—$65 a month in cash wages even when company time sheets reflected that they worked more than 40 hours a week. U.S. Dep't of Labor,

https://www.dol.gov/newsroom/releases/whd/whd20110427

(April 27, 2011).

202

Solis

Hill Country Farms,

808 F. Supp. 2d 1105 (S.D. Iowa 2011),

aff'd,

469 Fed. App'x 498 (8th Cir. 2012);

EEOC

Hill Country Farms, Inc.,

899 F. Supp. 2d 827 (S.D. Iowa 2012),

aff'd,

564 Fed. App'x 868 (8th Cir. 2014).

203

2020 USCCR Report at 25.

In sum, the USCCR's qualitative and quantitative study of the use and cessation of section 14(c) certificates—encompassing employer, worker, family, government, and expert perspectives—substantially aided the Department's review of whether section 14(c) certificates are still necessary to prevent curtailment of employment opportunities for workers with disabilities. Furthermore, given this body of evidence, the Department finds the USCCR's conclusion that subminimum wages are no longer necessary to be compelling.

ii. National Council on Disability Reports Relevant to Payments of Subminimum Wages

The National Council on Disability (NCD) is an independent Federal agency charged with advising Congress, the President, and other entities on policy related to people with disabilities. NCD has issued several reports related to section 14(c), including two reports that specifically favor the cessation of subminimum wages, finding that such practices are not necessary to prevent curtailment of opportunities for employment of individuals with disabilities. As with the USCCR report, the NCD's thorough analysis, spanning nearly a decade, undergirds the Department's finding that subminimum wages are no longer necessary to prevent curtailment of employment opportunities for individuals with disabilities.

In 2012, the NCD issued a report recommending that section 14(c) be phased out.

204

In this report, published prior to the passage of WIOA, NCD recommended many reforms similar to those that were subsequently enacted, including “mandatory information sharing to workers,” and expansion of supported education and postsecondary education and training for individuals

with disabilities.

205

NCD recommended that section 14(c) “should be phased out gradually to provide adequate time for transition to new alternatives.”

206

To facilitate that proposed phaseout, NCD outlined in their 2012 report a “comprehensive system of support that will result in greater opportunities for people with disabilities.”

207

204

2012 NCD Report.

205

Id.

at 10.

206

Id.

at 18.

207

Id.

Among its key findings, the 2012 NCD report noted that work in subminimum wage settings generally did not provide a stepping stone to full-wage work but was instead almost always an end-placement. As NCD observed citing back to a 2001 GAO report, “Sheltered workshops are ineffective at transitioning people with disabilities to integrated employment. According to the 2001 investigation by [GAO] into the 14(c) program, only approximately 5 percent of sheltered workshop employees left to take a job in the community.”

208

Id.

at 10.

In a follow-up 2018 report, NCD again focused on the issue of whether subminimum wages were necessary to secure employment opportunities for individuals with disabilities. NCD reiterated its recommendation to phase out the use of section 14(c) certificates, labelling continued certificate issuance as “even more evidently outdated and ineffective than it was six years ago.”

209

NCD termed the continued issuance of section 14(c) certificates a form of “economic disenfranchisement” of “great significance to the overall health of our nation's economy and society.”

210

The report found that the “landscape of law and policy has been considerably expanded” to allow transitions from sheltered workshops into competitive integrated employment. NCD found that, despite these advances, those working under section 14(c) certificates remain “confined” to “sheltered workshops where they perform manual tasks that are often mismatched with their particular strengths and also with their preferences and interests as employees . . . even though new technologies, services, and supports exist that would allow them to succeed in competitive integrated employment.”

211

The NCD report, echoing the Department's findings discussed above in its report to Congress nearly 50 years earlier, posited that the “sheltered workshop business model, itself, rather than the impact of disability on productivity, incentivizes low wages and correspondingly disincentivizes reasonable accommodations, better job matches, and more integrated employment services.”

212

209

Nat'l Council on Disability, “National Disability Employment Policy from the New Deal to the Real Deal: Joining the Industries of the Future,” Letter of Transmittal, 2018,

https://www.ncd.gov/report/national-disability-employment-policy-from-the-new-deal-to-the-real-deal-joining-the-industries-of-the-future/

(2018 New Deal NCD Report).

210

Id.

at 12.

211

Id.

at 13-14.

212

Id.

at 53.

In its 2018 report, NCD described “successful examples of transformation from six States [of organizations] where providers have transitioned services from sheltered workshops that paid 14(c) subminimum wages to rival models of individualized supported and customized employment services . . . .”

213

In reviewing these examples, NCD analyzed “key success factors” in each of these organization case studies, including factors such as the presence of staff versed in “employment first” strategies, a strong organizational commitment to inclusion of individuals with disabilities in socially valued roles, collaboration with supported employment organizations, high expectations for outcomes, the fostering of an incentivizing link between an individual's work performance and “a paycheck,” a business-oriented emphasis on placing employees where they will meet employers' real needs, and fostering the self-advocacy skills of individuals with disabilities.

214

213

Id.

at Transmittal Letter.

214

Id.

at 66, 70, 73-74, 78, 83.

NCD also made site visits and highlighted the stories of individuals. In one example, NCD wrote

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