Biden proposal would close loophole that lets employers pay disabled workers less than minimum wage

The Department of Labor proposed a new rule on Tuesday that would prevent companies from paying workers with disabilities less than the federal minimum wage, which is currently $7.25 an hour.

Under Section 14(c) of the Fair Labor Standards Act of 1938, employers can apply for a certificate to pay less than minimum wage to employees with certain disabilities when "necessary to prevent the curtailment of opportunities for employment." The department’s proposal would discontinue that policy and establish a three-year phase out for any companies with existing certificates.

“One of the guiding principles of the American workplace is that a hard day’s work deserves a fair day’s pay, and this proposal ensures that principle includes workers with disabilities,” Wage and Hour Administrator Jessica Looman said in a statement.

More than 90% of employers with certificates are non-profits that provide services to people with disabilities, according to the department.

According to a 2020 report from the U.S. Commission on civil rights, the legal loophole has allowed some companies to pay their employees less than a dollar an hour.

In 2013, CNBC reported that some workers at Goodwill in Pennsylvania were paid as low as 22 cents per hour in 2011. At the time, defenders argued that the sub-minimum wage jobs provided workers with disabilities “meaningful work” and that, without it, they would be forced to “stay at home” or “otherwise engage in unproductive and unsatisfactory activities,” CNBC reported.

But that argument does not fly today, according to the Department of Labor.

“Since the enactment of the Fair Labor Standards Act in 1938, opportunities and training have dramatically expanded to help people with disabilities obtain and maintain employment at or above the full federal minimum wage," Looman said. "Similarly, employers today have more resources and training available to recruit, hire and retain workers with disabilities in employment at or above the full minimum wage, and this proposed rule aligns with that reality."

Disability advocates have long argued Section 14(c) is discriminatory. Disability rights groups are celebrating the move to do away with it.

“We applaud today's announcement by the Department of Labor and @ActSecJulieSu that the Department is proposing to phase out the 14(c) program — which has allowed people with disabilities to be legally paid less than minimum wage,” the National Disability Rights Network said in a statement on X.