Report on Subminimum Wage and Supported Employment

SCOPE AND PURPOSE:

In December 2011, the National Council on Disability (NCD) began discussions relative to Section 14(c) of the Fair Labor Standards Act. This provision allows employers certified by the United States Department of Labor (DOL) to compensate persons with disabilities for work at a rate less than the minimum wage – a wage set by Congress for all other workers in the United States. Following the Members’ discussion, Chairman Jonathan Young appointed Council Member Clyde Terry to chair a committee to examine the issue and bring forward recommendations to the full Council.

The Committee met several times in early January to review national research. The Committee determined that there are approximately 420,000 persons with disabilities in the 14(c) program. [[i]](https://ncd.gov/publications/2012/August232012/appendix#end1) The Committee also discussed the history of other attempts to address this issue. It was the Committee’s intent to learn from those attempts and recognize the concerns raised by individuals with disabilities and their families and to come forward with a series of recommendations that would address them. The guiding principle for the Committee’s work was to apply the vision of the Americans with Disabilities Act (ADA) to assure equality and opportunity for all and eliminate any policies of discrimination on the basis of disability.

It became clear the Committee needed to hear from stakeholders to determine how best to approach the issues. The Committee decided to visit seven states that reflected regional diversity, including both urban and rural settings. The committee also selected states that exhibited a range of progress in transitioning from 14(c) programs to supported employment programs in integrated competitive settings.

The visits occurred between March and May 2012. The Committee met with individual workers with disabilities, family members, parents and siblings, workshop operators who hold 14(c) certificates, state policymakers, and operators of supported employment programs.

The Committee recognized early that any statement of public policy or recommendation simply to eliminate all Section 14(c) certificates would jeopardize the security of many individuals who are currently involved with the program. The Committee thus concluded that a transformation strategy was needed to phase out a policy relic from the 1930s - when discrimination was inevitable because service systems were based on a charity model, rather than empowerment and self-determination. NCD stands for the principle that no person with a disability should be discriminated against in an employment setting by paying less than the minimum wage available to all other citizens.

This report offers a systems change approach. It puts forward a comprehensive system of support that will result in greater opportunities for persons with developmental and intellectual disabilities. This report recommends a phase-out of the 14(c) program, realizing that those who have been in the program for a long period of time will take time to transition to a supported employment environment. This approach includes formal requirements of mandatory information sharing to workers, informal systems of peer support and incentives to states and providers to expand supported employment services in integrated settings. The Committee also recognized the need to make certain recommendations to the United States Department of Education (DOEd) to improve K-12 education and to expand opportunities for higher education and postsecondary training for persons with disabilities. Those recommendations acknowledge that even supported employment is not the end of a career but rather a stepping stone for greater self-sufficiency. The end result will be greater opportunities for these individuals and a stronger, more inclusive workforce for American businesses.

The Committee researched and studied the issues of the subminimum wage program and Section 14(c) during the winter and spring of 2012. The Committee sought out views and experiences from workers with disabilities, family members, workshop operators, policymakers and supported employment programs to learn how best to address the many issues surrounding the 14(c) program.

In addition to its site visits, he Committee also reviewed the broad scope of research literature and policy information surrounding supported employment, sheltered workshops and the outcomes and cost-effectiveness of each. Key findings include:

• Sheltered workshops are ineffective at transitioning individuals with disabilities to integrated employment. According to the 2001 investigation by the Government Accountability Office into the 14(c) program, only approximately 5% of sheltered workshops employees left to take a job in the community. [[ii]](https://ncd.gov/publications/2012/August232012/appendix#end2)
• According to the Centers for Medicare and Medicaid Services, Medicaid-financed pre-vocational services to sheltered workshops are, “not an end point, but a time limited (although no specific limit is given) service for the purpose of helping someone obtain competitive employment.” [[iii]](https://ncd.gov/publications/2012/August232012/appendix#end3)
• Individuals in supported employment who had previously been served in sheltered workshop settings do not show a higher rate of employment as compared to those who had gone straight to supported employment without ever being in a sheltered workshop. [iv] However, research indicates that those who had previously been in sheltered workshops had higher support costs and lower wages than comparable individuals who had never been in sheltered workshop settings. [[v]](https://ncd.gov/publications/2012/August232012/appendix#end5)
• The 14(c) sub-minimum wage program is utilized primarily by non-profit or state-operated social services providers – specifically, sheltered workshops – rather than private, for-profit businesses. According to the GAO, 95% of all workers with disabilities being paid less than minimum wage under the 14(c) program were employed by sheltered workshops. [[vi]](https://ncd.gov/publications/2012/August232012/appendix#end6)
• Research indicates that employees receiving supported employment services generate lower cumulative costs than employees receiving sheltered workshop services and that whereas the cost-trend of supported employees shifts downward over time, the opposite is the case for individuals receiving sheltered workshop services. [[vii]](https://ncd.gov/publications/2012/August232012/appendix#end7)

It is important to note that the purpose of NCD is to promote the policies, programs, practices, and procedures that guarantee equal opportunity for all individuals with disabilities, regardless of the nature or severity of the disability; and empower individuals with disabilities to achieve economic self-sufficiency, independent living, and inclusion and integration into all aspects of society.

This is not an empirical study. The Committee did not review every state, every sheltered workshop, and every piece of literature on the subject. However, the Committee did set out to systematically ensure all stakeholders were represented and given an opportunity to present their views.

In addition to examining subminimum wages and legacy programs like sheltered workshops, NCD is also looking at what states are doing regarding supported employment and Employment First initiatives. The overarching framework for NCD’s examination is modernizing systems, eliminating segregation, and encouraging fair wages and competitive integrated employment for workers with disabilities.

At its June 2012 quarterly meeting in Los Angeles the Council was presented with the recommendations in this report and voted unanimously to approve them.