U.S. looks to end subminimum wage for workers with disabilities

The Department of Labor is proposing to phase out a controversial Depression-era program that lets some employers pay disabled workers less than the federal minimum wage.

Federal law currently allows the agency to issue certificates that let employers pay certain workers less than the federal minimum of $7.25 an hour based on the notion that their disabilities hinder productivity. Intended to help those with disabilities gain employment, the law currently has about 40,000 American workers laboring for half the minimum wage or less, according to the DOL. 

“Many earn less than half, some earn just pennies on the dollar,” assistant secretary of labor for disability employment Taryn Williams said at a Tuesday news briefing. 

The agency has issued a proposed rule that would immediately stop the issuance of certificates that let employers pay less than the federal minimum and start a three-year phase out period for the hundreds of employers that currently hold them.

The DOL’s proposal follows a review of the program, and the new rule would not take effect until a public comment period ends on January 17, 2025, days before President-elect Donald Trump takes office. The new administration could review and respond to the comments and issue a final rule, or withdraw it entirely.

Still, even if the proposal is not enacted, subminimum pay for those with disabilities could become a thing of the past, as more than a dozen states and the District of Columbia have already banned the program. The Illinois legislature recently passed legislation to phase out subminimum wage for disabled workers by 2029. California Nevada and Virginia are phasing out the program.

Initiated under section 14(c) of the Fair Labor Standards Act of 1938, the program was initially meant to provide jobs for injured vets. As things currently stand, many disabled people work in what are called sheltered workshops run by certified employers which pay as little as 25 cents an hour. 

As of November 1, at least 37,106 workers in 37 states were paid subminimum wages by 710 certificate holders, according to DOL data. Another 35 employers had their certificate renewals pending.