96466 Federal Register / Vol. 89, No. 233 / Wednesday, December 4, 2024 / Proposed Rules 

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

2Walling v. 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1990s, the government has replaced outdated and 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NPRM, the Department references outdated terms 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. 

3 Id. 

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 tollfree 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.’’ 1 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.’’ 2 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.’’ 3 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. 

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 


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4The 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. 

5 Id. 

6This 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/gao23-105116. 

7For 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. 

8 29 U.S.C. 206. 

9 29 U.S.C. 214(c)(1). 

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 1990,4 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.5

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.6 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. 

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.7

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.8 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.’’ 9 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 


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10 29 U.S.C. 214(c)(1). 

11WHD 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. 

12Portland Terminal, 330 U.S. at 151. 

13Barrentine v. Arkansas-Best Freight Sys., Inc., 

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

14Brooklyn Sav. Bank v. O’Neil, 324 U.S. 697, 706 

(1945). 

15Tony & Susan Alamo Found. v. Sec’y of Labor, 

471 U.S. 290, 302 (1985) (citing Barrentine, 450 U.S. 

728 and Brooklyn Sav., 324 U.S. 697). 

16 Jewell Ridge Coal Corp. v. Local No. 6167, 

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

17See 29 U.S.C. 202(a); Brooklyn Sav., 324 U.S. 

at 710. 

18See Walling v. Portland Terminal, 330 U.S. at 

151–52. 

19Portland Terminal, 330 U.S. at 151–52. 

20The 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). 

21See ‘‘Opportunity,’’ Webster’s New 

International Dictionary 1709 (1938 ed.). 

employers are currently using 

certificates. The Department then 

discusses its recent review of section 

14(c) and addresses the current need for 

rulemaking. 

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.10 The FLSA explicitly authorizes 

the Secretary to issue regulations 

governing the issuance of subminimum 

wage certificates. 

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.11

The Secretary’s issuance of 

certificates prior to permitting 

employers to pay a subminimum wage 

acts as a ‘‘safeguard’’ against widespread 

abuse.12 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. 

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.’’ 13 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.’’ 14 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.’’ 15 Second, 

the FLSA sought to establish a ‘‘uniform 

national policy of guaranteeing 

compensation for all work’’ performed 

by covered employees.16 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.17

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.’’ 18 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.’’ 19 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. 

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.20 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.’’ 21 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. 


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22Fair 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). 

23Fair 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). 

24 Id. 

25 Id. at 57. 

26 29 CFR 524.5 (1938). 

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.’’ 22 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. 

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.’’ 23 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.’’ 24

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.’’ 25

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.26 The Department 

amended its regulations in 1939, 

exercising its ‘‘curtailment clause’’ 

authority to limit the issuance of 

certificates by specifying that, for 


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27 29 CFR 524.7(a), (c), and (d) (1939). 

28 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). 

29Public Law 89–601, 80 Stat. 830, 843–44 (1966) 

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

30 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. 

31 Id. at 831–32 (29 U.S.C. 203(r), (s)). 

32See id. at 845. 

33U.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). 34 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). 

35 1967 DOL Report at 2. 

36 Id. 37 Id. at 21. 38See 36 FR 50–51 (Jan. 5, 1971) (29 CFR 

524.1(c)). 39See Public Law 93–259,88 Stat. 55, 72 (1974). 

40See n. 34, above. 

41See Pub. L. 99–486, 100 Stat. 1229 (1986) (29 

U.S.C. 214). 

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.27 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.’’ 28 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. 

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.29

The 1966 statutory amendments also 

created three special categories of 

certificates for workers who were not 

subject to the wage floor 30 and extended 

FLSA coverage to hospitals and other 

institutions as employers.31 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.’’ 32

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.’ ’’ 33 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.’’ 34

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.’’ 35 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.’’ 36 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.37

In 1971, the Department again 

amended its regulations to include, in 

part, the introduction of a new 25–50 

percent wage floor for ‘‘multihandicapped and other workers whose 

earning capacity is severely impaired’’ 

working under the sponsorship of a 

public rehabilitation agency.38 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.39 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.’’ 40

In 1986, Congress amended the FLSA 

to eliminate the specific types of 

certificates and wage floors that 

previously applied to section 14(c) 

employment.41 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 


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

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

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

45 Id. (29 U.S.C. 214(c)(5)(B)–(G)). 

46Since 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). 

47 54 FR 32920 (Aug. 10, 1989) (1989 final rule). 

48 Id. (29 CFR 525.3(d)). 

49 Id. (29 CFR 525.5(a). See also 29 CFR 525.12(b) 

(noting that a subminimum wage certificate applies 

only to such workers who ‘‘are in fact disabled for 

the work they are to perform’’)). 

50 Id. (29 CFR 525.9(a)). 

51 Id. 

52The Secretary has delegated authority to WHD 

to issue regulations governing FLSA section 14(c), 

as well as to administer and enforce the section 

14(c) provisions. See Sec’y of Labor’s Order No. 01– 

2014, Delegation of Authority and Assignment of 

Responsibility to the Administrator, Wage and Hour 

Division, 79 FR 77527 (Dec. 24, 2014) (Secretary’s 

Order No. 01–2014). 

53 29 CFR 525.11(b) and 525.13 (certificate 

denials), 525.17 (certificate revocations), and 525.18 

(administrative review process). 

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.’’ 42 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.43

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.44 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.’’ 45 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. 

The Department’s section 14(c) 

regulations have remained substantively 

untouched for the last 35 years.46 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.47 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.’’ 48 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.’’ 49

The Department’s 1989 regulations 

also state that the Department will 

consider four criteria in determining 

whether subminimum wage rates are 

necessary in order to prevent 

curtailment of opportunities for 

employment. As set out in the 1989 

rule, these criteria, still in effect today, 

examine the impact of the worker’s 

disability on their productivity 

compared to the earnings and 

productivity of experienced workers 

without disability doing essentially the 

same type of work and employed in the 

vicinity; as previously noted, the criteria 

do not include an assessment of the 

general scope of employment 

opportunities available to individuals 

with disabilities. The specific criteria 

are: (1) the nature and extent of the 

disabilities of the individuals employed 

as these disabilities relate to the 

individuals’ productivity; (2) the 

prevailing wages of experienced 

employees not disabled for the job who 

are employed in the vicinity in industry 

engaged in work comparable to that 

performed at subminimum wage rates; 

(3) the productivity of the workers with 

disabilities compared to the norm 

established for nondisabled workers 

through the use of a verifiable work 

measurement method or the 

productivity of experienced 

nondisabled workers employed in the 

vicinity on comparable work; and (4) 

the wage rates to be paid to the workers 

with disabilities for work comparable to 

that performed by experienced 

nondisabled workers.50 To determine 

whether these criteria are met, the 

Department’s regulations also provide 

guidance on determining the prevailing 

wage in a vicinity using different 

methods, instructions on establishing 

piece rates and hourly rates for workers 

with disabilities, and procedures to be 

used in deciding petitions for review of 

a subminimum wage rate under section 

14(c).51 In determining whether 

subminimum wages are necessary to 

prevent curtailment of employment 

opportunities for individuals with 

disabilities, the 1989 regulations do not 

consider the opportunities generated by 

the employment market as a whole, do 

not contemplate structural measures 

such as pre-employment training and 

skill-matching job placement services, 

and, notably, were published a year 

prior to the 1990 passage of the original 

ADA, and thus do not take into account 

the fundamental anti-discrimination 

and reasonable accommodation 

protections of the ADA. 

D. Administration, Use, and 

Enforcement of Section 14(c) 

Certificates Today 

1. Administration and Enforcement of 

Certificates 

The Department’s WHD administers 

and enforces the section 14(c) 

provisions.52 The administration, use, 

and enforcement of section 14(c) 

certificates is governed by the FLSA and 

WHD’s current regulations at 29 CFR 

part 525, as explained above. 

Specifically, the current § 525.9 

identifies the criteria that the 

Department considers in determining 

whether to issue a section 14(c) 

certificate. In effect, the current 

regulation conditions the issuance of a 

certificate on satisfaction of the 

standards set forth in other regulatory 

provisions governing the proper 

computation and payment of 

subminimum wages. Section 525.11 

likewise provides that ‘‘[u]pon 

consideration of the criteria cited in 

these regulations, a special certificate 

may be issued.’’ The regulations also 

outline procedures, further elaborated 

upon in subregulatory guidance, that 

WHD generally must use to deny or 

revoke certificates as well as appellate 

procedures for stakeholders who may be 

‘‘aggrieved’’ by any WHD certificate 

action.53 Employees and their parents or 

guardians also have the ability to 


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54 29 U.S.C. 214(c)(5), and 29 CFR 525.22. 

55Although the term ‘‘subminimum wages’’ 

typically refers to wage rates that are less than the 

Federal minimum wage, section 14(c) certificates 

also allow the payment of wages that are less than 

the required prevailing wage to workers who have 

disabilities for the work being performed on Federal 

contracts subject to the McNamara-O’Hara Service 

Contract Act (SCA) and the Walsh-Healey Public 

Contracts Act. See 41 U.S.C. 6701 et seq., 6501 et 

seq. The SCA’s implementing regulations generally 

incorporate the ‘‘conditions and procedures’’ 

governing section 14(c) employment set forth in 29 

CFR 525. 29 CFR 4.6(o). 

56See 29 CFR 525.10; 29 CFR 525.12; WHD Field 

Operations Handbook (FOH) 64g05, https://

www.dol.gov/agencies/whd/field-operationshandbook/Chapter-64. 

57See FOH 64g06. 

58 29 CFR 525.16. 

59 29 U.S.C. 794g. 

60Section 511 generally requires that youth with 

disabilities who are age 24 or younger complete 

certain activities, including pre-employment 

transition services under section 113 of the 

Rehabilitation Act or transition services under the 

Individuals with Disabilities Education Act (IDEA) 

(to the extent either of these services are available 

to them), an application for vocational 

rehabilitation services, and career counseling, 

information and referrals, to enable them to explore, 

discover, experience, and attain competitive 

integrated employment before they are employed at 

subminimum wage rates. See 29 U.S.C. 794g. 

Section 511 also requires that all workers with 

disabilities who are paid subminimum wages, 

regardless of their age, receive regular career 

counseling information and referrals and 

information about self-advocacy, selfdetermination, and peer mentoring training 

opportunities in their local area, every 6 months 

during the first year of employment and annually 

thereafter. Id. 

61See U.S. Dep’t of Labor, ‘‘Materials for 

Employers with Section 14(c) Certificates,’’ April 

2024, https://www.dol.gov/agencies/whd/workerswith-disabilities/employers. 

62See U.S. Dep’t of Labor, ‘‘14(c) Certificate 

Application,’’ April 2024, https://www.dol.gov/ 

agencies/whd/workers-with-disabilities/section-14c/ 

apply. 

63 29 CFR 525.13(b). 

64 Id. 

65Enforcement data collected by the 

Department’s enforcement agencies can be found at: 

https://enforcedata.dol.gov/views/data_

catalogs.php. The ‘‘Wage and Hour Compliance 

Action Data’’ dataset contains all concluded WHD 

compliance actions since fiscal year 2005. The 

dataset includes whether any violations were 

found, the back wage amount, number of employees 

due back wages, and civil money penalties 

assessed. 

66 Id. 

67 29 U.S.C. 214(c), 216(c); 29 CFR 525.17. 

petition for review of their subminimum 

wage rates.54

If an employer applies for and is 

issued a section 14(c) certificate, the 

certificate allows the employer to pay 

individualized subminimum wage rates 

to workers with disabilities whose 

disabilities impact their productivity on 

the work being performed that are 

‘‘commensurate’’ with the rates paid to 

workers without a disability performing 

the same type of work in the vicinity.55

Generally, to determine the proper 

commensurate wage rate, an employer 

must: (1) identify the prevailing wage 

rate paid to experienced workers 

without disabilities performing 

essentially the same type, quality, and 

quantity of work in the vicinity where 

the worker with a disability is 

employed, often by conducting a 

prevailing wage survey; (2) determine 

the productivity standard for 

experienced workers without 

disabilities (the ‘‘standard setter’’) 

against which the productivity of the 

worker with disabilities must be 

measured; and (3) assess the quality and 

quantity of the productivity of the 

worker with a disability.56 Employers 

generally determine the productivity of 

both the standard setter and the worker 

with a disability on a particular job by 

performing an observational stopwatch 

time study (‘‘time study’’).57 Employers 

holding a section 14(c) certificate must 

also maintain adequate documentation 

of each worker’s disability that impairs 

their productivity for the work 

performed, each required step that the 

employer took in determining the 

relevant commensurate wage, and time 

and pay records. Employers must also 

conduct periodic evaluations and make 

appropriate updates to the wage rates.58

In 2014, the Workforce Innovation 

and Opportunity Act (WIOA) 

established new limitations on the 

payment of a subminimum wage in 

section 511 of the Rehabilitation Act of 

1973 (Rehabilitation Act or section 511), 

which became effective in 2016.59 As 

discussed further in section III.B. below, 

section 511 prohibits an employer who 

holds a section 14(c) certificate from 

paying a subminimum wage to a worker 

with a disability unless the worker 

receives certain services and 

information prior to, and/or during, as 

applicable, their employment at 

subminimum wages.60 The Secretary 

has authority to enforce the terms under 

which individuals are employed at a 

subminimum wage, including the 

section 511 provisions, and WHD has 

issued guidance providing detailed 

instructions on the requirements.61

As previously discussed, an employer 

must obtain an authorizing certificate 

from WHD as a prerequisite to paying 

subminimum wages to workers with 

disabilities. The certificate application 

requires employers to provide WHD 

information about themselves and a 

snapshot of information about the way 

they use or seek to use the subminimum 

wage certificate.62 WHD reviews each 

application to determine whether to 

issue or deny a certificate. Having an 

active section 14(c) certificate does not 

provide the employer with a good faith 

defense should violations of section 

14(c) or other provisions of applicable 

law be found during an investigation of 

the employer. 

Certificates issued to employers by 

WHD have both an effective date and an 

expiration date and are generally valid 

for either 1 or 2 years, depending on the 

employer type (discussed in more detail 

below). To remain authorized to pay 

subminimum wages, the employer must 

properly and timely file an application 

for renewal with WHD before the 

expiration of its certificate.63 Employers 

submit applications to renew certificate 

authority in the same manner as when 

seeking an initial application but are 

required to provide additional 

information, including a snapshot of 

information about the applicant’s 

workforce paid a subminimum wage 

during their last completed fiscal 

quarter. If an application for renewal 

has been properly and timely filed with 

WHD, the employer’s existing 

subminimum wage certificate remains 

in effect and its authority to pay 

subminimum wages continues while the 

application for renewal is under 

review.64

Each year, WHD investigates a 

number of section 14(c) certificate 

holders to determine their compliance 

with all the provisions and 

requirements of section 14(c) as well as 

their compliance with section 511.65

WHD may initiate these cases due to a 

complaint or based upon agency 

selection. In fiscal year 2023, WHD 

concluded 89 investigations of 

employers holding section 14(c) 

certificates, found violations in 

approximately 88 percent of cases, and 

recovered more than $2 million in back 

wages for nearly 3,000 workers.66 WHD 

checks for compliance with the section 

511 requirements in every investigation 

of an employer holding a section 14(c) 

certificate and, since 2016, has 

identified violations of these provisions 

in more than 250 investigations. If WHD 

discovers a violation of the section 14(c) 

or section 511 requirements during the 

course of an investigation, WHD can 

assess back wages in addition to seeking 

action by the employer to ensure future 

compliance with the applicable laws. In 

certain circumstances, WHD can also 

assess liquidated damages and civil 

monetary penalties and can also revoke 

the employer’s section 14(c) 

certificate.67 Certificate revocation is an 

enforcement tool that WHD uses in 

certain circumstances such as 

misrepresentations or false statements 

made in obtaining the certificate or 

egregious violations of statutory 

requirements. In cases where employers 


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68U.S. Gov’t Accountability Off., GAO–01–886, 

‘‘Special Minimum Wage Program: Centers Offer 

Employment and Support Services to Workers With 

Disabilities, But Labor Should Improve Oversight’’ 

10, 18 (2001) (2001 GAO Report). 

69See U.S. Dep’t of Labor, ‘‘14(c) Archive,’’ June 

2024, https://www.dol.gov/agencies/whd/workerswith-disabilities/section-14c/certificate-holders/ 

archive. 

70 Id. The Department notes that data collected by 

the Department from section 14(c) applications is 

not census data. Data is derived from information 

received by WHD during the certificate application 

process, which is used for the purposes of 

determining whether to issue a certificate. The 

application requires the employer to provide a 

snapshot of its operations and workforce that is 

paid a subminimum wage during its most recently 

completed fiscal quarter at the time of its renewal 

application, and the submission date varies per 

applicant. Because certificates are issued to the 

employer, not individuals employed at 

subminimum wages, the specific number of 

employees may change over the duration of the 

certificate. The certificate application data is selfreported by employers and is not independently 

verified by WHD. Additionally, the data provided 

reflects active certificates as of the date that the 

Department’s website list was revised and does not 

include the number of employees on ‘‘pending’’ 

14(c) certificates. 

71The Department notes that the May 1, 2024, 

employee count (40,579) does not reflect any 

employment changes an employer may have made 

subsequent to the data provided to WHD in its 

certificate application nor does it reflect the 

workers with disabilities paid under pending 

renewal certificates. Notwithstanding, the 

Department believes this data comparison remains 

valid and would be little changed with these 

additional data points. 

72This statistic is compiled from WHD’s listing of 

14(c) certificate holders between October 1, 2020, 

and April 1, 2024. WHD maintains a listing of 

employers who hold or have applied for 14(c) 

certificates at https://www.dol.gov/agencies/whd/ 

workers-with-disabilities/section-14c/certificateholders. 

73WHD listing of certificate holders from October 

1, 2023, indicating that approximately 93 percent of 

certificate holders are CRPs, https://www.dol.gov/ 

agencies/whd/workers-with-disabilities/reports-tocongress. 

74FOH 64k00. 

75FOH 64b00. 

76WHD listing of certificate holders from October 

1, 2023, https://www.dol.gov/agencies/whd/ 

workers-with-disabilities/reports-to-congress. 

77Currently, the small number of private sector 

businesses amongst section 14(c) certificate holders 

is a marked contrast to the Congressional 

understanding of how such certificates would be 

used at the time of the original enactment of section 

14 in 1938. During the debate preceding the passage 

of the FLSA, members of Congress focused on the 

provision as being intended for employment in the 

private sector, discussing the impact on ‘‘industry,’’ 

‘‘manufacturers,’’ and ‘‘small businessmen.’’ 82 

Cong. Rec., 88–89 (1937). 

78See 2001 GAO Report at 14; 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’’). 

79 Id. at 6, n.19. 

80U.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’’). 

81See, 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). 

82See 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. 

83 Id. at 18–19. 

84FOH 64g06(a)(1). 

do not voluntarily agree to pay back 

wages and come into compliance, WHD 

can also file suit in Federal court to 

resolve violations of the law. 

2. Use of Section 14(c) Certificates 

In recent decades, the estimated 

number of workers with disabilities 

paid subminimum wages has 

dramatically declined, as has the 

number of employers holding section 

14(c) certificates. In 2001, the U.S. 

Government Accountability Office 

(GAO) estimated that approximately 

424,000 workers with disabilities were 

paid subminimum wages while working 

for 5,612 employers holding section 

14(c) certificates.68 As of May 1, 2024, 

the Department’s data shows there were 

801 employers with either an issued 

certificate or a pending certificate 

application.69 Employers with an issued 

certificate reported paying 

approximately 40,579 workers at 

subminimum wages in their previously 

completed fiscal quarter.70 The number 

of employers holding or pursuing a 

section 14(c) certificate as of May 1, 

2024, had dropped by nearly 86 percent 

from those in 2001. Further, there were 

roughly one-tenth the number of 

workers being paid subminimum wages 

under section 14(c) certificates as there 

were in 2001—approximately a 90 

percent reduction over that 23-year 

period.71 Additionally, very few 

employers seek new section 14(c) 

certificates; over 97 percent of certificate 

applications received annually seek 

renewal of an existing section 14(c) 

certificate.72

WHD issues section 14(c) certificates 

to business establishments, community 

rehabilitation programs (CRPs), 

hospitals/patient worker facilities, and 

school-work experience programs 

(SWEPs). The overwhelming majority of 

current certificate holders are CRPs, 

representing approximately 93 percent 

of current certificate holders in 2023.73

In the context of section 14(c), WHD 

defines CRPs as ‘‘not-for-profit agencies 

that provide rehabilitation and 

employment for people with 

disabilities.’’ 74 Such establishments are 

sometimes referred to as ‘‘sheltered 

workshops’’ 75 as they typically are 

facility-based and often serve workers 

with disabilities in sheltered, or 

segregated, settings. Only a small 

number of private-sector, for-profit 

businesses hold certificates for the 

payment of subminimum wages, as 

reflected by the fact that only 

approximately 4 percent of current 

section 14(c) certificate holders are 

businesses.76 77

Many CRPs provide both employment 

and other services, such as 

rehabilitation and training, and receive 

public funding. GAO has noted that 

many employers holding a section 14(c) 

certificate pay their operating costs 

through a mix of public funding and 

public and private contracts for goods or 

services.78 Specifically, GAO noted in a 

2021 report that Medicaid is the largest 

source of Federal funds for day and 

employment services (such as those 

provided by CRPs) for individuals with 

developmental disabilities.79 Likewise, 

in a 2020 report, the USCCR found that 

‘‘the majority of community 

rehabilitation programs which provide 

supports and services for people with 

intellectual and developmental 

disabilities to obtain a job are funded by 

the vocational rehabilitation 

[program].’’ 80 As the USCCR explained, 

in addition to Medicaid funding noted 

by GAO, the vocational rehabilitation 

funding includes U.S. Department of 

Education program grants under the 

Rehabilitation Act, in addition to State 

and local funding used for match 

purposes under the Vocational 

Rehabilitation program.81

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.82

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 83 (a piece rate fixes a 

wage payment on each completed unit 

of work).84 Using WHD’s administrative 

data of issued certificates that were 

valid in the first two quarters of fiscal 

year 2024 (between October 2023 and 


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86 1967 DOL Report at 21. 

87 2001 GAO Report at 19. 

88 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. 

89See 29 U.S.C. 214(c). 

90See, 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. 

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. 

Scope of data studied 

GAO’s 

2019 to 2021 

analysis 

WHD’s 

October 2023 to March 2024 

analysis 

62 percent of renewal certificates 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.86 In 2001, GAO estimated 

that three-quarters of workers employed 

under a section 14(c) certificate 

experienced some form of I/DD.87 By 

2021, GAO estimated approximately 90 

percent of workers employed under a 

section 14(c) certificate experienced I/ 

DD.88

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 longterm 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.89 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.90 Through the disability 

rights movement, advocates, including 

self-advocates, have worked to ensure 

that individuals with disabilities have 

the same access to employment and 


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91See, e.g., Nicole LeBlanc, ‘‘Why Employment 

Matters: A Resource Guide by and for SelfAdvocates 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. 

92Arlene 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’’). 

93The 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.’’). 

94 ‘‘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. 

95See, 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. 

96For 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. 

97See Olmstead v. L.C. ex rel. Zimring, 527 U.S. 

581 (1999); see also Tennessee v. Lane, 541 U.S. 509 

(2004); Toyota Motor Manufacturing, Kentucky, Inc. 

v. Williams, 534 U.S. 184 (2002); Sutton v. United 

Air Lines, Inc., 527 U.S. 471 (1999); Cedar Rapids 

Community School District v. Garret F., 526 U.S. 66 

(1999). 

98See, for example, USCCR Report; National 

Council on Disability (NCD), ‘‘Has the Promise Been 

Kept? Federal Enforcement of Disability Rights 

Laws (Part 1),’’ (October 2018), https://

www.ncd.gov/report/has-the-promise-been-keptfederal-enforcement-of-disability-rights-laws-part-1- 

october-2018/(‘‘2018 NCD Progress Report’’); NCD, 

‘‘Report on Subminimum Wage and Supported 

Employment’’ (2012), https://www.ncd.gov/report/ 

national-council-on-disability-report-onsubminimum-wage-and-supported-employment/ 

(‘‘2012 NCD Report’’). 

99The term ‘‘competitive integrated employment’’ 

(CIE) is defined at 29 U.S.C. 705(5), and in the 

Department of Education’s regulations at 34 CFR 

361.5(c)(9). Those regulations define CIE as work 

that is performed on a full-time or part-time basis 

for which an individual is: compensated at or above 

minimum wage and comparable to the customary 

rate paid by the employer to employees without 

disabilities performing similar duties and with 

similar training and experience; receiving the same 

level of benefits provided to other employees 

without disabilities in similar positions; at a 

location where the employee interacts with other 

individuals without disabilities; and presented 

opportunities for advancement similar to other 

employees without disabilities in similar positions. 

See also https://www.dol.gov/agencies/odep/ 

program-areas/cie. 

100The Department of Education amended 

regulations at 34 CFR parts 361 and 363, and 

established new part 397, in response to the WIOA 

amendments to the Rehabilitation Act. These 

amended and new regulations govern the State 

Vocational Rehabilitation Services program and the 

State Supported Employment Services program, 

and placed greater emphasis on the achievement of 

CIE. See U.S. Dep’t of Education, State Vocational 

Rehabilitation Services Program; State Supported 

Employment Services Program; Limitations on Use 

of Subminimum Wage, Final Regulations, 81 FR 

55630 (Aug. 19, 2016). 

101See U.S. Dep’t of Labor, Bureau of Labor 

Statistics, ‘‘Economic News Release: Persons with a 

Disability: Labor Force Characteristics Summary,’’ 

Feb. 22, 2024, https://www.bls.gov/news.release/ 

pdf/disabl.pdf (noting that the unemployment rate 

for individuals with a disability was 7.2 percent in 

2023, and also stating that ‘‘[i]n 2023, 22.5 percent 

of people with a disability were employed—the 

highest recorded ratio since comparable data were 

first collected in 2008’’ and that such rate reflected 

a 1.2 percentage point increase from 2022); 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). 

102As 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 

Continued 

other opportunities as others and that 

individuals with disabilities are not 

subject to segregation and 

discrimination on the basis of a 

disability.91 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.92 Thus, there has been a 

striking and consistent movement away 

from the medical 93 and charitable 94

models of disability, toward a social 

model of disability focused on various 

barriers which may hinder full and 

effective participation in society.95

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.96

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.97 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.98 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) 99 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

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 


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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, crossreferencing 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. 

103See 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. 

104See 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. 

106The 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. 

107This 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. 

108See 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 v. 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/enforcementguidance-non-waivable-employee-rights-undereeoc-enforced-statutes. 

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

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. 

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 


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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). 

110See 42 U.S.C. 12111. 

111 29 CFR 1630.2(o)(1). 

112 42 U.S.C. 12111(9). 

113The 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). 

114Many 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/. 

115 42 U.S.C. 12131, 12132. 

116 28 CFR part 35, app. B, 703 (2023) (addressing 

28 CFR 35.130(d)). 

117See 527 U.S. 581, 583, 597, 602 (1999). 

118 Id. at 607. 

119 Id. at 600. 

120 Id. at 601. 

121See 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.’’). 

122See U.S. Dep’t of Justice, Civil Rights Div., 

‘‘Questions and Answers on the Application of the 

ADA’s Integration Mandate and Olmstead v. 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’’). 

123 42 U.S.C. 12182(a). 

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

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

In 1999, in Olmstead v. 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

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. 

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. 

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 


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124See DOJ ADA Integration Mandate Q&As, 

https://www.ada.gov/assets/pdfs/olmsteademployment-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). 

125See 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). 

127See DOJ ADA Integration Mandate Q&As. 

128 Id.; see also 42 U.S.C. 12181(7)(K). 

129The Department notes that holding a section 

14(c) certificate does not protect an employer from 

charges pursuant to the ADA, see FOH 64a02(c). 

130Educ. 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. 

131See 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 CaustonTheoharis, & 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). 

134The 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. 

135See 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-statementinclusion-of-children-with-disabilities-in-earlychildhood-; see also Endrew F. v. 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.’’) 

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 selfsufficiency.’’ 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

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. 

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 


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136Mary 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. 

138 29 U.S.C. 794g; also see https://

www.congress.gov/113/bills/hr803/BILLS113hr803enr.pdf. 

139The 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. 141Section 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 Preemployment 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. 

143See 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 federallyfunded, means-tested benefits such as SSI and 

Medicaid.’’ See ABLE National Resource Center, 

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

146On 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. 

147See 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:// 

Continued 

preparation for employment than past 

generations of students with disabilities. 

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

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

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 meanstested 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 meanstested public benefits such as health 

care.145

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


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obamawhitehouse.archives.gov/the-press-office/ 

2014/02/12/executive-order-minimum-wagecontractors. 

149 86 FR at 22835. 

150 79 FR 2948 (Jan. 16, 2014). 

151 42 CFR 441.530(a)(1)(i). 

152See 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. 

157See 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. 

158U.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. 

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

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

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 nonprofit 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 subprevailing 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. 

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. 

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 


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161See https://apse.org/home-v2-2/employmentfirst/ 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. 

162See, 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.’’). 

163See https://ipsworks.org/index.php/what-isips/. 

164See 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. 

165See U.S. Dep’t of Labor, Office of Disability 

Emp’t Policy, ‘‘Customized Employment,’’ https://

www.dol.gov/agencies/odep/program-areas/ 

customized-employment. 

166U.S. Dep’t of Labor, Office of Disability Emp’t 

Policy https://www.dol.gov/agencies/odep/ 

initiatives/campaign-for-disability-employment. 

167U.S. Dep’t of Labor, Office of Disability Emp’t 

Policy https://www.dol.gov/newsroom/releases/ 

odep/odep20160914. 

168See supra note 159. 

169See 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. 

170U.S. Dep’t of Labor, Office of Disability Emp’t 

Policy, https://www.dol.gov/agencies/odep/ 

program-areas/cie/hub. 

171To 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. 

172See Consolidated Appropriations Act, Public 

Law 117–103, 136 Stat. 49, 479 (2022). 

173U.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/pressContinued 

regulations in place in support of the 

Employment First framework.161

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

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. 

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

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

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 


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174U.S. Dep’t of Educ., Rehabilitation Services 

Administration (RSA), ‘‘RSA Programs,’’ https://

rsa.ed.gov/about/programs. 

175See 29 U.S.C. 705(5); see also Dep’t of Educ., 

RSA, ‘‘Disability Innovation Fund,’’ https://

rsa.ed.gov/about/programs/disability-innovationfund-pathways-to-partnerships. 

176The 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-factsheet/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. 

177Oregon Dep’t of Human Services, ‘‘Lane v. 

Brown Settlement Agreement Report,’’ https://

www.oregon.gov/odhs/employment-first/ 

Documents/lane-v-brown-settlement-message-2022- 

06-21.pdf. 

178 Id. 

179See 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-IntegratedEmployment-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/departmentjustice-reaches-landmark-americans-disabilitiesact-settlement-agreement-rhode. 

180See discussion in section III.A. 

181This 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. 

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

A landmark agreement in Oregon, the 

Lane v. 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, fullwage employment opportunities.179

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

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 


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182USCCR 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. 

185 Id. at i. 

186USCCR 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. 

189 Id. at xi. 

190 Id. at 198. 

191 Id. 

192 Id. at 143–45. 

193 Id. 

194 Id. at 217. 

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. 

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. 

To generate the report, the USCCR 

collected data, reports, and testimony 

from ‘‘Members of Congress, Labor and 

Justice Department officials, selfadvocates 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 fullwage and subminimum wage 

worksites.185

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

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

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

In addition to receiving comments 

urging the elimination of subminimum 

wages, however, the USCCR also noted 

that ‘‘the majority of the public 


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195 Id. at xi. 

196 Id. at 175. 

197 Id. at xiv and 179–80. 

198 Id. at xi–xii. Similarly, recent nongovernmental 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/theuse-of-subminimum-wage-for-disabled-workersacross-the-us/. 

199 2020 USCCR Report at xvi. 

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). 

202Solis v. Hill Country Farms, 808 F. Supp. 2d 

1105 (S.D. Iowa 2011), aff’d, 469 Fed. App’x 498 

(8th Cir. 2012); EEOC v. 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. 

204 2012 NCD Report. 

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

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

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

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 


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205 Id. at 10. 206 Id. at 18. 207 Id. 208 Id. at 10. 209Nat’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-fromthe-new-deal-to-the-real-deal-joining-the-industriesof-the-future/ (2018 New Deal NCD Report). 210 Id. at 12. 211 Id. at 13–14. 

212 Id. at 53. 

213 Id. at Transmittal Letter. 

214 Id. at 66, 70, 73–74, 78, 83. 

215 Id. 

216 Id. at 76. 

217 Id. at 14. 

218 Id. at 99–100. 

219 2018 NCD Progress Report. 

220 Id. at 68–69. 

221 Id. at 69–70. 

222 Id. at 74. 

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

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 endplacement. 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

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

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

NCD also made site visits and 

highlighted the stories of individuals. In 

one example, NCD wrote ‘‘[a] person 

with I/DD who was accused of being a 

‘slow worker’ in the sheltered workshop 

became ‘a raging success’ working 

competitively in a family restaurant. He 

was better matched, and therefore 

performed better, in a job where he 

could interact with customers.’’ NCD 

also described, in specific detail, the 

methodologies of agencies in several 

States providing supportive 

employment services, such as 

individualized job matching and 

community networking strategies.215

NCD noted that ‘‘families’ viewpoints 

often change from hesitance about 

working in the community to full 

support after they see how successful a 

family member can be in a typical work 

setting, and how that success can run to 

other domains of life.’’ 216

Based on its review, NCD made 

several recommendations in its 2018 

report. For example, NCD recommended 

that disability policy should focus on 

‘‘increased capacity for sustained 

funding for integrated supported and 

customized employment,’’ improving 

technical assistance, benefits 

counseling, business engagement 

strategies, and developing resources and 

innovations to allow people with 

disabilities to do current and future 

available jobs.217 In conclusion, NCD 

recommended current certificate 

holders should be given time to phase 

out subminimum and sub-prevailing 

wages, while the Department’s issuance 

of ‘‘new’’ certificates should 

immediately cease.218

In an additional 2018 report entitled 

‘‘National Disability Policy: A Progress 

Report,’’ (2018 NCD Progress Report), 

NCD also extensively reviewed WHD’s 

administration and enforcement efforts 

under section 14(c).219 Among other 

findings, NCD noted that WHD had 

recognized the need to focus 

enforcement efforts on areas ‘‘where 

large numbers of vulnerable workers are 

found,’’ such as workers employed by 

holders of section 14(c) certificates.220

As part of this effort, NCD reported that 

WHD conducted extensive 

investigations of such employers 

between 2008 and 2017. During that 

period, as also discussed in section 

II.D.1 (‘‘Administration and 

Enforcement of Certificates’’), NCD 

‘‘documented ‘a high prevalence’ of 

FLSA and other violations among the 

14(c) certificate holders investigated. In 

many instances, employers were 

unaware of the requirements of Section 

14(c) or did not implement the 

requirements appropriately.’’ 221

The 2018 NCD Progress Report also 

highlighted the intersection between 

section 14(c) and anti-discrimination 

civil rights protections. This report, 

among many other recommendations, 

called for more collaboration between 

WHD and civil rights enforcement 

agencies; as an example of this type of 

activity, NCD highlighted that as a result 

of a WHD investigation of a certificate 

holder in Rhode Island, WHD made a 

referral to DOJ’s Civil Rights Division. 

DOJ then found ‘‘unnecessary 

segregation of adults and serious risks of 

unnecessary segregation of students in 

violation of the ADA and the U.S. 

Supreme Court Olmstead decision,’’ 

resulting in a court ordered settlement 

agreement with the State of Rhode 

Island and the city of Providence.222


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223 29 U.S.C. 795n. 

224 Id. 

225The Advisory Committee’s Federal 

membership consisted of the following agency 

leaders or their designee: Department of Labor’s 

Assistant Secretary of ODEP, the Assistant Secretary 

for Employment and Training Administration 

(ETA), and the WHD Administrator; the HHS 

Commissioner of the Administration on Intellectual 

and Developmental Disabilities; CMS Director; the 

Commissioner of the Social Security 

Administration (SSA) and the Department of 

Education’s RSA Commissioner. 

226Advisory Committee on Increasing 

Competitive Integrated Employment for Individuals 

with Disabilities, ‘‘Final Report,’’ 2016, at p. iv, 

https://www.dol.gov/sites/dolgov/files/odep/topics/ 

pdf/acicieid_final_report_9-8-16.pdf. 

227 Id. at 1–4. 

228 Id. at 2. 

229 Id. at 30. 

230 Id. at 28. 

231 Id. at 29. 

232 Id. 

233 Id. at 10. 

234 Id. at 21. The Department notes that in 

addition to the agency reports discussed herein, in 

2018, the minority staff of the U.S. Senate 

Committee on Health, Education, Labor, and 

Pensions reached a similar conclusion that the 

evidence does not support the continued payment 

of subminimum wages and the Department should 

no longer issue new section 14(c) certificates. 

Minority Staff of S. Comm. on Health, Educ., Labor, 

and Pensions, ‘‘Disability Employment: Outdated 

Laws Leave People with Disabilities Behind in 

Today’s Economy,’’ Comm. Print 2018, https://

web.archive.org/web/20181224100838/https://

www.murray.senate.gov/public/_cache/files/ 

84084732-e011-470a-b246-1cdab87755c3/staffreport-on-employment-for-people-with-disabilities10-29-2018-pm-.pdf. 

The Department considers the NCD 

reports insightful in analyzing changed 

employment opportunities for 

individuals with disabilities, especially 

as the NCD documented the impact of 

these changes in reports spanning 

several years. Furthermore, it is relevant 

that NCD not only found that 

subminimum wage employment is 

unnecessary given the alternatives, but 

also put forward evidence that many 

employees working under section 14(c) 

certificates may, despite positive 

intentions, experience negative 

outcomes. 

iii. Report of the Advisory Committee 

on Increasing Competitive Integrated 

Employment for Individuals With 

Disabilities 

In 2014, the Advisory Committee on 

Increasing Competitive Integrated 

Employment for Individuals with 

Disabilities (Advisory Committee) was 

established under section 609 of the 

Rehabilitation Act, as amended by 

section 461 of the WIOA.223 The 

Advisory Committee was created to 

advise the Secretary and Congress in 

three areas: (1) ways to increase 

competitive integrated employment 

opportunities for individuals with 

intellectual or developmental 

disabilities or other individuals with 

significant disabilities; (2) the use of the 

section 14(c) certificate program for the 

employment of individuals with I/DD or 

other individuals with significant 

disabilities; and (3) ways to improve 

oversight of the use of such 

certificates.224 The Advisory Committee 

was established according to the 

provisions of the Federal Advisory 

Committee Act, which helps ensure the 

independent nature of the Advisory 

Committee in providing advice and 

recommendations to the Secretary. 

Especially as Congress specifically 

created the Advisory Committee to 

independently study questions closely 

related to the Department’s charge to 

determine whether continued issuance 

of certificates is necessary, the 

Department gives weight to the 

Committee’s relevant findings. 

Members of the Advisory Committee 

included Federal members,225 selfadvocates for individuals with I/DD, 

providers of employment services, 

representatives of national disability 

advocacy organizations for adults with 

I/DD, academic experts, representatives 

from the employer community or 

national employer organizations, and 

other individuals or representatives 

with expertise on increase opportunities 

for CIE for individuals with disabilities. 

The Advisory Committee worked for 2 

years on its study of the topics 

mentioned above. In evaluating these 

issues, the Advisory Committee held 10 

public meetings during which 

individuals and organizations provided 

testimony and public comments. The 

Advisory Committee also received 

‘‘more than 2,000 letters, emails and 

personal video messages from people 

with disabilities, and other citizens and 

organizations across the nation that 

helped inform the work of the 

committee and its final 

recommendations.’’ 226

As the culmination of these efforts, in 

September 2016, the Advisory 

Committee issued a detailed report 

(Committee Report) that included six 

chapters discussing that increasing CIE 

will require substantial capacity 

building, including for youth, in the 

marketplace, and within the Federal 

government itself.227 The Advisory 

Committee, among other conclusions, 

recommended that Congress repeal 

section 14(c) through a multi-year 

phaseout.228 The Advisory Committee 

further recommended that WHD 

‘‘engage in stronger enforcement’’ of 

section 14(c) certificates and require 

both States and individual applicants to 

submit more information (including 

information about States’ and 

applicants’ efforts to work towards 

alternatives to the payment of 

subminimum wages) to show that the 

issuance of certificates would be 

necessary to prevent the curtailment of 

employment opportunities for 

individuals with disabilities.229

The Advisory Committee observed 

that ‘‘one by-product of subminimum 

wage employment is a culture with a 

low expectation for competitive 

integrated employment.’’ 230 The 

Committee further concluded that the 

‘‘current widespread practice of paying 

workers subminimum wages, based on 

assumptions that individuals with 

disabilities cannot work in typical jobs, 

or on assumptions about the 

unavailability of alternative work 

opportunities, is antithetical to the 

intent of modern federal policy and 

law.’’ 231 The Advisory Committee 

explained that modern Federal policy 

and laws are ‘‘based on the assumption 

that all individuals with disabilities are 

capable of, and have a right to, CIE.’’ 232

The Advisory Committee further 

recommended that vocational 

rehabilitation services for individuals 

with disabilities focus more on practices 

demonstrated to produce positive 

outcomes in full-wage employment. For 

example, the Advisory Committee 

explained that research shows providing 

experience in community-based 

workplaces performing actual work 

tasks is a superior training strategy 

compared with providing ‘‘work 

readiness training’’ in sheltered 

workshops.233 Similarly, the Advisory 

Committee made recommendations 

regarding supportive employment 

practices based on its finding of the 

importance of factors such as ‘‘work 

experience and [competitive integrated 

employment] during secondary school 

years’’ and family expectations about 

employment.234

As with the other government 

oversight reports discussed above, the 

Department finds the thorough 

conclusions of the Advisory Committee 

to be highly relevant to the 

Department’s analysis, and, in 

particular, the Department notes the 

import of the Committee’s congressional 

mandate. Specifically, the Advisory 

Committee’s conclusions regarding the 

availability of alternatives to section 

14(c) certificates informed the 

development of this proposed rule; the 

Committee Report provides a picture of 

the employment landscape for workers 

with disabilities that does not rely upon 

subminimum wages. 


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235Additional GAO reports include GAO–81– 

116519, ‘‘Stronger Fed. Efforts Needed for Providing 

Emp’t Opportunities and Enforcing Labor Standards 

in Sheltered Workshops’’ (1981), https://

www.gao.gov/products/hrd-81-99; GAO–01–886, 

‘‘Special Minimum Wage Program: Centers Offer 

Emp’t and Support Servs. to Workers with 

Disabilities, But Labor Should Improve Oversight’’ 

(2001), https://www.gao.gov/products/gao-01-886; 

and GAO–12–594, ‘‘Students with Disabilities: 

Better Fed. Coordination Could Lessen Challenges 

in the Transition from High School’’ (2012), https:// 

www.gao.gov/products/gao-12-594. 

236See 2023 GAO Report. 

237 Id. at 14–15. 

238 Id. at 2. 

239 Id. at 26. 

240 Id at 17. 241 Id. 242 2021 GAO Report. 243 Id. at 13. 244 Id. at 13. 

245 Id. 

246 Id. at 2. 

247 Id. at 1. 

248 Id. at 1–2. 

249 Id. at 14. 

250 Id. at 19. 

251 Id. 

252 Id. 

253 Id. at 20. 

254 Id. at 25–27. 

iv. U.S. Government Accountability 

Office Reports 

Unlike the government agency reports 

detailed above, GAO has not directly 

addressed the question of whether it is 

still necessary to permit payment of 

subminimum wages to promote 

employment opportunities for 

individuals with disabilities. However, 

GAO has issued multiple reports 

addressing various aspects of the use 

and operation of section 14(c) 

certificates, and in doing so, has 

generated significant data and analysis 

relevant to this proposed rule.235 The 

Department found this data and analysis 

to be helpful in its review of section 

14(c) and development of this NPRM. 

In 2023, GAO issued a report 

addressing the Department’s oversight 

of employers using section 14(c) 

certificates. In this report, in addition to 

its primary recommendations regarding 

section 14(c) certificate processing, GAO 

emphasized that participation of 

employers using section 14(c) 

certificates has markedly decreased, 

tracking a steady decline over the 

decade from 2010 to 2019.236 GAO 

attributed this decline to changing 

Federal laws and policies, changing 

State policies (such as state-level 

phaseouts of the use of subminimum 

wages), and shifts in employer and 

worker views.237

In the 2023 report, GAO also 

published important demographic and 

statistical data about employers holding 

section 14(c) certificates and the 

employees they were paying 

subminimum wages. GAO confirmed 

that, currently, CRPs are the ‘‘vast 

majority of 14(c) employers,’’ and that 

‘‘almost all 14(c) workers had an 

intellectual or developmental 

disability.’’ 238 GAO estimated that 

approximately 70 percent of section 

14(c) workers were 25–54 years old, 

with approximately 26 percent 55 years 

or older, and only approximately 4 

percent 18–24 years old.239 As already 

noted above, GAO found that the 

majority of workers paid under section 

14(c) certificates in the data they 

analyzed were paid less than $3.50 per 

hour, approximately 14 percent were 

paid less than one dollar per hour, and 

approximately 5 percent were paid less 

than 25 cents per hour.240 GAO also 

found that ‘‘few 14(c) workers’’ engaged 

in competitive employment, including 

being paid at least minimum wage in an 

integrated work setting.241

Additionally, in 2021, GAO issued a 

report on ‘‘Factors Influencing the 

Transition of Individuals with 

Disabilities to Competitive Integrated 

Employment.’’ 242 GAO identified 32 

factors that may influence transitions 

away from subminimum wages to 

competitive integrated employment.243

GAO did not find a consensus across the 

individuals it interviewed about the 

most significant factors influencing 

‘‘14(c)–to–CIE transition.’’ 244 Instead, 

‘‘each of the 32 factors was identified by 

at least one interviewee to be among the 

most important in influencing an 

individual’s transition to CIE.’’ 245

Additionally, many interviewees 

emphasized that the factors were 

heavily inter-related. GAO also 

emphasized the potential impact of the 

COVID–19 pandemic, noting 

uncertainty about such impacts at the 

time of the report’s publication.246 As a 

backdrop to its study of factors that 

might influence individuals’ transition 

to CIE, GAO noted legislative changes— 

such as WIOA—that promote access to 

employment at full wages.247

Additionally, GAO highlighted a ‘‘shift 

in federal and state priorities’’ away 

from reliance on section 14(c), and 

noted that ‘‘at least 40 states have 

adopted legislation or state policy 

stating that integrated employment in 

the community is the first and preferred 

option for people with disabilities 

. . . .’’ 248

GAO’s interviews with employees 

identified several factors that inhibited 

transitions to CIE, including the 

individuals’ age, concern for 

maintaining benefits, desire for a social 

community, concern for safety of nonsheltered working environment, and 

‘‘views’’ about an individuals’ skills.249

Observing that family members’ 

judgments were often decisive even 

when differing from the preferences of 

employees themselves, GAO recounted 

that ‘‘one participant told us that family 

members may not see the individual’s 

potential for accomplishing work 

because they remember times when the 

person struggled.’’ 250 Interviewees also 

noted that ‘‘people who have been 

exposed to CIE, including through realworld, authentic experiences, almost 

always choose CIE . . . because they 

have a more accurate perception of what 

it entails.’’ 251

Regarding the views of employers, 

GAO listed factors that might influence 

a section 14(c) certificate holder’s 

decision to transition away from 

subminimum wages, a process GAO 

referred to as ‘‘provider 

transformation.’’ 252 GAO found that the 

factors most relevant to whether section 

14(c) holders transitioned from 

subminimum wages to CIE were, in 

addition to resource-related factors, 

‘‘14(c) certificate holder leadership 

views, 14(c) certificate holder’s use of 

person-centered approach to 

employment planning, 14(c) certificate 

holder’s mission or business model, 

14(c) certificate holder’s access to 

training and technical assistance, and 

14(c) certificate holder’s provision of 

ongoing supports for CIE.’’ 253

Finally, GAO noted several policy and 

economic factors that could influence 

transition away from subminimum 

wages. Among these factors, GAO 

identified State resources supporting 

CIE, State policies ‘‘allowing public 

benefits to continue while working,’’ 

‘‘federal support for 14(c) employment 

versus CIE,’’ the overall unemployment 

rate, available transportation, and 

available employment services.254

In sum, while GAO’s reports did not 

directly address whether section 14(c) 

certificates were necessary to prevent 

curtailment of opportunities for 

employment, the Department found 

them relevant in several ways, as 

reflected by the information discussed 

above. In particular, GAO’s 2023 report 

provided additional insight into the 

demographics of the workers with 

disabilities currently working under 

section 14(c) certificates while GAO’s 

2021 report provided a better 

understanding of many of the challenges 

potentially faced by employers in 

transitioning from section 14(c) 

subminimum wage employment to an 

alternative model. The Department’s 

proposed phaseout approach, discussed 

in greater detail below, is intended to 


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255See, e.g., Nat’l Fed’n of the Blind, Letter to the 

Secretary of Labor, https://nfb.org/sites/nfb.org/ 

files/2021-06/Letter%20to%20Secretary

%20Walsh%20regarding%2014c.pdf (June 21, 

2021) (‘‘We believe Section 14(c) of the FLSA is a 

discriminatory practice and we have long been 

fighting to end it . . . 14(c) certificates have been 

a source of systemic abuse and corruption . . . 

[and] can no longer be justified, even under the 

FLSA’s own terms . . .’’); Minn. Disability Law 

Ctr., ‘‘Ending the Subminimum Wage in Minnesota: 

A Report from the Minnesota Disability Law 

Center,’’ https://mylegalaid.org/wp-content/ 

uploads/2024/03/Ending-the-Subminimum-Wagein-Minnesota_October-2022_Text-Version.pdf 

(October 2022) (among other findings, 

recommending the State government ‘‘[pa]ss 

legislation to phase out the payment of 

subminimum wages in Minnesota by a specific date 

with funding to implement the phase out.’’); 

Association of People Supporting Employment First 

(APSE), ‘‘Trends and Current Status of 14(c),’’ 

https://apse.org/wp-content/uploads/2021/10/10_

20_21-APSE-14c-Update-REV.pdf (October 2021) 

(presenting data in support of APSE’s call for 

complete phase out of the use of 14(c) certificates); 

Jean Winsor, Cady Landa, Cady, Andrew Perumal, 

and John Butterworth, ‘‘The Power of Disability 

Employment: The Impact to Arizona’s Economy,’’ 

ThinkWork!, https://www.thinkwork.org/sites/ 

default/files/files/Arizona_whole%20report_

Final.pdf (October 2019) (finding that increasing the 

number of workers with disabilities will positively 

impact Arizona’s economy). 

256On December 13, 2021, the Department’s WHD 

and NDRN renewed a memorandum of 

understanding (MOU) establishing a collaborative 

relationship to promote compliance with laws of 

common concern. See https://www.dol.gov/ 

agencies/whd/workers-with-disabilities/nationaldisability-rights-network-mou. This MOU built 

upon the foundation established by a prior MOU 

entered into between WHD and NDRN in December 

2015. Although WHD and NDRN collaborate on 

certain enforcement and training-related matters, 

the Department did not independently consult with 

NDRN about the development of this proposed rule. 

257Nat’l Disability Rights Network, ‘‘Segregated 

and Exploited: The Failure of the Disability Service 

System to Provide Quality Work,’’ 2011, A Letter 

from the Executive Director, https://www.ndrn.org/ 

wp-content/uploads/2019/03/Segregated-andExploited.pdf at 7. 

258 Id. at 32–33. 

259 Id. at 46. 

260 Id. at 7. 

261A Voice of Reason, ‘‘In Support of Protecting 

Vocational Centers and 14(c) Wage Certificates,’’ 

https://vor.net/images/stories/2020-2021/VOR_-_

In_Support_of_Protecting_Vocational_Centers_and_

14c_Wage_Certificates_2-4-21.pdf; see also 

Coalition for Preserving 14(c) White Paper (2022), 

https://employmentchoice.org/protectingemployment-for-individuals-with-i-dd-coalitionwhite-paper-2022/. 262 Id. 263 Id. 264At the local level, Chicago, Seattle, Denver, 

and Reno are among the localities that have passed 

city-specific bans on the payment of subminimum 

wages. See APSE ‘‘Trends and Current Status of 

14(c)’’ at 8 (July 2023), https://apse.org/wp-content/ 

uploads/2023/09/APSE-14c-Update-REV-0723.pdf. 265 It bears mentioning that there have also been 

litigation and consent decrees aimed at the 

enforcement of Olmstead’s integration mandates 

that have resulted in States eliminating the payment 

of subminimum wages. For example, as discussed 

in greater detail in section III above, following a 

settlement agreement (see Settlement Agreement, 

Lane v. Brown,, No. 3:12–cv–00138, https://

www.justice.gov/media/1237561/dl), Oregon 

transitioned many workers from sheltered 

workshops to CIE. An important part of Oregon’s 

progress was investing in the employment support 

agencies to learn how to properly implement CIE 

programs. ‘‘Oregon’s efforts have resulted in the 

state being recognized in 2020 by the U.S. 

Commission on Civil Rights as a leader in 

eliminating subminimum wage and in transitioning 

to integrated employment.’’ Or. Dep’t Hum. Servs., 

‘‘Lane v. Brown Settlement Agreement Report,’’ at 

2 (Jan. 2022), https://www.oregon.gov/odhs/ 

employment-first/Documents/lane-v-brownsettlement-message-2022-06-21.pdf. 

mitigate against such potential 

transition difficulties. 

2. Non-Governmental Assessments of 

Certificate Issuance Under Section 14(c) 

In recent years, not-for-profit, 

academic, and advocacy organizations 

have also issued many reports and 

shared public comments on the 

payment of subminimum wages to 

individuals with disabilities.255 This 

proposed rule does not include a 

complete survey of these reports and 

viewpoints. Rather, the reports noted 

here are a sampling of nongovernmental views on subminimum 

wage payments under section 14(c). The 

Department notes that these reports 

reflect a wide range of the views on the 

use of section 14(c) certificates and 

subminimum wage employment of 

workers with disabilities. 

In general, most (but not all) 

organizations that advocate on behalf of 

individuals with disabilities strongly 

oppose reliance on the payment of 

subminimum wages to generate 

employment opportunities for 

individuals with disabilities. For 

example, in 2011, the National 

Disability Rights Network (NDRN),256 a 

non-profit membership organization for 

the federally mandated State Protection 

and Advocacy Systems and Client 

Assistance Programs for individuals 

with disabilities, issued a report 

detailing their review of ‘‘segregated 

work, sheltered environments, and the 

sub-minimum wage to determine 

whether they meet the needs of people 

with disabilities and whether they 

comply with federal law.’’ 257 NDRN 

found that workers with disabilities in 

‘‘sheltered workshops’’ using section 

14(c) certificates are often ‘‘stuck’’ 

indefinitely, without a meaningful 

option of other employment, because 

workers under section 14(c) certificates 

are not provided with effective, 

transferable skills training in such 

settings.258 Among many 

recommendations to Congress, States, 

and Federal agencies, NDRN called for 

the cessation of section 14(c) certificate 

issuance.259 NDRN explained that ‘‘[i]n 

the best of situations, sheltered 

environments, segregated work, and the 

sub-minimum wage does not truly 

provide a meaningful experience for 

workers with disabilities. Workshop 

tasks are often menial and repetitive, the 

environment can be isolating, and the 

pay is often well below the Federal 

minimum wage. In the worst situations, 

the segregated and sheltered nature of 

the lives of workers with disabilities 

leaves them vulnerable to severe abuse 

and neglect.’’ 260

Conversely, some organizations and 

individuals vigorously support the 

continued issuance of section 14(c) 

certificates. For example, the non-profit 

organization A Voice of Reason (VOR), 

which is a grassroots advocacy 

organization that consists primarily of 

families of individuals with I/DD, 

posted a public letter in 2021 opposing 

the elimination of section 14(c) 

certificates. In the letter, VOR stated that 

it is important to preserve 

‘‘opportunities for those who can 

succeed in competitive integrated 

employment as well as those who 

cannot.’’ 261 VOR elaborated that section 

14(c) gives ‘‘thousands of individuals 

with I/DD the opportunity to work in a 

specialized environment that nurtures 

them and fits their abilities.’’ 262 VOR 

asserted that for these individuals 

‘‘[w]ithout 14(c) certificates, they would 

lose any opportunity to work.’’ 263 The 

Department received similar feedback in 

its listening sessions from parents and 

other proponents of section 14(c). 

While acknowledging dissenting 

views, the Department relies on the 

significant quantitative and qualitative 

evidence discussed throughout these 

third-party reports that supports the 

preliminary conclusion that section 

14(c) certificates are no longer necessary 

to prevent curtailment of opportunities 

for employment for workers with 

disabilities. The Department welcomes 

comments on its review and analysis of 

the reports mentioned in this section or 

other recent reports that consider the 

role of section 14(c) certificates and 

subminimum wages in the employment 

of workers with disabilities. 

D. State Elimination of Subminimum 

Wages and Other Relevant Data 

1. State Elimination of Payments of 

Subminimum Wages to Individuals 

With Disabilities 

An increasing number of States and 

localities 264 have prohibited, limited, or 

plan to phase out the payment of 

subminimum wages to workers with 

disabilities, suggesting that these States 

and localities have reached the 

conclusion that such certificates are no 

longer necessary or appropriate in their 

jurisdictions.265


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266As of December 2022, no employer in Alaska 

is permitted to pay an individual with a disability 

less than the State minimum wage, due to the 

repeal of the State statute which previously allowed 

for the use of subminimum wage certificates. See 

Alaska Stat. Ann. sec. 23.10.070 (2022). 

267 In 2021, California enacted Senate Bill 639, 

implementing a multi-year phaseout of the use of 

licenses authorizing a subminimum wage. See Cal. 

Lab. Code. sec. 1191 (2022). 

268On June 29, 2021, Colorado enacted Senate 

Bill 21–039, which was designed to phase out the 

use of subminimum wages for employees with 

disabilities by 2025. See Colo. Rev. Stat. Ann. sec. 

8–6–108.7 (2021). As of July 2023, 2 years sooner 

than initially contemplated by the legislation, 

employers in Colorado are prohibited from paying 

an individual with a disability less than the State 

minimum wage. See Press Release, Polis-Primavera 

Administration Eliminates Subminimum Wages for 

People with Disabilities Two Years Ahead of 

Schedule (Oct. 31, 2023), https://

www.colorado.gov/governor/news/10901-polisprimavera-administration-eliminates-subminimumwages-people-disabilities-two-years. 

269 In 2021, Delaware enacted the Jamie Wolfe 

Employment Act, which repealed the State 

statutory provision permitting the payment of 

subminimum wages and prohibited the payment of 

subminimum wages after January 31, 2024. See Del. 

Code. Ann. tit. 19 sec. 905 (2024); Del. Code. Ann. 

tit. 19 sec. 752 (2024). 

270 In 2021, Hawaii enacted Senate Bill 793, 

which immediately repealed the authority of the 

Director of Labor and Industrial Relations to permit 

the employment of individuals with disabilities at 

a subminimum wage. See Hawaii Rev. Stat. Ann. 

sec. 387–9 (2021). 

271 In 2020, Maine enacted Legislative Document 

1874, which, effective June 16, 2020, amended its 

minimum wage law to state that the Director of 

Labor Standards ‘‘may not’’ issue a certificate 

authorizing an employer to pay a subminimum 

wage to an employee with a disability. See Me. Rev. 

Stat. Ann. tit. 26, sec. 666 (2020). 

272 In 2016, Maryland enacted the Ken Capone 

Equal Employment Act, which amended its 

minimum wage law to abolish the payment of 

subminimum wages to persons with disabilities 

after October 1, 2020. See Md. Code Ann., Lab. & 

Empl. sec. 3–414 (2016). 

273 In 2023, Nevada enacted Assembly Bill 259, 

which phases out the use subminimum wages in 

Nevada by January 1, 2028, see Assemb. 259, 82d 

Sess. sec. 12 (Nev. 2023), and prohibits providers 

of jobs and training services from entering into new 

contracts that included the payment of 

subminimum wages on or after January 1, 2025. See 

id., sec. 8 (amending Nev. Rev. Stat. secs. 608.250 

and 435.305). 

274 In 2015, New Hampshire enacted Senate Bill 

47, which generally prohibited the payment of 

subminimum wages to workers with disabilities as 

of July 6, 2015. See N.H. Rev. Stat. Ann. sec. 279:22 

(2024). 

275 In 2019, Oregon enacted Senate Bill 494, 

which banned the payment of subminimum wages 

to workers with disabilities after June 30, 2023. See 

Or. Rev. Stat. Ann. sec. 653.033 (2019). 

276 In 2022, Rhode Island enacted Senate Bill 

2242, which banned the payment of subminimum 

wages to workers with disabilities after June 15, 

2022. See R.I. Gen. Laws Ann. sec. 28–12–9 (2022). 

277 In 2022, South Carolina enacted Senate Bill 

533, which phases out the use of section 14(c) 

certificates which allow the payment of 

subminimum wages in the State by August 1, 2024. 

See S.C. Code Ann. sec. 41–6–10 (2022); 2022 S.C. 

Act No. 209, sec. 3(C)(1). 

278 In 2022, Tennessee enacted the Tennessee 

Integrated and Meaningful Employment Act, which 

states that, effective July 1, 2022, Tennessee 

employers must pay at least the Federal minimum 

wage to all workers with disabilities. See Tenn. 

Code Ann. sec. 50–2–114 (a). 

279 In 2023, Virginia enacted House Bill 1924 to 

phase out the use of the subminimum wages by 

2030. As part of the phase out, no new 

authorizations were permitted after July 1, 2023; 

however, any employer that was certified prior to 

July 1, 2023, is permitted to continue paying 

employees pursuant to section 14(c) until 2030. See 

Va. Code Ann. sec. 40.1–28.9(A)(9) (2023) 

280 In 2021, Washington enacted Senate Bill 5284 

which phases out the use of subminimum wage 

certificates for private employers. See Wash. Rev. 

Code Ann. sec. 49.46.170(2) (2021). For private 

employers, no new certificates were issued after 

July 31, 2023, and the last potential date a 

certificate can remain valid under the law is July 

30, 2026. See id. sec 49.46.170(2)–(3); see also 

Wash. Dep’t of Labor & Indus. & Wash. Dep’t of 

Social & Health Servs., ‘‘Subminimum Wage 

Certificates’’ at 2 (2023), https://www.lni.wa.gov/ 

agency/_docs/2023SubMinimumWageCertificates

Report.pdf. As to State employers, ‘‘no state 

agency’’ is permitted to ‘‘employ an individual to 

work under a special certificate . . . for the 

employment of individuals with disabilities at less 

than the minimum wage’’ as of July 1, 2020. Id. sec. 

49.46.170(1) (2021). Any certificate issued to a State 

agency expired on June 30, 2020. Id. 

281For example, House Bill 793 in Illinois, which 

would ban the payment of subminimum wages to 

workers with disabilities by 2030, passed the 

Illinois House in May 2024 and is currently 

pending in the Illinois Senate. See Illinois General 

Assembly-Bill Status, https://ilga.gov/legislation/ 

billstatus.asp?DocNum=793&GAID=17&GA=103&

DocTypeID=HB&LegID=142668&SessionID=112. 

282 In 2019, Texas enacted Senate Bill 753, which 

ended the use of subminimum wages in its State 

Use Program. See Tex. Hum. Res. Code Ann. sec. 

122.0076(a) (2019). A community rehabilitation 

program may not participate in the program 

administered under this chapter ‘‘unless each 

worker with a disability employed by the program 

is paid at least the federal minimum wage . . .’’; the 

provision, however, contains an exceptions clause. 

See id. sec. 122.0076(a), (b). 

283On October 4, 2021, Illinois Governor JB 

Pritzker issued Executive Order 2021–26, which 

required that contracts and sub-contracts with State 

agencies that participate in the State Use Program 

must pay ‘‘no less than the applicable local, if 

higher, or Illinois minimum wage for all employees 

performing work on the contract, notwithstanding 

any provision that would permit payment of a 

lower wage rate.’’ See Ill. Exec. Order 2021–26, 

https://www.illinois.gov/government/executiveorders/executive-order.executive-order-number26.2021.html. 

284See Kan. Admin. Regs. 49–31–5(b) (2024). 

Additionally, on February 8, 2024, Kansas enacted 

the Disability Employment Act, which incentivizes 

employers to pay employees with disabilities the 

State minimum wage. The Act established the 

‘‘sheltered workshop transition fund,’’ in order to 

‘‘facilitate[ ] transitions by Kansas sheltered 

workshop employers away from employing 

individuals with disabilities under a certificate 

issued by the United States Secretary of Labor 

under 29 U.S.C. [ ] 214(c) and toward paying all 

such employees at least the minimum wage,’’ by 

providing matching grants to sheltered workshops 

that commit to paying at least the minimum wage. 

See 2024 Kan. Sess. Laws Ch. 1, sec. 2(a). The Act 

also provides a tax incentive for purchases of goods 

and services from ‘‘qualified vendors,’’ which 

include vendors that do ‘‘not employ individuals 

under a certificate issued by the United States 

Secretary of Labor under 29 U.S.C. [ ] 214(c).’’ Kan. 

Stat. Ann sec. 79–32,273(b) & (e)(1)(A)(iv) (2024). 

285See Minn. Stat. Ann. sec. 177.28, subd. 5 

(2007); Minn. R. 5200.0030 (2008); N.M. Stat. Ann. 

sec. 50–4–23. Additionally, from 2021–24 

Minnesota established a task force ‘‘to develop a 

plan and make recommendations to phase out 

payment of subminimum wages to people with 

disabilities on or before August 1, 2025.’’ See 2021 

Minn. Laws, First Spec. Sess., ch. 7, art. 17, sec. 14. 

i. Legal Developments at the State Level 

Eliminating or Curtailing Subminimum 

Wage Payments 

A number of States have statutes, 

regulations, or other guidance regarding 

the payment of subminimum wages to 

workers with disabilities, further 

narrowing the universe of workers being 

paid below the Federal minimum wage. 

Significantly, nearly one-third of States 

have already passed laws entirely 

prohibiting (or planning to prohibit 

through a phase out) the payment of 

subminimum wages to workers with 

disabilities. To date, Alaska,266

California,267 Colorado,268 Delaware,269

Hawaii,270 Maine,271 Maryland,272

Nevada,273 New Hampshire,274

Oregon,275 Rhode Island,276 South 

Carolina,277 Tennessee,278 Virginia,279

and Washington 280 have all passed 

legislation or executive orders 

prohibiting (or planning to prohibit 

through a phase out) the payment of 

subminimum wages to at least some 

workers with disabilities in their State. 

These bills were often passed with 

bipartisan support and with the support 

of broad coalitions of stakeholders. 

Several additional States are 

considering similar legislation.281 Other 

States have limited or restrained the 

payment of subminimum wages in 

various ways, such as Texas (prohibiting 

payment of subminimum wages by 

CRPs participating in State use 

contracts, with limited exceptions),282

Illinois (executive order prohibiting 

payment of subminimum wages for 

work performed by employees of State 

not-for-profit vendors, including 

subcontractors),283 Kansas (limiting 

payment of subminimum wages to no 

less than 85 percent of the State 

minimum wage),284 Minnesota (limiting 

payments to no less than 50 percent of 

the State minimum wage, with some 

exceptions) and New Mexico (limiting 

payment of subminimum wages to no 

less than 50 percent of the State 

minimum wage),285 West Virginia, 

Nebraska, and New York (subminimum 

wages only permissible in certain 


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286W. Va. Code Ann. sec. 21–5C–1(f)(8) (limited 

to non-profit sheltered workshops); Neb. Rev. Stat. 

Ann. sec. 48–1202(3)(i) (limited to rehabilitation 

programs receiving public funding); N.Y. Lab. Law 

secs. 651(5)(i); 655(5)(c)(2) (limited to charitable, 

educational, or religious employers). 

287 Indus. Comm’n of Ariz., ‘‘Substantive Policy 

Statement Regarding Application of Arizona 

Minimum Wage Act to Work Activities Performed 

by Individuals with Disabilities,’’ (Mar. 29 2007), 

https://www.azica.gov/sites/default/files/migrated_

pdf/Labor_MinWag_SubstantivePolicyDisabilities_

32907-2.pdf. State laws do not affect whether an 

individual is an employee under the FLSA. 

288 2020 USCCR Report at 181 (noting that 

Vermont eliminated the payment of subminimum 

wages in practice in 2002 but did not pass 

legislation banning subminimum wages at that 

time). The District of Columbia and Wyoming 

similarly do not have any formal legislation in 

place, yet do not report any workers receiving 

subminimum wages under section 14(c) certificates. 

See https://www.dol.gov/agencies/whd/workerswith-disabilities/section-14c/certificate-holders. 

289See id. 

290See e.g., preliminary regulatory impact 

analysis discussion in section VII.E (‘‘Transfers’’). 

The Department further notes that nationwide and 

for decades, there has been growth in the number 

of individuals with disabilities who participate in 

State-funded non-work supportive rehabilitation 

programming (such programs, which offer both 

enrichment to individuals with disabilities and 

respite to caregivers, often consist of activities such 

as taking adult education classes, support for daily 

activities, and participating in social activities). See 

2023 Thinkwork Report at 3. This broader trend 

appears to be unrelated to State action related to the 

cessation of subminimum wage employment under 

section 14(c) certificates. As discussed above, in 

Oregon, the overwhelming majority of former 

sheltered workshop employees transitioned to fullwage jobs, exceeding the goal for the numbers of 

individuals entering into CIE placement set forth in 

the settlement agreement. See Oregon Dep’t of 

Human Servs., ‘‘Lane v. Brown Settlement 

Agreement Report,’’ https://www.oregon.gov/odhs/ 

employment-first/Documents/lane-v-brownsettlement-message-2022-06-21.pdf. 

291 Id. at 180–81 (citing Univ. Mass. Boston, Inst. 

for Community Inclusion, StateData.info, ‘‘State 

Employment Snapshot: Vermont,’’ https://

www.statedata.info/statepages/Vermont). 

292Bryan Dague, ‘‘Sheltered Employment, 

Sheltered Lives: Family Perspectives of Conversion 

to Community-Based Employment,’’ 37 J. of 

Vocational Rehab. 1 (Jan. 2012). 

293 Id. at 4–5. 

294 Id. at 5–7. 

295 Id. at 7. 

296 Id. at 8. 

297See, e.g., 2020 USCCR Report at 198. 

settings or by certain employers),286 and 

Arizona (pursuant to a policy statement, 

an employer must pay an ‘‘employee’’ 

with a disability at least the State 

minimum wage; however under 

Arizona’s guidance, a worker in a CRP, 

vocational training program or service 

recipient program may not be an 

employee in certain circumstances 

under Arizona state law).287

Additionally, although Vermont does 

not have any formal legislation 288

specifically to disallow the payment of 

subminimum wages to workers with 

disabilities, the Vermont Division of 

Disability and Aging Services does ‘‘not 

support center-based or group 

supported employment services’’ and 

there have been no active section 14(c) 

certificate holders in Vermont for many 

years.289 USCCR notes in its 2020 

Report that ‘‘Vermont achieved an end 

to subminimum wage and segregated 

employment by ending funding for new 

entrants into sheltered workshops in 

2000, which also began a three year 

phase-out of all subminimum wage, 

sheltered employment.’’ In sum, 15 

states have laws that prohibit or are in 

the process of prohibiting subminimum 

wage payments, and an additional nine 

states have limited or restrained the 

payment of subminimum wages, 

resulting in nearly half of the States 

eliminating or restricting such 

payments. As discussed below, the 

Department’s analysis yields no 

statistical evidence that employment or 

the labor force participation rate of 

individuals with cognitive disabilities, 

such as I/DD, differed in states that have 

adopted laws, policies, or regulations 

that end the payment of subminimum 

wages relative to states that do allow 

subminimum wages.290

ii. Data From Vermont Regarding LongTerm Impacts of Elimination of 

Subminimum Wage Payments 

While many States have moved away 

from subminimum wage payments 

relatively recently, data and studies 

regarding Vermont’s decision to end 

funding for sheltered workshops and 

phase out all subminimum wage 

employment offer insight into how 

elimination of the payment of 

subminimum wages to individuals with 

disabilities impacted the long-term 

employment opportunities of those 

workers. Despite this longstanding 

absence of the payment of subminimum 

wages under section 14(c) certificates in 

Vermont, that absence does not appear 

to have negatively impacted 

employment rates of workers with I/DD 

when compared with national 

employment rates. Instead, as observed 

by the USCCR in its 2020 report, from 

2008 to 2016–2017, the rate of 

employment for workers with I/DD in 

Vermont rose from 35.8 percent to 42 

percent, more than double the national 

average employment rate in 2016–2017 

for this group.291

Additionally, academic research from 

Vermont also shows that workers’ 

transitions away from a sheltered 

workshop, subminimum wage model 

are often positive, despite those 

workers’ (and their families’) initial 

opposition to such changes. For 

example, years after Vermont eliminated 

subminimum wage employment, a 

researcher at the University of Vermont 

published a case study based on 

extensive interviews with individuals 

with I/DD and their family members.292

Some of the individuals had previously 

worked for subminimum wages, and 

their interviews speak to deep anxieties 

about the elimination of subminimum 

wages.293 At the beginning of the 

transition in Vermont, parents of 

workers with disabilities expressed fear 

of the future, with particular emphasis 

on issues of safety where an adult child 

was leaving a sheltered workshop 

setting.294 However, parents reported 

that as their children with disabilities 

‘‘spent more time in the community, the 

fears of abuse and ridicule did not 

materialize[.]’’ 295 Moreover, the 

workers with disabilities generally 

reported positive feelings about their 

new jobs.296 As discussed above, the 

USCCR made similar findings based on 

its case studies in Vermont.297

E. Summary of Analysis and Conclusion 

Congress gave the Secretary the 

authority to issue certificates allowing 

employers to pay subminimum wages to 

individuals with disabilities but not 

without restriction and not in 

perpetuity. Instead, Congress included a 

significant statutory limitation on the 

Department’s authority, allowing the 

issuance of certificates only to the 

extent ‘‘necessary to prevent curtailment 

of opportunities for employment,’’ and 

conferred authority upon the 

Department to determine whether that 

standard has been met. 

Given the expanded legal protections 

and opportunities for employment of 

individuals with disabilities available 

today, to comply with the terms of the 

statute, the Department must determine 

whether the FLSA’s standard continues 

to be met. When Congress first enacted 

the subminimum wage provision of the 

FLSA in what is now known as section 

14(c), the employment opportunities 

available to individuals with disabilities 

were a fraction of what they are today. 

Through the Department’s 

comprehensive review culminating with 

this rulemaking, the Department has 

reflected on the substantial progress, 

resources, and supports for workers 

with disabilities that have emerged over 

the last several decades. After 

extensively reviewing and analyzing the 

issues, developments, and reports 

discussed in this proposed rule, holding 

listening sessions, and partnering 

closely with agencies within and 

outside of the Department, as well as the 

Department’s extensive experience 

administering and enforcing section 

14(c) certificates, the Department 

preliminarily finds that subminimum 


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298 42 U.S.C. 12101 note (2008). 

299Congressional Record, Vol. 82, Part I, 75th 

Cong. 2d Sess., p. 88. 

300For example, in the 1967 report to Congress, 

the Department noted that there were sheltered 

workshops paying subminimum wages for older 

workers, workers who were blind, workers with 

tuberculosis, workers who were epileptic, workers 

with alcoholism, workers who were paraplegic, and 

workers experiencing mental illness, among others. 

See generally 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,’’ 

September 1967. 

301See, e.g., Agnieszka Zalewska, Jean Winsor, & 

John Butterworth, ‘‘Intellectual and Developmental 

Disabilities Agencies’ Employment and Day 

Services (1988–2021),’’ ThinkWork, Data Note Plus, 

Issue 87 (2023), at 8, https://www.thinkwork.org/ 

sites/default/files/2024-01/DN_87_R_0.pdf. See also 

NLTS2, Exhibit 5–2, noting the vast majority of 

youths with I/DD having a transition goal of 

competitive or supported employment (79 percent) 

compared to sheltered employment (14 percent). 

302See, e.g., ‘‘Legal Foundations for Protection 

and Advocacy Entities,’’ Part 1 (July 15, 2021) 5, 

n.22, https://aoddisabilityemploymenttacenter.com/ 

wp-content/uploads/2021/07/DETAC_BY_

Resource_PA_Legal_Foundations_Pt_1_Final_

508.pdf (explaining that research demonstrates that 

a very low percentage of workers—less than 5 

percent—transition from sheltered workshops being 

paid subminimum wages to integrated or 

community-based employment at full wages) 

(citations omitted); see also U.S. Dep’t of Justice 

Civil Rights. Div., ‘‘Questions and Answers on the 

Application of the ADA’s Integration Mandate and 

Olmstead v. L.C. to Employment and Day Services 

for People with Disabilities,’’ p.1 (‘‘The work of 

individuals with disabilities in segregated settings 

is often highly regimented and typically offers no 

opportunity for advancement.’’). 

303Nat’l Disability Rights Network, ‘‘Segregated 

and Exploited: The Failure of the Disability Service 

System to Provide Quality Work,’’ 2011, A Letter 

from the Executive Director, https://www.ndrn.org/ 

wp-content/uploads/2019/03/Segregated-andExploited.pdf at 32–33. 

304See DOJ ADA Integration Mandate Q&As. 

305See Portland Terminal, 330 U.S. at 151. 

wages are no longer necessary to 

prevent curtailment of employment 

opportunities for individuals with 

disabilities. Accordingly, the 

Department proposes to amend 29 CFR 

part 525 to phase out the issuance of 

section 14(c) certificates. 

Under the Department’s current 

regulation at 29 CFR 525.9, ‘‘in order to 

determine that special minimum wage 

rates are necessary in order to prevent 

the curtailment of opportunities for 

employment,’’ the Administrator 

considers whether a certificate applicant 

has satisfied the standards set forth in 

other regulatory provisions governing 

the proper computation and payment of 

subminimum wages. The current 

regulations thus focus on whether a 

certificate applicant has properly 

evaluated and calculated productivitybased wage rates for workers with 

disabilities at specific jobs (and under 

the specific conditions) offered by the 

employer. The statute does not require 

the framework currently in place, 

however and this regulatory 

methodology, now 35 years old, could 

not have taken into account today’s 

more structural, comprehensive 

strategies for preventing curtailment of 

employment opportunities for 

individuals with disabilities. However, 

the Secretary now has the benefit of 

being able to take such strategies and 

developments into account. Thus, to 

comply with the terms of the statute, the 

Department must determine whether the 

statute’s prerequisite—that payment of 

subminimum wages be necessary to 

prevent the curtailment of employment 

opportunities—can be met given the 

current demonstrated systemic and 

nationwide advances in employment 

opportunities for individuals with 

disabilities. 

In the introductory section of the 

ADA Amendments Act of 2008, 

Congress states that ‘‘in enacting the 

ADA, Congress recognized that physical 

and mental disabilities in no way 

diminish a person’s right to fully 

participate in all aspects of society, but 

that people with physical or mental 

disabilities are frequently precluded 

from doing so because of prejudice, 

antiquated attitudes, or the failure to 

remove societal and institutional 

barriers.’’ 298 With this context in mind, 

the Department takes note of the 

historical evolution of the use of section 

14(c) certificates. When first enacted, 

Congress focused significantly on 

private industry and small 

businesses,299 and a far broader swath of 

U.S. workers were being paid 

subminimum wages based on age, 

disability, or injury.300 Over time, the 

use of section 14(c) certificates has 

narrowed to almost exclusively one 

setting—CRPs rather than private sector 

opportunities—and has constricted to 

consist almost exclusively of workers 

with I/DD. As other groups experiencing 

different disabilities (e.g., age-related, 

addiction-related, those experiencing 

blindness) have already generally 

moved away from working for 

subminimum wages to employment at 

or above the full minimum wage, so too 

now are workers with I/DD. 

Specifically, as to these workers, reports 

show, among the general population of 

workers with I/DD, working in 

integrated settings for at least the 

minimum wage is now far more 

common than working for subminimum 

wages.301 At the same time, the number 

of section 14(c) certificates has 

dwindled, with a decades-long 

downward trend and with the vast 

majority of certificates now being 

renewals, with only a few new 

applications. 

Today, the issuance of section 14(c) 

certificates may be self-reinforcing, with 

the continued use of certificates 

facilitating workers continuing to only 

receive subminimum wages despite the 

potential to engage in other full-wage 

employment opportunities, which is 

contrary to the statute’s intent of 

providing for certificates only when 

necessary.302 As noted by NDRN, 

workers with disabilities in sheltered 

workshops using section 14(c) 

certificates are often ‘‘stuck’’ 

indefinitely, without a meaningful 

option of other employment, because 

workshop tasks are often menial and 

repetitive, the environment can be 

isolating, and workers under section 

14(c) certificates are not provided with 

effective, transferable skills training in 

such settings.303 DOJ has similarly 

observed that workers with disabilities 

in community rehabilitation programs 

typically have ‘‘no opportunity for 

advancement’’ and ‘‘often earn 

extremely low wages when compared to 

people with disabilities in integrated 

employment, resulting in stigmatization 

and a lack of economic 

independence.’’ 304 Given this, the 

Department is cognizant that today, the 

issuance of section 14(c) certificates 

may, inadvertently and 

counterintuitively, even contravene the 

statute’s intent of promoting 

opportunities for gainful 

employment.305

In light of these realities, as well as 

the legal and policy developments 

discussed above, the Department 

preliminarily finds that today, the 

issuance of subminimum wage 

certificates is no longer necessary to 

prevent the curtailment of employment 

opportunities. Moreover, the evidence 

indicates such certificates themselves 

may, in fact, sometimes contribute to 

the curtailment of employment 

opportunities at or above the full 

Federal minimum wage for some 

workers with disabilities. 

The disability rights movement, led 

by a broad coalition of stakeholders 

including self-advocates, has forged a 

path toward increased equity, selfdetermination, and inclusion, thereby 

expanding access to and opportunities 

available for employment. As discussed 

above, this movement has resulted in a 

very different—and improved—legal 

and policy landscape than existed in 

1938 or even 1989 when section 14(c) 

regulations were last substantively 

updated, reflecting the 1986 

amendments to the FLSA. 

An array of Federal legislation has 

substantially broadened opportunities 


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306Supra note 110. 

307President George H.W. Bush, Remarks at the 

Signing of the Americans with Disabilities Act (July 

26, 1990), https://perma.cc/VNU4-HR7P. 

308 Disability Rights Oregon, ‘‘Lawsuit: State 

Required to Limit Use of Sheltered Workshops,’’ 

https://www.droregon.org/litigation-resources/lanev-brown. 

309 Id. 

310Final Report to the Court of the Independent 

Reviewer, Lane v. Brown, Civil Action No. 3:12–cv– 

00138–ST (D. Or.), https://

www.centerforpublicrep.org/wp-content/uploads/ 

FINALLaneIRFinalReporttotheCourt6.30.22.pdf. 

311 Id. Specifically, Oregon ceased funding and 

closed all sheltered workshops within a matter of 

a few years, and instead increased access to 

supported employment services and CIE for 

workers with I/DD, expanded evidence-based 

transition practices, developed an agency 

infrastructure across State agencies, and, critically, 

enhanced Federal and State funding to support 

access to CIE. 

312USCCR Report at 180. 

and access, while legal precedent has 

bolstered these nationwide laws. Most 

significantly, over the past several 

decades, the ADA and the Supreme 

Court’s Olmstead decision have 

profoundly impacted the rights and 

employment opportunities available to 

individuals with disabilities. These 

legal developments have resulted in 

changes to workforce development and 

vocational rehabilitation systems that 

provide more support to individuals 

with disabilities in achieving and 

maintaining employment at or above the 

full minimum wage, as discussed above. 

While the ADA has been the catalyst for 

substantial change and progress in the 

legal landscape affecting workers with 

disabilities, the section 14(c) regulations 

could not have contemplated this 

progress or incorporated the 

fundamental anti-discrimination and 

reasonable accommodation protections 

of the ADA. Additionally, the ADA’s 

broad legal protections (made more 

broadly applicable through the 

ADAA 306), coupled with Olmstead’s 

integration mandate and the array of 

employment-related programs, and 

supports for workers with disabilities 

discussed in this proposed rule, 

fundamentally alters the assessment as 

to whether subminimum wages are 

necessary to prevent curtailment of 

employment opportunities. The 

Department is also cognizant of the 

Department of Justice’s conclusion that 

public entities (i.e., state and local 

governments) may be in violation of the 

ADA’s integration and equal 

employment opportunity mandates if 

they plan, administer, operate, fund, or 

implement any services—including 

employment or day services—in a way 

that unjustifiably segregates individuals 

with disabilities. 

The Department also takes notice of 

the multitude of Federal and State 

programs encouraging CIE that do not 

rely on the payment of subminimum 

wages to workers. There is now an 

extensive and continually growing 

network of supports for workers with 

disabilities to access full-wage 

employment opportunities in a variety 

of ways, as evidenced by the fact that all 

States and the District of Columbia have 

taken Employment First actions. The 

opportunities available to workers with 

intellectual or developmental 

disabilities have been fundamentally 

changed by these laws, regulations, 

executive orders, and policy initiatives. 

As a result, more than ever before, these 

workers have the chance to ‘‘move 

proudly into the economic mainstream 

of American life.’’ 307

The Department is further persuaded 

by the overwhelming evidence and 

arguments put forward by the majority 

of disability-focused government, 

academic, and advocacy organizations 

illustrating that section 14(c) certificates 

are no longer necessary. Non-partisan 

Federal agencies that have studied the 

issue in depth, such as the USCCR and 

NCD, have published detailed reports 

concluding that the payment of 

subminimum wages is unnecessary to 

create employment opportunities for 

individuals with disabilities, including 

individuals with I/DD, and that section 

14(c) certificates may actually be 

detrimental to the population they are 

intended to help. Indeed, as noted 

above, the USCCR found there is little 

distinction among characteristics of the 

I/DD workforce that receives at least the 

full Federal minimum wage and the 

characteristics of the I/DD workforce 

that receives subminimum wages. The 

Department finds it particularly 

noteworthy that, as evidenced in the 

USCCR findings, workers with 

disabilities being paid at least the full 

minimum wage experience similar 

disabilities and have similar support 

needs as workers with disabilities being 

paid subminimum wages, and finds this 

compelling evidence to preliminarily 

conclude that section 14(c) certificates 

are no longer necessary to prevent the 

curtailment of employment 

opportunities. Indeed, individual 

experiences of workers in States where 

subminimum wages have been phased 

out also demonstrate that there are not 

insurmountable barriers to transitioning 

to employment at or above the full 

Federal minimum wage, as evidenced 

by the experience of the lead plaintiff in 

Lane v. Brown. Prior to filing her suit, 

Paula Lane worked on an assembly line 

packaging gloves for 66 cents an 

hour.308 Subsequently, Lane found work 

at full wages in a community setting.309

Nearly half of U.S. States have now 

prohibited or limited the payment of 

subminimum wages. Additionally, as 

further discussed in section VII, 

although the unemployment rate for 

individuals with disabilities remains 

relatively high compared to the entire 

population (though it is trending in a 

favorable direction), the available data 

demonstrates that there is a strong 

demand for CIE opportunities, that 

subminimum wage employment does 

not typically lead to competitive 

integrated employment, and that the 

States that have abolished subminimum 

wages have not, in general, seen a 

comparative decrease in employment 

opportunities for individuals with 

disabilities. The Department finds that 

Oregon’s experiences—and the amount 

of data available due to the Lane v. 

Brown settlement agreement, discussed 

above—are especially instructive in 

considering why subminimum wages 

are no longer necessary. In a relatively 

short time period, Oregon was able to 

meet or exceed the numerical metrics of 

the Lane v. Brown settlement agreement 

regarding, among other things, the 

reduction in sheltered workshop hours, 

the provision of supported employment 

services, and achieving competitive 

integrated employment for the numbers 

of individuals specified in the 

settlement agreement.310 The 

Department notes that the Oregon 

example sheds light on the fact that 

current employers of workers receiving 

subminimum wages are usually publicly 

funded, and that States which have 

stopped the payment of subminimum 

wages can achieve positive outcomes in 

part by redirecting these funds away 

from sheltered workshops or other jobs 

where subminimum wages are being 

paid toward full wage employment 

opportunities.311 Similarly, nearly 25 

years ago, Vermont achieved an end to 

subminimum wage by, in part, ending 

funding for new entrants into sheltered 

workshops.312 These examples also 

highlight the shift in employer 

demographics for certificate holders— 

from the ‘‘industry,’’ ‘‘manufacturers,’’ 

and ‘‘small businessmen’’ who were the 

potential section 14(c) employers 

discussed during the floor debate in 

1937 to the vast majority of certificate 

holders today being CRPs, many of 

whom receive some type of public 

funding. While most of the employers 

envisioned in 1937 were market-driven 

private sector employers, today’s section 

14(c) employers are commonly 

enmeshed with public funding streams 


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that may be able to be redirected, as 

several States such as Oregon and 

Vermont have already demonstrated. 

The Department finds that the 

evidence from Oregon and Vermont’s 

experiences further supports its 

preliminary conclusion that payment of 

subminimum wages is no longer 

necessary to prevent the curtailment of 

employment opportunities for workers 

with disabilities. As described in 

Section VII, the Department’s analysis 

yields no statistical evidence that 

employment or the labor force 

participation rate of individuals with 

cognitive disabilities differed in States 

that have adopted laws, policies, or 

regulations that do not allow the 

payment of subminimum wages. 

However, the Department’s analysis did 

show a statistically significant increase 

in average hourly wage rates of such 

individuals. The Department believes 

the results of this analysis, while not 

dispositive, further support its 

preliminary conclusion that 

employment opportunities exist for 

workers with disabilities that are 

independent from section 14(c) 

certificates. The Department welcomes 

comments on States’ experiences in 

prohibiting or limiting the payment of 

subminimum wages to workers with 

disabilities. 

The Department recognizes and 

deeply values the lived experiences of 

workers as well as families who may 

have a loved one working under a 

section 14(c) certificate and who may 

wish to continue in their current 

positions under which they are paid 

subminimum wages. The Department 

welcomes public comment on this 

proposed rule. The Department also 

emphasizes that nothing in this 

proposal would require existing section 

14(c) certificate holders to amend the 

services they currently provide, 

including employment services, other 

than by paying all workers the full 

required minimum wage for all covered 

work, as of the phaseout effective date, 

as explained below. The Department 

notes that, as a general matter, the 

empirical evidence reviewed does not 

indicate that workers transitioning from 

subminimum wage employment have 

had negative outcomes. As outlined 

above and discussed in a number of 

reports referenced herein, many more 

workers with disabilities are working in 

competitive integrated employment and 

workers and their families have 

expressed positive feelings about new 

opportunities and spending more time 

in the community, as noted, for 

example, by families in Vermont who 

have experienced this transition. 

Congress has directed that employment 

of workers with disabilities at 

subminimum wages may occur only if 

the Secretary determines it is necessary 

to prevent the curtailment of 

employment opportunities for workers 

with disabilities. Thus, in considering 

its obligations under the section 14(c) 

provisions to evaluate opportunities for 

employment for workers with 

disabilities, it is appropriate for the 

Department to consider how the 

evolution described above impacts 

whether the payment of subminimum 

wages to workers with disabilities is 

necessary to prevent the curtailment of 

employment opportunities for workers 

with disabilities. The Department must 

also enforce this statutory mandate in 

the broader context of the FLSA 

generally, including the fundamental 

principle that FLSA rights cannot be 

waived by workers or employers, and 

consider whether, even if workers 

would agree to work for subminimum 

wages, it is necessary to continue 

granting certificate authority permitting 

payment of wages below the current 

Federal minimum wage of $7.25 per 

hour. 

The Department’s analysis as set forth 

in this proposed rule preliminarily 

indicates workers with disabilities— 

including workers with I/DD—no longer 

need subminimum wages for 

employment opportunities. With 

expanded opportunities and legal 

protections, both compared to the 

enactment of section 14(c) in 1938 and 

the last substantive update to the 

section 14(c) regulations in 1989, and 

with opportunities for full-wage 

employment now substantially more 

common than subminimum wage 

employment, the Department proposes 

to phase out issuance of section 14(c) 

certificates based on its tentative 

conclusion that these certificates are no 

longer necessary to prevent the 

curtailment of employment 

opportunities for workers with 

disabilities. 

IV. Discussion of Proposed Regulatory 

Changes 

The Department proposes to revise 29 

CFR 525.1 to explain that, as evidenced 

by the analysis set forth above in the 

Need for Rulemaking section, the 

Secretary has preliminarily determined 

that section 14(c) certificates are no 

longer necessary to prevent the 

curtailment of opportunities for 

employment of individuals with 

disabilities. The Department further 

proposes to revise that regulation to 

explain, in light of this determination, 

that the Secretary will cease issuing new 

certificates immediately as of the 

effective date of a final rule and that 

certificates will only be available to 

renewing applicants for a limited 

phaseout period ending 3 years after the 

effective date of a final rule. The 

Department further proposes to revise 

29 CFR 525.1 to clarify that this part 

remains in effect during the phaseout 

period. The contours of the 

Department’s proposed certificate 

phaseout are explained below in greater 

detail. The Department seeks comments 

on the structure of the proposed 

phaseout, including the proposed length 

of the phaseout period and any potential 

extensions to the defined phaseout 

period, factors affecting the sufficiency 

of any phaseout period, and states’ and 

organizations’ experience with phasing 

out the use of subminimum wages. 

A. Phaseout 

The Department proposes that WHD 

would no longer issue new section 14(c) 

certificates in response to initial 

applications postmarked or submitted 

online on or after the effective date of 

the final rule because the Department 

preliminarily finds such certificates are 

no longer necessary to prevent the 

curtailment of employment 

opportunities for individuals with 

disabilities. Employers that do not hold 

a valid section 14(c) certificate or that 

have not timely and properly filed a 

renewal application as of the effective 

date of the final rule would not have 

authority to pay subminimum wages 

and neither they nor the workers whom 

they employ would be actively utilizing 

a section 14(c) certificate for their 

respective operations or jobs. 

Accordingly, proposed 29 CFR 525.7 

states that only applicants who are 

seeking to renew a certificate pursuant 

to proposed 29 CFR 525.13, but not 

initial applicants, may apply for 

certificates. The Department also 

proposes to amend 29 CFR 525.7 to 

provide minor clarifying edits regarding 

the certificate application process. 

For employers who hold a valid 

section 14(c) certificate at the time of 

the effective date of a final rule and seek 

to renew that certificate, the Department 

proposes, at 29 CFR 525.13, that it 

would continue to process renewal 

applications for such existing certificate 

holders for a 3-year period beginning on 

the effective date of a final rule, with all 

renewals granted within that period 

expiring no later than the date that is 3 

years after the effective date of a final 

rule. The Department proposes that a 

phaseout period would allow those 

employers to prepare and transition to 

the payment of minimum wages 

required under the law. Based on the 

Department’s experience, the 

Department preliminarily finds this 


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313 2018 NCD Report at 99–100. 314USCCR Report at 223. 

315Wash. Rev. Code Sec. 49.46.170, [Washington 

Minimum Wage Act; Minimum Wage and Labor 

Standards; State Agencies Prohibited From 

Employing Individuals With Disabilities At Less 

Than Minimum Wage Beginning July 1, 2020; No 

New Special Certificates May Be Issued After July 

31, 2023], Wages & Hours P 50–41016; see also 

Washington Department of Labor and Industries, 

2023 Annual Report to the Legislature, p.2, https:// 

www.lni.wa.gov/agency/_docs/ 

2023SubMinimumWageCertificatesReport.pdf (Most 

private certificate holders were subject to a two-year 

phaseout, with a possible one-time, one-year 

extension for a total of three years). 

316Prohibition on the Payment of Subminimum 

Wages Under 14(c) Certificates as a Qualification for 

Participation as a Nonprofit Agency Under the 

Javits Wagner O’Day Act, 87 FR 43427, 43428 (July 

21, 2022) (codified at 41 CFR part 51) (‘‘However, 

an [non-profit agency] may apply for an extension 

for up to 12-months in order to come into 

compliance if it can provide evidence for why it 

cannot make the wage adjustments by the effective 

date (due to budgetary limitations, because doing so 

will necessarily harm employees, or for other good 

cause) and if it provides a corrective action plan 

describing the steps it intends to take to achieve 

compliance within the approved extension 

period.’’). The Commission noted, in implementing 

a 90-day effective period for its rule, that its 

position on phasing out use of section 14(c) had 

been announced in a 2019 notification and 

resources supporting transition were invested even 

prior to the rulemaking. 

multi-year phaseout period would 

provide time for employers who are 

paying subminimum wages pursuant to 

section 14(c) certificates, if needed, to 

make necessary adjustments to their 

operation and funding models. 

Likewise, affected workers with 

disabilities who would be due higher 

wages under the Department’s proposed 

rule may, for example, use the phaseout 

period to explore new workplace 

accommodations, participate in 

additional job training or vocational 

services, or receive counseling about 

public benefits and income. Finally, the 

proposed phaseout period would also 

provide time for States and other 

entities to adjust budget allocations, 

staffing, and disability service delivery 

programs, as needed, to continue to 

support workers with disabilities and 

service providers after the phaseout 

period ends and the payment of 

subminimum wages is prohibited for 

workers with disabilities. As discussed 

below in section V., State statutes 

containing multi-year phaseouts have 

phaseout periods that range from 2 years 

to 7 years, with many states opting for 

a 2- or 3-year phaseout. The Department 

proposes that 3 years should be 

sufficient to allow for transitions away 

from subminimum wage employment 

but seeks comments on the need for, 

length of, and factors affecting any 

phaseout period. As specified at 

proposed 29 CFR 525.13(b), all section 

14(c) certificates renewed on or after a 

final rule’s effective date would expire 

at or before the end of that phaseout 

period, and under the proposed rule, if 

finalized, the Department would no 

longer issue any section 14(c) 

certificates after the last day of that 

phaseout period. The Department 

proposes to make conforming edits to 29 

CFR 525.2, 525.9, and 525.11(c) to 

ensure that stakeholders understand the 

proposed phaseout. 

The Department also notes that, as 

discussed above, many oversight and 

advocacy reports that recommend an 

end of the payment of subminimum 

wages concluded that such plans should 

include a phaseout period but varied in 

providing recommendations concerning 

the length of the phaseout period. For 

example, NCD recommended a gradual 

phaseout of the use of subminimum 

wages to allow time for modernization 

of employment service systems that 

would promote successful transitions 

for people currently working under 

section 14(c) certificates.313 In another 

example, the USCCR also recommended 

a multi-year phaseout ‘‘to allow 

transition among service providers and 

people with disabilities to alternative 

service models . . . .’’ but did not 

specify a length for the phaseout 

period.314 The Department further notes 

that many such reports recommend that 

a gradual end of subminimum wages 

should be accompanied by 

simultaneous movement of workers 

with disabilities into integrated 

employment. However, the 

Department’s authority and its proposed 

rule do not require any change to 

employment settings during the 

phaseout period or anytime thereafter. 

In accordance with this phaseout 

proposal, the Department proposes to 

modify 29 CFR 525.7 to reflect that the 

Department would no longer accept 

initial applications for a section 14(c) 

certificate as of the effective date of a 

final rule. Moreover, the Department 

proposes in 29 CFR 525.11 that section 

14(c) certificate holders, assuming all 

legal requirements are met, may 

continue to operate under section 14(c) 

certificate authority for up to 3 years 

after the effective date of a final rule. 

Because the Department proposes that 

this phaseout would lead to a cessation 

of all certificate issuance, the 

Department does not propose any 

changes to the operational requirements 

of the section 14(c) regulations, such as 

the procedures for determining a 

commensurate wage, for employers who 

hold a valid certificate during the 

phaseout period. 

The Department requests comments 

on the length and structure of the 

proposed phaseout period and any 

evidence that supports those comments, 

including data, case studies, 

explanations of program or funding 

structures, and the personal experiences 

of employers and employees. The 

Department’s proposal to phase out 

section 14(c) over several years is 

intended to avoid disruptions to 

services, supports, and funding streams 

needed to transition workers from being 

paid subminimum wages while still 

timely phasing out subminimum wage 

payments to individuals with 

disabilities. The Department specifically 

invites comment on how it may 

implement any proposed phaseout in a 

manner that further reduces potential 

disruptions. The Department also 

invites comment on how State and 

publicly funded entities may be 

impacted by a phase out of section 

14(c), including comments relevant to 

the length of the phase-out period. 

Finally, the Department proposes to 

revise 29 CFR 525.18, which sets forth 

an administrative appeal process for any 

person aggrieved by any action of the 

Administrator taken pursuant to the 

regulations, to explain that any 

administrative review granted cannot 

result in section 14(c) certificate 

authority being extended beyond the 

phaseout period. 

B. Request for Comments Related to 

Potential Extensions 

In reviewing phaseouts of 

subminimum wages, the Department 

observes that the State of Washington 

allowed for a one-time extension period 

of up to 12 months in its phaseout of 

subminimum wages.315 Similarly, the 

AbilityOne Commission granted limited 

extensions no longer than 12 months 

when it phased out subminimum 

wages.316 The Department has not 

proposed such an extension framework 

in this proposed rule. As discussed 

above, the Department proposes that a 

3-year phaseout period should be 

sufficient for most, if not all, employers 

that currently hold section 14(c) 

certificates to adjust their operations 

and funding structures such that they 

can transition away from subminimum 

wages by the end of that period. 

However, if the Department finalizes the 

proposal herein that current section 

14(c) certificate holders may renew their 

certificates to allow payment of 

subminimum wages until 3 years from 

the effective date of a final rule, the 

Department anticipates considering 

whether any potential extension 

framework should be added to the final 

rule, and seeks comments accordingly. 

The Department requests comments 

on all aspects of a possible limited 


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317Barrentine, 450 U.S. at 740 (quoting Brooklyn 

Sav., 324 U.S. at 707). 

318See section III.D.1.i. for a fuller discussion of 

State phaseout periods. 

extension provision beyond the end of 

the proposed 3-year phaseout period, 

including whether an extension 

provision would be appropriate, the 

duration of any such extension(s), the 

showing (including any documentation) 

an employer must make to receive an 

extension, the criteria by which requests 

for extension should be reviewed, and 

the procedures by which employers 

apply for extension(s). 

For example, the Department requests 

comments as to the length of time any 

extension might extend (including 

whether any potential extension should 

be limited to a maximum of 3, 6, 12, or 

18 months, or some other period). The 

Department further requests comment as 

to whether any employer should be able 

to receive more than one extension, and 

if multiple extensions are allowed, 

whether there should be a maximum 

limit on the total number of extensions 

granted to a certificate holder (e.g., each 

certificate holder would only be entitled 

to two time-limited extensions). 

Similarly, the Department requests 

comments on whether there should be 

a maximum time limit on the total 

number of extensions granted to a 

certificate holder (e.g., each certificate 

holder would be eligible for multiple 

extensions, but not to exceed a total 

extension period of 12 months). 

Likewise, the Department also seeks 

comments on whether, if extensions 

were to be available, certificate holders 

should be required to demonstrate good 

cause for any extension request. The 

Department welcomes public comment 

on what a certificate holder might need 

to present to demonstrate such good 

cause as well as the specific 

documentation needed to support such 

cause. For example, the Department 

welcomes comment on whether, if an 

extension were to be available, it should 

be granted only when there are unique 

factual circumstances outside of an 

employer’s control, a need for 

additional time for the employer to 

complete an orderly transition from the 

payment of subminimum wages, and a 

need to avoid undue disruptions 

impacting workers with disabilities 

currently employed at subminimum 

wages. 

C. Severability 

The Department proposes that the 

regulatory text include a severability 

provision in part 525 so that if one or 

more of the provisions in part 525 is 

held invalid or stayed pending further 

agency action, the remaining provisions 

would remain effective and operative. 

The Department proposes to add this 

provision as § 525.25. The proposed 

provision explains that each provision 

is capable of operating independently 

from one another, and that if any 

provision of part 525 is held to be 

invalid or unenforceable by its terms, or 

as applied to any person or 

circumstance, or stayed pending further 

agency action, the provision shall be 

construed so as to continue to give the 

maximum effect to the provision 

permitted by law, unless such holding 

shall be one of utter invalidity or 

unenforceability, in which event the 

provision shall be severable from the 

regulation and shall not affect the 

remainder thereof. 

V. Alternatives to the Proposed Rule 

In developing this proposed rule, the 

Department considered a wide range of 

alternative regulatory approaches. For 

example, the Department considered 

whether to allow workers with 

disabilities who are currently paid 

subminimum wages to ‘‘opt out’’ of the 

proposed phaseout of section 14(c) 

certificates set forth in this proposed 

rule. In other words, the Department 

evaluated whether to permit such 

workers to choose to continue receiving 

subminimum wage payments where 

they believe such continuity would be 

beneficial. However, after consideration 

and analysis, the Department has 

determined that such a regulatory 

alternative would not be legally 

permissible or advisable as a policy 

matter. 

In this proposed rule, the Department 

has preliminarily concluded that 

payment of subminimum wages is not 

necessary to prevent curtailment of 

opportunities for employment. In the 

absence of such need, an opt-out 

provision would be akin to allowing a 

waiver of the FLSA’s requirement to pay 

minimum wages. As discussed in 

section II.D. above, it is well-established 

that the right to the full Federal 

minimum wage cannot be waived by 

individual workers or employers. The 

Supreme Court has consistently and 

explicitly held that ‘‘FLSA rights cannot 

be . . . waived because this would 

‘nullify the purposes’ of the statute and 

thwart the legislative policies it was 

designed to effectuate.’’ 317 The 

Department is foreclosed, as a legal 

matter, from allowing workers with 

disabilities, or their families or 

guardians, to ‘‘opt out’’ of receiving the 

full Federal minimum wage on an 

individual basis. Rather, the FLSA is 

clear that an employer may only pay 

subminimum wages to workers with 

disabilities after obtaining a certificate 

from the Department and that such 

certificates can only be issued when the 

Department decides that they are 

necessary to prevent the curtailment of 

employment opportunities. Congress 

did not grant the Department 

unconditional authority to issue 

subminimum wage certificates, or to 

permit subminimum wage payments 

based on such workers’ preferences. 

Finally, the Department rejected this 

alternative because it would likely 

result in formidable administrative 

challenges for both WHD and 

employers, as well as confusion on the 

part of workers. 

The Department also considered 

alternative regulatory approaches to the 

proposed phaseout of section 14(c) 

certificates. As detailed above, the 

Department proposes to: (1) 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 (2) 

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. 

Among the alternative approaches 

that were considered the Department 

also considered whether to use a 

different phaseout period. The 

Department declined to propose a 

shorter phaseout period (or no phaseout 

period) because, as explained in this 

proposed rule, individuals with 

disabilities who have been working for 

employers holding a section 14(c) 

certificate, employers who have held a 

section 14(c) certificate, and government 

entities may need time to transition to 

the payment of the full minimum wage 

in order to mitigate disruptions that 

might potentially otherwise cause 

curtailment of employment 

opportunities. At the same time, the 

Department also declined to propose a 

longer phaseout period. As discussed in 

section III.D.1.i., many States have 

already passed laws prohibiting (or 

planning to prohibit) the payment of 

subminimum wages through a phase 

out.318 State statutes containing multiyear phaseouts range from 2 years to 7 

years, with many states opting for a 2- 

or 3-year phaseout. In view of this, the 

Department thus believes that 3 years 

should be sufficient to allow for 

transitions away from subminimum 

wage employment. Furthermore, the 

Department is concerned that a longer 

period might incentivize delay of 

effective transition measures. 


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The Department also considered 

revising its existing regulations to 

change the process and evidence 

employers would need to provide in 

order to demonstrate that the payment 

of a subminimum wage is necessary to 

prevent the curtailment of employment 

opportunities. The Department did not 

propose such changes because, as 

explained elsewhere in this proposal, 

given the statutory legal authority 

requiring the Department to determine 

the necessity of certificates (to the 

extent necessary to prevent the 

curtailment of opportunities for 

employment), the best approach is to 

examine the standard based on a 

comprehensive consideration of how 

employment opportunities are both 

currently curtailed and created across 

the employment market rather than on 

the framework set out in the 1989 

regulations reflecting the presumption 

that subminimum wages are necessary 

where productivity measures are 

satisfied. As this proposal explains, the 

Department’s preliminary findings are 

that employment opportunities exist 

sufficiently apart from section 14(c) 

certificates to justify the proposed 

determination to stop issuing 

certificates through a multi-year 

phaseout. Given this belief and the 

Department’s proposed determination, a 

change to only alter the requirements of 

holding a certificate may not fully meet 

the Department’s statutory obligation 

under the curtailment clause given the 

changed opportunities for employment 

currently. 

The Department also considered 

proposing an additional extension 

period beyond the 3-year phaseout 

period. However, as stated above, the 

Department proposes that a 3-year 

phaseout period should be sufficient for 

most, if not all, employers that currently 

hold section 14(c) certificates, to adjust 

their operations and funding structures 

such that they can transition away from 

subminimum wages by the end of that 

period. Furthermore, any extension 

option increases the risk of use of 

certificates beyond an actual period of 

demonstrated need for orderly 

transition, and might undercut the 

incentive for those employers to make 

efficient and timely plans to move away 

from subminimum wages. However, as 

noted above, the Department seeks 

comments about a potential extension 

option. 

VI. Paperwork Reduction Act 

The Paperwork Reduction Act of 1995 

(PRA), 44 U.S.C. 3501 et seq., and its 

attendant regulations, 5 CFR part 1320, 

require the Department to consider the 

agency’s need for its information 

collections, their practical utility, the 

impact of paperwork and other 

information collection burdens imposed 

on the public, and how to minimize 

those burdens. The PRA typically 

requires an agency to provide notice and 

seek public comments on any proposed 

collection of information contained in a 

proposed rule. See 44 U.S.C. 

3506(c)(2)(B); 5 CFR 1320.8. 

This rulemaking would revise the 

burdens for the existing information 

collection previously approved under 

Office of Management and Budget 

(OMB) control number 1235–0001, Fair 

Labor Standards Act Special 

Employment Provisions. The 1235–0001 

information collection encompasses 

information collected pursuant to FLSA 

sections 11(d), 14(a), and 14(b), as well 

as section 14(c). As required by the 

PRA, the Department has submitted 

information collections as revisions to 

existing collections to OMB for review 

to reflect changes to existing burdens 

that will result from and are limited to 

the implementation of this section 14(c) 

rulemaking. 

Summary: FLSA section 14(c) 

authorizes the Department to issue 

certificates permitting employers to pay 

workers whose disabilities impair their 

earning or productive capacity at wage 

rates below the Federal minimum wage. 

The Department has promulgated 

regulations at 29 CFR 525 to administer 

and enforce section 14(c) of the FLSA. 

This NPRM, if finalized, would impose 

new information requirements revising 

an existing information collection. 

Purpose and use: This proposed rule, 

which would revise 29 CFR part 525, 

would result in the Department no 

longer issuing new section 14(c) 

certificates in response to initial 

applications postmarked or submitted 

online on or after the effective date of 

a final rule. Pursuant to the proposed 

rule, the Department would permit 

existing section 14(c) certificate holders, 

assuming all legal requirements are met, 

to continue to operate under section 

14(c) certificate authority and re-apply 

for continued certificate authority for up 

to 3 years after the effective date of a 

final rule. In addition, as discussed 

above, the Department proposes that a 

3-year phaseout period should be 

sufficient for most, if not all, employers 

that currently hold section 14(c) 

certificates to adjust their operations 

and funding structures such that they 

can transition away from subminimum 

wages by the end of that period. 

However, the Department also requests 

comments on all aspects of a possible 

limited extension provision beyond the 

end of the proposed 3-year phaseout 

period. 

This proposed rule, if finalized, 

would impact the collection by reducing 

the number of employers that hold 

section 14(c) certificates throughout the 

phaseout period, and thereby also 

reduce employees employed under 

section 14(c) certificates. However, 

ultimately, 3 years from the effective 

date of a final rule, there would be no 

section 14(c) certificates and no 

employees employed under section 

14(c) certificates, which would 

eliminate the burden associated with 

this collection. 

WHD obtains PRA clearance under 

OMB control number 1235–0001 for an 

information collection with respect to 

subminimum wage employment. An 

Information Collection Request (ICR) 

has been submitted to revise the 

approval and adjust the burdens for this 

collection. 

Information and technology: There is 

no particular order or form of records 

prescribed in the current regulations or 

in the proposed rule. An employer may 

meet the requirements of this proposed 

rule using paper or electronic means. 

The Department has enhanced the 

section 14(c) certificate application 

process by implementing an online 

electronic application platform to 

submit Forms WH–226 and WH–226A; 

this platform can be found on the 

Department’s website at: https://

section14c.dol.gov/. The Department 

also makes Forms WH–226 and WH– 

226A and instructions for completing 

them available in a fillable Adobe PDF 

format for downloading and printing 

from the Department’s website at: 

https://www.dol.gov/agencies/whd/ 

forms/wh226. Respondents currently 

have the option of either mailing the 

form(s) or completing and submitting an 

application using the section 14(c) 

online application system. 

Minimizing Small Entity Burden: 

While information collections, i.e., WH– 

226 and WH–226A, may involve a 

substantial number of small businesses 

or non-profit agencies, the collections 

do not have a significant impact on 

those small entities. Forms WH–226 and 

WH–226A collect information necessary 

for the Department to determine if an 

employer qualifies for a certificate. The 

data collection gathers additional 

information on individual workers to 

better assist the agency in preventing 

abuse of a vulnerable worker 

population. The Department has 

provided detailed item-by-item 

instructions and online tools such as 

wage calculators to assist all employers, 

including small entities, in completing 

these forms and complying with the 

statutory and regulatory requirements. 

The Department also has an online 


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319 29 U.S.C. 206(a), 207(a). 

320 29 U.S.C. 214(c)(1). 

electronic platform for submission of 

the information. 

Public comments: As part of its 

continuing effort to reduce paperwork 

and respondent burden, the Department 

conducts a preclearance consultation 

program to provide the general public 

and Federal agencies with an 

opportunity to comment on proposed 

and continuing collections of 

information in accordance with the 

PRA. This program helps to ensure that 

requested data can be provided in the 

desired format, reporting burden (time 

and financial resources) is minimized, 

collection instruments are clearly 

understood, and the impact of collection 

requirements on respondents can be 

properly assessed. 

The Department seeks comments on 

this NPRM and its potential impact to 

public burdens associated with ICR 

1235–0001, Fair Labor Standards Act 

Special Employment Provisions. 

Detailed calculations indicating 

respondents, responses, burden hours, 

and burden costs are contained in the 

supporting statement found at 

www.reginfo.gov. 

Commenters may send their views on 

the Department’s PRA analysis in the 

same way they send comments in 

response to the NPRM as a whole (e.g., 

through the www.regulations.gov 

website), including as part of a comment 

responding to the broader NPRM. 

Alternatively, commenters may submit a 

comment specific to this PRA analysis 

by sending an email to 

WHDPRAComments@dol.gov. While 

much of the information provided to 

OMB in support of the information 

collection request appears in the 

preamble, interested parties may obtain 

a copy of the supporting statements for 

the affected ICR by sending a written 

request to the mail address shown in the 

ADDRESSES section at the beginning of 

this preamble. Alternatively, a copy of 

the ICR with applicable supporting 

documentation, including a description 

of the likely respondents, proposed 

frequency of response, and estimated 

total burden, may be obtained free of 

charge from the RegInfo.gov website by 

visiting http://www.reginfo.gov/public/ 

do/PRAMain. 

OMB and the Department are 

particularly interested in comments 

that: 

• Evaluate whether the proposed 

collections of information are necessary 

for the proper performance of the 

functions of the agency, including 

whether the information will have 

practical utility; 

• Evaluate the accuracy of the 

agency’s estimate of the burden of the 

proposed collection of information, 

including the validity of the 

methodology and assumptions used; 

• Enhance the quality, utility, and 

clarity of the information to be 

collected; and 

• Minimize the burden of the 

collection of information on those who 

are to respond, including through the 

use of appropriate automated, 

electronic, mechanical, or other 

technological collection techniques or 

other forms of information technology, 

e.g., permitting electronic submission of 

responses. 

Total burden for the affected 

information collection, including the 

burdens that will be affected by this 

proposed rule and any changes are 

summarized as follows: 

Type of review: Revision to currently 

approved information collections. 

Agency: Wage and Hour Division, 

Department of Labor. 

Title: Fair Labor Standards Act 

Special Employment Provisions. 

OMB Control Number: 1235–0001. 

Affected public: Private sector, notfor-profits, businesses or other forprofits, and Individuals or Households. 

Estimated number of respondents: 

335,167 (0 from this rulemaking). 

Estimated number of responses: 

1,338,561 (0 from this rulemaking). 

Frequency of response: On occasion. 

Estimated annual burden hours: 

671,464 (0 from this rulemaking). 

Estimated annual burden costs 

(capital/startup): $0 ($0 from this 

rulemaking). 

Estimated annual burden costs 

(operations/maintenance): $2,284 ($0 

from this rulemaking). 

Estimated annual burden costs: 

$32,404,730 ($0 from this rulemaking). 

VII. Analysis Conducted in Accordance 

With Executive Order 12866, 

Regulatory Planning and Review, 

Executive Order 13563, Improving 

Regulation and Regulatory Review, and 

Executive Order 14094 

Under Executive Order 12866 (as 

amended by Executive Order 14094), 

OMB’s Office of Information and 

Regulatory Affairs (OIRA) determines 

whether a regulatory action is 

significant and, therefore, subject to the 

requirements of the Executive order and 

OMB review. As amended by Executive 

Order 14094, section 3(f) of Executive 

Order 12866 defines a ‘‘significant 

regulatory action’’ as a regulatory action 

that is likely to result in a rule that may: 

(1) have an annual effect on the 

economy of $200 million or more; or 

adversely affect in a material way the 

economy, a sector of the economy, 

productivity, competition, jobs, the 

environment, public health or safety, or 

state, local, territorial, or Tribal 

governments or communities; (2) create 

a serious inconsistency or otherwise 

interfere with an action taken or 

planned by another agency; (3) 

materially alter the budgetary impact of 

entitlements, grants, user fees or loan 

programs or the rights and obligations of 

recipients thereof; or (4) raise legal or 

policy issues for which centralized 

review would meaningfully further the 

President’s priorities or the principles 

set forth in the Executive order. OIRA 

has determined that this proposed rule 

is a ‘‘significant regulatory action’’ 

under section 3(f)(1) of Executive Order 

12866, as amended. 

Executive Order 13563 directs 

agencies to, among other things, propose 

or adopt a regulation only upon a 

reasoned determination that its benefits 

justify its costs; that it is tailored to 

impose the least burden on society, 

consistent with obtaining the regulatory 

objectives; and that, in choosing among 

alternative regulatory approaches, the 

agency has selected those approaches 

that maximize net benefits. Executive 

Order 13563 recognizes that some costs 

and benefits are difficult to quantify and 

provides that, when appropriate and 

permitted by law, agencies may 

consider and discuss qualitatively 

values that are difficult or impossible to 

quantify, including equity, human 

dignity, fairness, and distributive 

impacts. The analysis below outlines 

the impacts that the Department 

anticipates may result from this 

proposed rule and was prepared 

pursuant to the above-mentioned 

executive orders. 

A. Background and Need for 

Rulemaking 

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.319 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 whose disabilities impair 

their earning or productive capacity at 

wage rates below the Federal minimum 

wage. That statutory provision, 

however, has always provided a 

significant condition precedent: such 

certificates may only be issued to the 

extent ‘‘necessary to prevent curtailment 

of opportunities for employment.’’ 320


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96498 Federal Register / Vol. 89, No. 233 / Wednesday, December 4, 2024 / Proposed Rules 

Since the Department first 

promulgated regulations governing the 

issuance of section 14(c) certificates in 

1938, and even since the Department 

last substantively updated those 

regulations more than 35 years ago, 

opportunities for employment have 

dramatically changed for individuals 

with disabilities. In recent years, the 

employment rate for individuals with 

disabilities has generally climbed 

(Figure 1, Panel A). During the same 

time period, the estimated number of 

individuals working under section 14(c) 

certificates has declined (Figure 1, Panel 

B). 

Notes: Employment-population ratios 

calculated using the average monthly 

ratios for the year ending in May of each 

year to align with Panel B. Ratios are 

based on data from the Current 

Population Survey (CPS), which is the 

primary source for labor force statistics. 

CPS tends to estimate a lower number 

of disabled workers compared to other 

nationally representative surveys, such 

as the American Community Survey 

(ACS), which is more commonly used 

for population estimates. However, the 

changes in trends over time are similar 

across both surveys. 

Sources: Panel A: U.S. Bureau of 

Labor Statistics, EmploymentPopulation Ratio—With a Disability, 16 

Years and over [LNU02374597], 

retrieved from https://data.bls.gov/ 

timeseries/LNU02374597, September 

30, 2024; Panel B: WH–226A form data 

of issued and pending certificates, May 

1 (2014 through 2024). 

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), enacted in 1990, 

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. 

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 regulations were first promulgated 

over 85 years ago, and since 1989, when 

the Department’s regulations were last 

substantively updated, to assist 

individuals with disabilities both in 

obtaining and maintaining employment 

at or above the full Federal 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 Federal 

minimum wage. Recognizing the 

expansion of full-wage employment 

options for individuals with disabilities, 

an increasing number of oversight and 

advisory reports 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. Furthermore, 

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, while at the same time the 

employment rate for people with 

disabilities has generally climbed. Due 

to expanded opportunities both 

compared to the enactment of the 

section 14 provisions and promulgation 

of initial regulations in 1938 and the last 

substantive update to the section 14(c) 

regulations in 1989, with opportunities 

for full-wage employment now 

substantially more common than 

subminimum wage employment, the 

Department preliminarily concludes 

that the issuance of section 14(c) 

certificates is no longer necessary to 

prevent the curtailment of employment 

opportunities for individuals with 

disabilities. 

Accordingly, the Department 

proposes to phase out the issuance of 

section 14(c) certificates. The 

Department specifically proposes to: (1) 

cease issuance of new section 14(c) 


ddrumheller on DSK120RN23PROD with PROPOSALS2EP04DE24.034</GPH>

Figure 1. Employment and Section 14(c) Workers 2014 -2024 

Panel A: Employment-Population 

Ratio - With a Disability, 16 Years and 

Over, 2014 - 2024 

25 

20 

5 

0 

300,000 

lS0,000 

200,000 

1S0,llO0 

100,GOO 

50,000 

Panel 8: Estimated Number of 14(c) 

Workers, 2010 -- 2024 

"' .-i 

0 

N 

N 

N 

0 

N 
Federal Register / Vol. 89, No. 233 / Wednesday, December 4, 2024 / Proposed Rules 96499 

321WHD, 14(c) Certificate Holders, May 1, 2024, 

https://www.dol.gov/agencies/whd/workers-withdisabilities/section-14c/certificate-holders. Note 

that some of these entities (34 employers) report 

having zero workers paid a subminimum wage, so 

this may be an overestimate of the actual number 

of affected entities. Based on this list, employers 

operate in the following 38 States: Alabama, 

Arizona, Arkansas, California, Colorado, 

Connecticut, Florida, Georgia, Idaho, Illinois, 

Indiana, Iowa, Kansas, Kentucky, Louisiana, 

Massachusetts, Michigan, Minnesota, Mississippi, 

Missouri, Montana, Nebraska, Nevada, New Jersey, 

New Mexico, New York, North Carolina, North 

Dakota, Ohio, Oklahoma, Pennsylvania, South 

Carolina, South Dakota, Texas, Utah, Virginia, 

Wisconsin, and West Virginia. The remaining 12 

States, plus the District of Columbia, had no section 

14(c) employers on the list. 

322 Id. Note that the number of workers paid 

subminimum wages are only reported for entities 

that have issued certificates and does not represent 

workers that may be employed by employers with 

subminimum wage payment authority listed as 

pending. 

323The information collected from the form WH– 

226A is submitted by applicants and may include 

inaccuracies, such as instances when an employer 

reports a piece rate instead of an hourly wage rate 

or miscalculates the wage. Inaccuracies may also be 

the result of data entry errors. The Department 

presents this information to provide context for the 

general status of workers on section 14(c) 

certificates. The summary data presented here does 

not reflect any changes an employer made after 

submission of its application, including those based 

upon the Department’s oversight of section 14(c) 

through its application processes and enforcement 

actions. 

324WHD collects this data for the purpose of 

processing applications to provide employers with 

certificates authorizing the payment of 

subminimum wages to workers with disabilities 

under section 14(c). Although the data from the 

application forms is not collected for 

comprehensive statistical analysis, it is the best data 

that the Department has on the population of 

workers paid subminimum wages under section 

14(c) certificates and is useful to provide context for 

purposes of this analysis. 

325 In this data set, the effective dates for the 

certificates range from July 2022 to the present. 

326For example, in the overall employed 

population in the U.S., White workers represent 

76.5 percent of all employed persons, and workers 

ages 25 to 54 represent 64 percent of all employed 

persons. U.S. Dep’t of Labor, Bureau of Labor 

Statistics, BLS Current Population Survey, 

Employment Status of the Civilian Population by 

Age, Sex, and Race, 2023, https://www.bls.gov/cps/ 

cpsaat03.htm. 

certificates to employers submitting an 

initial application on or after the 

effective date of a final rule and (2) 

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 requests 

comments on all aspects of a possible 

limited extension provision beyond the 

end of the proposed 3-year phaseout 

period, including whether an extension 

provision would be appropriate, the 

duration of any such extension(s), the 

showing (including any documentation) 

an employer must make to receive an 

extension, the criteria by which requests 

for extension should be reviewed, and 

the procedures by which employers 

apply for extension(s). 

B. Number of Affected Workers and 

Employers 

The entities that will be directly 

affected by this proposed rule are 

section 14(c) certificate holders and 

workers with disabilities being paid a 

subminimum wage by a certificate 

holder. According to WHD’s data on 

section 14(c) certificate holders as of 

May 1, 2024, there were 801 employers 

who had certificates that were either 

issued or pending.321 Employers 

holding issued certificates reported 

paying approximately 40,579 workers at 

subminimum wages in their previously 

completed fiscal quarter.322

The Department has provided 

additional data below about the hours, 

earnings, and primary disability of 

workers reported by employers on 

applications for section 14(c) 

certificates. In addition to these 

workers, there may be other categories 

of workers affected by this proposed 

rule, such as youth with disabilities 

looking to enter employment, or nonworking individuals with disabilities 

who may choose to enter the labor force 

if there is an increase in full-wage 

employment options (see section 

VII.D.4. for an additional discussion on 

this population). The Department 

welcomes comments regarding other 

types of workers who may be affected by 

the proposed rule. 

1. Form WH–226A—Information 

Collected 

When applying for a section 14(c) 

certificate to employ workers with 

disabilities at subminimum wages, 

employers must fill out form WH–226A, 

which asks for information about 

workers who were paid subminimum 

wages at each job site, including the 

type of work being performed, average 

hourly earnings, average weekly hours 

worked, and the primary disability that 

affects the worker’s productivity for the 

job most performed.323 The data 

discussed here reflects what employers 

have entered on their application 

forms.324 Data is for May 1, 2024, and 

reflects the applicant’s most recently 

completed fiscal quarter at the time they 

applied.325

According to this data, the mean 

‘‘average hourly earnings’’ for workers 

on section 14(c) certificates is $4.08, and 

the median ‘‘average hourly earnings’’ is 

$3.46. These workers work a mean of 

11.45 hours per week. Form WH–226A 

also asks certificate holders about the 

primary disability that affects each 

subminimum wage worker’s 

productivity for the job at which they 

have worked the most number of hours 

over the most recently completed fiscal 

quarter. As shown in Table 1, the vast 

majority (about 91 percent) of workers 

being paid subminimum wages under 

section 14(c) certificates have I/DD 

reported as their primary disability. 

TABLE 1—WORKERS ON SECTION

14(c) CERTIFICATES BY PRIMARY

DISABILITY

Primary disability 

Share of 

workers on 

section 14(c) 

certificates 

Age Related Disability .......... 0.09% 

Hearing Impairment .............. 0.14 

Intellectual/Developmental 

Disability ............................ 90.96 

Neuromuscular Disability ...... 0.68 

Psychiatric Disability ............. 4.34 

Substance Abuse ................. 0.02 

Visual Impairment ................. 0.21 

Other ..................................... 3.41 

2. Section 14(c) Workers 

Demographics—Race, Age, and 

Ethnicity 

The WHD section 14(c) application 

form does not ask for any other 

demographic data on section 14(c) 

certificate workers. For their 2023 

report, GAO surveyed community 

rehabilitation program (CRP) employers 

to estimate the percentage of section 

14(c) workers employed by CRPs in 

August 2021 by race and ethnicity and 

by age. As shown in Table 2, GAO 

estimated that a large share of these 

workers are White and fall between the 

ages of 25 and 54, which aligns with 

demographic breakdowns found in the 

overall employed population.326


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327U.S. Dep’t of Labor, Bureau of Labor Statistics, 

BLS Current Population Survey, ‘‘Employment 

status of the civilian noninstitutional population by 

disability status and selected characteristics, 2023 

annual averages,’’ https://www.bls.gov/ 

news.release/disabl.t01.htm. 

328WHD Field Operations Handbook (FOH) 

64k00, https://www.dol.gov/agencies/whd/fieldoperations-handbook/Chapter-64. 

329California (38), Colorado (1), Nevada (4), and 

South Carolina (10). WHD, 14(c) Certificate Holders, 

May 1, 2024, https://www.dol.gov/agencies/whd/ 

workers-with-disabilities/section-14c/certificateholders. 330U.S. Gov’t Accountability Office, GAO–01– 

886, ‘‘Special Minimum Wage Program: Centers 

Offer Employment and Support Services to Workers 

with Disabilities, But Labor Should Improve 

Oversight’’ (2001) (2001 GAO Report) at 10, 18. 331The Department notes that data collected by 

the Department from section 14(c) applications is 

not census data. Data is derived from information 

received by WHD during the certificate application 

process, which is used for the purposes of 

determining whether to issue a certificate. The 

application requires the employer to provide a 

snapshot of its operations and workforce that is 

paid a subminimum wage during its most recently 

completed fiscal quarter at the time of its renewal 

application, and the submission date varies per 

applicant. Because certificates are issued to the 

employer, not individuals employed at 

TABLE 2—ESTIMATED PERCENTAGE OF SECTION 14(c) WORKERS REPORTED TO BE EMPLOYED BY COMMUNITY

REHABILITATION PROGRAMS IN AUGUST 2021, BY RACE/ETHNICITY AND AGE

Estimated share 

of workers 

on section 14(c) 

certificates 

(%) 

Racial/ethnicity Category: 

White (Not Hispanic or Latino) ............................................................................................................................................. 78 

Black or African American (Not Hispanic or Latino) ............................................................................................................ 14 

Asian (Not Hispanic or Latino) ............................................................................................................................................. 1 

Native American or Alaska Native (Not Hispanic or Latino) ................................................................................................ 1 

Hispanic or Latino ................................................................................................................................................................. 5 

All other race/ethnicity categories ........................................................................................................................................ 2 

Age: 

18–24 years old .................................................................................................................................................................... 4 

25–54 years old .................................................................................................................................................................... 70 

55 years old or older ............................................................................................................................................................ 26 

Source: GAO Survey of Community Rehabilitation Program employers, 2023 GAO Report 

Aside from the information discussed 

in this section, the Department is 

unaware of any data source that 

regularly publishes additional up-todate demographic information 

specifically on workers employed by 

section 14(c) certificate holders. The 

Department’s Bureau of Labor Statistics 

(BLS) publishes data on all workers 

with a disability, including sex, race, 

age, and educational attainment.327

However, workers who are currently 

employed under section 14(c) 

certificates are only a small subset of all 

workers with a disability. The 

Department welcomes comments and 

data on the demographics of workers 

with disabilities employed under 

section 14(c) certificates. 

3. Affected Employers 

As discussed in section II.C.2., WHD 

issues section 14(c) certificates to 

business establishments, community 

rehabilitation programs (CRPs), 

hospitals/patient worker facilities, and 

school-work experience programs 

(SWEPs). The overwhelming majority of 

current certificate holders are CRPs, 

representing approximately 93 percent 

of current certificate holders as of May 

1, 2024. In the context of section 14(c), 

WHD defines CRPs as ‘‘not-for-profit 

agencies that provide rehabilitation and 

employment for people with 

disabilities.’’ 328 Such establishments 

are sometimes referred to as ‘‘sheltered 

workshops’’ as they typically are 

facility-based and often serve workers 

with disabilities in sheltered or 

segregated settings. At the time of 

drafting, only 30 private-sector, forprofit businesses hold certificates for the 

payment of subminimum wages, 

representing 4 percent of total certificate 

holders. Apart from CRPs and business 

establishments, the remaining 

certificates are held by hospitals or 

residential care facilities that employ 

patients, representing 3 percent of total 

certificate holders, and ‘‘school work 

experience programs’’ that represent 

less than half of one percent of total 

certificate holders. 

In the WHD data reviewed, the 

expiration dates for certificates fall 

between May 2024 and early 2026. The 

Department assumes that a share of the 

certificate holders with certificates 

expiring before the publication of the 

final rule would reapply and be granted 

new certificates with later expiration 

dates (no later than 3 years after the 

effective date of a final rule). The 

Department does not have information 

to estimate exactly how many certificate 

holders will choose to reapply. As of 

May 1, 2024, 779 of the 801 employers 

holding or seeking a certificate (97 

percent) were renewals, but the overall 

trend of certificate holders has been in 

a steady decline over the past decade 

(the number of pending and issued 

certificate holders was 2,820 in April 

2015 and has declined every year since). 

If this trend continues, fewer certificate 

holders may choose to reapply in the 

future even absent any regulatory 

action. Furthermore, the publication of 

the proposed rule may impact certificate 

holders’ choices if they anticipate that 

certificates are going to be phased out if 

the rule is finalized as proposed. There 

may also be changes to State or local 

laws during this time period that may 

affect whether certificate holders 

operating in those states or localities 

reapply for a certificate. Similarly, 

employers in States that have already 

begun a phaseout of subminimum wages 

may choose not to reapply before 

expiration of the phaseout period. As of 

May 1, 2024, there are 53 certificate 

holders located in States that are in the 

process of phasing out the payment of 

subminimum wages.329

The number of certificate holders has 

declined over recent years, and the 

Department expects that trend to 

continue. In 2001, the GAO estimated 

that approximately 424,000 workers 

with disabilities were paid 

subminimum wages while working for 

5,612 employers holding section 14(c) 

certificates.330 As mentioned above, as 

of May 1, 2024, that number dropped to 

approximately 40,579 workers with 

disabilities being paid subminimum 

wages to employers with issued 

certificates, while 801 employers held 

or were seeking section 14(c) 

certificates, representing a decline in 

certificate holders of almost 86 

percent.331 All impacts discussed in this 


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subminimum wages, the specific number of 

employees may change over the duration of the 

certificate. The certificate application data is selfreported by employers and does not reflect any 

changes made by the employer after its submission. 

Additionally, the data provided reflects active 

certificates as of the date that the Department’s 

website list was revised and does not include the 

number of employees on ‘‘pending’’ section 14(c) 

certificates. 

332As discussed above, this may be an 

overestimate of the number of employers who will 

review the final rule, as some of these certificate 

holders operate in States that are phasing out the 

payment of subminimum wages to workers with 

disabilities in the near future. 

333Brysbaert, Marc (April 12, 2019), ‘‘How many 

words do we read per minute? A review and metaanalysis of reading rate,’’ https://doi.org/10.31234/ 

osf.io/xynwg. 

334U.S. Dep’t of Labor, Bureau of Labor Statistics, 

Occupational Employment and Wage Statistics 

survey (OEWS), May 2023, https://www.bls.gov/ 

news.release/ocwage.t01.htm. 

335The benefits-earnings ratio is derived from 

BLS’s Employer Costs for Employee Compensation 

(ECEC) data using variables CMU1020000000000D 

and CMU1030000000000D. The Department 

averaged the four quarters of 2023 to get a full-year 

2023 ratio. 

336There may be some certificate holders who rereview the regulations if/when they decide to reapply for their certificate during a phaseout period. 

However, the Department has not estimated rule 

familiarization costs in future years. The 

Department welcomes comments that would help 

inform this estimate. 

337The Department does not have data to estimate 

how many certificate holders would close their 

organization following the changes proposed in this 

rule but welcomes comments from certificate 

holders to help inform this estimate. 

regulatory impact analysis use the 

current number of certificate holders at 

the time of drafting, but the Department 

expects this may be an overestimate, as 

the number of certificate holders could 

likely decline by the time of publication 

of the final rule given the overall trends 

in the number of certificate holders. For 

example, as of May 1, 2023, the number 

of employers holding or seeking a 

section 14(c) certificate was 931, 

meaning that the number of certificate 

holders declined by almost 14 percent 

over the year. If a similar decline were 

to occur over the forthcoming year, the 

number of certificate holders could be 

below 700 by May 2025. Additionally, 

the data includes certificate holders in 

states that have plans to phase out the 

payment of subminimum wages for 

workers with disabilities in the near 

future, which could also result in a 

lower number of certificate holders at 

the time of the final rule. 

C. Costs 

1. Regulatory Familiarization Costs 

This proposed rule would impose 

direct costs on section 14(c) certificate 

holders by requiring them to review the 

regulation. To estimate these 

‘‘regulatory familiarization costs,’’ three 

pieces of information must be estimated: 

(1) the number of affected certificate 

holders; (2) a wage level for the 

employees reviewing the rule; and (3) 

the amount of time spent reviewing the 

rule. As discussed above, WHD data 

shows that there are 801 employers who 

had certificates that were either issued 

or pending as of May 1, 2024.332 The 

Department assumes that each of these 

entities would incur some regulatory 

familiarization costs, and that each 

certificate holder would spend an 

average of 2 hours reviewing this 

proposed rule. The Department assumes 

that each reviewer will spend 1 minute 

per page reviewing the regulatory 

text,333 which is equivalent to 5 doublespaced pages at the time of publication. 

They will also review sections of the 

preamble and any compliance 

assistance materials as appropriate, so 

the Department has added significant 

additional time for that review. 

The Department assumes that a 

Compensation, Benefits, and Job 

Analysis Specialist (SOC 13–1141) with 

a median hourly wage of $35.83 will 

review the rulemaking.334 The 

Department also assumes that benefits 

are paid at a rate of 45 percent of the 

base wage 335 and overhead costs are 

paid at a rate of 17 percent of the base 

wage, resulting in an hourly rate of 

$58.04 in 2023 dollars. Therefore, the 

total regulatory familiarization cost to 

employers is $92,980 (801 entities × 2 

hours × $58.04). Although the issuance 

of section 14(c) certificates would be 

phased out over multiple years under 

this proposal, the Department assumes 

that most affected entities will review 

the rule when it is published.336

Therefore, all regulatory familiarization 

costs are assumed to occur in Year 1 

following publication of the rule. Total 

annualized rule familiarization costs 

over the first 10 years are estimated to 

be $12,373, assuming a 7 percent 

discount rate. 

2. Adjustment Costs 

As discussed further in Section VII.D., 

if the issuance of section 14(c) 

certificates is phased out, employers 

who are certificate holders might choose 

to respond in a few different ways. If 

certificate holders only serve workers 

with disabilities who are paid the 

subminimum wage, they might choose 

to continue operations as they are but 

pay at least the full Federal minimum 

wage to those workers. These certificate 

holders may instead choose to close 

their organization.337 Certificate holders 

who employ other workers (at or above 

minimum wage) might choose to replace 

affected workers with disabilities with 

the other workers; or they might choose 

to no longer employ workers with 

disabilities who had been paid 

subminimum wages under section 14(c), 

spread the work of those workers to 

other employees, and not hire any new 

workers. If certificate holders are 

already providing rehabilitation or other 

non-work services to individuals with 

disabilities, they may alternatively 

decide to discontinue the employment 

of these workers while still providing 

them with those services. Certificate 

holders will likely incur some 

adjustment costs under each of these 

scenarios. If they choose to transition all 

workers with disabilities to at least the 

full minimum wage, the increased wage 

cost would be considered a transfer 

(discussed below), but they could still 

incur some adjustment costs associated 

with updating payroll systems, etc. If 

entities choose to hire new workers or 

spread work to existing workers, they 

may incur hiring costs or adjustment 

costs associated with these activities. 

The Department assumes that these 

costs would likely be incurred by each 

certificate holder at different points in 

time prior to when their current 

certificate expires, so the total costs 

would be spread out over multiple 

years. 

Because there are many uncertainties 

in exactly how each certificate holder 

would respond to this proposed rule, 

and how the costs would be spread over 

the proposed phaseout period, the 

Department has not provided a 

definitive estimate of adjustment costs. 

However, as an example, if all certificate 

holders incurred an average of 1 hour of 

adjustment costs, the total cost would be 

$46,490 (801 entities × 1 hour × $58.04). 

These costs would be spread over 

multiple years as employers transition 

their pay practices or change their 

operation models. The Department 

welcomes comments and data from 

certificate holders that would help 

inform an estimate of adjustment costs. 

3. Costs to Workers Employed Under 

Section 14(c) Certificates 

The Department acknowledges that 

this rule may also result in some costs 

to workers currently paid subminimum 

wages under section 14(c) certificates. 

Although any changes in the wages they 

receive, the hours they work, or their 

employment status would be considered 

a transfer and are discussed below, there 

could be follow-on effects that would 

lead to costs for these workers. For 

example, if a certificate holder does not 

retain its section 14(c) workers at the 

full minimum wage, the worker may 

need to spend time looking for 

employment at or above the full Federal 

minimum wage or may need to obtain 


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additional support services or other 

meaningful non-work activities to 

replace the time previously spent in 

subminimum wage employment. They 

could incur transition and job search 

costs associated with these activities. 

These transition costs include the cost 

of time spent learning about available 

resources, time for eligibility 

determinations, time spent on waitlists, 

training costs, etc. There may be some 

employers who will choose not to retain 

the workers working under section 14(c) 

certificates; a subset of those workers 

may be unable to find replacement 

employment or support services. For 

this group of workers, they may incur 

costs associated with reduced wellbeing from no longer being employed or 

due to a reduction in hours worked. 

Some of their families may also incur 

increased care costs, if they need to find 

or provide care for their family member 

for the time that was previously spent 

working at subminimum wages. 

However, as discussed throughout this 

rulemaking, the Department believes 

that a wide range of strategies, 

opportunities, and supports exist that 

can minimize this outcome. Although 

there may be time required for workers 

to transition from subminimum wage 

jobs, the Department believes that the 

phaseout approach proposed in this rule 

would help ensure that workers will 

ultimately be able to make this 

transition. 

Additionally, the Department 

acknowledges workers may also have 

concerns about potential limitations on 

their disability benefits due to an 

increase in their wages. In response to 

such concerns, some workers with 

disabilities may choose to leave the 

workforce or limit the number of hours 

they work. The Department is unable to 

specifically quantify these potential cost 

impacts but notes workers receiving 

Supplemental Security Income or 

Disability Insurance have access to free 

employment support resources, such as 

the Social Security Administration’s 

‘‘Ticket to Work’’ program, that allows 

enrolled workers with disabilities to 

improve their earning potential. 

Likewise, as addressed in the preamble, 

the availability of resources such as 

ABLE accounts, allow workers with 

disabilities to accumulate savings 

without jeopardizing access to certain 

public benefits, thus minimizing this 

concern. 

The Department does not have data to 

quantify costs to workers currently 

employed under section 14(c) 

certificates but welcomes comments and 

input to help inform this estimate, 

including comments on available 

resources that address the impacts that 

earnings may have on disability 

benefits. 

D. Cost Savings 

Any increased costs for certificate 

holders could be balanced out, in part, 

by the cost savings of no longer 

applying for section 14(c) certificates 

and no longer participating in the 

activities required to maintain their 

certificate and determine appropriate 

commensurate subminimum wage rates 

for workers. Currently, employers who 

wish to apply for a section 14(c) 

certificate may submit their application 

to WHD in one of two ways: completing 

their application online or submitting 

completed forms WH–226 and WH– 

226A. When applying for a certificate, 

applicants are responsible for providing 

information related to their employment 

operations and the subminimum wage 

workers employed during the 

applicant’s most recently completed 

fiscal quarter, including details on 

hours, wages, job descriptions, and 

primary disability. Any affected entity 

that would have renewed their 

application in absence of this rule could 

likely experience some cost savings 

following this rule, since they no longer 

would be filling out an application for 

and maintaining a section 14(c) 

certificate. As an example, in the 

Paperwork Reduction Act Supporting 

Statement for these regulations, the 

Department estimates that for employers 

who are renewing their application for 

a section 14(c) certificate, it will take 

them 75 minutes to fill out form WH– 

226 and 2 hours to fill out form WH– 

226A, for a total of 3.25 hours. If these 

forms are filled out by a Compensation, 

Benefits, and Job Analysis Specialist 

(SOC 13–1141) with a full-loaded wage 

of $58.04, each employer who was 

planning to renew their section 14(c) 

certificate application would save 

$188.63 per application cycle. In order 

to calculate an illustrative estimate of 

the potential total maximum cost 

savings, the Department assumes all 447 

certificate holders with certificates 

expiring in the next year (between the 

dates of May 1, 2024, and May 1, 2025) 

would decide to renew their application 

for a section 14(c) certificate in absence 

of this proposed rulemaking. If these 

certificate holders no longer have to fill 

out the application following the rule, 

the total potential annual cost savings 

would be $84,318 ($188.63 × 447). The 

true cost savings is likely somewhat 

lower, because all certificate holders 

may not choose to re-apply when their 

certificate expires, due to both overall 

downward trends in the number of 

certificate holders and potential 

expectations of a phasing out of section 

14(c) certificates based on the 

publication of this proposed rule. 

Employers who no longer hold a 

section 14(c) certificate to pay 

subminimum wages would also be 

relieved of several operations costs 

required to remain in compliance with 

the section 14(c) provisions. For 

example, employers would no longer 

conduct prevailing wage surveys used to 

determine worker commensurate wage 

rates for each type of work paid at a 

subminimum wage. This would relieve 

the employer of their at least annual 

task of ascertaining the wage rates paid 

to the experienced nondisabled workers 

of other employers in the vicinity, 

usually obtained by surveying 

comparable firms in the area that 

employ primarily nondisabled workers 

doing similar work. The appropriate 

size of such a survey sample depends on 

the number of firms doing similar work 

but generally would include at least 

three firms. Employers would also be 

relieved of conducting time studies of 

both hourly paid workers as well as staff 

that do not have disabilities for the work 

being performed (‘‘standard setters’’). To 

maintain compliance with section 14(c), 

employers must review the wages of all 

subminimum wage employees at least 

once every 6 months. The work 

measurement or time study process 

involves a review with respect to the 

quantity and quality of work of each 

hourly-rated worker with a disability as 

compared to that of workers engaged in 

similar work or work requiring similar 

skills that do not have a disability for 

the work performed. With the prevailing 

wage rate for each job and the 

productivity measurement of each 

individual worker, the employer must 

calculate the commensurate wage rate 

for each worker and implement that 

wage rate no later than the first 

complete pay period following the 

evaluation. These steps would have to 

be repeated more frequently if an 

employee changes jobs or the job’s 

structure is changed. Section 14(c) 

certificate holders also have compliance 

responsibilities under section 511 of the 

Rehabilitation Act that require them to 

obtain, review, and maintain certain 

documentation of services provided to 

youth employees prior to subminimum 

wage employment as well as services 

required for all subminimum wage 

employees every 6 months for the first 

year of employment and annually 

thereafter. Also, employers must inform 

each worker paid subminimum wages of 

local training opportunities for selfadvocacy, self-determination, and peer 

mentoring. (See section III.B.2.ii. for an 

overview of these requirements.) 


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338 Guidance based on WHD Section 14(c) Online 

Calculators User Guide, https://www.dol.gov/sites/ 

dolgov/files/WHD/legacy/files/calculatorGuide.pdf. 339WHD, 14(c) Certificate Holders, May 1, 2024, 

https://www.dol.gov/agencies/whd/workers-withdisabilities/section-14c/certificate-holders. 

340Workers receiving wage increases as a result 

of the proposed rule would be subject to both 

Federal and State minimum wage requirements. 

Estimates of transfers in States with minimum wage 

rates higher than the Federal minimum wage 

incorporated the cost increase to the higher State 

minimum wage rate. 

341 Due to difficulties in assessing each certificate 

holder’s local area, the analysis did not take into 

account that some localities may have minimum 

wages that are higher than the State minimum 

wage. The differences between a worker’s average 

hourly earnings and local minimum wage could be 

greater than the difference calculated here, leading 

to an underestimate of transfers. Additionally, some 

workers may find new employment at a wage rate 

above their State or local minimum wage, which 

could also lead to an underestimate of transfers. 

342The average of the difference between the 

applicable minimum wage and the section 14(c) 

wage is $6.49 and the average of the reported 

average number of hours worked per week is 11.45. 

Multiplying the increase in weekly earnings when 

section 14(c) workers earn the applicable minimum 

wage by the number of workers by 52 weeks ($76.86 

× 43,748 × 52) equals $174.8 million per year. 

Therefore, section 14(c) certificate 

holders would no longer be conducting 

many hours of work for each worker 

that was previously employed under 

their certificate. 

While the Department does not 

require a specific method for employers 

to conduct time studies and therefore 

does not have definitive data on how 

long it takes employers to complete all 

these activities, a common method for 

performing time studies is for the 

employer to conduct at least 3 separate 

25-minute time studies for both the 

standard setter and hourly paid worker 

with a disability, which would be at 

least 75 minutes per typical time study 

per job worked for each worker.338

Because time studies of workers with 

disabilities must occur at least every 6 

months, this cost could be 2.5 hours per 

year per worker. If we were to attribute 

this cost savings to all current 

employers with pending or issued 

certificates (801), and assuming even 

only 1 employee per each employer, the 

total cost savings could be at least 

$116,225 (801 employers × 2.5 hours × 

$58.04), spread over multiple years as 

certificates expire. Given that, at the 

time of drafting, WHD data shows 

employers with issued certificates 

employed approximately 40,579 

workers under section 14(c) 

certificates,339 the Department 

anticipates the cost savings would be 

significantly greater. 

The Department welcomes comments 

and data to help inform an estimate of 

cost savings to certificate holders, 

including data specific to section 511 

compliance responsibilities. 

E. Transfers and Other Aspects of 

Changing Employment Arrangements 

The Department expects that if the 

issuance of section 14(c) certificates is 

phased out as discussed in this 

proposed rule, workers currently paid 

subminimum wages under these 

certificates would be impacted in 

various ways. Some of these workers 

will transition to employment at the full 

minimum wage while others may lose 

their subminimum wage employment 

but will be able to transition to other 

vocational rehabilitation services and 

supports available to them. Workers 

may observe impacts on their earnings, 

employment status, or hours worked. In 

this section, the Department discusses a 

full range of potential transfer impacts 

associated with this proposed rule and 

presents evidence to help narrow that 

potential range. Because of the many 

uncertainties discussed throughout this 

section, the Department has not 

provided quantitative estimates but has 

instead provided information to help 

illustrate the potential impact. The 

Department welcomes comments 

providing additional data that would 

help inform an estimate of transfers or 

other effects not already quantified. 

1. Potential Range of Effects 

The Department acknowledges that 

workers employed under section 14(c) 

certificates may be affected differently 

by this proposed rule and, therefore, has 

presented a range of effects here to 

provide context on potential transfers. 

The highest potential transfers to 

workers would be if 100 percent of 

current workers employed under section 

14(c) certificates transition to full-wage 

employment for the same number of 

hours they are currently working 

following the phaseout of section 14(c) 

certificates, resulting in all affected 

workers receiving wage increases to the 

full minimum wage.340 The other end of 

the range of possible impacts would 

occur if only a fraction of workers 

currently employed under section 14(c) 

certificates transition to full-wage 

employment, resulting in a significant 

loss of earnings (some portion of which 

would be lost surplus, or the value of 

the earnings above and beyond the 

value of leisure). To provide points of 

reference, the Department has 

conducted a sensitivity analysis using 

the following assumptions of the 

percentage of section 14(c) workers who 

transition to full-wage employment: 100 

percent, 75 percent, 50 percent, and 25 

percent. 

In order to calculate the upper bound 

of transfers for the sensitivity analysis, 

the Department calculated the 

difference between each worker’s 

reported average hourly earnings and 

the greater of the Federal minimum 

wage or State minimum wage for the 

State in which their employer 

operates.341 If all workers on section 

14(c) certificates receive wage increases 

to minimum wage (either as a result of 

wage increases from their current 

employer or if they find new 

employment at the minimum wage) 

while maintaining their current hours, 

the total gain in annual earnings would 

be $174.8 million.342 This annual 

estimate would likely take multiple 

years to phase in as employers make 

changes leading up to the expiration of 

their certificate. 

For additional potential transfer 

estimates (i.e., total increased earnings 

to workers who keep their job at a 

higher wage, accompanied by loss in 

earnings to those workers who lose their 

job), the Department assumed that a 

percentage (75 percent, 50 percent, and 

25 percent) of randomly selected 

workers would remain employed and be 

paid the minimum wage. See Table 3. If 

75 percent of current workers under 

section 14(c) certificates remain 

employed and are paid the minimum 

wage, the Department estimates that 

transfers from employers to workers 

would be $131.7 million (additional 

wages to the workers remaining 

employed), and the changes from 

workers to employers would be $27.1 

million in wages no longer being paid 

to the quarter of workers who are no 

longer employed. With 50 percent or 25 

percent of workers remaining employed, 

transfers (i.e., decrease in wage costs to 

still-employed workers) and changes 

(i.e., wages lost by newly-unemployed 

workers) would be as shown in Table 3, 

below. 


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343ACS identifies other groups of individuals 

with disabilities, such as hearing and visual 

disabilities, independent living difficulties, selfcare difficulties, and ambulatory disabilities. This 

analysis focuses on individuals with cognitive 

difficulties, as this group would be more directly 

affected by the proposed rule due to its larger 

participation in section 14(c) certificate 

employment. For purposes of this analysis, the 

Department assumes that the ACS category of 

cognitive difficulties is most similar to the 

population of interest, workers with I/DD. As noted 

above, based on WHD section 14(c) certificate data 

as of May 1, 2024, individuals with I/DD comprised 

about 91 percent of the workers with disabilities 

being paid subminimum wage. 

344For a fuller discussion of the States that have 

enacted legislation prohibiting or limiting the 

payment of subminimum wages, see section III.D. 

of this proposal. 

345As noted in section VII.B.1., most workers 

employed under 14(c) certificates have I/DD listed 

as their primary disability. The disability questions 

in the ACS are much more general than the specific 

requirements of an I/DD diagnosis. Thus, it is likely 

that respondents with cognitive difficulties in the 

ACS include individuals who do not meet the 

definition for having I/DD. It is uncertain how well 

the ACS respondents with cognitive difficulties 

represent the labor market behaviors of individuals 

working under section 14(c) certificates, but the 

Department believes that there is no clearly better 

data available. For a more detailed discussion, see 

Havercamp, S.M., Krahn, G., Larson, S., Weeks, J.D. 

and the National Health Surveillance for IDD 

Workgroup (2019), ‘‘Working Through the IDD Data 

Conundrum: Identifying People with Intellectual 

Disability and Developmental Disabilities in 

National Population Surveys,’’ Washington, DC: 

Administration on Intellectual and Developmental 

Disabilities, https://acl.gov/sites/default/files/ 

Aging%20and%20Disability%20in%20America/ 

National_Data_Paper_AIDD-ACL_

09.25.2019%20508%20compliant.pdf. 

346The Department used a differences-indifferences approach to compare changes in these 

measures before and after payments were stopped 

to States that did not stop payment of subminimum 

wages. 

Percentage of workers in minimum wage employment 

(%) 

Percentage 

of workers 

who lose 

employment 

(%) 

Total transfers 

from employers 

to workers 

(in millions) 

Newlyunemployed 

workers’ 

lost wages 

(in millions) 

100 ......................................................................................................................................... 0 $174.8 $0 

75 ........................................................................................................................................... 25 131.7 27.1 

50 ........................................................................................................................................... 50 87.7 54.7 

25 ........................................................................................................................................... 75 43.8 81.7 

The Department requests comments 

providing quality empirical research on 

the effects of phasing out the payment 

of wages below the Federal minimum 

wage on employment, earnings, or other 

outcomes for workers with disabilities. 

2. Illustrative Analysis To Help Inform 

Estimates 

In order to help narrow the range of 

potential effects, the Department has 

performed an illustrative analysis to 

help assess the impact of phasing out 

section 14(c) certificates on labor force 

outcomes for workers with disabilities. 

As discussed above in section III.D., in 

recent years, an increasing number of 

States and localities have prohibited, 

limited or planned to phase out the 

payment of subminimum wages to 

workers with disabilities. The 

Department conducted an analysis 

looking at employment and earnings 

outcomes for individuals with I/DD in 

states that have phased out the issuance 

of section 14(c) certificates compared to 

the states that continue to allow the 

payment of subminimum wages to 

workers with disabilities. If, as the 

Department has stated, the cessation of 

section 14(c) certificates does not lead to 

adverse labor market outcomes for 

workers currently employed under these 

certificates, then one would expect to 

find no statistically significant 

difference between the employment and 

labor force participation outcomes for 

workers with disabilities in states that 

have phased out the payment of 

subminimum wages for workers with 

disabilities compared to those that have 

not. Thus, the Department used data 

from the American Community Survey 

(ACS) from 2013 to 2023 in regression 

analyses to look at employment and 

labor force status for workers with 

cognitive difficulties in states that have 

banned the payment of subminimum 

wages for workers with disabilities 

versus those that have not.343

The Department notes that there may 

be some uncertainties in the data that 

prevent the conclusions of the analysis 

from being applied to a definitive 

transfer estimate. First, phaseouts of the 

payment of subminimum wages were 

implemented gradually in many states 

and in some instances are still ongoing. 

This phased elimination complicates 

the measurement of the timing of the 

effect of disallowing subminimum 

wages because it is unclear how much 

of the impact will occur immediately 

versus what will occur over time as 

current certificates expire. Second, 

multiple states have prohibited the 

payment of subminimum wages to 

individuals with disabilities in recent 

years; thus, state data representing their 

prohibition are not yet fully represented 

in the ACS.344 Third, complete ACS 

data on disability status and other 

variables is not available for the year 

2020 due to data collection issues 

during the COVID–19 pandemic. Lastly, 

the overall population of workers with 

cognitive difficulties in the ACS is not 

a perfect representation of the specific 

population of workers employed under 

section 14(c) certificates.345

The Department conducted an 

analysis comparing the change in labor 

force outcomes for workers with 

disabilities in states that stopped the 

payment of subminimum wages with 

the changes in outcomes for workers 

with disabilities in states that did not. 

Specifically, the Department looked for 

differences in employment status 

(measured by the variable asking if an 

individual worked last week) and labor 

force status (whether an individual was 

in the labor force).346 In the regression 

model, the Department used year fixed 

effects to control for any common 

factors that affected all states equally in 

each year, such as the business cycle or 

the COVID–19 pandemic. The 

Department used state fixed effects to 

control for any unobserved 

characteristics that are specific to each 

State and do not vary over time, such as 

the relative size of the population of 

individuals with disabilities or the 

availability of social services. The 

Department also controlled for 

observable factors that vary by State and 

year and could affect the outcomes of 

interest, such as the labor market 

outcomes for workers with no cognitive 

disabilities, since that could reflect 

overall labor market conditions. 

Despite including year fixed effects to 

account for common yearly shocks, 

analyzing workforce trends by State and 

year highlights a potential pitfall in 

using 2020 data. The differences-indifferences approach assumes that Statespecific trends in the relevant labor 

force measures prior to the change in 

subminimum wage laws are similar 

across all States, known as the ‘‘parallel 

trends’’ assumption. The pandemic 

caused significant disruptions in each 

State’s labor markets, which are 

reflected in the outcomes for that year. 

As a result, the assumption of parallel 

trends is less likely to hold as systemic 

changes such as the pandemic may have 

disproportionately affected different 


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347According to Census documentation, 

‘‘[B]ecause of the underlying quality concerns, the 

Census Bureau urges caution in using the 

experimental estimates as a replacement for 

standard 2020 ACS 1-year estimates. Users should 

evaluate the estimates and alternatives to determine 

if they are suited for their needs.’’ https://

www.census.gov/newsroom/press-releases/2021/ 

experimental-2020-acs-1-year-data.html. 

Specifically, ‘‘the Census Bureau does not 

recommend comparing the 2020 ACS 1-year 

experimental estimates with our standard ACS 

estimates or the decennial census, or comparing the 

2020 1-year PUMS data with standard pre-tabulated 

products or PUMS-based estimates from previous 

years.’’ https://www.census.gov/newsroom/pressreleases/2021/changes-2020-acs-1-year.html. 

348A formal statistical analysis to confirm parallel 

trends in the pre-treatment period would need to 

test the divergence in the outcomes before the 

policy change. However, there are difficulties to 

applying the test in this context. First, subminimum 

wage bans were implemented at different times 

across States, resulting in a staggered treatment 

period. Second, the partial introduction of the 

policy in some States introduces further 

complexity. This makes it challenging to select a 

single year as the benchmark that applies uniformly 

to all States, rendering a formal statistical test 

impractical. 

349The Department notes that, given the nuanced 

and evolving nature of these State laws, the 

classification of these States, laws, and relevant 

enactment dates is complex. The Department 

welcomes comment and data from the public on 

this analysis and the Department’s preliminary 

conclusion that there is no statistical evidence that 

employment or the labor force participation rate of 

individuals with cognitive disabilities differed in 

States that stopped the payment of subminimum 

wages. 

351Oregon Department of Human Services, ‘‘Lane 

v. Brown Settlement Agreement Report,’’ https://

www.oregon.gov/odhs/employment-first/ 

Documents/lane-v-brown-settlement-message-2022- 

06-21.pdf. 

352 Id. 

groups in each State’s labor force. 

Moreover, the ACS was also heavily 

affected in 2020, leading the data to fail 

the Statistical Data Quality Standard 

from the Census Bureau for that year.347

Given these concerns, the 2020 data 

were excluded from the analysis. To 

check the validity of the parallel trend 

assumption, the Department visually 

inspected these States’ trends from 2010 

to 2022, which indicated that the pretreatment trends were largely parallel 

despite variation around each State’s 

average that makes the visual 

interpretation less clear. These findings 

remain consistent when controlling for 

State- and year-fixed effects.348 While it 

is impossible to completely ascertain 

the validity of the parallel trend 

assumption because it relates to a 

counterfactual world where the policy 

change did not occur, this evidence 

suggests that the estimation assumption 

is reasonable in this context. 

The Department performed two 

different analyses, one focusing on the 

States that enacted an immediate 

transition away from the payment of 

subminimum wages, and one including 

states that gradually phased out the 

policy. The Department did not find 

significant differences in the results of 

these two analyses on employment or 

labor force participation. 

The Department’s analysis yields no 

statistical evidence that employment or 

the labor force participation rate of 

individuals with cognitive disabilities 

differed in States that stopped the 

payment of subminimum wages.349 The 

findings of this analysis do not support 

that the changes in this proposed rule 

would lead to statistically detectable 

adverse labor force outcomes for 

workers employed under section 14(c) 

certificates. Due to the uncertainties 

discussed above, the Department has 

not applied the results of this analysis 

to a definitive transfers estimate. 

However, these results can help to 

narrow the range of potential transfer 

effects, suggesting that the lower loss of 

employment estimate of transfers may 

be more likely to be realized than the 

higher loss of employment.350

3. Additional Evidence 

In 2015, in response to a class action 

complaint that was filed on behalf of 

individuals with I/DD, the State of 

Oregon entered into a statewide 

settlement agreement that required, 

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. 

Oregon implemented competitive and 

supported employment strategies, 

ultimately ending the payment of 

subminimum wages to workers with 

disabilities in Oregon. A 2022 report on 

the changes made following the 

settlement agreement reported that in 

2016—the year the settlement was 

reached and approved by the court, 

there were 1,405 people working in 

sheltered workshops in Oregon, and by 

2021, that number had declined to 

zero.351 This report also noted that 

Oregon placed 1,138 individuals from 

the class who had previously worked for 

subminimum wages into CIE.352 This 

data shows that it is possible, with the 

right supports, for large numbers of 

workers with disabilities earning the 

subminimum wage to transition to fullwage employment opportunities. 

Although the evidence comes from just 

one State, the Department believes that 

the results could be scalable, and that it 

further serves to narrow our estimated 

impacts in the direction of more affected 

workers finding employment at the full 

Federal minimum wage. See discussion 

in section VII.B.; Figure 1, Panel A 

(Employment-Population Ratio—With a 

Disability, 16 Years and Over, 2014— 

2024). 

As discussed in section III, legislative, 

policy, and programmatic changes have 

broadly influenced available options for 

workers with disabilities today. Because 

of these changes, and the evidence 

discussed above, the Department 

believes that this proposed rule would 

not result in widespread negative labor 

force outcomes for individuals with 

disabilities. 

4. Other Transfers or Behavior-Change 

Effects 

The Department also considered 

additional impacts that may occur as a 

result of this proposed rule. For 

example, it could be possible for some 

affected workers to see a reduction in 

hours worked. If the certificate holder 

chooses to retain the section 14(c) 

workers and pay them the full Federal 

minimum wage, they may also choose to 

offset increased labor costs by providing 

fewer hours of work for these workers. 

The Department has not estimated a 

change in hours that may result from 

this rule but believes that the change 

could be minimal given that the current 

average number of hours worked by 

workers on section 14(c) certificates is 

very low (as discussed in section VII.B., 

the mean number of hours worked by 

this population is 11.45 hours per 

week.) Nevertheless, the Department 

welcomes comments on the extent to 

which this could occur. 

Following the changes proposed in 

this rule, some workers who were 

previously employed under section 

14(c) certificates could also experience 

a change in eligibility for certain 

entitlement programs, and therefore a 

change in the public benefits that they 

receive. Any change in benefits would 

depend on a number of factors, 

including whether each individual finds 

employment at or above the full 

minimum wage following the phaseout 

of section 14(c) certificates, the number 

of hours they work, and other factors. 

The Department has not quantified this 

change in benefits, because there is no 

data available on all of the benefits 

currently received by workers under 

section 14(c) certificates, and any 

change in benefits depends heavily on 

the situation of each individual. 

However, the Department welcomes 

comments or data to better understand 

this potential transfer. 

Additionally, there may be some 

impacts that go beyond the affected 

workers employed under section 14(c) 

certificates. For example, some 

certificate holders employ support staff 

to assist the workers with disabilities 


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96506 Federal Register / Vol. 89, No. 233 / Wednesday, December 4, 2024 / Proposed Rules 

353Taylor, Joshua et al., ‘‘The Impact of 

Competitive Integrated Employment on Economic, 

Psychological, And Physical Health Outcomes for 

Individuals With Intellectual and Developmental 

Disabilities,’’ Journal of Applied Research in 

Intellectual Disabilities: JARID vol. 35,2 (2022): pp. 

448–459, https://doi.org/10.1111/jar.12974. 

354U.S. Dep’t of Labor, Bureau of Labor Statistics 

Bureau of Labor Statistics, Current Population 

Survey, Table A–6. Employment status of the 

civilian population by sex, age, and disability 

status, not seasonally adjusted, https://www.bls.gov/ 

webapps/legacy/cpsatab6.htm. 

355Mary Wagner, Lynn Newman, Renee Cameto, 

Nicolle Garza, and 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, https://www.nlts2.org/reports/2005_04/nlts2_

report_2005_04_complete.pdf. 

356 Virginia Commonwealth University, 

‘‘Supporting Individuals with Significant 

Disabilities: The Roles of a Job Coach,’’ https://

dors.maryland.gov/crps/Documents/RSM2_0800- 

4.pdf. 

being paid subminimum wages. These 

support staff generally provide job 

coaching, assist the worker with their 

tasks, and may perform portions of the 

job, if necessary. They may also assist in 

communicating on behalf of the 

employee or providing necessary 

training including job-related and soft 

skills. If a certificate holder chooses to 

no longer employ workers with 

disabilities, they may also no longer 

require the services of the support staff, 

potentially leading to a reduction in 

employment for the support staff 

workers. Conversely, if a certificate 

holder chooses to transition by 

providing non-work rehabilitation 

services to individuals with disabilities, 

they may need to increase their support 

staff to help with these activities. Even 

if an employer chooses to transition 

workers with disabilities to full-wage 

employment, they may also choose to 

retain existing support staff, increase 

these staff, or hire other support staff to 

assist workers. 

The Department welcomes comments 

and data on additional impacts that 

could occur following this rule. 

F. Benefits 

As discussed above, the Department 

expects that, following the changes 

proposed in this rule, many current 

workers with disabilities paid 

subminimum wages under a section 

14(c) certificate will transition to fullwage employment opportunities. The 

increased wages could improve the 

financial strength and personal wellbeing of these workers, while also 

enhancing the overall equity and 

inclusion of workers with disabilities in 

the workplace. For example, in a review 

of 17 studies on the impacts of CIE on 

economic, psychological, and physical 

health outcomes for individuals with 

intellectual and developmental 

disabilities, researchers found that 

workers in CIE are paid higher wages 

and have better career prospects than 

individuals in sheltered workshops or 

non-work activities.353 They also found 

a positive relationship between CIE and 

health outcomes such as quality of life, 

self-determination, personal 

independence, locus of control, 

autonomy, and reduced support needs. 

On the other hand, the Department has 

heard from some individuals with 

disabilities and their families about the 

benefits that they have experienced in 

section 14(c) employment. For example, 

some individuals have explained that 

they feel safe in their current jobs, view 

their jobs as providing a secure and 

stable work community, and feel proud 

to earn wages, regardless of the amount 

of those wages. The Department 

welcomes comments from the public, 

including individuals with disabilities, 

their family members, and entities 

employing workers on section 14(c) 

certificates, on the benefits of section 

14(c) employment. Working in concert 

with the broader societal shifts in 

opportunities for workers with 

disabilities, this proposed rule could 

also lead to spillover effects for the 

overall population of individuals with 

disabilities. In 2023, the labor force 

participation rate for persons with a 

disability was 24.2 percent, compared to 

68.1 percent for persons with no 

disability.354 The changes in this 

proposed rule could help reduce this 

gap in labor force participation. If 

individuals with a disability view 

subminimum wage employment as the 

only option for them, they may choose 

to remain out of the workforce. They 

may be more likely to look for a job if 

they know that they would be paid at 

least the full minimum wage. For 

example, the National Longitudinal 

Transition Study-2 (NLTS2) found that 

there was 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 postschool years, 62 percent had a goal to 

work in competitive employment, while 

only 3 percent wished to work in 

‘‘sheltered’’ employment.355 By phasing 

out the issuance of section 14(c) 

certificates and ending subminimum 

wage employment for workers with 

disabilities, this rule could lead to an 

increase in labor force participation 

among individuals with disabilities 

more broadly. 

Businesses may also find it beneficial 

to integrate workers with disabilities 

into their workplace. For example, 

employers working with job coaches can 

identify work solutions that will resolve 

company needs and result in mutually 

beneficial employment relationships for 

employers and employees with 

disabilities. Additional potential 

benefits to employers are expansion of 

their talent pool, creation of more 

inclusive workplaces, and promotion of 

compliance with EEOC law.356 The 

Department also welcomes comments 

providing additional information on the 

impacts of increasing labor force 

participation of people with disabilities. 

As explained throughout this notice 

of proposed rulemaking, the Department 

has proposed to phase out section 14(c) 

certificates because the Department’s 

preliminary conclusion is that such 

certificates do not continue to be 

necessary in order to prevent the 

curtailment of employment 

opportunities for individuals with 

disabilities. The Department also 

predicts, as evidenced in the transfers 

analysis above, that a significant share 

of workers currently employed under 

section 14(c) certificates will be able to 

transition to full-wage employment. The 

Department would welcome additional 

data to quantify the various benefits of 

this proposed rule. 

VIII. Initial Regulatory Flexibility 

Analysis (IRFA) 

The Regulatory Flexibility Act of 1980 

(RFA) as amended by the Small 

Business Regulatory Enforcement 

Fairness Act of 1996 (SBREFA), 

hereafter jointly referred to as the RFA, 

requires that an agency prepare an 

initial regulatory flexibility analysis 

(IRFA) when proposing, and a final 

regulatory flexibility analysis (FRFA) 

when issuing, regulations that will have 

a significant economic impact on a 

substantial number of small entities. 

A. Reasons Why Action by the Agency 

Is Being Considered and Statement of 

Objectives and Legal Basis for the 

Proposed Rule 

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 

whose disabilities impair their earning 


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Federal Register / Vol. 89, No. 233 / Wednesday, December 4, 2024 / Proposed Rules 96507 

357 29 U.S.C. 214(c). 358SBA size standards by NAICS code are 

available at https://www.sba.gov/document/ 

support-table-size-standards. SBA guidance defines 

both small businesses and small non-profit 

organizations as entities that are ‘‘independently 

owned and operated and not dominant in its field, 

with no indication that the size standards for 

businesses are not applicable to organizations.’’ See 

‘‘How to Comply with the Regulatory Flexibility 

Act,’’ https://advocacy.sba.gov/wp-content/ 

uploads/2019/07/How-to-Comply-with-the-RFAWEB.pdf. SBA defines a governmental jurisdiction 

as ‘‘small’’ if it has a population of less than 50,000 

residents. 

359The IRS Tax Exempt Organization Search 

Tool, https://apps.irs.gov/app/eos/, was used to 

obtain revenue from tax-exempt filings, which 

includes all public support. DemographicsNow and 

AtoZdatabases were also used to obtain more recent 

revenue than available on the IRS Tax Exempt 

Organization Search Tool, to collect information on 

the number of employees, and for revenues of forprofit entities. 

or productive capacity at wage rates 

below the Federal minimum wage. That 

statutory provision, however, has 

always imposed an important 

prerequisite: such certificates may only 

be issued to the extent ‘‘necessary to 

prevent curtailment of opportunities for 

employment.’’ 357 Given the profound 

legal and policy developments that have 

vastly expanded employment 

opportunities and rights for individuals 

with disabilities since the Department 

last substantively updated regulations 

governing section 14(c) in 1989, and 

even more so since the Department first 

promulgated regulations upon 

enactment in 1938, the Department 

preliminarily concludes that 

subminimum wages are no longer 

necessary to prevent the curtailment of 

employment opportunities for 

individuals with disabilities. 

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. 

B. Description of the Number of Small 

Entities to Which the Proposed Rule 

Will Apply 

The proposed rule will impact entities 

who currently hold a section 14(c) 

certificate at the time of publication of 

the final rule. While it could, in theory, 

also impact those who were previously 

interested in applying for a section 14(c) 

certificate, the percentage of 

applications that WHD receives from 

initial applicants (i.e., applicants who 

have not previously applied for a 

section 14(c) certificate) is very small. 

From the May 1, 2024, WHD data, only 

3 percent of applicants indicated that 

they were filing an initial application. 

Both the number of total certificate 

holders and initial applicants has been 

trending downward over time and the 

Department expects that the trend 

would continue even in absence of this 

proposed rule. Therefore, the 

Department does not expect the net 

number of affected entities to be higher 

than the number of current certificate 

holders. 

The overwhelming majority of current 

certificate holders are Community 

Rehabilitation Programs (CRPs), 

representing approximately 93 percent 

of current certificate holders as of May 

2024. In the context of section 14(c), 

WHD defines CRPs as ‘‘not-for-profit 

agencies that provide rehabilitation and 

employment for people with 

disabilities.’’ Only a small percentage of 

current certificate holders are privatesector, for-profit businesses, as 

discussed in section VII.B. 

To estimate the impact of eliminating 

section 14(c) certificates on small 

entities, the Department first 

determined whether current section 

14(c) certificate holders were ‘‘small’’ as 

defined by the SBA. SBA broadly 

defines an entity (whether a ‘‘business’’ 

or a nonprofit ‘‘organization’’) as 

‘‘small’’ if it is ‘‘independently owned 

and operated’’ and is ‘‘not dominant in 

its field of operation.’’ More concretely, 

SBA defines an entity as small if its 

employees or annual revenues are less 

than the threshold published in its 

Table of Size Standards.358 Although 

affected entities fall under different 

NAICS, for the vast majority of section 

14(c) certificate holders, the applicable 

size standard is $20 million in revenues. 

To perform this task, the Department 

began with the list of entities currently 

holding a valid section 14(c) certificate, 

then used the entity’s name, IRS 

Employer Identification Number (EIN), 

and address to ascertain the primary 

NAICS code, sales/revenue, and number 

of employees in business databases and 

other online searches.359 The 

Department determined that 636 of 

these firms, which consists of both nonprofit and for-profit entities, are small 

using the SBA size standard based on 

the primary NAICS code of each entity, 

which represent the Department’s best 

estimate given inherent uncertainties in 

publicly available data, especially for 

for-profit organizations. Table 4 

contains the number of and percentage 

of small entities by major industry 

NAICS code. Table 5 contains the 

distribution of these small entities by 

NAICS code and entity type, as reported 

on form WH–226. 

TABLE 4—NUMBER AND PERCENTAGE OF SMALL ENTITIES BY NAICS 

6-digit NAICS NAICS description Number of 

small entities 

Percentage of 

small entity 

certificate 

holders 

(%) 

623220 ....................... Residential Mental Health and Substance Abuse Facilities ............................................ 29 4.6 

624120 ....................... Services for the Elderly and Persons with Disabilities .................................................... 39 6.1 

624190 ....................... Other Individual and Family Services .............................................................................. 68 10.7 

624310 ....................... Vocational Rehabilitation Services .................................................................................. 277 43.6 

813319 ....................... Other Social Advocacy Organizations ............................................................................. 20 3.1 

Other NAICSa ........... .......................................................................................................................................... 203 31.9 

All ....................... .......................................................................................................................................... 636 100 

Note: 

aThe five most frequent NAICS codes within the ‘‘Other NAICS’’ category are 611110 (Elementary and Secondary Schools), 621420 (Outpatient Mental Health and Substance Abuse Centers), 623990 (Other Residential Care Facilities), 621498 (All Other Outpatient Care Centers), 

and 623110 (Nursing Care Facilities (Skilled Nursing Facilities)). Of the 203 entities in the ‘‘Other NAICS’’ category, 66 entities are in one of 

these five NAICS codes. 


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96508 Federal Register / Vol. 89, No. 233 / Wednesday, December 4, 2024 / Proposed Rules 

360For additional discussion of adjustment costs, 

see section VII.C.2. 

361The Department imputed revenue using the 

number of employees for five entities for which 

revenue was not found. 

TABLE 5—DISTRIBUTION OF SMALL ENTITIES, BY ENTITY TYPE AND NAICS CODE

6-Digit NAICS NAICS description Businesses CRPs 

Hospitals or 

residential 

care facilities 

that employ 

patients 

SWEPs Total 

623220 .............................. Residential Mental Health and Substance Abuse Facilities.2 27 0 0 29 

624120 .............................. Services for the Elderly and Persons with Disabilities 0 39 0 0 39 

624190 .............................. Other Individual and Family Services ......................... 2 66 0 0 68 

624310 .............................. Vocational Rehabilitation Services ............................. 8 267 0 1 276 

813319 .............................. Other Social Advocacy Organizations ........................ 0 19 1 0 20 

Other NAICSb .................. ..................................................................................... 15 180 6 2 203 

All a ............................ ..................................................................................... 27 589 7 3 635

Note: ‘‘Entity Type’’ is as designated based on the ‘‘Certificate Type’’ listed in the current section 14(c) certificate holders list, available at 

https://www.dol.gov/agencies/whd/workers-with-disabilities/section-14c/certificate-holders/archive. If an entity lists more than one certificate type, 

and one of those types is Community Rehabilitation Program, the entity is categorized as a CRP. Entities with certificate types of ‘‘Business Establishment’’ only are categorized as Businesses and entities with certificate types of ‘‘Hospital/Patient Worker Facility’’ only are categorized as 

Hospitals or Residential Care Facilities that Employ Patients. aOne entity has a Certificate Type of ‘‘Unknown’’ in NAICS code 624310 (Vocational Rehabilitation Services) and is excluded from this table. 

bThe five most frequent NAICS codes within the ‘‘Other NAICS’’ category are 611110 (Elementary and Secondary Schools), 621420 (Outpatient Mental Health and Substance Abuse Centers), 623990 (Other Residential Care Facilities), 621498 (All Other Outpatient Care Centers), 

and 623110 (Nursing Care Facilities (Skilled Nursing Facilities)). Of the 203 entities in the ‘‘Other NAICS’’ category, 66 entities are in one of 

these five NAICS codes. 

C. Projected Reporting, Recordkeeping, 

and Other Compliance Requirements of 

the Proposed Rule 

There are no reporting or 

recordkeeping requirements associated 

with this proposed rule. Thus, the direct 

costs to affected entities would be rule 

familiarization costs, adjustment costs, 

and potential payroll increases if they 

choose to retain their workers currently 

employed under section 14(c) 

certificates and pay the full minimum 

wage. As discussed in section VII.C.1, 

total rule familiarization costs are 

$92,980 (801 employers × 2 hours × 

$58.04), and the per entity cost is $116 

($58.04 × 2 hours) in Year 1. As 

discussed in section VII.C.2., the 

Department did not provide a definitive 

estimate of adjustment costs, because of 

the uncertainties of how and when each 

certificate holder would respond to the 

rule. However, as an example, if 

certificate holders incurred an average 

of 1 hour of adjustment costs, their per 

entity cost would be $58.04.360

Using aggregate data on workers 

employed under section 14(c) 

certificates as submitted by employers 

on form WH–226A, the Department 

calculated the mean increase in wage 

cost per employee and the total number 

of section 14(c) workers by State. These 

additional wage costs represent the 

maximum transfers from employers to 

workers because they are calculated 

based on each section 14(c) worker 

being paid the applicable minimum 

wage (i.e., the greater of the State or 

Federal minimum wage) and working 

for the same number of hours as they 

currently work. The Department 

calculated total wage cost by 

multiplying the mean increase in wage 

cost per employee in each State by the 

sum of the number of section 14(c) 

workers for all certificate holders in the 

state. The Department added the upper 

bound of wage costs, regulatory 

familiarization cost, and adjustment 

costs to estimate the total cost of the 

rule for small entities. 

The Department calculated the sum of 

the revenue of the small entities holding 

section 14(c) certificates by state using 

the revenues associated with each small 

entity identified in the business 

databases as described in the previous 

section.361 The Department then 

divided total cost to small section 14(c) 

certificate holders by aggregated 

revenues to yield the estimated cost to 

revenue ratios by NAICS code as shown 

in Table 6. Many of these ratios of cost 

to revenue are greater than the generally 

accepted threshold of one percent that 

indicates a significant impact. The 

results presented in this table assume 

that public funding streams to nonprofit 

CRPs remain constant. To the extent 

that public funding streams change as a 

result of implementation of this 

proposal, nonprofit revenues from that 

source will directly increase or 

decrease. 


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362Some examples of certificate holders for 

which the respective number of section 14(c) 

employees greatly exceeds the business database 

listing for total employees are: 182 versus 2, 102 

versus 1, 42 versus 4, and 51 versus 2. Of the 655 

small entities, 66 have data values such that the 

number of section 14(c) workers is at least five 

times greater than the total number of employees 

listed in a business database. The WHD application 

for a section 14(c) certificate requires employers to 

provide data about the workers with disabilities 

employed at each separate work site or location. 

Applicants must include workers corresponding to 

each work site, and therefore, summary data may 

count workers multiple times if that worker works 

for the employer at multiple locations. However, 

these potential duplicates likely do not account for 

the large differences noted. Moreover, as explained 

above in section VII.B.1, the information collected 

from the form WH–226A is submitted by applicants 

and may include inaccuracies, such as instances 

when an employer reports a piece rate instead of 

an hourly wage rate or miscalculates the wage. 

363United States Census Bureau, Statistics of U.S. 

Businesses, https://www.census.gov/programssurveys/susb.html. 

TABLE 6—ESTIMATED RATIOS OF COMPLIANCE COST TO REVENUE FOR SMALL ENTITIES CURRENTLY HOLDING VALID

SECTION 14(c) CERTIFICATES, BY NAICS CODE

Proportion of revenue impacted 

6-Digit NAICSa <1% 1%–2% 2%–3% 3%–4% 4%–5% 5%–10% ≥10% Total 

623220 .......................................... 15 51.7% 4 13.8% 2 6.9% 5 17.2% 1 3.4% 2 6.9% 0 .......... 29 

624120 .......................................... 10 25.6% 4 10.3% 7 17.9% 3 7.7% 2 5.1% 6 15.4% 7 17.9% 39 

624190 .......................................... 13 19.1% 13 19.1% 10 14.7% 5 7.4% 2 2.9% 12 17.6% 13 19.1% 68 

624310 .......................................... 51 18.4% 30 10.8% 28 10.1% 30 10.8% 16 5.8% 45 16.2% 77 27.8% 277 

813319 .......................................... 7 35.0% 1 5.0% 5 25.0% 1 5.0% 1 5.0% 1 5.0% 4 20.0% 20 

Other NAICSb ............................... 68 33.5% 21 10.3% 18 8.9% 14 6.9% 14 6.9% 24 11.8% 44 21.7% 203 

Total ....................................... 164 25.8% 73 11.5% 70 11.0% 58 9.1% 36 5.7% 90 14.2% 145 22.8% 636 

Note: 

a NAICS descriptions are 623220 (Residential Mental Health and Substance Abuse Facilities), 624120 (Services for the Elderly and Persons with 

Disabilities), 624190 (Other Individual and Family Services), 624310 (Vocational Rehabilitation Services), and 813319 (Other Social Advocacy Organizations). bThe five most frequent NAICS codes within the ‘‘Other NAICS’’ category are 611110 (Elementary and Secondary Schools), 621420 (Outpatient 

Mental Health and Substance Abuse Centers), 623990 (Other Residential Care Facilities), 621498 (All Other Outpatient Care Centers), and 

623110 (Nursing Care Facilities (Skilled Nursing Facilities)). Of the 203 entities in the ‘‘Other NAICS’’ category, 66 entities are in one of these five 

NAICS codes. cOf the 636 small entities affected, 598 (or 94%) are Community Rehabilitation Programs (CRPs), the majority of which are non-profit. As discussed in the preamble, many CRPs provide employment and other services, such as rehabilitation and training, and receive public funding. Such 

entities also often pay their operating costs through a mix of public funding and public and private contracts for goods or services. CRPs generally 

operate differently than private, for-profit small businesses and do not focus on earning profit through their operations. For the cost-revenue ratio 

calculations of the 598 CRPs, the Department used their total receipts, which includes grants and donations, instead of just revenue. Therefore, 

the cost-revenue ratios in Table 6 may not accurately reflect the cost impact on their operational continuity. 

TABLE 7—ESTIMATED RATIOS OF COMPLIANCE COST TO REVENUE FOR SMALL ENTITIES CURRENTLY HOLDING VALID

SECTION 14(c) CERTIFICATES, BY ENTITY TYPE

Proportion of revenue impacted 

Entity type <1% 1%–2% 2%–3% 3%–4% 4%–5% 5%–10% ≥10% All 

entities 

Businesses .............................................. 8 29.6% 1 3.7% 4 14.8% 1 3.7% 1 3.7% 4 14.8% 8 29.6% 27 

CRPs ....................................................... 147 24.6% 72 12.0% 66 11.0% 57 9.5% 34 5.7% 86 14.4% 136 22.7% 598 

Hospitals or Residential Care Facilities 

that Employ Patients ........................... 7 100.0% 0 .......... 0 .......... 0 .......... 0 .......... 0 .......... 0 .......... 7 

School Work Experience Program 

(SWEP) ................................................ 2 66.7% 0 .......... 0 .......... 0 .......... 0 .......... 0 .......... 1 33.3% 3 

Total a ............................................... 164 25.8% 73 11.5% 70 11.0% 58 9.1% 35 5.5% 90 14.2% 145 22.8% 635 

Note: ‘‘Entity Type’’ is as designated based on the ‘‘Certificate Type’’ listed in the current section 14(c) certificate holders list, available at https://

www.dol.gov/agencies/whd/workers-with-disabilities/section-14c/certificate-holders/archive. If an entity lists more than one certificate type, and one 

of those types is Community Rehabilitation Program, the entity is categorized as a CRP. Entities with certificate types of ‘‘Business Establishment’’ 

only are categorized as Businesses and entities with certificate types of ‘‘Hospital/Patient Worker’’ only are categorized as Hospitals or Residential 

Care Facilities that Employ Patients. aOne entity has a Certificate Type of ‘‘Unknown’’ with a proportion of revenue impacted of 4%–5% but is excluded from this table. 

The Department has concerns about 

the accuracy of the underlying data used 

to calculate these ratios. For example, 

although the Department was able to 

verify revenue data for most nonprofit 

organizations using Form 990 filings 

with the IRS, other entities’ revenue 

data listed in the business databases 

may be inconsistent with other 

company data. Business database 

listings for other affected section 14(c) 

certificate holders may show reasonable 

values for revenue compared to 

employees but list a number of section 

14(c) workers on their form WH–226A 

that is many times larger than the total 

number of employees listed in the 

business database.362 Finally, some 

entities appear to have multiple 

conflicting records in the same database. 

The Department considered using 

other data sources to estimate the 

impact of this proposed rule on small 

entities. One option is to use revenue 

data from the Statistics of U.S. 

Businesses (SUSB).363 However, to 

estimate revenues from SUSB data 

would require determining the 

appropriate employment size class of 

the entity. As described above, due to 

the prevalence of part-time 

employment, and duplication in 

counting the number of employees 

using section 14(c) certificates, strong 

assumptions would be required to 

assign each entity to an employment 

size class. Furthermore, SUSB only 

publishes revenue data every 5 years 

(the Economic Census years and has not 

yet published revenue data from the 

2022 Economic Census). While it is 


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364For additional discussion of payroll costs, see 

section VII.E. 365 2 U.S.C. 1501 et seq. 

possible to inflate 2017 revenues to 

represent 2022 dollars, that again 

requires a strong assumption given the 

impact of COVID on the economy 

between 2017 and 2022. The 

Department welcomes comments and 

data that could provide a more accurate 

measure of the costs of this proposed 

rule relative to revenues of affected 

small entities. 

As discussed in section VII.E.1., the 

Department estimated payroll costs 364

as an upper bound corresponding to a 

scenario in which all workers on section 

14(c) certificates were to find 

employment at the full minimum wage. 

However, actual costs are likely to be 

somewhat lower, as it is possible not all 

affected subminimum wage workers 

will transition to employment at the full 

minimum wage for the same number of 

hours worked at subminimum wages. 

For those employers that choose to do 

so, their increased payroll costs will 

depend on the number of current 

workers they have employed under 

section 14(c) certificates, and their 

current wages. 

In addition, the Department expects 

costs could be offset by cost savings for 

affected employers. These cost savings 

consist of no longer applying for section 

14(c) certificates and no longer 

participating in the activities required to 

maintain their certificate and determine 

appropriate commensurate 

subminimum wage rates for workers. As 

discussed in section VII.D., the cost 

savings of no longer filling out the 

application forms for a section 14(c) 

certificate could save employers $188.63 

annually, while the cost savings of no 

longer performing time studies of the 

work of a ‘‘standard setter’’ and the 

hourly paid worker with a disability 

could save employers, at least, $116.08 

(2.5 hours × $58.04) annually. 

The Department welcomes comments 

and data that could help refine the 

estimates of payroll costs for affected 

small employers. 

D. Alternatives to the Proposed Rule 

The Department considered various 

regulatory alternatives in the formation 

of this proposed rule. For example, the 

Department also considered proposing 

different phaseout periods. As detailed 

above, the Department proposes that 

WHD will no longer issue new section 

14(c) certificates for initial applications 

postmarked or submitted online on or 

after the effective date of the final rule. 

For employers who seek to renew a 

section 14(c) certificate, the Department 

proposes a phaseout period of 3 years 

from the effective date of the final rule 

during which those employers may 

continue to hold a valid section 14(c) 

certificate (provided that they comply 

with the statutory and regulatory 

requirements for certificate holders) and 

WHD will continue to process renewal 

applications. 

The Department considered proposing 

both a shorter and longer phaseout 

period. However, the Department 

declined to propose a shorter phaseout 

period (or no phaseout period) because 

some individuals with disabilities who 

have been working for employers 

holding a section 14(c) certificate, 

employers who have held a section 

14(c) certificate, and government 

entities may need more time to mitigate 

potential disruptions that might 

otherwise cause curtailment of 

employment opportunities. A shorter 

phaseout period would also be more 

burdensome on small entities. The 

Department also declined to propose a 

longer phaseout period because, in most 

cases, 3 years should be sufficient to 

allow for such transitions, and because 

a longer period might incentivize delay 

of effective transition measures. As 

explained above, States that enacted 

laws containing multi-year phaseouts 

ranged from 2 years to 7 years, with 

many States adopting a 2- or 3-year 

phaseout. The Department has also 

considered proposing an extension 

period but instead asks stakeholders to 

comment on the necessity of any 

extensions and if so, their scope, 

structure, and length. 

E. Relevant Federal Rules Duplicating, 

Overlapping, or Conflicting With the 

Proposed Rule 

The Department is unaware of any 

Federal rules which duplicate, overlap, 

or conflict with the proposed rule. 

IX. Unfunded Mandates Reform Act of 

1995 

The Unfunded Mandates Reform Act 

of 1995 (UMRA),365 requires agencies to 

prepare a written statement for 

rulemaking that includes any Federal 

mandate that may result in increased 

expenditures by State, local, and Tribal 

governments, in the aggregate, or by the 

private sector, of $200 million ($100 

million in 1995 dollars adjusted for 

inflation to 2023) or more in at least one 

year. This rulemaking is not expected to 

exceed that threshold. See section VII. 

for an assessment of anticipated costs, 

transfers, and benefits. 

X. Executive Order 13132, Federalism 

The Department has (1) reviewed this 

proposed rule in accordance with 

Executive Order 13132 regarding 

federalism and (2) determined that it 

does not have federalism implications. 

The proposed rule would not have 

substantial direct effects on the States, 

on the relationship between the 

National Government and the States, or 

on the distribution of power and 

responsibilities among the various 

levels of government. 

XI. Executive Order 13175, Indian 

Tribal Governments 

This proposed rule would not have 

tribal implications under Executive 

Order 13175 that would require a tribal 

summary impact statement. The 

proposed rule would not have 

substantial direct effects on one or more 

Indian tribes, on the relationship 

between the Federal Government and 

Indian tribes, or on the distribution of 

power and responsibilities between the 

Federal Government and Indian tribes. 

List of Subjects in 29 CFR Part 525 

Administrative practice and 

procedure, Equal employment 

opportunity, Individuals with 

disabilities, Minimum Wages, Reporting 

and recordkeeping requirements, 

Vocational rehabilitation, Wages. 

■ 1. The authority citation for part 525 

continues to read as follows: 

Authority: 52 Stat. 1060, as amended (29 

U.S.C. 201–219); Pub. L. 99–486, 100 Stat. 

1229 (29 U.S.C. 214). 

■ 2. Revise § 525.1 to read as follows: 

§ 525.1 Introduction. 

The Fair Labor Standards Act (FLSA) 

authorizes the Secretary of Labor, to the 

extent necessary to prevent curtailment 

of opportunities for employment, to 

issue certificates to employers to pay 

workers whose disabilities impair their 

earning or productive capacity at 

commensurate wage rates below the 

Federal minimum wage rate. In view of 

the legal and policy developments that 

have expanded access to employment 

opportunities for individuals with 

disabilities since Congress first included 

the provision for subminimum wages in 

1938 and since the Department last 

substantively updated its regulations in 

1989, the Secretary has determined that 

subminimum wages are no longer 

necessary to prevent the curtailment of 

opportunities for employment for 

individuals with disabilities, see 

§ 525.9. In light of this determination, 

the Secretary will cease issuing new 

certificates immediately as of 

[EFFECTIVE DATE OF FINAL RULE] 


ddrumheller on DSK120RN23PROD with PROPOSALS2
Federal Register / Vol. 89, No. 233 / Wednesday, December 4, 2024 / Proposed Rules 96511 

and certificates will be available only to 

renewing applicants for a limited 

phaseout period ending [DATE 3 

YEARS AFTER THE EFFECTIVE DATE 

OF FINAL RULE]. See § 525.13. 

■ 3. Revise § 525.2 to read as follows: 

§ 525.2 Purpose and scope. 

The regulations in this part govern the 

issuance and cessation of all certificates 

authorizing the employment of workers 

with disabilities at special minimum 

wages pursuant to section 14(c) of 

FLSA. 

■ 4. Revise § 525.7 to read as follows: 

§ 525.7 Application for certificates. 

(a) As of [EFFECTIVE DATE OF 

FINAL RULE], an application for a 

certificate may be filed only by an 

applicant seeking to renew a certificate 

pursuant to § 525.13. An applicant 

seeking to renew a certificate may do so 

by completing an online application or 

submitting paper application forms 

provided by the Wage and Hour 

Division. For more information and to 

access the online application system or 

download forms, see the Wage and Hour 

Division website at https://

www.dol.gov/agencies/whd/workerswith-disabilities/section-14c/apply, or 

its successor website. 

(b) The employer must provide 

answers to all of the applicable 

questions contained in the application. 

(c) The application must be signed by 

the employer or the employer’s 

authorized representative. 

■ 5. Revise § 525.9 to read as follows: 

§ 525.9 Criteria for employment of workers 

with disabilities under certificates at special 

minimum wage rates. 

(a) As of [EFFECTIVE DATE OF 

FINAL RULE], the Secretary has 

determined that certificates allowing for 

the payment of subminimum wage rates 

for workers with disabilities are no 

longer necessary to prevent the 

curtailment of opportunities for 

employment. 

(b) Pursuant to the regulations set 

forth above related to certificate 

phaseout, in order to be granted a 

renewal certificate authorizing the 

employment of workers with disabilities 

at special minimum wage rates during 

the phaseout period, the employer must 

provide the following written 

assurances concerning such 

employment: 

(1) In the case of individuals paid 

hourly rates, the special minimum wage 

rates will be reviewed by the employer 

at periodic intervals at a minimum of 

once every six months; and, 

(2) Wages for all employees will be 

adjusted by the employer at periodic 

intervals at a minimum of once each 

year to reflect changes in the prevailing 

wages paid to experienced nondisabled 

individuals employed in the locality for 

essentially the same type of work. 

■ 6. Revise § 525.11 to read as follows: 

§ 525.11 Issuance of certificates. 

(a) Upon consideration of the criteria 

cited in these regulations, a special 

certificate may be issued. 

(b) If a special minimum wage 

certificate is issued, a copy will be sent 

to the employer. If denied, the employer 

will be notified in writing and told the 

reasons for the denial, as well as the 

right to petition under § 525.18. 

(c) Certificates will not be issued to 

any employer after [3 YEARS FROM 

THE EFFECTIVE DATE OF FINAL 

RULE]. 

■ 7. Revise § 525.13 to read as follows: 

§ 525.13 Renewal of special minimum 

wage certificates. 

(a) Applications may be filed for 

renewal of special minimum wage 

certificates. 

(b) If an application for renewal has 

been properly and timely filed, an 

existing special minimum wage 

certificate will remain in effect until the 

application for renewal has been 

granted or denied. No certificate will be 

valid as of [DATE 3 YEARS AFTER 

EFFECTIVE DATE OF FINAL RULE] 

regardless of any pending renewal 

application. 

(c) Workers with disabilities may not 

continue to be paid special minimum 

wages after notice that an application 

for renewal has been denied. 

(d) Except in cases of willfulness or 

those in which the public interest 

requires otherwise, before an 

application for renewal is denied facts 

or conduct which may warrant such 

action shall be called to the attention of 

the employer in writing and such 

employer shall be afforded an 

opportunity to demonstrate or achieve 

compliance with all legal requirements. 

■ 8. Revise § 525.18 to read as follows: 

§ 525.18 Review. 

Any person aggrieved by any action of 

the Administrator taken pursuant to this 

part may, within 60 days or such 

additional time as the Administrator 

may allow, file with the Administrator 

a petition for review. Such review, if 

granted, shall be made by the 

Administrator. Other interested persons, 

to the extent it is deemed appropriate, 

may be afforded an opportunity to 

present data and views. Any review 

granted cannot result in section 14(c) 

certificate authority being extended 

beyond [DATE 3 YEARS AFTER THE 

EFFECTIVE DATE OF FINAL RULE]. 

■ 9. Add § 525.25 to read as follows: 

§ 525.25 Severability. 

The provisions of this part are 

separate and severable and operate 

independently from one another. If any 

provision of this part is held to be 

invalid or unenforceable by its terms, or 

as applied to any person or 

circumstance, or stayed pending further 

agency action, the provision must be 

construed so as to continue to give the 

maximum effect to the provision 

permitted by law, unless such holding 

will be one of utter invalidity or 

unenforceability, in which event the 

provision will be severable from this 

part and will not affect the remainder 

thereof. 

Jessica Looman, 

Administrator, Wage and Hour Division. 

[FR Doc. 2024–27880 Filed 12–3–24; 8:45 am] 

BILLING CODE 4510–27–P 


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