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Workers With Disabilities Are Making Cents Per Hour — and It’s Legal

Under a 1938 labor law, people with disabilities are paying the economic price while major corporations get rich.

A woman repackages plastic sprayers at a sheltered workshop for adults with disabilities. Under a 1938 labor law, people with disabilities are paying the economic price while major corporations get rich.

Imagine making cents on the dollar to toil in a warehouse, separated from the broader society, while repeatedly piecing together widgets or engaging in manual labor for some multinational corporation with which you’ve never interacted. For many Americans, the concept of making nickels and dimes for your labor in the richest nation in human history is incomprehensible. But for the tens of thousands of Americans making far less than minimum wage due to their disabilities, it is an all too familiar reality.

In 1938 the Fair Labor Standards Act (FLSA), a monumental piece of legislation, was ratified and signed into law. Earning scorn from the business community and elitist politicians alike, the law created the right to a minimum wage, required overtime pay for some workers, and curtailed child labor. Yet, despite the law’s worker-conscious stipulations, it contains an antiquated provision that is being used by business executives today to pay subminimum wages to workers with disabilities.

Section 214(c) of the FLSA, which is known in disability policy circles as 14(c), allows employers that hire people with disabilities to pay their workers a subminimum wage. Section 214(c) of the FLSA states that workers “whose earning or productive capacity is impaired by age, physical or mental deficiency, or injury” can be paid based on their “productivity” or on the “quality and quantity” of their labor. The underlying assumption is that workers with disabilities are less valuable than workers without disabilities and should thus be paid based on their productivity to incentivize employers to hire them.

Originally, 14(c) was intended to reduce the barriers to employment for people with disabilities, but over time employers have taken advantage of this provision. It certainly has not yielded equality for people with disabilities. Although some advocates say 14(c) advances employment outcomes, people with disabilities are disproportionately underemployed, unemployed or forced to live in poverty compared to the rates of the general population.

A Pipeline for Cheap Labor

Currently, there are over 1,400 firms holding 14(c) certificates in the US, collectively employing over 320,000 workers with disabilities. Certificate holders range from small operations with a sole employee working under 14(c) to large-scale operations with several hundred workers, and in a few cases, over a thousand. 14(c) certificate holders are known as Community Rehabilitation Programs, or more commonly, sheltered workshops. These organizations seek and receive contracts from large corporations to generate products and services that fund their operations.

Sheltered workshops also receive government funding through the AbilityOne Program, a program used to provide federal contracts for people with disabilities, while also receiving reimbursements from the Centers for Medicare and Medicaid Services (CMS). Almost half of 14(c) certificate holders participate in the AbilityOne Program. In other words, while sheltered workshops pay workers as little as a dollar an hour, taxpayer dollars through CMS reimbursements and AbilityOne government contracts are funding their operations.

At face value these organizations seem like a harmless force in American communities, but they are exploiting many vulnerable people. Many sheltered workshops’ workers make extraordinarily less than the minimum wage, sometimes even as low as 36 cents an hour. While their workers are compensated at sweatshop rates, sheltered workshop executives are often compensated to the tune of hundreds of thousands of dollars a year. PRIDE Industries, a Sacramento-based sheltered workshop, pays its CEO a salary of $792,132, while 906 workers are employed at subminimum wages.

14(c) is being used as a pipeline for cheap labor under the guise of “job creation” for an underserved population. Certificate holders act as a vessel for larger corporations to obtain inexpensive labor and form a symbiotic relationship based on revenue generation and exploitation masquerading as philanthropy. Unjustly, in addition to receiving little compensation, workers with disabilities are often held back from receiving promotions or placement at jobs with competitive wages in integrated settings.

Subminimum wages not only unjustly impact workers with disabilities — they also have an effect on total wages for all workers in a labor market. When labor’s costs are driven down, the wages of all workers are decreased and businesses yield higher profits. 14(c) is not only inequitable for the workers with disabilities, but also for the total labor force in a given market. Workers who are not categorized as having disabilities have to compete against labor that is almost costless for a corporation. Subminimum wages impact all workers’ wages.

Large multinational corporations like Firestone, Home Depot, Kohler, Kroger, Mary Kay, Raytheon, Time Warner Cable, Walmart and Honda, are heavily invested in 14(c). They are able to secure contracts where labor is only paid a dollar an hour. People with disabilities pay the economic price so corporations and executives can continue amassing wealth.

Sheltered workshops that hold 14(c) certificates are segregated in nature. At a glance, businesses holding 14(c) certificates may seem philanthropic, but people with disabilities, especially those with intellectual and developmental disabilities, have historically been segregated from the rest of society.

The use of subminimum wages is inherently inequitable and contradicts the very mission of the FLSA. The FLSA’s purpose was to promote worker protections and guarantee a minimum standard for labor. Unfortunately, workers with disabilities are excluded from that guarantee.

14(c) is paternalistic and does not account for the skills and contributions of workers with disabilities. Social and scientific understandings of disability have certainly progressed since the inception of 14(c) in 1938. The disability service system in America is not only outdated, but also is skewed toward profit-generation, rather than community inclusion and fair compensation.

Proponents of the subminimum wage try to frame it as a civil rights issue and claim that the provision offers more choices to people with disabilities. Yet for many workers with disabilities, working for subminimum wages is not a choice. Because for-profit corporations only see people with disabilities as profitable when working for subminimum wages, 14(c) employment is often their only option for work.

The champions of the subminimum wage also argue that sheltered workshops and their executives do not have enough funds to pay their workers a decent wage and remain competitive, yet the sheltered workshop industry employs dozens of D.C. and state lobbyists to peddle influence in favor of this very issue.

Subminimum wage advocates also argue that 14(c) is used as a training program to get people with disabilities into the workforce. Yet a National Council on Disability report, citing an audit by the Government Accountability Office, found that less than 5 percent of 14(c) workers ever transitioned to a job found in the broader community or earned competitive wages.

No other classification or grouping of labor in the US is paid based on employees’ productivity or at a wage significantly lower than the minimum wage. Subminimum wages are a violation of the civil rights of people with disabilities. They amount to government-endorsed and corporate-sponsored discrimination.

Challenging Workplace Exploitation of People With Disabilities

The FLSA has been amended over 20 times since its ratification in the late 1930s, and yet 14(c) remains unaltered. Is a change coming? It’s possible: Advocates and organizers with disabilities are leading the way in challenging these harmful practices. Disability rights organizations and self-advocates (activists with disabilities) are pursuing litigation against corporations that are profiting off of overtly exploited labor. Cutting off the pipeline of cheap labor that allows multinationals to reap exuberant profits is an effective strategy and has the apologists for subminimum wages on their heels.

However, advocates and disability rights organizations should not be solely responsible for confronting these unjust labor practices. An enormous responsibility also lies with legislators, regulators, and the public. Policymakers must ensure that people with disabilities are not segregated and economically marginalized, while also ensuring disability services are appropriately funded. To promote fair wages and community integration, lawmakers must work to eliminate 14(c).

Solutions that reduce economic disparities and eliminate exploitation and segregation for workers with disabilities are long overdue. The public and members of Congress must support the Raise the Wage Act and the Transition to Competitive Employment Act, both of which would phase out subminimum wages over time and are meaningful steps in the moral direction. Policymakers and the public must also be aware that the euphemistically titled Workplace Choice and Flexibility for Individuals with Disabilities Act, or H.R. 5658, would promote state agency referrals to many 14(c) certificate holders that participate in the AbilityOne Program and continue to place people with disabilities in organizations that use 14(c) certificates. The holders of 14(c) certificates should not be allowed to receive government contracts while they pay out subminimum wages. H.R. 5658 has not yet been reintroduced in this Congress, but it is expected to make a return later this congressional session.

Another responsibility lies with employers: 14(c) certificate holders must discontinue the practice of subminimum wages. A vast majority of these organizations, funded by wealthy donors, taxpayers, and corporate contracts, certainly possess the funds to pay their workers with disabilities a respectable wage. For those that don’t, CEOs and executive staff should take a pay cut to promote the fulfillment and dignity for all of their workers, especially those with disabilities. The large for-profit corporations that fund 14(c) contracts must also discontinue the practice and work to include people with disabilities at fair wages and full employment.

The era of certificate holders and for-profit corporations benefiting from federally endorsed discrimination and poverty wages is rightfully coming to a head, and the capabilities of workers with disabilities are being realized. All working people must strive for a system that fully integrates workers with disabilities and workers without disabilities, with both receiving more equitable wages and benefits.

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