United Cerebral Palsy Policy Statement regarding the anticipated phase-out of Section 14(c) of the Fair Labor Standards Act

United Cerebral Palsy and its network of 58 affiliates, including 56 in the United States and two in Canada, are among the thousands of nonprofit service providers across the country preparing for the proposed phase-out of the federal subminimum wage and evaluating how it would impact the employment opportunities and incomes of people with disabilities.

The application of the subminimum wage has been guided by Section 14(c) of the Fair Labor Standards Act since 1938. The Act allows employers that receive a certificate to pay subminimum wages — wages less than the federal minimum wage of $7.25 — to some workers with disabilities. Since that time, many individuals with disabilities have found opportunities to work in jobs that compensated them at wages lower than the official federal minimum wage or the wage they would otherwise earn in a competitive environment.

A movement to eliminate or phase-out this employment pathway has evolved over the last few years, led by state and local governments.  Some local laws prohibit employers from paying subminimum wage (Disability Scoop, January 2020).

One of the main reasons for this opposition is a view that allowing employers to pay subminimum wage discriminates against people with disabilities and is inconsistent with policy goals established under the Americans with Disabilities Act (ADA). Concerns about possible exploitation of low-wage workers also exist; tens of thousands of people with disabilities across the United States earn an average of $3.34 an hour, according to a 2020 report by the U.S. Commission on Civil Rights.

At the same time, others see the important role of the subminimum wage certification program in ensuring opportunities for individuals with disabilities to find employment and training options they otherwise would not have. President Obama recognized this complex and important trade off in a letter to the National Council on Disability in 2012.  He noted that while many advocates argue for the abolition of section 14(c), “the subminimum wage certification program still has an important role among a range of employment options because it provides opportunities to people with disabilities who are unable to obtain competitive employment jobs.” Many disability service providers see value in those programs in helping disabled clients get training and experience that help them get a foothold in the workforce; many people in the disabled community, including family members, view those programs as important to their lives and development.

As part of broader policy efforts to raise the overall minimum wage, the movement to eliminate subminimum wage programs has gained traction in the new Congress and with the Biden Administration. Indeed, President Biden pledged during his campaign in 2020 to enact legislation “eliminating the subminimum wage based on disability.”

United Cerebral Palsy supports policies that help individuals with disabilities have access to employment opportunities and supports that can increase their financial security and help them develop careers.  Given concerns about discrimination and abuse of the 14(c) program and changes in the employment landscape to technology-focused jobs, tele-commuting, and other factors, UCP believes an alternative approach is now needed — and possible with additional support of policymakers. 

We believe the 14(c) program should be phased out gradually to ensure that people with disabilities are able to transition with confidence and financial security into competitive employment or other service options. However, to ensure that individuals do not get left behind, we believe federal and state guidelines and corresponding funding should accompany any legislation in this area to ease the phase-out of 14(c) by nonprofit service providers, including UCP affiliates which continue to rely on the program.

More specifically, UCP recommends the following proposals to eliminate or phase out 14(c) should advance:

  1. Enhanced funding to support individuals affected by the transition. Increased federal funding to support people with disabilities as they transition away from 14(c) certification and pursue competitive integrated employment or other service options.  This approach might include a replication and expansion of federal “Money Follows the Person” grant programs to support people with disabilities currently using 14(c) certificates as they transition to competitive employment. Another option would be the development of a new Medicaid vendor rate or braided funding model to ensure sufficient funding to assist people with disabilities throughout their employment journey.  Funding should also help service providers cover the costs of expanding their capacity and/or make operational changes during transition of 14(c).  Finally, grant programs to large employers in certain targeted areas could help to ease the transition.
  2. Thresholds and triggers for transition. Design of a phase-out approach that is flexible and could be revisited if employment opportunities fall below certain thresholds for people with disabilities.
  3. New policies to ensure protection of health care and other income transfer programs.  For example, people with disabilities must be allowed to keep health insurance coverage by raising the “substantial gainful activity level” cap set by the federal government.  Additionally, people with disabilities must be allowed to easily regain Supplemental Security Income (SSI) and previous federal waiver support if they become unemployed. This could be supported by a thorough review of federal disability benefits and corresponding counseling programs that apply to people with disabilities. A major barrier to employment for people with disabilities include existing Supplemental Security Income (SSI) and Social Security Disability Insurance limitations on earnings. These barriers can have the effect of discouraging full-time or part-time employment because of the risk of losing federal benefits.
  4. Benefit counseling and training. Policymakers should provide benefits counseling to help people with disabilities make informed choices about employment and benefit options.
  5. Analysis of impact on employment. Ongoing analysis of the impact of the phase-out on employment of people with disabilities will be important to the success of this approach. Funding to study the long-term impact on people with disabilities who transition out of 14(c) employment activities should be provided. Additionally, there should be a Government Accountability Office (GAO) to monitor and report on the transition of people from 14(c) during the transition period and upon completion of the program’s phase-out.
  6. Academic research and long-term impact. Support for independent academic research regarding the growing costs of Medicaid affected by people with disabilities transitioning away from 14(c) work activities who would enter day support programs without the ability to earn personal compensation.

Ultimately, the effect of the implementation of a phase-out of 14(c) must ensure that people with disabilities are allowed to transition to competitive employment or other service options with as minimal disruption as possible, while also guaranteeing the protection of civil rights and fair labor standards as they apply to people with disabilities in the workforce, while also ensuring the development funding and support mechanisms that ease the phase out of 14(c) by nonprofit service providers, including UCP affiliates currently using the program.

NOTE: This statement was approved by a unanimous vote of the UCP Board of Trustees on September 13, 2021.