clock menu more-arrow no yes mobile
Demonstrators hold a banner that reads “Disability Rights are Human Rights” during the Non-March For Disabled Women in New York City on January 19, 2019.
Barbara Alper/Getty Images

Filed under:

Why businesses can still get away with paying pennies to employees with disabilities

An 80-year-old law makes it legal to pay people with disabilities less than minimum wage. Will Congress finally act to change that?

As we head into the endgame of the Democratic primary, it may not seem like the remaining candidates have very much in common. Former Vice President Joe Biden has campaigned for a return to the comfort and normalcy of the Obama era, while Sen. Bernie Sanders is asking for a revolution and fundamental changes to how American government functions. And yet there are a handful of issues upon which they agree, not only with each other, but with a surprising number of not-at-all-moderate Republicans. One of those shared issues: Ending below-minimum wage for people with disabilities.

Under a little-known regulation called 14(c) of the Fair Labor Standards Act, businesses can apply for permits to pay disabled employees well below the federal minimum wage of $7.25 an hour. That amount can dip down to mere pennies in some cases. In one particularly galling story from a 2012 report from the National Council on Disability, an Ohio woman who had promised to take her family out to dinner with her first paycheck was sad and surprised to find out she had only earned 38 cents for the entire pay period.

Over the past decade, though, there has been a quiet battle raging to end the practice. Both Sanders and Biden have pledged to do away with below-minimum wage for people with disabilities. And even under the Trump administration and in some red states, the fight to end subminimum wage, as it’s called in policy terms, has not been deterred.

Last year, Texas banned state contracts with organizations that pay less than the federal minimum wage. Meanwhile, one of the biggest advocates for ending subminimum wage is Rep. Cathy McMorris Rodgers, previously the highest-ranking Republican woman in the House. McMorris Rodgers is also one of the most reliable votes for President Trump’s agenda. She has supported Trump’s tax cuts, consistently gets an A rating from the NRA, and recently appeared on a podcast put out by the Heritage Foundation to promote a new restriction on abortion. She is also a cosponsor, along with Democratic Rep. Alexandria Ocasio-Cortez, on the latest legislation to stop this exception to the minimum wage.

Part of how McMorris Rodgers and Ocasio-Cortez ended up on the same side of an issue: Disability is not constrained by concerns like class, race, religion, or any of the other demographic divisions that often form political opinion. Anyone can become disabled. Anyone can have a disabled child. McMorris Rodgers’s son Cole has Down syndrome. In 2017, McMorris Rodgers told Roll Call, “You want to do everything you can so your child has every tool to succeed.”

The history of subminimum wages

In 1937, President Franklin Delano Roosevelt first called for the enactment of a federal minimum wage, resulting in the Fair Labor Standards Act of 1938. During the hearings for the legislation, Labor Secretary Frances Perkins asked for a subminimum wage for people she called “substandard workers,” who she defined as “persons who by reason of illness or age or something else are not up to normal production.” It soon became clear that “substandard workers” and “or something else” would be interpreted in the worst possible ways. Some in Congress argued that people in the Southern United States should be paid less than minimum wage on account of being “slower.” Others argued that black workers were intrinsically “substandard,” according to a report from the Congressional Research Service.

Subminimum wage for disabled people, unlike these other recommendations, was uncontroversial. Over the years, disabled people have remained one of the few groups to be given subminimum wage.

In 1938, Labor Secretary Frances Perkins asked for a subminimum wage for “substandard workers”, which came to be interpreted in the worst possible ways.
London Express/Getty Images

Subminimum wage for some specific categories of workers, like prisoners, agricultural, and tipped workers, was designed with racial bias in mind. Restaurants and rail operators embraced tipping because it allowed them to save money by not paying newly freed slaves.

However, these laws do not explicitly single out people of color as a class for subminimum wage. Julie Christensen, the policy and advocacy director for the Association of People Supporting Employment First, said to this day, disabled people remain the only group of people who can be paid below minimum wage based on an indelible trait. “Disability is the only exemption based on class of citizen,” she told Vox.

Additionally, unlike subminimum wage for agricultural and tipped workers, there is no floor for how little a disabled person can be paid. Instead, people are paid based on how productive they are, or rate per piece. The rate is set as a percentage of a non-disabled person’s productivity.

So, if a non-disabled person makes 100 widgets an hour at $7.25 an hour and a disabled person makes 20 widgets an hour, that disabled person receives $1.45 an hour. Additionally, if productivity is down for reasons unrelated to a person’s disability, like poor management or short stock, the person still receives their wage based on rate per piece. So their wage may be extremely low for arbitrary reasons beyond the person’s physical capacity or control. (Meanwhile, non-disabled people are not always at peak productivity, and it is not legal or acceptable to pay them less when they have an off day.)

According to Christensen, subminimum wage for disabled people wasn’t nefarious by design. It was originally intended to serve as a transition for the large number of disabled soldiers returning from the world wars. Eventually, people were supposed to be able to work themselves up to full productivity before graduating out of the sheltered workshop — a segregated, disabled-only workplace that is supposed to double as job training for disabled people

However, instead of their original intended use, subminimum wage and sheltered workshops have become permanent for many disabled workers, especially those with intellectual disabilities. Despite being classified as “vocational rehabilitation,” few ever graduate to the mainstream working world. According to a 2001 audit from the Government Accountability Office, only 5 percent of sheltered workshop employees ever transition to outside jobs with normal pay.

In addition to simple lack of opportunity, there are numerous financial incentives to keep people employed in subminimum wage for the rest of their working lives. Ross Ryan, an Oregon man with an intellectual disability, stayed at a sheltered workshop for 22 years until a class action lawsuit shut it down. “I was not given choices growing up, and this led to me feeling trapped in a sheltered workshop for most of my adult life.”

Social service providers for disabled people were, from the beginning, the largest industry represented in 14(c). This meant that they had a dual role as people who were supposed to be providing some level of care and support to disabled people, as well as being the bosses of disabled people.

Due to disability, their workers were often extremely poor and were ignored by organized labor. This created a conflict of interest that persists to this day. Large nonprofits like Goodwill can provide cheaper clothes in their thrift stores, and organizations like SourceAmerica are able to make a bigger profit margin and deliver goods and services through lucrative government contracts for a fraction of the cost, because they can legally pay their labor force pennies an hour.

The long fight against subminimum wages

The first challenge to subminimum wages came in the 1960s during an explosion of the expansion of civil rights for many marginalized groups in America. The National Federation of the Blind led the charge.

Sen. Wayne Morse, a Democrat from Oregon, proposed bringing the “moderately disabled” up to full minimum wage during a three-year transition period and that wages for the “severely disabled” be at least half of the federal minimum wage. Employers of disabled people being paid subminimum wage, like Goodwill, called it “unrealistic” and “a drain on the economy” during Senate hearings. They also claimed that the change would deprive the “severely disabled” of the opportunity to work. These are the same criticisms leveled by supporters of subminimum wage decades later.

More challenges came soon after. Since the 1970s, there have been several attempts to alter or end subminimum wage. All of them have gone nowhere.

During one 1980 hearing before the House Subcommittee on Labor Standards, Jerry Daugherty of the National Industries for the Severely Handicapped claimed, “more important than wages to the disabled, is the opportunity to work.”

He and others representing subminimum-wage nonprofits and businesses argued that disabled people did not need real payment because they were supported by Social Security and other government benefits instead. His argument was apparently convincing, and subminimum wage continued more or less unchanged.

Sen. Wayne Morse (D-OR) proposed increasing the minimum wage for disabled workers in the 1960s. Employers called the proposal “unrealistic.”
Bettmann Archive/Getty Images

There have, however, been some advances. In the late ’60s, the Self-Advocacy Movement — the first political rights organization by and for people with intellectual disabilities — formed, and by 1974 the movement had spread to the United States. More and more people with intellectual disabilities were being moved out of large state institutions and into everyday society as deinstitutionalization ramped up. Faced with freedom, some people seized the opportunity to advocate for themselves and the rights of people like them.

Then, in 1988, the Association of People Supporting Employment First was formed using newly created federal grants from the US Department of Education. Forty states received grants to help people find and maintain ordinary jobs in the community, rather than in traditional subminimum wage sheltered workshops.

But it wasn’t until 1990 that the crowning achievement of disability civil rights policy was passed. The Americans with Disabilities Act included provisions intended to end discrimination against hiring disabled people and to legally require accommodations like ramps and screen readers. Unfortunately, it has had seemingly little impact in terms of improving the unemployment rate for disabled people.

However, what the ADA did do was cement disability rights as a bipartisan issue. The ADA and ensuing amendments have been championed by Democrats and Republicans alike. While some major aspects of disability policy, like Medicaid, have become extremely politically charged, much disability policy is still the purview of both parties.

In 2002, Vermont became the first state to abolish subminimum wage. In addition to being first, they’ve been one of the most successful. Not only is there no longer subminimum wage, but they also have the highest rate of employment and the highest median annual income for people with intellectual and developmental disabilities in the country.

Ari Ne’eman, a former Obama appointee to the National Council on Disability, told Vox that Vermont is considered by many experts to be a model for disabled employment. Ne’eman was especially struck by the shift in sentiment. “Years later, many of the same people who had opposed workshop closure had come to see it as a blessing and as the beginning of greater opportunities for their loved ones,” he said.

The number of subminimum wage workers are dwindling. But where are they going?

The movement against subminimum wage has been picking up steam slowly but surely since Vermont made the first leap. In the past five years alone, there’s been more than a 56 percent drop in the number of disabled people being paid less than minimum wage for their work.

Part of the decrease is simply a result of more and more states banning subminimum wage for disabled people, or at least significantly limiting the practice. From Alaska to Texas, 21 states already have some limit on the books to subminimum wage for disabled people. In the 2020 legislative session alone, nine more states are set to address the issue.

What is unclear, however, is where those workers are going instead. The unemployment rate for disabled people has remained static since the Americans with Disabilities Act passed in 1990. Not everyone who leaves a sheltered workshop automatically gets a mainstream job. So how does 100,000 people leaving sheltered workshops not impact the unemployment rate?

The answer is that the basic unemployment rate is not actually an estimate of the number of people who are or aren’t working. That measure is the number of people who are actively looking for work and who have previously been employed for at least six months. People in sheltered workshops being paid subminimum wage are counted as employed. But people who have simply given up looking for work after leaving the sheltered workshop or who have never worked in the first place don’t exist in unemployment calculations. They seemingly disappear.

Some research hints that more people are entering adult day care programs instead of sheltered workshops. Whether that’s an improvement is disputed, even within the movement to end subminimum wage.

Julie Christensen feels strongly that it is not. “From APSE’s perspective, we don’t want people ending up in [adult day care] programs,” she said. It isn’t enough just to end subminimum wage. Real victory for the disability community will mean increasing the number of disabled people in the mainstream workforce.

“Unemployment is going to fluctuate with the economy. That’s just life,” Christensen said. “We want to close the employment gap. We want people with disabilities to be working at the same rate as people without disabilities.”

Importantly, the level of disability a person has is not necessarily related to whether that person can get and maintain a mainstream job. Bill Stumpf’s son, Kyle, who has Down syndrome and does not speak, has been successfully employed at a Papa John’s in Dubuque, Iowa, for five years, after leaving a sheltered workshop. Stumpf said that initially, like many parents, he had been afraid of what would happen to Kyle if the sheltered workshop closed. “Change is hard,” he said. But Stumpf said that Kyle loves his new job. “You can see it in his face,” Stumpf said. “He basically runs to the car when it’s time to go to work.”

For Shawn Fulton, who said he prefers not to be referred to by his disability — “I’m just Shawn” — the turning point was getting involved in the Self-Advocacy Movement. He had previously been employed in a sheltered workshop for 25 years, where he was paid half a cent per piece to grind bits of metal. He still doesn’t know what the bits of metal were used for.

“I started learning about how I can get out and work,” he said. “I owe it all to self-advocacy.” He now works as an education and training coordinator at the Arc of Indiana, teaching other people with intellectual disabilities how to better advocate for what they want in life. Shawn called working for the Arc of Indiana “the greatest thing that ever happened to [him].”

The fate of the subminimum wage lies with Congress

There are currently two bills in Congress that address subminimum wage. The first, the Raise the Wage Act, pledges to raise minimum wage for all workers, including those with disabilities, to $15 an hour. It passed the Democratic House, and senators including presidential candidate Bernie Sanders have cosponsored it, but the bill seems unlikely to move in the Senate. Christensen praised the inclusion of disabled people in the bill, but “most people don’t even realize [ending the subminimum wage for people with disabilities] is in there.” She said it also does not build the capacity needed to get disabled people into the mainstream workforce.

Instead, Christensen is enthusiastic about the Transformation to Competitive Employment Act, which would provide for a phase-out period and build capacity to make sure disabled people currently working for subminimum wage don’t fall through the cracks. “How do we make such a significant shift and simultaneously do the least harm? There aren’t enough direct support professionals, there aren’t enough job coaches. If we woke up tomorrow and everyone in a 14(c) setting needed a job coach, that wouldn’t exist,” she said.

Rep. Alexandria Ocasio-Cortez works at a bar in Queens, New York, on May 31, 2019, to raise awareness for the One Fair Wage campaign, which calls to raise the federal minimum wage for tipped workers to a full minimum wage.
Drew Angerer/Getty Images

The Transformation to Competitive Employment Act would address these problems. With the House bill cosponsored by Reps. McMorris Rodgers and Ocasio-Cortez, it is considerably more likely to pass than the Raise the Wage Act, with broad, bipartisan support.

A fair wage for disabled people is “much more than just a paycheck,” McMorris Rodgers told Vox. “It’s a foundation for a better life.”

So far, however, the Senate version of the bill has not been cosponsored by any of the senators currently or previously running for president — Bernie Sanders and Elizabeth Warren included — except Kamala Harris.

Biden, though, has endorsed the bill. He also answered the American Association of People with Disabilities questionnaire in early March, which gives a small glimpse into what a Biden administration’s disability policy might look like, since he still hasn’t released a comprehensive disability plan. (In contrast, Sanders and former presidential candidate Pete Buttigieg submitted theirs last year and both put out detailed disability plans.) While most of Biden’s answers seem focused on restoring Obama-era policies, subminimum wage is one significant area where Biden is willing to take a step forward.

Meanwhile, Sanders’s campaign told Vox that in addition to supporting legislative solutions like the Raise the Wage Act, Sanders would be open to exploring the use of executive power to end subminimum wages. He could, theoretically, tell the Department of Labor to stop issuing and renewing subminimum wage certificates. This would force a phase-out period and end subminimum wages for disabled people. The use of executive power isn’t totally unprecedented — Vermont and Maine simply declined to renew certificates for subminimum wage as part of their strategies to abolish it.

While Biden and Sanders are in agreement about curbing subminimum wages, their wildly different approaches are an illuminating look into how each might choose to govern. While Sanders is willing to explore radical and nontraditional avenues to get the job done, Biden is interested in consensus-driven bipartisan legislation — as rare as that is these days. In the coming weeks, it will become clearer who will lead the Democratic Party in the election, but one way or another, the subminimum wage will be on the agenda.

Sara Luterman is a Washington, DC-based freelance journalist and commentator. She writes about disability politics, research, and culture. Her work has appeared in the Washington Post, Slate, the New York Times, and Undark Magazine, among other outlets. Follow her on Twitter.


The conspiracy theories about Kate Middleton’s disappearance, explained


Fetal personhood laws, explained

Supreme Court

The courts were never going to save America from Donald Trump

View all stories in Politics

Sign up for the newsletter Today, Explained

Understand the world with a daily explainer plus the most compelling stories of the day.