Subminimum or subpar? A note in favor of seattle U. L. Rev



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SUBMINIMUM OR SUBPAR? A NOTE IN FAVOR OF..., 37 Seattle U. L. Rev....














37 Seattle U. L. Rev. 1097



Seattle University Law Review

Spring, 2014

Note

SUBMINIMUM OR SUBPAR? A NOTE IN FAVOR OF REPEALING THE FAIR LABOR STANDARDS ACT’S SUBMINIMUM WAGE PROGRAM



Melia Preedya1

Copyright © 2014 by the Seattle University Law Review; Melia Preedy

“Let’s tie the minimum wage to the cost of living, so that it finally becomes a wage you can live on.”

- President Barack Obama.1

 

 

“Congress acknowledged that society’s accumulated myths and fears about disability and disease are as handicapping as are the physical limitations that flow from actual impairment.”



- William J. Brennan, Jr.2

 

 


 

I. INTRODUCTION

The term “employment” implies so much more than the mere holding of a job for wage compensation. Employment can be a vehicle for fulfilling basic needs while also allowing a person to do what she most desires to accomplish. There are feelings of fulfillment and pride that can only be experienced from finishing an honest day’s work. However, for too long these feelings of satisfaction from earning a living wage have *1098 been outside the reach of certain persons with disabilities. Despite the strides made in achieving civil rights3 and combating the low expectations of persons with disabilities in regards to physical mobility, intellectual ability, and educational capacity, stereotypes in the field of employment continue to persist. Since 1938, Section 14(c) of the Fair Labor Standards Act (FLSA) has discriminated against people with disabilities by authorizing employers to pay less than the federal minimum wage to certain employees with disabilities.4

 

In 2011, Representatives Cliff Stearns (R-Fla.)5 and Timothy Bishop (D-N.Y.)6 proposed legislation intended to address the rights disparity and ensure workers with disabilities earn a fair wage.7 That legislation, the Fair Wages for Workers with Disabilities Act of 2011 (House Resolution 3086),8 was intended to phase out Section 14(c)’s productivity-based subminimum wage program; however, the proposed bill--opposed by employers of workers with disabilities9--died on the house floor during the 112th Congress.10 Representative Gregg Harper (R-Ms.)11 recently proposed similar legislation during the 113th Congress.12 The Fair Wages for Workers with Disabilities Act of 2013 (House Resolution 831) was referred to the House Committee on Education and the Workforce, which has no currently scheduled action on the bill.13


 

*1099 This Note argues for the repeal of Section 14(c) of the FLSA, which continues to perpetuate a system allowing employers to pay less than minimum, or “subminimum,” wage to certain employees with disabilities. The Section 14(c) program is a relic of policy leftover from the 1930s and does not help the disabled community, but rather rests on the presumption that persons with disabilities never progress. In light of recent House Resolution 3086, Congress went against the current trend of encouraging maximum independence and equal opportunities for persons with disabilities and instead upheld the subminimum wage program; however, Congress now has another opportunity to repeal Section 14(c) with House Resolution 831.

 

Part II of this Note examines the historical development of disability rights and the circumstances giving rise to House Resolutions 3086 and 831. Part III discusses the pros and cons of Section 14(c)’s subminimum wage program--using Washington State as a model, this Note argues for the repeal of Section 14(c) of the FLSA. Part IV suggests alternatives to the Section 14(c) program. Part V briefly concludes.14


 

II. HISTORICAL DEVELOPMENT OF DISABILITY RIGHTS AND WAGE LEGISLATION

Although discriminatory in its application, the Fair Labor Standards Act’s Section 14(c) subminimum wage certificate program seems to have largely escaped the critical attention of disability rights activists despite its embodiment of the very stereotypical assumptions targeted by the Americans with Disabilities Act (ADA).15 This may be changing, however, as activists and the disabled community come to recognize a reality articulated by Samuel Bagenstos:16 “In the post-ADA world, Section *1100 14(c) is an anomaly in the law, and it is one that should be ed.”17 This reality gives rise to the dire need for a systematic restructuring of employment opportunities for individuals with disabilities. Regardless of the approach chosen, one thing is certain--Section 14(c) of the FLSA must be repealed. To understand the current landscape of disability rights may require some understanding of how we arrived at this point. This Part thus begins by discussing the historical development of disability rights. For the convenience of readers new to the Section 14(c) program, this Part then outlines the basic structure and tenets of Section 14(c), and the rise of sheltered workshops that are the holders of over 94% of Section 14(c) subminimum wage certificates. Lastly, this Part considers recent statutory challenges to the subminimum wage certificate program.

 

A. Development of Disability Rights



At the close of the nineteenth century, Washington’s mission for the disabled was misguided but well-intentioned. Like most states, Washington’s modest goals for the disabled community included furnishing bodily care, medical attention, and instruction with training in a manner of cleanliness.18 During the early twentieth century, these goals fell to the wayside as the American eugenics movement gained support, focusing on the compulsory sterilization of the poor, disabled, and the “immoral” in order to “prevent degeneracy of race, pauperism, insanity and crime by permitted feebleminded to procreate their kind.”19 On March 22, 1909, Washington became the second state in the United States to pass a law allowing for the forced sterilization of people with disabilities and other citizens in the name of improving society.20 Such pieces of legislation were buttressed by the United States Supreme *1101 Court’s 1927 decision in Buck v. Bell,21 in which the Court upheld a statute permitting forced sterilization of the mentally retarded for the protection and health of the state, famously writing that “three generations of imbeciles are enough.”22

 

During the first half of the twentieth century, institutionalization of disabled people rose in popularity;23 however, during the 1960s, there was strong pushback to keep individuals with disabilities in community settings or return them home as soon as possible.24 With origins in the U.S. civil rights movement, the disability rights movement focused on the right of self-determination and on an individual’s ability to live independently.25 Deinstitutionalization was largely popularized after the media exposed Willowbrook State School, a state-supported institution for children with intellectual disabilities in New York. Geraldo Rivera’s 1972 exposé brought the crowded, filthy living conditions and the neglect of institutionalized residents into America’s living room.26 This triggered a number of lawsuits against state-run institutions and, for the most part, institutionalization policies dropped in favor of integrating the developmentally disabled into the community.27


 

Around this same time, Congress recognized the serious and pervasive problems of isolation and segregation of individuals with disabilities. To address these problems, Congress enacted civil rights laws designed to protect persons with disabilities from discrimination for reasons related to their disabilities. Thus, Section 504 of the Rehabilitation Act of 197328 (Section 504) was enacted to protect the rights of individuals with disabilities enrolled in programs and activities (including schools) receiving federal funds. Widely recognized as the first civil *1102 rights statute for persons with disabilities, Section 504 provides, “No otherwise qualified individual with a disability in the United States ... shall, solely by reason of her or his disability, be excluded from the participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance ....”29

 

The ADA’s30 Title II language, as it applies to public entities, is identical.31 The ADA also broadened its application to agencies and businesses, which must comply with the non-discrimination and accessibility provisions of the law under Title III of the ADA.32 As such, the ADA affords similar protections against discrimination to Americans with disabilities33 similar to the protections the Civil Rights Act of 1964 affords to African-Americans.


 

By providing broad protections in employment, transportation, public accommodations, telecommunications, and the public services available for people with disabilities, the passage of the ADA was a major step in correcting past wrongs experienced by people with disabilities. Landmark decisions like Olmstead v. L.C.34 have been used to interpret the scope of the ADA. Hailed as the Brown v. Board of Education35 of the disabled rights movement, the U.S. Supreme Court’s decision in Olmstead holds that the unjustified isolation and segregation of the disabled, including persons with developmental disabilities, constitutes a form of discrimination.36

 

Essentially, Olmstead reaffirms the ADA’s requirement that people with disabilities have a right to receive services in the most integrated setting appropriate to them.37 The Court reasoned that public entities are required to provide community-based services to persons with disabilities when (a) the services are appropriate; (b) the affected persons do not oppose community-based treatment; and (c) the services can be reasonably accommodated taking into account the resources available to the entity *1103 and the needs of others who are receiving disability services from the entity.38 The Supreme Court explained that this holding reflects two evident judgments.39 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.”40 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.”41 In making these findings, the Court complied with the ADA’s integration mandate, requiring public entities to reasonably modify their policies, procedures, or practices in order to avoid discrimination.42


 

In the years since the Olmstead decision, the ADA’s integration mandate has been the subject of substantial litigation.43 While individuals with disabilities have made significant progress in expanding rights related to education and housing, employment continues to be a battleground where there is significant room for progress. People with disabilities are regularly denied freedom of choice, or in other words, “To be denied the right to choose how to lead one’s life is to deny a person’s right as a human being.”44

 

Despite the passage of Section 504, the ADA, and the groundbreaking Olmstead decision, the employment rate of Americans with disabilities remains dramatically lower than the employment rate of people without disabilities.45 Not only are Americans with disabilities underemployed, but federal law46 also allows persons with disabilities to be dramatically undercompensated.


 

*1104 B. The Fair Labor Standards Act’s Section 14(c) Program

The Fair Labor Standards Act (FLSA)47 provides for a federal minimum wage,48 overtime pay,49 and child labor protections.50 At the time the FLSA was adopted, Congress found that some employers paid substandard wages and addressed the issue in 1938 by establishing a minimum wage of $0.25 an hour.51 After several increases, the federal minimum wage is currently set at $7.25 per hour,52 which means that under the FLSA, employers must pay employees at least minimum wage.53 However, there are still a handful of exemptions that allow employers to pay their employees a subminimum wage: Such employees include tipped employees, workers with disabilities, new hires under the age of twenty, full-time students who work in retail or service establishments, agricultural workers, institutions of higher education, and high school students who are at least sixteen years of age and enrolled in a vocational education program.54 Under Section 14(c) of the FLSA, employers may pay subminimum or special minimum wages (SMWs) to workers with disabilities.55 Today, about 424,000 persons with disabilities are paid subminimum wages.56

 

At its core, the intent of Section 14(c)’s subminimum wage certificate program is not to maliciously rob disabled workers of fair wages. In fact, Section 14(c) was in many ways adopted to incentivize job creation opportunities for persons with disabilities in work settings where they otherwise might not be hired.57 Thus, “to the extent necessary to prevent curtailment of opportunities for employment,”58 under Section 14(c) the *1105 Secretary of Labor has the power to grant wage certificates, which lawfully permit employers to pay below federal minimum wage to persons “whose earning or productive capacity is impaired by age, physical or mental deficiency, or injury.”59


 

Section 14(c) defines a disability as either physical or mental, including blindness; mental illness or retardation; alcoholism; and drug addiction.60 It is noteworthy that not all persons with disabilities fall under the Section 14(c) program because the statute is designed to target workers who, because of a disability, have lower productivity level than that of non-disabled workers.61 This diminished level of productivity requirement is used to justify paying persons with disabilities a wage often far lower than the federal minimum wage.62

 

The FLSA’s subminimum wage program operates under a system of employer certificates from the Department of Labor Wage and Hour Division that authorizes employers to pay subminimum wages.63 An application for a certificate authorizing the payment of special minimum wages to disabled workers is relatively simple and can be completed by the employer.64 The Wage and Hour Division issues certificates to three types of employers: work centers, hospital or residential care facilities, and business establishments.65 Work centers, also called “sheltered workshops,” offer employment, training, and rehabilitation services. Of the estimated 5,600 employers paying special minimum wages to workers with disabilities, the General Accounting Office (GAO) determined about 84% are sheltered workshops-- established to provide employment opportunities to persons with disabilities.66


 

In order to pay a disabled worker less than federal minimum wage, the employee’s disabilities must impair his productive capacity in the job being performed.67 While no specific wage floor is mandated, the wages *1106 paid must be scaled to the individual’s productivity.68 The worker’s special minimum wage is calculated “commensurate” to the productivity of experienced workers who are not disabled and who perform the same kind and quality of work in the surrounding vicinity.69 Thus, if a disabled worker’s productivity is reported to produce 50% of the productivity of a nondisabled worker doing essentially the same kind of work, the disabled worker can be legally compensated with 50% of the prevailing wage.70 This system of paying subminimum wages keeps people with disabilities in a cycle of poverty and dependence.71

 

Per Section 14(c), an employer must review and adjust the disabled workers’ wages accordingly every six months.72 Additionally, the wages of all disabled workers must also be adjusted at least annually to account for changes in wages paid to experienced nondisabled workers.73 Any employee (or the employee’s parent or guardian) paid a special minimum wage may ask the Wage and Hour Division to review the worker’s wage.74 Unfortunately, financing a lawsuit against an employer violating the Section 14(c) program is all but impossible given the paltry wages of the disabled workers.75


 

Unlike other FLSA subminimum wage provisions which make workers eligible for wages below the minimum because they are at a particular stage in their careers (apprentices, students, etc.),76 Section 14(c) denies disabled workers minimum wage for potentially any job based on their disability status-- “a status that can be lifelong.”77 In the post-ADA and Olmstead world, such blatant discrimination demands justification.

 

*1107 C. The Rise of Sheltered Workshops


Section 14(c) allows employers to use government-issued certificates to pay their disabled workers subminimum or special minimum wages,78 a practice often, although not exclusively, used in sheltered workshops. Labor force statistics from February 2013 state that 68.8% of working-age adults (ages sixteen and over) without disabilities are employed, compared with a meager 20.1% of working-age adults with disabilities.79 In 2001, a GAO survey estimated that about 424,000 workers with disabilities earned special minimum wages,80 and of these workers, 400,000, or about 94%, were employed by work centers or sheltered workshops.81 Businesses, hospitals, other residential care facilities, or schools employ the remaining workers.82 In theory, the wages for subminimum wage employees are commensurate with their productivity.83

 

Consistent with the perceptions and policies originally used to justify institutionalization, sheltered workshops abide by the paternalistic belief that disabled persons are incapable of adequately functioning in a community setting.84 Sheltered workshops arose from the need to provide an outlet for the identified vocational skills of persons classified as having severe disabilities.85 Within the sheltered workshop model, there are two distinct types of shops: transitional and extended. Transitional workshops attempt to eventually find competitive community employment for individuals once they are deemed “ready for community work;”86 extended workshops provide indefinite sheltered work for people deemed “unable to compete in the open labor market.”87 It is beyond the purview of this Note to review all justifications for sheltered workshops; however, the inherent contradictory policy message that is furthered by the existence of sheltered workshops is evident. While the passage of the ADA signals that people with disabilities are recognized as capable citizens with the same rights as those without disabilities, many people with disabilities continue to be subjected to old stereotypes due to *1108 the segregating effect of sheltered workshops and the Section 14(c) program that transmits images of deficiency, weakness, and inequality.


 

Segregated subminimum wage programs, often referred to as sheltered workshops, pay people with disabilities below minimum wage, often for fully productive work. In 1970, there were approximately 160,000 workers with disabilities employed in sheltered workshops; in 1987, this number ballooned to over 650,000.88 As recent as 2001, GAO surveys determined that approximately 400,000 workers were employed in sheltered workshop programs.89 The GAO estimates that over half of these certificate employees are earning $2.50 or less per hour.90 Seventy-four percent of certificate employees were individuals with mental retardation or another developmental disability.91

 

The issue of subminimum wages recently gained traction in Oregon when Disability Rights Oregon (DRO) filed suit against the State. DRO alleged that the State failed to provide supported employment services to Oregon residents in the most integrated setting as is required under Olmstead.92 In total, DRO asserts that more than 2,300 residents are segregated in sheltered workshops and are paid below minimum wage--many of these workers are often paid less than $1.00 per hour for their labor in the workshops.93


 

D. Challenges to FLSA Section 14(c) and House Resolutions 3086 and 381

In the subsequent decades since the enactment of the FLSA, there have been numerous challenges to, and ongoing restructuring of, section 14(c).94 In 2001, during the 107th Congress, the issue of Section 14(c) emerged. Then-Representative Johnny Isakson (R-Ga.) introduced House Resolution 881, which would have prevented the Secretary of Labor from issuing certification for the payment of a subminimum wage to persons who are vision-impaired; however, no action was taken on the Isakson proposal.95 In 2001, the GAO released a scathing study of the *1109 Department of Labor’s (DOL) management of the Section 14(c) program.96 The GAO concluded that the DOL “lacks the data it needs to manage the program and determine what resources are needed to ensure employer compliance.”97 The GAO also stated that the DOL “has not done all it can to ensure that employers comply with the law” and “has provided little training to its staff” that would enable them to run the program.98

 

On October 4, 2011, Representatives Cliff Stearns and Tim Bishop introduced House Resolution 3086 during the 112th Congress.99 House Resolution 3086 would phase out Section 14(c)’s special wage certificates, which continue to allow employers to hire individuals with disabilities and compensate them at subminimum wages below the federal minimum wage of $7.25 an hour.100 The bill proposed a gradual transition to fair wages by revoking special wage certificates held by private for-profit entities one year from the bill’s date of enactment; by public or governmental entities within two years; and by non-profit entities within three years.101 Representative Bishop compellingly argued for the end of wage discrimination: “Ensuring that Americans with disabilities receive equal pay for equal work is more than a matter of basic fairness, it’s a long-overdue acknowledgement of the value disabled Americans contribute to our workplaces every day.”102 Along similar lines, Representative Stearns stated, “Protections for disabled workers were excluded in the Fair Labor Standards Act in the mistaken belief that they were not as productive as other workers. Workers with disabilities contribute to our economy and to our society, and they deserve equal pay for equal




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