Hiring People with Disabilities Is Not a Charity: Here’s Why and How to Stop Paying Subminimum Wage

Article Highlights:

• COVID taught employers to be more flexible — now they need to do it for employees with disabilities.
• Minimum Wage Exemptions in the Fair Labor Standards Act (FLSA) of 1938
• Subminimum Wage Creates Bad Job Matches, Inhibiting Employees and Nonprofits
• “Lower Productivity” and Other “Reasons” Are Excuses—Not Reasons
• Hiring People with Disabilities Is Not a Charity
• How Nonprofits Can Transition Away from Subminimum Wage
• You’re Not Doing “What’s Best” for Disabled Family and Friends

COVID taught employers to be more flexible — now they need to do it for employees with disabilities.

Minimum wage exemptions date from 1938, a time when people with disabilities did not have a right to go to school or work, when we could be sterilized in the name of genetic purity or imprisoned just for appearing in public. During this time of rampant segregation, these exemptions may have been made with the best intentions, but they still allowed employers to exploit disabled workers in congregate settings called sheltered workshops. There is no excuse for them today, and they effectively undermine the mission of the nonprofit sector.

Minimum Wage Exemptions in the Fair Labor Standards Act (FLSA) of 1938

The Fair Labor Standards Act of 1938 allows certain exemptions to the federal minimum wage. Most of these workers are simply paid a lower minimum wage, but workers with disabilities, along with certain farmworkers, have no limit to how little they can be paid.

These old models are out-of-step with modern civil rights laws, argues Regina Kline, a Washington, D.C.-based attorney who is an expert on such laws.

“The direction of federal law—regardless of administration—is that you must provide services in the most integrated setting appropriate to the needs of individuals with disabilities, including employment,” Kline says, citing the integration mandates of the Americans with Disabilities Act, the Supreme Court’s decision in Olmstead v. L.C., and the Workforce Innovation and Opportunity Act. “You can’t force a person to enter segregation in order to receive services for which they are eligible and that could be provided in the community.”

Subminimum Wage Creates Bad Job Matches, Inhibiting Employees and Nonprofits

While receiving services in the community does not always prevent people from being referred to subminimum wage jobs, it does make it difficult. The current regulations implementing the FLSA allow lower productivity as legal justification for the wage, even though the subminimum wage itself is predicated on:

1. forcing large numbers of people to do a job they do not prefer,
2. with minimal oversight, and
3. no reasonable accommodations.

This incentivizes employers to keep productivity low.

In theory, there are strict parameters on the issuance of special wage certificates under Section 14(c) of the FLSA. But the Department of Labor, by its own admission, does not adequately monitor working conditions and rarely enforces the law.

Under this model, employees’ productivity is measured via time studies, and employees are paid a percentage of the prevailing wage corresponding to their productivity. For instance, if a disabled person is 50 percent as productive as a nondisabled person, they are supposed to get 50 percent of the prevailing wage for the job and industry at hand. However, a nondisabled employee who is 50 percent as productive is protected by minimum wage laws.

By definition, workers receiving subminimum wage have to be poorly matched to the job at hand. In contrast, supported employment seeks to match workers with a job that suits their interests and skillsets, along with providing the necessary accommodations and supports workers need to succeed.

This isn’t really different from how nondisabled people find jobs. Most people pick their profession and equip themselves with whatever accommodations they need to make it work—an alarm clock, child care, a cell phone, transportation—but these accommodations are invisibilized because able people don’t think of things they need as “accommodations.” Covid-19 has compelled employers to rethink this assumption.

“Lower Productivity” and Other “Reasons” Are Excuses—Not Reasons

Heather Weldon, who in 1998 had been contracted to develop 30 jobs for workers with disabilities for the City of Seattle within 18 months, has heard all the excuses too—that the accommodations would be too burdensome, that the families would hate it, that the unions would not go for it, that people with intellectual disabilities cannot work in city government. “

I had to put the budget issue in a parking lot and asked them to talk to me about one job. Just one. I looked at something called efficient division of labor, where you take tasks from highly skilled professionals to create entry-level jobs. Probably 10 to 20 percent of what high-salary professionals were doing could have been done by an entry-level employee at market rate for that work.”

Creating a job for an individual is called customized employment, but this didn’t just benefit the new employee—by paying entry-level salaries for entry-level jobs, it saved the city a lot of money.

Today, Weldon is the supported employment program manager at the City of Seattle and oversees more than 100 employees, most with intellectual disabilities, working for the city across 17 departments. All of them make at least the city’s minimum wage of $16.39 per hour, in a city where, as recently as a few years ago, workers with intellectual disabilities made as little as 20 cents an hour.

Hiring People with Disabilities Is Not a Charity

Brian Collins and Gillian Maguire run the Supported Employment Program at Microsoft, through which more than 300 people are employed globally, at well above the cost of minimum wage. Collins makes a business argument: “There are numerous studies that show people with disabilities make loyal employees. That results in a retention rate that reduces costs for the employer.”

Maguire also mentions Microsoft’s Autism Hiring Program, which boasts more than 100 employees, some of whom are making six figures. Taken together, Collins tells me, “a more diverse workforce results in increased empathy and understanding, and ultimately, better products.”

These new ways of thinking are winning because they are better—for business, and for employees. Decades of sheltered work and subminimum wage failed to increase the staggeringly low labor force participation rate for disabled people (only 20 percent) or lift us out of poverty, but supported employment policies have been far more successful.

As an example, when Seattle became the first city government in the country to ban subminimum wage in 2018, there were only two employees in the city being legally paid below the minimum wage, while Weldon’s program alone employed 113 workers with disabilities.

How Nonprofits Can Transition Away from Subminimum Wage

Washington state pioneered an approach called Employment First, where competitive, integrated employment at or above minimum wage is the first and preferred outcome for all people with disabilities receiving services in the state.

Not only did Washington phase out support in sheltered settings, but the number of people with developmental disabilities working for minimum wage or better increased 81 percent in just over a decade, from 2,322 in 2007 to 4,200 in May 2018, according to StateData.

Change is coming, Kline warns. In 2014 and 2015, Rhode Island and Oregon settled lawsuits from the Department of Justice for unlawfully segregating people with disabilities at work. Rhode Island’s consent decree became the blueprint by which states across the United States began to make transformative changes to rebalance their employment service systems, ultimately leading to the phaseout of pre-vocational employment last year.

Pre-vocational employment presumed that employees were being paid a subminimum wage in preparation for a job paying at least minimum wage, but many people were being “prepared” for 20 or 40 years in sheltered workshop settings.

Despite the seeming inevitably of federal law, disabled advocates ourselves are driving these changes. The National Federation of the Blind brought this issue into the public spotlight back in 2011, and, working with groups like the Autistic Self Advocacy Network, it managed to pass bans in states from Alaska to Maryland.

Marci Carpenter, president of NFB Washington and my co-organizer in ending Seattle’s subminimum wage, argues that subminimum wage exploits disabled workers. “I have blind friends with college degrees who have been forced to take subminimum wage jobs because of a lifetime of low expectations by family, educators, and service providers,” she says. “Blind and disabled workers deserve to make the same wage as sighted and able people doing the same work.”

You’re Not Doing “What’s Best” for Disabled Family and Friends

Ultimately, inertia and fear drive most of the resistance to ending subminimum wage. Many family members fear this is the best they can get for their loved one, and service providers are put in a difficult position balancing those fears against public opinion. Cesilee Coulson is the executive director of the Washington Initiative for Supported Employment, or WISE. She figures that no matter which way you look at it, subminimum wage does not make sense any longer.

“As nonprofit employers, staff are 70 to 80 percent of our expenses,” says Coulson. “In human services, our wages trend much lower than most industries—yet why, as mission-driven businesses, would we pay anyone the lowest wage possible? If we value our employees with disabilities like we value all other employees, there should be no need for subminimum wages.”

Many nonprofits that make their money on contracts performed by workers at subminimum wage have been successful financially. As successful businesses, they are positioned to take the step of ending subminimum wage. “I feel very strongly that this is the decision that organizational leaders need to make, and if they were successful previously,” says Coulson, “they will be successful again. I’ve seen many organizations successfully leave subminimum wage behind. It’s a lot of hard work. The resources need to be made available to support the changes, and families need to be supported as well.”

Training and technical assistance have been key ingredients in the successful transformation of organizations. When subminimum wage is left behind, Coulson says, “it says we value every employee and that people with disabilities are compensated for their contribution to our workplaces.”

If you’re a nonprofit paying subminimum wages and want to transition, begin by reaching out for technical assistance, which will help you utilize Medicaid funding, private and project grants, and other sources appropriate for your circumstances.

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