California’s Ban on Subminimum Wage for Disabled Workers Effective January 2025 and DOL May Soon Follow
Topics: Discrimination, Harassment & Retaliation, Employee Hiring, Discipline & Termination, Personnel Policies and Procedures, Wage & Hour Issues
For years, Federal law authorized employers to pay wages below the federal minimum wage to incentivize employers to hire disabled employees who might not otherwise have been hired. To qualify, employers were required to obtain a “section 14(c) certificate” from the Department of Labor (DOL) authorizing a special minimum wage. 29 C.F.R. § 525.5. The DOL authorized section 14(c) certificates for workers with intellectual disabilities, visual and hearing impairments, and psychiatric disabilities, such as anxiety, depression, and bipolar disorder.
Last week, the DOL proposed a rule phasing out section 14(c) certificates, reasoning that employment opportunities for individuals with disabilities have increased dramatically since the federal regulations were last updated in 1989. Under the proposed rule, the DOL will no longer issue new section 14(c) certificates on or after the effective date of the final rule. Employees subject to the FLSA would then be entitled to the federal minimum wage ($7.25 per hour) despite any impact their disability may have on productivity. Existing section 14(c) certificate holders will be able to continue paying the subminimum wage for up to 3 years after the effective date of the final rule. The DOL will hear comments on the proposed rule until January 17, 2025. This rule, along with many others adopted under the Biden administration, may be scrapped by the Trump administration.
Whether or not the DOL moves forward with its proposed rule, employers should be aware that California already approved a similar phase-out, effectively banning subminimum wages for disabled workers. Effective January 1, 2025, an employee with a disability must be paid the state minimum wage or the applicable local minimum wage ordinance, whichever is higher. California Labor Code Section 1191.5, the previous law permitting California employers to pay a subminimum wage to workers with a physical or mental disability, will be repealed on January 1, 2025. (California Labor Code Section 1191.5(b)).
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