Re: 2024-27880, Employment of Workers with Disabilities under Section 14(c) of the Fair Labor Standards Act

To Director Daniel Navarrete,

We write to offer public comment on the US Department of Labor’s Notice of Proposed Rulemaking published on December 4, 2024 (2024-27880). We are employees of the Urban Institute specializing in a wide variety of policy and research areas, including housing, employment, and health care, and all our work intersects through the lens of disability as part of the Urban Institute’s Disability Equity Policy Initiative. The Disability Equity Policy Initiative is working to build a body of evidence to improve the lives of disabled people. The initiative aims to equip policymakers and practitioners with the rigorous, timely, and actionable research they need to advance economic mobility, housing stability, community connections, and a more accessible and equitable public safety net. We are employed by the Urban Institute, a nonprofit research and policy organization, but the views expressed here are our own and do not represent the Urban Institute, its trustees, or its funders.

We would like to provide supporting evidence regarding the Employment of Workers with Disabilities under Section 14(c) of the Fair Labor Standards Act. This submission addresses the following points:

1. 14(c) employment does not lead to competitive integrated employment, creates economic precarity for people with disabilities, and violates disabled people’s civil rights (PDF).
2. In recent years, 14(c) employment has decreased notably, as more than two dozen states have taken action to eliminate or discourage it. Meanwhile, disability employment has remained steady, increasing to historic levels following the economic fallout from COVID-19. According to a 2024 quasi-experimental study, two states that repealed Section 14(c) have not seen a decrease in labor force participation and employment among workers with intellectual disabilities, who represent 90 percent of 14(c) workers (PDF).
3. Though some proponents of Section 14(c) fear disabled workers will lose the supports that sheltered workshops offer, these supports are primarily enabled by public funding that can be repurposed to support integrated employment. Funding from vocational rehabilitation programs through the Workforce Innovation and Opportunity Act that sheltered workshops use to offer specialized supports can be repurposed and put toward programs that help disabled people access and maintain competitive integrated employment.

Ultimately, phasing out Section 14(c) and prioritizing integrated employment for people with disabilities will better support their financial security and full participation in society.

1. 14(c) employment does not lead to integrated employment, creates economic precarity for people with disabilities, and violates disabled people’s civil rights (PDF).

Section 14(c) of the Fair Labor Standards Act in 1938 was originally intended to secure employment opportunities for disabled people at a time when many were institutionalized and excluded from the education system and economic opportunities. Since then, several laws have established the civil rights of disabled people and prohibited discrimination against people with disabilities in several areas, including employment. These include Section 504 of the Rehabilitation Act passed in 1973 and the 1990 Americans with Disabilities Act.

In recent decades, subminimum wage employment has declined as disabled people’s rights, access to education, and employment opportunities have expanded. The 2014 Workforce Innovation and Opportunity Act, which governs the public workforce system, prioritizes competitive integrated employment (CIE) for disabled people. CIE is defined as a job where the worker earns the prevailing minimum wage, works alongside nondisabled workers, receives the same benefits as nondisabled workers, and has opportunities for advancement.

Research has shown that 14(c) programs do not lead to integrated employment and create economic precarity for people with disabilities. Today, 93 percent of 14(c) employers are community rehabilitation programs known as sheltered workshops. There, disabled workers do piece work, often assembling or packaging items in a segregated workplace, without the protection of a minimum wage. Almost no sheltered workshops offer benefits.

A 2012 report by the National Council on Disability found that Section 14(c) employment is ineffective at helping disabled workers transition into the wider workforce. Additionally, a ProPublica investigation found that from January 2017 to June 2022, only 2.3 percent of disabled people working in sheltered workshops transitioned to regular employment.

A 2020 report from the US Commission on Civil Rights found that 14(c) programs can also harm disabled workers (PDF). The report concluded that the operation of 14(c) programs is discriminatory, often contributing to the segregation of disabled workers from the larger workforce. It also explained that between 2010 and 2020, the majority of 14(c) employers investigated by the US Department of Labor had violated subminimum wage rules and were ordered to pay their employees back pay. In addition, a Government Accountability Office investigation found that workers employed by Section 14(c) holders were owed $15 million in unpaid wages (PDF), mostly for violations of federal labor laws.

In the US, disabled people are twice as likely as nondisabled people to experience poverty, and only 23 percent of disabled adults are employed. Subminimum wage employment perpetuates a narrative of disabled workers as less capable, reflecting the discrimination disabled people face in the broader labor force. To achieve economic security, disabled people, like all people, need dignity and autonomy in the workplace. Ending 14(c) programs can help ensure disabled people have the same right to thrive as other workers in the US.

2. In recent years, 14(c) employment has decreased notably, as more than two dozen states have taken action to eliminate or discourage it. Meanwhile, disability employment has remained steady, increasing to historic levels following the economic fallout from COVID-19. According to a 2024 quasi-experimental study, two states that repealed Section 14(c) have not seen a decrease in labor force participation and employment among workers with intellectual disabilities, who represent 90 percent of 14(c) workers (PDF).

As of July 2024, more than 38,000 disabled people (PDF)—90 percent of whom have intellectual or developmental disabilities (PDF)—earned subminimum wages. In 2001, the number of people employed by 14(c) certificate holders was 10 times that, at roughly 424,000 (PDF). Today, the majority of 14(c) workers earn under $3.50 per hour, less than half the federal minimum wage ($7.25).

Currently, 18 states have passed legislation that has or will end subminimum wage work for people with disabilities or have no active 14(c) programs. An additional eight states have begun phasing out or disincentivizing 14(c) programs in other ways.

However, since the Bureau of Labor Statistics began collecting disability data in the Current Population Survey in 2008, the share of disabled people overall who are employed has remained fairly stable. Since 2021, this share has risen to historic levels—roughly 38 percent of working-age disabled people (ages 25 to 64) are now employed.

In addition, a 2024 quasi-experimental study published in JAMA Health Forum has shown that two states that repealed Section 14(c) did not reduce the employment prospects of people with intellectual disabilities. The researchers analyzed whether repealing Section 14(c) in New Hampshire and Maryland affected the employment rate and labor force participation of 450,838 people with cognitive disabilities in the two states. The researchers found that repealing Section 14(c) increased labor force participation and employment among people with cognitive disabilities in New Hampshire. Labor force participation and employment also increased in Maryland, but the changes were not statistically significant.

3. Though some proponents of Section 14(c) fear disabled workers will lose the supports that sheltered workshops offer, these supports are primarily enabled by public funding that can be repurposed to support integrated employment. Funding from vocational rehabilitation programs through the Workforce Innovation and Opportunity Act that sheltered workshops use to offer specialized supports can be repurposed and put toward programs that help disabled people access and maintain CIE.

Some supporters of Section 14(c) argue that eliminating sheltered workshops would deprive disabled workers of workplaces with specialized supports. However, many of these supports are funded through vocational rehabilitation programs, which can receive funding through the Workforce Innovation and Opportunity Act to ensure they can provide workers with employment. Policymakers could instead put these funds toward programs that have been shown to help disabled people access and maintain integrated employment.

How states phase out 14(c) programs matters. A comprehensive transition approach and robust job supports are needed to support disabled people in finding work and achieving economic security. Insights from how states have eliminated subminimum wages can help policymakers develop robust employment pathways for disabled people and better support their overall economic security.

Policymakers can better support the economic security of disabled people by implementing policies that help disabled people find and maintain quality jobs. For example:

• California created a transition plan (PDF) and funded efforts to help disabled workers employed by 14(c) certificate holders find CIE when it passed legislation to fully phase out 14(c) by January 2025. California was a grantee of the Subminimum Wage to Competitive Integrated Employment program, which funded five-year demonstration projects through the Disability Innovation Fund, administered by the US Department of Education, to increase CIE among people currently in or otherwise heading for subminimum wage employment. The bill to phase out 14(c) in California required the State Council on Developmental Disabilities to develop a transition plan and subsequent reports after the phase-out deadline through 2027. Bill cosponsors Disability Rights California and the State Council on Developmental Disabilities prioritized creating a transition plan gathering feedback from key stakeholders, including disabled workers, family advocates, and community members.
• Some states have used regulations and funding to implement an Employment First framework, which holds that all people, including people with disabilities, are capable of working in CIE and being a part of the community.
• States could also adapt tested models like customized employment programs, which focus on building a personalized employer-employee relationship, to shape their comprehensive transition programs.

Evidence shows that phasing out this rule and eliminating Section 14(c) can help address the many documented negative consequences of subminimum employment for disabled workers without curtailing their employment opportunities. Furthermore, evidence also points to the need for a comprehensive and thoughtful transition plan that bolsters support for creating pathways to integrated employment opportunities and engages various stakeholders to foster the economic security of people with disabilities.