BILL ANALYSIS Ó
AB 488
Page A
Date of Hearing: January 6, 2016
ASSEMBLY COMMITTEE ON LABOR AND EMPLOYMENT
Roger Hernández, Chair
AB 488
(Gonzalez) - As Amended January 4, 2016
SUBJECT: Employment discrimination
SUMMARY: Eliminates an exemption to the Fair Employment and
Housing Act (FEHA) for individuals "employed under a special
license in a nonprofit sheltered workshop or rehabilitation
facility."
EXISTING LAW:
1)Prohibits employment discrimination and harassment on the
basis of race, religious creed, color, national origin,
ancestry, physical disability, mental disability, medical
condition, genetic information, marital status, sex, gender,
gender identity, gender expression, age, sexual orientation,
or military and veteran status of the person discriminated
against. (Government Code section 12940 et seq.)
2)Provides that "employee" for purposes of these protections
does not include any individual employed by his or her
parents, spouse, or child, "or any individual employed under a
special license in a nonprofit sheltered workshop or
rehabilitation facility."
AB 488
Page B
FISCAL EFFECT: None. This bill is currently keyed non-fiscal
by Legislative Counsel.
COMMENTS: The California Fair Employment and Housing Act (FEHA)
prohibits employment discrimination and harassment of
individuals on the basis of specified enumerated categories -
race, religious creed, color, national origin, ancestry,
physical disability, mental disability, medical condition,
genetic information, marital status, sex, gender, gender
identity, gender expression, age, sexual orientation, or
military and veteran status.
FEHA defines an "employer" as any person regularly employing
five or more persons, but does not include a religious
association or corporation not organized for private profit.
FEHA also excludes from the definition of "employee" any
individual employed by his or her parents, spouse or child, or
"any individual employed under a special license in a nonprofit
sheltered workshop or rehabilitation facility."
What is a "sheltered workshop?"
Section 14(c) of the federal Fair Labor Standards Act (FLSA)
provides for the employment of certain individuals at wage rates
below the minimum wage. Under this provision, individuals whose
earnings or productive capacity is impaired by physical or
mental disability for the work to be performed, including those
related to age or injury, may be paid less than the federal
minimum wage. Certificates issued by the Department of Labor to
the employer are required for the employer to pay the special
minimum wage.
AB 488
Page C
Employers that have obtained such special certificates to pay a
subminimum wage to disabled workers have traditionally been
referred to as "sheltered workshops." However, the term
"sheltered workshop" is seen by some as offensive and obsolete,
and has become generally disfavored. Unfortunately, many
statutes, including FEHA, continue to use the term "sheltered
workshop."
Related Provisions of California Law
The California Labor Code contains two specific provisions
related to the payment of subminimum wage to individuals with
disabilities:
Labor Code Section 1191 provides as follows:
"For any occupation in which a minimum wage has been
established, the commission may issue to an employee who is
mentally or physically handicapped, or both, a special license
authorizing the employment of the licensee for a period not to
exceed one year from date of issue, at a wage less than the
legal minimum wage. The commission shall fix a special minimum
wage for the licensee. Such license may be renewed on a yearly
basis."
Labor Code Section 1191.5 provides as follows:
"Notwithstanding the provisions of Section 1191, the
commission may issue a special license to a nonprofit
organization such as a sheltered workshop or rehabilitation
facility to permit the employment of employees who have been
determined by the commission to meet the requirements in
Section 1191 without requiring individual licenses of such
AB 488
Page D
employees. The commission shall fix a special minimum wage for
such employees. The special license for the nonprofit
corporation shall be renewed on a yearly basis, or more
frequently as determined by the commission."
Additional Background on Section 14(c) of the FLSA
A 2005 paper prepared<1> by the Congressional Research Service
describes the history of the FLSA Section 14(c) program as
follows:
"Under Section 14(c) of the Fair Labor Standards Act (FLSA),
persons with various physical or mental disabilities (or
persons who have vision impairment or are blind) can be
employed at rates below the otherwise applicable federal
minimum wage. Under certificates issued by the Secretary of
Labor, their wages are set at a level commensurate with their
productivity and reflective of rates found to be prevailing in
the locality for essentially "the same type, quality, and
quantity of work." For these workers, under current law, there
is no other statutory wage rate.
The origins of Section 14(c) treatment of persons with
disabilities go back at least to the National Industrial
Recovery Act (NIRA) of 1933-1935. Under the NIRA, a
productivity-based sub-minimum wage, arranged through a system
of certificates, was established for persons with
disabilities. In competitive industry, such workers were
payable at 75% of the industry minimum. In sheltered
workshops, there was no wage floor. The NIRA was declared
unconstitutional in 1935.
--------------------------
<1> Whittaker, William G. "Treatment of Workers with
Disabilities Under Section 14(c) of the Fair Labor Standards
Act." Congressional Research Service. (February 9, 2005).
AB 488
Page E
With passage of the FLSA in 1938, the certification system was
reestablished under Section 14 of the Act. No statutory wage
floor was set for persons with disabilities, though,
administratively, minimum wages for the disabled in
competitive industry came to be set at 75% of the federal/FLSA
minimum. In the sheltered workshops, the floor was
productivity-based with no lower limit. Under the 1966 FLSA
amendments, the system was modified. The rate for persons with
disabilities was set in statute at not less than 50% of the
FLSA minimum, both in competitive industry and in workshops,
except that in separate work activities centers where
employment was largely therapeutic and its economic content
inconsequential there was no statutory floor.
Charges of inequities followed - together with a rapid
expansion of employment in the work activities centers. Some
suggested that workers with vision impairment should not, on
that basis alone, be included under the Section 14 reduced
wage option. A number of studies subsequently reviewed
operation of the system.
Congressional hearings on the issue were conducted repeatedly
through the years.
In 1986, Section 14(c) was amended to remove the separation of
workshops and work activities centers - and to eliminate any
statutory wage floor for persons with disabilities in
certificated employment. In theory, such workers were to be
paid a wage commensurate with their productivity. In 1994,
further hearings were held and it was asserted that the entire
system of productivity-based sub-minimum wage rates was
inequitable and unworkable. The law, however, supported by
AB 488
Page F
employers of workers with disabilities, was not altered."
Controversy Surrounding FLSA Section 14(c)
For many years, the special minimum wage certification program
has generated heated debate on both sides of the issue. One
commentator<2> described the nature of the debate as follows:
"There is disagreement among many factions of the disability
community regarding the efficacy and integrity of the Section
14(c) wage certificate program of the Fair Labor Standards Act
(FSLA) which allows employers to pay workers with disabilities
a special minimum wage based on their productivity. Some
believe this program may keep disabled employees in isolated
workshop environments and often allows them to be paid less
than the federal minimum wage. Others believe that some form
of financial support is essential to creating and maintaining
jobs for people with disabilities. The initial legislation was
passed to give individuals with disabilities a chance to work
when the perspective on disability was very different than it
is today. As views have changed, this program seems to no
longer be fully aligned with the national disability agenda.
Although Section 14(c) gives individuals with disabilities the
experience of working, it allows them to be paid less than
prevailing wage, and in some instances isolates them and fails
to integrate them fully with their non-disabled peers. Federal
legislation was introduced that would repeal Section 14(c) and
prohibit the payment of special minimum wages. While this
legislation will potentially leave hundreds of thousands of
workers without employment, opponents argue that special
minimum wage certificates are antithetical to current national
disability policy promoting integration and financial
--------------------------
<2> Nye, Gretchen. "The Uncertain Future of Section 14(c) of
the Fair Labor Standards Act." The George Washington University
School of Public Health and Health Services, Department of
Health Policy. (June 2013).
AB 488
Page G
independence for individuals with disabilities."
Recent Movement Towards "Integrated Employment"
In light of some of the controversy associated with payment of a
subminimum wage discussed above, in recent years several states
have announced initiatives to transition from "sheltered
workshops" to focus more on "integrated employment." This
effort involves preparing people with disabilities to work in
integrated settings (as opposed to isolated workshops employing
primarily disabled individuals) earning a livable wage. This
trend is sometimes referred to as "competitive integrated
employment."
In January 2015, the California Department of Rehabilitation,
the Department of Developmental Services, and Department of
Education, in collaboration with Disability Rights California,
announced plans to join other states in transforming its
provision of employment services to people with intellectual and
developmental disabilities. The agencies announced the
development of a blueprint that among other things, states that
employment in integrated, competitive settings is preferred for
individuals with disabilities, and calls for the establishment
of measurable goals and benchmarks.
In making this move, California joined several other states,
AB 488
Page H
including New York, Massachusetts, Pennsylvania and Rhode
Island, which have announced efforts to transition from
"sheltered workshops" to "integrated employment."
Change in this area is also being directed by the federal
government. Specifically, the Workforce Innovation and
Opportunity Act (WIOA), which was signed by President Obama in
2014, placed a number of limitations on placements at sheltered
workshops. Under the law, individuals with disabilities age 24
and younger will no longer be allowed to work for less than the
federal minimum wage unless they first are provided
pre-employment transition services and attempt vocational
rehabilitation services first. WIOA also requires state
vocational rehabilitation agencies to work with education
providers to provide transition services and requires the
agencies to allocate at least 15 percent of their federal funds
towards such transition efforts.
Change Proposed by This Bill
As discussed above, FEHA currently contains an exemption which
excludes employees in "sheltered workshops" from the provisions
of the law. This bill seeks to eliminate that exemption and
provide that such employees are covered under the employment
discrimination provisions of FEHA.
AB 488
Page I
ARGUMENTS IN SUPPORT
According to the author, workers in sheltered workshops and
rehabilitation centers are currently excluded from the
protections against discrimination and sexual harassment offered
by California's Fair Employment and Housing Act. This leaves
workers with disabilities who are employed in these settings no
recourse for discrimination based on characteristics like race,
religion or gender identity by their employer.
The author notes that AB 1443 (Skinner) from 2014 extended
FEHA's protections to cover unpaid interns and volunteers,
suggesting that these workplace protections are appropriate even
for those making less than minimum wage or in a program for a
limited time to gain experience.
Also, the author notes that, while California has been moving
towards competitive and integrated job placements for
individuals with disabilities, this does not take away from the
fact that it is important for workers in all settings to have
legal protections against and recourse from discrimination and
harassment.
The sponsor of this bill, Disability Rights California, states
that it would change the Government Code so that individuals
with disabilities who are in sheltered work are considered
AB 488
Page J
"employees" and are provided the same protections as other
employees under FEHA. They argue that reform is needed to
strengthen rights and protections for sheltered workshop
employees who work in highly-restrictive environments and
currently are not afforded the same protections against
discrimination as other employees.
REGISTERED SUPPORT / OPPOSITION:
Support
Disability Rights California (sponsor)
State Council on Developmental Disabilities
Opposition
None on file.
Analysis Prepared by:Ben Ebbink / L. & E. / (916) 319-2091
AB 488
Page K