BILL ANALYSIS                                                                                                                                                                                                    ”

                                                                     AB 488

                                                                     Page A

          Date of Hearing:  January 6, 2016 


                               Roger HernŠndez, 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  

          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  

          Related Provisions of California Law

          The California Labor Code contains two specific provisions  
          related to the payment of subminimum wage to individuals with  

          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  

          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  

            "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  

          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



          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  

          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.




          Disability Rights California (sponsor)

          State Council on Developmental Disabilities


          None on file.

          Analysis Prepared by:Ben Ebbink / L. & E. / (916) 319-2091


                                                                     AB 488

                                                                     Page K