BILL ANALYSIS �
Senate Committee on Labor and Industrial Relations
Senator Ben Hueso, Chair
Date of Hearing: June 25, 2014 2013-2014 Regular
Session
Consultant: Deanna D. Ping Fiscal:No
Urgency: No
Bill No: AJR 36
Author: Gonzalez
As Amended: June 18, 2014
SUBJECT
Special Minimum Wage Certificate Program.
KEY ISSUE
Should the legislature urge the United States Congress to phase
out the use of the Special Minimum Wage Certificate provision
and eventually repeal a section of the 1938 Fair Labor Standards
Act?
ANALYSIS
Existing law states that a special license can be authorized for
an employee who is mentally or physically handicapped to be paid
at a wage less than the legal minimum wage. (Labor Code �1191)
Existing law states that a special license may be issued to a
nonprofit organization such as a sheltered workshop or
rehabilitation facility for a special minimum wage. (Labor Code
�1191.5)
Existing federal law under the 1938 Fair Labor Standards Act
states in Section 14(c) the ability for entities that employ
disabled persons to obtain special minimum wage certificates
from the United States Department of Labor's Wage and Hour
Division which entitle them to pay a disabled worker less than
the legislated minimum wage rate.
This bill makes various legislative findings and declarations
including:
1) Meaningful employment, and the wages associated with it,
can be an integral part of enabling human dignity and
creating more meaningful lives for disabled persons.
2) The State of California has supported opportunities for
employment for all disabled workers, specifically in the
adoption of the Employment First Policy which states that
"it is the policy of the state that opportunities for
integrated, competitive employment shall be given the
highest priority for working age individuals with
developmental disabilities regardless of the severity of
their disabilities."
3) The 1938 Fair Labor Standards Act's subminimum wage
provisions were created in the era of the Great Depression
with the intent of subsidizing sheltered workshops which
could not afford to pay their workers full wages and, some
may argue, incentivizing private companies to employ
disabled persons.
4) These employers have proven that there are workable
alternative employment models to Section 14(c) of the 1938
Fair Labor Standards Act for disabled workers, such as
Employment First, which allow for the successful
development of individuals by providing quality training
and supports for individuals with disabilities to obtain
competitive integrated employment.
5) The productivity-based calculation of a special minimum
wage is generally done by a complicated "time study" which
entails an administrator comparing how fast a disabled
worker is able to complete a certain task compared to
nondisabled workers.
6) Time study practices used to determine special wage
rates are both inconsistent and unfair and the subminimum
wages they produce have been described by disabled workers
throughout the media as humiliating, degrading, and making
them feel like "second-class citizens."
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7) Some entities have claimed that the special minimum wage
certificates are an essential stepping stone to permanent
and fully paid employment in the general workforce. The
Psychiatric Rehabilitation Journal published empirical
evidence in 2004 which suggested that sheltered workshops
are generally ineffective at progressing the disabled
workers, while for other employers the special minimum wage
certificates serve as an incentive to exploit disabled
workers rather than integrate them into the mainstream
economy.
8) Some employers, such as the National Industries for the
Blind, have already recognized the exploitive nature of
paying disabled workers subminimum wage and have been able
to transition to the payment of Federal minimum wage, or
higher, to their disabled employees without a significant
change in profitability or a reduction in their workforce.
9) Resolves that the legislature of California request
that the United States Congress should phase out the use of
the Special Minimum Wage Certificate provision and
eventually Section 14(c) of the 1938 Fair Labor Standards
Act.
10) Also resolves that prior to and during the phasing out
of Section 14(c) of the 1938 Fair Labor Standards Act the
United States Congress:
a) Promote the continuation of existing employment and
support models for disabled individuals other than
Section 14(c) as well as identify and develop
alternatives of access to a diverse range of employment
opportunities to be in place and widely available
b) Continue to collect comprehensive data that
accurately reflects the number of disabled individuals
working, the number of disabled individuals seeking
employment, and the number of disabled individuals who
have expressed an interest in working but who have not
yet been successful in locating and securing gainful
employment
c) Continue to utilize strategies which identify the
industries and types of work in demand in both the public
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and private sector, and the skills and abilities of
potential workers with disabilities that either exist of
need to be developed to move people into these positions
COMMENTS
1. Brief Background on Section 14(c) of the FLSA
A 2005 paper prepared by the Congressional Research Service
provides a history of the Fair Labor Standards Act (FLSA)
Section 14(c) program. Under this section, persons with
various physical or mental disabilities 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.
This treatment of persons with disabilities goes back to the
National Industrial Recovery Act (NIRA) of 1933-1935. Under
the NIRA, which was declared unconstitutional in 1935, 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.
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
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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
employers of workers with disabilities, was not altered."
1. Need for this bill?
According to the author's office, the program of Special
Minimum Wage Certificates authorized under 14(c) of the 1938
Fair Labor Standards Act was enacted during the Great
Depression when organizations struggled to pay disabled
workers full wages, but also a time when the disabled
community was viewed very differently. The author's office
argues that the use of this certificate contributes to an
outdated perception of disabled persons as inherently less
productive and less valuable than others. According to the
author's fact sheet, the practice of the Special Minimum Wage
Certificate should be repealed because it enables exploitation
of disabled workers, perpetuates a degrading view point of
disabled persons instead of recognizing fundamental equality,
the program lacks oversight and a strong appeals process, and
lastly, historically based reasons for the program no longer
exist - evident by organizations and states that have moved
away from using Section 14(c). AJR 36 would call for the
United States Congress to phase out and repeal Section 14(c)
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Senate Committee on Labor and Industrial Relations
of the Fair Labor Standards Act that authorizes the use of
Special Minimum Wage Certificates for disabled workers.
2. Proponent Arguments :
Proponents argue that the Special Minimum Wage certificates,
allowed by Section 14(c) of the 1938 Fair Labor Standards Act,
have meant that in some cases disabled workers were paid less
than a dollar per hour. Proponents note that these subminimum
wages are determined by time studies, which compare the
disabled worker's "productivity" as determined by the speed of
task to that of a non-disabled person. However, proponents
argue that these time studies make inaccurate comparisons by
not fully accounting for the external work environment and
assuming productivity can be tied to the speed of menial
labor.
Proponents further argue that the law is antiquated in that it
reflects not only an outdated perception of disabled persons,
but also the economic practices sparked by the Great
Depression rather than current industry. Proponents maintain
that it is an immoral and unjust practice to maintain, which
perpetuates a discriminatory environment for disabled workers.
Proponents argue that the United States should be striving
toward competitive integrated employment for all individuals,
with or without disabilities - especially since it has already
been seen that with modern technology, vocational
rehabilitation, and high expectations people with disabilities
have been able to reach their full vocational potential in
meaningful, fulfilling, and productive ways.
3. Opponent Arguments :
Opponents argue that AJR 36 is a well-meaning but very
damaging effort to improve employment outcomes for people with
significant disabilities. They contend that this resolution
implies that all workers, regardless of their disability,
should be able to compete with workers without disabilities.
Opponents ask the question, but what if as a result of their
disability, they cannot complete the same amount of work or
work at the same rate as someone without a disability?
Opponents argue that people with disabilities can and do work
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but it makes the implementation of a number of strategies,
starting with extensive and individual discovery of each
person's expectations and skills as well as matching each
person with a job they want to do with an environment they
want to work for. Opponents argue that the elimination of
14(c) would tell persons with disabilities that if they cannot
compete then they will be denied opportunities to work.
Lastly, opponents argue that the passage of AJR 36 would
undermine the employment efforts of thousands of Californians
with severe disabilities by forcing them to remain at home
rather than participate in paid work activities that are
designed to meet their individual needs.
4. Prior Legislation :
SB 1109 (Hueso) of 2014 would address this issue in a number
of ways related to state contracts for services including
excluding successful bidders on specified state service
contracts from using the minimum wage exemption and
establishing a statewide participation goals of not less than
3 percent for persons with disabilities business enterprises
to participate in state service contracts. SB 1109 failed to
pass but was then granted reconsideration in the Senate
Governmental Organization Committee.
AB 1041 (Chesbro), Chapter 677, Statutes of 2013 - created a
statewide Employment First Policy and sets forth requirements
related to the inclusion of employment opportunities and
services in a regional center consumer's individual program
plan (IPP).
SUPPORT
Association of People Supporting EmploymentFirst (APSE)
Association of Regional Center Agencies
California Labor Federation, AFL-CIO
Disability Rights California
Lifehouse
National Association of Social Workers-California Chapter
National Federation of the Blind
OPPOSITION
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Achievement House, Inc.
Advocacy for Respect and Choice
California Disability Services Association
Concord City Council
NCI Affiliates, Inc.
On My Own
Pleasantview Industries
PRIDE Industries
The Alliance Supporting People with Intellectual and
Developmental Disabilities
The Arc
The California Disability Services Association
United Cerebral Palsy California Collaboration
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Senate Committee on Labor and Industrial Relations