California Capitol Watch: Time to Phase Out Sub-Minimum Wages for People with Disabilities?

By Eric Gelber

National attention has recently been given to whether the federal minimum wage should be raised to $15/hour. But few may be aware that, since 1938, some employers (primarily sheltered workshops), including those in California, have been allowed to pay employees with disabilities far less than the federal minimum wage of $7.25 an hour. SB 639 (Durazo), co-sponsored by Disability Rights California and the State Council on Developmental Disabilities, would phase out sheltered workshops and end the practice of paying people with disabilities less than the California minimum wage.

What problem/issue would the bill address?

Section 14(c) of the federal Fair Labor Standards Act gave employers the ability to apply for a certificate allowing them to pay employees with disabilities less than the federal minimum wage. Section 14(c) was intended to provide opportunities for employment and training for World War I veterans with disabilities. In California, the Industrial Welfare Commission (IWC) is authorized to issue annual special licenses to employees with physical and developmental disabilities likewise authorizing the employment of the person at a wage less than the legal minimum wage.

What Section 14(c) ultimately led to, however, was the creation of segregated workplaces providing dead end, exploitative jobs in sheltered workshops, primarily for people with developmental disabilities, and paying as little as 15 cents an hour.

State-funded sheltered workshops continue to operate despite such laws as the Americans with Disabilities Act (ADA), prohibiting discrimination against people with disabilities in employment and mandating states to provide services in integrated, community-based settings to people with disabilities who can benefit from those services.

What would the bill do?

SB 639 would prohibit the IWC from issuing any new special minimum wage licenses for employees with disabilities after January 1, 2022 and would provide that existing minimum wage licenses can only be renewed if specified benchmarks in the employee’s development and implementation plan are reached.

SB 639 would also require the Governor’s office, in partnership with relevant state agencies, to develop and implement a phase-out plan with stakeholder involvement, by January 1, 2023, to guarantee any employee with a disability the minimum wage by January 1, 2024. After January 1, 2024, the IWC would be prohibited from issuing special minimum wage licenses to sheltered workshops permitting the employment of persons with disabilities at less than the minimum wage.


According to the author: “The original intent of subminimum wage employment was to offer employment opportunities to disabled veterans in industrial settings. Some veterans with disabilities were not able to produce widgets in a factory setting at the same rate as their peers without physical disabilities, and federal law allowed a lesser wage to be given to disabled workers based on this purported impact to production. According to Labor Secretary Frances Perkins, a subminimum wage was suitable for, “persons who by reason of illness or age or something else are not up to normal production.” Section 14(c) was little known and rarely used until the 1950s when sheltered workshops began to flourish. Sheltered workshops were started with good intentions as parents were seeking a way to keep their children out of institutions. Now, sheltered workshops are an outdated model of segregation and exploitation.”

Sheltered workshops (also referred to as Work Activity Programs), which were initially designed to help people with disabilities learn meaningful skills and obtain gainful employment evolved into perpetual segregation. In reality, they provide meaningless work and little hope for improving quality of life. They are stigmatizing—reinforcing attitudes that people with disabilities are incapable of meaningful work and should be segregated from the community.

In a report issued in 2011 (and subsequently updated), the National Disability Rights Network (NDRN) argued that sheltered workshops and the sub-minimum wage:

  • Keep people with disabilities marginalized and hidden in the shadows and create opportunities for abuse and neglect to occur.
  • Facilitate feelings of isolation for many people and impinge on the natural desire to connect with others.
  • Reinforce a life of poverty for people with disabilities.
  • Often teach skills that are not relevant or transferable to traditional work environments.
  • Provide workers with disabilities with dead-end jobs, meager wages, and the glimpse of a future containing little else.
  • Offer options that are unskilled, low-wage jobs with few, if any, benefits.

Segregated and Exploited, NDRN, January 2011. In sum, NDRN concluded, the limited array of employment choices directly impacts an individual’s capacity to live a full, rich life as an active, tax-paying member of the community.

In addition to the ADA, prohibiting discrimination in employment, California’s landmark law establishing the state’s service system for people with developmental disabilities—the Lanterman Developmental Disabilities Services Act (Lanterman Act)—includes an “Employment First Policy” providing that: “In furtherance of the purposes of [the Lanterman Act] to make services and supports available to enable persons with developmental disabilities to approximate the pattern of everyday living available to people without disabilities of the same age, to support the integration of persons with developmental disabilities into the mainstream life of the community, and to bring about more independent, productive, and normal lives for the persons served, 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.”

Despite these enactments, employment rates for people with developmental disabilities remain woefully low. California ranks 22nd in the nation in employment of people with disabilities. 2016 employment data for California indicate that the overall employment rate of the general working age population was 76.5%. The employment rate for people with disabilities was 35.0%, while the rate for people with developmental disabilities was 14.2% (well below the national average of 33.5% in 2014). Moreover, as of fiscal year 2016-17, the vast majority of working age people with developmental disabilities in California were served in sheltered workshops (approximately 7,800) or non-employment day programs (approximately 72,000) as opposed to more integrated, community-based employment settings (approximately 11,000). Data source: State of California Developmental Disabilities System Employment Data Dashboard.

Since the 1960s, the trend nationally and in California has been to provide services and supports for people with developmental disabilities in community-based, non-institutional settings. The resident population of the state-operated institutions for people with developmental disabilities, for example, declined from approximately 13,400 in 1968 to fewer than 300 (primarily individuals with criminal justice system involvement) in the current fiscal year. This occurred as a result of a commitment and expenditure of funds to expand and strengthen residential and other community services to ensure that each individual was provided with services and supports to meet their individual needs.

A recent report issued by the U.S. Commission on Civil Rights found that, for example:

  • People with intellectual and developmental disabilities who are currently earning subminimum wages under the 14(c) program are not categorically different in level of disability from people with intellectual and developmental disabilities currently working in competitive integrated employment.
  • People with disabilities, including those with significant disabilities, work for competitive wages in mainstream workplaces and are successful at their jobs.
  • People previously categorized for decades as “unable to work” have nevertheless obtained and maintained competitive employment through the opportunities of the ADA, new technology, and funding for and commitments by vocational rehabilitation specialists to seek out mainstream employment. For example, many people with disabilities have found success performing work in new jobs created in the tech economy, as well as employment in more conventional positions.
  • Paying low wages to people with disabilities harms their economic potential, increasing the likelihood that they will remain reliant on state and federal support.

Subminimum Wages: Impacts on the Civil Rights of People with Disabilities, September 2020.

The Commission report recommended that Congress repeal Section 14(c) with a planned phase-out period to allow transition among service providers and people with disabilities to alternative service models prioritizing competitive integrated employment.

The primary alternative to sheltered workshops are supported employment programs. Supported employment services are aimed at finding competitive work in a community integrated work setting for persons with severe disabilities who need ongoing support services to learn and perform the work. Supported employment is an alternative to the longstanding “train and place” model, which provides general training followed by employment. Supported employment is a “train in place” model that offers employment first accompanied by on-the-job training and ongoing support for that particular job.

Supported employment placements can be individual placements, or group placements (called enclaves or work crews), such as landscaping crews. Support is usually provided by a job coach who meets regularly with the individual on the job to help them learn the necessary skills and behaviors to work independently. As the individual gains mastery of the job, the support services are gradually phased out.

The vast majority of companies in the U.S. do not have disability-targeted recruiting methods or supported employment. However, increasing numbers of companies have invested substantial efforts to employment of people with disabilities, including Walgreens, Bank of America, Marriott, and JPMorgan Chase.

Success stories of individuals with disabilities, including those with autism, intellectual, and other developmental disabilities, are well documented. See, e.g., Department of Developmental Services, Spotlight – Profiles and Success Stories; Grinker, R., Nobody’s Normal, W.W. Norton & Company, 2021 (chap. 17). Not all people with developmental disabilities will succeed. But, “[t]here is dignity in risk, in having the opportunity both to succeed and to fail. There is dignity in being visible, in having the chance to be judged in a way you didn’t expect.” Grinker, p. 311.

While there was no written opposition submitted at the time SB 639 was heard in the Senate Committee on Labor, Public Employment and Retirement (LPE&R), testimony in opposition on behalf of sheltered workshop providers focused primarily on the asserted unrealistic timelines in the bill for transitioning from a sheltered workshop to a supported employment model.

Notwithstanding enactments such as the ADA and the Lanterman Act, a commitment comparable to residential deinstitutionalization has yet to be made in California to expand the capacity of supported employment programs to provide the services and supports needed to enable people with developmental disabilities to engage in competitive, integrated employment. SB 639 would provide an impetus for changing the status quo.

After passing out of the Senate LPE&R Committee SB 639 was referred to the Senate Human Services Committee where it is scheduled to be heard on April 6th.

Eric Gelber, now retired, is a 1980 graduate of UC Davis School of Law (King Hall). He has nearly four decades of experience monitoring, analyzing, and crafting legislation through positions as a disability rights attorney, Chief Consultant with the Assembly Human Services Committee, and Legislative Director of the California Department of Developmental Services.

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Disclaimer: the views expressed by guest writers are strictly those of the author and may not reflect the views of the Vanguard, its editor, or its editorial board.

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