Subminimum Wage for Disabled Workers (Still Legal)

The subminimum wage for disabilities (often searched as subminimum wage disabilities) is a legal exception most people have never heard of. The federal minimum is $7.25 an hour. For a group of workers with disabilities, the legal floor is lower, and in some cases there is no floor at all.

What is the subminimum wage for people with disabilities?

It is a rule that lets a certified employer pay a worker with a disability less than the minimum wage if the disability affects how much work the person can do. The rule sits in Section 14(c) of the Fair Labor Standards Act, which Congress passed in 1938 at the same moment it created the federal minimum wage itself.

The employer applies to the Department of Labor, receives a certificate, and sets each worker's pay by comparing the worker's output to that of a worker without a disability doing the same task. If a worker produces 50 percent of the benchmark, the worker may be paid 50 percent of the prevailing wage. The test can be measured in widgets, boxes, or minutes, and employers run their own versions of it. For the baseline this sits beneath, see the federal minimum wage explained.

Why does the exception exist?

The original logic was protective. In 1938, lawmakers worried that a hard minimum would shut disabled workers out of jobs, and they gave sheltered workshops a path to hire them. The idea was that a lower wage would buy a place to work.

Disability advocates, many labor economists, and a growing number of states now say that logic has aged badly. The workshops were meant to be a step toward regular jobs. Federal reviews, including work by the Government Accountability Office, have found that few workers move on to competitive employment, and many stay for years at the same low rate. The National Council on Disability has recommended phasing the practice out.

How much do these workers actually earn?

Department of Labor and GAO reviews have found that many workers paid under 14(c) earned well below the federal minimum, and a meaningful share earned a few dollars an hour. Some earned less than $1. The rate depends on the productivity test, which the employer designs and applies.

The last two rows are illustrations of how the formula works on the federal minimum, not reported averages. Actual rates vary by employer and by the prevailing wage the employer uses. Many workers also work part-time, so annual earnings run lower.

Who is covered?

Workers with a physical or mental disability that affects productivity at a specific job, employed by a certificate holder. Most work in segregated settings, often called sheltered workshops, packing, assembling, shredding, or sorting. Some work in community settings under the same certificate.

Federal data show the number of workers has fallen from past highs to tens of thousands as employers surrender certificates and states close the door. The exact count shifts each year, so check the Department of Labor's current 14(c) data before citing a number. A worker's disability does not by itself lower the wage. Only the certificate does.

Which states have ended it?

More than a dozen states have phased out or banned the practice, including Maryland, New Hampshire, Oregon, and California. Their laws differ. Some end new certificates and phase out old ones. Others set a deadline for all employers. In each case, workers who had been in sheltered workshops were offered supported employment, job coaching, or other services to move into regular jobs at the full minimum.

The results are still being studied, and states differ in how well the transition has worked. Supporters of a federal end date point to workers who moved into integrated jobs. Others, including some families and providers, warn that if funding for supports is thin, workers could lose day programs and income at once.

What do workers and families say?

Opinions split, and the split deserves a fair hearing. Many disability self-advocates call 14(c) discriminatory and want it gone. They argue that a person who can do a job should be paid a wage for it, and that productivity tests shortchange workers who need only support, not a lower rate. Some families and providers, though, say sheltered workshops give structure, community, and a paycheck to people who would otherwise have no daytime program, and fear that closing them without funded alternatives leaves workers with nothing.

Both concerns point at the same gap: the money for real supported employment has to exist before a wage exception can safely end.

Is there a federal fix?

Congress has debated bills to phase out 14(c) for years, with bipartisan sponsors, and has not passed one. The pattern mirrors the broader wage floor: a rule written in 1938, never updated by a vote. Our post on minimum wage history traces how the base rate itself got stuck.

What does the loophole tell us?

It tells us that a floor with an asterisk is not a floor. The principle behind the minimum wage is that no full day's work should pay less than a set amount, and Section 14(c) says that principle has an exception for a group of workers who often face the hardest path to other jobs.

The systemic cause is not any one employer. It is a federal law that has carried this carve-out for almost ninety years, with no automatic review and no sunset. The same inaction that froze the base rate at $7.25 since 2009 keeps the exception alive. If you want the full affordability picture, read is minimum wage a living wage and our living wage hub. A wage floor that applies to everyone, and rises with prices, would close the gap.