Loophole in Federal Law Allows Companies to Pay Disabled Workers $1 an Hour

Reprinted from VOX, May 4, 2018, by Alexia Fernández Campbell

Rock River Valley Self Help Enterprises, an Illinois nonprofit, billed itself as a vocational training program for people with disabilities. But it essentially operated as a subcontractor for local factories, providing menial tasks to workers with developmental disabilities, such as scraping debris from metal casts.

Last week, the Department of Labor took action against the company “after finding nearly 250 workers with disabilities were being exploited.” One of the ways they were being exploited? Self Help paid some workers with gift cards instead of money.

The DOL’s announcement underscores the grim employment landscape for many disabled workers. Several nonprofits, including one in Seattle, have recently been cited for underpaying workers with disabilities. But while Self Help’s infractions are outrageous, it’s also worth noting that federal law allows companies to provide less compensation to some workers with disabilities.

In addition to sometimes paying workers in gift cards, Self Help also paid them less than the minimum wage. Paying workers with disabilities in gift cards is unlawful; paying them a subminimum wage is legal. That’s because current law allows employers to pay as little as $1 per hour, or less, to workers with disabilities if they can’t perform a job as well as a person who is not disabled (the current federal minimum wage is $7.25). It’s an exemption to the Fair Labor Standards Act that has been in place for 80 years.

Self Help had the exemption — but the DOL revoked that waiver after its investigation. In addition to finding that the nonprofit was paying workers with gift cards, the agency also noted that Self Help could not show proof that the disabled workers were not as productive as workers without disabilities, a requirement to get a waiver. And the DOL found that the company had tried to “mislead and obstruct … by concealing relevant information” from the agency’s investigation. The agency ordered Self Help to pay two years of back wages to more than 250 workers. The department did not say how much they were earning.

The incident underscores how the waiver program for workers with disabilities can be horribly misused. Giving employers permission to pay workers less seems to justify treating them differently in other ways. The workers at Self Help and their guardians knew they were allowed to receive less than the minimum wage, but they may not have realized that getting paid in gift cards is against the law.

There are about 153,030 workers with disabilities in the US who can be paid less than minimum wage under federal law, according to data from the Department of Labor. Some workers earn as little as 4 cents an hour.  In February, Alaska became the third state to ban the practice, and last week, a group of Democratic lawmakers, including Sen. Elizabeth Warren (D-MA) and Sen. Bernie Sanders (I-VT), expressed concern about the potential abuses.


Categories: Workforce & Government.