DOL Proposes Phasing Out Subminimum Wage for Disabled Workers

On December 3, 2024, the U.S. Department of Labor (DOL) issued a proposed rule that would eventually phase out certificates that permit employers to pay certain disabled workers, whose earning or productive capacity is reduced by a physical or mental disability, a minimum wage below the standard federal minimum wage of $7.25 per hour. Upon taking effect, the proposed rule would immediately cease new certificates from being issued to employers and provide a three-year phase out of existing certificates from the effective date.

The federal subminimum wage is a distinct subset of rules for disabled employees who ordinarily can’t perform the essential functions of their job — with or without a reasonable accommodation. Disabled workers don’t have a set federal subminimum wage rate because it’s determined based on both the worker’s individual productivity in proportion to the wage and the productivity of experienced workers with no disabilities performing the same type of work.

Employers who employ these particular disabled workers must submit an application to the DOL Wage and Hour Division and receive approval prior to paying any subminimum wage. Every six months, these wages are reviewed to evaluate the worker’s productivity as well as annually reviewed for the prevailing wage for the work in the area. This subminimum wage can’t be used for a worker who is disabled but can perform the essential functions of the position with or without a reasonable accommodation.

The DOL’s rule follows California’s SB 639, enacted in 2021 and took effect January 1, 2022, which provided the same process as the DOL’s proposed rule. No new disabled worker subminimum wage certificates have been issued since January 1, 2022, and the three-year phaseout of existing certificates concludes on January 1, 2025. So, only employers with employees covered by just the Federal Labor Standards Act may continue to apply for the subminimum rate.

Employers who wish to apply for a federal subminimum wage certificate should consult with legal counsel. Employers may also provide public comment on the DOL’s proposed no later than January 17, 2025.

Matthew J. Roberts, Associate General Counsel, Labor and Employment

CalChamber members can read more about “Subminimum Wages” in Minimum Wage in the HR Library. Not a member? Learn how to power your business with a CalChamber membership.