The Payment of Special Minimum Wages to Workers with Disabilities under Section 14(c) of the Fair Labor Standards Act Wage and Hour Division Employment Standards Administration U.S. Department of Labor DDS Refresher Training East Hartford CT March 4,2011
FLSA Major Provisions • Coverage • Minimum Wage • Overtime Pay • Child Labor • Recordkeeping
FLSA Coverage • Individual • Enterprise
FLSA Coverage • Two types of coverage • Enterprise coverage: if an enterprise is covered, all employees of the enterprise are entitled to FLSA protections • Individual coverage: Even if the enterprise is not covered, individual employees may be covered and entitled to FLSA protections
FLSA Enterprise Coverage • Enterprises with: • At least two (2) employees • At least $500,000 a year in business • Named enterprises with at least two (2) employees such as hospitals, businesses providing medical or nursing care for residents, schools, preschools and government agencies
FLSA Individual Coverage • Workers who are engaged in: • Interstate commerce; • Production of goods for interstate commerce; • Closely related process or occupation directly essential (CRADE) to such production
The FLSA Does Not Require • Vacation, holiday, severance or sick pay • Meal or rest periods, holidays off, or vacations • Premium pay for weekend or holiday work • A discharge notice, reason for discharge, or immediate payment of final wages to terminated employees • Any limit on the number of hours in a day or days in a week an employee at least 16 years old may be required or scheduled to work • Pay raises or fringe benefits
Minimum Wage: Basics • Covered, non-exempt employees must be paid not less than the minimum wage for all hours worked. • Currently $7.25* per hour • Cash or equivalent – free and clear *$7.25 was effective on July 24, 2009
Overtime Pay • Covered, non-exempt employees must receive one and one-half times their regular rate of pay for all hours worked over forty in a workweek. • Each workweek stands alone • Workweek is 7 consecutive 24 hour periods (168 hours)
Section 14(c) of FLSA • Authorizes the employment of workers with disabilities at special minimum wages when the disabilities impair their productivity for the work performed • A special minimum wage is a wage below the federal minimum wage (currently $5.15). For SCA contracts with a wage determination (WD), it is a wage below the WD rate applicable to the job, as listed on the WD.
Section 14(c) of FLSA • Is one more option available to help individuals with disabilities realize their full potentials. • Allows Community Rehabilitation Programs (CRPs) and State Agencies to use “real work” as a tool in the vocational training of individuals with disabilities.
Regulations 29 CFR Part 525 • Set forth the conditions and terms governing the employment of workers with disabilities at special minimum wage(s).
SPECIAL MINIMUM WAGE SPECIAL MINIMUM WAGE : • wage paid a worker with a disability • commensurate with the worker’s productivity as compared to the wage and productivity of experienced workers who do not have disabilities for the work • performing essentially the same type, quality, and quantity of work • in the vicinity where the worker with a disability is employed.
Worker with a disability • Worker whose earning or productive capacity is impaired by age, physical or mental disability, or injury for the work to be performed. • The Section 14(c) definition of a worker with a disability differs from that of JWOD and ADA
Records to support disability • Medical, psychiatric, and/or psychological tests (Master’s level or above) that support the nature of disability(ies) • AND staff notes on how disability affects productivity
Employment Relationship • Volunteers • Trainee
VolunteersWorkers with disabilities • A worker with disabilities must be legally competent to freely volunteer. • If over 18 years of age and is not own guardian, parent or guardian, as appropriate, must approve volunteer work. • Work must be substantially different from the work performed during duty hours.
VolunteersWorkers with disabilities • Work must be of the type that would be normally classified as “volunteer”. • Work must be performed outside normal duty hours.
Vocational Rehabilitation Program Wage and Hour will not assert an employment relationship for certain vocational rehabilitation programs if seven criteria are met. All seven of the criteria must be met. • Participants in the program are individuals with disabilities for whom competitive employment at or above the minimum wage is not immediately obtainable and who, because of their disability, will need intensive ongoing support to perform in a work setting.
Vocational Rehabilitation Program • Participation is for vocational exploration, assessment, or training in community-based worksite under the general supervision of rehabilitation organization personnel, or in the case of a student, public school personnel.
Vocational Rehabilitation Program • Community-based placements must be clearly defined components of individual rehabilitation programs developed and designed for the benefit of each individual. • Each student must have Individualized Education Program (IEP) • Each community-based rehabilitation organization participant must have an Individual Plan for Employment (IPE)
Vocational Rehabilitation Program • Documentation will be provided to Wage & Hour upon request that the individual is enrolled in the community-based placement program, that this enrollment is voluntary and that there is no expectation of remuneration.
Vocational Rehabilitation Program • While the existence of an employment relationship will not be determined exclusively on the basis of the number of hours spent in each activity, as a general rule, an employment relationship is presumed not to exist when each of the three components does not exceed the following limitations: Vocational explorations: 5 hours* Vocational assessment: 90 hours* Vocational training: 120 hours* * per job experienced
Vocational Rehabilitation Program • Individuals are not entitled to employment at the conclusion of the program. • If an individual becomes an employee, he or she cannot be considered a trainee at that particular community-based placement unless in a different, clearly distinguishable occupation.
Prevailing Wage • Prevailing wage rate is wage paid to an experienced worker who does not have a disability that impairs his/her ability to do the work, performing essentially the same type of work in the vicinity.
Prevailing Wage • Experienced workeris a worker who has learned the basic elements or requirements of the work to be performed • ordinarily by completion of a probationary or training period and • typically will have received at least one pay raise after successful completion of the probationary or training period.
Prevailing Wage • Vicinity– the geographic area from which the labor force of the community is drawn. • Employer will normally be required to survey a representative number of comparable firms in the vicinity that primarily employ workers who do not have disabilities for the work being performed.
Prevailing Wage • A comparable firm is one that is similar in size in terms of employees or competes for or bids on contracts of a similar size or nature.
Prevailing Wage • If comparable work cannot be found in the vicinity, the closest comparable community may be used. • If data for the specific job to be performed cannot be found, it is acceptable to use the wage paid to experienced workers employed in similar jobs that require the same general skill levels.
Prevailing Wage • Employer may contact other sources such as the Bureau of Labor Statistics, private or State employment services where surveys are not practical. • Foreign Labor Certification Data Center: flcdatacenter.com • The prevailing wage rate may never be LESS the applicable State or Federal Minimum Wage and will usually be higher. • An increase in the federal and/or state minimum wage does have an immediate impact on the prevailing wages paid in the vicinity.
Prevailing WageSpecial situations • When the employer’s workforce consists primarily of workers who do not have disabilities: • The employer may use as the prevailing wage rate the rate paid to his or her experienced workers who do not have disabilities who perform similar work
Prevailing WageSpecial Situations • When the Section 14(c) employer has a subcontract to perform a job in essentially the same way and with the same type of equipment as the prime contractor: • the Section 14(c) employer may use the wage rate the prime contractor pays to his or her experienced workers.
Prevailing Wage • “De-skilling” of prevailing wage rates (arbitrary downward adjustments made in prevailing wage rates to account for differences in duties, methods, equipment and responsibilities between the work of the worker with disabilities and the work done by employees who do not have disabilities in competitive industry) is not permitted by the Wage & Hour Division.
Prevailing Wage • Although work center certificates and patient worker certificates are now normally issued for a 2-year period, the employer is still required to do an annual review of prevailing wage rate(s) and make any necessary adjustments of commensurate wages.
Prevailing Wage Worker’s wages should be adjusted no later than the first complete pay period following each prevailing wage review.
Prevailing Wage Don’t forget to document in your records that the prevailing survey was completed. 29 CFR Part 525.10(g) requires that you record: • The name, address and phone number of the firm and the date the contact was made. • Individual contacted and his/her title. • Brief description of work involved. • Wage rate provided. • Basis for concluding that wage data provided was not for an entry level position.
Prevailing Wage • When computing prevailing wage, the employer may use either a simple average or weighted average method, provided a consistent methodology is used. • Special Rounding • Go out to the 5th decimal round up to 4th
Prevailing Wage Weighted Average Company # of Employees Wage Rate Gross Wages ABC, Inc. 40 $8.00 $320.00 KLM Co. 17 $8.15 $138.55 XYZ Inc. 25 $8.20 $205.00 82 $663.55 Weighted Average: $663.55 ÷ 82 = $8.09207 $8.0921* * Special Rounding
Prevailing Wage Simple (straight) Average Company Wage Rate ABC, Inc. $8.00 KLM Co. $8.15 XYZ Inc. $8.20 $24.35 Simple average: $24.35 ÷ 3 =$8.11666 8.11667* *Special rounding
Prevailing Wage An increase in the federal and/or state minimum wage does have an immediate impact on the prevailing wages paid in the vicinity. Wage and Hour will mail out written guidance concerning the adjustment of prevailing wages when the federal minimum wage increases.
Prevailing Wage The Fair Minimum Wage Act of 2007 increases the minimum wage from $6.55 per hour to: $7.25 per hour on July 24, 2009
Prevailing WageWhat Happens When the Federal Minimum Wage is Increased? • Employers will have to review all prevailing wage rates. • 2. Employers will have to determine if any of their current prevailing wage rates were established when the applicable state minimum wage exceeded $7.25 per hour.
Prevailing WageWhat Happens When the Federal Minimum Wage is Increased? • Employers will have to adjust certain prevailing wage rates using one of two methods. • a. Percentage Increase (10.69%), or • b. Conduct New Survey
Prevailing WageWhat Happens if the Federal Minimum Wage is Increased? • Employers will have to review all prevailing wage rates. • Are any below $7.25 per hour? • If yes, they must be raised to at least • $7.25 and a new survey will have to • be conducted.
Prevailing WageWhat Happens if the Federal Minimum Wage is Increased? • Employers will have to review all prevailing • wage rates. • Were any current surveys conducted when • the applicable State minimum wage was at • least $7.25? • If yes, and the resulting prevailing wage exceeds $7.25, no new survey need be done until the next anniversary date of that survey or until the state minimum wage increases, whichever comes first.
Prevailing WageWhat Happens if the Federal Minimum Wage is Increased? • If prevailing wage rates need to be adjusted, the employer may: • a. Apply a percentage increase, or • b. Conduct new prevailing wage surveys.
Setting Production Standards • Write job description • Write task analysis • Set the standard • Work measurement must be verifiable
Hourly production standards • Develop job description and task analysis • Define quality • Set standard using workers without disability for the work • 3 time measurements recommended • Length of time study should be one that results in rate of production the worker can maintain over the course of a full work day
Hourly Evaluations • Must be based on the worker’s productivity as it compares to the standard of a worker without a disability for the quantity and quality of work performed. • An initial evaluation of a worker’s productivity must be made within 1 month after employment begins.
Hourly Evaluations • Retroactive pay increase for the initial period is required if the commensurate wage exceeds the wage paid during that period. • Review no less than every 6 months thereafter and after a worker changes jobs. • Worker’s wages should be adjusted no later than first complete pay period following the review.