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The Payment of Special Minimum Wages to Workers with Disabilities under Section 14(c) of the Fair Labor Standards Act

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Title: The Payment of Special Minimum Wages to Workers with Disabilities under Section 14(c) of the Fair Labor Standards Act


1
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

2
FLSA Major Provisions
  • Coverage
  • Minimum Wage
  • Overtime Pay
  • Child Labor
  • Recordkeeping

3
FLSA Coverage
  • Individual
  • Enterprise

4
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

5
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

6
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

7
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

8
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

9
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)

10
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.

11
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.

12
Regulations 29 CFR Part 525
  • Set forth the conditions and terms governing the
    employment of workers with disabilities at
    special minimum wage(s).

13
SPECIAL MINIMUM WAGE
  • SPECIAL MINIMUM WAGE
  • wage paid a worker with a disability
  • commensurate with the workers 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.

14
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

15
Records to support disability
  • Medical, psychiatric, and/or psychological tests
    (Masters level or above) that support the nature
    of disability(ies)
  • AND staff notes on how disability affects
    productivity

16
Employment Relationship
  • Volunteers
  • Trainee

17
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.

18
VolunteersWorkers with disabilities
  • Work must be of the type that would be normally
    classified as volunteer.
  • Work must be performed outside normal duty hours.

19
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.

20
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.

21
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)

22
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.

23
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

24
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.

25
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.

26
Prevailing Wage
  • Experienced worker is 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.

27
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.

28
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.

29
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.

30
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.

31
Prevailing WageSpecial situations
  • When the employers 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

32
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.

33
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.

34
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.

35
Prevailing Wage
  • Workers wages should be adjusted no later
    than the first complete pay period following each
    prevailing wage review.

36
Prevailing Wage
  • Dont 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.

37
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

38
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

39
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

40
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.
41
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
42
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.

43
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

44
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.

45
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.

46
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.

47
Setting Production Standards
  • Write job description
  • Write task analysis
  • Set the standard
  • Work measurement must be verifiable

48
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

49
Hourly Evaluations
  • Must be based on the workers 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 workers productivity
    must be made within 1 month after employment
    begins.

50
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.
  • Workers wages should be adjusted no later than
    first complete pay period following the review.

51
Hourly Evaluations
  • Behavioral factors or general work habits cannot
    be considered when setting hourly commensurate
    wages.
  • Personal time, fatigue, and unavoidable delay
    (PFD) allowance is not required in setting hourly
    standard.

52
Hourly Evaluations
  • Re-work method
  • 90/10 evaluation form
  • Rounding

53
RATING FORM FOR ESTABLISHING WAGE RATES (Worker
is to be rated at least once every six months)
54
9/20/10
10 min
Vacuum hall
10 min
20 min
10 min
50
50
13..00
7.50
8.00
55
Calculating the Hourly Wage using ReworkFilling
out the Rework Hourly Wage Determination Form
  • Employee name of the employee being evaluated.
  • Date/Time
  • Name and Title of Evaluator person who did the
    actual timing and recording.
  • Location where the time study took place.
  • Date date that the tasks were performed and
    timed. Can record up to five different tasks or
    five different timings of the same tasks or a
    combination of both.
  • Tasks Performed brief description of the work
    being timed.
  • Elapsed Time (A) total time taken by the
    employee to complete the entire task.
  • Rework Time (B) should include time needed to
    finish the task so that it is 100 complete (I.e.
    quality is 100.)

56
Rework continued
  • Total Time (C) add the elapsed time and the
    rework time to get the total time.
  • Standard Time (D) time that has been established
    as the production standard to complete the task
    as described.
  • Productivity (D/C) divide the standard time by
    the elapsed time to get the productivity rating
    for task being performed. Shown as a percent.
  • (a) divide the total of the standard times by
    the total of the elapsed times to get the total
    productivity rating for quantity.
  • (b) record the current, ,prevailing industry
    hourly wage or the current SCA Wage Determination
    Rate (for Federal Service Contracts)
  • Hourly Wage Rate multiply the final productivity
    rating (a) by the prevailing industry or SCA wage
    (b). Always round up on this number.

57
Hourly Evaluations
  • Factoring
  • -An employer may rate a worker only on the job
    components actually performed by the worker.
  • -An employer may not penalize a worker because
    he/she fails to perform, or is incapable of
    performing, certain component(s) of the job.

58
Piece Rates
  • When properly computed, piece rates accurately
    reflect the quality and quantity of the
    productivity of the individual worker.
  • Employers must perform some type of work
    measurement to establish standard production
    rates of workers without disabilities.

59
Piece Rates
  • Detailed job description and task analysis should
    be developed for the job, including set-up
    activities, packaging, counting, boxing, clean-up
    activities, and other irregular operations.
  • The time studies should utilize the same work
    methods, equipment, and materials used by the
    majority of the workers.

60
Piece Rates
  • Additional time study required when entirely
    different methods of production are used, or when
    a worker does not have access to certain
    equipment.

61
Piece Rates
  • Jigs modifications made and used to accommodate
    the special needs of individual workers with
    disabilities or to help them be more productive
  • -A separate time study does not have to be made
    utilizing these special modifications.

62
Piece Rates
  • Wage Hour encourages the use of three testing
    periods.
  • The 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.

63
Piece Rates
  • The results of any work measurement must be
    verifiable.
  • Determine average hourly production, allowing for
    personal time, fatigue, and unavoidable delays
    (9-10 minutes per hour).

64
Piece Rates
  • PFD allowance factor
  • -If using 9 minutes per hour, the PFD allowance
    factor should be 1.1765 (60 minutes divided by 51
    minutes equals 1.1765).
  • -If using 10 minutes per hour, the PFD allowance
    factor should be 1.20 (60 minutes divided by 50
    minutes equals 1.20).

65
Piece Rates
  • Prevailing wage rate divided by standard of
    worker without disability Piece rate
  • Rounding
  • Piece rate x Units Produced Commensurate Wage

66
Piece Rates
  • THE GOLDEN RULE
  • Standard multiplied by piece rate must equal or
    exceed the prevailing wage rate

67
Hours Worked Issues
  • Rehabilitation Services
  • Downtime
  • Work samples/simulations
  • Travel time

68
Rehabilitative services
  • Not hours worked provided the services are not
    primarily for the purpose of increasing job
    productivity
  • Examples counseling, psychological testing,
    mobility training, medical treatments, personal
    care, physical or occupational therapy, recreation

69
DowntimeWorkers with disabilities
  • Refers to compensable time when worker is on the
    job but not producing because of factors not
    within his/her control.
  • Downtime should be paid at the rate equal to the
    workers average hourly earnings during the most
    recently completed period, not to exceed a
    quarter.

70
EXTENDED PERIOD(S)OF DOWN TIME
  • The Wage Hour Division has adopted an
    enforcement position which allows community
    rehabilitation programs to remove workers with
    disabilities who are paid special minimum wages
    under Section 14(c) from the production area
    during periods of extended down time and provide
    them with activities that are not compensable.

71
EXTENDED PERIOD(S)OF DOWN TIME
  • Worker(s) must be removed from production area
    so as not to interfere with others who are still
    involved in production.
  • Employer must maintain a record of the time
    employees spend in non-compensable
  • activities

72
Work sample/simulations
  • Not hours worked if
  • Performed in area away from work area
  • Do not yield a product used to fulfill any of the
    facilitys contracts
  • No economic benefit is derived from the product

73
Work sample/simulations
  • -Supervised by non-production personnel
  • -Are a specific part of well-defined program of
    rehabilitation
  • -Typically materials or products are discarded
    or recycled for future use in work simulation

74
Travel TimeWorkers with Disabilities
  • Transportation provided to and from worksite and
    workers home by employer at beginning and end of
    work day is not hours worked. This
    transportation retains the characteristics of
    normal home to work travel.

75
Travel Time Workers with Disabilities
  • Reporting to centralized pickup point to get a
    ride to remote job site not readily accessible by
    public transportation is not hours worked if
  • Workers do not perform any work at the pickup
    point
  • Workers do not engage in any activities
    considered an integral part of their principal
    activity
  • Workers retain the option to transport themselves
    to the jobsite

76
Travel TimeWorkers with Disabilities
  • Any time spent in transportation provided by the
    facility between jobsites during the course of
    the workday is hours worked.
  • The worker shall be paid a wage rate that is at
    least equal to his or her average hourly earnings
    during the most recently completed representative
    period, not to exceed a quarter.

77
Recordkeeping
  • Maintaining good records is essential to proper
    compliance
  • Records need not be kept in any particular form
    and time clocks are not required
  • Payroll records must be kept for 3 years and the
    time cards and wage computation records must be
    kept for 2 years
  • An accurate record of the hours worked each day
    and total hours worked each week is critical to
    avoiding hours worked problems

78
Required Records
  • Employees name, home address, occupation, sex,
    and birth date if under 19 years of age
  • Hour and day when workweek begins
  • Total hours worked each workday and each workweek
  • Total daily or weekly straight time earnings

79
Recordkeeping-workers with disabilities employed
at special minimum wages
  • Prevailing wage survey documentation
  • SCA contract information to include wage
    determination
  • Productivity records
  • Hours worked records
  • Worker without disability production standards
    used to set piece rates or hourly rates

80
Recordkeeping-workers with disabilities-continued
  • Consumer productivity evaluations and supporting
    documents including time studies
  • Posting of required special minimum wage poster
  • Advising consumers orally and in writing of the
    terms of special minimum wage certificate

81
Section 14(c) Certificates
  • Certificates are issued with both an effective
    date and an expiration date.
  • A certificate, along with the employers
    authorization to pay special minimum wages, will
    expire on the indicated date unless the employer
    files an application for renewal with the Wage
    Hour Division before the expiration date.

82
Section 14(c) Certificates
  • Work Center and Patient Worker certificates are
    normally issued for 2 year period.
  • Business and School Work Experience Program
    (SWEP) certificates are normally issued for 1
    year period.

83
Common Errors to Avoid
  • Use of entry level rates or minimum wage for
    prevailing wage rates
  • Failure to conduct prevailing wage survey at a
    minimum of annually
  • Use of behavioral factors to evaluate hourly paid
    workers with disabilities
  • Use of incorrect personal time, fatigue, and
    unavoidable delay (PFD) allowance factor in
    calculating piece rates

84
Common Errors to Avoid
  • Improper rounding of piece rates
  • Recommendation Carry out to 5 decimal places
    and round up to 4 places.
  • Failure to use correct wage determination rate
    for SCA work classification
  • Failure to pay full fringe benefits required by
    SCA wage determination

85
Child Labor
86
Minimum Age Standards
  • 18 and above
  • No limitations
  • Minimum for occupations declared hazardous by the
    Department of Labor
  • 16 and 17 year-olds
  • General minimum for employment
  • Limited to non hazardous occupations
  • No limitations on hours or time

87
Minimum Age Standards(Continued)
  • 14 and 15 year-olds
  • Minimum age for employment in specified
    occupations
  • Limited to work outside school hours
  • Total work hours limited per day and per week
  • Only non-hazardous and non-manufacturing jobs
  • Under 14 years of age
  • Work only in jobs that are exempt from or are not
    covered by the FLSA
  • NOTE Rules differ in agricultural employment

88
Wage Hour Section 14(c) Investigations
  • Complaint or directed
  • Appointment letter
  • Opening Conference
  • Tour
  • Review of records (both staff consumers)
  • -Payroll, time, production records
  • -Disability records

89
Wage Hour Section 14(c) Investigations
  • Verification of sample number of time studies
  • Employee interviews
  • Prevailing wage survey follow up
  • Final conference
  • Letter of findings

90
Enforcement
  • In the event there is not a voluntary agreement
    to comply and/or pay back wages, the Wage and
    Hour Division may
  • Obtain an injunction to restrain the employer
    from violating the FLSA, including the
    withholding of proper minimum wage and overtime
  • Bring suit for back wages and an equal amount as
    liquidated damages

91
Northeast Region Section 14 Team Leader
  • Maggie MacDonald
  • U.S. Dept. of Labor
  • Wage Hour Division
  • JFK Federal Building, Room 525
  • Boston MA 0220
  • 617-624-6720
  • E-mail macdonald.margaret_at_dol.gov

92
CERTIFICATION TEAM STATE ASSIGNMENTS
  • Gail Arnold (312) 596-7198 CA (business
    establishments and schools only), C0, DE, DC, FL,
    GU, IL, IN, IA, KS, ME, NJ, ND, OK, PA, PR, RI,
    TN, VI, and VA.
  • Nicole Howard (312) 596-7200 AL, AR, CA
    (community rehabilitation centers and
    hospital/residential care facilities only), HI,
    ID, LA, MD, MI, MO, NE, NV, NH, NC, SC, UT, WA,
    WV, WI, and WY.
  • Nancy Madison (312) 596-7202 AK, AZ, CN, GA,
    KY, MA, MN, MS, MT, NM, NY, OH, OR, SD, TX, and
    VT.

93
ADDITIONAL INFORMATION
  • Visit the WHD homepage at www.dol.gov/esa/whd_org
    .htm
  • Call the WHD toll-free information and helpline
    at 1-866-487-9243
  • Use the DOL interactive advisor system - ELAWS
    (Employment Laws Assistance for Workers and Small
    Businesses at www.dol.gov/elaws
  • Call or visit the nearest Wage and Hour Division
    Office

94
Thank you,Any Questions?
  • Contact Maggie MacDonald
  • 617-624-6720
  • Anonymous questions answered
  • Stress free atmosphere
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