For other versions of this document, see http://wikileaks.org/wiki/CRS-RL30674
------------------------------------------------------------------------------

      
       

 
   

  




                                                    

                                                         
                                                     
     
Prepared for Members and Committees of Congress
                                                                              



¢
Under Section 14(c) of the Fair Labor Standards Act (FLSA), persons with various physical or
mental disabilities (or persons who have vision impairment or are blind) can be employed at rates
below the otherwise applicable federal minimum wage. Under certificates issued by the Secretary
of Labor, their wages are set at a level commensurate with their productivity and reflective of
rates found to be prevailing in the locality for essentially "the same type, quality, and quantity of
work." For these workers, under current law, there is no other statutory wage rate.

The origins of Section 14(c) treatment of persons with disabilities go back at least to the National
Industrial Recovery Act (NIRA) of 1933-1935. Under the NIRA, a productivity-based sub-
minimum wage, arranged through a system of certificates, was established for persons with
disabilities. In competitive industry, such workers were payable at 75% of the industry minimum.
In sheltered workshops, there was no wage floor. The NIRA was declared unconstitutional in
1935.

With passage of the FLSA in 1938, the certification system was reestablished under Section 14 of
the act. No statutory wage floor was set for persons with disabilities, though, administratively,
minimum wages for the disabled in competitive industry came to be set at 75% of the
federal/FLSA minimum. In the sheltered workshops, the floor was productivity-based with no
lower limit. Under the 1966 FLSA amendments, the system was modified. The rate for persons
with disabilities was set in statute at not less than 50% of the FLSA minimum, both in
competitive industry and in workshops, except that in separate work activities centers where
employment was largely therapeutic and its economic content inconsequential there was no
statutory floor.

Charges of inequities followed, together with a rapid expansion of employment in the work
activities centers. Some suggested that workers with vision impairment should not, on that basis
alone, be included under the Section 14 reduced wage option. A number of studies subsequently
reviewed operation of the system. Congressional hearings on the issue were conducted repeatedly
through the years. In 1986, Section 14(c) was amended to remove the separation of workshops
and work activities centers--and to eliminate any statutory wage floor for persons with
disabilities in certificated employment. In theory, such workers were to be paid a wage
commensurate with their productivity. In 1994, further hearings were held and it was asserted that
the entire system of productivity-based sub-minimum wage rates was inequitable and
unworkable. The law, however, supported by employers of workers with disabilities, was not
altered.

The issue resurfaced in the 107th Congress, but no action was taken on the proposal. No new
legislation dealing with Section 14(c) was introduced in either the 108th or 109th Congresses--and
none as yet in the 110th Congress.




   
                                                                                                               



    
Introduction ..................................................................................................................................... 1
Current Practice............................................................................................................................... 2
Some General Questions with Respect to Implementation of Section 14(c)................................... 3
Evolution of the Section 14(c) Program.......................................................................................... 4
   The Early Initiatives, 1933-1939............................................................................................... 5
   Reform and Oversight (the 1960s) ............................................................................................ 7
       The Morse Proposal and Statutory Change (1965-1966).................................................... 7
       The 1967 DOL Report ........................................................................................................ 8
The 1978 Hearings on the Burton Proposal..................................................................................... 9
The 1980s: Oversight and Restructuring........................................................................................11
   The Wall Street Journal Investigation ......................................................................................11
   The Beard Hearings (1980)..................................................................................................... 12
       Testimony from the Department of Labor ........................................................................ 12
       Assertions, Pro and Con.................................................................................................... 13
   The GAO Report of 1981........................................................................................................ 18
       Separating WACs from Regular Workshops..................................................................... 18
       General Enforcement and Compliance: the "Commensurate" Rate ................................. 19
   The Nickles Hearings (1982) .................................................................................................. 20
   The 1986 FLSA Amendments................................................................................................. 22
       The Murphy Hearings (1985) ........................................................................................... 22
       Section 14(c) Amended (1986) ......................................................................................... 23
The Issue Reopened (1994) ........................................................................................................... 25
   The Traficant Proposal ............................................................................................................ 25
   The Murphy Hearings ............................................................................................................. 25
       Worker and Employer Testimony ..................................................................................... 25
       Testimony from Donald Elisburg (private citizen) ........................................................... 26
Proposals of the 106th Congress .................................................................................................... 28
Legislative Activity: the 107th Through the 110th Congresses ....................................................... 28
   New Legislation in Recent Congresses? ................................................................................. 29
   GAO Revisits Section 14(c).................................................................................................... 29
Concluding Observations .............................................................................................................. 30




Table 1. Specialized Wage Treatment of Workers with Disabilities Under the National
  Industrial Recovery Act (1933-1935) and the Fair Labor Standards Act (1938 ff.)................... 24



   
Author Contact Information .......................................................................................................... 32




    
                                                                                             




Under Section 14(c) of the FLSA, "to the extent necessary to prevent curtailment of opportunities
for employment," the Secretary of Labor may permit payment of wages lower than the otherwise
applicable federal minimum to persons "whose earning or productive capacity is impaired by age,
physical or mental deficiency, or injury." The reduced wage option operates under a system of
certificates issued by the Secretary. No specific wage floor is mandated. However, the Section
14(c) rate is to be, broadly, "commensurate with those [wages] paid to nonhandicapped workers,
employed in the vicinity in which the individuals under certificates are employed for essentially
the same type, quality, and quantity of work." The Section 14(c) wage is to be "related to the
individual's productivity."1

Section 14(c) of the FLSA is narrowly focused. It deals only with workers who, because of a
disability, are deemed to have their productivity (for the particular type of work in which they are
engaged) reduced below that of non-disabled workers. Because of that putative diminished
productivity, they are payable at a wage below the otherwise applicable federal minimum. Where
such workers earn in excess of the federal minimum wage, Section 14(c) is not applicable.2

Some Section 14(c) workers are employed in sheltered workshops; others, in regular firms. By
the mid-1990s, there were 5,912 certificated rehabilitation centers employing about 241,000
disabled workers. In competitive employment, there were 1,809 certificates for authorized
employment of 6,807 workers.3 Of the universe of workers with disabilities covered by Section
14(c), only a small number list visual impairment as their primary disability: the most numerous
categories being retardation or mental illness. Statistical measurement in this area is complicated
in that workers may have a single disability or may have multiple disabilities. Further, with
training (or placed in a specialized work environment), they may be able to overcome one of their
disabilities but not another. And, those employed under Section 14(c) represent a relatively small
proportion of persons with disabilities--or, for that matter, of persons with disabilities who are
employed but who are outside the Section 14(c) system.4

1
  Section 214(c) of the Fair Labor Standards Act, as amended. The act is the primary federal statute dealing with
minimum wages, overtime pay, child labor, and related issues.
2
  This report focuses narrowly upon Section 14(c) of the FLSA. For a broader consideration of issues involving persons
with employment disabilities, see CRS Report 98-921, The Americans with Disabilities Act (ADA): Statutory Language
and Recent Issues, by Nancy Lee Jones.
3
  U.S. Department of Labor, Employment Standards Administration, Minimum Wage and Overtime Hours Under the
Fair Labor Standards Act: 1998 Report to the Congress Required by Section 4(d)(1) of the Fair Labor Standards Act,
Washington, June 1998, p. 42. (Hereafter cited as DOL, Section 4(d)(1) Report.) The certificates, the department notes,
include "temporary certificates for trainees that were issued by state vocational rehabilitation agencies and the Veterans
Administration and certificates issued for school work-experience programs." Where workers have multiple
disabilities, an accurate count (with distinction as to primary and/or secondary disability) may prove difficult. Further,
disabled workers, like others, may move in and out of the workforce. It is not always clear how long a disabled worker
may remain engaged in sheltered employment or how many persons may find sheltered employment a short-term
expedient. Wage data are similarly problematic. Wages for such workers are, in theory, commensurate with their
productivity. But, since productivity may vary with a shift from one production process to another, their commensurate
wage can be flexible. Specific wage data are not readily available.
4
  Estimates of the number of persons with disabilities and of their employment status vary substantially, depending
upon the definition of "disability" and of "employment": concepts that appear to differ from one context to another. In
1997, there would seem to have been about 14 million persons with disabilities in the labor force. See John M. McNeil,
Employment, Earnings, and Disability, a paper prepared for the 75th Annual Conference of the Western Economic
Association International, June 29-July 3, 2000; and CRS Report RL30653, The Employment of People with
(continued...)



   
                                                                                           



In the 106th Congress, legislation was introduced that would have removed vision impairment
from the criteria for a Section 14(c) exemption: inter alia, H.R. 3540 (Isakson) and S. 2031
(Dodd). Neither bill was acted upon. In the 107th Congress, a similar measure was introduced by
Representative Isakson: H.R. 881. The bill was referred to the Committee on Education and the
Workforce, Subcommittee on Workforce Protections, but once again, no action was taken on the
proposal.

In the 108th Congress and in the 109th Congress, legislation dealing with Section 14(c) was not
introduced--nor the wage treatment of persons who are vision-impaired or who have other
disabilities. And, no comparable legislation has as yet been introduced in the 110th Congress.

This report sketches the evolution of wages and related issues under Section 14(c) of the Fair
Labor Standards Act. It does not deal with other workplace issues affecting persons with
disabilities.


    
Under Department of Labor (DOL) regulations, a worker with a disability is one "whose earning
or productive capacity is impaired by a physical or mental disability, including those relating to
age or injury, for the work to be performed." (Italics added.) Such disabilities may "include
blindness, mental illness, mental retardation, cerebral palsy, alcoholism, and drug addiction." The
regulations acknowledge that "a disability which may affect earning or productive capacity for
one type of work may not affect such capacity for another."5

"Employment" is defined broadly in the FLSA: "to suffer or permit to work." The existence of an
employment relationship "does not depend upon the level of performance or whether the work is
of some therapeutic benefit." Patients, working within an institutional context, may be classified
as employees if "the work performed is of any consequential economic benefit to the
institution."6 Some difficulty may arise in distinguishing strictly charitable or therapeutic activity
from marginally profitable work. Case-by-case judgments are necessary.

Disability is not a unilateral judgment on the part of an employer. The "nature and extent" of the
disability must be assessed, together with the precise relationship between the disability and
reduced productivity: a disability unrelated to productivity is insufficient for Section 14(c)
purposes. A comparison must be made between the "productivity of the workers with disabilities"
and "the norm established for nondisabled workers"--with careful documentation maintained by
the employer. For each of these measurements, a carefully structured system has to be in place.7


(...continued)
Disabilities: Federal Data Sources and Trends, by Dennis M. Roth.
Under Executive Order 13078 of March 13, 1998, President Clinton established a National Task Force on Employment
of Adults with Disabilities, to be chaired by the Secretary of Labor. Inter alia, the Task Force (BLS and the Census
Bureau) was directed to "design and implement a statistically reliable and accurate method to measure the employment
rate of adults with disabilities" and to report prior to termination of the Task Force in 2002.
5
  Concerning regulatory language, see 29 CFR 525.
6
  There is a specialized certificate program for patient workers. In 1996, 376 certificates were issued for authorized
employment of 14,472. See DOL, Section 4(d)(1) Report, p. 42, cited above.
7
  Whether such systems actually are in place and the extent to which they are feasible is part of the continuing debate
(continued...)



   
                                                                              



When a certificate has been issued to an employer for employment of workers with disabilities,
the terms of the certificate are to be made known to the worker "and, where appropriate, a parent
or guardian of the worker." When a disabled worker is hired, an "initial evaluation" of his or her
productivity "shall be made within the first month after employment begins in order to determine
the worker's commensurate wage rate." (Italics added) Further, the employer must agree (a) to
review the wage rates paid to such workers at least once every six months and (b) to review the
wages of all Section 14(c) employees at least once each year to insure that the Section 14(c)
wages "reflect changes in the prevailing wage paid to experienced nondisabled individuals
employed in the locality for essentially the same type of work." The worker ("or the parent or
guardian" of the worker) may appeal to the Secretary concerning the circumstances of his or her
employment.

Under the commensurate rate, there is no effective floor; it can vary from zero to the full FLSA
minimum. Where workers are paid in excess of the regular FLSA minimum wage, the wage
requirements of Section 14(c) are basically moot.


      
    
Through the years, the Section 14(c) reduced wage option, or Section 14 during the early years of
the FLSA, has sparked a range of questions. For example, is the sub-minimum wage
(commensurate rate) equitable and appropriate? Does it lend itself to abuse? And, has the Section
14(c) program been monitored, effectively, by the DOL? Beyond these concerns, some have
questioned whether the blind (based upon their vision impairment alone) ought to be included
under the Section 14(c) commensurate wage option. Might approaches, other than the sub-
minimum wage option under Section 14(c), be more effective in providing income, rehabilitation,
and other services to persons with disabilities within sheltered employment?

Within the context of Section 14(c), other more technical queries have also been raised. The
regulations implementing Section 14(c) require substantive standards for measurement of the
locally "prevailing wage rate" upon which, in part, the "commensurate wage" paid the disabled
worker is based. In methodological terms, such determination can be complex. For a firm (or
agency) employing persons with disabilities to secure comparable wage/benefit data from
competing firms--in the locality and engaged in essentially the same type of work--also presents
problems. Comparability may pose a question: namely, finding the same or similar production
processes, product lines, equipment, work organization, managerial input, etc.

When is a worker disabled for Section 14(c) purposes? How is impairment measured--and by
whom? While there must be a relationship between the specific disability and the type of work
performed (with resultant diminished productivity), would the worker be equally disabled in all
occupational circumstances? What if the work were more carefully structured or if specialized
equipment were utilized? Are all deviations from the norm equally burdensome and equally an
impairment: for example, physical disability, mental retardation, loss (or partial loss) of vision?


(...continued)
with respect to Section 14(c) and is discussed below.




   
                                                                                          



Such assessments may be difficult to render under the best of circumstances; where workers have
multiple-disabilities, significant sophistication and staff training may be required.

Disabled persons in sheltered workshops often work as teams which raises further questions
concerning wage rates. DOL regulations note: "Employers may `pool' earnings only where piece
rates cannot be established for each individual worker," as, for example, in "team production"
where "each worker's individual contribution to the finished product cannot be determined
separately." In such situations, the employer is admonished to "make every effort to objectively
divide the earnings according to the productivity level of each individual worker."8 Such
disaggregation, however, may be impossible.

Even though most operators of sheltered workshops are charitable or nonprofit institutions or
governmental entities, they are nonetheless employers and have a labor-management relationship
with Section 14(c) workers. Where such workers are not covered by a collective bargaining
agreement, who bargains for them? Who negotiates for them in the employment process? Their
disabilities may reduce their options for other employment, shaping the power balance in the
labor-management relationship. Where Section 14(c) workers are represented by a parent or
guardian, there may be a subtle conflict of interest. Allowing the disabled person to engage in
useful activity (even if largely custodial) may be of primary importance: whether that activity is
also economically productive may be of less concern to the parent or guardian.

The Section 14(c) reduced wage option is permitted though certification by the Secretary of
Labor. But, how closely does DOL monitor the actual wages and working conditions of such
employees and inspect sheltered workshops or work activities centers? When an inspection is
made, are the concerns of the workers--some blind, some perhaps unable to speak clearly, others
emotionally disturbed or mentally retarded--given appropriate weight vis-a-vis those of the
supervisory staff?

Is there a similarity of interest among all Section 14(c) workers, regardless of the severity of their
disabilities?9 Are differences of individual productivity adequately taken into account when
structuring work--and with respect to wages? While there is a complex system through which a
worker (or his or her parent or guardian) can appeal to the department, is the process effective and
effectively available to workers with disabilities who are, by definition, disadvantaged--often
personally and in the world of work?


                                                               
Work-related programs to assist persons with disabilities share a common purpose: to allow the
client/worker population "to work and to acquire the benefits that come from work."10 Those
benefits may include skill development, socialization to the world of work, a sense of personal

8
  Code of Federal Regulations (July 1, 1996), Title 29, Part 525.12 (i).
9
  As noted above, the definition of a "disability" may vary from case to case. For some workers who could not tolerate
competitive employment, there may be a prolonged need for sheltered work. For others, whose disability is marginal, a
brief period of training may allow them to be transitioned into competitive employment.
10
   Nathan Nelson, Workshops for the Handicapped in the United States: An Historical and Developmental Perspective
(Springfield, Ill.), Charles C. Thomas, Publisher, 1971, p. 5. (Hereafter cited as Nelson, Workshops for the
Handicapped in the U.S.)




      
                                                                                      



confidence and esteem, rehabilitation, and social contact. But, they may also include an
employer's desire for productivity and a worker's desire for wages earned under decent working
conditions. Thus, arguably, public policy might be expected to seek a balance between humane
considerations and economic interests.


 ¢ 
The origins of Section 14(c), like much else about the FLSA, are linked to the NIRA of the early
New Deal. Under the NIRA (1933-1935), codes of conduct which normally included minimum
wage, overtime pay, and related standards, were written for most industries. Once in place, they
provoked a flood of complaints that employers "took advantage of the codes to break down
decent standards." Some charged that ordinary workers were artfully classified in order to exempt
them from otherwise applicable standards while categories of work (traditionally performed by
the older workers and by minorities) were defined as beyond the reach of the codes.11

On February 17, 1934, President Roosevelt issued an executive order defining the treatment of
persons with disabilities under the NIRA. He decreed that a person "whose earning capacity is
limited because of age, physical or mental handicap, or other infirmity, might (with DOL
certification) be employed on light work at a wage below the minimum established by a Code."
No wage floor was established other than that specified in the certificates for employment. DOL
set about development of "methods of determining who are substandard workers" but then
delegated actual operation of the program/option to the several state agencies.12

To prevent manipulation of the system by employers seeking low-wage labor under the pretense
of helping persons with disabilities, certificates specified the nature of the disability of each
individual worker, his or her work history, prospective wage, etc., with a place for a doctor's
estimate of the specific physical or mental condition.13 A linkage between impairment and
productivity was necessary with the wage reduction "proportionate to the reduction in their [the
worker's] efficiency."14

With time, these workers came to be divided into three classifications under the NIRA. First,
there were employees of sheltered workshops, where the wage floor was set by the charitable
institution.15 Second, there were disabled workers in the private for-profit sector, where the floor
(in the absence of a special code provision) could not be "less than 75 percent of the minimum
wage" in the industry. Such workers could not constitute more than "5 percent of the working


11
   These assertions may need further research to assess. See Bernard Bellush, The Failure of the NRA (New York:
Norton and Company, Inc., 1975), pp. 43-44, 55, 74-78, and 166; and Raymond Wolters, Negroes and the Great
Depression: The Problem of Economic Recovery (Westport, Conn.: Greenwood Publishing Corporation, 1970), pp.
110-112.
12
   U.S. Department of Labor, Twenty-Second Annual Report of the Secretary of Labor for the Fiscal Year Ended June
30, 1934 (Washington: GPO, 1935), p. 7. Italics added. See also Margaret H. Schoenfeld, "Analysis of the Labor
Provisions of NRA Codes," Monthly Labor Review, March 1935, pp. 574-603. (Hereafter cited as Schoenfeld, Analysis
of the Labor Provisions of NRA Codes.)
13
   "Enforcement of Code Provisions Limiting Employment of Handicapped Workers," Monthly Labor Review, May
1934, p. 1058. "Old age" did not require a doctor's certificate.
14
   Schoenfeld, Analysis of the Labor Provisions of NRA Codes, pp. 595-596.
15
   "Exemption of Handicapped Workers and Sheltered Workshops from Code Provisions," Monthly Labor Review,
April 1934, p. 804.




   
                                                                                          



force in any establishment."16 Third, special treatment was later afforded certain persons who, by
virtue of disability, were employed in industrial homework.17 When the NIRA was declared to be
unconstitutional (May 27, 1935), its requirements were largely set aside.18

Two years later, in May 1937, President Roosevelt called for enactment of federal wage and hour
legislation, a proposal that touched off a year of debate--part of which focused upon workers
who might be regarded at outside the mainstream. During hearings on the legislation, Labor
Secretary Frances Perkins endorsed a reduced wage option for "substandard workers" whom she
understood to include "persons who by reason of illness or age or something else are not up to
normal production."19 As consideration of the legislation progressed, it became less clear how
"substandard workers" and "or something else" might be interpreted. Some argued that in certain
regions of the country (namely, in the South), workers tended to be slower of movement and less
oriented toward production, and thus, they should be payable as "substandard" workers. Others
saw the option as a device through which "to discriminate against Negro workers as was done
under N.R.A."20 Such concerns set the stage for ongoing debate over sub-minimum wages for
various segments of the workforce.

In general, a reduced wage for workers with disabilities under the FLSA seemed to provoke little
concern. Largely following NIRA practice, the 1938 statute read

         Section 14. ... the employment of individuals whose earning capacity is impaired by age or
         physical or mental deficiency or injury, under special certificates issued by the
         Administrator, at such wages lower than the minimum wage ... and for such period as shall
         be fixed in such certificates.

Thus, for persons with disabilities, the wage floor was whatever the Administrator determined
was appropriate. President Roosevelt signed the FLSA on June 25, 1938.

The Wage and Hour Administrator (DOL), sensitive to issues raised during the hearings,
affirmed: "No Special Certificate will be issued for a worker because he is shown to be slow or
inexperienced, unless he is handicapped within the meaning of the act and these regulations."
Administratively, he set a wage floor of not less than 75% of the standard 25 cent federal
minimum wage (i.e., 17½ cents per hour). However, fearing that the 17½ cent rate might disrupt
"the work of rehabilitation being carried on by ... charitable groups," he ruled that the wages in
the sheltered workshops would be set "on the basis of earning capacity."21 Thus, in practice, a
dual standard was established: a productivity wage in sheltered workshops; a specific minimum
rate for other sheltered employment.

16
   Schoenfeld, Analysis of the Labor Provisions of NRA Codes, p. 595; and "Enforcement of Code Provisions Limiting
Employment of Handicapped Workers," Monthly Labor Review, May 1934, p. 1058.
17
   Executive Order 6711-A by President Franklin D. Roosevelt, May 15, 1934, compiled in United States Executive
Orders, available in the Law Library, Library of Congress.
18
   "National Recovery Program: Decision of Supreme Court on the National Industrial Recovery Act," Monthly Labor
Review, June 1935, pp. 1466-1483.
19
   U.S. Congress, Joint Hearings before the Senate Committee on Education and Labor and the House Committee on
Labor, Fair Labor Standards Act of 1937, hearings, 75th Cong., 1st sess., June 4, 1937, and forward. (Washington:
GPO, 1937), p. 190. Italics added. (Hereafter cited as Joint Hearings, Fair Labor Standards Act of 1937.)
20
   Ibid., p. 573-574. It was also suggested that the determination of "substandard" be left up to the various states.
21
   U.S. Department of Labor, Wage and Hour Division, Press Releases, R Series, October 12, 1938, and November 10,
1938.




   
                                                                                          



From the beginning, the social services industry tended to dominate the program that would
evolve as Section 14(c). Under the NIRA, a special Sheltered Workshop Committee had been
established with representatives of charitable institutions and social work organizations. No one,
it appears, was specifically representative of workers with disabilities.22 Under the FLSA, the
department again called for counsel from "leaders in the field of rehabilitation among the
handicapped." But, it was not clear who spoke for the persons with disabilities as workers.

Institutional spokespersons, inevitably, wore two hats: first, as representatives of charitable
institutions or related organizations; and, second, as employers of the disabled (or associates of
such employers). In the latter context, they were employers of unorganized workers, by definition
suffering a disability, likely disadvantaged economically, and perhaps unable effectively to
represent themselves in the labor-management relationship. Calling upon the social services and
sheltered workshop community for leadership had a certain logic: but, it also presented a potential
conflict of interest. The pattern would persist to the end of the century.


                                                       
The FLSA's handicapped provisions remained unchanged for nearly three decades (i.e., no wage
floor for sheltered workshops), a sub-minimum rate for sheltered employment in the competitive
sector set administratively at 75% of the otherwise applicable federal minimum rate.

    ¢ 
In June of 1965, Senator Wayne Morse (D-OR) proposed a change in the wage structure for the
disabled under the FLSA. He proposed (a) to bring the moderately disabled up to the full
minimum wage over a three-year transitional period, and (b) to require that the more severely
disabled--still under DOL certification--be paid not less than 50% of the otherwise applicable
minimum.23

Employers of the disabled were critical of the Morse proposal, branding it "unrealistic" and "a
drain on the economy" and forecast that its enactment "would deprive severely disabled people of
the opportunity for employment."24 During these debates, a cleavage developed between the blind
and other workers with disabilities. In the early 1960s, there had been "a movement by some
organizations for the blind and others to eliminate the minimum wage exemption for handicapped
persons in workshops."25 The National Federation of the Blind urged that the Morse proposal be
adopted. It argued that the sub-minimum wage option for sheltered workshops "permits ready
abuse at the expense of handicapped workers, particularly in the absence of a vigorous
investigation and enforcement program."26


22
   NRA Press Release No. 5032, May 12, 1934.
23
   Congressional Record (CR), June 28, 1965, pp. 14956-14957.
24
   U.S. Congress, Senate Subcommittee on Labor, Committee on Labor and Public Welfare, Amendments to the Fair
Labor Standards Act, hearings, 89th Cong., 1st sess., Part 2, July 6-16, 1965 (Washington: GPO, 1965), pp. 1331-1333.
(Hereafter cited as Senate Subcommittee on Labor, Amendments to the Fair Labor Standards Act.)
25
   Nelson, Workshops for the Handicapped in the U.S., p. 134.
26
   Senate Subcommittee on Labor, Amendments to the Fair Labor Standards Act, p. 1341-1342, and 1352-1355.
Hereafter, consideration of Section 14(c) issues became increasingly framed as a conflict between spokespersons for
the blind, notably the National Federation of the Blind (NFB), and the social services industry. While there are many
(continued...)



       
                                                                                           



Modified through the legislative process, the Morse proposal (P.L. 89-601) came to provide (a)
that the reduced wage option for the disabled be applied to agricultural employment; (b) that the
wage rate in certificated employment outside of the work activities centers be not less than 50%
of the federal minimum wage; and (c) that regular sheltered employment be divided from more
nearly therapeutic sheltered employment ("work activities centers") for which there would be no
wage floor. In the "work activities centers," operating under DOL certification, those with severe
disabilities would be engaged in work "which is incidental to training or evaluation programs"
and would be paid "at wages ... which are related to the worker's productivity." Congress
mandated that such wages must "constitute equitable compensation" for center clients and
defined "work activities centers" as

         ... centers planned and designed exclusively to provide therapeutic activities for handicapped
         clients whose physical or mental impairment is so severe as to make their productive
         capacity inconsequential.

DOL was directed to study the wage structure of "handicapped clients of sheltered workshops"
and to report to Congress, with recommendations, by July 1, 1967.


                 
DOL accepted the spirit of the original (now modified) Morse proposal as indicative of the intent
of Congress: "that handicapped workers' wages be raised to at least the minimum wage as soon as
feasible."27

The 1967 DOL report suggested that workshops, themselves, were partly to blame for the reduced
productivity of sheltered workers (i.e., the result of "obsolete methods of organization and
production.")28 It averred that the industry had not been entirely forthright in dealing with the
wage issue under the 1966 amendments. "Instead of increasing wages," it suggested, the
workshops had reinvented themselves as "work activities centers ... and thus have no applicable
statutory minimum wage rate." However, it concluded, a further minimum wage increase would
be "more likely to increase the number of `work activities centers' than to increase wages."29

Instead, to provide workshop employees a realistic earning opportunity, DOL proposed: wage
supplements for disabled workers, increased funding of social services, improved equipment in
the facilities, and technical assistance for managers. In short, it urged an expanded public
commitment to the disabled. The report concluded: "We must at the outset face up to the fact that
the achievement of a full minimum wage for handicapped clients of sheltered workshops will


(...continued)
other entities that work in behalf of the vision-impaired through various channels, the NFB has been a consistent
presence through the years when Congress has considered the Section 14(c) issue.
27
   U.S. Department of Labor, Wage and Hour and Public Contracts Divisions, Sheltered Workshop Report of the
Secretary of Labor (Washington, GPO, September 1967), p. 1. (Hereafter cited as DOL, Sheltered Workshop Report.)
28
   Ibid., p. 2-3.
29
   Ibid., p. 4-5. The number of work activities centers "increased from 513 in 1968 to 3,656 in 1981" while during the
same period, regular workshops "increased from 686 to 1,854." See U.S. Congress, Senate Subcommittee on Labor,
Committee on Labor and Human Resources, Amending the Fair Labor Standards Act of 1938, hearing, 97th Cong., 2nd
sess., August 11, 1982 (Washington: GPO, 1982), p. 5. (Hereafter cited as Senate Subcommittee on Labor, Amending
the Fair Labor Standards Act of 1938.)




   
                                                                                        



require outside financial support." And, it added: "This will mean a basic shift away from basing
wages on what the handicapped worker can `produce.'"30

Implicit in the DOL report were a number of complex policy issues. For example: (a) Should
there be federal wage subsidies for disabled workers? If so, how should they be determined and
upon what should they be based? What ought to be the relationship between the earnings of
workers in sheltered employment and any welfare or other benefits which they may receive? (b)
Given the client diversity in sheltered employment, should clients enjoy equality of
compensation? Would productivity-based earnings be reduced where severely disabled and
minimally disabled persons engage in team production? Might such arrangements have a
disproportionate impact upon the blind? (c) Profitability of sheltered employment and the wages
of handicapped workers depends upon involvement in the market. Might subsidized sheltered
employment unfairly compete with unsubsidized private sector firms and their workers? (d)
Might the very nature of sheltered employment be conducive to exploitation of the disabled
worker? In the absence of a union, who would speak for such workers? Is it feasible to combine,
in one person (or institution), the roles of caregiver, therapist and employer?


                    
    
After 1966, it appears, the number of persons with disabilities served under Section 14 increased
substantially. Further, clients enrolled in sheltered programs appear to have had a higher "level of
severity" of disability than those of prior years. There seems also to have been increased pressure
with respect to productivity and out-placement and enhanced tension among groups of disabled
workers/clients. At the same time, the "average hourly earnings in workshops" had not kept pace
with the statutory minimum.31 Perhaps for all of these reasons, congressional oversight in 1978
seems to have focused upon sheltered employment of persons with vision impairment. Should
they continue to be a part of the sheltered programs; and, if so, upon what basis and through how
long a period?

In June 1977, Representative Phillip Burton (D-CA) introduced legislation to prohibit payment of
Section 14(c) sub-minimum wages to "individuals who are blind or whose sight is impaired." The
Burton bill was not intended to exclude persons with vision impairment from sheltered
employment: merely to insure that, were they so employed, they would be paid at least the federal
minimum wage. The sheltered industry argued that such payment would be inequitable.

Hearings were conducted by the House Subcommittee on Labor Standards on May 10-11, 1978.
James Gashel (National Federation of the Blind, NFB), describing himself as "the only non-
industry person" at the opening session, declared that the Burton proposal would establish "a far-
reaching principle ... that the blind are not to be considered as handicapped workers."32
Management spokesperson Milton Jahoda (Cincinnati Association for the Blind), opposing the
bill, questioned whether "... it [would] be fair, appropriate, ethical, or logical for a blind person to

30
   DOL, Sheltered Workshop Report, pp. 5-7.
31
   U.S. Congress, House Subcommittee on Labor Standards, Committee on Education and Labor, Application of the
Fair Labor Standards Act to Blind and Handicapped Workers, hearings, 95th Cong., 2nd sess., May 10-11, 1978
(Washington: GPO, 1978), p. 91. (Hereafter cited as House Subcommittee on Labor Standards, Application of the Fair
Labor Standards Act to Blind and Handicapped Workers.)
32
   Ibid., p. 32.




       
                                                                                          



be paid the statutory minimum ... regardless of productivity [when engaged in team production],
when a person who is a victim of cerebral palsy or who had some other disability is being paid
according to his ability to produce? I would suggest," he said, "that it is not."33

Proponents of the Burton bill suggested that blind workers were often victimized by their
employers (sometimes by indirection), even by non-profit and quasi-charitable employers. They
argued that sheltered workshops, perhaps because of their charitable and welfare orientation, were
often not structured for profitability and production. Managerial practice in such establishments,
it was argued, tended to be soft, with managers failing to manage. Further, it was argued,
employment in the workshops could have a negative impact on a worker's skills and self-
confidence, retarding transition to competitive employment: for example, payment of a sub-
minimum wage could be a constant reaffirmation of the worker's putative inability to produce.
They noted a conflict of interest where the workshops are expected to compete in the market
while transitioning their best workers to competitive industry.

"The system of certification ... is open to abuse and has been abused," Gashel stated. "It is
confusing and cumbersome; how can a blind worker have any confidence that he or she is
receiving what the law allows?" He noted the complex structure of certification and argued that
"only a lawyer, an accountant, or perhaps a federal bureaucrat can determine how they relate and
apply in any particular case."34 It should be noted that while these arguments were made by
advocates for the blind, they could be used as well to argue against sub-minimum wage rates for
certain other disabled workers.

Industry tended to oppose the Burton bill. As managers with responsibility for diverse groups of
client/workers, they saw a different set of opportunities and challenges and tended to emphasize
the therapeutic value of work, not its economic rewards. Some blind persons, they conceded, may
be fully competitive with sighted individuals; others may need an opportunity to work in
"sheltered" employment where the pace is restrained, supervision is readily available, and
accommodation can be made for idiosyncracies. Such opportunities are costly, both in terms of
staff and of diminished overall production. A sub-minimum wage helps offset those costs.

What some may perceive as managerial inefficiency, the industry suggested, may well be
adjustment by staff to the special needs of workers in different stages of skill development.
Similarly, while an absence of sophisticated equipment may reflect the fiscal constraints of quasi-
charitable institutions, it may also be an accommodation to the skill levels of a workforce that is,
by definition and recruitment, disabled. Finally, a team approach to work, institutional witnesses
suggested, provides a context for learning and growth. There may be utility in mixing workers of
differing levels of growth in a single production process so that they learn from each other.

The hearing also focused on DOL administration of the Section 14(c) program. Wage and Hour
Administrator Xavier Vela noted that some 163,000 handicapped workers were then employed
(1978) in 3,511 certificated sheltered workshops. During FY1977, DOL made "a total of 155
onsite investigations ... an increase of 67 percent over the previous year."35 At that rate, it could
33
   Ibid., p. 61.
34
   Ibid., p. 49-50. It was also argued that some workshops, as charitable institutions, were recipients of community
support, have tax advantages, are favored by federal and local governments in procurement terms and, therefore, should
be expected to pay at least the minimum wage.
35
   House Subcommittee on Labor Standards, Application of the Fair Labor Standards Act to Blind and Handicapped
Workers, pp. 91-92. A parallel issue is the quality of the investigations undertaken. (See discussion, below.)




       
                                                                             



be expected to take about 22 years to complete a cycle of oversight of sheltered employment.
Vela, however, noted other complications. "Many of the managers of the sheltered workshops are
not sufficiently knowledgeable in costing and pricing," he said, "... essential elements of a
successful workshop operation." And he pointed to "the relatively high turnover of top workshop
staff."36 Thus, there emerged an image of a program for the disabled, lacking in federal oversight,
managed by ill-trained staff, and subject to high managerial turnover.

The Burton proposal was not adopted. It did, however, provide an occasion for a reexamination of
Section 14(c).


                       
In 1979, The Wall Street Journal published two investigative articles on employment of the blind
in the New York City area and in certain other sections of the country as well. These provoked
further congressional interest and led to an inquiry by the General Accounting Office (GAO; now
the Government Accountability Office) into operation of Section 14(c). Hearings would follow in
the House (1980), in the Senate (1982), and again in the House (1985). In 1986, Congress would
amend Section 14(c), reversing the position it had taken 20 years earlier.


    
Reporters Jonathan Kwitny and Jerry Landauer opened their Wall Street Journal series with the
observation: "Blind people for years have entered the job market through so-called sheltered
workshops--sheltered by law, that is, from having to pay the blind workers the minimum wage."
Further, "many of the blind workers feel they are working at coolie wages, helping to fatten the
profits not only of the charities that run the workshops but also of the big companies" that
contract with them.

Workshop administrators, they stated, justify the low rates on at least two grounds: that blind
workers "produce less" and that "in any case most blind workers receive other benefits through
Social Security payments and tax exemptions." They wrote about low wages and adverse working
conditions--and about blind workers allegedly fired for pro-union activity. Management had
opposed unionization, The Journal reported. It suggested that, to management, "its blind workers
aren't employees but `clients.'" (Italics added.)

Kwitny and Landauer went on to discuss administrative and financial practices within the
workshops and the related institutions: the allegedly high salaries for administrators (some said to
be military personnel on pension), and the relationship between the workshops and the business
community. Were the workshops operating under an unfair competitive advantage?37 Also
questioned was the institutional relationship between the regular workshops and the work
activities centers.38



36
   Ibid., p. 92.
37
   The Wall Street Journal, January 24, 1979, pp. 1, 35.
38
   The Wall Street Journal, January 25, 1979, pp. 1, 31.




       
                                                                                         



  

In May 1980, the House Subcommittee on Labor Standards, chaired by Representative Edward
Beard (D-RI), conducted two days of oversight hearings on Section 14(c) and on legislation
reintroduced by Representative Burton. The hearings produced little consensus among worker
and employer witnesses, but did suggest, overall, that something was amiss. DOL confirmed that
its oversight of the program had been inadequate--but it offered little hope of substantive
improvement. Internally, the system of sheltered employment seemed conflicted with growing
tensions between the least and most severely disabled. The wage rate determination process, it
was argued, was inadequate. Nor did employers of the disabled provide a totally clear picture of
who they were and what their mission was.

As the lead witness, Representative Patricia Schroeder (D-CO) charged that the industry was
guilty of "workshop schizophrenia." It was a critical issue that would infuse debates on the issue
through the next two decades. She noted that some workshops "consider themselves to be both a
rehabilitation center providing services to their `clients,' and a place of employment providing
work to their `employees.'" The dichotomy could not be ignored with impunity. She called for a
"top to bottom reorganization" of the system with the crucial "first step" that workshops come to
regard their "`clients' as `employees.'"39

¢                                 
As in 1978, a central and critical issue was of DOL administration of the Section 14(c) program.
The primary departmental witness was Donald Elisburg, Assistant Secretary for Employment
Standards since the beginning of the Carter Administration, with responsibility, inter alia, over
Section 14(c).

Elisburg's opening comments were largely factual and routine. He assured the Subcommittee that
DOL "cares about the welfare of workers in sheltered workshops and is committed to the
vigorous enforcement of fair labor standards in those workshops." He noted there were then
"4,000 certificated workshops employing nearly 180,000 workers" with work activities centers
accounting for "slightly over two-thirds of all sheltered workshop employment." Increasingly, he
stated, certificated employment was of "the severely handicapped." Thus, he stated, "the
yardstick for measuring the success of a workshop cannot simply be how many leave ... to enter
competitive employment" but "must also be measured in more human terms"--"the sense of
accomplishment and self-respect as well as income earned."40

Elisburg acknowledged that the workshop program had "long been considered routine" and had
"suffered from a lack of attention by the policy makers of several successive administrations."
The program, he said, was "relatively obscure with little attention focused upon it." Applications
for sub-minimum wage employment "were routinely approved." The Wage/Hour Division had
"demonstrated ... a low priority for investigations." Compliance staff "were not afforded the
specialized training needed" for "dealing with the special procedures and technical problems


39
   U.S. Congress, House Subcommittee on Labor Standards, Committee on Education and Labor, Oversight Hearings
on Section 14(c) of the Fair Labor Standards Act, hearings, 96th Cong., 2nd sess., May 14-15, 1980 (Washington: GPO,
1978), pp. 3-12. (Hereafter cited as House Subcommittee on Labor Standards, Oversight Hearings on Section 14(c).)
40
   Ibid., pp. 17-21.




       
                                                                                            



involving the sheltered workshops." Again: "The Wage and Hour Division did not have an
accurate barometer against which to measure the productivity of the handicapped worker."41

This was not an indictment from a new appointee, assessing the neglect of his predecessor.
Elisburg, here, was three years into his tour of duty: his performance was under review. Although
workers with disabilities apparently were not a primary concern for DOL, Elisburg recognized "a
need to strengthen the management" of the program and "to commit more of our resources to its
enforcement." In FY1979, he reported, DOL had found 57% of workshops investigated were in
violation of the wage requirements of the FLSA. But, he also acknowledged that the department
expected to investigate only 10% of the 4,000 workshops during FY1980: that is, that a workshop
employer of the disabled could expect to be investigated only once in a decade.42 He stressed the
need for highly trained investigators, better training for workshop managers, a heightened
awareness on the part of workers of their rights--and increased computerization to help with
monitoring certification. "... we believe that we are now moving in the right direction. Our
managers," he stated, "now understand that we expect the sheltered workshop program to be
more than a paper processing operation."43

What could workers with disabilities expect from DOL, Chairman Beard challenged. Elisburg
was reassuring. "... if we are properly running this workshop program, if we are carefully looking
at these applications and the standards against which individuals are measured, those people with
disabilities who are in these workshops should not be impeded in their productivity." Pointing to a
hearing room "packed with people" who, he argued, feel that the law had not functioned properly,
Chairman Beard queried: "... what guarantees can you give them?" Elisburg again was reassuring.
"It is hard to give anyone a total guarantee, but we have stepped up our investigations. We are
very responsive to complaints." Then, he added: "... to the extent there has been exploitation, it
should never have been allowed. We are simply not going to allow it in the future."44


        
Divisions of philosophy were evidenced, together with some measure of hostility between
employer and employee groups. The schizophrenia referred to by Representative Schroeder early
in the hearings--whether the disabled were "clients" or "employees" (by inference, whether the
supervisors were charitable social workers or employers)--was readily apparent as the hearings
progressed.


     ¢  
"Few of us would deny the therapeutic aspect of a day's work," noted Jerry Daugherty (National
Industries for the Severely Handicapped). "[M]ore important" than wages to the disabled, he
suggested, "is the opportunity to work." In contrast to the depictions of The Wall Street Journal,
Daugherty stated:
41
   Ibid., p. 28-29.
42
   Elisburg affirmed as DOL's "primary objective for the sheltered workshop program ... to monitor wage payments to
insure that handicapped workers are paid wages commensurate with their productivity." DOL, he said "bears a
particular responsibility to see that this program is vigorously enforced since these workers are largely unorganized and
often hesitate to question their pay" (p. 28).
43
   House Subcommittee on Labor Standards, Oversight Hearings on Section 14(c), pp. 21-27.
44
   Ibid., pp. 30-32. For contrast, see Elisburg's 1994 testimony, below.




       
                                                                                              



          To the handicapped individual, work means much more than therapy or wages. It means that
          there is a place to go where people are friendly, understanding and accepting. A place where
          the person has the chance to make a real contribution, to be appreciated as a valuable
          member of a team effort, and to participate in a meaningful and stimulating environment.45

But to pay such people a minimum wage, Daugherty argued, would be "disastrous."46 He noted
that sheltered workshops "survive on contract work, much the same way as small businesses do"
and they "must be efficient and well-managed to survive." Without profits from the market, where
the workshops compete, "their client/employees would not receive the counseling and training
services that are necessary adjuncts to productive employment."47

The goods and services provided by sheltered workers must be available at "a fair market price,"
explained Charles W. Fletcher (Committee for Purchase from the Blind and Other Severely
Handicapped). The sub-minimum wage under Section 14(c), he stated, permits workshops "to
maintain direct labor costs which are generally competitive with the direct labor costs for
commercial industry."48 The impact of raising the wage of workshop employees, he argued,
would have an "adverse impact" upon the ability of the workshops to compete.49

Dean Phillips (Goodwill Industries) viewed workshops as "a very special kind of enterprise with
a special type of employee or client. The basic purpose is not to make money or [to] be the most
efficient producers, but to provide a real work setting for evaluation and training and," further, "to
provide employment for persons who cannot find or retain work in the competitive labor market
because of a disability or disadvantaging condition."50 Phillips added: "We are certainly in favor
of paying our handicapped clients the minimum wage, and more, when and where they can earn
it, but sheltered workshops must operate in the real world." In the last analysis, he seemed to say,
the workshops are businesses with a due respect for the bottom line.

          When workshops face wage increases due to new minimum wage levels, the workshop must
          face the same problem that businesses face. They must (1) increase efficiency, (2) obtain
          more productive workers, or (3) raise the price of the goods and services produced. ... To get
          more productive and efficient clients often means getting clients with less severe
          handicaps.51

The workshops, he noted, "are not immune to the fluctuations of the marketplace. They are
separate entities, operating in an economic environment to obtain capital, labor, and commodities
to deliver their services." Are the disabled, then clients or low-wage labor or both? Phillips
observed: "We are, in reality, a special type of small business, competing in a free enterprise
system to maintain solvency, to sustain growth, and to continue providing services to
handicapped people."52

45
   Ibid., p. 229.
46
   Ibid., p. 226.
47
   Ibid., p. 223. Emphasis in the original.
48
   Ibid., p. 39. In much of the testimony, the character of the "workshop" was not clearly specified (i.e., whether a
regular workshop (with a 50% FLSA minimum wage base) or a work activities center in which the wage was
productivity-based).
49
   House Subcommittee on Labor Standards, Oversight Hearings on Section 14(c), pp. 40-41.
50
   Ibid., p. 79.
51
   Ibid., pp. 78-79.
52
   Ibid., pp. 80-81.




       
                                                                                            



Joseph Larkin (General Council of Workshops for the Blind) stated the issue differently. If the
disabled were "unable to earn substantial portion" of the minimum pay they received, it "might
rob these workers of the incentive to exert their best efforts." If they "were to receive the
minimum wage regardless of [their] ... productivity," Larkin reasoned, it could "inhibit his
motivation toward increased upward mobility and in reality encourage less productivity."53 "As
professionals in the rehabilitation and welfare of blind people," Armand Leco (Rhode Island
Association for the Blind) suggested: "it is better for those requiring a sheltered workshop
situation to have employment at a lower wage than no wage at all."54


               
Not unexpectedly, workers viewed the issue differently. Kenneth Jernigan of NFB challenged that
the "agencies which serve the blind and the workshops which employ the blind have often
assumed the status of self-appointed spokesman for the blind."55 He urged the Subcommittee to
be alert to that distinction and pointed to "the myth of diminished productivity" to which the blind
are subject and which provides the basis for "an elaborate network of agencies, societies, and
associations ... which purport to help the blind while paying them the lowest possible wages."56

Productivity, Jernigan stated, rests largely with management. Section 14(c), he charged, "...
unfairly discriminates by setting up a class of workers who are blind or handicapped and then
forcing the members of this class to justify every penny of their paychecks by means of
productivity ratings while working under conditions and with equipment over which they have no
control." Workshop productivity, he argued, is impacted by "factors which are exclusively within
the hands of management" and "is largely dependent on what management does, or conversely,
on what management fails to do"--"poor job lay-out," "deliberate work-stretching by the
workshop during periods when contracts are slow," "assembly lines slowed down to the lowest
common denominator."57

Establishment of "`normal' productivity rates using the prevailing standards for similar work in
similar industry as a base," he contended, is also unfair. Sheltered work, "... has little resemblance
or parallel to the tasks which can be found commonly in open industry, and even where there are
similarities you will find marked differences in production methods." Workshops "tend to be
labor intensive where more mechanized production is used in the competitive" industry.
Contracting practices also pose a problem with "small contracts and intermittent work" which
means that the workshops "barely [have] time to work out the bugs in the production line before
the project is over. These industries," he noted, "are generally not specialized, yet their
productivity standards are based on the prevailing rates in plants which are."58 Thus, data from
which to develop "commensurate" wage rates are dubious. Finally, he suggested, there is the
matter of labor standards compliance. Since DOL is "not exceedingly knowledgeable in what

53
   Ibid., pp. 166-167. Ralph Sanders (Blind Industries and Services of Maryland) observed that employees, "without
regard to their vision, respond to reward. Employees who are treated as being less than valuable respond in a similar
fashion. Employees who are treated as valuable members of the manufacturing team respond positively." House
Subcommittee on Labor Standards, Oversight Hearings on Section 14(c), p. 113.
54
   Ibid., p. 517.
55
   Ibid., pp. 47-48. James Gashel appeared with Jernigan.
56
   Ibid., p. 49.
57
   Ibid., pp. 54-56.
58
   Ibid., p. 57.




       
                                                                                          



blind people can and cannot do," he stated, the workshops have "supervised themselves. You
would not do that in any other kind of job and I don't think it is reasonable or fair to do it here."59

Implicitly expanding upon the Schroeder theme of workshop schizophrenia, Jernigan argued that
the sheltered institutions were basically industries that "have covered their business activities with
a veil of `social services'" and labeled their workforce as "clients." He charged that they do "very
little rehabilitation and a whole lot of business and industrial activity."60


                                    

On two issues from the 1980 hearings, there would be especially strong disagreement between
representatives of blind workers and the industry: the role of work activities centers and
calculation of a commensurate wage rate.

The Place of "Work Activities Centers"? In 1966, Congress had provided for separation of work
activities centers (WACs) from the regular workshops. The NFB agreed. "If the concept of a work
activity center (where primarily therapeutic and rehabilitation functions are performed) is valid,
then [it] ... is markedly different from a regular sheltered workshop (where productive business
activity predominates)."61

If physically separate from the workshops (and some argued that they were not),62 how were
WACs treated in other respects? Were WAC-produced goods, of "inconsequential" value,
marketed with products from the regular workshops? Where services (counseling, rehabilitative
assistance) were available in both settings, were they arranged separately? Did this result in
redundancy? Did the presence of less impaired workers in a WAC provides positive role models
for severely disabled WAC workers, aiding in their socialization to the world-of-work? Might
workers, informally or by assignment, move from WAC to workshop? And what of funding?

James Cox (National Association of Rehabilitation Facilities) testified that some believe
separation of WACs from the regular workshops "inhibits productivity" and "upward mobility"
for WAC clients. "We believe," he stated, "that facilities holding both types of certificates should
not be required to integrate clients, but should be permitted to integrate less productive and more
productive workers when the results will be higher productivity and wages" and facilitation of the
"rehabilitation goals" of WAC clients.63 But, in practice, how are WACs and workshops
distinguished one from the other? The NFB would argue, conversely, that WAC/workshop
integration inhibits productivity, results in lower wages, and could discourage the more severely
disabled who might not be able to compete.

Prevailing Wage and "Commensurate" Wage. Workshops and WACs are supposed to utilize a
sophisticated system to determine appropriate wage rates. Jack Jones of National Industries for
the Blind, speaking from industry experience, explained how the system operates. For each
manufacturing operation, the workshops "determine the `going hourly pay' in plants in their own

59
   Ibid., p. 73.
60
   Ibid., pp. 54-55.
61
   Ibid., p. 366.
62
   Some suggested that a "white line" painted down through the center of a room might, in some cases, be the indicator
of division between the center and the regular workshop.
63
   House Subcommittee on Labor Standards, Oversight Hearings on Section 14(c), pp. 144-145.




       
                                                                              



local geographical area for operations that are the same or have similar skill levels to their
manufacturing operations." For data, they turn first to "their local Employment Service"--and,
thereafter, if necessary, to other sources: the Chamber of Commerce, industry and trade
associations, trade unions, and government agencies. But, if the workshop "cannot afford to pay
the hourly rate because of the extent of submarginal workers," it then applies to DOL for
certification for payment of a lower wage.64

Thus, several elements are immediately involved, any one of which can distort the
appropriateness of the wage to be paid. First. Are the locally prevailing wage rate determinations
accurate? Since these seem to be made by each individual workshop for each product line and for
each production process, the burden could be substantial. It could also require a high level of
sophistication on the part of the workshop employee making the determination. Second. An
assessment of the "submarginal" quality of individual workers must be made--not a simple task.
Third. A judgment must be made (presumably by the employer) as to whether the workshop can
"afford" to pay the locally prevailing rate. Fourth. The entire process must be reviewed by
DOL--unless certification is more or less automatic.

Complexities abound. Is the sheltered workshop even roughly comparable to competitive
industry? Are the production processes similar? Jones remarks: "Piece rates from industry are
rarely used ... because a workshop's operations are usually modified in order to adapt to the
capabilities of blind workers."65 Since rates apply to individual production processes and product
lines, is a new certificated rate developed with each change of activity? Are the rates shaped to fit
the capability of each individual worker? What happens when workers are employed in teams?

How is a general production standard, modified to fit a submarginal workforce, applied to the
individual worker? "Occasionally," Jones notes, "a production standard is not developed and an
individual's productivity is determined by observation or performance rating. Performance ratings
are generally done by the individual's foreman along with a rehabilitation counselor. They
observe the worker for an extended period," he explained, "and determine how his productivity
compares with a non-handicapped worker."66 How often "observation" is used instead of a more
precise method is not clear. Where comparison is made with outside industry, the process
assumes, at least implicitly, that the prevailing wage data are accurate, that the evaluators observe
both the disabled worker and the outside employee, and that the supervisory personnel are
competent to render such judgments. But, who are the supervisors in sheltered employment? Are
they trained professionals? Is the workshop "foreman" simply a less severely disabled worker?
How high is the turnover rate for supervisory staff in sheltered workshops?

Wage/hour compliance inspections in competitive industry may be reasonably straight forward. In
a sheltered workshop, the task is more complicated. Jones notes it "is difficult to verify the
appropriateness of workshop wage rates. To do so," he explains, "it is necessary to go over each
individual shop's records, operation by operation, and do a wage rate survey in the area.
Comparisons of industry averages, average wages from annual reports and average wages by
product ... can be very misleading." Even the wage paid may be complicated. The records, he



64
   Ibid., p. 525.
65
   Ibid., p. 525.
66
   Ibid., p. 526.




       
                                                                                        



explains, may show "average earnings which are the result of the worker's productivity plus
make up pay and subsidy."67


               
In September 1981, GAO issued a report on sheltered workshops that tended to underscore the
issues raised during the hearings: that separation of the WACs from the workshops may have
been more nearly a chimera than institutional reality, and that development of an accurate and fair
commensurate rate was certainly difficult if not impossible. But, the extent to which either the
hearings or the GAO report (or the DOL report before it) would affect public policy was not
immediately clear.

Recalling the intent of Congress (1966) "to generally provide a guaranteed wage of 50% of the
statutory minimum wage to handicapped persons working in ... sheltered workshops," the GAO
report concluded the goal "has not been realized." Exemptions (evaluation, training, etc.) had
allowed for payment of a lower rate. Further, with the shift toward WACs, it found that "[l]ess
than 17 percent of the handicapped workers" employed in the workshops were "eligible for the
Federal subminimum wage guarantee."68

                           
DOL regulations required WACs, physically separated from workshops and separately
administered, to provide "therapeutic activities" with only "inconsequential" production. The
regulations, GAO found, had "created an artificial distinction" that "cannot, in many instances, be
substantiated by current sheltered workshop operating practices." Many WACs "did not appear to
exclusively provide therapeutic activities, and it did not appear that the production of most
handicapped workers was inconsequential."69 Further, the available data from the workshops "do
not provide an accurate or reliable measure of a workshop's compliance."70

Even for GAO, hard data were difficult to develop. It found, often, that the available records "did
not ... differentiate between handicapped workers employed in a center and those employed in a
regular workshop program," maintain appropriate wage/hour data, keep "separate information on
dollar volume of sales for the work activities center," or "permit data to be retrieved within a
reasonable time frame."71

Separation of WACs from workshops was a problem and "federal criteria were sometimes not
complied with." Some facilities were located in separate rooms or buildings; others were
separated "by an aisle or temporary barrier in the same room" with WAC and workshop workers
commingled. Though statute and regulations required that WAC clients not be engaged in

67
   Ibid., pp. 526-527. Emphasis in original.
68
   U.S. General Accounting Office, Stronger Federal Efforts Needed for Providing Employment Opportunities and
Enforcing Labor Standards in Sheltered Workshops, Report to the Congress, Comptroller General of the United States,
HRD-81-99, September 28, 1981 (Washington: GPO, 1981), pp. 10-15. (Hereafter cited as GAO Report, Stronger
Federal Efforts Needed.)
69
   Ibid., p. 18.
70
   Ibid., p. 19.
71
   Ibid., p. 21.




       
                                                                                              



activities the primary purpose of which was production, GAO found that in most WACs,
"handicapped persons were employed on the same jobs or types of jobs" as workers in the
workshops.72

                                                                        
As for DOL enforcement policy, GAO encountered a series of complexities: "... stricter
interpretation of the work activities center concept would probably result in additional paperwork
and administrative costs with minimal benefit for handicapped workers."73 The disabled often
"have little knowledge of their rights" under the FLSA while workshop managers "may
inadvertently violate the act's provisions or not understand the steps necessary for compliance."74

During fiscal years 1977-1979, GAO found, between 3.8% and 5.9% of the universe of sheltered
workshops had been investigated annually. Of those, it found that 60% had underpaid their
workers. Most violations involved failure to pay "commensurate wages" and to conform to the
terms of workshop certification.75 GAO acknowledged that "compliance with the act's
commensurate wage provision is not easily achieved." But, it found that in all of the workshops
visited for its study, there were "problems in computing piece and hourly rates and in determining
the appropriate prevailing wage rates" in addition to faulty record-keeping practices.76

Establishment of piece rates (one standard upon which the commensurate rate rests) involves time
studies. In practice, GAO found such studies ranged from simple counting to more sophisticated
methodologies, but that they were irregular and not strictly applicable to real work conditions.77
Straight hourly rates were equally difficult to determine. For purposes of comparison,
productivity had to be measured not only for the disabled worker but also for those in competitive
industry. A range of systems, often flawed, was in place. The report noted

          there are two fundamental shortcomings: (1) a high degree of subjective judgment is required
          by someone who may or may not have any background in performance evaluation, and (2)
          workers may switch jobs, but retain the same hourly rate even though the individual's ability
          and level of productivity will probably vary for different jobs.78

Some assigned value to the task, not to the productivity of the worker. Some workers were paid
on a modified seniority basis. Where outside workers may have received wage increases with
fluctuations in the cost of living, those in the workshop (productivity-based) remained unchanged.


72
   Ibid., pp. 21-23.
73
   Ibid., pp. 22-23.
74
   Ibid., p. 29.
75
   Ibid., pp. 29-31.
76
   Ibid., p. 31. In 1977, Congress created the Minimum Wage Study Commission (MWSC), an ad hoc blue-ribbon
panel. The seven-volume Report of the Minimum Wage Study Commission (Washington, GPO, 1981) in some measure
paralleled the work of GAO. (Hereafter cited as MWSC Report.) In vol. V, p. 436, Andrew Kohen notes (of workshop
studies of the late 1970s) that "... no hard data were collected on productivity, primarily because they do not exist. That
is, the extremely variegated and somewhat haphazard practices of measuring the physical production of individual
handicapped workers are not systematically documented by the workshops, in spite of the Federal Regulation requiring
the payment of wages commensurate with relative productivity."
77
   GAO Report, Stronger Federal Efforts Needed, p. 32.
78
   Ibid., p. 33.




       
                                                                                           



Productivity of disabled workers, it was found, might vary (or be alleged to vary) with shifting
medical, mental or other elements.79

Establishing the commensurate rate involves determination of the prevailing rate in the locality
for a comparable type of work, a process left up to the individual workshop. But local firms,
GAO noted, may be reluctant to provide wage information. Beyond a dollar amount,
comparability of production processes must be determined. Not surprisingly, GAO found
prevailing wage data (and, thus, the commensurate rate) not entirely adequate.80 Assessing the
accuracy of such determinations depends upon documentation which was not always kept:
"productivity records, time studies, performance evaluations, and hours worked."81

DOL resources for enforcement were found to be "minimal" with compliance "to a large extent"
voluntary with the workshops. By the nature of the Section 14(c) program, a "specially trained
staff" seemed almost essential; but GAO found a fluctuating body of compliance officers--only
intermittently and infrequently involved with Section 14(c) assignments. It estimated that 25 to 35
hours (three to four days) were required properly to investigate a single workshop: most
investigations consumed significantly less time.82

Ultimately, GAO recommended that the FLSA be altered "to eliminate the provision" requiring a
wage floor for handicapped workers--generally, the position taken by industry. DOL objected,
but the proposal was endorsed by National Industries for the Blind and by National Industries for
the Severely handicapped, Inc.--bodies generally representative of the sheltered workshop
industry.83


  

In August 1982, Senator Don Nickles (R-OK), then Labor Subcommittee chairman, convened a
hearing on legislation that he had introduced (S. 2634) to eliminate the required separation of
WACs from workshops.84 Senator Nickles maintained that the requirement had "become a
hindrance to the employment and therapy of handicapped persons" and had prevented them from
working with "more productive workers," thereby denying them "the models and also the
stimulation which would only encourage greater personal development."85 The latter argument,
79
   Ibid., pp. 34-35.
80
   Monroe Berkowitz, in MWSC Report, vol. V, p. 512, noted the "great confusion among workshop managers about
the appropriate firms and jobs to sample in order to determine the prevailing wage, wide variety in methods used to
establish production standards and uncertainty as to how to account for different supervisory-labor ratios and other
conditions of work." Berkowitz (p. 509) pointed to the need to know "more about how manager motivation affected
employment, wage, and production decisions" in the absence of "the usual profit-maximizing model."
81
   GAO Report, Stronger Federal Efforts Needed, pp. 35-37.
82
   Ibid., pp. 39-43. Here, what constitutes an investigation (a conciliation, an individual complaint, a comprehensive
review) is not immediately evident.
83
   GAO Report, Stronger Federal Efforts Needed, pp. 127-131, 149, and 165. The report noted extensive consultations
by GAO with officials from industry and government; it is not clear that any workers (or their spokespersons) were
consulted. Both NISH and NIB reviewed the report prior to publication; their comments are included in the published
document.
84
   See CR, June 16, 1982, pp. 13812-13814. Companion legislation was introduced in the House by Rep. Tom Petri (R-
WI): H.R. 7178. See CR, September 23, 1982, pp. 25021-25022.
85
   U.S. Congress, Senate Committee on Labor and Human Resources, Subcommittee on Labor, Amending the Fair
Labor Standards Act of 1938, hearing. 97th Cong., 2nd sess., August 11, 1982, p. 1. (Hereafter cited as Senate Labor and
(continued...)




       
                                                                                               



denial of role models and of stimulation from less severely disabled co-workers would remain
central to the debate through the remainder of the century.86

Industry supported the Nickles proposal. Walter J. Payne ( National Association of Rehabilitation
Facilities) argued that separation of WACs from workshops creates "artificial barriers, both
physical and psychological, between programs." Payne acknowledged that, "[q]uite often, similar
work is being performed in both programs, except for the fact that persons able to produce at a
higher rate are in the regular workshop rather than in work activities." But, then, separation, he
said, "tends to stigmatize those persons in work activities centers."87 Others suggested that
elimination of the requirement would "enhance productivity and individual growth," "allow more
effective use of available facilities, staff and dollars,"88 "increase the productivity of work activity
center clients,"89 and "send a message to the severely handicapped ... that we do believe in the
American way and that everyone does have the opportunity to accomplish and work to the best of
their ability."90 Admiral David Cooney (Goodwill Industries) added that the "whole emphasis in a
successful workshop ... is on arranging the work so that it suits the individual's best needs."91

James Gashel of NFB, in opposition to the Nickles bill, noted that it would "effectively repeal the
50 percent minimum wage standard" applicable in the regular workshops. Further, he maintained
that mixing of WAC and workshop employees would "result in lower productivity and lower
wages" as the more productive workers were "forced to slow down in order to match their
output" with that of the more severely disabled. Since wages would be productivity-based, the
workers in regular workshops would "take a pay cut in order to accommodate" slower or less-
skilled workers. The fundamental purpose of separation, he argued had been "to prevent
exploitation of the members of either group--clients or workers."

Gashel's statement, Senator Nickles observed, presented the legislation as "for the benefit of the
managers ... at the expense of the individual." The Senator denied that intent. Rather, he stated, it
was intended to "open up doors of opportunity."92 Critics had also suggested that the
clients/workers were subject to exploitation, a premise that Senator Nickles questioned. Gashel
responded that "in some of those workshops, actual exploitation does occur. Some of it is
unintentional; some of it is intentional."93 As the hearings closed, disagreement persisted.



(...continued)
Human Resources Committee, Amending the Fair Labor Standards Act of 1938.)
86
   Ibid., pp. 2-3.
87
   Ibid., pp.4-5.
88
   Ibid., pp. 38-39.
89
   Ibid., p. 87.
90
   Ibid., p. 94.
91
   Ibid., pp. 45-46. Admiral Cooney added: "We are not there to make money; we are there to serve. On the other hand,
we are not there to lose money, because if we do, we cannot serve."
92
   Senate Subcommittee on Labor, Amending the Fair Labor Standards Act of 1938, p. 82.
93
   Ibid., p. 83. In the MWSC Report, vol. V, p. 512, Monroe Berkowitz stated: "Precise and measurable definitions of
exploitation are difficult to establish. The ability of a worker who is dissatisfied with his pay and treatment to leave his
employer is the best protection any individual, impaired or not, has against exploitation. Limited demand for impaired
workers, as well as the inability of some client/employees to recognize and act on unfair practices, weakens the
protection offered by the market.... the limited mobility of disabled workers create[s] a condition in which exploitation
(in the sense of being paid less than nonhandicapped workers) can occur."




   
                                                                                         



The Nickles bill (S. 2634) was not reported from the full Committee on Labor and Human
Resources. It died at the close of the 97th Congress.


                             
Twenty years after it last revised Section 14(c), Congress would essentially reverse its earlier
position. Several initiatives of the 99th Congress were combined into S. 2884, promptly passed
and signed into law (P.L. 99-486).94 The measure removed the minimum wage requirements for
certificated employment of the disabled but added what sponsors argued were procedures through
which workers employed under Section 14(c) certification might be protected. The adequacy of
those protections would remain a source of contention and dispute into the 21st century.


 ¢ 

In the mid-1980s, Congress again considered sheltered employment under Section 14(c) and,
specifically, the treatment of workers with vision impairment. Immediately, the continuing gulf
between employers of the disabled and spokespersons for the blind became apparent.95 New
legislation was proposed by Representative Thomas Petri (R-WI).

Hearings were convened on October 3, 1985, by Austin Murphy (D-PA), Chair of the
Subcommittee on Labor Standards. In an opening statement, Representative Petri stated that the
issue was not "labor standards" but rather service to the disabled. "It's not the intent" of this
legislation, he said, "to lower or change what anyone is paid." Section 14(c), Mr. Petri observed,
"has been called an administrative nightmare. It creates a tremendous paperwork burden, and
there no longer appears to be much purpose to it...."96 Therefore, Representative Petri called for
(a) an end the distinction between WACs and regular workshops, and (b) elimination of any wage
floor other than a commensurate productivity-based rate.

Industry spokesperson James Ansley (National Association of Rehabilitation Facilities) noted the
"unnecessary burden on the employers" created by the minimum wage and separation features of
Section 14(c) and, basically ignoring the data problems raised during earlier hearings and reports,
endorsed the commensurate wage concept.97 Other management witnesses concurred, arguing
further that the Section 14(c) program was too complex for effective administration: that DOL
focused too heavily on paper violations, its regulations were confusing and the administrative
burden was unconnected to rehabilitation. DOL site visits, they said, were infrequent, "tend to
dwell on irrelevant details, and are all too often adversarial in nature."98 Admiral Cooney of
Goodwill Industries, though an active participant in prior hearings where the technical aspects of

94
   In the 99th Congress, Rep. Marilyn Lloyd (D-TN) introduced H.R. 808. Based on the Burton bills of 1978 and 1980,
it was not a focus of the 1985 hearings.
95
   At issue was employment of the disabled under DOL certification both in competitive industry and in the workshops,
though it was the latter that was the focus of controversy.
96
   U.S. Congress, House Committee on Education and Labor, Subcommittee on Labor Standards, Amendments to the
Fair Labor Standards Act, Certification and Ages of Handicapped Workers, hearing, 99th Cong., 1st sess., October 3,
1985, p. 3. (Hereafter cited as House Subcommittee on Labor Standards, Amendments to the Fair Labor Standards Act,
Certification.)
97
   Ibid., pp. 4-7. Under the minimum wage, there is a specific floor. With the "commensurate wage," the rate is
determined by management with no floor and, in practice, with only limited DOL oversight.
98
   House Subcommittee on Labor Standards, Amendments to the Fair Labor Standards Act, Certification, p. 38.




       
                                                                                        



wage rate determination had been discussed, urged "doing away with the floor and then having
the records be addressed to the actual productivity of the individual."99

Gashel of the NFB opposed the Petri bill. "We don't support the present form of Section 14(c) ..."
he stated, branding it indefensible "in philosophy, theory or administration." He urged that the
regular workshops continue to be separated from the WACs, but that the latter be redesigned
"exclusively for therapeutic benefit for the clients." He suggested "a ban on subminimum wage
payments in the case ... of blind and visually impaired workers" and that other groups of persons
with disabilities be allowed to opt out of the Section 14(c) program as well.100 However, where
workers remained in sheltered employment, the paperwork requirements, he urged, were
essential. Employers of the disabled, he reminded the Members, were seeking the right to pay
their workers a sub-minimum wage with no floor. "The least we owe these people," he protested,
"is some form of protection to be sure that they're not being exploited." The Petri bill, he
charged, would "result in lower wages for handicapped workers."101

                     
In March of 1986, Senator Nickles introduced legislation parallel to the Petri proposal, noting that
it would "end an inadvertent form of discrimination against" the most severely disabled and
eliminate a minimum wage requirement that "has also been burdensome."102 A period of gestation
followed. In September 1986, new legislation was introduced: S. 2884 (for Senator Howard
Metzenbaum, D-OH) and H.R. 5614 by Mr. Murphy.103

S. 2884 expanded upon the Petri/Nickles legislation (i.e., eliminating the distinction between
WACs and regular workshops, and replacing the minimum wage requirement with a
commensurate wage) by adding a provision for an administrative system within DOL for
contesting wage and related employment standards associated with the certificated disabled. As
well, employers would be required regularly to review the special minimum wage rates paid to
their employees and were precluded from reducing the wages of current employees (prior to June
1988) without DOL approval.104

Gashel offered his qualified endorsement for the Metzenbaum bill. For blind persons, he
observed, "the appeal rights provided by an amendment would be a distinct improvement over
current law." But this, he added, "does not alter our opposition to sub-minimum wages for all
blind workers."105

The Senate quickly approved the legislation.106 Five days later, on October 1, the Committee on
Education and Labor was discharged from further responsibility for H.R. 5614: the bill was called

99
   Ibid., p. 54. Italics added.
100
    Ibid., pp. 62-63.
101
    Ibid., pp. 62-64.
102
    CR, March 6, 1986, pp. 3965-3966 (S. 2148).
103
    CR, September 27, 1986, p. 26383, and September 29, 1986, p. 27116.
104
    CR, Sept 26, 1986, pp. 26555-26556.
105
    Ibid., p. 26556. He made clear that the NFB, though approving the Metzenbaum amendment, did not regard the
matter as settled.
106
    CR, September 26, 1986, pp. 26557-26558.




       
                                                                                          
                                                                                        Ibid., pp. 27495-27498.           108
                                                                                        CR, October 1, 1986, p. 27495.    107
                                                                                              .smret evitartsinimda
 ni yltnereffid deldnah era yeht hguoht--spohskrow deretlehs ni dna rotces evititepmoc eht ni tnemyolpme
        detacifitrec neewteb edam si noitcnitsid on ;spohskrow deretlehs raluger dna sretnec seitivitca krow
      neewteb edam si noitcnitsid oN ".ytivitcudorp s'laudividni eht ot detaler" si taht dna "krow fo ytitnauq
       dna ,ytilauq ,epyt emas eht yllaitnesse rof ... ytiniciv eht ni deyolpme ,srekrow deppacidnahnon ot diap
esoht htiw etarusnemmoc" eb ot si etar ehT .delbasid eht rof egaw muminim yrotutats a regnol on si erehT .d
                                                                                  .ASLF eht rednu egaw muminim
       yrotutats eht fo %57 naht ssel ton ta tes saw tnemyolpme evititepmoc ni muminim a ,ylevitartsinimdA
   .robaL fo yraterceS eht ot tfel saw noitercsid :etutats ni deificeps saw delbasid eht rof egaw muminim oN .c
                                                                                                        .dehsilbatse
         saw etar egaw muminim evitanretla on ;sedoc ARIN eht yb derevoc ton saw tnemyolpme deretlehS .b
                                                                                                      .yrtsudni eht
  rof egaw muminim edoc eht fo %57 ta tes eb ot emac taht dettimrep saw delbasid eht rof egaw muminim
  -bus a ,4391 ,71 .beF ,redrO evitucexE yB .setar egaw muminim dedulcni ,yllamron ,hcihw seirtsudni tsom
    rof dehsilbatse erew ecitcarp fo sedoC .egaw muminim lanoitan deificeps on saw ereht ,ARIN eht rednU .a
                                                                                      d.ylppa ot etar                )drawrof
 .ylppa ot etar etarusnemmoc          .ylppa ot etar etarusnemmoc            etarusnemmoc a ;egaw          dna( stnemdnemA
      a ;dradnats etarapes oN              a ,dradnats etarapes oN           muminim yrotutats oN              ASLF 6891 ehT
       ".ytivitcudorp s'rekrow
     eht ot detaler" eb ot etar                               .egaw               .egaw muminim              stnemdnemA
;egaw muminim yrotutats oN          muminim yrotutats eht fo %05             yrotutats eht fo %05           ASLF 6691 ehT
                                                           .rekrow
                                      delbasid eht fo ytivitcudorp
                                            nopu desab eb ot etar                c.egaw muminim       )8391 ,ASLF( tcA
                           AN        eht ;roolf egaw deificeps oN            yrotutats eht fo %57 sdradnatS robaL riaF
                                                                                                            )5391-3391(
                                                                                   a.yrtsudni eht         tcA yrevoceR
                           AN            b   .roolf egaw deificeps oN    ni egaw muminim fo %57     lairtsudnI lanoitaN
          sretneC                             spohskroW                          rotceS
     seitivitcA kroW                           deretlehS                      evititepmoC                    etutatS
      ,tnemyolpmE                            ,tnemyolpmE                     ,tnemyolpmE
       detacifitreC                           detacifitreC                    detacifitreC
                                       ).ff 8391(
   tcA sdradnatS robaL riaF eht dna )5391-3391( tcA yrevoceR lairtsudnI lanoitaN
     eht rednU seitilibasiD htiw srekroW fo tnemtaerT egaW dezilaicepS .1 elbaT
   486). Section 14(c), as amended in 1986, remains in place.
   On October 16, 1986, the Metzenbaum bill (S. 2884) was signed by President Reagan (P.L. 99-
S. 2884 (an identical bill) to clear it for dispatch to the President.108
brief discussion, H.R. 5614 was passed in the House. Thereafter, the House called up and passed
"hopefully insure against exploitation of this vulnerable sector of our work force."107 Following
present system for regulating sheltered workshops has not worked." He argued that the bill would
greater protection to the disabled employee." The legislation was necessary, he said, "because the
reduce the amount of bureaucratic red tape involved in certifying sheltered workshops" and "offer
up for immediate consideration. Mr. Murphy assured his colleagues that the bill would "greatly
                                             
                                                                                      



  
Since the restructuring of Section 14(c) in 1986, it appears that the reform may not have worked
out entirely as planned. By the mid-1990s, the parties, pro and con, had resumed the battle. New
legislation was introduced early in 1994 and, almost immediately, the Subcommittee on Labor
Standards conducted oversight hearings on the impact of the1986 amendments.


  
In March 1994, Representative James Traficant (D-OH) introduced H.R. 3966, the "Blind
Workers' Wage Equity Act." Blind workers, he stated, "... have proven to be as productive as their
sighted coworkers." Yet, "quality employees--are denied minimum wage, and they are denied it
for one reason--the workshops are legally permitted to do it. Employers," he continued, "decide
the prevailing wage for a job, then pay the blind worker a mere percentage of that wage." H.R.
3966 would have prohibited DOL from issuing a certificate under Section 14(c) to authorize
payment of wages to anyone "by reason of such individual's impaired vision or blindness;" then,
it defined blindness.109

Although the Traficant proposal would be discussed, at least tangentially during oversight
hearings in the 103rd Congress (and would be adversely critiqued by employers of sheltered
workers), it would not be acted upon.


 ¢ 

In mid-March of 1994, Representative Murphy convened an oversight hearing on experience
under the 1986 legislation. Mr. Murphy explained that in 1986, "we listened primarily to the
nonprofit employers who ... were encumbered with a complicated system of permits and
programs then required to administer a sheltered workshop." We "carefully considered the
explanations of the workshop administrators" and "learned about white lines painted on the floor"
to separate workers of differing levels of disability. "In return for employer flexibility, workers in
sheltered environments received a right to an expedited hearing on any complaint of inadequate
wages." However, he noted, the experience of DOL since then "has shown that few petitions by
or on behalf of workers are filed." Whether that "is indicative of a lack of problems or of the
difficulty of bringing such administrative action is something we hope to learn at today's
hearing."110


  ¢ ¢
Speaking for the NFB, James Gashel was blunt. In 1986, Congress had "insisted upon certain
procedural safeguards. I am here to tell you that the safeguards are not working."111 The problem,

109
    CR, March 11, 1994, p. 4795.
110
    U.S. Congress, House Subcommittee on Labor Standards, Occupational Health and Safety, Committee on Education
and Labor, Section 14(c) of the Fair Labor Standards Act, hearings, 103rd Cong., 2nd sess., March 16, 1994
(Washington: GPO, 1994), pp. 1-2. (Hereafter cited as House Subcommittee on Labor Standards, Section 14(c) of the
Fair Labor Standards Act.)
111
    Ibid., p. 11.




    
                                                                                             



Gashel argued, was more than one of employer/manager culture: it was structural. Management is
"empowered to gather all of the facts and make all of the decisions which end up justifying their
determinations." The blind enter a workshop under the presumption of low productivity. Their
employers, who control the work process, then monitor the worker's every move and create a
work/productivity file--one that can be extremely negative. Then, when there is a dispute, the
individual worker is left to contest not only the inappropriateness of the wage rate determination
but, also, documentation the employer has systematically developed over an extended period. The
workers, Gashel concluded, "can challenge the sub-minimum wage in a hearing, but they are
almost certain to lose...."112

Employer spokespersons focused their counter arguments, in part, upon the Traficant bill.
Admiral Cooney (Goodwill Industries), for example, termed H.R. 3966 "ill-advised" and stated
that it "would reduce employment for thousands of workers with visual impairments." Terming
charges of exploitation merely "unsubstantiated allegations," he noted that Section 14(c)
"allow[s] workers with disabilities and/or their guardians to appeal wage determinations to the
Secretary of Labor."113 Patricia Beattie (National Industries for the Blind, inter alia), taking note
of the appeals process under the 1986 amendments, thought the workers well protected.114 But,
she stated, there were other protections as well. "... we (NIB) visit each associated agency at least
once every three years for a comprehensive on-site review of their compliance" with DOL
regulations. Where they are not being complied with, "we strongly urge" that the
agency/workshop take "appropriate action." Though "NIB does not have the legal authority
similar to DOL to enforce the payment of back wages," she added, the associated agencies "are
quite receptive."115

¢                              £
Donald Elisburg, who had been Assistant Secretary of Labor in the late 1970s, was in 1994 an
attorney in private practice.116

Elisburg commenced by stating that the "present system for challenging workshop abuses ... is a
study in futility." He characterized the procedures included in the 1986 amendments as "not only
not helpful, they are useless."117 The problems under current law he regarded as systemic. As he
proceeded with his testimony, he pointed specifically to the following issues: the absence of a
class action option in pursuing an appeal and redress; the unrealistic constraints of time for
dealing with Section 14(c) cases imposed upon public entities; the need for evidence that, likely,
neither a disabled plaintiff nor his or her employer will have; a lack of clarity with respect to the
responsibilities of the several parties (i.e., the Department of Labor, the courts, the employer,
etc.); and that no provision was made for payment of attorney's fees--even when a plaintiff is
successful in his or her litigation. The structure, he seemed to suggest, was stacked against the
aggrieved person with a disability.
112
    Ibid., p. 11.
113
    Ibid., pp. 32-33.
114
    Ibid., pp. 26-27.
115
    Ibid., pp. 37-38.
116
    During his tenure as Assistant Secretary, he also served through "extensive periods" as acting Wage and Hour
Administrator--and, in both capacities, had responsibility for administration of Section 14(c). He had testified as an
Administration witness during the Beard hearings of 1980. See discussion above.
117
    House Subcommittee on Labor Standards, Section 14(c) of the Fair Labor Standards Act, p. 20.




    
                                                                                          



There was no option for a class action appeal. A petition to the Secretary seeking review of the
special minimum wage "must be filed by the employee, the employee's parent, or guardian,
which, he argued, presents a serious problem. "Basically, the individual workers who are required
to sign a complaint are put at tremendous risk of conflict with their employers under difficult
employment circumstances."118

Time constraints were identified as another serious problem. In an attempt, it would seem, to
assure prompt adjudication of complaints, Congress provided that the Secretary has ten days after
receipt of a petition to assign the case to an administrative law judge who, then, must hear the
case within thirty days. This process, Elisburg viewed as "an illusion." From his own experience
with litigation in Texas, he observed, it had taken "15 months to bring [a comparable case] to
closure."119

Evidentiary requirements and procedures were cited as troublesome; further, the court would
necessarily become involved in the commensurate rate and prevailing rate determinations. The
1986 amendments mandated that "the employer shall have the burden of demonstrating that the
special minimum wage rate is justified as necessary in order to prevent curtailment of
opportunities for employment." But, in turn, the administrative law judge would be required to
assess the validity of the evidence put forth by the employer. In addition, he must take into
account the "productivity of the employee" and the "productivity of other employees performing
work of essentially the same type and quality for other employers in the same vicinity."120 From
his own experience, Elisburg found

         ... that the sheltered workshop personnel and management had little understanding of the
         rules, the records they had were virtually nonexistent to support the exemption, and they had
         little economic justification for the wage scales they set.

         To make matters worse, it was also clear during the litigation of these cases that the
         administrative law judges did not fully understand or accept the notion that the employer had
         the burden of establishing the data to defend the exemptions claimed, and such confusion
         would impact on the judge's decision....

He raised concerns about the proper role to be filled by DOL in these cases (i.e., in providing
technical support for the judge). The department, Elisburg stated, "did not really have a well
defined role as to how they were supposed to help in this case or, as a matter of fact, whom they
were supposed to help."

But, if the system imposed a technical/evidentiary burden upon a judge, he suggested, it was even
more onerous where the plaintiffs were concerned. Where workshop records are inadequate or
non-existent, then a "worker's claim must be established by that worker's testimony of hours
worked and wages paid on a piece work basis." Yet, the disabled worker has "almost no way of
keeping separate counts of pieces produced or of hours worked." The responsibilities the system
imposed upon the disabled worker (and his or her family) he viewed as overwhelming. "It is
virtually impossible to proceed without the aid of an expert economist and experts in time and


118
    Ibid., p. 20.
119
    Ibid., pp. 21-22. Representative Murphy termed the time constraints in the 1986 amendments as "the administrative
equivalent of the speed of light." (p. 2)
120
    Section 14(c)(5)(C) and (D).




    
                                                                                        



motion studies and related issues." Further: "To put that burden on the administrative law judge,
who is not trained in wage and hour or any of the related kinds of issues, is also impossible."

Finally, Elisburg noted, there were the dollar costs of the entire proceeding with no provision
having been made for attorney's fees.

         ... Congress has created a law that is not speedy, is extremely technical, permits below
         minimum wages to be paid to people whose only disability is that they are blind, insists that
         individuals pursue a claim on their own behalf, and then must pay legal fees even if the
         employer is at fault.

The persons filing these complaints, Elisburg reminded the Subcommittee, were fighting for the
option of being paid at least the federal minimum wage. "How in good conscience can we ask
these workers to also foot the legal bill?" He stated his doubt that the guarantees of Section 14(c)
"can be enforced by any agency" and "to suggest that a worker earning $2.05 an hour can afford
legal counsel is likewise ludicrous."121


                                           
                                                   
On January 27, 2000, Representative Johnny Isakson (R-GA) introduced H.R. 3540, a bill to
amend the FLSA to provide that the "Secretary shall not issue a certificate" for the payment of
sub-minimum wages under Section 14(c) "to any individual by reason of such individual's
impaired vision or blindness." The bill then defines impaired vision or blindness.122 On February
3, 2000, a companion bill (S. 2031) was introduced by Senator Christopher Dodd (D-CN).123 The
Isakson bill was referred to the Committee on Education and the Workforce and, later, to the
Subcommittee on Workforce Protections.

The bills were essentially the same as the Traficant proposal of the 103rd Congress. Like the
Traficant bill, they would not have precluded the possibility that a certificate could be issued for
employment at a sub-minimum wage to multiply-disabled individuals who happen, as well, to be
blind or vision-impaired. (As noted earlier in the paper, precise data with respect to such workers
are difficult to develop.) The Dodd bill was referred to the Committee on Health, Education,
Labor, and Pensions. Each remained in committee at the close of the 106th Congress.


 ¢                                                          
                                                                                                       



For a relatively small segment of the workforce, the matter of treatment of persons with
disabilities (notably, persons with visual impairment) has remained an issue. However, the
question of management of the Section 14(c) program has emerged only sporadically during
recent Congresses.


121
    House Subcommittee on Labor Standards, Section 14(c) of the Fair Labor Standards Act, pp. 21-25.
122
    CR, January 27, 2000, p. H49.
123
    CR, February 3, 2000, p. S328.




    
                                                                                           



     
On March 6, 2001 (the 107th Congress), Representative Isakson introduced H.R. 881 which was
referred to the Committee on Education and the Workforce, Subcommittee on Workforce
Protections. Like its counterpart in the 106th Congress, H.R. 881 would have prevented the
Secretary of Labor from issuing a certification for the payment of a sub-minimum wage to
persons who are vision-impaired solely on the basis of vision impairment. The bill would not,
however, have prevented the issuance of such a certificate where potential workers have multiple
disabilities, one of which may be vision impairment. No action was taken on the Isakson
proposal.

The issue did not resurface during the 108th Congress, when the primary issue was concern with
overtime pay.124 Nor has the issue re-emerged during the 109th or the 110th Congresses. If
Congress perceives that the revision of Section 14(c) is appropriate, new proposals could emerge
at any time--either as freestanding legislation or as part of a more general umbrella measure
dealing broadly with overtime pay and related matters--of which, some suggest, the employment
of people with disabilities may be a logical part. Of course, there is no statutory requirement that
Congress revisit this issue.


                                            
In September 2001, GAO released a new study, Special Minimum Wage Program: Centers Offer
Employment and Support Services to Workers With Disabilities, But Labor Should Improve
Oversight.125 The agency focused upon (a) "the characteristics of employers that employ
individuals with disabilities at less than the minimum wage" under the Section 14(c) program, (b)
"the characteristics of workers with disabilities who earn less than the minimum wage," and (c)
the DOL's "management of the special minimum wage program."

GAO indicated that there were about 5,600 employers of workers with disabilities. It found that
"about 84 percent are work centers established to provide employment opportunities and support
services to individuals with disabilities." It also found that "74 percent of the workers paid special
minimum wages by work centers have mental retardation or another developmental disability as
their primary impairment, and 46 percent have multiple disabilities." GAO reported that DOL
"has not effectively managed the special minimum wage program to ensure that 14(c) workers
receive the correct wages." It noted that "in past years," the department had "placed a low priority
on the program." DOL, it asserted, "lacks the data it needs to manage the program and determine
what resources are needed to ensure compliance by employers." GAO concluded that the
department "has not done all it can to ensure that employers comply with the law" and that it "has
provided little training to its staff" that would enable them to work with the several program
participants.126

124
    On March 31, 2003, the Department of Labor proposed a revision of Section 13(a)(1) of the Fair Labor Standards
Act, dealing with executive, administrative and professional workers. That issue remained active until late August 2004
when formally implemented. See CRS Report RL32088, The Fair Labor Standards Act: A Historical Sketch of the
Overtime Pay Requirements of Section 13(a)(1), by William G. Whittaker.
125
    United States General Accounting Office, Report to Congressional Requesters, Special Minimum Wage Program:
Centers Offer Employment and Support Services to Workers With Disabilities, But Labor Should Improve Oversight,
GAO-01-886, September 2001, 73 p.
126
    GAO Report GAO-0l-886, pp. 3-5. This is a complex document that needs to be read with care.




    
                                                                                           



       
Largely, Section 14(c) issues involve wages. How much must employers pay disabled workers in
sheltered employment? Even concern about separation of the workshops from the WACs
(notwithstanding discussion of role models) has been largely wage-based. The wages, in question,
have always been minimal. When, in 1986, Congress moved from a statutory minimum rate (not
less than 50% of the FLSA minimum) to a commensurate wage standard, the highest statutory
rate required would have been approximately $1.68 per hour. Since 1986, the rate for disabled
workers has been productivity-based ("commensurate"). As noted above, the wage rests upon a
foundation of individual worker productivity, however measured. Such rates, because they are
productivity-based, may fluctuate from one production process to the next and from one day to
the next. In practice, it would appear, wage rates are set, essentially, at whatever the employer
determines the economic value of the worker to be and can document.127

Much of the administrative structure supportive of Section 14(c), similarly, has been created with
the wage issue in mind. It involves complicated measurement of disability, of productivity, of
comparability with production in competitive industry--and, for enforcement purposes, oversight
by the Department of Labor. Finally, in theory, there are options for appeal of wage
determinations. Some, however, have questioned the value of these processes. Do they result in
accurate findings? Are they unduly cumbersome?128

Since the mid-1960s at least, concern has been voiced, pro and con, about separation of the
WACs from the regular workshops. This is often argued in terms of role models (a chance for the
severely disabled to work alongside less disabled workers) and in terms of the dignity and self-
esteem of the severely disabled. On the other hand, the needs of the less severely disabled may
not be served as well by ignoring differences in ability levels. And, mixing workers of
significantly different levels of ability may produce tensions within each group. Where the
severely disabled may find themselves striving to meet challenges that are beyond their
capabilities, the less severely disabled may find themselves subjected to a collectively calculated
sub-minimum wage. Though workshop managers may find it economically useful to deal with the
disabled as a homogenous group, it may be reasonable to distinguish between levels of disability
(as the Congress judged it to be in 1966) and to structure work and rehabilitation (not necessarily
the same things) to meet specific needs of the disabled clients and/or employees.



127
    As noted elsewhere in the report, methodologies for calculation of relative productivity vary substantially among
places of employment, partly reflecting the sophistication of the employer. As well, disabled workers are often engaged
in group work in which their individual productivity may well be beyond their own individual ability to control.
Although there is testimony, largely anecdotal, that the workers engaged in sheltered employment through recent years
are more severely disabled than those of earlier periods, such comparisons are difficult to document.
128
    The degree of worker satisfaction with sheltered employment probably can not be shown with any reasonable
accuracy. Individual sheltered workers may be unhappy in their work and dissatisfied in the program of which they are
a part; but, on the other hand, their parent or guardian may have praise for the arrangement. Assessment must take into
account degrees of articulateness where the disabled are concerned. Even complaints, per se, may be difficult to
assess--for all of the reasons suggested by Donald Elisburg during the 1994 hearings, discussed above. Should a
complaint to a supervisor be credited and given weight comparable to that lodged with DOL. Where a complaint, even
if raised with DOL, is not pursued (perhaps because of the cost or difficulty of doing so), should it be discounted. As
Representative Murphy noted at the commencement of the 1994 hearings, it is not clear whether the paucity of official
complaints "is indicative of a lack of problems or of the difficulty of bringing such administrative action."




    
                                                                                            



The Section 14(c) sub-minimum wage option is rooted in the premise that, in order "to prevent
curtailment of opportunities for employment," a wage rate "lower than" the otherwise applicable
FLSA minimum may be justified. There appears to be little hard evidence whether or not a
reduced wage rate prevents curtailment of opportunities for employment. Unfortunately, the data
are sparse and provocative of further questions. Would all types of disability be equally impacted
by a reduced wage option? And, in which types of employment? That employers in competitive
industry actually hire persons with disabilities at the sub-minimum rate whom they would not
have hired had they been required to pay a full minimum wage is difficult to document.

The option of paying lower wages, some argue, encourages employers more readily to hire the
disabled and to spend the time to deal with their presumed idiosyncracies. Whatever their
productive level, it is argued, the sub-minimum wage opens the door to employment: thus, an
"opportunity" wage.129 Others view the issue differently. They point out that in theory, the
disability must be linked directly to diminished productivity; in practice, that linkage may not be
obvious. Some argue that the sub-minimum wage option inflicts an additional burden: the
disabled worker (in the context of Section 14(c)) must prove that he is sufficiently productive to
merit at least the minimum wage; a worker without a recognized disability is presumed to be
worth at least the FLSA minimum.

It has been argued that, on several levels, a dichotomy has been built into the Section 14(c)
program. From the hearings, it has not always been clear, for example, how clients were
distinguished from workers--or, for that matter, that they always have been. Some may view the
progression from the client, to the worker in the workshop, and to the worker in competitive
industry as a continuum. It appears that, in practice, differentiation is not always made. The issue
becomes more complex in light of other internal program conflicts. While the workshops are
normally nonprofit institutions, they compete in the world of commerce for contracts through
which to sustain their nonprofit activities. Thus, while they seek to transition their clients into
competitive industry, they may at the same time be reluctant to lose their best workers. In terms
of public policy, while the workshop/WAC community may be the beneficiaries of public
subsidies (tax concessions, special marketing arrangements, charitable contributions, etc.), they
may also compete with private sector firms and their employees. In practice, do the managers of
workshops and WACs regard themselves as corporate CEOs, as social services workers, or
both--and, do these several identities sometimes clash?

Making commensurate wage rate determinations is a technically challenging task. It is not clear,
from a review of the various hearings and reports, that workshop operators/managers have the
expertise effectively to implement such a wage structure. Nor is it clear that the DOL, were it to
place a priority upon compliance with the spirit motivating Section 14(c), has the means
necessary to effect compliance.

It seems reasonable to assume that Section 14(c) will continue to be a focus of debate. As
discussed above, a variety of policy options might be considered by Congress in dealing with this
matter. In addition to legislative proposals suggested through the years, other options might
include developing additional financial subsides for those in sheltered employment; an attempt to
establish a clearer distinction between rehabilitation, on the one hand, and work on the other--
with different patterns of activity for workers and for clients or patients engaged under Section
14(c); reconsideration of the concept of minimum compensation (and commensurate rates) in the

129
      These arguments have also been used with respect to other segments of the workforce, notably, youth workers.




    
                                                                           



Section 14(c) context; or elimination of the Section 14(c) exemption entirely. Conversely,
Congress may find, upon review, that the present system is functioning as well as any might, and
that no remedial action is warranted.



    

William G. Whittaker
Specialist in Labor Economics
wwhittaker@crs.loc.gov, 7-7759




   

------------------------------------------------------------------------------
For other versions of this document, see http://wikileaks.org/wiki/CRS-RL30674