[Federal Register Volume 86, Number 194 (Tuesday, October 12, 2021)]
[Proposed Rules]
[Pages 56679-56686]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-22118]
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COMMITTEE FOR PURCHASE FROM PEOPLE WHO ARE BLIND OR SEVERELY DISABLED
41 CFR Part 51-4
RIN 3037-AA16
Prohibition on the Payment of Subminimum Wages Under 14(c)
Certificates as a Qualification for Participation as a Nonprofit Agency
Under the Javits Wagner O'Day Program
AGENCY: Committee for Purchase From People Who Are Blind or Severely
Disabled.
ACTION: Notice of proposed rulemaking; request for comments.
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SUMMARY: The Commission proposes to add a new qualification
requirement. The requirement provides that for each nonprofit agency
(``NPA'') that seeks to qualify or maintain its qualifications under
the AbilityOne Program, the NPA must certify that it will not pay
subminimum wages using special wage certificates authorized under
section 14(c) of the Fair Labor Standards Act of 1938 to employees on
all contracts or subcontracts awarded, extended (other than through the
exercise of an option) or renewed under the program after the effective
date of the final rule.
DATES: The Commission will consider all comments submitted
electronically on or before November 12, 2021.
ADDRESSES: You may submit comments, identified by RIN 3037-AA16, only
by the following method: Internet--Federal eRulemaking Portal.
Electronic comments may be submitted through https://www.regulations.gov. To locate the proposed rule, use RIN 3037-AA16 or
key words such as ``Section 14(c),'' ``Committee for Purchase,'' or
``Subminimum Wage'' to search documents accepting comments. Follow the
instructions for submitting comments. Please be advised that comments
received will be posted without change to https://www.regulations.gov,
including any personal information provided. Accessible Format: On
request to the program contact person listed under FOR FURTHER
INFORMATION CONTACT, individuals with disabilities can obtain this
document in an alternative accessible format.
Electronic Access to This Document: The official version of this
document is the document published in the Federal Register. You may
access the official edition of the Federal Register and the Code of
Federal Regulations at www.govinfo.gov. You may also access documents
of Commission published in the Federal Register by using the article
search feature at: www.federalregister.gov.
FOR FURTHER INFORMATION CONTACT: Shelly Hammond, Director of
Contracting and Policy, by telephone (703) 603-2100 or by email at
[email protected].
During and after the comment period, you may inspect all public
comments about the proposed priority and requirements by accessing
Regulations.gov.
Assistance to Individuals with Disabilities in Reviewing the
Rulemaking Record: Upon request, we will provide an appropriate
accommodation to an individual with a disability who needs assistance
to review the comments for the proposed rule. If you want to contact us
to request assistance, please contact the person listed in this
section.
[[Page 56680]]
SUPPLEMENTARY INFORMATION:
I. The AbilityOne Program
The Javits-Wagner-O'Day Act (``JWOD'') Act, see 41 U.S.C. 8501-
8506, leverages the purchasing power of the Federal Government to
create employment opportunities for individuals who are blind or have
significant disabilities through a program called AbilityOne. Under
JWOD, the U.S. AbilityOne Commission, an independent Federal agency,
maintains a list of products and services offered by NPAs employing
workers who are blind or have significant disabilities, known as the
AbilityOne Procurement List. See 41 CFR 51-1.3. Federal Government
entities procuring products or services on the Procurement List then
purchase them from the sources identified by the Commission. NPAs are
subject to qualification standards during their initial qualification
for the program and are subject to qualification standards to maintain
their participation in the program. See 41 CFR 51-4.2 (initial
qualification) and 41 CFR 51-4.3 (maintaining qualifications).
The AbilityOne Commission consists of 15 members appointed by the
President. Eleven Commission members represent Federal agencies,
including a member each from the Departments of Defense, Army, Navy,
and Air Force, Agriculture, Education, Commerce, Veterans Affairs,
Justice, and Labor, and the General Services Administration. See 41
U.S.C. 8502(b)(1). The four non-Federal Government members must include
one each knowledgeable about employment issues regarding individuals
who are blind and individuals with significant disabilities, and one
each representing employees from NPAs who employ individuals who are
blind and individuals with significant disabilities providing services
or goods under an NPA that would be qualified under the program. See 41
U.S.C. 8502(b)(2).
As outlined in the JWOD Act, the Commission has five primary roles
under the program. First, the Commission decides on the addition or
removal of products or services from the AbilityOne Procurement List.
See 41 U.S.C. 8503(a). Second, the Commission sets the fair market
price the Federal Government will pay the NPAs for the products or
services. See 41 U.S.C. 8503(b). Third, the Commission is responsible
for designating nonprofit agencies to be central nonprofit agencies
(CNAs) to facilitate the distribution of the orders for products and
services among the participating NPAs. See 41 U.S.C. 8503(c). Fourth,
the Commission is responsible for promulgating regulations ``on other
matters as necessary'' to carry out the law. See 41 U.S.C. 8503(d)(1).
Finally, the Commission is responsible for engaging in a ``continuing
study and evaluation of its activities'' to ensure the effective
administration of the law. See 41 U.S.C. 8503(e).
The Commission has designated National Industries for the Blind
(``NIB''), whose members primarily employ individuals who are blind or
have vision impairments; and SourceAmerica, whose members consist of
more than 400 nonprofit organizations that typically employ workers
with more significant disabilities, as CNAs for the AbilityOne Program.
The CNAs facilitate the distribution of orders, provide information as
needed by the Commission, and otherwise assist the Commission in
implementing its regulations. See 41 CFR 51-1.3 (definition of CNA);
see also 41 CFR 51-3.2 (describing numerous responsibilities of the
CNAs).
The Commission's regulations at 41 CFR 51-4.2 identify the initial
qualification requirements for NPAs seeking to participate in the
AbilityOne Program. For example, to be initially qualified, a NPA must
submit documents demonstrating that it is incorporated and has bylaws
worded to the effect that no part of the net income of the NPA may
inure to the benefit of any shareholder or other individual. 41 CFR 51-
4.2(a)(1)(iii)(A). The Commission then reviews the documents submitted
and, if acceptable, notifies the NPA and its CNA. 41 CFR 51-4.2(b).
To maintain qualification, a NPA must annually certify that it
complies with the definition of a qualified NPA as specified in 41 CFR
51-1.3 as well as several additional requirements identified in 41 CFR
51-4.3(b) and (c). The Commission receives Annual Representations and
Certifications from every AbilityOne participating NPA, through the
CNAs, and reviews them to determine whether the NPAs are maintaining
qualification. 41 CFR 51-4.3(a). The Commission ensures that the NPA
has submitted its Annual Representation and Certification and that it
has complied with all the requirements on those forms. 41 CFR 51-4.2(b)
and 51-4.3(a). One of the regulatory criteria that the Commission must
consider in determining the suitability of a proposed addition to the
Procurement List is the qualification of the nonprofit agency to
furnish the product or service. 41 CFR 51-2.4(a)(2).
II. Section 14(c) of the Fair Labor Standards Act of 1938
The Fair Labor Standards Act of 1938 (``FLSA'') provides for the
employment of certain individuals at wage rates below the generally
applicable statutory minimum. 29 U.S.C. 201, et seq. Section 14(c) of
the FLSA provides that ``[t]he Administrator [of the Wage and Hour
Division], to the extent necessary in order to prevent curtailment of
opportunities for employment, shall by regulation or by orders provide
for . . . (2) the employment of individuals whose earning capacity is
impaired by physical or mental deficiency or injury, under special
certificates issued by the Administrator, at such wages lower than the
minimum wage.'' See 29 U.S.C. 214(c).
If an employer wishes to pay wages that are below the Federal
minimum wage rate to workers with disabilities, the employer first must
obtain an authorizing certificate from the Secretary of Labor
(``Secretary''). See 29 U.S.C. 214(c)(1). The Secretary may issue
certificates authorizing employers to pay workers with disabilities
subminimum wage rates which are commensurate with those paid to workers
not disabled for the work to be performed employed in the vicinity for
essentially the same type, quality, and quantity of work ``to the
extent necessary to prevent curtailment of opportunities for
employment'' for such workers with disabilities. 29 U.S.C.
214(b)(1)(A). The employee's subminimum wage is based on their
productivity (no matter how limited) compared to the norm established
for workers without disabilities through the use of verifiable work
measurement or the productivity of experienced workers who do not have
disabilities employed in the vicinity on comparable work. See 29 CFR
525.9(a)(3). For example, if the productivity or output of a worker
with a disability is measured to be 60% as much as the productivity or
output of an experienced worker who does not have a disability
performing comparable work, the subminimum wage for the worker with a
disability would be at least 60% of the prevailing wage (the wage rate
paid to experienced workers in the vicinity who do not have
disabilities performing the same or similar work). See 29 CFR 525.3(i).
A subminimum wage is always less than the applicable minimum wage
otherwise required by section 6(a) of the FLSA, or where applicable,
the prevailing wage required by the McNamara-O'Hara Service Contract
Act (``SCA'').
[[Page 56681]]
The SCA applies to service contracts entered into between
individuals or companies and the Federal Government, including the
District of Columbia. The SCA requires contractors and subcontractors
performing services on prime contracts in excess of $2,500 to pay
service employees in various classes no less than the wage rates and
fringe benefits found prevailing in the locality. 29 CFR 4.4(a)(1). A
``service employee'' (A) means an individual engaged in the performance
of a contract made by the Federal Government and not exempted under 41
U.S.C. 6702(b), whether negotiated or advertised, the principal purpose
of which is to furnish services in the United States; (B) includes an
individual without regard to any contractual relationship alleged to
exist between the individual and a contractor or subcontractor; but (C)
does not include an individual employed in a bona fide executive,
administrative, or professional capacity, as those terms are defined in
29 CFR part 541. See 41 U.S.C. 6701(3). A subminimum wage rate is
determined by comparing the productivity of the worker with a
disability against the productivity of an experienced worker without a
disability for the work being performed--the ``standard.''
The SCA governs most Federal contracts for services. Under the SCA,
the prevailing wage is the wage listed on a wage determination by the
U.S. Department of Labor for the classification of work being
performed. See 29 CFR 4.51. If a Federal contract is covered by the
SCA, all service employees (including those paid pursuant to section
14(c)) must receive the full fringe benefits as listed on the wage
determination. See 29 CFR 4.3. For example, if a worker with a
disability is performing work on an SCA-covered contract in a job
classification with a wage determination rate of $22.00 per hour and
the worker's productivity is measured to be 75%, the worker must be
paid at least $16.50 per hour under a section 14(c) certificate. The
worker would also be due the full fringe benefit amount.
The recently issued Executive Order 14026 ``Increasing the Minimum
Wage for Federal Contractors,'' 86 FR 22835 (April 30, 2021), calls for
an increase in the minimum wage for workers of Federal contractors and
subcontractors working on or in connection with covered Federal
contracts, including ``any new contract; contract-like instrument; new
solicitation; extension or renewal of an existing contract or contract-
like instrument; and exercise of an option on an existing contract or
contract-like instrument.'' \1\ The Executive Order 14026 raises the
minimum wage on covered Federal contracts to $15.00 effective January
30, 2022. Executive Order 14026, sections 1 and 2(i). Executive Order
14026 built on Executive Order 13658, ``Establishing a Minimum Wage for
Contractors,'' that raised the minimum wage to $10.10 for all workers
on Federal construction and service contracts on February 12, 2014. See
79 FR 9849 (Feb. 20, 2014); Executive Order 13658, section 1 and
2(a)(i). Significantly, both of these Executive orders direct that
workers employed under section 14(c) certificates performing work on or
in connection with covered contracts must be paid at least the full
applicable Executive order minimum wage rate.
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\1\ Section 8a of Executive Order 14026 provides that the order
applies to (i)(A) a procurement contract or contract-like instrument
for services or construction; (B) a contract or contract-like
instrument for services covered by the Service Contract Act; (C) a
contract or contract-like instrument for concessions, including any
concessions contract excluded by Department of Labor regulations at
29 CFR 4.133(b); or (D) a contract or contract-like instrument
entered into with the Federal Government in connection with Federal
property or lands and related to offering services for Federal
employees, their dependents, or the general public; and (ii) the
wages of workers under such contract or contract-like instrument are
governed by the Fair Labor Standards Act, the Service Contract Act,
or the Davis-Bacon Act.
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III. Evolution of Policies Regarding Employment of People With
Disabilities
A. Historical Background on the FLSA and the Javits-Wagner-O'Day Act
On June 25, 1938, President Roosevelt signed the FLSA into law. As
part of the legislation, section 14(c) formally addressed the
employment of individuals with disabilities. See 29 U.S.C. 214 (c).\2\
The law created the authority for the U.S. Department of Labor to issue
special certificates that permitted employers to pay less than the
minimum wage in order to provide for the employment of individuals
``whose earning capacity is impaired by physical or mental deficiency
or injury,'' See 29 U.S.C. 214(c). Since 1938, section 14(c)'s core
premise that the productivity of an individual with a disability to
perform work can be ``impaired'' by their disability has legally
allowed employees with disabilities to be paid less than the applicable
minimum wage where the individual's employer has obtained the
certificate's authority to do so. Both Senator Robert F. Wagner and
Congresswoman Caroline O'Day, the drafters of the 1938 legislation that
authorized what is now the AbilityOne Program, the Wagner-O'Day Act,
likewise expressed their intent to promote the employment of
individuals who were blind by allowing NPAs to sell manufactured goods,
such as mops and brooms, to the Federal Government for a fair market
price.\3\ During the more than 80-year history of the AbilityOne
Program, Congress has substantially amended the JWOD Act only once. In
1971, Congress, led by Senator Jacob Javits, expanded the statute
through amendments that added services provided by organizations that
employ individuals with significant disabilities to the Procurement
List, see S. Rep. No. 92-41, at 1 (1971), while maintaining an ongoing
preference for goods provided by blind employees. See Javits-Wagner-
O'Day Act of 1971, Public Law 92-28, sec. 6, 85 Stat. 77, 81, 82
(1971).
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\2\ The legislative origins of section 14(c) are found in the
National Industrial Recovery Act of 1933 (``NIRA''). While
ultimately declared unconstitutional by the Supreme Court in 1935 in
Schechter Poultry Corp. v. United States, 295 U.S. 495 (1935), the
NIRA contained a productivity-based subminimum wage specific to
individuals with disabilities. See William G. Whittaker, Treatment
of Workers with Disabilities Under Section 14(c) of the Fair Labor
Standards Act, CORNELL UNIVERSITY ILR SCHOOL, Summary (Feb. 9,
2005), available at https://ecommons.cornell.edu/bitstream/handle/1813/78685/CRS_February_2005_Treatment_of_Workers_with_Disabilities.pdf?sequence=1&isAllowed=y.
\3\ Melia Preedy, Subminimum or Subpar? A Note in Favor of
Repealing the Fair Labor Standards Act's Subminimum Wage Program,
SEATTLE UNIVERSITY LAW REVIEW, 37 Seattle U. L. Rev. 1097, 1104
(2014).
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Congress amended the FLSA in 1986 to provide, among other changes,
that subminimum wages paid to a worker with a disability under a
certificate must be based on the individual's productivity commensurate
with wages paid to workers without disabilities employed in the
vicinity for essentially the same type, quality, and quantity of
work.\4\ See Public Law 99-486, 100 Stat. 1229 (October 16, 1986).
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\4\ This section does not address statutory changes to the FLSA
between 1938 and 1986 and is intended to provide a brief overview
highlighting the most significant changes to section 14(c) and the
JWOD Act.
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B. Overview of Changes in Modern Disability Law
Two models of disability, often called the charity and medical
models, emerged during the first half of the 20th century. The medical
model promoted the idea that disability was something to be ``cured,''
and this model focused on the negative impact of an individual's
disability rather than on the person's skills, talents, and abilities.
Similarly, the charity model reinforced the idea that individuals with
disabilities were
[[Page 56682]]
``tragic'' and should be ``pitied.'' \5\ The original 1938 Wagner-
O'Day-Act is a product of this era.
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\5\ Vaughn, Jacqueline. 2003. Disabled Rights: American Policy
and the Fight for Equality. Washington, DC, Georgetown University
Press. See also Richard K. Scotch, From Good Will to Civil Rights:
Transforming Federal Disability Policy 20 (1984).
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The marginalization of individuals with disabilities continued
until World War I when veterans with disabilities demanded that the
U.S. Government provide rehabilitation in exchange for their service to
the nation. During the decade of the 1910s, Congress passed a series of
laws to support soldiers who now had disabilities as a result of their
service in World War I. For example, the Smith-Hughes Act made Federal
funds available to states on a matching basis for vocational education
programs in 1917.\6\ Shortly thereafter, the Soldier's Rehabilitation
Act created a vocational rehabilitation program for World War I
veterans with disabilities.\7\ Finally, in 1920, the landmark Smith-
Fess Act (also known as the Civilian Vocational Rehabilitation Act)
established the Vocational Rehabilitation program for American citizens
with physical disabilities.\8\ The law, however, did not provide
services for individuals with developmental disabilities until the
Rehabilitation Act Amendments of 1954.\9\
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\6\ 20 U.S.C. 11.
\7\ 50 U.S.C. App. 1.
\8\ Smith-Fess Act of 1920 (Pub. L. 66-236).
\9\ 29 U.S.C. 4.
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Despite the passage of the Wagner-O'Day Act, most individuals with
disabilities still did not have access to public transportation,
telephones, bathrooms, and stores. Further, worksites with stairs
offered no access for individuals with physical disabilities, and other
barriers often kept talented and eligible individuals with disabilities
from obtaining and maintaining jobs with private sector employers.\10\
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\10\ Vaughn, Jacqueline. 2003. Disabled Rights: American Policy
and the Fight for Equality. Washington, DC, Georgetown University
Press.
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With the civil rights movement in the 1960s, disability advocates
joined forces with other minority groups such as people of color,
women, and other marginalized groups to demand equal treatment, equal
access, and equal opportunity for individuals with disabilities. In
1973, when Congress passed the landmark Rehabilitation Act of 1973
(``Rehabilitation Act''), it included three non-discrimination
sections. Sections 501 established a non-discrimination and affirmative
action requirement for employees with disabilities within the Federal
Government; section 503 established a non-discrimination and
affirmative action requirement for employees with disabilities by
Federal contractors and section 504 established a non-discrimination
requirement for individuals with disabilities by any program or
activity that receives Federal financial assistance. See 29 U.S.C. 791,
793, and 794.
In the 1980s, disability activists began to lobby for an expansion
of disability rights so that entities that were not receiving Federal
funds would also be prohibited from discriminating against individuals
with disabilities. President George H.W. Bush signed the Americans with
Disabilities Act (``ADA'') into law in 1990. This sweeping law
prohibited discrimination because of disability in employment, services
rendered by state and local governments, places of public
accommodation, transportation, and telecommunications services. See 42
U.S.C. 12101-12213. Under the ADA, Congress mandated businesses to
provide reasonable accommodations to individuals with disabilities
(such as restructuring jobs or modifying work equipment), and that
public services such as public transportation systems become more fully
accessible to individuals with disabilities. Further, Congress found
that ``segregation'' of individuals with disabilities was a ``for[m] of
discrimination'' on the basis of disability. See 42 U.S.C. 12101(a)(2).
Segregation, Congress recognized, is ``a serious and pervasive social
problem'' that diminished the rights of individuals with disabilities
``to fully participate in all aspects of society.'' Id. at sec. 12101.
With this piece of legislation, the U.S. government finally broke the
old medical and charity models by identifying and championing the full
participation, inclusion, and integration of individuals with
disabilities in all levels of society.
Congress passed the ADA Amendments Act in 2008. The law restored
the ADA's definition of disability, rejecting two Supreme Court rulings
that had narrowed the scope of the ADA. These amendments made it easier
for individuals with disabilities to obtain protection under the ADA
and directed that the definition of ``disability'' shall be construed
broadly in favor of expansive coverage, to the maximum extent permitted
by the terms of the ADA. The ADA Amendments Act made clear that the
question of whether an individual meets the definition of disability
should not demand extensive analysis and that the primary object of
attention in cases brought under the ADA should be whether entities
covered under the ADA have complied with their obligations and whether
discrimination has occurred, not whether the individual meets the
definition of disability.
More recently, Congress addressed the Nation's workforce
development system with the passage of the Workforce Innovation and
Opportunity Act (``WIOA'') in 2014. See 29 U.S.C. 3101 et seq.). WIOA
reauthorized critical programs to help job seekers, including those
with disabilities, to access the services they need to succeed in
employment. In particular, section 188 of WIOA prohibits discrimination
in the provision of services by requiring that American Job Centers and
other programs and activities funded under WIOA ensure that individuals
with disabilities have equal opportunity to participate in services and
receive appropriate accommodations. In addition, title IV of WIOA
amended the Rehabilitation Act by defining ``competitive integrated
employment.'' See 29 U.S.C. 705(5). The law defines competitive
integrated employment, in part, as work for which individuals receive
wages equal to or exceeding the Federal, State, or local minimum wage
rates.\11\ In addition, title IV of WIOA added section 511, which
requires that individuals with disabilities have access to training
information and career counseling services to better enable them to
achieve competitive integrated employment before and/or during
employment at subminimum wages. 29 U.S.C. 794(g).
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\11\ See 29 U.S.C. 705(5).
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In short, since the enactment of the JWOD Act in 1938, Congress has
made a consistent effort to move away from institutionalization,
segregation, and unequal treatment of individuals with disabilities,
and to move toward integration, inclusion, and equal treatment. U.S.
public policy and approaches to serving individuals with disabilities
have changed dramatically since 1938, and the Commission recognizes
that the AbilityOne Program must change with the times as well. On
March 18, 2016, the Commission issued a declaration that promoted/
encouraged the NPAs in the program to discontinue use of subminimum
wages under section 14(c).\12\ The Commission believes that the
continued payment of subminimum wages to employees with disabilities
under section 14(c)
[[Page 56683]]
certificates is no longer aligned with modern disability policy.
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\12\ AbilityOne Commission, Declaration in Support of Minimum
Wage for All People Who Are Blind or Have Significant Disabilities,
March 18, 2016. https://www.abilityone.gov/commission/documents/US%20AbilityOne%20Commission%20Declaration%2018March2016%20Final.pdf.
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C. Recent Federal Reports on Section 14(c)
Given this evolution in the Nation's overall approach to disability
policy, the call for the phase out and elimination of subminimum wages
has steadily grown in volume. In addition to civil rights
organizations, many Federal Government agencies and official entities
have underscored their concerns with the outdated employment model
embodied by section 14(c). For example, in 2012, the National Council
on Disability (``NCD'') issued a report titled ``Subminimum Wage and
Supported Employment'' that called for the phase-out of section 14(c)
certificates. See National Council on Disability, Report on Subminimum
Wage and Supported Employment, September 27, 2012.
Notably, a Federal advisory committee tasked to provide
recommendations about the future of section 14(c) released its final
report in September 2016. In the report, the Advisory Committee on
Increasing Competitive Integrated Employment for Individuals with
Disabilities (``ACICIEID'' or ``Committee'') urged, ``Congress should
amend Section 14(c) of FLSA to allow for a well-designed, multi-year
phase-out of the Section 14(c) Program that results in people with
disabilities entering competitive integrated employment.'' See ACICIEID
Final Report, (September 2016).\13\ In a chapter addressing the
AbilityOne Program, the Committee stated that AbilityOne should
``immediately eliminate the use of the FLSA Section 14(c) certificates
for all contractors providing products or services to Federal customers
under the AbilityOne Program.'' See ACICIEID Final Report, p. 59.
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\13\ https://www.dol.gov/sites/dolgov/files/odep/topics/pdf/acicieid_final_report_9-8-16.pdf.
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More recently, two Government reports have called for the repeal of
section 14(c) as well as modernization of the AbilityOne Program. In
October 2018, the NCD published a report, From the New Deal to the Real
Deal: Joining the Industries of the Future. The report's first
recommendation stated, ``NCD renews its call from 6 years ago for a
phase-out of the 80-year-old 14(c) program and the concomitant phase-up
of the systems changes necessary to allow people with disabilities to
move into competitive integrated employment.'' See National Council on
Disability, From the New Deal to the Real Deal: Joining the Industries
of the Future, (Washington, DC: 2018).\14\ On September 17, 2020, the
United States Commission on Civil Rights (``USCCR'') published a report
titled ``Subminimum Wages: Impacts on the Civil Rights of People with
Disabilities.'' The USCCR recommended, ``Congress should repeal Section
14(c) with a planned phase-out period to allow transition among service
providers and people with disabilities to alternative service models
prioritizing competitive integrated employment.'' U.S. Commission on
Civil Rights, Subminimum Wages: Impacts on the Civil Rights of People
with Disabilities, (Washington, DC: 2020).\15\
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\14\ https://ncd.gov/sites/default/files/Documents/NCD_Deal_Report_508.pdf.
\15\ https://www.usccr.gov/files/2020-09-17-Subminimum-Wages-Report.pdf.
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D. Biden Administration Actions During the First 100 Days
The Biden administration has made it a priority to achieve a more
inclusive country for individuals with disabilities. Executive Order
13985, Advancing Racial Equity and Support for Underserved Communities,
issued by President Biden on January 25, 2021, directs the entire
Federal Government to pursue a comprehensive approach to advancing
equity for all. 86 FR 7009 (January 25, 2021). It defines equity as the
``consistent and systematic fair, just, and impartial treatment of all
individuals,'' including individuals with disabilities. See Executive
Order 13986, section 2. Executive Order 14026, ``Increasing the Minimum
Wage for Federal Contractors'', 86 FR 22835 (April 30, 2021), requires
an increase in the minimum wage to $15.00 per hour beginning January
30, 2022, for ``workers performing on or in connection with covered
Federal contracts,'' including the SCA. Executive Order 14026, section
8. Workers covered by the Executive order include workers employed
under section 14(c) certificates. Executive Order 14026, section 2.
Under a Federal contract that is covered by both the SCA and
Executive Order 14026, a worker performing contract work must be paid
at the higher applicable wage rate. For example, for a worker with a
disability performing work for an employer holding a section 14(c)
certificate on a Federal contract that is covered by both the SCA and
Executive Order 14026, where the SCA wage determination rate is $14.00
per hour and the worker's section 14(c) wage rate based on their
productivity is $9.50 per hour, the worker would be due $15.00 per
hour, which is the applicable wage rate under Executive Order 14026.
The worker would also be due the full fringe benefits on the contract.
The Commission will follow the Administration's updates and guidance
issued pursuant to both Executive orders and will implement such
changes as may be required.
On the legislative front, as part of the efforts to target
workforce development opportunities in underserved communities, the
Biden Administration's American Jobs Plan calls on Congress to
eliminate subminimum wage provisions in section 14(c) of the FLSA and
expand access to competitive, integrated employment opportunities and
fair wages for workers with disabilities. See Fact Sheet: The American
Jobs Plan, March 31, 2021.\16\
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\16\ https://www.whitehouse.gov/briefing-room/statements-releases/2021/03/31/fact-sheet-the-american-jobs-plan.
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E. Steps Taken By the AbilityOne Commission With Regard to Use of
Subminimum Wages in AbilityOne Contracts
In response to the growing recognition of the civil rights issues
associated with the payment of subminimum wages, the Commission has
taken steps to highlight its concerns with payment of such wages in
AbilityOne Programs. As mentioned previously, in 2016, the Commission
members issued a ``Declaration in Support of Minimum Wage for All
People Who Are Blind or Have Significant Disabilities.'' The
declaration directed ``all qualified nonprofit agencies participating
in the AbilityOne Program to commit to, and begin (if not maintain),
paying at least the Federal minimum wage, or state minimum wage if
higher, to all employees who are blind or have significant disabilities
working on AbilityOne contracts.'' \17\
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\17\ U.S. AbilityOne Commission, Declaration in Support of
Minimum Wage for All People Who Are Blind or Have Significant
Disabilities, March 16, 2016. https://www.abilityone.gov/commission/documents/US%20AbilityOne%20Commission%20Declaration%2018March2016%20Final.pdf.
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Building on the 2016 Declaration, in February 2019, the Commission
called on SourceAmerica to end the process of the payment of subminimum
wages by its NPAs on AbilityOne contracts within three years. The
Commission's letter acknowledged that ``[T]he imperative to end the
payment of subminimum wages in the AbilityOne Program is growing in
strength and momentum with every passing year. It is time to pay at
least the Federal minimum wage, or state minimum wage if higher, to all
employees who are blind or have
[[Page 56684]]
significant disabilities working on AbilityOne contracts.'' \18\
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\18\ AbilityOne Letter to Mr. Norman Lorentz, Chair of the
SourceAmerica Board, February 19, 2019. https://www.abilityone.gov/media_room/documents/Commission%20Chair%20Ltr%20to%20NIB%20&%20Sourceamerica%20Board%20Chairs%2020200323.pdf.
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In 2020, the Commission initiated a new practice to identify and
report in its decision documents any planned use of subminimum wages
related to products and services for additions to the AbilityOne
Procurement List. Commission members are thus informed about the use of
such wages before they decide whether to approve future AbilityOne
contract opportunities.
Through these various actions, the Commission has been working
towards bringing the AbilityOne Program into greater alignment with
other disability employment laws, such as WIOA. The Commission now
believes it is time to discontinue the practice of NPAs paying
employees with disabilities subminimum wages using section 14(c)
certificates on any new, extended, or renewed contract, with the
exception of the exercise of options in an existing contract.
IV. Specific Proposed Changes to the NPAs' Payment of Subminimum Wages
Under Section 14(c) Certificates for AbilityOne Contracts
As set forth in the regulatory procedures section below, the
Commission proposes to amend the qualification requirements for NPAs
that participate in the AbilityOne Program, as set forth in 41 CFR 51-
4.2 and 51-4.3. The Commission proposes to add a requirement for
initial qualification that a NPA must provide a certification that it
will not pay subminimum wages using special wage certificates
authorized under section 14(c) of the FLSA to employees on any contract
or subcontract awarded under the program. In addition, the Commission
proposes to add a requirement for maintaining qualification that a NPA
provide a certification that it will not pay subminimum wages using
section 14(c) certificates to employees on contracts or subcontracts
awarded under the program. This requirement would not apply to the
exercise of any options on an existing contract up to the time of the
contract's extension or renewal, except as otherwise required by law,
such as on the exercise of an option on an existing contract covered by
Executive Order 14026. The NPA must comply with the requirement at the
time of the extension or renewal of an existing contract.
The Commission is seeking comments specifically on the following
questions:
(1) Should the requirement that a qualified NPA not use section
14(c) certificates to pay subminimum wages on AbilityOne contracts
apply to the renewal or extensions of contracts once they expire or
only to new contracts? The Commission is interested in receiving data
in support of any comment on this question.
(2) Should the requirement that a qualified NPA not use section
14(c) certificates to pay subminimum wages on AbilityOne contracts
apply to the exercise of an option on an existing contract? The
Commission is interested in receiving data in support of any comment on
this question.
(3) What impact, if any, would the proposed regulatory change make
to the receipt of social security benefits, such as Supplemental
Security Income (SSI) or Social Security Disability Insurance (SSDI)
and attendant government health insurance, such as Medicare and
Medicaid, to employees with disabilities? The Commission is also
interested in receiving suggestions on how to address any possible
adverse impacts that may be identified.
(4) How much time, if any, would be necessary for NPAs to meet the
new requirements?
V. Regulatory Procedures
Executive Orders 12866 (Regulatory Planning and Review) and 13563
(Improving Regulation and Review)
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). E.O.
13563 emphasizes the importance of quantifying both costs and benefits,
of reducing costs, of harmonizing rules, and of promoting flexibility.
It is anticipated that this will be a ``significant regulatory action''
and, therefore, subject to review under section 6(b) of E.O. 12866,
Regulatory Planning and Review, dated September 30, 1993.
A. Costs of Prohibiting the Use of Subminimum Wages Under Section 14(c)
Certificates as a Qualification for Participation as a Nonprofit Agency
in the AbilityOne Program
The Commission believes that the costs of requiring all new NPAs
seeking to become qualified to participate in the AbilityOne Program
and all existing NPAs wishing to maintain their qualification in the
AbilityOne Program to certify that they will not pay subminimum wages
under a section 14(c) certificate on contracts are not substantial and
are outweighed by the benefits. NPAs participating in the AbilityOne
Program are currently represented by two CNAs--NIB and SourceAmerica.
NIB represents only one NPA that uses a section 14(c) certificate, but
the NPA does not pay subminimum wages on its AbilityOne contracts.
The Commission does not currently collect data directly from the
CNAs or the NPAs participating in the program regarding the NPAs' use
of section 14(c) certificates on AbilityOne contracts or the number of
employees with disabilities paid subminimum wages under those contracts
or the amount of those wages. The Commission requested information from
SourceAmerica on the use of section 14(c) certificates because
SourceAmerica's NPAs voluntarily report this data to the CNA.\19\
According to information provided by SourceAmerica, 160 of the 412 NPAs
it represents (38 percent) hold and use section 14(c) certificates to
pay subminimum wages on one or more AbilityOne contracts, as of the end
of the first quarter of 2021.\20\
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\19\ The Commission notes that because SourceAmerica data is
self-reported by the NPAs and fluctuates by quarter, the data should
be viewed as estimates and not exact figures.
\20\ Statistics provided by SourceAmerica Interim Chief
Executive Officer in a report to the Commission, posted at https://www.abilityone.gov/commission/public_meeting_archive.html.
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SourceAmerica reports that the number of NPA employees with
disabilities working under a section 14(c) certificate decreased from
1,212 employees in the first quarter of 2020 to 674 employees in the
first quarter of 2021.\21\ AbilityOne NPAs employ approximately 42,000
individuals with disabilities, so the 674 employees with disabilities
account for fewer than two percent of individuals with disabilities
employed by AbilityOne NPAs.\22\ Therefore, although the number of NPAs
affected by this proposed rule may be 42 percent of the NPAs
participating in the AbilityOne program, the actual number of employees
with disabilities for whom these NPAs will have to increase wages is a
small number of NPA employees. The costs of this rule will be further
reduced because the NPAs holding service contracts that are covered by
Executive Order 14026 will already have to pay at least $15.00/hour to
employees with disabilities under AbilityOne service contracts pursuant
to that Executive order and its
[[Page 56685]]
implementing regulations beginning January 30, 2022. Executive Order
14026, section 2(a)(1).
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\21\ U.S. AbilityOne Commission Report to the President, March
2021, p. 22.
\22\ Id., p. 2.
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A. Benefits
Paying wages to AbilityOne employees that are equal to the wages
paid to other employees without disabilities performing the same or
similar work will provide both tangible and intangible benefits to
employees with disabilities and to society at large.
The tangible financial benefits are the same that would accrue to
any worker who receives a wage increase. Employees with significant
disabilities who have been receiving subminimum wages for their work
will now receive the Federal minimum wage, state minimum wage, or
prevailing wage, depending on the applicable law. The result will be
that such individuals will have an increased ability to make life
decisions that require additional financial resources, such as where to
live, what activities to engage in, and other basic aspects of life.
The intangible benefits are, by definition, harder to quantify, but
those benefits will accrue both to individuals with significant
disabilities and society at large. Paying employees with disabilities
the same wage legally required to be paid to employees without
disabilities doing the same or similar work sends a message of respect
and a commitment to equity. Work provides structure, purpose, and a
sense of meaningful contribution to family and community. That is why
the AbilityOne Program is so important for individuals with significant
disabilities. At the same time, in our society, the wages paid for work
send a message about the value of that work. Paying equivalent wages to
employees with and without disabilities who are capable of and are
doing the same or similar work as employees without disabilities
reinforces that such work is equally valued and that individuals with
disabilities are fully included in our society.
The Commission recognizes that an increase in wages for employees
with significant disabilities has the potential to trigger benefits
reductions, depending on individual circumstances, for employees who
are recipients of government benefits programs such as Social Security
Disability Insurance (``SSDI'') or Supplemental Security Income
(``SSI''), with attendant implications for coverage under Medicaid that
often provides greater benefits than private health insurance.
AbilityOne employees with disabilities will need assistance in
assessing that possibility and in determining options to ensure that
they do not lose important government benefits. The Commission expects
to work closely with the CNAs and NPAs to assist in this effort. On
balance, the Commission believes the overall benefits that the proposed
rule will provide for AbilityOne employees with disabilities outweigh
the potential benefits challenges that some AbilityOne employees will
face.
Regulatory Flexibility Act
The Regulatory Flexibility Act of 1980, 5 U.S.C. 601 et seq.,
requires agencies to prepare regulatory flexibility analyses, and to
develop alternatives wherever possible, in drafting regulations that
will have a significant impact on a substantial number of small
entities. The rule only applies to NPAs that propose to use or
currently use certificates authorized by section 14(c) of the FLSA to
pay subminimum wages on AbilityOne contracts. The majority of
AbilityOne participating nonprofit agencies do not hold or use these
special certificates.
Unfunded Mandates Reform
This proposed rule does not include any Federal mandate that may
result in increased expenditures by State, local, and tribal
governments, taken together, of $100 million or more, or in increased
expenditures by the private sector of $100 million or more.
Paperwork Reduction Act
The proposed rule will require the Commission to collect
information within its Annual Representations and Certifications
regarding the certification not to pay subminimum wages under section
14(c) certificates to employees. The Commission collects similar
information (overall wages) but does not currently or specifically
collect a certification not to pay subminimum wages under section 14(c)
certificates to employees.
The following is a summary of the need for and objectives of the
proposed rule. A more complete discussion of various aspects of the
proposed rule can be found in the preamble. The payment of subminimum
wages under section 14(c) certificates to employees working on Federal
contracts in the AbilityOne Program is not consistent with modern
disability policy, diminishes the value of the work and the workers,
and diminishes support for the program itself. The Commission proposes
to add a new requirement for initial qualification and maintaining
qualification for NPAs to participate in the AbilityOne Program. The
requirement provides that for a NPA to qualify or maintain its
qualification under the AbilityOne Program, the NPA must certify that
on all contracts awarded, extended (other than through the exercise of
an option), or renewed after the effective date of this rule, the NPA
will not use a special wage certificate authorized under section 14(c)
of the FLSA to pay subminimum wages to employees on any contract or
subcontract awarded under the program.
Small Business Regulatory Enforcement Fairness Act of 1996
This proposed rule would not constitute a major rule as defined by
section 804 of the Small Business Regulatory Enforcement Fairness Act
of 1996. This proposed rule will not result in an annual effect on the
economy of $100,000,000 or more; a major increase in costs or prices;
or significant adverse effects on competition, employment, investment,
productivity, innovation, or on the ability of the United States-based
companies to compete with foreign-based companies in domestic and
export markets.
Authority: 41 U.S.C. 8503(d).
List of Subjects in 41 CFR Part 51-4
Government procurement, Individuals with disabilities, Reporting
and recordkeeping requirements.
Accordingly, the Commission proposes to amend 41 CFR part 51-4 as
set forth below:
PART 51-4--NONPROFIT AGENCIES
0
1. The authority citation for part 51-4 continues to read as follows:
Authority: 41 U.S.C. 46-48c.
0
2. Amend Sec. 51-4.2 by adding paragraph (a)(1)(iv) and revising
paragraph (b) to read as follows:
Sec. 51-4.2 Initial qualification.
(a) * * *
(1) * * *
(iv) A certification that the nonprofit agency will not pay
subminimum wages using special wage certificates authorized under
section 14(c) of the Fair Labor Standards Act of 1938 (29 U.S.C.
214(c)) to employees on any contract or subcontract awarded under the
program.
* * * * *
(b) The Committee shall review the documents submitted and, if they
are acceptable, notify the nonprofit agency by letter, with a copy to
its central nonprofit agency, that the Committee has verified its
nonprofit status and certification under paragraph (a)(1)(iv)
[[Page 56686]]
of this section under the Javits-Wagner-O'Day (JWOD) Act.
* * * * *
0
3. Amend Sec. 51-4.3 by adding paragraph (b)(10) to read as follows:
Sec. 51-4.3 Maintaining qualification.
* * * * *
(b) * * *
(10)(i) Except as provided in paragraph (b)(10)(ii) of this
section, provide certification that the nonprofit agency will not pay
subminimum wages using special wage certificates authorized under
section 14(c) of the Fair Labor Standards Act of 1938 (29 U.S.C.
214(c)) to employees on any contract or subcontract under the program.
(ii) The requirement of paragraph (a) of this section does not
apply to the exercise of any options on an existing contract up to the
time of the contract's extension or renewal, except as otherwise
required by law.
* * * * *
Michael R. Jurkowski,
Acting Director, Business Operations.
[FR Doc. 2021-22118 Filed 10-8-21; 8:45 am]
BILLING CODE 6353-01-P