[Federal Register Volume 87, Number 139 (Thursday, July 21, 2022)]
[Rules and Regulations]
[Pages 43427-43433]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-15561]


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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 Act

AGENCY: Committee for Purchase From People Who Are Blind or Severely 
Disabled.

ACTION: Final rule.

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SUMMARY: The Committee for Purchase From People Who Are Blind or 
Severely Disabled, operating as the U.S. AbilityOne Commission 
(``Commission''), is publishing a final rule implementing a new 
requirement that a nonprofit agency (NPA) seeking both initial and 
continuing qualification under the Javits Wagner O'Day Act (JWOD Act) 
to participate in the AbilityOne Program must certify that it will not 
use certificates authorized under section 14(c) of the Fair Labor 
Standards Act of 1938 (``14(c) certificates'') to pay employees on its 
AbilityOne contracts. Pursuant to the rule, individuals with 
significant disabilities and those who are blind employed by 
participating NPAs, and working on AbilityOne contracts, will earn at 
least the Federal minimum wage, the applicable local or state minimum 
wage if higher than the Federal minimum wage, or the applicable 
prevailing wage for contracts subject to the McNamara-O'Hara Service 
Contract Act, whichever is highest.

DATES: This final rule is effective October 19, 2022.

FOR FURTHER INFORMATION CONTACT: Shelly Hammond, Director of 
Contracting and Policy, by telephone (571) 457-9468 or by email at 
[email protected].

SUPPLEMENTARY INFORMATION:

I. Background

A. The JWOD Act and Implementing Regulations

    The JWOD Act leverages the purchasing power of the Federal 
Government to create employment opportunities through the AbilityOne 
Program for individuals who are blind or have significant disabilities. 
The Program is administered by the 15-member, presidentially appointed 
Commission that, as an independent Federal agency, maintains a 
Procurement List of products and services that Federal agencies must 
purchase from participating NPAs who employ individuals who are blind 
or have significant disabilities. See 41 U.S.C. 8503 and 8504. Central 
nonprofit agencies (CNAs) are responsible for distributing orders to 
Commission-approved NPAs to provide products and services to Federal 
agencies. See CFR 51-2.4(a)(3) & 51-3.4. NPAs must meet initial 
qualification requirements and maintain those qualifications throughout 
their participation in the

[[Page 43428]]

AbilityOne Program. See 41 CFR 51-4.2 and 51-4.3.
    The Commission has five roles stated in the JWOD Act. First, the 
Commission decides on the addition or removal of products and services 
on the Procurement List. See 41 U.S.C 8503(a). Second, the Commission 
sets the fair market price that the Federal Government will pay for the 
products or services. See 41 U.S.C. 8503(b). Third, the Commission 
designates nonprofit agencies to be the CNAs, who are responsible for 
``facilitating the distribution of orders'' for products or services 
among participating NPAs. See 41 U.S.C. 8503(c). Fourth, the Commission 
promulgates regulations ``on other matters as necessary'' to carry out 
the JWOD Act. See 41 U.S.C. 8503(d)(1). Fifth, the Commission engages 
in a ``continuing study and evaluation of its activities'' to ensure 
effective administration of the JWOD Act. See 41 U.S.C. 8503(e).
    To date, pursuant to the JWOD Act, the Commission has designated 
National Industries for the Blind (NIB) and SourceAmerica as the CNAs 
responsible for distributing orders to participating NPAs. See 41 CFR 
51-1.3 (definition of CNA); see also 41 CFR 51-3.2 (describing duties 
of a CNA). The CNAs provide information as needed by the Commission and 
otherwise assist the Commission in implementing the Commission's 
regulations. NPAs associated with NIB primarily employ blind and 
visually impaired individuals; NPAs associated with SourceAmerica 
primarily employ individuals with significant disabilities, including 
intellectual and developmental disabilities (IDD). As of April 2022, 
NIB represented 58 NPAs participating in the AbilityOne Program, and 
SourceAmerica represented 391 NPAs.
    In making its determination on whether to add a product or service 
to the Procurement List, the Commission assesses four suitability 
criteria. See 41 CFR 51-2.4. First, the Commission considers whether 
there is the potential for the NPA to employ enough individuals who are 
blind or have significant disabilities as needed to carry out the 
contract. Second, the Commission determines that the NPA meets all the 
qualification requirements set forth in 41 CFR part 51-4. Third, the 
Commission assesses the capability of the NPA to provide the product or 
service, including the required labor operations, Government quality 
standards, and delivery schedules. Finally, if there is a current 
contractor providing the product or service the Commission determines 
the level of impact on that contractor.

B. Notice of Proposed Rulemaking

    On October 12, 2021, the Commission issued a notice of proposed 
rulemaking (NPRM) in the Federal Register. The proposed rule required 
an NPA seeking initial qualification for the Program to provide 
certification that it would not pay subminimum or sub-prevailing wages 
(where applicable) by using wage certificates authorized under section 
14(c) of the Fair Labor Standards Act of 1938 (FLSA) to employees on 
any new contract or subcontract awarded under the Program, or any 
renewal or extension of such contract. See 29 U.S.C. 214(c). The NPRM 
required the same certification on an annual basis for NPAs to maintain 
their qualification under the Program.
    The NPRM invited comments through November 12, 2021. See 86 FR 
56679 (Oct. 12, 2021). After requests, the Commission extended the 
comment period through December 12, 2021. See 86 FR 62768 (Nov. 12, 
2021). The NPRM requested comments and supporting data on several 
specific questions. The Commission asked whether the rule should apply 
to new contracts, extensions and renewals of existing contracts once 
they expire, and the exercise of contract options. The Commission asked 
how much time, if any, would be necessary for NPAs to come into 
compliance with the rule. Finally, the Commission asked what impact, if 
any, the rule would have on the receipt by AbilityOne employees of 
Supplemental Security Income (SSI) or Social Security Disability 
Insurance (SSDI) and attendant Government benefits such as Medicare and 
Medicaid.
    The Commission received 183 total comments to the NPRM. Of this 
total, nearly 60 comments were from disability rights and advocacy 
organizations, seven comments were from the two CNAs (SourceAmerica and 
NIB) and five NPAs; more than 100 comments were from private 
individuals (commenters who did not assert or self-identify 
organizational membership); one comment was from a labor organization, 
one from a Fortune 500 company, and one from a Member of Congress.
    The Commission carefully considered and analyzed each comment but 
did not address technical and other minor changes requested by 
commenters.

C. Changes From the Proposed Rule

    The final rule applies the certification requirement to the 
exercise of options on existing contracts, as well as to new contracts 
and extensions and renewals of contracts. The final rule is effective 
90 days after publication in the Federal Register. However, an NPA may 
apply for an extension for up to 12-months in order to come into 
compliance if it can provide evidence for why it cannot make the wage 
adjustments by the effective date (due to budgetary limitations, 
because doing so will necessarily harm employees, or for other good 
cause) and if it provides a corrective action plan describing the steps 
it intends to take to achieve compliance within the approved extension 
period.

II. Analysis of Comments and Changes

A. Utility of the Rule

1. Comments
    Of the 183 comments received, the overwhelming majority of both 
individual and organizational commenters supported the utility and 
appropriateness of the rule. Numerous organizational commenters 
supported the rule as a means of ensuring access to economic 
independence and self-sufficiency for individuals with disabilities. 
Individuals with disabilities similarly claimed their right to earn 
equal wages for equal work and to be able to afford life's necessities, 
including housing. Several commenters noted that evolutions in 
disability rights law, modernizations and advancements in the business 
marketplace and available community supports rendered section 14(c) 
certificates no longer necessary or acceptable.
    Only five commenters opposed the rule in its entirety. These 
commenters predicted that increasing wages for individuals with 
disabilities would result in the loss of government assistance and 
attendant benefits, resulting in significant adverse impacts on 
individuals with disabilities. One NPA stated that the impact on 
employees with disabilities would be devastating, especially for those 
working on product contracts. Two commenters stated that the 
justification for 14(c) certificates remained as valid now as it had 
been in 1938, given the inability of some individuals with disabilities 
to work as productively as individuals without disabilities doing the 
same job.
2. Discussion
    Ending the payment of subminimum or sub-prevailing wages in the 
AbilityOne Program is designed to help break cycles of poverty and 
dependence and assist in moving individuals with disabilities to 
careers of meaningful employment, increased economic independence, 
greater dignity, enhanced self-worth, self-determination,

[[Page 43429]]

and self-sufficiency. Ending wage disparities between employees based 
solely on disability places the economic power of individuals with 
disabilities on par with their work colleagues who do not have 
disabilities and paying the same wage to individuals with disabilities 
and those without conveys a message of equality and a commitment to 
inclusion.
    Changes in societal expectations of people with disabilities, 
together with the availability of reasonable accommodations and 
employment supports, have significantly changed the employment 
landscape for individuals with disabilities. The assumptions that 
existed in 1938 regarding the inability of individuals with 
disabilities to work as productively as individuals without 
disabilities doing the same job are not supported by existing data.
    As discussed in greater detail below, there are Federal and state 
programs that can mitigate the adverse effects that increased wages may 
have on an employee's receipt of government benefits. Moreover, the 
Commission believes that any possible adverse effects in this area are 
outweighed by the benefits of the rule.
3. Change
    The Commission has made no change to this section of the rule.

B. Scope of the Rule's Application: New Contracts, Renewals, Extensions 
and Options

1. Comments
    The Commission requested comment on whether the rule should apply 
to new contracts, extensions, and renewals of contracts and/or the 
exercise of options on contracts. Twenty-two commenters, primarily from 
disability advocacy organizations and NPAs, supported application of 
the rule to new contracts, extensions and renewals of contracts, and 
the exercise of options. These commenters noted that AbilityOne Program 
contracts tend to be long term contracts with a base year and an 
additional four to nine option years. If option years were not 
included, an NPA could avoid applying the proposed rule for an 
additional five to ten years after the effective date. Additionally, 
some commenters stated that since more states are prohibiting the 
payment of 14(c) wages by requiring adherence to state minimum wage 
laws, there was no reason to delay application until a contract was 
ready for renewal or extension. A major corporation and two large 
AbilityOne NPAs commented that ending section 14(c) wages should apply 
universally, including options, and a labor union commented that not 
including options would introduce new inequities in the Program given 
the likelihood that contracts contain multiple option years.
    The two CNAs did not directly comment on the rule's application to 
new contracts, extensions, or options, but both CNAs supported the 
rule. However, SourceAmerica noted that ``it is critical that the final 
regulatory change include language that clarifies that at the time when 
a contract is up for renewal, the NPA will need to certify that they 
will not pay subminimum wages for that specific contract.'' This final 
rule does, in fact, clarify that NPAs must certify it will not use a 
14(c) certificate after the effective date on any AbilityOne existing 
contract at the point of renewing a contract renewal, executing an 
extension, or exercising an option.
    Once again, five commenters opposed the rule, but, of those, two 
commenters stated that, if implemented, the rule should only apply to 
either new contracts or contract renewals, and the remainder did not 
address the issue.
2. Discussion
    The purpose of the rule is to ensure that individuals with 
disabilities are paid equally for the work they perform as are 
individuals without disabilities performing the same or similar work. 
Applying the rule to extensions and renewals of contracts, as well as 
to options, avoids a piecemeal application of the rule. Given the 
variety and timing of contracts currently being performed, and their 
respective expiration or renewal dates, there is a possibility NPAs 
with more than one contract could potentially pay the Federal or higher 
state minimum wage, or prevailing wage, on new contracts, but a lower 
wage on existing contracts that were renewed or extended. Differences 
in contract timing could improperly incentivize NPAs to selectively 
assign employees to those AbilityOne contracts that are not yet subject 
to the rule.\1\ In addition, by including contract options, the 
Commission is more closely aligned with the Department of Labor (DOL) 
rule, implementing Executive Order 14026.\2\ That rule generally 
requires Federal contractors to pay employees workers performing on or 
in connection with covered Federal contracts at least the Executive 
order minimum wage (currently $15.00 per hour); that rule applies to 
new contracts entered into on or after January 30, 2022, and also 
covers existing contracts that are renewed or extended (pursuant to an 
exercised option or otherwise) on or after January 30, 2022, on Federal 
contracts, including options. The DOL rule generally covers employees 
working on AbilityOne service contracts.
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    \1\ This rule does not preclude an NPA from transferring 
employees to its non AbilityOne contracts and using 14(c) 
certificates to pay those employees. We address that issue below.
    \2\ See 86 FR 67126 (Nov. 24, 2021).
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3. Change
    The Commission has retained application of the rule to new 
contracts and to extensions and renewals. The Commission has changed 
the rule to apply its requirement to the exercise of options on 
contracts.

C. Effective Date of the Rule

1. Comments
    The proposed rule did not include an effective date. The Commission 
requested comment on how much time, if any, would be necessary for NPAs 
to comply with the new wage requirement.
    One commenter stated that the rule should be effective immediately, 
another stated the rule should be effective 90 days following 
publication, and two commenters felt the rule should be effective six 
months following publication. Two NPAs with experience eliminating the 
use of section 14(c) certificates noted that a two- or three-year phase 
in period might be appropriate.
    The primary reason provided for immediate coverage, as well as for 
short implementation time periods, was that NPAs had been given 
sufficient notice and lead time on eliminating the use of subminimum 
wages under section 14(c) certificates, in light of a statement made by 
the Commission in 2019 that NPAs should not be using 14(c) certificates 
on AbilityOne contracts. These commenters stated that the transition 
process away from subminimum wages should therefore be well underway at 
all NPAs.
    A coalition of more than 100 national disability organizations 
recommended the Commission adopt the timeline recommendation set forth 
in the report issued by the National Council on Disability (NCD) in 
2012. In that report, NCD recommended that individuals with 
disabilities in a certificate setting for ten years or less be 
transitioned within two years, those in the setting from ten to 20 
years be transitioned in four years, and those in a certificate setting 
longer than 20 years be transitioned within six years.\3\ The

[[Page 43430]]

recommendations of the NCD report applied to the elimination of all 
14(c) certificates. The commenters did not specifically explain why the 
same timeline should apply to the smaller number of affected 
individuals in the AbilityOne Program.
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    \3\ https://ncd.gov/publications/2012/August232012/recommendations (last viewed June 2022).
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    One commenter observed that NPAs employing individuals with 
disabilities are as different as their respective employees. This 
commenter suggested an individualized approach, recommending that the 
Commission establish different timelines based on factors such as an 
NPA's size, number and types of contracts and number of employees, 
geography and access to transportation, and an NPA's ability to recruit 
new employees.
    Twenty commenters, including many organizational commenters, 
recommended a one-year implementation period, others recommended a two-
year implementation period, and nearly ten commenters recommended a two 
to three-year implementation period, with a possible one-time 
extension. The rationale for implementation periods of one to three 
years was that NPAs would need significant time to adapt to the new 
wage requirement, including restructuring contracts and budgets. The 
rationale also included a need for NPAs to acquire or add services such 
as benefits counseling for their employees to ensure that any adverse 
impact on receipt of benefits by their employees would be mitigated.
2. Discussion
    In 2019, the Commission sent a letter to SourceAmerica stating that 
the use of 14(c) certificates on AbilityOne contracts was inappropriate 
and that the time had come to pay all AbilityOne employees the Federal 
minimum wage or the state minimum wage if higher. The Commission 
charged SourceAmerica with developing a strategic plan for assisting 
affiliated NPAs with transitioning from the use of 14(c) certificates. 
The letter stated as its goal that all AbilityOne NPAs would be paying 
the Federal minimum wage or the state minimum wage if higher within 
three years (February 2022) and the prevailing wage within six years 
(February 2025).\4\
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    \4\ Letter from Mr. Thomas Robertson, Chair of the AbilityOne 
Commission to Mr. Norman Lentz, Chair of the Board of SourceAmerica 
(February 19, 2019). https://www.abilityone.gov/media_room/documents/Commission%20Ltr%20to%20SourceAmerica%20-%20Subminimum%20Wage%20-%2020190219.pdf.
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    In response to the Commission's letter, SourceAmerica initiated a 
``14(c) Transition Program.'' The program provided interested NPAs with 
financial and technical assistance in eliminating their use of 14(c) 
certificates. Since October 2019, SourceAmerica has provided 
consultation services to 86 NPAs, enrolled 35 NPAs in at least one 
program support, and awarded NPAs more than $600,000 in transition 
support grants.\5\
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    \5\ SourceAmerica, 14(c) Transition Program Update, AbilityOne 
Public Meeting, October 7, 2021, Slides 15-17. https://www.abilityone.gov/commission/documents/US%20AbilityOne%20Commission%20Public%20Meeting%207Oct2021%20Advance%20Slides%20Post.pdf.
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    According to SourceAmerica, the program has been quite successful. 
The number of employees paid under 14(c) certificates by its affiliated 
NPAs has declined from 9,654 employees in mid-2018 to 2,900 employees 
as of the first quarter of fiscal year (FY) 2022. Of this number, 1,750 
employees were working on services contracts subject to Executive Order 
14026, which took effect in January 2022. Employees working on such 
contracts are required to be paid at least the Executive order minimum 
wage of (currently $15.00 per hour,), but under a section 14(c) 
certificate can be paid less than the prevailing wage. Data self-
reported to SourceAmerica by associated NPAs shows approximately 770 
employees being paid at least the Federal minimum wage but less than 
the prevailing wage.
    The remaining approximately 1,200 employees work primarily on 
product contracts and are clustered within approximately 24 NPAs. Data 
collected by the Commission indicates that the average wage paid such 
employees is $5.11 per hour.
    As noted above, SourceAmerica has invested significant resources 
toward transitioning its associated NPAs from using 14(c) certificates 
since 2019, and it has pledged to continue to do so after this rule has 
been formally implemented. Given the fact that NPAs have been on notice 
since 2019 of the Commission's position on phasing out use of 14(c) 
certificates, and the availability of CNA support to do so, the 
Commission believes that a 90-day implementation period is sufficient 
time to allow the remaining NPAs to effectuate the necessary change. 
For this reason, the Commission also does not adopt the lengthy 
implementation dates set force in the NCD report that applies to use of 
14(c) certificates nationwide.
    The Commission recognizes that some NPAs have not taken advantage 
of SourceAmerica's transition program or are still in the process of 
transitioning from use of 14(c) certificates. For that reason, the 
Commission will accept applications from NPAs for an extension of up to 
12 additional months to come into compliance with the rule. The 
Commission will use its existing authority under 41 CFR 51-4.5 to grant 
such extensions. The NPA must provide evidence for why it cannot make 
the wage adjustments by the effective date (due to budgetary 
limitations, because doing so will necessarily harm employees, or for 
other good cause) and must have a corrective action plan in place that 
the NPA will follow to come into compliance with the rule. Requests for 
an extension must be submitted no later than 30 days prior to the 
effective date of the rule. If an extension is granted, the Commission 
will not award any new Procurement List additions to that NPA during 
the extension period, absent exigent circumstances, and a written 
request from the Federal customer.
3. Change
    The Commission includes an effective date of 90 days after the 
publication date of the final rule, with the possibility of a one-time 
extension of up to 12 months.

D. Impact on Receipt of Government Benefits

1. Comments
    The Commission sought comment on what impact, if any, the proposed 
rule would have on 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, by employees with disabilities, and requested 
recommendations on how to address any adverse impacts that were 
identified.
    Several commenters, including a Member of Congress, stated that 
increased wages for individuals with disabilities could adversely 
impact the receipt of government income and health care by individuals 
with disabilities. However, the comments did not discuss Federal or 
state programs employees could utilize to mitigate a reduction or loss 
of benefits due to increased earnings. The commenters also did not 
describe any efforts to ensure their employees had access to benefits 
counseling or training to raise awareness about their eligibility for 
additional or alternative benefits. Finally, the commenters did not 
include data substantiating the adverse impact they predicted.
    Many organizational commenters acknowledged the reduction or loss 
of government benefits was a concern for some employees once their 
wages

[[Page 43431]]

increased. However, these organizations, as well as NPAs that 
successfully transitioned their employees from 14(c) certificates, 
highlighted the various government programs designed to assist 
employees with disabilities who are concerned that increased wages may 
adversely impact their benefits. These include assistance through a 
Medicaid Buy-In option in many states, the Ticket to Work program under 
the Social Security Act, and establishment of Achieving a Better Life 
Experience Act (ABLE) accounts (which are tax-favored accounts enabling 
individuals with disabilities to save money for disability-related 
expenses including education, housing, transportation, employment 
training and support, assistive technology and personal support 
services, health care prevention and wellness services, and financial 
management). A number of commenters also stated there was evidence that 
NPAs could pay above the minimum wage, and also provide healthcare and 
other important benefits for their employees, so that employees would 
not need to rely on government health care.
    Several commenters stated that an essential component of mitigating 
any adverse impact on continued receipt of government benefits was for 
employees to have access to professional benefits counseling. Some 
commenters recommended that the Commission require NPAs to offer such 
services as a qualification for participation in the Program; other 
commenters recommended that the CNAs be required to provide such 
services to the NPAs; and some commenters called for NPAs to educate 
their employees that a benefits reduction was not an inevitable outcome 
of a wage increase.
    Ultimately, these commenters stated that any potential loss of 
benefits was not a legitimate reason to scale back or not implement the 
proposed rule. They argued that the overall benefit the proposed rule 
would provide for AbilityOne NPA employees with disabilities on 
AbilityOne contracts outweighed the benefit reduction risk that some 
employees might face. These commenters also observed that reductions or 
loss of benefits was not a problem specific to the AbilityOne Program, 
but rather a broader issue about how the nation's system to assist 
individuals with disabilities can limit full employment. One NPA that 
noted this point stated that the focus should be on advocating for 
legislative efforts aimed at benefits reform.
2. Discussion
    The Commission has been concerned from the outset that the 
elimination of subminimum and sub-prevailing wages could harm 
individuals with disabilities who rely on government income and health 
benefits. As the comments indicate, however, there is a wide range of 
Federal and state government programs designed to mitigate the impact 
and fear of benefits reduction. The Commission has also determined that 
the potential loss of government benefits for some employees is not a 
sufficient basis to abandon a rule that will provide significant 
financial benefits to a large number of individuals.
    It is beyond the scope of this rule for the Commission to mandate 
that all NPAs have professional benefits counselors on staff or for the 
CNAs to provide such resources. However, SourceAmerica's ``14(c) 
Transition Program'' has already provided such resources to 
participating NPAs and can continue to do so for additional NPAs. The 
AbilityOne Commission will also develop a list of resources that NPAs 
can access and will make that list available on its website. Finally, 
the Commission observes that concerns regarding benefit reductions 
because of increased wages is a larger issue that requires engagement 
beyond the AbilityOne Program. The Commission will share the relevant 
comments with the Department of Health and Human Services, the Social 
Security Administration, and other agencies with cognizance over these 
topics.
3. Change
    The Commission has made no change to this section of the rule.

E. Concerns Regarding Reduced Working Hours and Job Losses

1. Comments
    One NPA stated that its budget could not absorb the increased 
salary expenses that the rule would require. This commenter stated they 
would need to reduce working hours for their employees with 
disabilities or, in some cases, terminate their employment. The 
commenter did not provide specific data to substantiate the anticipated 
adverse impact on employment or hours worked by employees with 
disabilities.
    Two NPAs shared their success in transitioning away from section 
14(c) certificates without dramatic adverse impacts on their employees 
in terms of working hours or jobs. Each of these NPAs described how 
they were able to pay their workers fair wages and benefits within 
their existing contracts.
2. Discussion
    The Commission recognizes that NPAs vary in size and budget and 
will thus experience different budget constraints in increasing wages. 
The allowance of a request for an extension of up to 12 months is 
designed to provide NPAs a more individualized approach to plan for 
change in a way that benefits its workforce without causing an adverse 
impact on the delivery of products and services to Federal customers.
3. Change
    The Commission has made no change to this section of the rule.

F. Expansion of the Current Rule

1. Comments
    Several commenters asked the Commission to expand the rule and 
prohibit NPAs, as a matter of Program qualification, from using 14(c) 
certificates at all, whether their employees were working on an 
AbilityOne contract or not. The commenters observed that since the 75 
percent direct labor hour ratio requirement extended to the entire NPA, 
and not simply to its AbilityOne contracts, the prohibition on use of 
section 14(c) certificates should similarly apply to the entire NPA.
    Several commenters applauded the rule as significant progress in 
advancing the rights of individuals with disabilities. However, they 
noted that more needed to be done to achieve competitive, integrated 
employment for people who are blind or have significant disabilities. 
Commenters offered a range of ideas for how the Commission could 
achieve such changes in the Program, including requirements for NPAs to 
help their employees move to employment outside of AbilityOne jobs.
2. Discussion
    The Commission appreciates the argument that to be qualified to 
participate in the AbilityOne program, NPAs should be precluded from 
using 14(c) certificates anywhere in their workforce. However, such a 
requirement would be a significant change from the proposed rule and 
the Commission believes it should provide an opportunity for separate 
notice and comment if it decides such a requirement is appropriate.
    This rule is a foundational step for ensuring that all AbilityOne 
NPA employees with disabilities on AbilityOne contracts receive 
competitive wages for the work they perform. The Commission also agrees 
that additional steps must be taken to

[[Page 43432]]

modernize the AbilityOne Program, but those changes are beyond the 
scope of this rule.
3. Change
    The Commission has made no change to this section of the rule.

Regulatory Procedures

Executive Orders 12866 (Regulatory Planning and Review) and 13563 
(Improving Regulation and Regulatory Review)

    Executive Orders 12866 and 13563 direct agencies to assess all 
costs and benefits of available regulatory alternatives. E.O. 13563 
directs agencies to propose or adopt a regulation only upon a reasoned 
determination that its benefits justify its costs; tailor the 
regulation to impose the least burden on society, consistent with 
achieving the regulatory objectives; and in choosing among alternative 
regulatory approaches, select those approaches that maximize net 
benefits (including potential economic, environmental, public health 
and safety, and other advantages). E.O. 13563 emphasizes the importance 
of quantifying both costs and benefits, of reducing costs, of 
harmonizing rules, and promoting flexibility. E.O. 13563 further 
recognizes that some benefits are difficult to quantify and provided 
that, where appropriate and permitted by law, agencies may consider and 
discuss qualitative values that are difficult or impossible to 
quantify, including equity, human dignity, fairness, and distributive 
impacts. The Office of Information and Regulatory Affairs in the Office 
of Management and Budget has determined that this is a significant 
regulatory action and, therefore, was 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 Section 14(c) Certificates as a 
Qualification for Participation in the AbilityOne Program
    The Commission believes the costs of requiring all new NPAs seeking 
initial qualification to participate in the Program, and participating 
NPAs wishing to maintain Program qualification, to certify they will 
not pay subminimum or sub-prevailing wages under a 14(c) certificate on 
AbilityOne contracts are not substantial and are outweighed by the 
benefits of the rule.
    No NIB-associated NPA uses 14(c) certificates to pay its employees 
on AbilityOne contracts. Those NPAs will not be affected by this rule.
    SourceAmerica-associated NPAs performing services contracts are 
generally subject to Executive Order 14026 and its implementing DOL 
regulation. Under that regulation, the covered NPAs must pay at least 
the Executive order minimum wage (currently $15.00 per hour and will be 
subject to inflationary increases in future years) for work on or in 
connection with covered Federal contracts. This rule will therefore not 
have an impact on those NPAs covered by Executive Order 14026 and DOL's 
implementing rule, except where the prevailing wage is higher than the 
Executive order minimum wage (currently $15.00 per hour).
    The NPAs who will be affected by this rule are those who hold 
product contracts with the Federal Government and use 14(c) 
certificates to pay their employees below the federal or state minimum 
wage. Given the concerted efforts by NPAs, supported by SourceAmerica, 
to reduce their use of 14(c) certificates, 120 of the 449 participating 
NPAs still use such certificates on some AbilityOne contracts. Those 
workers are clustered within 24 of the 120 NPAs. In terms of absolute 
numbers, this translates into approximately 1,200 employees, or 
approximately 3% of the AbilityOne workforce.
    Based on first quarter (Q1) FY 2022 data collected by AbilityOne, 
there are also approximately 550-750 employees working on services 
contracts who earn at least the Federal minimum wage but less than the 
prevailing wage. To the extent that the prevailing wage is higher than 
the Executive order minimum wage (currently $15.00 per hour), this rule 
will result in increased wages for those employees. Those commenters 
who stated they could not absorb the increased costs did not provide 
the Commission with any specific budget numbers for such increases or 
details on why they could not manage those costs.
    The Commission recognizes that increased wages may trigger benefit 
reductions for some individuals with disabilities depending on their 
individual circumstances. However, as described in this SUPPLEMENTARY 
INFORMATION, there are various Federal and state programs designed to 
mitigate this risk.
    With regard to benefits of the rule, paying individuals with 
disabilities the same hourly wage as individuals without disabilities 
performing same or similar work provides both tangible and intangible 
benefits. Individuals with disabilities earning subminimum or sub-
prevailing wages will now earn the Federal minimum wage, state minimum 
wage or prevailing wage. The tangible benefits to these individuals are 
identical to any worker experiencing a wage increase, including 
increased personal wealth and economic independence, and an increased 
ability to improve aspects of daily life requiring a higher level of 
financial resources.
    The intangible benefits are harder to quantify, but these benefits 
accrue to individuals with disabilities as well as our larger society. 
Paying individuals with disabilities wages equal to the legal wage 
requirements for individuals without disabilities performing same or 
similar work sends a clear message of equity and fairness that work 
should be valued equally. Removing subminimum or sub-prevailing wages 
helps further a culture of inclusion and enhances the dignity and life 
experiences of individuals with disabilities. Opportunities to earn 
higher wages leads to increased levels of self-sufficiency and less 
dependence on services or government assistance.

Final Regulatory Flexibility Analysis

    This final rule was reviewed under the Regulatory Flexibility Act 
(RFA), 5 U.S.C. 601 et seq., which requires preparation of an initial 
regulatory flexibility analysis for any rule that must be proposed for 
public comment and is likely to have a significant economic impact on a 
substantial number of small entities. The RFA also requires preparation 
of a final regulatory flexibility analysis, or a certification by the 
head of the agency that the rule, if promulgated, will not have a 
significant economic impact on a substantial number of small entities 
and a factual statement supporting the certification.
    The rule only imposes a burden on NPAs still paying subminimum or 
sub-prevailing wages under section 14(c) certificates. When the NPRM 
was published, the Commission stated that SourceAmerica's available 
data revealed 142 associated NPAs were utilizing section 14(c) 
certificates. Following publication, SourceAmerica provided updated 
data from first quarter FY 2022 showing 120 NPAs still paying either 
subminimum or sub-prevailing wages to just over 2,900 individuals with 
disabilities, which is slightly higher than ten percent of the total 
SourceAmerica AbilityOne work force of approximately 28,000 employees.
    Of this number, 1,750 employees were working on services contracts 
that would be governed by the provisions of the DOL rule implementing 
E.O. 14026, which took effect January 2022. Employees working on or in 
connection with such contracts would therefore be paid at least the new 
Executive order minimum wage (currently $15.00 per hour) for work on or 
in connection with

[[Page 43433]]

covered contracts as required by the rule. However, if such employees 
are being paid pursuant to a section 14(c) certificate, they can still 
be paid less than the prevailing wage. Data self-reported to 
SourceAmerica by associated NPAs shows approximately 550-750 employees 
being paid at least the Executive order minimum wage but less than the 
prevailing wage. After the effective date of this rule, those employees 
will be required to be paid the prevailing wage.
    The remaining approximately 1,200 employees work primarily on 
product contracts and are clustered within a handful of NPAs 
(approximately 24) relative to the overall number of just under 450 
participating NPAs. After the effective date of this rule, these 
employees will be paid at least the Federal minimum wage or the higher 
state minimum wage.
    Accordingly, the Commission certifies this rule will not have a 
significant economic impact on a substantial number of small entities, 
and, therefore, no final regulatory flexibility analysis has been 
prepared.

Paperwork Reduction Act

    The final rule requires the Commission to collect information 
within its Annual Representations and Certifications regarding the 
certification not to pay subminimum wages under 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 or sub-prevailing wages under section 14(c) certificates 
to employees.
    A more complete discussion of the need for this final rule is 
located throughout the Supplementary Information. In summary, the 
Commission has determined that payment of subminimum or sub-prevailing 
wages under 14(c) certificates to individuals with disabilities working 
in the AbilityOne Program is not consistent with modern disability 
policy. Paying individuals with disabilities less than individuals 
without disabilities performing same or similar work continues wage 
disparity in the Program.
    For the reasons set forth above, the Commission is adding a new 
requirement for NPAs to initially qualify and maintain qualification in 
the Program. Pursuant to this rule, NPAs must certify that after the 
effective date, on all new AbilityOne contracts awarded, after the 
effective date, on options exercised on existing contracts, and on 
contract extensions or renewals, the NPA will not pay individuals with 
disabilities subminimum or sub-prevailing wages under a 14(c) 
certificate. The Commission will collect information regarding 
compliance with this new requirement through documentation submitted 
for initial qualification, and on the Annual Representations and 
Certifications form.

Unfunded Mandates Reform Act of 1995

    The final 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.

    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.

    For the reasons set forth in the SUPPLEMENTARY INFORMATION, the 
Commission amends 41 CFR part 51-4 as follows:

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 use 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 AbilityOne 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) of this 
section under the under the Javits-Wagner-O'Day 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) Certify the nonprofit agency will not use 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 AbilityOne Program.
* * * * *

Michael R. Jurkowski,
Acting Director, Business Operations.
[FR Doc. 2022-15561 Filed 7-20-22; 8:45 am]
BILLING CODE 6353-01-P