Illinois could be 19th state to phase out subminimum wage for disabled workers

[May 24, 2024]  By ALEX ABBEDUTO
Capitol News Illinois
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After years of negotiations and continued opposition from service providers, Illinois appears poised to prohibit employers from using a federal exemption that allows them to pay individuals with disabilities less than the minimum wage.

The federal Fair Labor Standards Act of 1938 established minimum wage law, but created an exemption for businesses, rehabilitation and residential care facilities to pay disabled workers less than minimum wage if they obtain a special certificate permitted in Section 14(c) of the law. This “commensurate wage” is based on the worker's individual productivity in proportion to the wage and productivity of workers who do not have disabilities but are performing the same or a similar task.

Disability providers in Illinois offer various programs aimed at helping individuals become as independent as desired by teaching essential life skills. Some provide “sheltered work,” which is employment outsourced by a business to a facility with a 14(c) certificate. The facility pays their workers the commensurate wage, rather than minimum wage.

House Bill 793, which passed the House 78-30 on Thursday night, would prohibit companies from holding 14(c) certificates beginning in 2030 – a timeline that was extended in a late amendment to garner further support, including from Republicans.

The measure would also add certificate holders and research partners – including the Illinois Council on Disabilities – to the existing Employment and Economic Opportunity for People with Disabilities task force that will aim to ensure the transition works effectively. It also creates a $2 million transition fund, with money already appropriated to the Illinois Department of Human Services, to partially subsidize providers implementing shelter work alternatives.

It now heads to the Senate, where it will need to be read on three separate days before it can pass. It’s unclear how long the Senate will remain in Springfield before it adjourns its spring session, making it possible that the measure will have to wait until the fall veto session or later until it can be moved to the governor’s desk.

Advocates, including House sponsor Rep. Theresa Mah, D-Chicago, said eliminating 14(c) certificates would build upon rights granted to people with disabilities in previous decades by giving them higher paying and more rewarding employment.

“After more than five years of dialogue and compromise, stakeholders have united on this bill – the Dignity in Pay Act – which is designed to expand work opportunities and improve the menu of services and supports for people with disabilities in Illinois,” Mah said.

Mah noted that workers with disabilities who work in 14(c) workshops could have a variety of conditions like epilepsy, cerebral palsy, visual and hearing impairments, and mood disorders.

At a news conference earlier this year where Mah and proponents reintroduced the bill, disability self-advocates, including Federation of the Blind At Large Chapter’s President David Meyer, spoke in support of the changes.

Meyer, who is blind, said when he was in high school, he had friends with similar abilities to him that ended up in sheltered workshops.

“Most of them never got out,” he said. “Those who did eventually get out, and I believe they all did, got out with emotional scars that some have held for at least 55 years. Beyond that, those who got out without proper skillset were, for the most part, not employable.”

But many opponents, which include a number of 14(c) providers, some workers with disabilities, their families, and representatives on both sides of the aisle, worry there is not enough support – financial and otherwise – in the bill to keep the institutions open and workers employed once they transition to new models of programming.

Reading from a memo received from a 14(c) provider outside his district in Batavia, Rep. Dan Ugaste, R-Geneva, said “it’s not an employer, it’s a service.”

“It risks the mental health and independence of disabled individuals, imposes greater financial burdens on families and undermines community-based solutions that are already working effectively,” he said.

Josh Evans, president and CEO of Illinois Association of Rehabilitation Facilities, said sometimes people seeking community integrated employment get stuck in sheltered workshops. His organization was originally opposed to ending 14(c) certificate use in Illinois but is now one of the lead supporters of the bill.

He said the latest revisions provide more support for phasing out the subminimum wage and promoting community integrated employment. When a previous version of the bill failed to pass last year, Evans said he and others from his organization spoke with providers across Illinois.

“Our goal was to ‘okay we understand your opposition, show us what you do here, tell us more about what your concerns are’ because the goal was to improve the bill,” he said.

Evans said this year’s effort to pass the bill focused on extending the timeline for the phaseout to more than five years from now and ensuring facilities are represented on the transition task force. Advocates are also hopeful the yet-to-be-approved budget for the upcoming fiscal year 2025 will include another $2 million to further fund the transition, as proposed by Gov. JB Pritzker, who supports the phaseout.

HB 793 also calls for an increase in the personal needs allowance, an amount of money allocated to residents in care facilities they keep for personal use, from $60 to $100.

Rep. Theresa Mah, D-Chicago, speaks about a bill which would eliminate an exemption that allows certain organizations to pay disabled workers less than minimum wage in Illinois. (Capitol News Illinois photo by Andrew Adams)

Andy Kistler, executive director of a sheltered workshop in southern Illinois called Community Support Systems, said it pays its workers commensurate wages between 20 percent and 100 percent of the wage a non-disabled fulltime employee would earn at the same job.

Kistler said there’s no “litmus test” for deciding when someone might be ready to move from sheltered work to more traditional or “community integrated employment,” leaving it up to the individual and the skills they possess.

“The individual served may simply say, you know, ‘no, I don't want to work in the community – I'm fine here, I feel safe here, I have all my support needs met here,’” Kistler said.

Longtime advocate for people with disabilities and an opponent to previous attempts to end sheltered work, Rep. Charlie Meier, R-Okawville, expressed concern that phasing out 14(c) workshops would force layoffs of provider staff as well as workers with disabilities – leaving those who might not be able to find community integrated work without a job.

In an interview with Capitol News Illinois, Meier said the $2 million transition fund “is not anywhere near enough,” and he wanted more time to negotiate – although he ultimately voted for the measure after agreeing to do so in response to a late amendment addressing some of his concerns.

“Do we risk letting this bill go and not have these changes and being forced through and nobody being protected,” Meier said. “Or do we take the five-year leap and stay on their backs and make sure we do it correctly?”

The amendment sought by Meier would ensure the task force at least partially focuses on aging adults taking part in sheltered work who are thought to be some of the most vulnerable to the measure’s potential fallout.

Kistler, from CSS, said one challenge for sheltered workshops is that the federal government does not reimburse staffing costs for work activities at the same rate they do community day services – which include activities that help people use skills, like eating and problem solving, outside their homes.

Currently, reimbursements for community day services max out at $20,376 for on-site activity and $23,040 for off-site activity. But reimbursement rates are lower for some of the alternative services to sheltered workshops that providers might switch to amid the phaseout. For small-group, large-group and individual supported employment activities, rates max out at $18,864, $9,600, and $13,986, respectively.

Kistler said he would have preferred the bill include an increase to supported employment rates to match community day service rates.

In response to the discrepancy, HB 793 included a provision requiring IDHS to file a waiver amendment requesting the federal government increase the reimbursement rate for supported employment. Advocates also noted there are other federal and state programs that can provide funds to providers – some of which are not allowed to fund sheltered workshops.

One example advocates gave is the Subminimum Wage to Competitive Integrated Employment grant program. It is fully federally funded through 2028 and would give $13.9 million to at least six providers a year in Illinois.

Illinois would become the 19th state to phase out 14(c) certificates and subminimum wages for workers with disabilities. Federal legislation introduced in 2019 and 2023 would have done so nationwide, but both measures stalled.

According to data from the U.S. Department of Labor, Illinois currently has 66 sheltered workshops with 14(c) certificates that employ over 3,200 disabled workers. But some providers already shifted away from sheltered work and adopted other models of programming.

Kim Zoeller, president and CEO of the Ray Graham Association, said the organization hasn’t offered sheltered work in 20 years.

“We spent a great deal of time educating, supporting people to have experiences and exposure to a lot of different opportunities, and we let them lead us down the path of what they wanted to do,” Zoeller said.

She said following that philosophy sometimes led them to helping residents develop their own microbusinesses – like selling handmade cards at a farmer’s market. But she recognized that many of her colleagues, especially those located outside the Chicagoland area, might not have access to as many other resources, such as available partner organizations to offer “meaningful volunteer opportunities.”

“I do think that there are going to be some places in our state that it's going to be harder to do it,” she said of transitioning away from sheltered work. “And I realize that and I hope that the state partners with those organizations to make sure that, you know, it's done well, and it's done, right.”

While Meier said he did not like the bill passed Thursday, he acknowledged it allows time to ensure a smooth transition.

“I will be watching everybody and what’s going on closely,” Meier said.

Capitol News Illinois is a nonprofit, nonpartisan news service covering state government. It is distributed to hundreds of print and broadcast outlets statewide. It is funded primarily by the Illinois Press Foundation and the Robert R. McCormick Foundation, along with major contributions from the Illinois Broadcasters Foundation and Southern Illinois Editorial Association.