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Presentation (PDF) File Size: 13296 kb File Type: pdf Open in New Window Handout (PDF) File Size: 13296 kb File Type: pdf Open in new window 14(c) of the Fair Labor Standards Act THE PAYMENT OF SPECIAL MINIMUM WAGES TO WORKERS WITH DISABILITIES WAGE AND HOUR DIVISION U.S. DEPARTMENT OF LABOR Section 14(c) of the FLSA Authorizes the employment of workers with disabilities at special minimum wages when the disabilities impair their productivity for the work being performed Regulations 29 CFR Part 525 Sets forth the conditions and terms governing the employment of workers with disabilities at special minimum wages Special Minimum Wage (SMW) - A SMW is paid to workers with disabilities whose productive and earning capacities are impaired for the work being performed - A special minimum wage is a wage below the federal minimum wage (currently $7.25) Worker With a Disability Worker whose earning or productive capacity is impaired (by age, physical or mental disability, or injury) for the work to be performed Community Rehabilitation Program (CRP) A work center that traditionally provides rehabilitation services, day treatment, training, and/or employment opportunities to workers with disabilities Consumers Term commonly used to refer to workers with disabilities who are employed by a work center, hospital, institution or other employer Establishing FLSA Coverage - A firm with at least a $500,000 ADV (annual dollar value) of sales or business done OR - Is engaged in the operation of: - A hospital - A nursing home - A school for mentally or physically handicapped or gifted children - A public or private elementary or secondary school or institution of higher education (profit or non-profit) - A preschool - A Federal, State or local government agency Not-for-Profit CRP - Is NOT covered by the FLSA on an enterprise basis, regardless of dollar volume - Activities are not ordinarily considered to have a business purpose Exception - Retail outlets of not-for-profit work centers MAY BE COVERED on an enterprise basis if their annual dollar volume of sales and services is at least $500,000 Individual Coverage Individual coverage applies if the employee is engaged in: - Interstate commerce OR - The production of goods for interstate commerce OR - A closely-related process or occupation directly essential (CRADE) to such production An Employee Under the FLSA - FLSA Definitions - Employee = “any individual employed by an employer” - Employ = “to suffer or permit to work” - The FLSA does not differentiate between workers who do not have disabilities and workers with disabilities - Not all the time a consumer spends at a CRP is considered “hours worked” and compensable Patient Workers - An individual with a disability who receives treatment at a hospital or residential care facility and is employed by that same hospital or residential care facility - Treatment may be received on an inpatient or outpatient basis - Whether an employment relationship exists depends on whether the work performed is of any consequential economic benefit to the institution - A patient undergoing evaluation or training is not considered to be an employee during the first three months spent in work activities, if certain criteria are met Participants in Substance Abuse Programs - An individual enrolled in a substance abuse recovery program may be a patient worker if employed by the facility providing the treatment - An employment relationship will not exist for the first four weeks (28 consecutive calendar days) of residence at the facility School Work Experience Programs - A school-operated program designed to assist youths with disabilities find and maintain meaningful employment - Youths are placed by the school in community-based employment - Worksites outside of the school setting Volunteers Workers with disabilities may volunteer to perform certain tasks without creating an employment relationship if: - The worker is legally competent to freely volunteer - The task performed is substantially different from work performed during duty hours - The task is performed outside normal duty hours - The task is of the type that would normally be classified as “volunteer” work Competitive Employment - CRPs will often place a worker with a disability in a competitive employment situation - The worker with a disability works at a business or establishment other than the CRP - The CRP may: - Provide a “job coach” to supervise the worker - Continue to carry the worker on the CRP payroll - Continue to provide rehabilitation services to the worker Joint Employment When a worker with a disability is placed in competitive employment, and the worker is supervised by a “job coach” supplied by the CRP but paid by the competitive employer, the worker is considered to be jointly employed by the CRP and the establishment where the worker is placed FMLA Interaction - Workers with disabilities who are paid SMWs count as employees when determining if the employer has 50 employees - Workers with disabilities may be eligible to take leave under the FMLA Hours Worked - The FLSA concept of hours worked - determining when an employee is performing work for which he or she must be compensated - applies to workers with disabilities who receive special minimum wages - Unique characteristics of the work places operated by employers can cause confusion as to when an employee is performing compensable work Down Time - Compensable time when the worker with a disability is on the job but is not producing because of factors not within his or her control - Lack of work, equipment breakdowns, etc - If a CRP provides rehabilitation services to workers with disabilities during periods of extended down time, such time need NOT be considered compensable - The services provided cannot be primarily for the purpose of increasing job productivity - The services must be provided away from the production area - Time must be clearly identified, recorded, and segregated on time records Work Samples and Work Simulations - Types of rehabilitation services structured to resemble the work performed in the employer's facility (performed away from the production area) - Do not yield a product used to fulfill any of the employer's contracts and the employer does not derive any economic benefit from the product - Supervised by non-production personnel and are a specific part of a well-defined program of rehabilitation - The Wage and Hour Division does not consider time spent doing work samples or work simulations to be hours worked or compensable Travel Time - Time spent by workers with disabilities being transported to and from the work site and their homes (including group homes and dormitories) by the employer at the beginning and end of the day is not hours worked - Time spent in transportation between job sites during the course of the workday is hours worked and the employee shall be compensated Rest Periods and Coffee Breaks - The FLSA does not require rest periods or coffee breaks - Breaks between 5 and 20 minutes are considered to be primarily for the benefit of the employer, and are considered hours worked and are compensable - Workers with disabilities who are paid on an hourly basis must be compensated for such breaks - Worker with disabilities who are paid piece rates are NOT compensated for such breaks, since piece rates are calculated to include such time (PF & D) Recording Hours Worked - The FLSA requires employers to keep records of both the daily and weekly hours worked - 29 CFR Part 516 - The employer must clearly distinguish in its records non-compensable hours from hours that would be considered hours worked THE PROCESS HOW TO DETERMINE A SPECIAL MINIMUM WAGE The Process 1)DEFINE THE WORKER 2)ESTABLISH THE PREVAILING WAGE 3)DEFINE THE WORK 4)MEASURE THE WORK 5)MEASURE THE WORKER 6)CALCULATE AND IMPLEMENT RATE OF PAY Define the Worker DEVELOPING A JOB DESCRIPTION Define the Worker - A job description is useful when determining the prevailing wage and when setting the standard upon which the special minimum wage will be based - A detailed job description should: - Define the specific job duties, responsibilities and tasks; - Identify the types of equipment and supplies used to perform the tasks; - List the types of skills, education or experience levels required; - Indicate the location, and days and times of the week the work will be performed; and - Define and establish the minimum acceptable levels of quantity (how much production must be accomplished) and quality (how well the job must be performed). Establish the Prevailing Wage The Prevailing Wage - A wage paid to an experienced worker who does not have a disability that impairs his/her ability to do the work and who performs essentially the same type of work in the vicinity - May not be lower than the federal minimum wage, or where applicable, a higher state minimum wage - Normally, prevailing wage rates are based on the results of annual surveys conducted by the employer An employer determines the prevailing wage for a job by surveying a representative number of comparable firms in the vicinity that primarily employ workers who do not have disabilities for the work being performed How to Conduct a Prevailing Wage Survey Comparable Wage Data - The employer should obtain wage data from comparable businesses in the vicinity that primarily employ workers who do not have disabilities performing the same work and utilizing similar methods and equipment as used by the worker with a disability - The employer may contact other sources such as the Bureau of Labor Statistics, private or State employment services where surveys are not practical - If data for the specific job to be performed on the employer's premises cannot be found, it may be acceptable to use the wage paid to experienced workers employed in similar jobs that require the same general skill levels - The wage data from comparable businesses should be solicited, preferably in writing - The employer should keep: - Date of contact; - Name, address and phone number of firm contacted; - Name and title of individual contacted at each firm; - The wage rate information provided and the basis for concluding that each rate submitted was not based upon an entry-level position; and - A description of work for which wage information was collected. - This information must be retained for at least three years Calculating a Prevailing Wage WEIGHTED AVERAGE vs. SIMPLE AVERAGE EMPLOYER NO.OF EMPLOYEES WAGE RATE REPORTED GROSS WAGES (#Ees X WAGES) XYZ, Inc. 99 $7.25 $717.75 ABC, Inc. 17 $7.30 $124.10 RST, Ltd. 25 $7.45 $186.25 141 EMOPLYEES $22.00 $1,028.10 WEIGHTED AVERAGE $1,028.10 / 141 employees = $7.30 STRAIGHT AVERAGE $22.00 / 3 employers = $7.33333 or $7.34 - Note that in the example, the prevailing wage rate is $7.33333 but the employer rounded it up to $7.34 per hour. If the employer rounded to $7.33, he or she would be establishing a prevailing wage rate that is less than the true prevailing wage rate (less by $0.03333 per hour) - The Wage and Hour Division will accept the practice of carrying out computations to the fifth decimal point and then rounding up to the fourth decimal place Frequency of a Prevailing Wage Survey - The prevailing wage survey must be conducted prior to paying a special minimum wage - It must be reviewed and updated at least once a year - More frequently when a change in the prevailing wage has occurred, such as when the FLSA minimum wage or a state minimum wage has been increased - Although some certifications remain in effect for two years, the prevailing wage surveys must be conducted no less frequently than once a year De-Skilling - De-skilling is arbitrary downward adjustments made in prevailing wage rates to account for differences in duties, methods, equipment and responsibilities between the work of the worker with disabilities and the work done by employees who do not have disabilities - De-skilling is NOT permitted by the Wage & Hour Division Define the Work DEVELOPING A TASK ANALYSIS Task Analysis - A task analysis identifies: - Tasks and subtasks to be performed - Procedures to accomplish task - The specific area included in the work - Supplies and equipment necessary to perform the work - A definite start and stop point for the job/task - Environmental considerations - Defines quality - The written analysis must match the methods used by the workers to complete the job/task - “Standard procedures” Work Measurement - Determine the time it takes a worker who does not have a disability to perform the work as set out in the task analysis - Time becomes the “standard” against which the productivity of the worker with a disability is compared to determine the commensurate wage - The commensurate wage rate will be proportionate to the prevailing wage based on productivity differences - The employer is responsible for demonstrating the standard has been properly established Measure the Work ESTABLISHING THE PRODUCTION STANDARD Setting “The Standard” - Determined by conducting work measurements of workers without disabilities - Will be the exact methods required on the job - Work measurements must be conducted prior to the employment of workers with disabilities - As long as the job remains the same, new work measurements are not required - It is good practice to periodically review and confirm performance standards - Employer must use an accepted method of industrial work measurement to determine the standard - Stopwatch time studies - Predetermined time systems - Standard data - Other recognized measurement methods - The work measurement accurately measures the quality and quantity of the same work when performed by workers who do not have disabilities - Select an individual to conduct the study (the observer) - Select a worker without a disability for the job being measured to be timed (standard setter) The observer must: - Assure that the standard setter performs the task exactly as it will be performed by the worker with a disability - Compare the standard setter’s actions to the written procedures; - Structure the study to avoid “lost time” situations; - Time the standard setter’s work using the same starting and stopping point; - Read the stopwatch and make recordings; - Document the standard measurement ("quality" and "quantity“); - Conduct the study three times and determine average time The standard setter must be: - Average, experienced worker who does not have disability for the work being measured - Allowed to practice the work until he/she is comfortable, familiar and can perform the work without hesitation - Capable of maintaining a consistent, efficient pace ? - The observer will time the standard setter performing the job - If quality and quantity standards have been met, the time becomes the standard - If the minimum standards are not met, the worker is advised of the shortcoming(s) and the study will resume with the worker performing rework Work Measurements for Piece Rate - Multiply the standard "units per hour" by the "piece rate" you established to ensure that the result equals or exceeds the full prevailing wage rate - Time study must be for a period long enough to ensure pace may be sustained throughout the day - Personal Time, Fatigue and Delay Allowances - PF&D (breaks, cleanup time, unavoidable delay time, fatigue, etc) taken into consideration when determining piece rates Measuring PF&D METHOD 1: Conduct time studies of the standard setters for 25 minutes, and then multiply the number of completed units by 2 - Averaged results will yield the standard and will include a properly computed 10-minute PF&D METHOD 2 – Multiply the standard time it takes a worker who does not have a disability to produce one unit by an allowance factor of 1.20* to incorporate a 10-minute PF&D *Using an allowance factor of 1.1764705 will provide a 9-minute PF&D Measuring Hourly Paid Workers Evaluating Productivity - Each worker with a disability must: - be evaluated within the first month of initial employment or assignment to new job and, at a minimum, once every six months, thereafter - perform the same tasks and use the same equipment as the standard setter - Evaluation should not be done if: - the worker is not familiar with the job - the worker is fatigued - conditions are different than normal Rework - If quality and quantity standards have been met, the time as recorded is then compared to that of the standard setter. - The percentage yielded is applied to the prevailing wage in order to determine the SMW. - If the minimum standards are not met, the worker is advised of the shortcoming(s) and the study will resume with the worker performing rework. - The “clock” will again be started and continue ticking while the worker corrects/completes the work to that point where it meets the minimum acceptable standards. Calculate the SMW - The productivity of EACH worker with a disability is compared to the established standard - The SMW will reflect the individual productivity of the worker with a disability in proportion to the standard The Certification Process 14(c) Certification - Only employers who have applied for and received a certificate from the Wage and Hour Division may choose to pay SMWs to workers with disabilities - The granting of a certificate is NOT a statement of compliance by the Wage and Hour Division - Certificates will NOT be issued retroactively Types of Establishments - WHD issues 14(c) Certificates to: - Community Rehabilitation Programs (CRPs) - 2 year certificates - Establishments that employ Patient Workers - 2 year certificates - Business Establishments - 1 year certificates - School Work Experience Programs (SWEPs) - 1 year certificates Community Rehabilitation Programs - CRPs must submit an application - WH-226 - A separate supplemental sheet must be included for each physically separate location or worksite where workers with disabilities will be employed at special minimum wages - WH-226A - A certificate will be issued for the main establishment and each branch establishment Establishments that employ Patient Workers - Hospitals/residential care facilities must obtain a certificate from WHD if patient workers are employed - WH-226 & WH-226A - If the facility operates a work center, it must apply for a separate certificate for the work center - If the facility places patients in jobs at business establishments in the community, it must either obtain a work center certificate or ensure that the business establishments have their own certificate Business Establishments - Must obtain a certificate from WHD if workers with disabilities are employed - WH-226 & WH-226A - If an individual with a disability is placed at a business by a CRP, is supervised by CRP staff, and is carried on the CRP’s payroll, the business establishment need not obtain a certificate School Work Experience Programs (SWEP) - Certificates are issued to the schools administering the SWEP, not the businesses at which the students are placed - Certificates are obtained by submitting an application and the required supplemental sheet - WH-226 &WH-226A How to Apply for a Certificate - Employers wishing to obtain a certificate must complete the appropriate WHD forms - WH-226 & WH-226A - Instructions for completing the forms are on the last page of each form - Completed applications should be mailed to: - U.S. Department of Labor Wage and Hour Division 230 South Dearborn Street, Room 524 Chicago, Illinois 60604-1591 Certification Attestations The regulations 29 CFR Part 525 require that every applicant attest that: - The employer has read the application form and to the best of his or her knowledge and belief, all answers and information given in the application and attachments are true; - The representations set forth in support of the application to obtain or continue the authorization to pay workers with disabilities at subminimum wage rates are true; - The authorization to pay SMWs, if issued or continued, is subject to revocation in accordance with the provisions of 29 CFR 525; - Workers employed (or who will be employed) under the authority in 29 CFR 525 have disabilities for the work to be performed; - Wage rates paid (or which will be paid) to workers with disabilities under the authority in 29 CFR 525 are commensurate with those paid experienced workers, who do not have disabilities that impair their performance, in industry in the vicinity for essentially the same type, quality and quantity of work; The regulations 29 CFR Part 525 require that every applicant attest that: - The operations are (or will be) in compliance with the FLSA, the Walsh-Healey Public Contracts Act (PCA), the McNamara-O’Hara Service Contract Act (SCA) and the Contract Work Hours and Safety Standards Act (CWHSSA), an overtime statute for Federal contract work; - No deductions will be made from the commensurate wages earned by a patient worker to cover the cost of room, board or other services provided by the facility; - Records required under 29 CFR 525 with respect to documentation of disability, productivity, time studies or work measurements, and prevailing wage surveys will be maintained; - The wage rates of all hourly rated employees paid in accordance with FLSA Section 14(c) will be reviewed at least every six months; and - Wages paid to all employees under FLSA Section 14(c) will be adjusted at periodic intervals, at least once a year, to reflect changes in the prevailing wage paid to experienced workers employed in the vicinity for essentially the same type of work. Certification Questions All applications for 14(c) certification are processed by the WHD Certification Team in Chicago, Illinois - California, Colorado, Indiana, Massachusetts, Utah, Alaska, Arkansas, Delaware, D.C., Mississippi, Montana, Nebraska, New Jersey, Washington, Wyoming - (312) 596-7189 - North Carolina & Louisiana - (312) 596-7200 - Missouri, Ohio, South Carolina, Tennessee, Florida, Guam, Idaho, Iowa, Maryland, Michigan, Oklahoma, Puerto Rico, Vermont, Virgin Islands - (312) 596-7198 - Kansas, New Hampshire, New York, Oregon, Pennsylvania, Arizona, Georgia, Kentucky, Minnesota, Rhode Island - (312) 596-7202 - Alabama, Illinois, Texas, West Virginia, Connecticut, Hawaii, Maine, Nevada, New Mexico, North Dakota, South Dakota, Virginia, Wisconsin - (312) 596-7027 Application Processing - WHD Wage Specialists review each application for completeness, accuracy and compliance with the provisions of Section 14(c) of the Fair Labor Standards Act (FLSA) - Once the review is completed, a certificate will be issued or denied. If denied, the applicant will be advised. - Issuance of a certificate is not a statement by the Wage and Hour Division that the employer is in compliance with the provisions of the applicable Acts and does not provide the employer with a good faith defense should violations later be found To expedite the certification process, employers should: - Designate an individual within their organization who understands both the certification and compliance principles of FLSA Section 14(c) to oversee the completion and submission of the application - Submit a complete, accurate and timely application that includes all the required supporting documentation - Communicate with the Wage and Hour Division FLSA Section 14(c) Certification Team as needed before, during and after the submission of the application Denial of Application - A certificate will be denied if the application is incomplete, contains false statements or does not include the proper supporting documentation and attestations - If denied, the applicant will be advised in writing and told the reasons for the denial as well as the right to petition for review Certificate Expiration - Certificates are issued with both an effective date and an expiration date - Certificates expire on the indicated date unless the employer properly files an application for renewal with the Wage and Hour Division before the expiration date Certificate Renewal - Approximately two months before a certificate expires, WHD will notify the employer that it is time to apply for a new certificate - Renewal applications are submitted on WH-226 and WH-226A in the same manner as the initial application Certificate Revocation - A certificate may be revoked by the Administrator of WHD for the following reasons: - It is found that false statements were made or facts were misrepresented in obtaining the certificate. If this is the case, the certificate may be revoked back to the date of issuance. - It is found that the certificate holder violated any of the provisions of the FLSA, the McNamara-O’Hara Service Contract Act (SCA) or the terms of the certificate. If this is the case, the certificate may be revoked back to the date the violations began. - It is determined that the certificate is no longer necessary to prevent the curtailment of employment opportunities for workers with disabilities. If this is the case, the certificate will be revoked as of the date of the employer revocation notice. - A petition may be filed for review with the Administrator within 60 days of the action. McNamara-O’Hara Service Contract Act PREVAILING WAGE AND FRINGE BENEFITS Interaction with Service Contract Act (SCA) - SCA allows employers to pay employees with disabilities a SMW less than the prevailing wage required by the wage determination - Employers MUST pay full fringe benefits, or the equivalent cash payment in lieu of providing the benefits Recordkeeping, Notification and Posting Requirements Records The following must be maintained: - Records that document that the workers who are paid SMWs have disabilities that impair their productivity - Medical, psychiatric, psychological tests that support nature of disability - Records that document the accuracy and timeliness of the employer's establishment of prevailing wages. - Contact between the employer and the businesses surveyed - The wage rate information provided by the comparable employers and the basis for concluding that each rate submitted was not based upon an entry-level position - A description of work for which wage information was collected - Records of the time measurements the employer conducted to establish the standard for each job for which workers with disabilities are paid special minimum wages - Records of the productivity ratings of the workers with disabilities that document that the ratings were conducted properly and in a timely manner and that employee wages were adjusted accordingly by the end of the next pay period - Records identifying time spent by employees with disabilities at the employer’s establishment or in transit that are not considered hours worked and not compensable, such as receiving vocational or life skills training, receiving medical treatment, home-to-work travel and performing simulated work Posting Requirements - FLSA Minimum Wage Poster - Notice to Workers with Disabilities Paid at SMW - Family and Medical Leave Act Poster (if covered) - Notice to Employees Working on Government Contracts (if subject to SCA or PCA) Notification Requirements Each worker with a disability and, when appropriate, the parent or guardian of such a worker, shall be informed orally and in writing by the employer of the terms of the certificate under which such a worker is employed