Paying workers with disabilities below the minimum wage is still legal — the federal rule to end it was withdrawn in 2025

What is happening?

Section 14(c) of the Fair Labor Standards Act lets an employer hold a certificate that authorizes paying a worker with a disability less than the federal minimum wage. As of May 1, 2024, Department of Labor data showed 801 employers with either an issued certificate or a pending certificate application, and employers holding an issued certificate reported paying approximately 40,579 workers at subminimum wages in their most recently completed fiscal quarter.

Many of the reported wages are far below $7.25 an hour. In certificate data valid between October 2023 and March 2024, about 49 percent of reported workers earned less than $3.50 an hour, about 10 percent earned $1.00 an hour or less, and about 2 percent earned 25 cents an hour or less.

In December 2024 the Department proposed to stop issuing these certificates and to give existing holders up to three years to transition. On July 7, 2025, the Department withdrew that proposal, concluding that section 14(c) imposes a mandatory duty on it to provide for the issuance of subminimum wage certificates. The exemption is therefore still in force.

Whose problem is this?

The party that can remove the exemption and the party that lives on the wage are different, and in July 2025 the administering agency said it is not the party that can remove it.

Where does this problem end?

The boundary matters here because the wage is lawful and not evaded. What is at issue is a written exemption, not a failure to enforce a rule that already applies.

What is the state now, and what should it be?

Now

Needs a new measurementThe target state: there is no federal target value. The December 2024 proposal would have created one — zero new certificates on the effective date and existing holders wound down within three years — and the July 2025 withdrawal removed it. What remains are state statutes with their own dates and no confirmed federal endpoint.

How big is it?

The affected population used here is 40,579 — the number of workers that employers holding an issued section 14(c) certificate reported paying at subminimum wages in their most recently completed fiscal quarter, from Department of Labor data as of May 1, 2024. The population file carries the same number as a point estimate.

This count is a snapshot of people on certificates at one moment and not the number who pass through the program in a year. The annual number of people affected is therefore larger than the figure used.

The figure is also almost certainly stale in the downward direction. The program fell from about 424,000 workers in 2001 to 40,579 in the 2024 filings, and no official 2025 or 2026 count was confirmed in this round, so the true 2026 value is likely lower.

Under what conditions does it arise?

The exemption survives because the law that creates it does not expire and no agency is required to revisit it on a schedule.

1. It lives in the statute, not in a rule. A regulation can be replaced by the agency that wrote it. A statutory authorization cannot, and the July 2025 withdrawal turns on exactly that distinction. 2. The administering agency reads its own duty as mandatory. The Department concluded that section 14(c) directs it to provide for the issuance of these certificates, which converts a policy choice into a claimed legal obligation. 3. The program shrinks without anyone deciding to end it. Employer participation and worker counts have fallen by roughly 86 and 90 percent since 2001, which lowers the pressure to act while leaving the authority intact. 4. The exit is not automatic. Where states have ended the practice, more than half of the tracked workers were not in other jobs afterward, so ending the exemption and producing employment are two different results.

What has been tried?

Both directions have been tried — a federal rule that would have closed the door for everyone at once, and state statutes that close it one jurisdiction at a time. Only the second is still standing.

What was found?

Why is it still unsolved?

Institutional exemption — the carve-out is written into the statute, and the agency that administers it has concluded that it cannot remove the carve-out by rule.

A carve-out written into a statute does not fall away when the reason for it stops being persuasive. In December 2024 the Department of Labor tentatively concluded that subminimum wages are no longer necessary to prevent the curtailment of employment opportunities for individuals with disabilities, which is the condition the statute names. Seven months later, on July 7, 2025, the same Department withdrew the proposal and concluded that section 14(c) imposes a mandatory duty on it to provide for the issuance of the certificates. The factual finding was not what changed. The reading of who holds the power did.

The withdrawal also closes the obvious substitute path. It states that where states have ended subminimum wage programs they did so through state legislation under their own constitutional frameworks, and that the existence of those state laws does not bear on the federal statutory obligation. So sixteen state statutes do not accumulate into a federal repeal, and the sixteenth state changes nothing about the seventeenth.

That leaves a program that is shrinking on its own, which weakens the case for spending scarce legislative attention on it, while the authority to restart it at any scale remains fully intact.

What observation would mean it is solved?

Candidates — (a) the number of issued section 14(c) certificates reaching zero (b) every state having barred the practice by statute (c) the workers formerly paid under certificates holding jobs at or above the applicable minimum wage.

(a) alone is dangerous. It is reached if an administration simply stops approving applications while the statute stands, and the July 2025 reasoning says the statute is what governs. A later administration reopens it without any change in law.

(b) alone leaves the federal exemption untouched by construction, since the withdrawal already declared state law irrelevant to the federal obligation, and it moves at the pace of fifty legislatures.

(c) is the only candidate that measures the worker rather than the paperwork, and it is the one nobody measures at national scale. The only outcome tracking found in this round covered two states and roughly 1,000 people.

What is it connected to?

Fills with researchplausible neighbors are Medicaid funded day and employment services, the vocational rehabilitation system, sheltered workshop closures, and the disability employment rate generally. Relation type and evidence grade were not researched in this round.

What these sources do not say

• The current count. No official 2025 or 2026 figure for certificate holders or workers was confirmed. The Department of Labor certificate holder list returned HTTP 403 to our request, so every count of certificate holders and covered workers here carries a 2024 or earlier date even though the question is about 2026.
• Which 16 states, and whether Georgia is among them. GAO gives the number as of January 2025 but the state names sit on a map we did not read, and the Georgia statute took effect after that date, so the count may already be 17.
• How the two wage bases fit together. The 40,579 is described as workers paid at subminimum wages, while the roughly 16 percent at or above the federal minimum is drawn from workers reported on the most recent applications. Whether that 16 percent sits inside or outside the 40,579 is not stated, so the size of the certificate covered workforce is not the same number as the size of the affected population.
• What the 54 to 61 percent are doing. GAO reports they were not working and were receiving Medicaid funded non-employment services. Whether they wanted work, were on a waiting list, or lost household income is not reported.
• Whether any federal bill is moving. We did not confirm the status of pending legislation in Congress, so the only live path in these sources is state by state.
• What the employers said. More than 11,000 unique comments were filed on the 2024 proposal and none of them were read for this entry, so the stated transition costs and the counter arguments are unrepresented here.

See the evidence

Two Federal Register documents were read directly through the govinfo text service, so the 2024 counts and the 2025 withdrawal reasoning come from the documents themselves rather than from reporting about them. The Department of Labor list of certificate holders returned HTTP 403 and no count later than the 2024 filings was verified, which is why every certificate holder and worker count above is dated 2024 or earlier while the situation described is 2026. The count of 16 states appears on two separate GAO surfaces with the same as of date of January 2025, and a worker count near 40,000 appears in both the GAO material and the Federal Register documents — but these are the same underlying Department data reported twice, not two independent measurements, and the entry treats them accordingly.

People affected

Estimated range 40,579–40,579 As of 2024

Sensitivity The interval has zero width because a single measured figure was used. It is not a confidence interval and it is not a bound of any kind. Three separate limits push in different directions and none of them were resolved. First, this is a point-in-time snapshot of workers on certificates in one reported quarter, not the number of distinct people who pass through the program over a year, so the annual count of people affected is larger than 40,579. Second, the figure is stale and the direction of staleness is known: the program fell from about 424,000 workers in 2001 to 40,579 in the 2024 filings, and no official 2025 or 2026 count was confirmed in this round because the Department of Labor certificate holder list returned HTTP 403, so the true 2026 value is very likely lower. Third, the US Government Accountability Office reports almost 40,000 as of November 2024, which is a rounding of the same underlying Department data rather than an independent measurement, so the agreement between the two sources must not be read as corroboration by two methods. A fourth ambiguity is left open in the source itself: the same proposed rule reports that about 16 percent of workers listed on the most recent applications were paid at or above the federal minimum wage, and whether that share sits inside or outside the 40,579 is not stated, so the certificate-covered workforce and the subminimum-paid population are not the same quantity.

Regional breakdown No state-level worker counts were confirmed from a source that also reports the national total in the same dataset. The Department of Labor certificate holder list is organized by employer and would in principle allow a state roll-up, but that page returned HTTP 403 to our request. Splitting the national figure by state population would be proportional allocation, and it would be especially unfounded here because certificate use is concentrated in the states that have not legislated against the practice, so the geographic distribution is close to the inverse of a population-proportional one