Goal of new tax credit, grants in Kansas is to end subminimum wages paid to disabled workers
Kansas is hoping a new tax credit and grant program encourage employers to employ disabled workers and pay them at least the minimum wage.
This year’s passage of SB 15 marks one of the latest moves by states as they re-examine a federal policy established under the 86-year-old Fair Labor Standards Act. Under this law, companies are permitted to pay qualified disabled workers a subminimum wage by securing a “14(c)” certificate. This name refers to a section of the law that carves out an exemption to the act’s minimum-wage requirement. The exemption was designed to open employment to workers with qualifying disabilities who otherwise have little access to work.
However, legislators across the country have been considering measures to end the practice in their states. According to the Association of People Supporting Employment First, between 2015 and 2023, laws were passed in at least 15 states to end or phase out the subminimum wage and to prevent the issuance of new 14(c) certificates.
No Midwestern states have enacted an outright ban. Opponents of ending the 14(c) option argue that it will close job opportunities for individuals with disabilities or limit the benefits they receive from federal programs. Federal-level bans have been introduced but not advanced.
Kansas’ SB 15 lays out an alternative approach. First, it expands a state income tax credit for goods and services purchased from qualified businesses that employ disabled workers and that pay those workers at least the minimum wage. Second, the Sheltered Workshop Transition Grant Program aims to help employers transition away from paying workers with disabilities a subminimum wage.
Bills to phase out the subminimum wage advanced from their chambers of origin this year in Illinois (HB 793) and Minnesota (HF 4392), but then stalled. Legislation calling for a five-year phase-out of the subminimum wage also has been introduced in Ohio (HB 427). In 2021, Illinois Gov. JB Pritzker signed an executive order requiring state contractors and subcontractors to pay “no less than” the applicable local (if higher) or state minimum wage. The order applies to a state program that encourages the purchasing of “products and services produced and provided by persons with significant disabilities.”
According to The Minnesota Star Tribune, as part of the 2023-24 biennial budget, Minnesota legislators included more than $5 million in grants to help employers begin shifting away from use of the subminimum wage.