|
 Printer-Friendly Version
 |
On This Page |
 |
|
|
Background
The Wage and Hour Division issues certificates authorizing the employment
of workers with disabilities at special minimum wage rates which are less
than the minimum wage established by section 6 of the Fair Labor Standards
Act (FLSA). These special minimum wage rates are based on the prevailing
wage rates paid experienced workers in the area. To ensure that workers
receive their proper compensation, certificate holders must review the special
minimum wage rates for employees paid on an hourly basis at periodic intervals,
not to exceed six months as per Regulations, 29 CFR 525.9(b)(1). In addition,
the wages for all employees must be adjusted at least once each year to
reflect changes in prevailing wage rates paid to experienced nondisabled
individuals employed in the locality for essentially the same type of work
as per Regulations 525.12(f).
The September 1, 1997 increase in the minimum wage to $5.15 per hour will
most likely impact the prevailing wages being paid in your area. This is
true even if the current prevailing wage rates exceed the new statutory
minimum wage rate. To ensure that your employees are properly paid and that
you remain in compliance with the provisions of your certificate, you should
review the prevailing wage rates that you use to determine the commensurate
wage rates paid to your employees with disabilities. After this review,
you are required to adjust the commensurate wage rates to reflect any increases
in the prevailing wage rates. Rather than conduct a prevailing wage survey
at this time, you may choose to simply raise your prevailing wage rates
by the percentage of increase in the minimum wage (or 8.4%), and adjust
commensurate wage rates paid workers with disabilities accordingly. More
information concerning this blanket adjustment is provided later in this
guide.
To help you through this process, we are providing the following information
in a question and answer format. We are also providing information of a
more general nature at the end of this guide.
How can an increase in the minimum wage affect wages being paid to
workers with disabilities in my facility?
The certificate which authorizes you to pay special minimum wages requires
that workers with disabilities receive wages commensurate with those paid
experienced nondisabled workers. An increase in the minimum wage will most
likely affect the prevailing wage rates paid to these workers. In order
to assure continued payment of proper commensurate wage rates you should
review these guidelines and take measures to determine if there is an increase
in the prevailing wage rates. The mere adjusting of prevailing wage rates
that are below $5.15 an hour beginning September 1, 1997, may not be sufficient
for compliance under section 14(c) of the FLSA. You must consider all of
the appropriate issues discussed here.
What if my current computed prevailing wage rates are less than $5.15 an hour?
Commensurate wage rates that are based on prevailing wage rates less than
$5.15 an hour will have to be adjusted upward to at least that level effective
September 1, 1997, and you need to compute commensurate wage rates based
on the new (higher) prevailing wage rates. Section 525.10(h) of the regulations
prohibits a prevailing wage rate that is less than the minimum wage specified
in section 6(a) of the FLSA.
For example, if the current prevailing wage rate being used is $4.75
an hour, that rate will have to be adjusted to at least $5.15 beginning
September 1, 1997. Commensurate wage rates paid workers with disabilities
must reflect this increase for all hours worked on or after September
1, 1997.
What if my current prevailing wage rates already exceed $5.15 per hour?
Because the scheduled increases in the FLSA minimum wage will probably
impact most prevailing wage rates, including those already greater than
$5.15 per hour, certificate holders will still be required to review, and
adjust if necessary, the prevailing wage rates used to determine commensurate
wage rates.
How do we determine what the new prevailing wage rates are in our area?
As mentioned above, all prevailing wage rates will need to be reexamined
to assess the impact of the increase in the minimum wage. Your facility
should contact the sources from which you originally obtained prevailing
wage rate information to determine the effect of the increase of the statutory
minimum wage, or, if necessary, obtain this information from new sources.
Once you have this information, you should adjust the wage rates of workers
with disabilities no later than the next full pay period after the prevailing
wage rates are reexamined. You should make sure that the data you collect
on wage rates reflects the changes in the statutory minimum wage and advise
the sources accordingly. As with all prevailing wage surveys, you should
also document these contacts and have this information available for review
by the Wage and Hour Division. These procedures are required under sections
525.9(b)(2), 525.10, 525.12(f), and 525.16(c) of the regulations.
What if we just conducted a survey and it is not convenient to make a new survey at this time? Is there any alternative method for adjusting commensurate wage rates?
Yes, you may elect to make a blanket adjustment to prevailing wage rates
based on the percentage increase in the statutory minimum wage. This change
should be accomplished in the next complete pay period following the minimum
wage increase. For example, the September 1, 1997, minimum wage increase
from $4.75 an hour to $5.15 an hour is approximately 8.4%. Your facility
may elect to adjust all prevailing wage rates by 8.4% beginning September
1, 1997, and not reexamine prevailing wage rates until your facility would
be otherwise required to do so to maintain your authority to pay commensurate
wage rates to workers with disabilities.
For instance, if the current prevailing wage rate used is $5.00 an hour
and an hourly paid worker with disabilities paid under a special certificate
currently receives one-half of that rate ($2.50 an hour), you could adjust
the prevailing rate to $5.42 an hour ($5.00 X 8.4%), raise that worker's
commensurate wage rate to $2.71 an hour (one-half of $5.42), and meet
the requirements of the regulations.
To make this blanket adjustment to piece rates, simply multiply the
existing piece rate by the increase in the minimum wage. For example,
an existing piece rate is $0.05, based on a prevailing wage of $5.00 per
hour and time studies which showed that nondisabled workers were able
to produce 100 widgets in a "fifty-minute" hour, allowing 10 minutes per
hour for personal time and fatigue ($5.00 divided by 100 = $0.05). To
calculate the new piece rate using the blanket adjustment method, multiply
$0.05 per piece x 1.084 (amount of the increase in the minimum wage).
The product yields a new piece rate of $0.0542. It is suggested that your
records show that the prevailing hourly rate used to establish the piece
rate has been increased by 8.4%. It is also suggested that your records
indicate that the new piece rate ($0.0542) is based on the adjusted prevailing
wage of $5.42 ($5.42 divided by 100 = $0.0542).
How much time does an employer have to complete this process?
An employer may not base a commensurate wage rate on a prevailing wage
rate that is less than the statutory minimum wage. Therefore, any prevailing
wage rate less than $5.15 per hour must be raised to that level by September
1, 1997. It is anticipated that the "ripple effect" of the increased minimum
wage will not take place immediately. Consequently, we are advising employers,
who do not choose to use the blanket adjustment method of calculating commensurate
wage rates, to reexamine all prevailing wage rates no sooner than 30 days
and no later than 60 days after September 1, 1997. Upon completion of the
survey process, any increases in prevailing wage rates must be reflected
in the commensurate wage rates of workers with disabilities by the next
complete pay period. If a facility decides to increase rates using the blanket
adjustment percentage method described above, this should be completed by
the next full pay period after the minimum wage increase occurs.
What will happen if these adjustments in wage rates are not completed
in a timely fashion?
All adjustments to prevailing wage rates must be reflected by a corresponding
increase to commensurate wage rates. These changes must be made no later
than the next full pay period following the reexamination and/or adjustment
of the prevailing wage rates. Failure to follow these procedures is likely
to cause violations of the FLSA and affect the terms and conditions of your
certificate authorizing the employment of workers with disabilities at commensurate
wage rates. This may also result in the computation of back wages and a
request for payment of any back wages due to such workers.
We do McNamara-O'Hara Service Contract Act (SCA) work for a federal
agency and base our commensurate wage rates on the wage determination rate
required by the contract. Do we need to adjust these rates?
No, wages based on a wage determination issued under SCA do not have to
be increased unless the wage determination calls for a wage rate less than
the new, increased statutory minimum wage. In such instances, commensurate
wage rates must be based on a prevailing wage rate at least equal to the
statutory minimum wage.
What about our other workers who do not have disabilities? Do we have to increase their pay also?
Workers without disabilities for the work to be performed must be paid
at least the statutory minimum wage if they are performing work subject
to the minimum wage provisions of the FLSA. These workers must receive at
least $5.15 an hour beginning September 1, 1997. This includes both staff
members and production workers.
I have read this Guide and I still have questions. Who can help me with
my problems?
The Section 14 Specialist who is responsible for your area is available
to answer any additional questions you may have. We have enclosed a list
of these specialists and their addresses, phone numbers, FAX numbers and
Internet addresses. They will be happy to help you with any problems.
General Questions and Answers
How do I determine "commensurate wage rates"?
A commensurate wage rate is a special minimum wage paid to a worker with
a disability which is based on the worker's individual productivity, no
matter how limited, in proportion to the wage and productivity of experienced
nondisabled workers performing essentially the same type, quality, and quantity
of work in the geographic area from which the labor force of the community
is drawn. An example of a commensurate wage rate would be as follows:
If an experienced nondisabled worker makes boxes and can produce 40
boxes in an hour, but a worker with a disability can only produce 10 boxes
an hour; then, the worker with a disability is considered 25% as productive
as the experienced nondisabled worker and should receive at least 25%
of the prevailing wage rate for such work. If the prevailing wage rate
is determined to be $6.00 an hour, the worker with the disability employed
under a special certificate should receive at least 25% of that wage rate
or $1.50 an hour for performing the box production work. This is an extremely
simple example but it demonstrates the principle of commensurate wage
rates.
Properly established piece rates yield commensurate wage rates. A piece
rate fixes a price on each completed unit of work. This rate is derived
by dividing the prevailing wage rate by the average hourly production
of individuals not disabled for the work to be performed. For example,
if three nondisabled persons worked a total of ten "fifty-minute" hours
and produced 2800 units in total, the average production would be 280
units per hour (2800 units divided by 10 hours). Assuming the test involved
unskilled work, and the prevailing unskilled labor rate in the vicinity
is $5.15 per hour, the piece rate would be $0.018393 per unit ($5.15 divided
by 280 units). A disabled worker producing 185 pieces in an hour would
earn $3.40 for that hour (185 pieces x $0.018393 = $3.40).
Where are the requirements for commensurate wage rates found in the federal regulations?
The requirements for setting commensurate wage rates are found in sections
525.9 and 525.12 of Regulations, 29 CFR Part 525; and the procedures for
determining prevailing wage rates are found in section 525.10.
What conditions are considered "disabilities" for purposes of obtaining
a certificate? What conditions are excluded?
Individuals are considered workers with a disability when their earnings
or productive capability is impaired by a physical or mental incapacity
for the work to be performed, including aged or injured workers.
Disabilities which may affect earning or productive capacity include blindness,
mental illness, mental retardation, cerebral palsy, alcoholism, and drug
addiction. They also may include disabilities due to physical injuries to
the head, spine, skeletal system, amputations or other losses of muscle,
bone, etc. which may cause an individual to be incapable of meeting full
productivity.
The following are not considered disabilities: vocational, social, cultural
or educational disabilities; chronic unemployment; receipt of welfare benefits;
nonattendance at school; juvenile delinquency; and correctional parole or
probation. (However, these conditions taken together with some other mental,
physical or psychological condition may be considered as a disability.)
What if my state's minimum wage law is greater than the federal minimum
wage?
You should be aware that certain states or localities have wage and hour
laws that establish a statutory minimum wage higher than the FLSA standard
or establish other standards stricter than those set by the FLSA. Your certificate
issued under section 14(c) of the FLSA does not relieve you from your obligation
to comply with applicable state or local laws which establish other requirements
regarding the employment of workers with disabilities. On the other hand,
you are not relieved from compliance with the FLSA by state or local laws
that establish different standards from the FLSA.
U.S. DEPARTMENT OF LABOR EMPLOYMENT STANDARDS ADMINISTRATION
WAGE AND HOUR DIVISION SECTION 14 SPECIALISTS- September 1997
NORTHEASTERN REGION
Boston Office - (Connecticut, Maine, Massachusetts,
New Hampshire, Rhode Island, Vermont)
JFK Building, Room 525
Boston, Massachusetts 02203
Margaret MacDonald
(617) 565-2092; FAX (617) 565-3700
Internet: mmm@bos.dol-esa.gov
New York Office- (New Jersey, New York,
Puerto Rico, Virgin Islands)
Room 750
201 Varick Street
New York, New York 10014
William Devins
(212) 337-2020: FAX (212) 660-6957
Internet: wcd@nyc.dol-esa.gov
Philadelphia Office- (Delaware, District of Columbia,
Maryland, Pennsylvania, Virginia, West Virginia)
Gateway Building, Room 15210
3535 Market Street
Philadelphia, Pennsylvania 19104
Vacant
(215) 596-1193; FAX (215) 596-1479
SOUTHEAST REGION
Atlanta Office- (Alabama, Florida, Georgia, Kentucky,
Mississippi, North Carolina, South Carolina, Tennessee)
Atlanta Federal Center
61 Forsyth St., Rm 7M40
Atlanta, Georgia 30303BR
Randy Davis
(404) 562-2202; FAX (404) 562-2218
MIDWEST REGION
Chicago Office - (Illinois, Indiana, Michigan,
Minnesota, Ohio, Wisconsin)
Federal Building, Room 816 & 820
230 South Dearborn St.
Chicago, Illinois 60604
Robert Halson
(312) 353-6966; FAX (312) 353-2539
Internet: bob@chi.dol-esa.gov
SOUTHWEST REGION
Dallas/Denver Office - (Arkansas, Colorado,
Louisiana, Montana, New Mexico, North Dakota,
Oklahoma, South Dakota, Texas, Utah, Wyoming)
525 S. Griffin Square, Room 800
Dallas, Texas 75202
Gary Edwards
(214) 767-6895 ext 242; FAX (214) 767-2730
Internet: gedward@dal.dol-esa.gov
KANSAS CITY REGION
Kansas City Office - (Iowa, Kansas, Missouri, Nebraska)
City Center Square Building
1100 Main St., Suite 700
Kansas City, Missouri 64105-2112
Anne Hayes
(816) 426-5424; FAX (816) 426-3482
Internet: mah@kcm.dol-esa.gov
WESTERN REGION
San Francisco Office - (Alaska, Arizona, California, Guam,
Hawaii, Idaho, Nevada, Oregon, & Washington)
71 Stevenson Street, Suite 930
San Francisco, California 94105
Diane Reese
(415) 975-4510; FAX (415) 975-4539
Internet: reese@sfc.dol-esa.gov
| 
