DOL Subminimum Wage Certificate Does Not Preempt Higher State Law Minimum Wage

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By:  Karen L. Piper

While most employers were focused on complying with the new overtime rule (enforcement of which was enjoined on November 22, 2016), the Department of Labor (DOL) issued an “Administrator’s Interpretation” regarding wage certificates employers can obtain that allows employers to pay less than federal minimum wage ($7.25 per hour) to workers with disabilities.

In January 2009, under the Obama Administration, the DOL stopped issuing Administrator “Opinion Letters.”  In their place, DOL issued Administrator’s Interpretations as a means of providing guidance on the DOL’s interpretation of the laws DOL enforces (including the Fair Labor Standards Act (FLSA) and Family and Medical Leave Act (FMLA), among others[*]).  These Interpretations are designed to provide “meaningful and comprehensive guidance and compliance assistance … [when] further clarity regarding the proper interpretation of a statutory or regulatory issue is appropriate.”

The first Administrator’s Interpretation was issued in March 2010.  It reversed the DOL’s position that employees in the financial services industry, such as mortgage loan officers, generally met the duties test to qualify for exemption from the overtime pay requirement as an administrative employee.  That Administrator’s Interpretation was unanimously affirmed by the U.S. Supreme Court in 2015 after 5 years’ litigation.

The most recent Administrator’s Interpretation was issued on November 17, 2016.  It clarifies the DOL’s interpretation that, even with a DOL-issued subminimum wage certificate, employers must pay a higher wage rate to disabled workers if state or other federal law provides a higher minimum wage.

The FLSA allows employers who employ persons with disabilities to pay a lower wage rate to disabled workers.  The lower rate is based on comparing the productivity of the disabled worker with the productivity of an experienced non-disabled worker.  The rate payable to the disabled worker is a percentage of the “prevailing rate” for experienced workers.  An employer who employs a disabled worker can obtain a certificate from DOL authorizing the employer to pay the reduced wage to the disabled worker.

The new Administrator’s Interpretation makes clear the DOL’s position that such certificate does not relieve the employer from paying a higher wage rate than the certificate allows if state or other federal law provides a higher minimum wage.  For example, Michigan’s minimum wage currently is $8.50 per hour (going up to $8.90 per hour on January 1, 2017).  Even if the DOL certified a wage rate below $8.50 per hour for a disabled worker in Michigan, the employer must pay that worker $8.50 per hour.  The same rule applies to the minimum wage rate applicable on some federal contracts.  Some federal contractors are required to pay a minimum wage of $10.15 per hour for work performed in connection with the contract.  Even if the contractor obtained a certificate allowing a lower minimum wage for disabled workers, the contractor would have to pay the disabled worker the federal contract minimum wage ($10.15 per hour) for work performed in connection with the federal contract.

This Administrator Interpretation will be in effect unless and until the DOL withdraws it or the Interpretation is successfully challenged in the courts.  Anyone with questions about this Interpretation should consult experienced employment counsel, such as the author.

This article was written by Karen L. Piper, who is Secretary of the Board of Detroit SHRM, a member of the Legal Affairs Committee, and a Member of Bodman PLC, which represents employers, only, in Workplace Law.  Ms. Piper can be reached at Bodman’s Troy office at (248) 743-6025 or kpiper@bodmanlaw.com.

Detroit SHRM encourages members to share these articles with others, inside and outside their organization, as long as its name and logo, and the author’s information are included in the re-post of the article.  December 2016.