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California Reverses Subminimum Wage Rate Laws for Workers with a Disability

On Sept. 27, 2021, California announced the reversal of a provision that previously allowed employers to pay wages falling below the minimum wage rate to employees with physical or mental disabilities. This reversal was effective starting Jan. 1, 2022.

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Licenses for Subminimum Wage

Previously, state law permitted employers to acquire exclusive licenses that enabled them to pay below the minimum wage limit to workers with various disabilities. This clear discrimination went on for years, with these licenses being valid for up to a year.

However, nonprofit organizations, such as rehabilitation facilities and sheltered workshops, and their employers had the option of acquiring this license for an unlimited period and employing individuals with disabilities at exceedingly low wages.

The repeal has led the California Department of Industrial Relations to halt providing licenses that allow companies to offer subminimum wages for employees with disabilities. The enactment of this reversal went into effect on Jan. 1, 2022. However, current employers with access to these licenses will be legally allowed to extend them based on certain conditions.

In addition, under California laws, nonprofit organizations can proceed with subminimum payment arrangements for workers with disabilities without needing an individual license for each worker until Jan. 1, 2025.

We understand this isn't a topic to breeze through. Therefore, we want to assist you today! Call 909.466.7876 and schedule a meeting with one of our experts.

Also, don't forget to visit our Payroll site for more valuable information.

Multiyear Phase-out Plan

The legal documentation that reversed the law of subminimum wages also has certain requirements for the State Council of Developmental Disabilities. Through collaboration with all stakeholders and state agencies who remain relevant to the bill, the State Council of Developmental Disabilities is required to develop a thorough phase-out plan. It will be spread through multiple years. This requirement aims to implement the legal bill through the cessation of subminimum wages for employees by Jan. 1, 2025.

Effect on Employers

The plan of action for all employers should be to enact the new law immediately. This means all human resource plans and recruitment strategies for workers with disabilities must be re-evaluated thoroughly. Moreover, firms that recruit individuals with disabilities must scrutinize and educate themselves on the changes made to California Labor Code law. Additionally, organizations must thoroughly keep track of any further instructions from the California Department of Industrial Relations to be well-versed with the impending phase-out plan.


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