Administrative Advisory SPED 2017-1

Guidance Regarding the WIOA Prohibition on Contracting with Entities for the Purpose of Operating a Program Under Which a Youth with a Disability is Engaged in Subminimum Wage Employment

This advisory provides guidance in accordance with the regulations recently promulgated under the Workforce Innovation and Opportunity Act (WIOA) of 2014, specifically 34 CFR § 397.31. This regulation states:

The term "entity" is defined in 34 CFR § 397.5(d):

Background:

WIOA¹ is a comprehensive federal law, enacted on July 22, 2014, which is intended to streamline, consolidate, and improve workforce development and training services for various groups, including youth and workers with disabilities.² Throughout the Act, Congress emphasizes that individuals with disabilities, including those with the most significant disabilities, can achieve competitive integrated employment if provided the necessary supports and services.

Section 511 of WIOA defines limits on the payment of subminimum wage to individuals with disabilities. Within Section 511 there is a particular focus on youth aged 24 and under, and as a result, state and local education agencies play an important role in implementation of Section 511 regarding allowable wages for youth employed through secondary transition programming and services.

Guidance:

Effective July 22, 2016, in accordance with WIOA, local education agencies (LEAs) may not contract or make other arrangements³ with an employer, or a contractor or subcontractor of that employer, for the purpose of operating a program under which students are engaged in work compensated at a subminimum wage.⁴ This prohibition applies even if that employer, contractor, or subcontractor holds a section 14(c) certificate under the Fair Labor Standards Act (FLSA). As of January 1, 2016, the Massachusetts minimum wage is $10.00 per hour.

It is important to note that under WIOA, it is still allowable for an LEA to contract with entities holding an FLSA section 14(c) certificate, such as community rehabilitation programs, for purposes other than operating a program for youth under which work is compensated at a subminimum wage. For example, an LEA may contract with that type of entity for another purpose, such as for the provision of secondary transition services that are beneficial to students with disabilities, so long as the students are not paid subminimum wage if compensation is provided.

In addition, LEAs are not prohibited from contracting with an entity holding a special wage certificate for the purpose of operating a program in which the youth is paid at or above minimum wage. An LEA, prior to entering into such a contract, must ensure that the youth will be paid at least minimum wage.

To ensure compliance with WIOA regulations, all LEAs should promptly review their contracts or other arrangements with employers who hold 14(c) certificates, including contractors or subcontractors of that employer.

Note:

This guidance is excerpted, in large part, from WIOA commentary and regulations, 34 CFR Parts 361, 363, and 397.

¹ WIOA information on the U.S. Department of Education website

² U.S. Department of Labor Fact Sheet #39H: The Workforce Innovation and Opportunity Act and Limitations on Payment of Subminimum Wages under Section 14(c) of the Fair Labor Standards Act

³ "Other arrangements" refers to any other type of agreement (other than a contract), such as a memorandum of understanding or subcontract, through which the LEA makes arrangements with entities operating programs in which youth with disabilities are paid subminimum wages under section 14(c) of the FLSA.

⁴ 34 CFR § 397.31

Last Updated: September 19, 2016