H.R. 4771 — Transformation to Competitive Integrated Employment Act

This section authorizes the Secretary of Labor to award competitive grants, from amounts appropriated to carry out this title, to states and eligible entities to assist employers issued special certificates under section 14(c) of the Fair Labor Standards Act (FLSA) (29 U.S.C. 214(c))—which authorize payment of subminimum wages to workers with disabilities—in transforming to business models that provide competitive integrated employment. Grants support (1) compensating all employees at a rate not less than the higher of the FLSA minimum wage ($7.25 per hour under 29 U.S.C. 206(a)(1)) or applicable state or local minimum wage, and not less than the customary rate paid by the employer for the same or similar work by similarly situated non-disabled employees; (2) assisting individuals with disabilities previously employed by the employer in finding and retaining competitive integrated employment (possibly with the same employer); (3) providing integrated community participation and wraparound services for individuals with disabilities; and (4) ensuring grant-funded services comply with the Home and Community-Based Services final rule (79 Fed. Reg. 2948, Jan. 16, 2014).

This section establishes a grant program administered by the Secretary of Labor under which states may receive funding to transition all employers using special certificates under section 14(c) of the Fair Labor Standards Act (i.e., certificates authorizing subminimum wages for workers with disabilities) to competitive integrated employment (CIE), or a combination of CIE and integrated services, with a phaseout timeline not extending past the expiration date of such certificates under new subsection 14(c)(7). State applications must include (1) data on current special certificate employers, including numbers employing workers with disabilities, those also offering CIE, employee counts and demographics, weekly hours, and wages disaggregated by employer and statewide; (2) state activities promoting CIE, such as Employment First plans, Olmstead plans, ABLE accounts, and Medicaid buy-ins; (3) proposed grant activities, including processes and timelines to identify and transform employers, expand service infrastructure, recruit employers, prioritize individuals with the most significant disabilities, and engage stakeholders; (4) coordination of federal, state, and local programs; (5) an evaluation plan measuring impacts on employment status, wages, job satisfaction, and provider capacity through the transformation and for two years after phaseout; and (6) assurances that all special certificate employers will transform, affected workers (prioritizing those with the most significant disabilities) will transition to CIE, and designated state agencies (e.g., developmental disabilities, Medicaid, vocational rehabilitation) will partner.

This section establishes application requirements for eligible entities seeking grants to transition from special certificates under the Fair Labor Standards Act (FLSA)—which authorize wages below the $7.25 per hour minimum wage in 29 U.S.C. 206(a)(1)—to competitive integrated employment for individuals with disabilities. Applications must include (1) the entity's current and historical use of special certificates, including employee numbers and demographics, wages paid (average, minimum, maximum, range), transitions to competitive employment over five fiscal years, and business models; (2) planned grant activities and goals, including new business models, integrated services, projected employee numbers, a discontinuation date for special certificates, and a transformation process; (3) recruitment of government and private employers; (4) a quarterly timeline over three years; (5) coordination of federal, state, and local programs; (6) assurances of transformation, competitive employment, data compliance, evaluation cooperation, and technical assistance; (7) an evaluation plan; and (8) collaboration assurances from state entities (e.g., Medicaid, developmental disabilities, vocational rehabilitation agencies).

This section revises the wage requirements under special certificates issued pursuant to section 14(c)(1)(A) of the Fair Labor Standards Act (FLSA) for employing individuals with disabilities, previously set commensurate with individual productive capacity and potentially below the federal minimum wage. Effective three months after enactment, such wages must equal or exceed the greater of (1) a phased-in percentage of the federal minimum wage rate under FLSA section 6(a)(1)—60% beginning on the effective date, 70% one year later, 80% two years later, 90% three years later, and 100% four years later—or (2) the individual's wage rate in effect the day before enactment. (As background, FLSA section 14(c) certificates allow certain nonprofit and for-profit employers to pay subminimum wages to workers whose disabilities impair productivity; thus, this change establishes a minimum floor that transitions to the full federal minimum wage while grandfathering prior rates if higher.)

This section amends FLSA section 14(c), which authorizes the Secretary of Labor to issue special certificates permitting employers to pay subminimum wages (as low as permitted by the Secretary) to workers whose earning or productive capacity is impaired by physical or mental disability. It further (1) prohibits issuance of new certificates under that subsection to employers not holding one before enactment of the Transformation to Competitive Integrated Employment Act and (2) sunsets the authority to issue such certificates, rendering all existing certificates ineffective, beginning the day after four years following the effective date specified in section 201(b) of that Act.

This section authorizes the Secretary of Labor—acting through the Office of Disability Employment Policy (ODEP) of the Department of Labor (DOL) in partnership with DOL's Employment and Training Administration (ETA), the Administration for Community Living (ACL) of the Department of Health and Human Services (HHS), and the Office of Special Education and Rehabilitative Services (OSERS) of the Department of Education—to award a 6-year non-renewable grant to a qualified nonprofit entity from amounts appropriated for this title. The grant requires the recipient to (1) provide technical assistance to employers transitioning from special certificates (i.e., Fair Labor Standards Act section 14(c) certificates authorizing subminimum wages for workers with disabilities) to competitive integrated employment (CIE, i.e., employment at or above minimum wage with benefits in integrated settings); identify and disseminate public- and private-sector transition models; and develop replicable strategies to increase employer use of evidence-based CIE practices; (2) collect and disseminate evidence-based practices and strategies for such transitions, including those under the Workforce Innovation and Opportunity Act, Olmstead settlement agreements (i.e., enforcing community integration for individuals with disabilities), and the 2014 Home and Community-Based Services (HCBS) rule; (3) increase awareness of and access to training and technical assistance from ODEP, ETA, ACL, and OSERS; and (4) promote state Employment First initiatives (i.e., prioritizing CIE for individuals with disabilities) and coordinate dissemination of ABLE account (i.e., tax-advantaged savings accounts for disability expenses) information through the ABLE National Resource Center and the Department of the Treasury. Grant applications must demonstrate the entity's expertise in technical assistance for such transitions, program and systems change documentation and dissemination (including accessible web-based products), collaboration with agencies and families, youth transition support under the Individuals with Disabilities Education Act, and leveraging ODEP/ETA resources.

This section directs the Secretary of Labor, not later than six months after the date of enactment, to enter into a contract with a nonprofit entity experienced in program evaluations to (1) conduct a multi-year evaluation of the Act's impact—including title II amendments to section 14(c) of the Fair Labor Standards Act (29 U.S.C. 214(c)), which authorizes special certificates for subminimum wages for workers with disabilities—focusing on changes in wages and employment for such individuals and on employer and state compliance actions (including, for title I fund recipients, transformation requirements); and (2) prepare reports under subsection (c). The Secretary must submit to the Senate Committee on Health, Education, Labor, and Pensions and the House Committee on Education and the Workforce (1) an interim report on the evaluation, not later than three years after the evaluation commences; and (2) a final report not later than 18 months after the legal effect of special certificates expires pursuant to new FLSA section 14(c)(7).

This section directs the Secretary of Labor, acting through the Wage and Hour Division Administrator and in coordination with the Department of Justice's Civil Rights Division, to submit annual reports to the Senate Committee on Health, Education, Labor, and Pensions; the House Committee on Education and the Workforce; and other specified committees for each year of the five-year period under amended section 14(c)(1)(A) of the Fair Labor Standards Act of 1938 (FLSA). (Special certificates under FLSA section 14(c) authorize employers to pay workers with disabilities wages below the federal minimum of $7.25 per hour.) The reports summarize employer practices and must include (1) the number of such workers paid below the higher of the federal minimum wage or applicable state or local minimum wage, or below the employer's customary rate for similar work by nondisabled employees with similar training, experience, and skills; (2) employment settings (e.g., segregated or competitive integrated) and integrated services provided; (3) average, minimum, and maximum hourly wages and average weekly hours worked, disaggregated by employer and state; (4) aggregate demographics (gender, ethnicity, race, and disability type); and (5) transitions to competitive integrated employment, disaggregated by employer and state. This section further requires the Secretary to survey at least 10% of special certificate holders within one year of enactment—evaluating transition training and support, competitive employment placement efforts, and subminimum wages using the criteria above—and submit the results to the Senate HELP and Aging Committees and the House Education and Workforce Committee.

This section defines 13 terms for purposes of the Act, including (1) "ABLE account" (as defined in IRC §529A(e)(6)); (2) "competitive integrated employment" (as defined in Rehabilitation Act §7(5)); (3) "disability" (including intellectual, developmental, mental health, or other disabilities); (4) "integrated community participation and wraparound services" or "integrated services" (services promoting competitive employment, independent living, and community participation for individuals with disabilities in integrated community settings compliant with the 2014 HCBS rule, excluding nursing facilities, institutions for mental diseases, ICFs/IIDs, or non-inclusive congregate settings); (5) "Olmstead decision" (Supreme Court decision in Olmstead v. L.C., 527 U.S. 581 (1999)); (6) "individuals with disabilities" (including those described in FLSA §14(c)(1)); (7) "special certificate" (a certificate issued under FLSA §14(c)); and terms referencing the Workforce Innovation and Opportunity Act such as "local board," "local plan," "State board," and "workforce development system."