Wage and Hour Division (WHD)

Printer-Friendly Version

On This Page 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? How much time does an employer have to complete this process? What will happen if these adjustments in wage rates are not completed in a timely fashion? 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? What about our other workers who do not have disabilities? Do we have to increase their pay also? General Questions and Answers

A GUIDE TO ADJUSTING COMMENSURATE WAGE RATES AS A RESULT OF THE SEPTEMBER 1, 1997 INCREASE IN THE FLSA MINIMUM WAGE

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.

Back to Top

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).

Back to Top

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.

Back to Top

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.

Back to Top

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.

Back to Top

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.

Back to Top

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.

Back to Top

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).

Back to Top

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.

Back to Top

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.)

Back to Top

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.

Back to Top

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