Alaska wants to get rid of minimum wage exemption for people with disabilities

Alaska is looking to repeal a regulation that has long allowed employers to pay people with disabilities less than the state's minimum wage.

Employers need to apply for a waiver to pay people with disabilities below Alaska's $9.80 per hour minimum wage. Now, the Alaska Department of Labor and Workforce Development has proposed doing away with that exemption.

There are only four employers in Alaska that have the waiver to use the exemption — Fairbanks Resource Agency, The Arc of Anchorage, Assets Inc., and Threshold Services Inc., all of which do work that focuses on people with disabilities — but not all of those actively use it, said state labor commissioner Heidi Drygas.

"The idea was it would encourage employers who might not otherwise hire persons with disabilities to hire them," Drygas said. "I do think it was well-intentioned. … We just don't have the evidence that that's worked very well in practice."

The exemption from paying workers with disabilities at least minimum wage has existed at the federal level since 1938, as part of the Fair Labor Standards Act, and has been part of Alaska regulations since 1978.

Other states have started to move away from the practice as well, Drygas said.

"It absolutely undermines the economic security for those employees," she said. "Minimum wage is minimum for a reason. It's intended to meet basic needs for workers. And it hasn't worked out that way. And if the minimum wage doesn't do that, certainly sub-minimum wage doesn't."


[Alaska's total wages grew in the first quarter of 2017]

Matt Jones, executive director of Anchorage nonprofit Assets Inc., said while the organization has the waiver and has used it in the past, paying workers with disabilities below minimum wage hasn't been the practice there for several years.

"We support the change," he said. "We just strongly believe no one wants their work devalued."

The Arc of Anchorage just this month moved away from the practice of paying below $9.80 an hour to workers with disabilities, said Danny Parish, director of supported employment services there.

The Arc is a nonprofit that serves people with developmental disabilities or mental health issues. Parish said one reason the Arc used the wage exemption in the past was that it allowed the organization to provide support to more people in its job training programs.

"As we're improving our practices across the board … and making sure that as we are improving all of our efforts, we're also looking at fair standards," said Stephanie Wheeler, chief operating officer at the Arc.

At Threshold Services Inc., a recycling nonprofit in Kodiak, executive director Stephanie Mason said there isn't enough money to pay everyone at least minimum wage. Of the 13 people employed there, she said seven have severe physical or mental disabilities.

"We would love to pay our employees minimum wage," she said. "We have started making changes by slightly increasing their hourly rate. Honestly, it's to get them out of the house, get them interacting with the community."

Dave Fleurant, executive director of the Disability Law Center of Alaska, said allowing pay below minimum wage to people with disabilities clashes with the state's "employment first" law of 2014. That law says that the goal of education is to help people become "gainfully employed in an integrated workplace where individuals with disabilities work with and alongside" people without disabilities.

"The time is up for all of these programs that actually seem to discriminate against people with disabilities," he said. "It keeps individuals with disabilities in poverty; it keeps them segregated from society."

Ric Nelson, a program coordinator with the Governor's Council on Disabilities and Special Education, said the exemption was originally created to help people with disabilities find work opportunities. But times have changed, he said.

"The elimination of this law will make it so that each person that has a job that has a disability will be able to earn real wages for doing real work," Nelson said.

Mason said she understands the criticism of sub-minimum wage as discrimination.

"There are people out there that are abusing it and paying people at a very, very low rate that is very discriminatory," she said, "but that's not what we're doing here. We're trying to pay them as much as we can."

If the state changed the current regulation, Mason said, she would likely need to cut back hours for workers.

If this is something we can gradually work our way up to, work on other sources of revenue, we would be happy to comply with that,” she said.

In Alaska, the regulation says that a person being paid below minimum wage generally still needs to make at least half the minimum wage. Under federal law, Fleurant said, employers "could pay pennies on the dollar."

Employers could still get federal exemptions that would allow them to pay lower than minimum wage to people with disabilities, said Heather Beaty, special assistant to Drygas, in an email. But the U.S. Department of Labor "will honor" states that have eliminated the sub-minimum wage by not allowing entities in those states to get such waivers, she said.

The state labor department is seeking public comments on the proposed change, and those comments are due Nov. 15. Barring "major issues" in that commenting period, Drygas said the final repeal of the regulation would happen about three months later.

Annie Zak

Annie Zak was a business reporter for the ADN between 2015 and 2019.