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Transformation to Competitive Employment Act: Phasing Out 14(c) Employment

The Transformation to Competitive Employment Act aims to phase out subminimum wage employment under 14(c) of the Fair Labor Standards Act. It also includes capacity-building grants to assist states and employers with the transition. The legislation proposes a six-year timeline for phasing out 14(c) employment and establishes grants programs for capacity building.

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Transformation to Competitive Employment Act: Phasing Out 14(c) Employment

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  1. S.260/H.R. 873: Transformation to Competitive Employment Act

  2. What is the Transformation to Competitive Employment Act? The Transformation to Competitive Employment Act was introduced in the U.S. House of Representatives by Rep. Bobby Scott (D-VA-03), chairman of the Committee on Education and Labor, and Rep. Cathy McMorris Rodgers (D-WA-05), and introduced in the U.S. Senate by U.S. Senator Bob Casey (D-PA). The legislation would phase out (over a six-year period) subminimum wage employment under 14(c) of the Fair Labor Standards Act and would help strengthen and update the disability employment service delivery systems through capacity building grants to assist states and 14(c) employers with the phase-out transition. The U.S. House Education and Labor Committee and the U.S. Senate Health, Education, Labor, and Pensions Committee have jurisdiction over the legislation. No committee action has been scheduled yet for the legislation.

  3. Six-Year 14(c) Phase-out Timeline • The Transformation to Competitive Employment Act would phase-out 14(c) employment and certificates under the following six-year timeline: • Day of enactment: immediately prohibits the Department of Labor from issuing 14(c) certificates to new employers who have never held a 14(c) certificate before • 6 months after enactment: makes the minimum subminimum wage 50 percent of the federal minimum wage (i.e. no less than $3.63 per hour based on a $7.25 federal minimum wage) • 2 years after enactment: makes the minimum subminimum wage 60 percent of the federal minimum wage • 3 years after enactment: makes the minimum subminimum wage 70 percent of the federal minimum wage • 4 years after enactment: makes the minimum subminimum wage 80 percent of the federal minimum wage • 5 years after enactment: makes the minimum subminimum wage 90 percent of the federal minimum wage • 6 years after enactment: makes the minimum subminimum wage 100 percent of the federal minimum wage

  4. Capacity Building and Other Grants Established through Legislation • The legislation establishes two Competitive Integrated Employment Transformation Grants Programs intended for capacity building to assist in the phase-out transition: • State Capacity Building Grants: to support states as they revise and implement their Olmstead plans to improve integrated employment and home and community-based services options for people with disabilities. • 14(c) Employer Capacity Building Grants: toassist employers with 14(c) special certificates to transform their business and program models to models that support individuals with intellectual, developmental, mental health, and other disabilities to find and retain work in competitive integrated employment. • The legislation also proposes to fund two additional grants open to experienced nonprofit entities: one, to provide technical assistance and disseminate best practices, the other to provide reporting and evaluation on the transition. • The Transformation to Competitive Employment Act authorizes $300 million,total, over the six-year period for these grant programs. Congress would need to allocate new funds above current appropriated levels to fund the program.

  5. About the State Capacity Building Grants • Designed to support states to transition all 14(c) certificate holders to models that support competitive integrated employment (CIE) for individuals with disabilities. • Eligibility: open to all states; competitively awarded with focus on geographic diversity, including urban/rural • Grant Size: $2 million to $6 million for a 6-year grant; no more than one grant per state • The state grantee must: • Describe status of 14(c) employment in state, including number of 14 (c) employees and employers, average 14(c) employee wage, and average hours per week of 14(c) employee; • Identify process and partners who will help in the 14(c) phase-out and the transformation to competitive integrated employment and integrated services for individuals currently employed through a 14(c) certificate; • Assure that all 14(c) employees are employed in CIE or “be so employed and receive the integrated services desired by the individual”; • Develop plan for evaluating grant’s impact on transitioning individuals employed under 14(c) to competitive integrated employment and transforming business models of 14(c) providers; and • Establish an advisory committee made up of people with disabilities, employers (including 14(c) providers), state agencies, and independent living and university centers.

  6. About the 14(c) Employer Capacity Building Grants • Designed to support 14(c) certificate holders in transforming their business models to support and promote competitive integrated employment (CIE) for individuals with disabilities. • Eligibility: open only to 14(c) employers from states without a state capacity building grant; grantee must partner with 2 entities with “experience providing support to individuals with disabilities” in CIE (i.e. DD agency, employer); focus on geographic diversity and program size • Grant Size: $100,000 to $500,000 for a 3-year grant; no more than one grant per 14(c) employer • Grant Cycle: grants awarded through two grant cycles, the second cycle occurs 3-years after the first grants • The 14(c) employer grantee must: • Describe 14(c) employment status, including number of 14(c) employees, average 14(c) wage, average hours per week of 14(c) employee, and number of past 14(c) employees who have transitioned to CIE; • Describe current business and HR model, including budgets and recent contracts over past three fiscal years; • Identify transition plan and timeline, including new business model and evidence-based integrated services; and • Assure that all 14(c) employees are transitioned into CIE or “be so employed and receive the integrated services desired by the individual”.

  7. Things to Consider The Transformation to Competitive Employment Act is different than past 14(c) phase-out bills as it recognizes the need for capacity building to ensure individuals with disabilities currently employed under 14(c) can access other community employment or service options. The Transformation to Competitive Employment Act uses the WIOA statutory definition of “competitive integrated employment” not the regulatory definition. The Transformation to Competitive Employment Act uses elements of the HCBS rule to define integrated services. Specifically excludes a nursing facility, an institution for mental diseases, and an intermediate care facility for individuals with intellectual disabilities. The Transformation to Competitive Employment 14(c) phase-out timeline kicks-in regardless of whether Congress ever funds or fully funds the capacity building grants for states and 14(c) employers.

  8. Open Questions for Discussion Are states and 14(c) employers required to accelerate the phase-out timeline if they receive capacity building funding? What happens if the capacity building grants are not funded or not fully funded? Can an individual currently employed under a 14(c) certificate choose to only receive integrated services after exiting 14(c) employment? What happens if, at the end of the transformation, the individual currently employed under a 14(c) certificate is unable to secure or retain competitive integrated employment?

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