Minimum-wage exemptions

Legislative background
The Minimum Wage Amendment Act 2007 was enacted after the repeal of the Disabled Persons Employment Promotion Act (DPEP). The DPEP had been regarded by many disabled people as “utterly improper and an abuse of human rights”, according to a submission by the Disabled Person’s Assembly (DPA). At the time, it was argued that the changes in the legislation would see disabled people’s employment brought into line with New Zealand and international human rights norms.

The then Minister of Disability Issues, Ruth Dyson said: “The repeal will mean that all sheltered workshops will have to pay everyone they employ at least the minimum wage, unless an individual worker has an exemption. It will also mean that all people who work in sheltered workshops will have access to holiday and sick leave entitlements. To counter concerns about the continuing financial viability of sheltered workshops, the ministry has put in place a system of individual minimum wage exemption permits for workers who are ‘significantly and demonstrably limited’ in their work.”

DPA said that this means disabled workers can be subject to minimum wage payment provisions on the basis of productivity. “In this context, productivity is about comparing a disabled employee’s output with another employee doing the same job and, if it is considered that the disabled employee’s productivity is lower, paying them at a lower rate. It is not a concept used elsewhere in the employment sector.”

The DPEP Act along with the 1983 Minimum Wage Act had allowed for blanket minimum wage exemptions to be given to workplaces that employed disabled people. These workplaces were commonly known as ‘sheltered workshops.’ The law change meant that the individual employee, following an assessment, had to be issued with a permit from the Department of Labour that entitled their employer to pay them a particular amount less than the minimum wage.

The Minimum Wage Exemption Act enables a Labour Inspector to issue a minimum wage exemption permit to a worker if the Inspector is satisfied that -
(a) the worker is significantly and demonstrably limited by a disability in carrying out the requirements of his or her work; and
(b) any reasonable accommodations that could have been made to facilitate carrying out the requirements of the work have been considered by the employer and the worker; and
(c) it is reasonable and appropriate to grant the permit.

Various wage assessment tools are accepted for the purpose of exemptions. Before accepting a Minimum Wage assessment tool, Labour Inspectors have to consider it against set criteria. For example a tool should be balanced and look at both productivity and individual competencies. The tool should be transparent and clearly show how the assessment is linked to wage rates and how the wage rate is calculated. Disability advocates have advised the Commission that the tools used do not appear to be consistent.

National Conversation about Work
The Commission visited ‘business enterprises’ in Invercargill, Dunedin and Christchurch which provide employment for disabled people who would be unable to compete for work in the open labour market. The Commission also heard from disability advocacy groups about the very low rate of pay received by some disabled workers (as low as 15c an hour). They believe that while business enterprises which operate like sheltered workshops remained an option, supported work opportunities in the open labour market were not being fully implemented. Forms of assistance include supported employment (such as job coaches). Supported employment is usually provided on the assumption that the person will increase their skill levels and competence and that support can be gradually phased out.

Other employment options include micro-financing small business ventures, a mixture of education/training and work and narrowing job descriptions to a range of tasks that the disabled person can manage.

Business enterprises came into being after the repeal of the DPEP Act, which resulted in the closure of sheltered workshops. In reality, people receiving a wage below the minimum have their income supplemented by a social welfare benefit.

The employment of disabled people at rates below the minimum wage is controversial. The Commission heard all sides of the argument – from employers and employees, from business enterprises, from disability advocacy groups and from family members. Opponents of the exemption system say that it is discriminatory and alternate processes that support disabled people to work in the open labour market are necessary. Proponents argue that workers in business enterprises would not otherwise be employed and that working supports social inclusion and promotes well-being.

Facts and figures
Greater transparency around the process of determining minimum wage exemptions has been called for by the disability community. Disability advocates reported difficulty in accessing information from the Department of Labour. The Human Rights Commission wrote to the department asking for information about the number of people receiving exemption permits, rates of pay and about whether or not there was a standardised method of assessing payment rates.

Currently 1076 people receive a minimum wage exemption permit under s8 of the Minimum Wage Exemption Act.⁵ In 2001, under the DPEP Act, approximately 5400 people were employed in sheltered workshops. There are 136 employers across New Zealand who employ people who have a minimum wage exemption. Some but not all, are business enterprises.

Rates of pay vary from just under the minimum wage to less that a $1.00 an hour.⁶   The majority (54%) of people with minimum wage exemption permits earn less than $3.00 an hour.

Table 1: Minimum wage exemptions

 

Pay range	Number of permits
More than $10.00	37
$5 - $9.99	260
$3.00 - $4.99	213
$2.00 - $2.99	179
$1.00 - $1.99	364
Less than $1.00	53
Total	11067