The term sheltered workshop refers to an organization or environment that employs people with disabilities separately from others, usually with exemptions from labor standards, including but not limited to the absence of minimum wage requirements.^[1]

In the United States, an exemption in the Fair Labor Standards Act of 1938 allowed a lower minimum wage for people with disabilities, intended to help disabled World War I veterans have opportunities for employment. Since then, non-profit organizations have hired disabled workers in sheltered workshops, with about 300,000 individuals working in this arrangement in 2015. At the end of the 20th century, a movement to end sheltered workshops gained traction, with supporters stating that the jobs pay low wages, lack advancement training and opportunities, permanently trapping disabled people in those jobs while reducing their independence, and are discriminatory because they segregate disabled workers into separate work environments. Disability service providers, many parents, and disabled workers themselves support the workshops and state that eliminating the minimum wage exemption would eliminate those jobs and the choice to work (because many with severe disabilities will never be able to perform at the level of an ordinary worker) and thereby prevent disabled people from enjoying the many non-wage benefits of work (like a sense of pride for their societal contribution), and replace it with adult day care. By 2023, fourteen states had passed laws banning subminimum wages.^[2]

Sheltered workshops are often called Australian Disability Enterprises or ADEs. In Australia, employees with intellectual disabilities make up 75% of the ADE workforce.^[3] The Australian Disability Enterprise (ADE) sector in Australia generally has its roots in the early 1950s when families of people with disabilities established sheltered workshops to provide vocational activity for people with disability. At this time employment opportunities for people with disability were extremely limited.^[4]

In 1986, following the passage of the Commonwealth Disability Services Act (1986), Australia transitioned from the sheltered workshop system to the new model prioritizing employment for people with disabilities. In 1996, additional reforms were introduced for the purpose of improving service quality, matching service funding to the support needs of people with disability receiving assistance, and to link funding to employment outcomes. This led to a reform agenda in the ADE sector, with the introduction of legislated Quality Assurance standards that required ADEs to obtain independent verification of their compliance to these prior to receiving ongoing funding from the Australian Government. Additionally, a funding model that links payments to individual support needs was introduced.^[4]

In some ADEs individuals are paid as little as $1.79 an hour, based on the BSWAT (Business Services Wage Assessment Tool), which was found to be discriminatory in 2013, to be phased out by April 2015. Wages are based on a percentage of award rates, according to the workplace competencies and productivity of the person with a disability in comparison to a worker without a disability.^[5][6]

Following on from the court challenge on the discriminatory nature of the BSWAT, a large percentage of parents and employees of ADEs (along with the relevant Peak Body, National Disability Services) began a campaign to ensure their jobs were protected. Many raised the point that ADEs are not typical workplaces and provide significantly more support and opportunities than open employment workplaces. These parents, carers and Employees were concerned that if ADEs were forced to pay full livable award wages for employees with a disability, many would be financially unsustainable.^[7] An episode of the ABC's Background Briefing in September 2014 stated that ADE's either barely make a profit or operate at a loss, and have to compete with low wage labor in other countries, which makes some people concerned that requiring them to pay higher wages will make those they employ unemployed, and unable to enjoy the many non-wage benefits of work like friendships and a sense of societal contribution.^[8]

In Canada sheltered workshops are being phased out for supported employment but remain a predominant vocational model for people with intellectual disabilities, who have an employment rate of less than 30%.^[9]

Sheltered workshops are a common form of employment provision for people with disabilities across Europe where their disabilities create barriers to accessing the open labour market. Traditional sheltered workshops offer long-term or permanent employment for people with disabilities whereas transitional sheltered workshops aim to develop workers' skills so that they can access non-sheltered employment in other workplaces.^[10] Government procurement law in the European Union makes special provision for contracting with sheltered workshops for the supply of goods and services to public authorities.^[11] Germany's federal decree on contracts for workshops for the disabled (10 May 2005) requires German federal contracting authorities to set aside part of their budgets for contracts which can be awarded to workshops for workers with disabilities.^[12]

In the U.K., the Disabled Persons (Employment) Act of 1944 founded a company primarily to help returning veterans return to work called Remploy. Remploy founded factories across the United Kingdom. In 1986, 55,000 disabled people had been employed in the factories at some point. However, the UK moved towards mainstream employment, rather than sheltered workshops. By 2013, all Remploy factories were closed.^[13][14]

The Fair Labor Standards Act of 1938 established a minimum wage in the United States; Section 14(c) of the bill included an exception for people with disabilities, intended to help disabled World War I veterans have opportunities for employment.^[15] Employers who wish to pay less than minimum wage must acquire a certificate from the U.S. Department of Labor.^[16] The terms "sheltered workshop" and "work center," are used by the Wage and Hour Division of the Department of Labor to refer to entities that are authorized to employ workers with disabilities at sub-minimum wages.^[17] These entities are generally non-profit facilities that exclusively or primarily employ people with disabilities, and also provide vocational rehabilitation.^[18][19][15]

In 2020, the United States Commission on Civil Rights issued a report which recommends that the minimum wage exemption be phased out because it keeps workers in "exploitative and discriminatory" jobs.^[19] The issue of whether sheltered workshops should exist is a contentious issue within the disability services community.^{[15]: 1  [19][20]} Advocates of disability rights state that the jobs pay low wages and lack advancement training and opportunities, permanently trapping disabled people in those jobs while reducing their independence, and are discriminatory because they segregate disabled workers into separate work environments.^{[15][19][21][20]} Many people with severe disabilities cannot perform at the level of an ordinary worker (e.g., cannot fold as many shirts or wash as many dishes in a day), but self-advocates see minimum wage fight as having less to do with tangible worker productivity and more to do with their paycheck showing that they are equally valued members of society.^[22]: 73

Disability service providers, almost all of which are non-profits, as well as many parents and disabled workers themselves support the workshops and state that eliminating the minimum wage exemption would eliminate those jobs and the choice to work and thereby enjoy the many non-wage benefits of work (like a sense of pride for their societal contribution), and replace it with adult day care or "glorified babysitting".^{[15][19][20][21]} Some parents and caregivers rely on the sheltered workshops so that they can work, sleep, or care for themselves, or for the benefit of getting their children out of the house to see other people.^{[22]: 69–73} These programs often also offer Medicaid benefits.^{[22]: 69–73} Alternative respite care and adult daycare programs are often unavailable.^{[22]: 69–71}

On a national level, Congressional legislation that would phase out subminimum wages has been proposed multiple times unsuccessfully.^[19] Most recently, the Transformation to Competitive Integrated Employment Act (TCIEA) was introduced in 2021.^[23]

At the state level, Vermont was the first state to ban subminimum wages; since then six others have also enacted legislation banning subminimum wages: Alaska, Maine, Maryland, Nevada, New Hampshire and Oregon.^[19] Of those, four no longer have sheltered workshops.^[19]

In 2021, California banned organizations from paying disabled people less than minimum wage, giving the agencies who employ disabled workers until 2025 to either pay their workers the statewide minimum of $15.50 per hour or shut down.^[15] Advocates of the new legislation feel that subminimum wage programs segregate disabled workers into separate work environments, reduce their independence, and prevent them from learning better job skills which could lead to advancement.^[15] Supporters of the sub-minimum wage arrangements feel that it is unrealistic to think that severely disabled individuals will ever be able to produce the same output as ordinary minimum wage workers, and that making it illegal to pay them based on their performance will simply mean that they will be unemployed, and thereby not able to experience the sense of accomplishment that comes from a job.^[15] In 2022, less than 20% of developmentally disabled persons in California were employed.^[15]