Workforce Innovation and Opportunity Act Aims to Divert Workers with Disabilities from Sheltered Workshops

The Workforce Innovation and Opportunity Act (WIOA), which the President signed into law on July 22, adds new restrictions on sheltered workshops or other work environments where people with disabilities earn less than minimum wage in segregated settings. Beginning in two years, people with disabilities age 24 and under will not be allowed to receive less than the federal minimum wage of $7.25 per hour without receiving employment transition services in school and vocational rehabilitation settings. The aim of the law is to increase opportunities for youth with disabilities to try integrated and competitive employment before placement in sheltered workshops. Combined with new CMS regulations, WIOA may significantly curtail sheltered workshop placements and increase placements in competitive, integrated settings.

Many states use Medicaid funding for sheltered workshop placements through HCBS waivers. Under the CMS Final Rule on HCBS issued in early 2014, these funds may no longer be used for placements in settings that isolate people with disabilities from the community. Although CMS has yet to issue more detailed guidance on the rule’s application to employment services, many existing sheltered workshop settings maybe violating the rule. States presently using HCBS funding for individuals in sheltered workshops or other segregated settings are required to submit statewide transition plans to bring affected programs into compliance with the new regulations over the next five years.