Is Goodwill Required to Pay Minimum Wage?

Goodwill chaps my ass—half the time their prices are as high or higher than the same stuff brand new at Target. My friend says this money creates jobs for the disabled. I countered that Goodwill doesn’t even pay those folks minimum wage because of some loophole. That shut him up, but I admit it’s just a rumor I’ve heard. Is it true? —Labor, Pained

In fairness to Goodwill, Pained, their stated mission is “providing vocational opportunities to people with disabilities,” not “ensuring availability of Room Essentials hand towels for at least 75% off retail.” Were their prices lower in the days when no one knew about thrift stores except you, me and Diane Keaton? Sure, but between indie rock, Macklemore and Johnny Depp’s weird thing for scarves, I’d say the cat is out of the bag. Tie another onion to your belt and soldier on.

The subminimum wage isn’t just a rumor. Section 14(c) of the Fair Labor Standards Act really does allow certain employers to pay workers with intellectual or developmental disabilities a wage below the legal minimum. The employers have to apply for a special certificate from the U.S. Department of Labor, and the reduced wage has to be carefully calculated to match the worker’s (theoretically) lower productivity compared to a nondisabled worker, but the loophole is real.

There are just under 40,000 14(c) workers in the U.S., spread among about 800 mostly nonprofit employers, often in “sheltered workshops” with other disabled workers. These workshops may offer counseling, life coaching and other support services, but at the cost of being segregated—by design—from the workforce at large.

If you’re thinking, “Wow, that all sounds pretty fucked up,” recall that the FLSA was passed in 1938. The concept of a minimum wage still seemed pretty radical—obviously, it wouldn’t apply to everybody. This was a time when the U.S. Supreme Court had just upheld compulsory sterilization of “feebleminded” adults. The developmentally disabled were routinely institutionalized. Compared to letting them languish in an institution, authorities probably thought letting the disabled sort bolts in a sheltered workshop seemed pretty humane. It’s therapeutic!

That said, time has marched on. As of 2025, 16 states have phased out the 14(c) subminimum wage for disabled workers. That includes Oregon, so Goodwill is off the hook. And all that warehousing of the disabled while underpaying them according to a formula specifically designed to quantify their supposedly reduced worth? Turns out it’s not such a great look. Who knew?

Questions? Send them to dr.know@wweek.com.