OHIO LEGISLATIVE SERVICE COMMISSION
Office of Research Legislative Budget
www.lsc.ohio.gov and Drafting Office
H.B. 427 Bill Analysis
135th General Assembly
Click here for H.B. 427’s Fiscal Note
Version: As Introduced
Primary Sponsors: Reps. Jarrells and Lipps
Effective date:
Christopher Edwards, Attorney
SUMMARY
 Prohibits, beginning 90 days after the bill’s effective date, the Director of Commerce
from issuing or renewing state licenses authorizing an employer to pay an employee
with a mental or physical disability or injury at a wage lower than Ohio’s minimum wage
(a subminimum wage).
 Prohibits, beginning 90 days after the bill’s effective date, an employer from paying
subminimum wages to an employee with a disability unless the employer (1) employs
the employee on and after the date that is 90 days after the bill’s effective date and
(2) holds a state license authorizing the payment of subminimum wages.
 Prohibits, beginning five years after the bill’s effective date, all employers from paying
subminimum wages to employees with disabilities.
 Requires, not later than 15 months after the bill’s effective date, each employer holding
a state license or federal 14(c) certificate authorizing the payment of subminimum
wages to submit to the Director of Developmental Disabilities a transition plan that
addresses phasing out subminimum wages and supporting employees with disabilities.
 Requires the Director and the Executive Director of the Opportunities for Ohioans with
Disabilities Agency to assist employers with phasing out subminimum wages, gather
information regarding the phase out, and solicit assistance in carrying out the Director’s
duties under the bill from various interested parties.
 Requires specified state agencies that employ or provide employment services to
individuals with disabilities to coordinate to ensure state resources contribute toward
the competitive, integrated employment of individuals with disabilities and to share
information regarding phasing out subminimum wages.
 Requires the Employment First Task Force to review the employer transition plans,
support individuals with developmental disabilities in seeking competitive employment,
April 15, 2024
Office of Research and Drafting LSC Legislative Budget Office
ensure developmental disability services that align with national models are available,
and identify opportunities for improving health outcomes for these individuals.
 Requires each political subdivision that provides employment services to individuals
with developmental disabilities to implement a policy that complies with Ohio’s policy
regarding community employment for these individuals and ensure the policy is
followed whenever employment services are provided to them.
DETAILED ANALYSIS
Minimum wage for employees with disabilities
The bill enacts the Ohio Employment First and Greater Opportunities for Persons with
Disabilities Act.1 It phases out an employer’s ability to pay an employee whose earning capacity
is impaired by a physical or mental disability or injury at a wage lower than Ohio’s minimum
wage (a subminimum wage). Ultimately, beginning five years after the bill’s effective date, no
employer may pay a subminimum wage. The Minimum Wage Amendment to the Ohio
Constitution2 and Ohio’s Minimum Fair Wage Standards (MFWS) Law3 prescribe the minimum
wages an employer must pay its employees, including employees with disabilities. The Ohio
Constitution authorizes the issuance of licenses to employers permitting them to pay less than
Ohio’s minimum wage to employees with disabilities (a state license). Pursuant to Ohio’s MFWS
Law, the Director of Commerce has adopted rules regarding the issuance of these state
licenses. Although the Ohio Constitution authorizes the issuance of these licenses, it allows the
General Assembly to pass laws setting a higher minimum wage rate.4
Phase out
The bill, beginning 90 days after its effective date, prohibits the Director from issuing or
renewing any state licenses. Beginning the same date, an employer cannot pay a subminimum
wage unless the employer:
 Employs an employee with a physical or mental disability or injury on and after the date
that is 90 days after the bill’s effective date; and
 Holds an unexpired state license.5
1 Section 3.
2 Ohio Constitution, Article II, Section 34a.
3 R.C. Chapter 4111.
4Ohio Const., art. II, sec. 34a and R.C. 4111.06 and 4111.14(C). See also Ohio Administrative Code
Chapter 4101:9-1.
5 R.C. 4111.06(C).
P a g e |2 H.B. 427
As Introduced
Office of Research and Drafting LSC Legislative Budget Office
Prohibition
Beginning five years after the bill’s effective date, the bill prohibits all employers from
paying subminimum wages.6 Thus, on and after that date, an employer must pay an employee
with a disability at least Ohio’s minimum wage. For 2024, Ohio’s minimum wage is $10.45 per
hour for nontipped employees and $5.25 per hour for tipped employees.7
Continuing law prohibits an employer from paying or agreeing to pay wages at a rate
lower than the rates applicable under Ohio’s MFWS Law. Whoever violates that prohibition is
guilty of a third degree misdemeanor.8
Interaction with federal law
With some exceptions, the federal Fair Labor Standards Act9 (FLSA) requires an
employer subject to the FLSA to pay an employee the federal minimum wage of at least $7.25
per hour. One exception is that an employer may pay an employee with a disability at a rate
below the federal minimum wage under certain conditions. To do so, an employer must hold a
special certificate issued by the U.S. Department of Labor (known as a “14(c) certificate” and
referred to as a “federal certificate” in the bill).
An employer may be subject to the FLSA, Ohio’s Minimum Fair Wage Standards Law, or
both. The FLSA requires an employer subject to both laws to comply with the law that
establishes a higher minimum wage. According to U.S. Department of Labor guidance, an
employer must do so even if the employer holds a 14(c) certificate.10 Ohio currently has the
higher minimum wage.11
Employer transition plans
Not later than 15 months after the bill’s effective date, the bill requires each employer
that holds a state license or 14(c) certificate authorizing the payment of subminimum wages to
submit to the Director of Developmental Disabilities a transition plan that addresses how the
employer intends to:
 Phase out subminimum wages by five years after the bill’s effective date; and
6 R.C. 4111.06(D).
7R.C. 4111.06, with conforming changes in R.C. 4111.14. See R.C. 4111.02, not in the bill, and 2024
Minimum Wage (PDF), which may be accessed by conducting a keyword “minimum wage poster” search
on the Ohio Department of Commerce’s website: com.ohio.gov.
8 R.C. 4111.13 and 4111.99, not in the bill.
9 29 United States Code (U.S.C.) 201 et seq.
10 29 U.S.C. 206, 214(c), and 218, 29 Code of Federal Regulations 525.20, and Administrator’s
Interpretation No. 2016-2 (PDF), which may be accessed by conducting a keyword “Administrator’s
Interpretation No. 2016-2” search on the U.S. Department of Labor website: dol.gov.
11 See 2024 Minimum Wage (PDF).
P a g e |3 H.B. 427
As Introduced
Office of Research and Drafting LSC Legislative Budget Office
 Support individuals with disabilities in pursuing competitive, integrated employment.12
Phase out assistance
Assisting employers
The bill requires the Director of Developmental Disabilities, in consultation with the
Executive Director of the Opportunities for Ohioans with Disabilities Agency (OOD), to assist
employers with phasing out subminimum wages and to:
 Identify and develop protections to ensure competitive, integrated employment for
employees with disabilities while phasing out subminimum wages;
 Identify and collaborate with employees, employers, organizations, agencies, and
stakeholders impacted by the subminimum wage phase out to assist them with
implementing employer transition plans and creating sustainable, competitive
employment;
 Collect data on employers that hold state licenses or 14(c) certificates for five years after
the bill’s effective date;
 Propose a plan to establish and evaluate benchmarks for measuring progress with
respect to implementing the transition plans each year until subminimum wages are
eliminated;
 Propose a plan to monitor and track the outcomes of employees with disabilities;
 Identify initiatives, investments, training, and services designed to improve wages,
reduce unemployment rates, and provide support and sustainable work opportunities
for individuals with disabilities;
 Identify and make recommendations for sustainable support, funding, and resources to
assist individuals with disabilities with respect to phasing out subminimum wages, such
as financing for the cost to implement and provide employment services, training, and
support; and
 Ensure the employer transition plans protect the rights of individuals with disabilities
under the federal Americans with Disabilities Act of 199013 and Ohio’s Civil Rights Law.14
Reports
By January 1 that first occurs after the bill’s effective date, and annually by January 1
until five years after the bill’s effective date, the Director must submit to the Governor and
12 R.C. 4111.061(B).
13 42 U.S.C. 12111, et seq.
14 R.C. 4111.061(C), by reference to R.C. Chapter 4112.
P a g e |4 H.B. 427
As Introduced
Office of Research and Drafting LSC Legislative Budget Office
General Assembly a report that includes all of the information described above relating to
assisting employers.15
Requesting assistance
The Director, in consultation with the OOD Executive Director, must solicit assistance
from all of the following in carrying out the Director’s duties under the bill:
 The Employment First Task Force;
 Stakeholders who have expertise regarding the employment of individuals with
disabilities, at least 20% of whom must be individuals with disabilities;
 Family members of individuals with disabilities;
 Organizations that advocate on behalf of individuals with disabilities;
 Providers of services to individuals with disabilities;
 Local governments;
 Business associations.16
State agency duties
The bill requires cabinet level departments and other specified state agencies that
employ or provide employment services to individuals with disabilities to:
 Coordinate and collaborate with each other to ensure that state programs, policies,
procedures, and funding contribute toward the competitive, integrated employment of
individuals with disabilities; and
 Share nonconfidential data and other information with each other to track progress
with respect to phasing out subminimum wages.
These requirements apply to the state departments and agencies listed below: 17
State departments and agencies subject to the bill
Office of Budget Department of Department of Department of Department of
and Management Commerce Administrative Transportation Agriculture
Services
15 R.C. 4111.061(D).
16 R.C. 4111.061(E), by reference to R.C. 5123.023.
17 R.C. 4111.061(A) and (F), by reference to R.C. 121.01, not in the bill.
P a g e |5 H.B. 427
As Introduced
Office of Research and Drafting LSC Legislative Budget Office
State departments and agencies subject to the bill
Department of Department of Department of Job Department of Department of
Natural Resources Health and Family Children and Public Safety
Services Youth
Department of Department of Department of Department of Department of
Mental Health and Developmental Insurance Development Youth Services
Addiction Services Disabilities
Department of Environmental Department of Department of Department of
Rehabilitation and Protection Agency Aging Veterans Services Medicaid
Correction
Department of Bureau of Department of Department of Ohio Public
Education and Workers’ Higher Education Taxation Utilities
Workforce Compensation Commission
Political subdivision compliance with Ohio policy
The bill requires each political subdivision that provides employment services to
individuals with developmental disabilities to:
 Implement a policy that complies with Ohio’s policy that employment services for
individuals with developmental disabilities be directed at community employment
(competitive employment that takes place in an integrated setting); and
 Ensure the policy is followed whenever employment services are provided to individuals
with developmental disabilities.
Under continuing law, “competitive employment” is work in the competitive labor
market in which payment is at least the minimum wage but not less than the customary wage
and benefits paid for the same or similar work performed by individuals without a disability.
“Integrated setting” is a community setting where individuals with developmental disabilities
interact with individuals without disabilities to the same extent that individuals in comparable
positions without a disability interact with other individuals.18
Employment First Task Force
Duties
The bill includes additional duties for the Employment First Task Force. The Task Force’s
purpose under continuing law is to improve coordination of the state’s efforts to address the
needs of individuals with developmental disabilities who seek community employment. The bill
requires the Task Force to:
18 R.C. 5123.022.
P a g e |6 H.B. 427
As Introduced
Office of Research and Drafting LSC Legislative Budget Office
 Review the employer transition plans and develop long-term strategies to assist
employers in phasing out subminimum wages;
 Review and develop recommendations to transition individuals with developmental
disabilities from subminimum wages and to support them in seeking competitive
employment;
 Work with interagency partners to ensure developmental disability services that align
with national models are available for individuals with developmental disabilities; and
 Use data available to the Department of Developmental Disabilities to identify
opportunities for improving health outcomes for individuals with developmental
disabilities.19
Reports
By March 1 immediately after the bill’s effective date, and by March 1 of each even-
numbered year after that, the Task Force, in consultation with the Department, must submit to
the General Assembly a report that includes:
 Information regarding the outcomes, best practices, and challenges with respect to
individuals with developmental disabilities;
 Information regarding opportunities to support individuals with developmental
disabilities; and
 Legislative recommendations for creating a better system of care for individuals with
developmental disabilities.20
Patients and residents of hospitals and institutions
The bill eliminates the ability of a hospital for individuals with mental illnesses and an
institution for individuals with intellectual disabilities to pay subminimum wages to a patient or
resident who vo