Thank you to associate Chrissy Wabiszewski for writing this article.
Minimum wage rates are on the rise throughout the country and the federal contractor rate is no exception. On November 22, 2021, the U.S. Department of Labor published the final regulations implementing President Biden's Executive Order (EO) 14026. As previously reported here, the EO raises the hourly minimum wage paid by those contractors to workers performing work "on or in connection with" covered federal contracts from $11.25 to $15.00 per hour, beginning January 30, 2022.
The order builds on the foundation established by Executive Order 13658, "Establishing a Minimum Wage for Contractors," signed by President Obama on February 12, 2014, in several notable ways. E.O. 14026 raises the minimum wage to $15.00 an hour, defines "new contract" differently, and applies to a broader geographic area, among other things.
"New contracts" is now defined to include contracts that are renewed, are extended, or an option is exercised on or after January 30, 2022. Specifically, covered contracts include:
- Procurement contracts for construction covered by the Davis-Bacon Act (DBA)
- Service Contract Act (SCA) covered contracts
- Concessions contracts – meaning a contract where the federal government grants a right to another entity to use federal property to furnish services – and includes contracts principally for the furnishing of food, lodging, automobile fuel, souvenirs, newspaper stands, and recreational equipment to the general public or the government and its personnel
- Contracts in connection with federal property and the offering of services for federal employees, their dependents, or the general public
Whereas previously covered contracts were only those performed in the United States and the District of Columbia, the new EO also covers contracts performed in United States territories.
Workers are only entitled to the new federal minimum wage for hours worked in connection with the covered contract and those hours worked are "necessary to the performance" that contract. Meaning, not all employees who are tangentially related to the contract need to be paid the increased rate. Additionally, the final implementing regulations do not permit employers and unions to negotiate through collective bargaining, a rate lower than $15 per hour to govern the wages of workers while performing on or in connection with contracts covered by the EO.
In implementing the rate in practice, a minimum wage contract clause, as specified in Appendix A of the regulations, must be included in every new contract and subcontract agreement. It is the responsibility of the contractor and upper-tier subcontractor not only to ensure their own compliance with the clause, but also to ensure that any lower-tier subcontractors includes and abides by the clause.
Federal contract and subcontract employers should prepare to comply with the new federally required minimum wage standard and, where questions arise, should contact legal counsel soon to ensure ready compliance.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.