Department of Labor Issues Proposed Rule for Federal Contractor Minimum Wage
Last week, the Wage and Hour Division of the Department of Labor ("DOL") issued a proposed rule to implement President Biden's Executive Order ("EO") 14026 titled, “Increasing the Minimum Wage for Federal Contractors," which the President signed on April 27, 2021.
In April, we covered President Biden's EO, which raised the federal minimum wage to $15 per hour for certain federal contractors by January 30, 2022. In that regard, the proposed rule provides a brief snapshot of the EO:
The Executive order states that the Federal Government's procurement interests in economy and efficiency are promoted when the Federal Government contracts with sources that adequately compensate their workers. The Executive order therefore seeks to raise the hourly minimum wage paid by those contractors to workers performing work on or in connection with covered Federal contracts to $15.00 per hour, beginning January 30, 2022; and beginning January 1, 2023, and annually thereafter, an amount determined by the Secretary of Labor (Secretary)
Notably, the $15 per hour minimum wage requirement covers workers who are performing on, or in connection with, covered contracts (which is interpreted broadly and includes all contracts and any subcontracts of any tier thereunder, whether negotiated or advertised, including, for example, any procurement actions, lease agreements, cooperative agreements, provider agreements, intergovernmental service agreements, and service agreements), including:
Contracts covered by the Service Contract Act;
Contracts covered by the Davis-Bacon Act;
Concessions contracts not otherwise subject to the Service Contract Act (which includes, "a contract the principal purpose of which is to furnish food, lodging, automobile fuel, souvenirs, newspaper stands, or recreational equipment, regardless of whether the services are of direct benefit to the government, its personnel, or the general public"); and
Contracts in connection with Federal property or land and related to offering services for Federal employees, their dependents, or the general public.
Notwithstanding this broad coverage, the proposed rule also provides certain exclusions, including:
Contracts or agreements with Indian Tribes under the Indian Self-Determination and Education Assistance Act;
Procurement contracts for construction that are excluded from coverage of the Davis-Bacon Act;
Contracts for services that are exempted from coverage under the Service Contract Act;
Employees who are exempt from the minimum wage requirements of the Fair Labor Standards Act under 29 U.S.C. 213(a) and 214(a)-(b);
FLSA-covered workers performing in connection with covered contracts for less than 20 percent of their work hours in a given workweek; and
Contracts that result from a solicitation issued before January 30, 2022, and that are entered into on or between January 30, 2022 and March 30, 2022
Interested persons who want to submit written comments on proposed rule must do so on or before August 23, 2021. DOL expects to publish the final rule by November 24, 2021.
DOL's proposed rule is fulsome so contractors should carefully review it to help determine new compliance obligations for workers performing on, or in connection with, new contracts that are covered under the rule. In that regard, the proposed rule includes a broad definition of contract and "new contracts" includes a "contract that is entered into on or after January 30, 2022, or a contract that is renewed or extended (pursuant to an exercised option or otherwise) on or after January 30, 2022."
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