DOL Issues Final Rule Implementing Raise to Federal Contractor Minimum Wage
On February 12, 2014, President Obama signed Executive Order 13658, “Establishing a Minimum Wage for Contractors,” to raise the minimum wage to $10.10 for all workers on federal construction and service contracts. The Executive Order directed the Department of Labor (“DOL”) to issue regulations to implement the new federal contractor minimum wage. On October 1, 2014, the DOL announced its Final Rule implementing the provisions of Executive Order 13658. Key provisions of the Final Rule include definitions of key terms used in the Executive Order, including contracts, contract-like instruments, and concessions contracts, as well as guidance for contractors on their obligations under the Executive Order.
Executive Order 13658 applies to new contracts and replacements for expiring contracts with the federal government that result from solicitations issued on or after January 1, 2015, or to contracts that are awarded outside the solicitation process on or after January 1, 2015.
Notably, however, not all federal contracts are subject to the new obligations. Coverage of the Order and the Department’s final rule generally extends to four major categories of contractual agreements:
- Procurement contracts for construction covered by the Davis Bacon Act (“DBA”);
- Service contracts covered by the Service Contract Act (“SCA”);
- Concessions contracts, including any concessions contracts excluded from the SCA by the Department’s regulations at 29 C.F.R. 4.133(b); and
- Contracts in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public.
The Executive Order also establishes value threshold requirements for coverage. The Order only applies to prime contracts covered by the DBA that exceed $2,000 and prime contracts covered by the SCA that exceed $2,500. For procurement contracts where workers’ wages are governed by the FLSA, the Order specifies that it applies only to contracts that exceed $3,000. There is no value threshold requirement for subcontracts awarded under such prime contracts.
If you are a federal contractor for affirmative action purposes, but do not hold a contract described above, the minimum wage obligations will not apply to you.
We will keep you apprised of any further developments as we approach the January 1, 2015 deadline.
