DOL Issues Proposed Regulations For $15 Per Hour Minimum Federal Contractor Pay

Garrett Wozniak
Garrett Wozniak
07/23/2021

Under regulations proposed by the Department of Labor, the minimum hourly wage paid by many federal contractors will increase to $15 per hour on January 30, 2022, and then annually beginning January 1, 2023 to an amount determined by the Secretary of Labor.  The proposed rule, issued following Executive Order 14026, is open for public comment until August 23, 2021, and must be finalized by November 24, 2021.  The current minimum wage is $10.95 per hour, as established under President Obama via Executive Order 13658.

Tipped employees covered by the rule will be required to be paid a cash wage of at least $10.50 per hour effective January 30, 2022.  If a worker’s tips and required cash wages do not meet the $15 minimum wage, the contractor must increase the worker’s cash wage to make up the difference.

Contract is defined broadly in the rule to include contracts covered by the Federal Acquisition Regulation (FAR), under any Federal procurement statute, by the Service Contract Act (SCA) and Davis-Bacon Act (DBA), and more. 

The new minimum wage would apply to contracts entered into on or after January 30, 2022, and existing contracts that are renewed, extended, or for which an option is exercised on or after that date. 

Contractors and subcontractors are covered.  Procurement, services, and construction contracts are covered, as are contracts in connection with Federal property or lands related to services offered to Federal employees, their dependents, or the general public.  .

Subcontractors are covered if the subcontract qualifies as a contract or contract-like instrument under the regulation, the subcontract falls within one of the four types of contracts specifically set forth in the executive order, and the workers’ wages under the contract are governed by the SCA, DBA, or FLSA.  The value threshold for contracts does not apply to subcontracts.  As explained in the proposed rule:

Pursuant to this approach, only covered subcontracts of covered prime contracts are subject to the requirements of the Executive order. Just as the Executive order does not apply to prime contracts for the manufacturing or furnishing of materials, supplies, articles, or equipment, it likewise does not apply to subcontracts for the manufacturing or furnishing of materials, supplies, articles, or equipment. In other words, the Executive order does not apply to subcontracts for the manufacturing or furnishing of materials, supplies, articles, or equipment between a manufacturer or other supplier and a covered contractor for use on a covered Federal contract. For example, a subcontract to supply napkins and utensils to a covered prime contractor operating a fast food restaurant on a military base is not a covered subcontract for purposes of this order. The Executive order likewise does not apply to contracts under which a contractor orders materials from a construction materials retailer.

Exclusions include certain grants, contracts with Indian Tribes under the Indian Self-Determination and Education Assistance Act, procurement contracts for construction that are not covered by Davis-Bacon, service contracts that are exempted from coverage under the SCA, employees who are exempt from the FLSA’s minimum wage requirements (learners, apprentices, messengers, students), bona fide executive, administrative, and professional employees, workers covered by the FLSA who perform work on 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.

The regulation covers contracts with the Federal Government which require performance in the United States. 

The rule contains an anti-retaliation provision prohibiting adverse action and discrimination against workers who file a complaint or institute/participate in a proceeding under EO 14026.

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