Key Takeaways

• The hourly minimum wage for certain federal contractor employees will increase to $17.20 effective Jan. 1, 2024, according to a notice issued by the Wage and Hour Division of the U.S. Department of Labor on Sept. 28.

• The new minimum wage will apply to non-tipped and tipped workers alike, removing the lower wage for tipped workers that previously applied.

• The new $17.20 minimum wage rate applies to contracts entered into, renewed or extended on or after Jan. 30, 2022. A lower minimum wage rate of $12.90 applies to earlier contracts.

• The new minimum wage rule will not be enforced for contracts or subcontracts to which the states of Texas, Louisiana or Mississippi (including their agencies) are a party.

On Thursday, Sept. 28, the Wage and Hour Division of the U.S. Department of Labor (DOL) issued a notice published in the Federal Register increasing the minimum wage for employees of certain federal contractors to $17.20 effective Jan. 1, 2024.

The history of an hourly wage boost for federal contractor employees relates to Executive Order 13658, signed by President Barack Obama on Feb. 12, 2014. The executive order established a minimum wage of $10.10 for employees of certain federal contractors as of Jan. 1, 2015, with the hourly wage increasing annually as determined by the U.S. secretary of labor in accordance with a methodology prescribed in the executive order.

On April 21, 2021, President Joe Biden signed Executive Order 14026, which again raised the minimum wage paid by certain government contractors to $15.00 as of Jan. 1, 2022. Under that executive order, the DOL issued a notice increasing the minimum hourly wage to $16.20 per hour effective Jan. 1, 2023.

In addition to increasing the minimum wage to $17.20 per hour effective Jan. 1, 2024, the DOL also phased out the lower wage that previously applied to tipped employees under these federal contracts.

Executive Order 13658 and Executive Order 14026 – and the new wage increases – apply to employees performing work “on or in connection with” the following types of federal contracts:

• Procurement contracts for construction covered by the Davis-Bacon Act.
• Service contracts covered by the Service Contract Act.
• Concessions contracts, including any concessions contracts excluded from the Service Contract Act by regulations at 29 CFR 4.133(b).
• Contracts in connection with federal property or lands and related to offering services for federal employees, their dependents or the general public.

The DOL announcement comes on the heels of a federal district court in Texas blocking the enforcement of Biden’s Executive Order 14026 in three states (Texas, Louisiana and Mississippi). The federal court determined that Biden exceeded his constitutional authority in issuing the executive order, and it also found that the Procurement Act did not give him the authority to use an executive order to increase the starting pay of workers employed by federal contractors. To that end, the DOL has published the following message on its website:

Based on an order issued by the U.S. District Court for the Southern District of Texas on September 26, 2023, the minimum wage requirements of the final rule implementing Executive Order 14026 are not currently being enforced as to contracts or subcontracts to which the states of Texas, Louisiana, or Mississippi (including their agencies) are a party.

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