DOL Proposes New Rule to Establish Minimum Wage Standards for Federal Contractors

Ogletree, Deakins, Nash, Smoak & Stewart, P.C.

On July 22, 2021, the U.S. Department of Labor (DOL) published a notice of proposed rulemaking to outline the standards and procedures that it will use to administer President Joe Biden’s Executive Order 14026, which he signed on April 27, 2021. Executive Order 14026 proposed an increase to the minimum wage for workers performing work on federal contracts to $15 per hour beginning January 30, 2022. The proposed rule applies only to federal contractors. It builds upon Executive Order 13658 signed by then-president Barack Obama that established a minimum wage of $10.10 for federal contractors with annual increases for inflation. The current rate is $10.95 per hour; the minimum wage for tipped federal contract workers is $7.65 per hour. Below is a brief summary of the scope of the DOL’s proposed rule and changes, if finalized.

Scope and Summary

In accordance with the executive order, the new $15 minimum wage for federal contracts would “only appl[y] to a new contract, new solicitation, extension or renewal of an existing contract, and exercise of an option on an existing contract.” “New contracts” include extensions or renewals of existing contracts or contract-like instruments, and exercises of options on existing contracts or contract-like instruments on or after January 30, 2022. Thus, the federal government may have authority to exercise certain options in “old” contracts not subject to the $15 rate and make them subject to the new $15 wage requirement.

The DOL’s proposed rule includes provisions

  • increasing the minimum wage for “workers performing work on or in connection with covered Federal contracts to $15.00 per hour, beginning January 30, 2022”;
  • continuing to index the federal contract minimum wage in future years to the Consumer Price Index;
  • eliminating the tipped minimum wage for federal contract workers by 2024 (there will be an incremental increase in the tipped minimum wage until January 1, 2024, when the minimum wage for tipped federal contract workers will be 100 percent of the standard minimum wage for federal contract workers);
  • ensuring a $15 minimum wage for workers with disabilities performing work on or in connection with covered contracts; and
  • restoring minimum wage protections to outfitters and guides operating on federal lands.

Key Takeaways

If finalized, the proposed rule will increase the minimum wage from $10.95 to $15.00 per hour for work performed on or in connection with covered federal contracts beginning January 30, 2022. Beginning January 1, 2023, and annually thereafter, the secretary of labor will have discretion to issue further increases to the minimum wage. Comments on the proposed rule are due on or before August 23, 2021. Executive Order 14026 directs the DOL to issue final regulations by November 24, 2021.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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