Minimum Wage for Government Contractors Increases January 1, 2020

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Executive Order 13658, Establishing a Minimum Wage for Contractors (the Order) established a minimum wage for employees working on, or in connection with, covered government contracts. Each year, the Department of Labor (DOL) assesses the established minimum wage and, using determined methodology, announces an increase. On September 19, the DOL announced[1] the rate would increase to $10.80 per hour on January 1, 2020. The required minimum cash wage that generally must be paid to tipped employees performing work on, or in connection with, covered contracts will increase to $7.55 per hour on January 1, 2020.  For government contractors, if your workforce is affected by the increase, you may be eligible for a price adjustment.
 

Although many contractors have not been affected by the Order because their workforces were earning above the required minimum rates, contractors should annually evaluate whether the increases affect their workforce, including anyone that may not directly work on a contract but does work incidental to a contract. Unlike some prevailing wage rules, the Contracting Officer does not need to take any affirmative action to apply the new rates. If the appropriate provisions are in the government contract, the contractor must comply with any future increase. If your workforce is affected by the increase, you may be eligible for a price adjustment. 


[1] The Notice was published in 84 Fed Reg 49345 on September 19, 2019.

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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