New Minimum Wage Requirements for Government Contractors May Impact Price Adjustments

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PilieroMazza PLLC

Effective January 1, 2021, the Executive Order (the Order) minimum wage rate that generally must be paid to workers performing work on or in connection with covered government contracts will increase to $10.95 per hour, while 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 $7.65 per hour. Each year, the Department of Labor (DOL) assesses the established minimum wage and, using determined methodology, announces an increase.  For government contractors, if your workforce is affected by the increase, you may be eligible for a price adjustment.

Although some 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. 

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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