Proposed Regulations Implementing $15 Federal Contractor Minimum Wage Issued

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As covered in our last blog post on this topic, President Biden issued Executive Order 14026  on April 27, 2021 raising to $15 per hour the minimum wage certain federal contractors must pay workers performing work “on or in connection with” a covered federal contract or subcontract.  According to the Executive Order, the Department of Labor (DOL) must finalize implementing regulations by November 24, 2021.

To comply with that directive, the DOL today issued proposed regulations for public comment.  The Notice of Proposed Rule Making (NPRM) will be published in the Federal Register on July 22, 2021.

The bottom line?  The $15 minimum wage applies to the following types of contracts:

  • Procurement contracts for construction covered by the Davis-Bacon Act, but not the Davis-Bacon Related Acts;
  • Service Contract Act (“SCA”) covered  contracts;
  • Concessions contracts;
    • Concessions contract means a contract under which the federal government grants a right to use federal property, including land or facilities, for furnishing services. The term concessions contract includes but is not limited to a contract the principal purpose of which is to furnish food, lodging, automobile fuel, souvenirs, newspaper stands, and/or recreational equipment, regardless of whether the services are of direct benefit to the Government, its personnel, or the general public;
  • Contracts related to federal property and the offering of services the general public, Federal employees, and their dependents;

What’s not covered?  The Executive Order does not apply to:

  • Contracts for the manufacturing or furnishing of materials, supplies, articles, or equipment to the Federal Government;
  • Grants;
  • Contracts or agreements with Indian Tribes under the Indian Self-Determination and Education Assistance Act;
  • Contracts excluded from coverage under the SCA or DBA specifically excluded in the implementing regulations;
  • Other contracts specifically excluded.  See NPRM Section 23.40.

The Order applies to “new contracts” after January 30, 2022, but that term is more expansive than appears.  “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 unilaterally exercise an option in an “old” contract not subject to the $15 rate and make the contract subject to the new $15 wage requirement.

What workers are entitled to the $15 wage?  The proposed regulations would require the $15 wage for all workers (not just employees) who perform the work covered by the contract and whose wages are already covered by the FLSA, the SCA, or the DBA .

This means “service workers” under the SCA , construction workers under the DBA, and workers whose wages are covered by the FLSA except for workers in a bona fide executive, administrative, or professional capacity, as those terms are defined in the FLSA at 29 C.F.R. Part 541, who are exempt from the FLSA’s minimum wage and overtime requirements

Only workers performing work “on or in connection with” a covered contract must be paid $15 per hour and only for such work performed on or in connection with the contract.  The definition of “Worker” offers the following guidance:

A worker performs “on” a contract if the worker directly performs the specific services called for by the contract. A worker performs “in connection with” a contract if the worker’s work activities are necessary to the performance of a contract but are not the specific services called for by the contract.

For more information regarding the details of the proposed regulations, please read or Client Alert, which also covers federal contractor notice and record-keeping obligations, implications for tipped employees and comparisons to President Obama’s minimum wage regulations.

Public comments concerning the proposed regulations must be submitted no later than August 21, 2021 at www.regulations.gov and searching for Regulatory Information Number (RIN) 1235-AA41.

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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