SOTU "Minimum Wage" Announcement: What Does It Mean?

by Fisher Phillips

Considerable concern and confusion has arisen from President Obama's State of the Union announcement that he will raise the minimum wage for individuals working on federal contracts to $10.10 per hour. Until it is possible to study any Executive Order(s) he issues on the matter, the precise meaning, parameters, and effects of what he intends to do will remain unclear. As of this writing, no such order has been published in the Federal Register.

May The President Do This?

Published reports seem to indicate that any such measures will apply only to new contracts or to some renewals of contracts; some say that no change will occur before 2015. If this turns out to be so, then many or even most federal contractors might not face any pressure to act immediately. If instead the President is proposing to change ongoing contracts, then he is likely to face significant challenges in this regard.

A broader question is whether President Obama has any enforceable authority to order such an increase without Congressional action. Administration officials reportedly are contending that authority flows from the Federal Property and Administrative Services Act of 1949, which calls for "economical and efficient" federal procurement. What rationale the administration might offer for how a minimum-wage increase would advance this aim, and whether the courts will defer to such an explanation, are difficult to predict at present.

But What About Other Federal Laws?

However, the rates to be paid under many federal contracts are specified by or under other federal laws which do not appear to grant President Obama the power simply to pick a different amount that he happens to prefer. For example, the Service Contract Act requires "service employees" furnishing services under many federal contracts to be paid (i) "prevailing rates in the locality" as determined by the Secretary of Labor under a prescribed procedure, or (ii) the rates in an applicable collective-bargaining agreement, none of which may be less than the federal Fair Labor Standards Act's minimum (currently $7.25 an hour).

Similarly, the Davis-Bacon Act, which has to do with the construction, alteration, or repair of public buildings and public works (including many projects funded by or under the American Recovery and Reinvestment Act), requires "laborers and mechanics" engaged in this activity to be paid at least the locally-prevailing wage rates for corresponding work on similar projects in the area. Again, these rates (which cannot be less than the FLSA minimum wage) are to be established by the Secretary of Labor based upon an adequate analysis of specific, relevant information.

Another illustration is the Walsh-Healey Act, which applies to certain prime contractors or "substitute manufacturers" on some federal contracts for furnishing goods or supplies. It says that workers on these contracts must be paid at least "the prevailing minimum wages, as determined by the [U.S. Labor] Secretary, for individuals employed in similar work or in the particular or similar industries or groups of industries currently operating in the locality in which the materials, supplies, articles, or equipment are to be manufactured or furnished under the contract. . .." The current prevailing rate determined by the Secretary "[i]n all industries" is the FLSA minimum wage.

The Bottom Line

Concerned employers should await the actual publication of any directive(s) before deciding what impact, if any, President Obama's remarks might have. Only then will it be possible to begin evaluating what steps are advisable.

And it is likely that further questions will be raised in coming days about whether, to what extent, and with respect to whom a president has the power to raise a minimum wage for private-sector employees merely with the stroke of a pen.

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.

© Fisher Phillips | Attorney Advertising

Written by:

Fisher Phillips

Fisher Phillips on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.