What Federal Contractors Need to Know About the New Minimum Wage Requirements

Jackson Walker
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Jackson Walker

In 2014, President Obama signed an executive order requiring federal contractors to pay $10.10 per hour to workers performing work on or in connection with certain covered federal contracts for construction or services. Under that executive order, the minimum wage paid by federal contractors increased to $11.25 ($7.90 for tipped workers) on January 1 of this year.

However, on April 27, 2021, President Biden signed EO 14026, raising the hourly minimum wage to $15.00 ($10.50 for tipped workers). That new minimum wage is set to take effect on January 30, 2022, and will increase annually based on inflation.

On January 13, 2022, the United States Department of Labor published Field Assistance Bulletin (FAB) No. 2022-1 clarifying the requirements of EO 14026.

The Wage and Hour Division will host a free webinar on January 26 and January 27 from 1:30-3:30 p.m. EST. The webinar will include a video training on the order’s requirements followed by an interactive webinar with a live Q&A session. Those interested in attending can register here.

What Contracts Are Covered

The FAB identifies four categories of contracts covered by EO 14026:

  1. procurement contracts for construction covered by the Davis-Bacon Act (DBA);
  2. service contracts covered by the Service Contract Act (SCA);
  3. concessions contracts; and
  4. contracts entered into with the Federal Government in connection with Federal property or lands and related to offering services for Federal employees, their dependents, or the general public.

Where the New Mandate Applies

The FAB also defines the geographic scope of the EO’s application as including the 50 states or the District of Columbia as well as in Puerto Rico, the Virgin Islands, Outer Continental Shelf Lands as defined in the Outer Continental Shelf Lands Act, American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, Wake Island, and Johnston Island.

Who Is Covered

The FAB further identifies workers covered by the EO as:

  1. workers whose wages under the contract are governed by the FLSA, SCA, or DBA; and
  2. workers employed on or in connection with a covered contract.

The FAB explains the $15 minimum wage requirement for all contract workers and clarifies changes to minimum wage requirements for contract workers in tipped occupations and workers with disabilities employed on covered contracts under Section 14(c) of the Fair Labor Standards Act.

Requirements

Additionally, the FAB provides information on worker notice requirements, subcontractor requirements, recordkeeping requirements, and anti-retaliation provisions and remedies. The FAB also requires contracting agencies to incorporate the applicable EO contract clauses into covered prime contracts, and those same clauses must flow-down to subcontractors performing work under a covered federal contract.

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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