The Situation: President Biden signed an executive order ("Minimum Wage EO" or "EO") seeking to raise the federal minimum wage for government contractor employees, beyond the statutory minimum wage provided by Congress, to $15 an hour. If fully implemented, the new minimum wage will eventually be required for certain types of solicitations, contracts, and "contract-like instruments" (including extensions, renewals, and options on existing contracts).
The Result: Under the EO, the Secretary of Labor has until November 24, 2021, to issue implementing regulations, and the Federal Acquisition Regulation ("FAR") Council must then amend the FAR to provide for inclusion of the clause in solicitations, contracts, and contract-like instruments within 60 days thereafter. The new minimum wage will be applicable where the solicitation is issued, or contract or instrument is entered into, extended, renewed, or the option exercised on or after January 30, 2022. For contracts entered into prior to January 30, 2022, the EO states that agencies are "strongly encouraged" to ensure that the hourly wages paid under such contracts are consistent with the new minimum wage.
Looking Ahead: The minimum wage hike will unfold in stages; business and trade associations should be attuned to these limits.
First, although the new minimum wage will not be a mandatory contract requirement until 2022, the EO "strongly encourages" agencies, to the extent permitted by law, to begin including the new minimum wage for solicitations, contracts, and contract-like instruments issued between the effective date of the EO and the forthcoming regulations.
Second, interested stakeholders should actively engage by commenting on the rulemaking the Department of Labor ("DOL") and FAR Council propose. Comments should address procedural and substantive issues, as any new regulations will be tested based upon the administrative record. The procedural validity of these regulations may rest on whether the government adequately considered and responded to the public's input.
Third, presidents of both parties have sought to use the Procurement Act to advance a variety of policy aims and, while they have discretion, must act within statutory and constitutional limits. Courts have enjoined exercises of authority under the Procurement Act by Presidents Clinton, Obama, and Trump.