Minimum Wage for Federal Contractors Set to Increase on January 30, 2022
Takeaway:
Federal contractors and subcontractors should be aware that the minimum wage for workers on many Federal contracts increases to $15 per hour on January 30, 2022 for new contracts (which includes renewals, extensions, and options).
President Biden enacted the wage increase in Executive Order 14026, and the Department of Labor on November 22, 2021 announced a Final Rule implementing the increase, as well anti-retaliation, anti-waiver, recordkeeping, notice and other provisions. The DOL’s fact sheet can be found here.
Covered Contracts
Generally, the Executive Order and Final Rule apply to the following new contracts and contract-like instruments entered into on or after January 30, 2022, as well as extensions, renewals, and options to existing contracts after that date:
• Procurement contracts for construction covered by the Davis-Bacon Act;
• Contracts for services covered by the Service Contract Act;
• Concessions contracts (use of federal property); or
• Contracts entered into with the Federal government related to Federal land and offering services for Federal employees, their dependents, or the general public; and
Furthermore, the wages of workers under such contracts must be governed by the Fair Labor Standards Act, the Service Contract Act, or the Davis-Bacon Act (and for Service Contract Act and Davis-Bacon, at their thresholds) for the Final Rule and Executive Order to apply.
The Final Rule contains several exclusions, which start here.
The Rule also requires government agencies to include the minimum wage provision (set forth in Appendix A to the Final Rule) in covered prime contracts, except procurement contracts subject to the FAR.
Subcontracts
Importantly, these requirements also apply to subcontracts, which must include any necessary flow-down provisions as well as the actual wage provision.
Contractor responsibility does not end there: The prime contractor and upper-tier subcontractors are also responsible for compliance by any lower-tier subcontractor.
Conclusion
Federal contractors should familiarize themselves with the Executive Order and Final Rule, which contain numerous other requirements and changes (including the elimination of the tipped minimum wage by 2024 and a $15 per hour minimum wage for federal contract workers with disabilities).
Contractors should also ensure that their record-keeping and notices are up to date.