On April 27, 2021, President Biden signed the Executive Order on Increasing the Minimum Wage for Federal Contractors (EO), which increases the minimum wage to $15.00 per hour for federal contractors and subcontractors working on or in connection with covered contracts. Not surprisingly, President Biden's EO closely follows a 2014 executive order issued by then-President Obama that increased the minimum wage for federal contractors and subcontractors to $10.10.
What does this latest minimum wage increase for federal contractors and subcontractors mean and when does it take effect? We summarize the key provisions here.
- Federal contractors and subcontractors, but not grantees, must pay their hourly employees at least $15.00 an hour per the EO for covered contracts, i.e., contracts where the Federal Labor Standards Act, Service Contract Act, or Davis Bacon Act governs wages.
- Covered actions include any new contract, contract-like instrument, or solicitation; extension or renewal of an existing contract or contract-like instrument; and exercise of an option on an existing contract or contract-like instrument for:
- Procurement contracts or contract-like instruments for services or construction;
- Contracts or contract-like instruments for services covered by the Service Contract Act;
- Contracts or contract-like instruments for concessions; or
- Contracts or contract-like instruments "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."
- Covered actions include any new contract, contract-like instrument, or solicitation; extension or renewal of an existing contract or contract-like instrument; and exercise of an option on an existing contract or contract-like instrument for:
- For tipped employees, the EO raises the minimum hourly wage to $10.50, and by January 1, 2024, their wages will be equal to the minimum wage for all other federal contractors and subcontractors.
- In terms of timing, the EO provides that:
- Starting January 30, 2022, all agencies will need to incorporate a $15 minimum wage in contract solicitations;
- By March 30, 2022, all agencies will need to incorporate the minimum wage into new contracts; and
- Renewals of existing contracts issued on or after January 30, 2022 must include the higher wage requirement.
- On a going forward basis, starting January 1, 2023, and annually thereafter, the Secretary of Labor will also be required to calculate a percentage increase to the minimum wage by comparing the Consumer Price Index for the most recent month, quarter, or year available with the Consumer Price Index for the same month in the preceding year, the same quarter in the preceding year, or the preceding year, respectively, and publish it at least 90 days before the new minimum wage will take effect.
While the EO sets out the general goals of the Administration, we await further regulatory guidance from the Secretary of Labor. In particular, the EO directs DOL to issue regulations outlining both definitions of relevant terms and exclusions from the requirements of the EO, as appropriate, by November 24, 2021. Following this initial regulatory pronouncement, the Federal Acquisition Regulatory (FAR) Council must amend the FAR to incorporate relevant changes.
Venable will be tracking subsequent regulatory actions implementing this EO and provide further guidance when it becomes available.
*A special thank-you to Anna Kaye for her contributions to this article.