President Obama signed an Executive Order raising the minimum wage for employees of federal contractors on February 12, 2014. Our earlier entry on the issue discusses how a higher minimum wage will affect current contractors. It looks like more waiting will be required before the true impact will be known.
The Executive Order calls for the Secretary of Labor and the FAR Council to draft regulations and contract provisions implementing the new minimum wage and to publish them later this year. But the Executive Order also includes some useful guidance.
Here are the key takeaways—
- Beginning on January 1, 2015, new federal contracts will contain a clause imposing the $10.10 minimum wage. Consistent with language in the Davis-Bacon Act and the Service Contract Act, the new minimum wage does not apply to all employees but rather applies to workers “in performance of the contract . . . .”
- The Secretary of Labor is required to publish regulations implementing the order by October 1, 2014. The FAR Council is required to publish solicitation provisions and new contract clauses within 60 days thereafter (i.e. December 1, 2014).
- The forthcoming contract clause will make payment of the minimum wage a “condition of payment” and will be a mandatory flow-down to subcontractors at all tiers.
- The Secretary of Labor will adjust the minimum wage for federal contractors each year beginning on January 1, 2016. Contractors will be entitled to an equitable adjustment to their contract to the extent they are impacted by subsequent increases in the minimum wage.
- The Order applies to “Executive departments and agencies” but not to “Independent Agencies,” which are merely “strongly encouraged to comply.” This distinction could be a significant limit on the impact of the new minimum wage. The Order requiring the new minimum wage for contractors does not define the terms “Executive departments and agencies” or “Independent agencies.” A number of agencies that award significant government contracts (including GSA, EPA, FEMA, and NASA) are for some purposes considered independent agencies.