On February 12, 2014, President Obama signed Executive Order 13658 to raise the minimum wage for federal contractors to $10.10 per hour for all workers on federal constructive and service contracts, up from the current $7.25 per hour minimum. The final rule was issued to the Federal Register on October 7, 2014. The higher wage is a tool used to hopefully improve the quality and efficiency of the services provided to the government.
The new, higher wage requirement applies to new contracts and replacement contracts that result from solicitations issued and to those awarded on after January 1, 2015. The $10.10 per hour minimum will remain in effect until at least January 1, 2016.
Who does the new minimum wage rates requirement apply to?
The executive order applies to four major categories of contractual agreements:
- Government procurement construction contracts covered by the Davis-Bacon Act
- Service contracts covered by the Service Contract Act
- Including both procurement and non-procurement contracts exceeding $2,500
- All concessions contracts, and
- Contracts in connection with federal property or lands and relating to offering services for federal employees, their dependents, or the general public
Who does the new requirement not apply to?
- Contracts subject only to the Davis-Bacon Act
- Contracts and agreements with and grants to Indian Tribes under Public Law 93-638
- Procurement construction contracts not subject to the Davis-Bacon Act
- Employment contracts providing for direct services to a federal agency by an individual
- Contracts subject to the Walsh-Healey Public Contracts Act
Workers covered by the new minimum wage for federal contractors requirement:
- Employees entitled to the FLSA minimum wage rates
- Service employees who are entitled to prevailing wages under the Service Contract Act
- Laborers and mechanics who are entitled to prevailing wages under the Davis-Bacon Act
- Any FLSA covered employee who provides support for Service Contract Act and Davis-Bacon Act covered contracts
It is important to note that if a worker is entitled to a wage higher than $10.10 per hour, the worker must be paid the higher wage rate. It is up to the contracting agency to include the new require minimum wage for federal contractors in any new contracts or solicitations.
If a contractor or subcontractor fails to abide, then the contracting agency will withhold funds and submit a complaint to the wage and hour division. An additional penalty for violating the executive order is debarment.
Government Contractor Obligations:
- First and foremost, comply with the executive order and pay no less than the new minimum wage rates for all hours spent performing on covered contracts
- Include the new minimum wage rates in lower-tiered subcontracts
- Comply with obligations related to wage deductions, frequency of pay, and recordkeeping
- Do not take any kickbacks from wages paid to workers on covered contracts
Every year, beginning January 1, 2016, the Secretary of Labor is required to determine the new minimum wage rates, and publish the wage at least 90 days before it will take effect. Should the wage change, it will not be less than the amount in effect on the determination date.
Avoid unnecessary complaints, funds being withheld, and possible debarment. It is important to stay up-to-date on your obligations as a contractor. If you are unsure whether the new minimum wage for federal contractors will apply to you, please call Watson & Associates, LLC to speak with any of our Federal Government Contract Attorneys at 1-866-601-5518 for a free consultation.