DOL Announces Final Rule Raising Minimum Wage for Federal Contract Workers | Practical Law

DOL Announces Final Rule Raising Minimum Wage for Federal Contract Workers | Practical Law

This wage and hour update discusses US Secretary of Labor Thomas E. Perez's announcement of a final rule raising the minimum wage for federal contract workers. This rule, which implements the Executive Order signed by President Obama on February 12, 2014, will increase the minimum wage for federal contractor employees to $10.10 per hour beginning January 1, 2015.

DOL Announces Final Rule Raising Minimum Wage for Federal Contract Workers

Practical Law Legal Update 6-583-5865 (Approx. 4 pages)

DOL Announces Final Rule Raising Minimum Wage for Federal Contract Workers

by Practical Law Labor & Employment
Published on 07 Oct 2014 • USA (National/Federal)
This wage and hour update discusses US Secretary of Labor Thomas E. Perez's announcement of a final rule raising the minimum wage for federal contract workers. This rule, which implements the Executive Order signed by President Obama on February 12, 2014, will increase the minimum wage for federal contractor employees to $10.10 per hour beginning January 1, 2015.
On October 1, 2014, US Secretary of Labor Thomas E. Perez announced a final rule raising the minimum wage for federal contract workers. This rule, which implements the Executive Order signed by President Obama on February 12, 2014, will increase the minimum wage for federal contractor employees to $10.10 per hour beginning January 1, 2015. The order seeks to improve economy and efficiency in government procurement by increasing worker morale and productivity and lowering turnover and supervisory costs.
The Executive Order stated that:
  • The minimum wage to be paid to federal contractor workers must be at least $10.10 per hour beginning January 1, 2015.
  • Beginning January 1, 2016, and annually thereafter, a minimum wage amount will be determined by the Secretary of Labor. The amount must be published by the Secretary at least 90 days before the new contractor minimum wage is to take effect and must be:
    • not less than the contractor minimum wage in effect on the date of determination;
    • increased from the minimum wage in effect on the date of determination by the annual percentage increase in the Consumer Price Index; and
    • rounded to the nearest multiple of $0.05.
    The Executive Order also stated that for tipped employees, the hourly cash wage to be paid must be at least:
  • $4.90 an hour beginning January 1, 2015.
  • For each succeeding one year period until the hourly cash wage for tipped employees equals 70% of the contractor minimum wage, an hourly cash wage equal to the hourly cash wage for tipped employees for the preceding year, increased by the lesser of:
    • $0.95;
    • the amount necessary for the hourly cash wage for tipped employees to equal 70% of the contractor minimum wage; and
    • for each subsequent year, 70% of the contractor minimum wage for such year rounded to the nearest multiple of $0.05.
The final rule clarifies that the minimum wage requirement applies to:
  • Construction contracts covered by the Davis-Bacon Act (DBA).
  • Service contracts covered by the Service Contract Act (SCA).
  • Concessions contracts including any concessions contract excluded from the SCA by the Department of Labor’s regulations at 29 CFR § 4.133(b).
  • Contracts to provide services on federal property or lands to:
    • federal employees;
    • the dependents of federal employees; or
    • the general public.
The final rule defines key terms used in the Executive Order, including:
  • Contracts.
  • Contract-like instruments.
  • Concessions contracts.
The final rule also details which workers performing on or in connection with covered federal contracts are entitled to the Executive Order minimum wage, for example:
  • Employees entitled to the FLSA minimum wage.
  • Service employees entitled to prevailing wages under the SCA.
  • Laborers and mechanics entitled to prevailing wages under the DBA.
Under the final rule:
  • Contracting agencies are required to:
    • ensure that the contract clause implementing the Executive Order minimum wage requirement is included in new contracts or solicitations for contracts covered by the Executive Order;
    • withhold funds when a contractor or subcontractor fails to pay the required Executive Order minimum wage; and
    • forward complaints of a contractor’s failure to comply with Executive Order 13658 to the Wage and Hour Division.
  • Contractors are required to:
    • include the Executive Order contract clause in covered lower-tiered subcontracts;
    • notify all workers performing on or in connection with a covered contract of the Executive Order's minimum wage rate;
    • pay covered workers the Executive Order minimum wage for all hours worked on or in connection with covered contracts; and
    • comply with pay frequency and recordkeeping obligations.
  • The DOL is obligated to:
    • determine the Executive Order minimum wage rate annually beginning on January 1, 2016; and
    • publish the wage rate at least 90 days before the wage takes effect.
  • Finally, the final rule prohibits:
    • taking kickbacks from wages paid to workers on covered contracts; and
    • retaliating against workers who exercise their rights under the Executive Order.
The final rule was published in the Federal Register on October 7, 2014.