President Biden has issued an executive order superseding (for the most part) order 13658, “Establishing a Minimum Wage for Contractors,” issued in 2014. The previous order established a minimum wage of $10.10 per hour for most federal contractor employees for work performed on a qualifying federal contract or subcontract ($4.90 for tipped workers). That minimum wage rate has been adjusted annually for inflation and now stands at $10.95 per hour ($7.65 for tipped workers). New rates are announced by the Wage and Hour Division of the Department of Labor (not the OFCCP) via notice in the Federal Register.
The new executive order interrupts the established minimum wage rate increase formula and jumps the rate to $15.00 per hour ($10.50 for tipped workers). Note that these minimum wage rates only apply to workers “employed in the performance of the contract” (or any covered subcontract).
Otherwise, the provisions of the new order largely mirror the existing minimum wage order. That means it is not going to get any easier to determine when the federal contractor minimum wage rate applies and when it does not. For a full understanding of just how complicated this is, hop on over to the Department of Labor’s website here and you will see no less than 15 helpful resources for figuring that out.
That is likely by design. The recordkeeping that would be required to pay only covered workers the required minimum wage rate for work performed in connection with a qualifying federal contract is frightening. Can it be done? Theoretically, yes, but very few organizations try. Instead, it is much easier to raise the minimum wage for all workers at the organization to the federal contractor minimum. Whether or not that is cheaper is a bit of a guess because you would have to factor in the cost of the recordkeeping required to do otherwise.
And the order itself is explicit that it is intended to encourage non-federal-contracting employers to raise their own minimum wage rates to stay competitive.
The effective date of the new order, and therefore the new minimum wage rate, is… interesting? Confusing. It needs some parsing.
The new order is effective “immediately” but then explicitly states it only applies to “new” contracts (including contract renewals) executed on or after January 30, 2022. However, that appears to be the date on which federal contracting agencies are being ordered to begin enforcing the new $15.00 per hour minimum wage rate.
Section 9(c) of the new order states that for all contracts either entered into between now and the January 2022 effective date, or with solicitations issued between now and then, federal contracting agencies are “strongly encouraged” to ensure that the hourly wages paid under such contracts are consistent with the new order.
Note that other sources have reported a “split” effective date where agencies will be required to start inserting new contract language in solicitations in January, 2022, and then required to insert that language into executed contracts beginning in March, 2022. We see no such provision in the actual executive order.
So an initial reading of the executive order seems to imply that the existing federal contractor minimum wage rate is being raised to $15.00 immediately. And technically, that would appear to apply to existing federal contracts and subcontracts. But no one is going to be enforcing the new rate until 2022.
The Department of Labor has until November 24, 2021 to implement the requirements of the new order and issue regulations that must include definitions of relevant terms and exclusions from the order. That pretty much requires DOL to issue draft regulations about now in order to make it through the notice and comment rulemaking process by that November deadline.
Note that those implementing regulations should, to the extent possible, incorporate existing definitions, principles, procedures, remedies, and enforcement processes under existing laws and regulations, including the existing federal contractor minimum wage rule. So the framework is unlikely to change from the existing minimum wage order.
And like the existing order, the new order does not apply to grants or contracts/agreements with Indian Tribes under the Indian Self-Determination and Education Assistance Act.
But the order for DOL to implement the new order by November 24, 2021, well before the January 20, 2022 “effective date,” does support the notion that the federal contractor minimum wage does in fact rise to $15.00 today, but that will not be enforced on existing contracts until January, 2022. Perhaps the implementing regulations and subsequent guidance will shed more light.