The minimum wage for employees working on or in connection with a qualifying federal contract is set to rise from $16.20 per hour to $17.20 per hour effective January 1, 2024.

That will be the minimum wage rate for both non-tipped and tipped employees because, as promised, the lower cash wage contractors could pay to tipped employees will be eliminated on January 1.

But there is a bit of a convoluted history to deal with here, resulting in a potential “gap” that the Wage and Hour Division still has to address.

You see, in 2014 the Department of Labor implemented Executive Order 13658 establishing a minimum wage for employees working “on or in connection with” most types of federal contracts. It was incredibly complicated—likely by design to encourage federal contractor employers to establish a sufficient minimum wage for all their workers, whether they worked on a qualifying contract or not.

Then in 2021 the Department implemented Executive Order 14026 which set an even higher minimum wage for employees working on or in connection with a qualifying contract. But that order only applied to contracts entered into (or modified or extended) after January 30, 2022.

But there may still be federal contracts that were originally subject to the earlier E.O. 13658 that are still in effect without having been modified, renewed, or extended. The Department of Labor is not sure that there are any, mind you, but there could be. If so, employees working on those contracts are still subject to the lower E.O. 13658 minimum wage rates.

And according to a notice in the Federal Register, those lower E.O. 13658 wage rates are going up as well.

If you know your organization holds one of these “gap” contracts, and if you are able to track employee work “on or in connection with” those qualifying contracts, and you want to pay them the minimum allowed by law, the rate for non-tipped workers goes up from $12.15 per hour to $12.90 per hour effective January 1, 2024. And for those “gap” contracts, the cash wage for tipped workers is still in effect and rises from $8.50 per hour to $9.05 per hour.

It is highly unlikely that your organization holds such a “gap” contract. Even if you do, it is even more unlikely that you have the infrastructure necessary to apply these lower minimum wages to employees’ work done on or in connection with such a contract. The higher E.O. 14026 wage rates would apply to any work performed on or in connection with any other qualifying federal contract. Most, if not all federal contractor employers simply raised their minimum wages to align with E.O. 14026.

If you have questions about this or any other federal contractor requirement, feel free to reach out to us at BCGi@Biddle.com.