The Department of Labor has published a final rule that will put in place President Biden's executive order on raising the minimum wage to $15 an hour on federal contracts.
On April 27, 2021, Biden’s executive order 14026 detailed raising the minimum wage from $10.95 to $15 an hour on certain federal contracts. The order also details that there will be an increase in the $15 hourly wage on an annual basis as well. Biden's executive order builds on President Barack Obama's executive order 13658 titled “Establishing a Minimum Wage for Contractors”
In his order, President Biden explains, “Raising the minimum wage enhances worker productivity and generates higher-quality work by boosting workers’ health, morale, and effort; reducing absenteeism and turnover; and lowering supervisory and training costs. Accordingly, ensuring that federal contractors pay their workers an hourly wage of at least $15.00 will bolster economy and efficiency in Federal procurement.”
The final rule details that the new wage requirement will go into effect on January 30, 2022. After unveiling the executive order, the president strongly encouraged that the new wage be implemented between the announcement of the executive order and January 30, 2022, when the order is set to go into effect.
This new wage hike will impact four types of federal contracts executed in the United States, Washington DC, Puerto Rico, and other US territories. The contracts include the following types:
- Construction under contracts covered by the Davis-Bacon Act (DBA).
- Service Contract Act (SCA) covered contracts.
- Concession contracts. (These are contracts that are made between the federal government and a company, property owner, or other entity to operate a business on federal property.) Concession contracts can include businesses relating to lodging, recreational equipment, food services, and other services. The contract does not have to be directly beneficial to the government, officials within the government, or the public.
- Contracts related to scheduled property and services that are offered which will benefit the general public, federal employees, and their dependents.
The increased minimum wage will not apply to all contracts, however. The following will not be covered under the executive order
- Contracts in which companies provide manufacturing, supplies, or other equipment to the federal government will not be eligible.
- Contracts that are made with Indian tribes under the Indian Self-Determination and Education Assistance Act
- Grants.
- Other contracts specifically excluded as described in the final rule.
Jessica Looman, Acting Administrator of DOL’s Wage and Hour Division, shared that the small business administration has helped develop guidance materials for those small companies that are entering into a contract and that the public’s response to the proposed ruling was “mostly very positive.”
The Department of Labor issued a tweet that details who is likely to benefit because of this increased federal contract wage. They explained that over half of the beneficiaries would be women while 25% would be Hispanic and 15% would be Black. They detail that another 34% would be in service occupations including workers in child care, maintenance, and the restaurant industry.
