Federal Contractor Minimum Wage Final Rule Requires $15.00 Minimum Wage

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On November 22, 2021, the Department of Labor's (DOL) Wage and Hour Division issued a final rule implementing President Biden's Executive Order 14026, increasing the Minimum Wage for Federal Contractors, which applies to all workers performing work on or in connection with covered federal contracts.  This minimum wage will increase to $15.00 per hour beginning January 30, 2022.  According to a DOL news release, in addition to increasing the minimum wage for federal contractors, the final rule:  

  • Continues to index the federal contract minimum wage in future years to inflation;
  • Eliminates the tips minimum wage for federal contractor employees by 2024; and
  • Insures a $15.00 minimum wage for workers with disabilities performing work on or in connection with covered contracts.

Because of the impact of this higher federal minimum wage for federal contractors and certain subcontractors, it is important for employers to understand who is covered by the requirements. In general, the requirements apply to federal contractors, and those subcontractors who are either covered by the Davis-Bacon Act, by the Service Contract Act, contracts for concessions; or contracts entered with the Federal Government in connection with Federal property or lands and related to offering services for Federal employees, their dependents or the general public supply services, but not who supply products.  It specifically does not apply to contracts related to the manufacturing or furnishings of materials, supplies, articles or equipment to the Federal Government.

The $15.00 an hour rate does not apply to existing contracts until that contract is renewed, extended or an option on the contract is exercised on or after January 30, 2022.  All new contracts entered into on January 30, 2022 and after obligate the contractor to pay the $15.00 an hour minimum wage.  If a solicitation is accepted before January 30, 2022 but the contract is to be signed on January 30, 2022, some special rules apply.  Please give us a call if you are in that situation.

This is part of our January 2022 Newsletter.

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