Minimum wage for some federal contractors increasing to $15 an hour

Excerpted from a Constangy Brooks Smith & Prophete LLP Blog by Cara Yates Crotty

Some employees will be getting a raise.

President Biden issued an Executive Order this week increasing the minimum wage for certain federal contractors to $15 per hour. Similar to President Obama’s Executive Order 13658, which set a minimum wage for employees of federal contractors, this requirement will also apply only to a subset of contractors.

The changes won’t take place for months, but here is what covered contractors need to know:

Which federal contractors have to comply with the minimum wage requirement?
The new requirement will apply only to the following types of federal contracts where the wages of the employees are governed by the Fair Labor Standards Act, the Service Contract Act, or the Davis-Bacon Act:

• Procurement contracts for services or construction
• Contracts covered by the Service Contract Act
• Contracts for concessions
• Contracts in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public.

In other words, this applies to the same contracts that were covered by Executive Order 13658, which is officially superseded by this new Executive Order to the extent that it is inconsistent.

Which employees will be covered by the minimum wage requirement?
Only those employees “working on or in connection with” a covered contract will be entitled to the new minimum wage. The regulations implementing Executive Order 13658 defined this to include individuals “engaged in working on or in connection with the contract, either in performing the specific services called for by its terms or in performing other duties necessary to the performance of the contract.”

The regulations excluded workers who were not directly engaged in performing the specific work called for by the contract and were performing only “ancillary” work. If ancillary employees spent less than 20 percent of their hours in a particular workweek performing duties “in connection with” the contract, then they were not covered by the minimum wage requirement for that week. Examples of workers who were performing work “in connection with” a covered contract included a security officer at a Davis-Bacon construction site, or a payroll clerk.

Although we expect the new implementing regulations to be consistent with these existing regulations, we will need to wait and see.

When will the new minimum wage rate go into effect?
Federal agencies will not start including the $15 minimum wage in new solicitations until January 30, 2022, and the new wage provisions must be included in new contracts by March 30, 2022.

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