Executive Order increases minimum wage for federal contractors

By Kelline R. Linton,
Junior Associate.


Last week, President Obama signed an executive order that raised the minimum wage for federal contractors to $10.10 an hour from the current rate of $7.25. The following is a breakdown of the key implementation aspects of this Order:


The Scope of the Order:
The Order is not limited to just the federal contracts covered by the Service Contract Act (“SCA”) and the Davis Bacon Act (“DBA”). The Order applies to all federal contracts with executive departments and their federal agencies. However, the Order currently does not apply to independent agencies.


The Regulations for the Order:
The Secretary of Labor will issue regulations for this Order by October 1, 2014. These regulations are supposed to be consistent with the current definitions, procedures, remedies, and enforcement processes under the SCA, DBA, and the Fair Labor Standards Act (“FLSA”). These regulations may include “independent agencies” because the Order strongly encourages “independent agencies” to comply, and the SCA and FLSA already apply to such agencies. However, the current Order only applies to contracts with federal agencies. We will update you if this changes once the Regulations are issued.


Contracts that need to comply with the Order:
The Order only applies to “contracts” entered into on or after January 1, 2015. The Order defines “contracts” as “new contracts, contract-like instruments, and solicitations.” This means an option exercise or modification to a current contract covered by the SCA or DBA may constitute a “new contract” under the Order. In such a situation, the new wage determination needs to be incorporated into the option or modification.


Further, we recommend that for any solicitations issued between now and January 1, 2015, federal contractors should probably build equitable adjustments into the contract to ensure that the additional costs associated with the wage increase may be recouped once effective.


As a reminder, the Order only affects those rates that are currently below $10.10 per hour. If a current wage determination has hourly rates above this minimum, you will not need to make any adjustments.