On October 1, 2014, the DOL announced final rules for the $10.10 minimum wage for federal contractors as required under Executive Order 13658. The EO, which the President signed February 12, 2014, requires that the hourly minimum wage paid by contractors to workers on covered contracts with the federal government be at least (1) $10.10 per hour, beginning January 1, 2015; and (2) an amount determined by the Secretary of Labor, beginning January 1, 2016, and annually thereafter.
The stated justification for this EO is that by raising the pay of low-wage workers, it increases their morale and productivity and the quality of their work, lowers turnover and its accompanying costs, and reduces supervisory costs. These savings and quality improvements will lead to improved economy and efficiency in Government procurement. Although the EO is to apply to all federal contractors, most already pay over $10.10 for employees. Therefore the impact on federal contractor employees is likely to be minimal, which makes the justification for the EO questionable.
The final rule applies to all of the following contracts:
- All contracts covered by the Davis-Bacon Act
- Contracts for services covered by the Service Contract Act
- Concessions contracts, such as contracts to furnish food, lodging, automobile fuel, souvenirs, newspaper stands and recreational equipment
- Contracts to provide services, such as child care or drycleaning, on federal property for federal employees or the general public.
Highlights of the rule include:
- The definition of “contractor” has been “simplified” and narrowed to mean only individuals and legal entities awarded a Federal Government Contract or subcontract under a Federal Government Contract.
- It applies only to new contracts after January 1, 2015 but amendments or modifications to pre-existing contracts may make them new contracts.
- A new subsection (10.4[f]) provides that workers performing support work “in connection with a covered contract” for less than 20% of their hours in a workweek are not entitled to the minimum wage. (Previously all support employees would have been covered, whatever “support employee” meant; this new section defines employees covered.)
- Section 10.4(d) clarifies that if a contract is exempt from the SCA, it is also exempt from the Executive Order, unless the contract is covered by one of the three other coverage provisions: a covered concession contract or a contract in connection with Federal land and related to service offerings.
- Contracts must include the following clause which will incorporate all the requirements under the EO: “Executive Order 13658 – Establishing a Minimum Wage for Contractors, and its implementing regulations, including the applicable contract clause, are incorporated by reference into this contract as if fully set forth in this contract,’ with a citation to a webpage that contains the contract clause in full, to the provision of the Code of Federal Regulations containing the contract clause set forth at Appendix A of this part, or to the provision of the FAR containing the contract clause promulgated by the FARC to implement this rule.”
- If a contracting officer for the federal government fails to incorporate the clause into the initial contract, the contractor may be entitled to a contract adjustment to cover the additional costs.
- For recordkeeping requirements, contractors must maintain records reflecting each worker’s occupation or classification, and maintain records reflecting total wages paid.
- Contractors must prominently post the applicable wage which will include notice of minimum wage rights, and display a poster (to be provided by DOL) for support workers which may be posted electronically.
The final rules were published in the Federal Register October 7th, and will be effective on December 6, 2014. ASE will follow up when the posters are available for posting.
Source: USDOL, Seyfarth Shaw 10/2/14, Jackson Lewis 10/3/14