U.S. Department of Labor’s Wage and Hour Division Announces Final Rule to Implement Executive Order 14026
On November 22, 2021, the Biden administration published a final rule instituting a $15 minimum wage for certain covered federal contractors. The new rule will apply to new or updated covered contracts beginning on January 30, 2022, and the required minimum wage will be updated annually for inflation. In addition to new contracts and contract renewals, the minimum wage requirement will also apply when contracting agencies exercise options on existing contracts.
Enforcement of the regulation will be the responsibility of the Department of Labor’s Wage and Hour Division. The Labor Department estimates more than 300,000 workers will receive a wage increase due to the rule.
The Labor Department’s final rule is intended to apply to a wide range of contracts with the federal government for services or construction. Specifically, it applies to:
- Procurement contracts for construction covered by the Davis-Bacon Act (DBA) (but not the Davis-Bacon Related Acts);
- Contracts for services covered by the Service Contract Act (SCA);
- Contracts for concessions; and
- Contracts in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public.
For contracts covered by the Davis-Bacon Act or the Service Contract Act, the new rule applies only to prime contracts at the thresholds specified in those statutes. For procurement contracts where wages are governed by the FLSA, the rule applies when the prime contract exceeds the micro-purchase threshold, as defined by 41 U.S.C. 1902(a).
The Final Rule specifically excludes:
- Contracts for the manufacturing or furnishing of materials, supplies, articles, or equipment to the Federal Government;
- Contracts or agreements with Indian Tribes under the Indian Self-Determination and Education Assistance Act; and
- Contracts excluded from coverage under the SCA or DBA specifically excluded in the implementing regulations.
The new minimum wage rule generally applies when workers are performing on or in connection with a federal contract if the wages of such workers are not exempt from minimum wage under the Fair Labor Standards Act. (Work is performed “in connection with” a contract when the activity is necessary to the performance of a contract but is not the specific service(s) called for by the contract itself.) Moreover, the final rule includes an exception for employees who spend less than 20 percent of their work hours in connection with covered contracts.
Please contact your Miller Johnson attorney if you have more specific questions. The Wage and Hour Division has issued FAQs as well.