Updated: Sep 16, 2021
Executive Order 14026 , issued on April 27, 2021, required that the Department of Labor issue regulations raising federal contractor minimum wage to $15 per hour.
The Department of Labor has issued proposed regulations in response to the Executive Order. The proposed regs would take affect on January 30, 2022.
For purposes of minimum wage, most employers will want to know what areas of the economy, what employees, and what contracts, are covered by the regs. Covered contracts included the following:
Procurement contracts for construction. The regulations specifically contemplated defining this as “any contract covered by the DBA (Davis Bacon Act)” but “not…to contracts subject only to the Davis-Bacon Related Acts (DBRA),” many of which are listed here in subdivisions (2) through (60). A contract is “for construction” if “more than an incidental amount of construction-type activity” is involved in its performance. The regulations apply to DBA covered prime contracts exceeding $2000 in value, and all subcontracts awarded under qualifying prime contracts without regard to value of the sub contract.
Contracts for services which are covered by the Service Contract Act (SCA). This includes prime contracts which meet the $2,500 value threshold, and all subcontracts regardless of value. Service contracts not covered by the SCA may also be subject to the regulations if they qualify as concessions contracts or contracts in connection with Federal property and related to offering services to Federal employees, their dependents, or the general public.
Concessions contracts, whether or not those concessions contracts are otherwise excluded by the SCA. This applies to prime contracts exceeding $2,500 in value; or, for contracts where workers’ wages are governed by the FLSA, where the contract exceeds $10,000 in value. Under both circumstances, all subcontracts are covered without regard to value
Contracts in connection with federal property or lands related to offering services for federal employees, their dependents, or the general public.
The regulations apply only to “new contracts” after the effective date of the regulations, but this includes extensions, renewals or the exercise of an option – taking a measure of control away from employers who are existing contract holders. The proposed regulations exclude certain contracts and workers from the new minimum wage. The excluded contracts include:
Contracts with Indian Tribes subject to the Indian Self-Determination and Education Assistance Act, as amended.
Contracts for the manufacturing or furnishing of materials, supplies, articles or equipment to the Federal Government.
What workers do the new regulations cover? The minimum wage applies to workers “working on or in connection with” a covered contract whose wages are subject to the FLSA, SCA or DBA. Working “on” a contract means “directly performing “the specific services called for by the contract.” Working “in connection with” a covered contract means that the “work activities are necessary to the performance of a contract” but not the specific services called for. Tipped workers subject to the regulations will see their hourly wage rise in 2022 and achieve parity in 2024. Disabled workers whose wages are set by special certificate are also included under contemplation of the bill.
To determine if your contract, business and employees are covered by these new regulations, contact our office today.
Some helpful links when reviewing the requirements of these new regulations may be: