President Obama Signs Executive Order Raising Contractor Minimum Wage

MoneyOn February 12, 2014, President Obama signed an Executive Order that will require many federal contractors to pay wages of at least $10.10 per hour to employees working on federal contracts.  The EO provides many details about its implementation but also defers some details to rulemaking by the Department of Labor (DOL) and Federal Acquisition Regulation (FAR) Council. 

Under the EO, solicitations for covered contracts issued after January 1, 2015, and contracts awarded pursuant to those solicitations, must include clauses requiring the new contractor minimum wage.  Solicitations issued before January 1, 2015, are not covered by the EO, which means that some contracts awarded after January 1, 2015 might not be subject to the new minimum wage.

Not all federal contracts will be subject to the new contractor minimum wage next year,  The EO limits its coverage to contracts under which wages are governed by the Fair Labor Standards Act (FLSA), Service Contract Act (SCA), or Davis Bacon Act (DBA), and that fit into one of the following categories:

  • Procurement contracts for services or construction;
  • Contracts for services covered by the SCA;
  • Contracts for concessions, including any concessions contract excluded by DOL regulations at 29 C.F.R. 4.133(b); or
  • Contracts entered into with the Government in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public.

The EO notably thus omits coverage of contracts for supplies, such as manufacturing contracts covered by the Walsh-Healey Public Contracts Act.  The EO also expressly does not cover grants, certain contracts and agreements with and grants to Indian Tribes, and any contracts excluded by implementing regulations yet to be written or adopted.

The EO is silent on whether and, if so, when existing contracts will ultimately require the new minimum wage.  It is likely that this issue will be address in the new rules to be written.  The EO does provide several additional salient details at present.  First, Section 2 of the EO states that the clauses implementing the new contractor minimum wage must make payment of the higher wage a condition of payment by the government. Second, the new contract clauses must flow down to lower-tier subcontractors.  Moreover, the EO did not limit the flowdown requirement contract type, dollar value or subcontractor tier. Third, DOL must set a new minimum wage annually, with increases tied to inflation.