What federal contractors need to know about the $15 minimum wage

Well, it probably hasn’t escaped your attention that the minimum wage for government contractors is now $15 an hour.

The national media is all over it. But in those articles the focus quickly shifts to the fact the executive order did not raise the federal minimum wage in general. Here’s how quickly national news outlets started talking about the national minimum wage: The Washington Post (ninth graph), NBC News (sixth graph), CBS News (fifth graph), CNN (first graph), USA Today (first graph), and The New York Times (no idea, I’m out of free articles).

Here at GovConBrief, we won’t treat the folks actually affected by this like an afterthought. Let’s take a look a the Executive Order and see what contractors really need to know.

The order itself is relatively short. It consists of 10 sections, a few of which are boilerplate language. Obviously the main effect is that the effect of the executive order will be to eventually raise the hourly pay of minimum wage workers to $15 with cost of living increases annually thereafter. This includes workers with disabilities and, eventually, tipped workers. It applies to contracts “and contract-like instruments” with executive departments and agencies. But it doesn’t happen right away. It will be next year before the ball gets rolling.

Beyond that, here are some govcon-specific provisions that stood out to me.

The $15 minimum wage applies to subcontractors too. But what it means to be a subcontractor has not yet been defined. The executive order instructs the Secretary of Labor to define what being a subcontractor means in this context in its implementing regulations.
Most news stories say that the minimum wage increase will be effective January 30, 2022, but it is a little more complicated than that. The Executive Order itself is effective immediately. But, the effect of the order comes later because it is essentially an order directing people to do things. It first instructs the Secretary of Labor to issue implementing regulations by November 24 of this year. Then it gives the FAR Council 60 days to amend the FAR to implement the Secretary’s regulations. Finally, it instructs agencies to insure that new solicitations and contracts entered into as of January 30, 2022, include the $15 minimum wage. In other words, effective immediately the Secretary of Labor must write implementing regulations triggering the FAR counsel to update the FAR, which will provide contracting officers with a $15 minimum wage clause to include in contracts. All that must happen by January 30, 2022. Simple enough, right?
It increases the wages of tipped workers to $10.50 per hour and by 2022 with a stair step up to $15 by 2024. But you have to wonder how many people this actually effects. Do agencies have valets? Coat checks? I know there are bars and restaurants on bases–I recall famously there being a Subway in the Green Zone in Baghdad–but this has got to be a relatively small group of people, right? Correct me if I’m wrong.
There is an enforcement element. Though violating the $15 minimum wage provision does not create any rights under the Contract Disputes Act, the Secretary of Labor will be authorized to conduct investigations and presumably use whatever power is inherent to the office to rectify such occurrences.
Finally, and this is the provision that stood out the most, the new minimum wage applies to options as well as new contracts. So, if an option is picked up after January 30, 2022, the $15 minimum wage will apply. It will be interesting to see how the regulations choose to address this, because its not difficult to conceive of a situation where a contractor bid on a project based on paying a $10.95 per hour rate and has been performing admirably along those lines, but will soon have to pay workers 37% more an hour in order to get an option picked up. It’s easy to picture the contractor and the government disagreeing about the project budget thereafter.

We’ll keep an eye on it an update you with any significant changes.