Earlier this year, we covered President Biden’s executive order raising the contractor minimum wage to $15. This week, DOL published the final rule implementing the executive order. Let’s take at look at some of the key provisions.

General requirement

For impacted contracts, contractors must pay workers performing on those contracts at least $15/hour beginning January 30, 2022. But the DOL Secretary may raise the minimum wage annually starting in 2023. If he or she does, then contractors must start paying that higher wage.

What about subcontractors? Yep, the final rules doesn’t leave them out. If the prime contractor must pay the $15/hour wage, then so must any subcontractors.

The rule applies to new contracts

The rule requires contractors to begin paying their employees a minimum wage of $15/hour beginning on January 30, 2022 for new contracts. But don’t let the term new contracts fool you.

Under the rule, a new contract can mean (1) a contract that is entered on or after January 30, 2022 or (2) a contract that is renewed or extended on or after that date. So, an existing contract under which the Government exercises an option after January 30, 2022 is considered a new contract. Yes, I know that’s confusing. Just remember this: if your contract is executed or an option exercised (or the contract is otherwise extended) after January 30, 2022, the new $15 minimum wage applies.

Also, the rule only applies the new wage to new contracts (where the Fair Labor Standards Act, the Davis-Bacon Act, or the Service Contract Act govern the wages) that fit within on of the following categories:

  • any construction contract to which the Davis-Bacon Act applies
  • a services contract to which the Service Contract Act applies
  • a concessions contract
  • contracts with the federal government in connection with federal property and and which relate to offering services to federal employees, their dependents, or the general public

Lastly, the rule applies the wage to contracts performed in the United States and its territories. If a contractor performs domestically and internationally, the new wage applies to the part performed in the United States.

Exclusions

The minimum wage requirement does not apply to certain contracts and workers, such as:

  • grants
  • contracts or agreements with Indian Tribes
  • construction contracts that are not covered by the Davis-Bacon Act
  • service contracts that are not covered by the Service Contract Act
  • employees exempt from the minimum wage requirements of the Fair Labor Standards Act
  • FLSA-covered workers who perform work connected with a impacted contract for less than 20% of their weekly work hours. These are workers who don’t perform the specific work called for by the contract, but who perform duties necessary for contract performance.
  • contracts resulting from a solicitation issued before January 30, 2022 and are entered in between January 30, 2022 and March 30, 2022. But if an agency extends the contract, then the minimum wage requirement will apply.

Other provisions

The final rules also includes some other important provisions.

  • The rule makes it unlawful to fire an employee because he or she files a complaint (or testifies in a proceeding) related to the minimum wage requirement.
  • The final rule includes a contract clause that agencies should include in impacted contracts (see pages 341-346 in the final rule). Contractors must flow down this clause to their subcontractors. And subcontractors, as a condition of payment, must include the minimum wage contract clause in lower-tier subcontracts.
  • If a contractor fails to pay its workers the minimum wage, DOL can withhold contract payments.
  • The contracting agency must forward complaints of contractor noncompliance to DOL.
  • A contractor cannot discharge any of its minimum wage obligation by furnishing fringe benefits (or cash equivalents, if the Service Contract Act applies).
  • For work subject to the final rule, Contractors and subcontractors must keep payroll information for three years and allow DOL to inspect it.
  • For tipped employees, the final rule moves the wage up to at least $15/hour by 2024.

If you have any questions about this new minimum wage or other labor regulations, give us a call at 913-354-2630.

DOL issues final rule for $15 minimum wage for contractor and subcontractor employees was last modified: November 24th, 2021 by John Mattox