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U.S. Department of Labor Issues Final Rule Implementing Executive Order 13658 (Minimum Wage for Certain Federal Contractors)

By: Subhash Viswanathan

Submitted by Firm:
Bond, Schoeneck & King, PLLC
Firm Contacts:
Louis P. DiLorenzo, Thomas G. Eron
Article Type:
Legal Update
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On October 1, the U.S. Department of Labor announced the issuance of its final rule implementing Executive Order 13658, which establishes a minimum wage requirement for certain federal contractors. The final rule was published in the Federal Register on October 7.

As stated in Bond’s Labor and Employment Law Report February 14, 2014 blog post "President Signs Executive Order Establishing Minimum Wage For Federal Contractors," Executive Order 13658 requires that certain types of new federal contracts and subcontracts contain a clause specifying that the minimum wage to be paid to workers must be at least $10.10 per hour beginning January 1, 2015. The new $10.10 minimum wage will also apply to disabled employees who are currently working under a special certificate issued by the Secretary of Labor permitting payment of less than the minimum wage.

The final rule defines "new contract" as a contract that results from a solicitation issued on or after January 1, 2015, or a contract that is awarded outside the solicitation process on or after January 1, 2015. A contract that was entered into prior to January 1, 2015 will constitute a "new contract" if, through bilateral negotiation, on or after January 1, 2015: (1) the contract is renewed; (2) the contract is extended (unless the extension is made pursuant to a term in the existing contract providing for a short-term limited extension; or (3) the contract is amended pursuant to a modification that is outside the scope of the existing contract.

The final rule also clarifies, to some degree, the types of federal contracts and subcontracts covered by the Executive Order. The following types of contracts and subcontracts are covered: (1) procurement contracts for construction covered by the Davis-Bacon Act; (2) contracts for services covered by the Service Contract Act; (3) contracts for concessions, including any concessions contract excluded from coverage under the Service Contract Act; and (4) contracts entered into in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public. Grants, within the meaning of the Federal Grant and Cooperative Agreement Act, are expressly excluded from coverage.

Beginning January 1, 2016, and annually thereafter, the minimum wage for federal contractors will be increased by the Secretary of Labor based on the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers, and rounded to the nearest multiple of five cents. The Secretary of Labor is required to publish the new minimum wage at least 90 days before the new minimum wage is scheduled to take effect.

For tipped employees, the hourly cash wage paid by a federal contractor must be at least $4.90 beginning on January 1, 2015. In each subsequent year, the federal contractor minimum wage for tipped employees will be increased by 95 cents until it equals 70 percent of the federal contractor minimum wage in effect for non-tipped employees. If an employee’s tips, when added to the hourly wage, do not add up to the federal contractor minimum wage for non-tipped employees, the federal contractor will be required to supplement the employee’s hourly wage to make up the difference.

The final rule also provides an investigation and enforcement procedure with respect to alleged violations of Executive Order 13658. The potential remedies and sanctions that could be imposed include: (1) requiring payment of back wages owed; (2) withholding of amounts due to the contractor under the federal contract to the extent necessary to satisfy the contractor’s wage obligations; and (3) debarment for a period of up to three years.

The Department of Labor’s Wage and Hour Division has published on its web site a list of frequently asked questions and a fact sheet about Executive Order 13658.