As covered in our last blog post on this topic, President Biden issued Executive Order 14026  on April 27, 2021 raising to $15 per hour the minimum wage certain federal contractors must pay workers performing work “on or in connection with” a covered federal contract or subcontract.  According to the Executive Order, the Department of Labor (DOL) must finalize implementing regulations by November 24, 2021.

To comply with that directive, the DOL today issued proposed regulations for public comment.  The Notice of Proposed Rule Making (NPRM) will be published in the Federal Register on July 22, 2021.

The bottom line?  The $15 minimum wage applies to the following types of contracts:

  • Procurement contracts for construction covered by the Davis-Bacon Act, but not the Davis-Bacon Related Acts;
  • Service Contract Act (“SCA”) covered  contracts;
  • Concessions contracts;
    • Concessions contract means a contract under which the federal government grants a right to use federal property, including land or facilities, for furnishing services. The term concessions contract includes but is not limited to a contract the principal purpose of which is to furnish food, lodging, automobile fuel, souvenirs, newspaper stands, and/or recreational equipment, regardless of whether the services are of direct benefit to the Government, its personnel, or the general public;
  • Contracts related to federal property and the offering of services the general public, Federal employees, and their dependents;

What’s not covered?  The Executive Order does not apply to:

  • Contracts for the manufacturing or furnishing of materials, supplies, articles, or equipment to the Federal Government;
  • Grants;
  • Contracts or agreements with Indian Tribes under the Indian Self-Determination and Education Assistance Act;
  • Contracts excluded from coverage under the SCA or DBA specifically excluded in the implementing regulations;
  • Other contracts specifically excluded.  See NPRM Section 23.40.

The Order applies to “new contracts” after January 30, 2022, but that term is more expansive than appears.  “New Contracts” include:

  • Extensions or renewals of existing contracts or contract-like instruments; and exercises of options on existing contracts or contract-like instruments on or after January 30, 2022.
  • Thus, the federal government may unilaterally exercise an option in an “old” contract not subject to the $15 rate and make the contract subject to the new $15 wage requirement.

What workers are entitled to the $15 wage?  The proposed regulations would require the $15 wage for all workers (not just employees) who perform the work covered by the contract and whose wages are already covered by the FLSA, the SCA, or the DBA .

This means “service workers” under the SCA , construction workers under the DBA, and workers whose wages are covered by the FLSA except for workers in a bona fide executive, administrative, or professional capacity, as those terms are defined in the FLSA at 29 C.F.R. Part 541, who are exempt from the FLSA’s minimum wage and overtime requirements

Only workers performing work “on or in connection with” a covered contract must be paid $15 per hour and only for such work performed on or in connection with the contract.  The definition of “Worker” offers the following guidance:

A worker performs “on” a contract if the worker directly performs the specific services called for by the contract. A worker performs “in connection with” a contract if the worker’s work activities are necessary to the performance of a contract but are not the specific services called for by the contract.

For more information regarding the details of the proposed regulations, please read our Client Alert, which also covers federal contractor notice and record-keeping obligations, implications for tipped employees and comparisons to President Obama’s minimum wage regulations.

Public comments concerning the proposed regulations must be submitted no later than August 21, 2021 at www.regulations.gov and searching for Regulatory Information Number (RIN) 1235-AA41.

 

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Photo of Laura A. Mitchell Laura A. Mitchell

Laura Mitchell is a principal in the Denver office of Jackson Lewis P.C. and leads the firm’s Workplace Analytics and Preventive Strategies Pay Equity subgroup. She partners with employers to evaluate, develop and implement policies and practices that ensure workplace fairness while mitigating…

Laura Mitchell is a principal in the Denver office of Jackson Lewis P.C. and leads the firm’s Workplace Analytics and Preventive Strategies Pay Equity subgroup. She partners with employers to evaluate, develop and implement policies and practices that ensure workplace fairness while mitigating legal risk. Laura is a guiding force in the firm’s most specialized and technical practice areas where she leverages an analytics-focused approach to partner with her clients in building legally compliant programs around which they can anchor their workplaces achieving productivity and stability.

Laura understands that creating a competitive advantage for employers in today’s workplace involves using a data-driven approach to counsel companies on the development of proactive and equitable non-discriminatory practices in hiring, promotions, separations and pay—and where advancements in technology can create both opportunities for efficiencies and risk that can be measured. Committed to putting her clients’ organizational goals first and foremost while balancing legal risk, Laura views herself as an extension of her clients’ team, responsible for providing proactive guidance and engaging in transparent, ongoing communication. Staying the course with employers across their organizational journey while balancing legal compliance obligations throughout their employees’ lifecycle ensures Laura’s position as a go-to resource.

Laura works with companies across all industries—both new and well-established multi-national organizations of all sizes—to realize the combined vision of legal compliance, increased productivity and economic growth enhanced by a focus on pay equity.  As part of the pay equity journey, she advises employers on the evolving pay transparency landscape, working to align compliant practices with the practical realities of the business world.

Laura partners closely with government contractors to understand, implement and demonstrate compliance with their EEO regulatory and compliance obligations. She also works closely with non-government contractor clients to conduct risk assessments of their programs, policies, and training to align with federal and state anti-discrimination requirements.

Laura is the editor and a principal contributor of the GovCon Employment Exchange blog and presents on pay equity and government contractor obligations. To round out her days, Laura enjoys spending time with her family and friends attending sports events, working out, riding her bike, playing pickleball and taking in Colorado’s incomparable sunsets.