Overview
On April 27, 2021, the Biden administration issued an executive order requiring a minimum wage of $15.00 per hour under covered federal contracts and subcontracts. The executive order supersedes Executive Order 13658, which raised the minimum wage to $10.95.
The $15.00 minimum wage rate broadly applies to “those workers working on or in connection with” the performance of the following types of federal contracts and subcontracts, where the wages of workers are governed by the Fair Labor Standards Act:
- Procurement contracts or contract-like instruments for services or construction.
- Concession contracts.
- Contracts related to federal property or lands and the offering of services for the general public, federal employees, and their dependents.[1]
For service contracts and construction contracts covered by the Service Contract Act and the Davis-Bacon Act, respectively, the executive order applies only to contracts or contract-like instruments at the thresholds specified in those statutes (Service Contract Act - $2,500; Davis Bacon Act - $2,000).
Beginning January 30, 2022, all federal agencies must incorporate the $15.00 minimum wage in new contract solicitations. In addition, agencies must implement the wage into any existing contracts if they are extended or renewed. Beginning January 1, 2023, and annually thereafter, the Secretary of Labor will determine adjustments to the minimum wage consistent with the adjustment methodology provided in the executive order, and the new minimum wage will be published at least 90 days before taking effect.
The executive order directs the Department of Labor to issue proposed regulations for comment by November 24, 2021.
To take effect, the executive order’s minimum wage requirements must be implemented into regulations and then into the applicable contracts. However, contractors should closely review solicitations and contract modifications now. For all existing contracts, contract-like instruments, and solicitations issued between the date of the executive order (April 27, 2021) and its implementation date (January 30, 2022), the executive order “strongly encourage[s]” agencies “to the extent permitted by law, to ensure that the hourly wages paid under such contracts or contract-like instruments are consistent with the minimum wages specified.”
Federal contractors with one or more of these federal contracts or subcontracts should start preparing to ensure that appropriate compensation adjustments are put in place prior to the January 30, 2022 implementation of this executive order or the renewal of applicable contracts.
Steptoe & Johnson will continue to monitor the implementation of the executive order and anticipated regulations.
[1] The executive order revokes Executive Order 13838, which exempted minimum wage requirements for contracts related to recreational services on federal lands.
