This month, the United States Department of Labor (“DOL”) issued a Final Rule establishing a minimum wage of $10.10 per hour for certain federal contractors beginning January 1, 2015. The rule implements Executive Order 13658 signed by President Obama earlier this year. The Final Rule applies to:
- Procurement contracts for construction covered by the Davis-Bacon Act;
- Service contracts covered by the Service Contract Act;
- Concession contracts such as those to furnish food, lodging, fuel, etc.;
- Contracts entered into in connection with federal property; and
- Contracts entered into in connection with offering services for Federal employees, their dependents, or the general public (e.g., childcare).
The language of the Final Rule is particularly important as it covers all “contracts” and “contract-like instruments.” As the DOL explained, the proposed definition is intentionally all encompassing and could apply to an expansive range of different types of legal arrangements. According to the Final Rule, the same test for determining the application of the Executive Order to prime contracts also applies to determination of whether a subcontract is covered, subject only to the value threshold requirements set forth in the Service Contract Act and Davis-Bacon Act.
The Final Rule has unsurprisingly been met with both criticism and praise. Those criticizing the rule suggest that the Final Rule’s scope goes beyond the Executive Order with regard to coverage of certain employees who don’t work directly on a contract but may qualify as working under a “contract-like” arrangement. This lack of clarity, some argue, could lead to a host of problems. Supporters of the rule cite many of the same benefits proffered by proponents of raising the national minimum wage—higher wages lead to lower employee turnover while increasing the standard of living and worker productivity rates.
The $10.10 minimum wage applies to new contracts with the federal government that result from solicitations issued on or after January 1, 2015. As such, contractors bidding for contracts potentially affected by the new rule should take into account the new minimum wage in estimates and bids for federal government work.
Image Courtesy of Flickr (licensed) by Nick Acres