Oct 03, 2014

Department of Labor to Publish Final Rule Implementing Executive Order on Minimum Wage for Contractors

As we reported in an SGR client alert earlier this year, President Barack Obama signed Executive Order 13658 on February 12, 2014,increasing the federal minimum wage to $10.10 per hour for workers of federal contractors and subcontractors, an increase of 39 percent from the current minimum wage of $7.25 per hour. Executive Order 13658 also determined that starting in 2016, increases to the minimum wage for federal contractors will be tied to the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers. The Order also increased the wage for tipped workers of federal contractors and subcontractors, as well as for individuals with disabilities who are employed by federal contractors and subcontractors and currently paid less than others doing the same job. The Order directed the Department of Labor to promulgate regulations to implement the new minimum wage and other provisions in the Order.

The Department of Labor published a Notice of Proposed Rulemaking on June 17, 2014 to receive comments from the public regarding its proposed regulations to implement Executive Order 13658. On October 1, 2014, the Department of Labor announced a Final Rule implementing the executive order to be published in the Federal Register on October 7, 2014. The Final Rule provides guidance to federal contractors and subcontractors on how to determine whether their workers are covered by Executive Order 13658, as well as setting forth recordkeeping requirements. The Final Rule also sets forth certain limited exclusions from the coverage of Executive Order 13658, including exclusions for workers who are exempt under the Fair Labor Standards Act and for workers  who spend less than 20 percent of their time in a workweek performing work “in connection with” a covered government contract. Finally, the Final Rule defines terms used in the Executive Order and institutes a method for enforcing the Executive Order by filing complaints with the Wage and Hour Division.

The Executive Order is likely to have a significant financial impact on contractors and subcontractors with minimum wage workers on federal contracts and is expected to benefit approximately 200,000 workers. Going forward, federal contractors and subcontractors should factor the new minimum wage requirements into future contract bids. When published, the Final Rule implementing Executive Order 13658 may be found here.

If you have any questions regarding these issues, please contact your Labor and Employment counsel at Smith, Gambrell & Russell, LLP.

This client alert is intended to inform clients and other interested parties about legal matters of current interest and is not intended as legal advice.


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