DOL Issues Proposed Rule on Minimum Wage Increase for Federal Contractors

Final rule will be issued by November 24, 2021

As we previously reported President Biden issued an Executive Order (E.O.) raising the minimum wage to $15 per hour for all companies holding federal contracts or subcontracts with agencies of the U.S. government. On July 21, 2021, the Department of Labor (DOL) issued a proposed rule to implement President Biden’s Executive Order for all employees, except tipped employees who must be paid $10.50 per hour.   The increases must be made by January 30, 2022, with annual increases beginning in 2023 to account for inflation. The requirement will apply to new contracts issued on or after January 30, 2022, or existing contracts renewed or extended on or after that date.

The Proposed Rule requires the new minimum wage requirements to apply to and be incorporated into all “new contracts” with government agencies beginning January 30, 2022. This excludes contracts where the solicitation pre-dates January 30, 2022, and the contract is entered into between January 20, 2022, and March 30, 2022, but renewals, extensions, and exercised options during this time period seem to be subject to the increased wage requirement. The Proposed Rule does not apply to grants or to employees who are exempt from the minimum wage requirement of the FLSA and student workers.

Other than the increase to $15 per hour, this E.O. is almost identical to the E.O. 13658 issued by President Obama in 2014.

The final rule will be issued by November 24, 2021, and the DOL’s Wage and Hour Division will be responsible for enforcement.