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Final Rule for Minimum Wage Increase

October 23, 2014

As anticipated, on October 1, 2014 the U.S. Department of Labor (DOL) issued final rule (RIN 1235-AA10) that implements Executive Order 13658, increasing the federal minimum wage for contract workers to $10.10 an hour beginning in January 2015. The final rule has significant implications for employers with workers who will perform work under covered federal contracts or subcontracts.

The final rule identifies important terms used in the Executive Order. It also provides assistance for contractors on their obligations under the Executive Order, including a thorough description of the types of covered contracts, including those covered by the Davis-Bacon Act and the Service Contract Act, as well as concession contracts or any contract in connection with a Federal property when used to provide services to Federal employees.

President Obama signed Executive Order 13658, “Establishing a Minimum Wage for Contractors” in February stating that its intent was to “increase efficiency and cost savings in the work performed by parties that contract with the federal government.”

However, when analyzing the effect of the increase the DOL found that almost 200,000 employees will be receiving a wage increase in 2015 and that means employers who need to cover those $100.2 million of additional wages will likely be passing the costs back to the federal government through higher bids on contract work.

Employers should be watchful about checking whether their contracts will be subject to the terms of the final rule which will apply to new contracts with the federal government as well as with replacements for expiring contracts that result from solicitations issued on or after Jan. 1, 2015 and to contracts that are awarded outside the solicitation process on or after Jan. 1, 2015.