President Biden’s $15 hourly minimum wage for employees of federal contractors officially took effect on Sunday.
Biden announced this initiative shortly after taking office in January 2021, then followed up with an executive order in April. The final regulation, which was issued in November, will be indexed for inflation. It also eliminates the tipped minimum wage for federal contractors by 2024, ensures workers with disabilities don’t earn a sub-minimum wage and protects outfitters and guides working on federal lands, reversing a policy from the Trump administration.
“The $15 minimum wage required by Executive Order 14026 applies only to contracts entered into, renewed or extended (pursuant to an exercised option or otherwise) on or after Jan. 30, 2022,” Labor Department spokesperson Edwin Nieves told Government Executive on Thursday. “Despite recent litigation, the DOL is proceeding with the implementation of [the executive order].”
Government Executive reported on one legal challenge in December. The U.S. District Court for the District of Colorado denied the plaintiff’s request for a preliminary injunction on the rule on Jan. 24 and they appealed that decision last Wednesday.
“Contracting agencies will need to take appropriate implementing steps to ensure that covered contracts comply with the executive order’s requirements by, for example, incorporating the relevant contract clause into covered contracts,” Nieves continued.
More than 300,000 individuals will be impacted in the first year
To help contractors and contracting agencies prepare for implementation, the Labor Department’s Wage and Hour Division issued fact sheets, frequently asked questions and answers, a training video and other materials as well as hosted two virtual seminars last week. Also, training on the executive order will be included in the Wage and Hour Division’s prevailing wage seminars in the spring, said Nieves. The Labor Department estimated that 327,300 individuals will be affected in the first year of implementation.
Laura Mitchell, an attorney at Jackson Lewis P.C. who specializes in pay equity and government contracts, pointed out in an interview with Government Executive on Thursday that President Obama issued a similar executive order in 2014, so contractors and contracting agencies have experience with this.
“I think wages are always a potential issue,” she said. “However, for federal contractors part of the bid process is putting forth what your costs would be to complete the contract, so contractors have the ability to work into pricing labor, the cost of labor. So essentially, flowing through to the government any increased cost that they would incur by an increased minimum wage.” This potential issue is for small and large businesses.
Also, “it’s not as though everything happens on Jan. 30,” she said. “You could have a contract a year from now that would include this provision, so it’s really about monitoring the terms of any new contracts.”