As promised in his 2014 State of the Union address, President Obama has greenlighted a minimum wage increase for federal contract workers. The first step was the issuing of Executive Order 13658 – “Establishing a Minimum Wage for Contractors” – in mid-February. Nearly ten months later and after careful review of feedback from interested stakeholders, the Department of Labor announced a final rule raising the minimum wage from $7.25 to $10.10 an hour. The final rule, which is being deemed an important milestone in the broader movement for higher minimum wages, could impact nearly 200,000 American workers.
Due to this final rule, most federal contractors and subcontractors are required to display a new minimum wage poster as of January 1, 2015.
Without this latest poster on display, affected contractors will be out of compliance and vulnerable to penalties – including suspension or cancellation of federal contracts, as well as the debarring from future federal contracts.
In addition to requiring a new minimum wage poster in the workplace, the final rule provides guidance on the types of federal contracts and workers that are covered. It also outlines recordkeeping procedures for each worker, along with specifics on the appropriate rate of pay for tipped employees and disabled workers. Finally, the rule establishes an enforcement process that protects workers and ensures they receive the new $10.10 minimum wage.
“By raising the minimum wage for federal workers on federal contracts, we’re rewarding a hard day’s work with fair pay,” says U.S. Secretary of Labor Thomas E. Perez. “Boosting wages lowers turnover and increases morale, and will lead to higher productivity.”
What does the final rule mean for your day-to-day business operations? Here are a few guidelines to keep in mind:
- The minimum wage increase applies to new contracts and replacements for expiring contracts beginning on January 1, 2015
- Coverage includes four major categories: 1) contracts for construction under the Davis-Bacon Act (DBA); 2) contracts for services under the Service Contract Act (SCA); 3) concession contracts, such as those providing food, lodging, automobile fuel, souvenirs, newspaper stands and recreation equipment; and 4) contracts providing services, such as child care or dry cleaning, on federal property for federal employees or the general public
- A worker is defined as “any person engaged in performing work on or in connection with a covered contract,” including employees entitled to the minimum wage under the FLSA (also tipped employees and employees earning wages under special certificates), service employees under the SCA, and laborers and mechanics under the DBA
- There are only a few exemptions to the final rule, such as grants, contracts, and agreements with Native American tribes, procurement contracts for construction less than $2,000, and service contracts excluded under the SCA
- The $10.10 rate will be adjusted for inflation annually, beginning January 1, 2016
Federal Contractors and Subcontractors, be sure to start 2015 in full compliance! The federal contractor minimum wage poster is now available.
Did You Know?
In addition to the new minimum wage poster covered here, federal contractors need to be aware of seven separate employee notice requirements (PLUS two notices for contractors in the construction industry). These postings change frequently. In fact, there’s been at least one change every year for the past five years, with a handful of changes expected in 2015. Here’s a closer look:
Federal contractors with contracts over
Federal contractors with contracts over $10,000
for the manufacturing or furnishing of materials, supplies
and equipment to the federal contractors who provide
services to the federal government using service
employees with contracts over $2,500.