On November 22, 2021, Secretary Walsh announced that the U.S. Department of Labor’s Wage and Hour Division published the final rule to implement President Joe Biden’s April 27, 2021, Executive Order 14026, which increases the hourly minimum wage for thousands of federal contractors and subcontractors from $10.95 per hour to $15.00 per hour, effective January 30, 2022.
This rule helps to improve the efficiency of federal contracting by increasing productivity, minimizing turnover and helps to lower training costs. As a result of Executive Order 14026, increased wage growth will assist to reduce income disparity and provide additional income security to federal contract workers and subcontractors.
This rule establishes standards and processes for implementing and enforcing minimum wage safeguards for certain federal contracts; it imposes additional requirements, such as:
- Raises the hourly minimum pay to $15.00 per hour for certain federal contractors and subcontractors.
- Adjusts the minimum wage according to the measure of inflation in future years.
- Eliminates the tipped minimum wage (currently, $7.65 per hour) for federal contractors and subcontractors by 2024.
- Establishes a $15.00 per hour minimum wage for workers with disabilities who work on or in connection with covered contracts.
- Restores minimum wage protections to those working on federal lands.
However, the rule excludes certain contracts, such as federal grants, contracts or agreements with American Indian Tribes under the American Indian Self-Determination and Education Assistance Act, contracts not performed in the United States and contracts that are excluded from coverage under the Service Contract Act (SCA) or Davis-Bacon Act (DBA).
The new minimum wage rule will apply to new contracts, new solicitations and extensions or renewals of existing contracts on or after January 30, 2022. In addition, the final rule strongly suggests that agencies reflect the new requirements in existing contracts that were in effect prior to January 30, 2022. Starting January 1, 2023, and annually thereafter, the minimum wage amount will be determined by the Secretary of Labor.
About The Author
Susan T. Yohn, SPHR, SHRM-SCP is the Director of Human Resources. She manages all areas of the HR Department as well as consults with clients on topics including, but not limited to: recruitment, orientation, employee relations, compliance with HR related laws, employee benefit plans, Family and Medical Leave Act (FMLA) and Workers’ Compensation.
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