The Push to Increase Minimum Wage for Federal Contractors Could Be Confusing
A proposed rule of the U.S. Department of Labor’s Wage and Hour Division to raise the minimum wage for workers of federal contractors to $15.00 per hour from the current $10.95 could cause confusion for federal contractors already paying more than that.[1] The proposal stems from a presidential executive order issued last April.[2] If the rule is enacted, the wage increase would begin January 30, 2022.[3] Then, beginning on January 1, 2023, the Secretary of Labor would have discretion to raise annually the minimum wage according to inflation[4] to the nearest multiple of $0.05.[5]
According to the Executive Branch, the change will “promote economy and efficiency in [federal] procurement by contracting with sources that adequately compensate their workers.”[6] During the rule’s comment process, however, groups representing federal contractors in various industries expressed concerns about the potential for an increased regulatory burden on firms already required to pay “prevailing wages” that likely exceed the proposed new minimum wage. One such comment came from Associated Builders and Contractors (ABC).[7]
ABC is a national construction industry trade association representing more than 21,000 members.[8] Many members are government contractors required to comply with existing federal contractor minimum wage provisions of the Davis-Bacon Act (DBA) and/or the Service Contract Act (SCA), in addition to the Fair Labor Standards Act.[9]
“At a minimum,” the organization contends, “the Department [of Labor] should conform the proposed new minimum wage to the existing requirements of DBA and SCA in order to avoid confusion and unnecessary burden on government contractors.”[10] ABC points out that, for example, one section of the proposed rule states that it does not cover contracts for suppliers under the Public Contracts Act, while another section “indicates that the proposed rule does apply to subcontractors performing work for a prime contractor covered by the DBA or SCA, at whatever tier.”[11] ABC calls for “[a]dditional clarification of these potentially conflicting requirements[.]”[12]
While ensuring the workers of federal contractors are adequately paid is laudable, as the ABC comment shows there are many intertwining laws and regulations the proposed new rule may affect and potentially disrupt. The Department of Labor received over 275 comments, many of them echoing ABC’s assertion that raising the minimum wage for workers of federal contractors with a single sweeping gesture is not as simple as it sounds.
The Takeaway
The Labor Department’s proposed new rule to increase minimum wage for workers of federal contractors could change between now and its proposed effective date, January 30, 2022. Campbell Litigation, P.C. will continue monitoring the proposed rule. You can follow developments at www.federalregister.gov/documents/2021/07/22/2021-15348/increasing-the-minimum-wage-for-federal-contractors.
[1] Dept. of Labor Proposed rule “Increasing the Minimum Wage for Federal Contractors,” available at www.federalregister.gov/documents/2021/07/22/2021-15348/increasing-the-minimum-wage-for-federal-contractors, last visited September 1, 2021. The federal minimum wage for all other covered, non-exempt workers is $7.25/hour. See www.dol.gov/general/topic/wages/minimumwage, last visited September 1, 2021.
[2] Id.
[3] Id.
[4] Specifically, “the annual percentage increase in the Consumer Price Index (CPI) for Urban Wage Earners and Clerical Workers (United States city average, all items, not seasonally adjusted) (CPI-W), or its successor publication, as determined by the Bureau of Labor Statistics.” Id.
[5] Id.
[6] Exec. Order no. 14026, April 27, 2021, available at www.federalregister.gov/documents/2021/04/30/2021-09263/increasing-the-minimum-wage-for-federal-contractors, last visited September 1, 2021.
[7] Comment WHD-2021-0004-0252 by Associated Builders and Contractors, August 27, 2021, available at www.regulations.gov/comment/WHD-2021-0004-0252, last visited September 1, 2021.
[8] Id. at p. 1.
[9] Id., p. 2. See 40 U.S.C. § 3142, 41 U.S.C. § 6702, and 29 U.S.C. § 206.
[10] ABC Comment, supra, at p. 7.
[11] Id. at p. 9 (emphasis added), citing 86 Fed. Reg. 38828 and 86 Fed. Reg. 38821. The comment also examines the proposed rule’s potential impact on, among other things, employee classifications, use of fringe benefits as a component of meeting minimum wage obligations, and payment of apprentices. ABC Comment at pp. 7–9.
[12] Id. at p. 9.