Executive Order Raises Minimum Wage For Government Contractor Employees

On April 27, 2021, President Biden announced an executive order that raises the minimum wage for non-tipped employees of federal government contractors and subcontractors to $15 per hour beginning on January 30, 2022.  Significantly, the executive order requires the minimum wage to be increased annually by an amount determined by the U.S. Department of Labor (DOL) and based on the Bureau of Labor Statistic’s Consumer Price Index.

Under the executive order, the minimum wage for tipped employees of federal government contractors and subcontractors increases to $10.50 per hour on January 30, 2022, and increases, on January 30, 2023, to 85% of the minimum wage for non-tipped employees.  Beginning on January 30, 2024, the minimum wage for tipped employees of contractors and subcontractors will be the same as the minimum wage for non-tipped employees.

The executive order requires DOL to issue regulations by November 24, 2021, in order to implement the executive order’s requirements. The executive order also requires the Federal Acquisition Council to amend the Federal Acquisition Regulation (FAR) within 60 days of the issuance of the DOL regulation in order to ensure that government contracts entered into after January 30, 2022 comply with the minimum wage requirements.

The executive order does not apply to federal government grants, but will apply to new solicitations on or after January 30, 2022, and to new government contracts, government contract extensions and government contract renewals entered into on or after January 30, 2022.  It will also apply to the exercise of options on or after January 30, 2022, on contracts for services or construction, on contracts for services covered by the Services Contract Acts, on contracts for concessions, and on certain contracts with the Federal government in connection with Federal lands or property, if the workers are covered by the Fair Labor Standards Act, the Services Contract Act, or the Davis-Bacon Act. 

As for employees under existing federal government contracts, the executive order strongly encourages agencies to ensure that wages paid to employees of contractors and subcontractors are consistent with the executive order.

To read the executive order, go here.

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