On October 7, 2014, the Department of Labor (“DOL”) published its Final Rule, 79 Fed. Reg. 60633, implementing Executive Order (EO) 13658’s new minimum wage requirements for government contractors and subcontractors. While addressing the nation in the January 2014 State of the Union Address, President Obama stated his intention to issue an EO that would “requir[e] federal contractors to pay their federally-funded employees a fair wage of at least $10.10 an hour.” Shortly thereafter, President Obama issued EO 13658, setting the new federal contractor minimum wage at $10.10, and tasking the secretary of the DOL with the responsibility of publishing new implementing regulations. In an earlier June 2014 post, we discussed the DOL’s then-proposed rule and its potential reach and applicability, as well as the potential pitfalls for contractors who ignore this new regulatory development. Since then, the DOL has wrapped up its notice and comment period, and put forth its Final Rule.
Scope
The DOL’s Final Rule applies to new and replacement federal contracts that arise from solicitations issued on or after January 1, 2015, or contracts awarded on or after January 1, 2015. Contractors engaging in business under any of the following four contractual categories will come under the provisions of the new regulations:
- Procurement contracts for construction under the Davis-Bacon Act (DBA)
- Service contracts under the Service Contract Act (SCA)
- Concessions contracts, including any concessions contract excluded from the SCA by the Department of Labor’s regulations at 29 CFR 4.133(b)
- Contracts related to federal property or lands and related to offering services for federal employees, their dependents, or the general public
New Obligations
Contractors and subcontractors are now subject to certain new obligations. For example, any covered lower-tiered subcontract must include the Executive Order contract clause informing parties of the new minimum wage. Additionally, contractors and subcontractors must assure notification of the new applicable minimum wage rate to all workers performing on or in connection with a covered contract.
The Final Rule also imposes new recordkeeping obligations that may cause some administrative headaches. For example, if a covered contractor during any workweek is not exclusively engaged in performing covered contracts, the contractor must record the time spent on covered contracts apart from time worked on contracts not covered. Further, contractors with covered contracts are required to maintain records of each worker’s occupation or classification and the total wages paid.
Enforcement
The Final Rule provides regulations authorizing agency investigations and administrative hearings when necessary. Generally, enforcement procedures and remedies under these regulations will be based on the text of the Federal Labor Standards Act (FLSA), SCA, and DBA.