On Feb. 12, President Obama signed an executive order that raises the minimum wage for direct federal contractors to $10.10 per hour. Federally assisted contracts are not affected. The new mandate affects contracts entered into on or after Jan. 1, 2015.
The order also mandates that the Secretary of Labor determine a new minimum wage for federal contractors in 2016, and each year thereafter, based on the annual percentage increase in the Consumer Price Index (CPI) for urban wage and clerical workers. If the annual CPI percentage decreases, the minimum hourly wage rate will not decrease. Under this scenario, the president essentially places the minimum wage on auto-pilot without consideration for business conditions in 2016 and beyond.
How will this mandate work under federal, state and local prevailing wage laws? The order notes that it will not excuse noncompliance with such laws that have a higher minimum wage than that established in the order. However, it does not address what will happen when the order's minimum wage is above either federal, state or local laws' prevailing wage. It also does not shed light on how contracts issued under a pre-2015 multiple award contract will be impacted.
The executive order instructs the Secretary of Labor to issue regulations implementing this mandate by Oct. 1, 2014. Within 60 days of that, the Federal Acquisition Regulation (FAR) Council must issue regulations in the FAR to provide for inclusion of the minimum wage contract clause in direct federal solicitations and contracts.
For more information, please contact Jimmy Christianson at christiansonj@agc.org.
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