If you’re a federal contractor, you’ve probably seen the headlines – on July 22, 2021, the U.S. Department of Labor (DOL) issued a Notice of Proposed Rulemaking outlining how it wants to enforce Executive Order 14026, Increasing the Minimum Wage for Federal Contractors. But what exactly does this mean? President Biden tasked the DOL with creating regulations to increase minimum wage to $15/hr. for federal contractors beginning January 30, 2022, and to increase for inflation thereafter. He also asked for regulations to eliminate the tip credit by 2024 (which does not affect Minnesota employers as we are not allowed to take a tip credit under Minnesota law).

Accordingly, the DOL has until November 24, 2021 to issue final regulations to implement the order’s requirements.  At this point, the DOL has taken the first step by issuing the Notice of Proposed Rulemaking (this is like a “draft” for everyone’s review). Accordingly, once the timeline for comments closes (August 23, 2021), the DOL will review the comments make any changes it feels are prudent, then finalize for the final rule to be published.

At this point, federal contractors will want to review the notice and keep an eye on the final rule (which must be published by November 24, 2021).  For example, determine whether it will even apply to your business and/or which employees. Just because your company may  be a federal contractor does not mean this automatically applies to your business (or all your employees). For example, the proposed rules provide, “This part does not apply to contracts for the manufacturing or furnishing of materials, supplies, articles, or equipment to the Federal Government…”  It will also be applicable only to workers who spend more than 20% of their time performing “on” or “in connection with covered contracts”. However, in an example, the DOL suggests wide coverage with it’s interpretation of “in connection with” – stating that a payroll clerk would be performing covered work “in connection with” a covered contract as their work would be necessary to the performance of the contract.

Also – keep in mind that the minimum wage will only be applicable to new contracts on or after January 30, 2022 (or renewed, extended or optioned contracts thereafter). The government contracting agency will be required to include notice of this requirement in all covered contracts and solicitations. Thus, for new contracts, it should be crystal clear; in renewals or options, if it is not clear, ask the contracting agency to confirm whether it applies (and get it in writing). Though you can’t rely on that (yes, the government can screw up), it can be used as a good faith argument to avoid a willful violation claim.

In sum, I think I said a whole lot of nothing: There is a rule that is coming requiring federal contractors to pay $15/hr. minimum wage on or after January 30, 2022, that may apply to your business (or not), may apply to some or all employees (or not), and we don’t know exactly how it will work, but it might work as proposed, or it may change. You’re welcome!