Federal Contractors Minimum Wage in 2022

Two executive orders are set to increase the federal minimum wage for federal contractors beginning in January 2022. Under former President Obama’s Executive Order 13658, “Establishing a Minimum Wage for Contractors,” covered employees will see a pay increase from $10.95 per hour to $11.25 per hour as of January 1, 2022. Additionally, tipped employees performing work on or in connection with covered contracts must be paid a minimum cash wage of $7.90 per hour beginning January 1, 2022.

For new, renewed, and extended covered contracts entered on or after January 30, 2022, a higher minimum wage rate of $15 per hour will apply under President Biden’s Executive Order 14026, “Increasing the Minimum Wage for Federal Contractors.” These contracts include agreements in which the federal government exercises a unilateral option. The U.S. Department of Labor expects some 327,300 contract workers will be entitled to this higher pay rate.

 

What Federal Contracts Are Covered?

Although there may be a few changes when the regulations are finalized by November 24, 2021, the proposed rules interpret the term “contract” broadly to include “subcontracts, lease agreements on federal property, licenses, permits, and other forms of agreement between the U.S. government and private-sector businesses.”

The increased minimum wage will apply to all workers for the following types of contracts:

• procurement contracts for construction covered by the Davis-Bacon Act, but not the Davis-Bacon Related Acts;
• Service Contract Act (SCA) covered contracts;
• concessions contracts, in which the federal government grants a right to use Federal property, including land or facilities, for furnishing services, such as food, lodging, automobile fuel, souvenirs, newspaper stands, and/or recreational equipment; and
• contracts related to federal property and the offering of services to the general public, federal employees, and their dependents.

The Executive Order does not apply to any of the following:

• grants;
• contracts with Indian Tribes under the Indian Self-Determination and Education Assistance Act; or
• contracts for the manufacturing and furnishing of materials, supplies, articles, or equipment to the federal government.

The requirement will apply to workers in the 50 states, the District of Columbia, Puerto Rico, the Virgin Islands, outer Continental Shelf lands, American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, Wake Island, and Johnston Island.

 

Which Workers Are Entitled to the Increased Minimum Wage?

The federal contractor minimum wage applies only to those working “on or in connection with” a covered federal contract or subcontract. A worker works “on” a covered contract when the work is called for by the contract. A worker works “in connection with” a covered contract when the work activities are “necessary to the performance of a covered contract but . . . are not directly engaged in performing the specific services called for by the contract itself.”

If less than 20% of a worker’s time in any given week is spent working “in connection with” a covered contract, then the increased minimum wage does not apply.

 

How Are Posting Requirements Affected?

Every company with contracts with a federal government entity, regardless of its location, must post certain labor law posters to comply with federal law. These posters must be displayed at every building where employees work on a federal contract and in a conspicuous location where employees can see them readily, such as a breakroom or locker room.

For large projects with workers in various locations, there will need to be multiple postings to ensure their visibility. For remote workers, the federal contractor should send the federal and state posters electronically.

Posters may also need to be displayed in different formats to ensure all workers are accommodated. If a significant number of employees do not speak English as their first language, the employer must display posters in additional languages. If one or more workers are sight-impaired, then the employer may be required to provide the poster in Braille.

Bear in mind that there may be additional labor law posting requirements from state and local laws.

Poster Compliance Center is the go-to source for up-to-date federal contractor labor law posters, plus state-specific labor law posters, to ensure you meet your legal requirements. Check out our website for more details, or get in touch if you have any questions.