Happy New Year... and a Friendly Reminder
Ringing in the New Year is often a time of reflection on the past year and a time of hope for a coming year of prosperity. And we wish you well!!
But with our wishes for a great new year, being lawyers we’ve just gotta nag you about something. So here goes…
The minimum wage rates applicable to the employee of many federal contractors went up effective January 1, 2023 if those employees work on (or in connection with) contracts covered by one of the Executive Orders. Given that these requirements apply to contracts covered by the Fair Labor Standards Act, pretty much every federal contract is covered.
The new wage rates are:
$16.20/hour or, for tipped employees, $13.75 per hour for contracts covered by the “new” Biden-era minimum wage provisions (specifically, Executive Order 14026).
$12.15/hour, or for tipped employees, $8.50 per hour for contracts covered by the “old” Obama-era minimum wage provisions (under Executive Order 13568).
At this point, a significant majority of contracts will be covered by the “new” Executive Order because Contracting Officers are obligated to add the new clause at the inception of a new solicitation or contract or upon the exercise of options for contracts that already were awarded before the Biden Executive Order went into effect. Nevertheless, you should check your contract to see if it has one of the clauses in it.
To do this, pull out your contract, go to Section I - Contract Clauses and look for a clause with the following number and title: 52.222-55 Minimum Wages for Contractor Workers Under Executive Order 14026 (Jan 2022). If that clause is in your contract, then it is subject to the Biden Executive Order wage rates. If, however, it has a clause with this number and title: 52.222-55 Minimum Wages for Contractor Workers Under Executive Order 13658 (Nov 2020) (or earlier), then it is covered by the Obama Executive Order wage rates.
If it does not have either of these clauses because the Contracting Officer dropped the ball and failed to update your contract, then your minimum wage rates will be those set forth in Wage Determinations included in your contract under either the Service Contract Act (“SCA”) or the Davis Bacon Act (“DBA”). For supply contracts covered by the Walsh Healy Public Contracts Act, your minimum wage rate is the FLSA hourly rate, presently $7.25 an hour. Bottom line—what’s in your contract establishes your duty with respect to requirements imposed by the laws and regulations applicable to federal contractors.
Finally, you have to figure out the highest minimum wage rate applicable to your personnel. It may come from an SCA or DBA wage determination if that rate is lower than the contractor minimum wage. But you also have to consider whether state or local minimum wages exceed the contractor minimum wages under the EOs. If they do – that’s the minimum wage that must be paid to your employees in that jurisdiction regardless of what your contract requires. Presently, there are a few jurisdictions (e.g., the cities of Seattle, San Francisco, and Denver) where the minimum wage rates exceed the Biden order rate of $16.20 an hour. A number of state and local jurisdictions have minimum wages that exceed the Obama order rate of $12.15 an hour.
With new rates, come new posters, so as we pointed out in a blog in November, make sure you update the posters that are required by the Department of Labor to provide notice of their wage rates and other rights.
One final note, contractors that have fixed price contracts may be entitled to a price adjustment under the contractor minimum wage clauses (see, e.g., FAR 52.222-55(b)(3)). These price adjustment clauses may entitle you to an adjustment measured by the difference between the new wage rate and the rate you’re actually paying regardless of what’s presently required. Thus, if you’re paying $15.50 per hour, you may get an adjustment to cover the $.70 difference you’ll incur when you start paying $16.20 per hour under the New EO.
Once again, we wish you a Happy (and compliant) New Year.