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Increasing the Minimum Wage for Federal Contractors rule (2022)

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The Increasing the Minimum Wage for Federal Contractors rule is a significant rule issued by the U.S. Department of Labor (DOL) effective January 30, 2022, that increased the minimum wage for federal contractors to $15 per hour.[1]

HIGHLIGHTS
  • Name: Increasing the Minimum Wage for Federal Contractors
  • Code of Federal Regulations: 29 CFR Parts 10 and 23
  • Agency: Wage and Hour Division, Department of Labor
  • Action: Final rule
  • Type of significant rule: Economically significant rule

    • Timeline

    The following timeline details key rulemaking activity:

    • January 30, 2022: The final rule took effect.[1]
    • November 24, 2021: DOL published the final rule.[1]
    • August 27, 2021: DOL closed the comment period.
    • August 4, 2021: DOL extended the comment period in response to a request made to extend the comment period.[2]
    • July 22, 2021: DOL published the proposed rule and opened the comment period.[3]
    • April 27, 2021: President Joe Biden (D) issued an executive order directing executive departments and agencies to increase the minimum wage for federal contractors to $15 per hour and directing the DOL secretary to issue regulations to implement the order.[4]

    Background

    The Obama administration issued an executive order on February 12, 2014, which increased the minimum wage for federal contractors to $10.10 per hour in an effort to improve what the order described as "economy and efficiency in Government procurement."[5]

    The Trump administration amended that executive order on May 25, 2018, to exclude seasonal recreational services on federal lands from the minimum wage. The order aimed to "ensure that the Federal Government can economically and efficiently provide the services that allow visitors of all means to enjoy the natural beauty of Federal parks and other Federal lands," according to the order.[6]

    President Joe Biden (D) issued an executive order on April 27, 2021, increasing the minimum wage for federal contractors to $15 per hour in what Biden described as an effort to further "promote economy and efficiency in procurement by contracting with sources that adequately compensate their workers." The action superseded the Obama administration's executive order from 2014 and revoked the Trump administration's executive order from 2018.[4]

    Summary of the rule

    The following is a summary of the rule from the rule's entry in the Federal Register:

    “ This document finalizes regulations to implement an Executive order titled 'Increasing the Minimum Wage for Federal Contractors,' which was signed by President Joseph R. Biden, Jr. on April 27, 2021. The Executive order states the Federal Government's procurement interests in economy and efficiency are promoted when the Federal Government contracts with sources that adequately compensate their workers. The Executive order therefore seeks to raise the hourly minimum wage paid by those contractors to workers performing work on or in connection with covered Federal contracts to $15.00 per hour, beginning January 30, 2022; and beginning January 1, 2023, and annually thereafter, an amount determined by the Secretary of Labor (Secretary). The Executive order directs the Secretary to issue regulations by November 24, 2021, consistent with applicable law, to implement the order's requirements. This final rule therefore establishes standards and procedures for implementing and enforcing the minimum wage protections of the Executive order. As required by the order, the final rule incorporates to the extent practicable existing definitions, principles, procedures, remedies, and enforcement processes under the Fair Labor Standards Act of 1938, the Service Contract Act, the Davis-Bacon Act, and the Executive order of February 12, 2014, entitled 'Establishing a Minimum Wage for Contractors,' as well as the regulations issued to implement that order.[1][7] ”

    Summary of provisions

    The following is a summary of the provisions from the final rule's entry in the Federal Register:[1]

    “ The Department's final rule, which amends Title 29 of the Code of Federal Regulations (CFR) by adding part 23 and modifying part 10, establishes standards and procedures for implementing and enforcing Executive Order 14026. Subpart A of part 23 relates to general matters, including the purpose and scope of the rule, as well as the definitions, coverage, and exclusions that the rule provides pursuant to the Executive order. It also sets forth the general minimum wage requirement for contractors established by the Executive order, an antiretaliation provision, a prohibition against waiver of rights, and a severability clause. Subpart B establishes requirements for contracting agencies and the Department to comply with the Executive order. Subpart C establishes requirements for contractors to comply with the Executive order. Subparts D and E specify standards and procedures related to complaint intake, investigations, remedies, and administrative enforcement proceedings. Appendix A contains a contract clause to implement Executive Order 14026. An additional appendix, which will not publish in 29 CFR part 23, sets forth a poster regarding the Executive Order 14026 minimum wage for contractors with FLSA-covered workers performing work on or in connection with a covered contract. The Department also finalizes a few conforming revisions to the existing regulations at part 10 implementing Executive Order 13658 to fully implement the requirements of Executive Order 14026 and provide additional clarity to the regulated community.[7] ”

    Rate of pay

    The following is a summary of the provisions regarding the rate of pay from the final rule's entry in the Federal Register:[1]

    “ Proposed § 23.220 addressed contractors' obligations to pay the Executive order minimum wage to workers performing work on or in connection with a covered contract under Executive Order 14026. Proposed § 23.220(a) stated the general obligation that contractors must pay workers the applicable minimum wage under Executive Order 14026 for all hours spent performing work on or in connection with the covered contract. The proposed section also provided that workers performing work on or in connection with contracts covered by the Executive order must receive not less than the minimum hourly wage of $15.00 beginning January 30, 2022.[7] ”


    The rule continued to address the matter of noncompliance:[1]

    “ Proposed § 23.220(a) explained that the contractor's obligation to pay the applicable minimum wage to workers on or in connection with covered contracts does not excuse noncompliance with any applicable Federal or state prevailing wage law, or any applicable law or municipal ordinance establishing a minimum wage higher than the minimum wage established under Executive Order 14026. This proposed provision would implement section 2(c) of the Executive order. 86 FR 22836.[7] ”

    Significant impact

    See also: Significant regulatory action

    An agency rule can be deemed a significant rule if it has had or might have a large impact on the economy, environment, public health, or state or local governments. The term was defined by Executive Order 12866, which was issued in 1993 by President Bill Clinton. The following is drawn from the rule to determine its classification as economically significant or significant for some other reason:[1]

    “ OIRA has determined that this final rule is economically significant under section 3(f) of Executive Order 12866.[7] ”

    Text of the rule

    The full text of the rule is available below:[1]

    Responses

    The following sections provide a selection of responses to President Biden's executive order calling for a $15 minimum wage for federal contractors and the subsequent rule issued by the DOL aimed at implementing the order.

    Responses to executive order

    Arizona Attorney General Mark Brnovich (R) issued a press release arguing that the initial executive order demonstrated an overreach of federal power:[8]

    “ [Biden's] minimum wage mandate is yet another example of attempted federal overreach that has become a pattern with this administration.[7] ”


    Five states (Arizona, Idaho, Indiana, Nebraska, and South Carolina) filed a complaint that the federal mandate violated the Procurement Act and the Spending Clause:[9]

    “ To be sure, the Executive Branch may have authority to set some provisions of contracts to ensure the contracts are performed efficiently. But the Procurement Act provides no clear notice to States that accepting federal contracting funds will require them to surrender their sovereignty over the wages that they pay their own workers. Nor does Congress have any power under the Spending Clause to impose a condition such as the Contractor Minimum Wage Mandate.[7] ”


    The White House issued a press release regarding the executive order, arguing that the mandate would encourage competitors to increase wages to aid in recruiting and retaining workers:[10]

    “ It will help improve the economic security of their families and narrow racial and gender disparities in income. In addition to directly lifting the wages of hundreds of thousands of contract workers, the executive order will have impacts beyond federal contracting, as competitors in the same labor markets as federal contractors may increase wages, too, as they seek to compete for workers. Employers may seek to raise wages for workers earning above $15 as they try to recruit and retain talent. And, research shows that when the minimum wage is increased, the workers who benefit spend more, a dynamic that can help boost local economies.[7] ”

    Responses to final rule

    U.S. Secretary of Labor Marty Walsh announced the final rule in Birmingham, Alabama among local officials and area workers and issued the following response:[11]

    “ Now, the federal government is doing its part to ensure that workers on federal contracts are earning a decent wage for the invaluable services they provide to keep our government running.[7] ”


    Connecticut Attorney General William Tong (D) released a statement in conjunction with a coalition of attorneys general to support the final rule, offering support for the increased minimum wage and the actions of the Department of Labor:[12]

    “ Working Americans should not live in poverty. That’s why we have adopted a $15 minimum wage here in Connecticut, and that’s why the Biden administration increased the minimum wage for federal contract workers. The Department of Labor was well within its legal authority to apply this important measure to all federal contract workers.[7] ”


    Associated Builders and Contractors (ABC) issued the following response in a press release following the final rule, arguing that the increased minimum wage would place a burden on contractors:[13]

    “ ABC is concerned with the Biden administration’s decision to ignore Congress’s authority and not establish a market-driven approach to wage determination. This rulemaking will create unnecessary confusion and needlessly increase the compliance burden on ABC member contractors that build America’s infrastructure and perform other federal or federally assisted work.[7] ”

    Noteworthy events

    District judge blocks federal contractor minimum wage increase, invokes major questions doctrine (2023)

    Judge Drew Tipton of the United States District Court for the Southern District of Texas on September 26, 2023, invoked the major questions doctrine in a decision that blocked a Department of Labor (DOL) rule increasing the minimum wage for federal contractors from being enforced in Texas, Louisiana, and Mississippi.

    President Biden issued Executive Order (EO) 14026 in April 2021 requiring the DOL to issue regulations increasing the minimum wage for federal contractors to $15 an hour. Texas, Louisiana, and Mississippi challenged the executive order and subsequent DOL rule, arguing in part that the order overstepped Biden’s statutory authority under the Procurement Act and that Congress has the authority to set the minimum wage.

    Judge Tipton ruled that President Biden did not have the authority to issue the executive order and based his ruling in part on the major questions doctrine—an administrative law principle that Congress must provide clear authorization to an agency before the agency can issue regulations on matters of economic or political significance. The judge agreed with the plaintiffs' argument that the executive order “presents an issue of vast economic and political significance,” and that the Procurement Act did not “[speak] clearly in granting the President the power to unilaterally raise the minimum wage of the employees of federal contractors.”

    The DOL, as of October 12, 2023, added a notice to their website stating that “the minimum wage requirements of the final rule implementing Executive Order 14026 are not currently being enforced as to contracts or subcontracts to which the states of Texas, Louisiana, or Mississippi (including their agencies) are a party,” as a result of the court order.[14]

    See also

    External links

    Footnotes

    1. ↑ 1.0 1.1 1.2 1.3 1.4 1.5 1.6 1.7 1.8 Federal Register, "Increasing the Minimum Wage for Federal Contractors," November 24, 2021
    2. ↑ Federal Register, "Increasing the Minimum Wage for Federal Contractors," August 4, 2021
    3. ↑ Federal Register, "Increasing the Minimum Wage for Federal Contractors," July 22, 2021
    4. ↑ 4.0 4.1 Federal Register, "Increasing the Minimum Wage for Federal Contractors," April 30, 2021
    5. ↑ Federal Register, "Establishing a Minimum Wage for Contractors," February 20, 2014
    6. ↑ Federal Register, "Exemption From Executive Order 13658 for Recreational Services on Federal Lands," June 1, 2018
    7. ↑ 7.00 7.01 7.02 7.03 7.04 7.05 7.06 7.07 7.08 7.09 7.10 Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
    8. ↑ Arizona Attorney General Mark Brnovich, "General Brnovich Leads Coalition in Lawsuit Challenging Biden's Illegal Minimum Wage Hike," February 8, 2022
    9. ↑ United States District Court for the District of Arizona, "Complaint for Declaratory and Injunctive Relief," accessed November 3, 2022
    10. ↑ The White House, "FACT SHEET: Biden-Harris Administration Issues an Executive Order to Raise the Minimum Wage to $15 for Federal Contractors," April 27, 2021
    11. ↑ U.S. Department of Labor, "ICYMI: SECRETARY WALSH STANDS WITH WORKERS IN ALABAMA TO ANNOUNCE FINAL RULE TO RAISE MINIMUM WAGE TO $15 FOR FEDERAL CONTRACT WORKERS," November 22, 2021
    12. ↑ The Office of the Attorney General William Tong, "Attorney General Tong Calls for Federal Contract Workers to Receive Fair Wages," May 9, 2022
    13. ↑ Associated Builders and Contractors, "ABC Responds to Biden Administration Federal Contractor Minimum Wage Increase," November 22, 2021
    14. ↑ Reuters, "Biden's $15 minimum wage for federal contractors blocked by US judge," September 7, 2023
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