The Biden administration has announced its Final Rule directing federal contractors to pay their workers a $15 minimum wage starting next year.
The Final Rule, effective January 30, 2022, establishes standards and procedures for implementing and enforcing the minimum wage protections of Executive Order 14026 (Order). Additionally, it sets forth an anti-retaliation provision, a prohibition against waiver of rights, and a severability clause. Finally, the Final Rule specifies procedures related to complaint intake, investigations, remedies, and administrative enforcement proceedings.
Background:
On April 27, 2021, President Joe Biden issued the Order directing an increase in the minimum wage for certain federal contractors to $15.00 per hour for new or renewed contracts beginning January 30, 2022. In addition, the Order stipulates that the minimum cash wage for tipped employee will increase to $10.50 per hour on the same timeline and conditions (for new or renewed contracts).
As of January 1, 2023, the required minimum wage may be adjusted each year by the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers.
The Order also phases out the tipped minimum wage for certain federal contractors according to the following schedule:
- Beginning January 30, 2022, federal contractors must pay tipped workers $10.50 per hour.
- Beginning January 1, 2023, federal contractors must pay tipped workers 85% of the required minimum wage.
- Beginning January 1, 2024, federal contractors must pay tipped workers the required minimum wage.
If a tipped worker’s hourly wages and tips do not amount to the higher minimum wage, the federal contractor must increase the hourly wage to make up the difference.
The minimum wage for workers performing work on covered federal contracts is currently $10.95 per hour and the tipped minimum wage is $7.65.
Compliance Recommendations:
Federal contractors should ensure compliance with the Final Rule, which can be found here. Please contact your dedicated service professional with any questions.