Executive Summary: The Department of Labor (DOL) has announced that the minimum wage for employees performing work on certain federal contracts will increase to $10.20 per hour beginning January 1, 2017. Additionally, the minimum cash wage that generally must be paid to tipped employees of covered federal contractors will increase to $6.80 per hour effective January 1, 2017. This increase is in accordance with the requirements of Executive Order 13658, Establishing a Minimum Wage for Contractors, signed by President Obama on February 12, 2014.

EO 13658 originally increased the minimum wage rate for covered federal contracts to $10.10 per hour, effective January 1, 2015. It also authorized the DOL to make an annual determination of the minimum wage rate for subsequent years, beginning January 1, 2016. Accordingly, the DOL increased the minimum wage rate to $10.15 per hour and increased the minimum cash wage that must be paid to tipped employees to $5.85, effective January 1, 2016. The 2017 increase was announced in compliance with the EO’s mandate to adjust the minimum wage rate annually.

As discussed in our October 28, 2014 alert, the minimum wage requirements apply to procurement contracts for construction covered by the Davis-Bacon Act (DBA); service contracts covered by the Service Contract Act (SCA); concessions contracts, including any concessions contract excluded from the SCA by the Department of Labor's regulations at 29 CFR § 4.133(b); and contracts in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public. The wages of workers under such contracts must be governed by the DBA, the SCA, or the Fair Labor Standards Act (FLSA).