In mid-February, President Obama followed through on his State of the Union promise by signing an Executive Order hiking the minimum wage for employees of certain federal contractors and subcontractors (government contractors). Beginning January 1, 2015, government contractors entering into new or amended federal construction or service contracts will be required to pay their employees a minimum wage of at least $10.10 per hour. The Executive Order also raises the minimum hourly wage for federal contractors’ tipped employees to at least $4.95 per hour.
In addition, all prime construction or service contracts entered into on or after January 1, 2015 will include a clause specifying the new minimum wage to be paid. Government contractors who enter into covered contracts must pass down the new wage requirements to subcontractors by including a similar clause in any subcontract related to the prime contract. After 2015, the minimum wage can be increased based on the Consumer Price Index for Urban Wage Earners and Clerical Workers. However, the Executive Order does not relieve government contractors from complying with other prevailing wage laws that impose a higher minimum wage for employees. As a result, government contractors must pay employees the highest of any applicable minimum wage requirement.
While the Executive Order only applies to a government contract or subcontract for construction or services that is entered into, amended or renewed on or after January 1, 2015, existing government service and construction contractors should prepare for these new wage requirements. All employers should also continue to monitor state wage laws and make certain that they comply with any provisions requiring a higher wage for workers.
The Executive Order indicates that the Department of Labor should issue regulations to implement the requirements no later than October 1, 2014. Thompson Hine will continue to monitor the situation and will provide additional information once those regulations are issued.