The White House and the Department of Labor (DOL) released a proposed rule that would raise the minimum wage for employees under federal contracts from $7.25 to $10.10 per hour, a 39% increase. The proposed rule implements Executive Order 13658, Establishing a Minimum Wage for Contractors, which was signed by President Obama on February 12, 2014. That order applies to new and renegotiated contracts starting January 1, 2015.

The proposed rule estimates that wages for nearly 200,000 workers will be affected and applies to Davis-Bacon Act construction contracts, service contracts covered by the Service Contract Act, concession contracts and contracts to provide services in federal buildings (e.g., child care services). The new hourly wage would go into effect on January 1, 2015 and would be subject to annual increases beginning January 1, 2016, as determined by the Secretary of Labor. Tipped employees of government contractors and their subcontractors also would receive a raise under the proposed rule, which seeks to raise the current federal tipped minimum wage of $2.13 per hour to $4.90. Thereafter, the order increases that base by $0.95 per year until it reaches 70% of the regular minimum wage. If a worker's tips on top of the minimum do not add up to $10.10 per hour, the federal contractor will be required to make up the difference.

Consistent with the Order, the proposed rule incorporates existing procedures, remedies and enforcement process under the Fair Labor Standards Act, Service Contract Act, and Davis Bacon Act. Specifically, the Department of Labor's Wage and Hour Division will have overall responsibility for enforcing the rule, including conducting investigations and informal complaint resolution. Remedies include payment of back wages and specific debarment authority "if the Administrator determines that a contractor has disregarded its obligations to workers" under the new wage requirements.

The White House has encouraged all interested parties to view the proposed rule and submit comments at http://www.regulations.gov (Regulation Identification Number 1235-AA10) Comments must be received on or before July 17, 2014. The final version of the rule is expected to be released by October 1, 2014.