President Biden recently signed an executive order (EO) that will increase the minimum wage rate to be paid to workers performing work on or in connection with a federal contract from $10.95 per hour to $15.00 per hour beginning January 30, 2022.

The EO states that federal executive departments and agencies shall, to the extent permitted by law, ensure that contracts and contract-like instruments include a new wage clause that the contractor and any covered subcontractors shall incorporate into lower-tier subcontracts. This clause shall specify that, as a condition of payment, the minimum wage to be paid to workers employed in the performance of the contract or any covered subcontract thereunder shall be at least $15.00 per hour, beginning January 30, 2022. Then, beginning January 2, 2023, and annually thereafter, the secretary of labor shall determine whether any cost-of-living increase to the hourly rate is required.

The EO further states that the secretary shall issue implementing regulations by November 24, 2021, and that within 60 days of the secretary issuing such regulations, the Federal Acquisition Regulatory Council shall amend the Federal Acquisition Regulation to provide “for inclusion in Federal procurement solicitations, contracts, and contract-like instruments subject to this order the clause described” above.

Finally, the EO states that, where a contract or contract-like instrument is governed by the Service Contract Act or the Davis-Bacon Act, the order “shall apply only to contracts or contract-like instruments at the thresholds specified in those statutes.” For contracts covered by the Fair Labor Standards Act, that act applies when the contract value exceeds the micro-purchase threshold. Because the applicability thresholds for these acts are low — $2,500, $2,000, and $10,000, respectively — the wage rates established by these laws generally shall apply, assuming the wage rates are higher than $15.00 per hour.