Like prior EO 13658, not all employees of covered employers would be entitled to EO 14026’s minimum wage protections.
On July 22, 2021, the U.S. Department of Labor (DOL) published a Notice of Proposed Rulemaking (NPRM) implementing President Biden’s April 27, 2021, Executive Order 14026 “Increasing the Minimum Wage for Federal Contractors,” which increases the minimum wage for employees of certain federal contractors to $15 per hour (and to $10.50 per hour for tipped employees) effective January 30, 2022. The executive order goes into effect on January 30, 2022, and includes several significant expansions of the Obama-era Executive Order 13658 on which it is based. The executive order does not cover employers who are not federal contractors and only covers federal contractors who have certain categories of federal contracts.
Prior Executive Order 13658
Prior EO 13658 covers certain categories of federal government contracts under which workers’ wages are governed by the Fair Labor Standards Act (FLSA), Service Contract Act (SCA) and/or Davis-Bacon Act (DBA):
- Procurement contracts for services or construction;
- Contracts for services covered by the SCA;
- Contracts for concessions; and
- Contracts on federal lands related to offering services for federal employees and their dependents or the general public.
EO 13658 instituted a minimum wage of $10.10 per hour beginning January 1, 2015, increased annually thereafter, for all workers who worked on these categories of contracts. It applied to the 50 states and the District of Columbia.
On May 25, 2018, EO 13658 was limited by Executive Order 13838, which exempted from coverage employee engaged in “seasonal recreational services” on federal lands, such as mountaineering activities, youth camps, recreational ski services, horseback riding, camping, hunting and fishing.
Expanded Scope of Covered Contracts
New EO 14026 applies to the same four main categories of federal government contracts as prior EO 13658. EO 14026 also reinstates minimum wage protections for recreation workers on federal lands, who had been exempted from coverage through a Trump-era executive order.
While these broad categories of contracts are consistent with those set forth in prior EO 13658, EO 14026 and the proposed regulations expand the scope of contracts covered in those categories in terms of both geographic and temporal reach. New EO 14026 expands the definition of “new contracts” to include: “new contract-like instrument; new solicitation; extension or renewal of an existing contract or contract-like instrument; and exercise of an option on an existing contract or contact-like instrument.” Further, the proposed regulations define “contract or contract-like instrument” extremely broadly as “an agreement between two or more parties creating obligations that are enforceable or otherwise recognizable at law.”
Thus, the federal government’s unilateral exercise of an option already negotiated by the parties, even when accepted through performance rather than by written acceptance, falls within the definition of a “new contract” triggering the coverage of EO 14026. Under prior EO 13658, the government’s unilateral exercise of a pre-negotiated option would not have triggered coverage. Many contracts that predate January 30, 2022, therefore, will eventually fall within the scope of EO 14026.
EO 14026 expands coverage to Puerto Rico and U.S. territories, which were not covered under the prior order.
Like prior EO 13658, not all employees of covered employers would be entitled to EO 14026’s minimum wage protections. The proposed regulations provide that workers who perform “on” covered contracts, i.e., directly perform the specific services called for by the contract, are covered, as are workers who perform “in connection with” a covered contract. Such workers are afforded coverage if “the worker’s work activities are necessary to the performance of a contract but are not the specific services called for by the contract.” However, only workers whose work “in connection with” covered contracts exceeds 20 percent of their hours in a workweek are entitled to the $15 per hour wage.
Covered employees in tipped wage positions will be entitled to gradual increases in their minimum wage, starting at $10.50 per hour in 2022, until the tipped minimum wage is phased out in January 2024.
Similar to the prior EO 13658, workers with disabilities whose wage rates are calculated to special certificates issued under section 14(c) of the FLSA will be covered under the executive order’s minimum wage requirement. However, the proposed regulations would exclude from coverage those workers covered by wage certificates under FLSA sections 14(a) and (b), such as FLSA-covered learners, apprentices and full-time students.
Employee Protections and Enforcement
Similar to the prior EO 13658, the proposed regulations prohibit retaliation. The regulations provide that it will be unlawful for any person to discharge or discriminate against a worker who files a complaint, institutes a proceeding or testifies in a proceeding. In keeping with the FLSA, the provision applies to employees who complain internally as well as to a government agency. Workers cannot waive their right to payment of the minimum wage established under the executive order.
The NPRM explains that most of the proposed regulations on enforcement procedures and remedies for new EO 14026 are based on the implementing regulations for prior EO 13658, which in turn were based on the statutory text or implementing regulations of the FLSA, SCA and DBA.
Notice and Recordkeeping
The proposed regulations provide that employers must post notices of the executive order’s minimum wage requirements and require the DOL to publish separate notices for employers covered under the FLSA and employers covered under the SCA and DBA.
Wage records must be maintained for three years and must include the employee’s:
- Name, address and Social Security number;
- Occupation or classification (or occupations/classifications);
- Rate or rates of wages paid;
- Number of daily and weekly hours worked;
- Any deductions made; and
- Total wages paid.
The proposed regulations will remain in an open comment period until the final day for comment August 23, 2021. Final regulations currently are due to be published by November 24, 2021. As noted above, the effective date of the new EO 14026 is January 30, 2022. New federal contracts that are solicited between April 27, 2021, entered into on or after January 30, 2022, as well as existing contracts with options for renewal, will be subject to the $15 minimum wage beginning March 30, 2022.
What This Means for Employers
Federal government contractors and subcontractors with current contracts subject to EO 13658 should closely review those existing contracts to determine whether they include an option for renewal that may be exercised on or after January 30, 2022, as an exercise of such an option likely would likely trigger coverage under new EO 14026 minimum wage requirements. Contractors in contract bidding and negotiations with the federal government in the coming months will also want to be mindful of the effective date of the contract, as the effective date of a covered contract will dictate whether the contractor is subject to EO 14026’s minimum wage requirements. Employers who are covered or may become covered should begin to identify which workers or segments of the workforce would likely qualify for coverage under EO 14026 and plan accordingly for potential increases and compliance with the new executive order’s requirements.