The Department of Labor annually increases the minimum wage for federal contractor employees in accordance with Executive Order 13658. It recently noticed, via the Federal Register, that the 2020 minimum wage for most of these employees will increase from $10.60 to $10.80. For tipped employees, the cash wage will increase from $7.40 to $7.55.
In 2014, President Obama signed Executive Order 13658. That order increased the minimum wage for federal contractors to $10.10 for new contracts in 2015 and authorized the Secretary of Labor to adjust the wage annually. The Secretary of Labor issued regulations, located at 29 CFR Part 10, to implement the order. The order and implementing regulations generally cover U.S. Government contracts governed by the Fair Labor Standards Act, the Service Contract Act, or the Davis-Bacon Act.
E.O. 13658 and DOL’s implementing regulations use a prescribed formula for adjusting the minimum wage each year. For each calendar year the minimum wage shall be:
- Not less than the amount in effect on the date the new wage is determined;
- Increased from the previous year by the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), or its successor publication, as determined by the Bureau of Labor Statistics; and
- Rounded to the nearest multiple of $0.05.
To determine 2020’s minimum wage, DOL calculated the CPI-W for the most recent four quarters and compared it with data from the preceding year. Based on this comparison, DOL calculated the CPI-W’s annual percentage increase as 2.036%. Applied to the previous wage rate of $10.60, the resulting wage rate was $10.816; rounding to the nearest nickel established the rate at $10.80. For tipped employees, the cash wage must equal 70% of the full minimum wage. So, DOL established a $7.55 rate for those employees.
With respect to this increase, the applicable FAR contract provision is FAR 52.222-55 (Minimum Wages Under Executive Order 13658). This clause requires a contractor to annually adjust, if necessary, its minimum wage to comply with the new wage promulgated by DOL. It also permits the contractor request a price adjustment on the contract, but only to the extent the new minimum wage increases the contractor’s labor costs.
While we’re on the subject of FAR 52.222-55, the clause contains other important components. For example, it clarifies that E.O. 13658 does not excuse a contractor from complying with other applicable federal (or state) prevailing wage laws. And if further requires that contractors notify workers performing on federal contracts about the minimum wage or the wages to which they’re entitled under wage determinations promulgated under the Service Contract Act or Davis-Bacon Act.
Compliance with labor regulations, including minimum pay, mandates attention to details. In that spirit, be sure to review your practices to confirm that you’re complying with FAR 52.222-55 and other labor-related requirements.
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