The U.S. Department of Labor (DOL) recently issued a proposed rule raising the minimum wage to $10.10 per hour for employees staffing any of four categories of federal contracts. The proposed rule implements an executive order signed by President Obama on February 12, 2014. The rule likely will become final without significant changes, so employers should take steps now to plan for its effects.

The wage increase applies to employees staffing:

  • Construction contracts
  • Service contracts under the Service Contract Act
  • Concession contracts
  • Contracts related to services provided to federal employees, federal employee dependents, or the general public on federal property or lands

The DOL anticipates issuing a final rule by October 1, 2014. The rule will become effective for contracts that are new or renegotiated on or after January 1, 2015; however, the executive order encourages agencies to ensure that federal contractors pay the new minimum wage for employees working under contracts entered into or negotiated after February 12, 2014, but before January 1, 2015. Employers and other members of the public may submit comments on the proposed rule within 30 days.

In addition to setting $10.10 as the new base minimum wage, the proposed rule provides for yearly increases tied to inflation. The rule also dispenses with the provisions of the specialized certificate program that permit employers to pay individuals with disabilities less than other workers. Finally, the proposed rule raises the base hourly wage of tipped employees from $2.13 per hour to $4.90 per hour. It is structured to increase this base hourly wage each year until it reaches 70 percent of the minimum wage for other federal contract employees.

The DOL will be responsible for enforcing the new rule through investigations and formal complaint procedures. Penalties for violations include back pay damages and possible debarment from federal contracts.

Ballard Spahr’s Labor and Employment Group routinely assists employers with issues related to federal contractor compliance and can assist in making the transition to the new minimum wage.

If you have questions about the proposed rule, please contact Brian D. Pedrow at 215.864.8108 or pedrowb@ballardspahr.com, Amy L. Bashore at 856.761.3402 or bashorea@ballardspahr.com, or the Ballard Spahr attorney with whom you work.


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