On April 27, 2021, the President issued an Executive Order which increases the minimum wage for most federal contractors. Beginning January 30, 2022, that minimum wage must be at least $15.00 per hour and will be adjusted annually thereafter. The new wage will apply to federal contracts entered into or renewed on or after January 30, 2022. The Department of Labor issued its final Rule on November 24 with regulations to implement the Order. The Rule is found at Federal Register :: Increasing the Minimum Wage for Federal Contractors. It applies primarily to service contracts, and does not apply to grants.
The Order says that the minimum wage applies to workers performing work “on or in connection with” a “covered contract or any covered subcontract thereunder,” and not to all employees of the company. The definition of “worker” in the Rule states: “A worker performs ‘in connection with’ a contract if the worker’s work activities are necessary to the performance of the contract but are not the specific services called for by the contract.” The preamble to the Rule provides an example:
“For example, a payroll clerk who is not a [Davis-Bacon Act]-covered laborer or mechanic directly performing the construction identified in the DBA contract,but whose services are necessary to the performance of the contract, would necessarily be performing “in connection with” a covered contract.”
The Order applies to an employee if the majority of the employee’s time is devoted to the contract. An employee who performs an incidental service related to the contract (such as front office invoicing) would not be covered by the Order if only a small part of their work relates to the contract. The preamble notes that workers who spend less than 20 percent of their work hours in a workweek performing “in connection with” covered contracts are excluded from the Order’s minimum wage requirement. The rule also does not apply to exempt employees, but only to hourly workers.
John Falcone and Luke Malloy handle employment law matters at PLDR Law. Feel free to contact us if you have questions about this matter.
