Process Begins for $15 Minimum Wage in Federal Contracts - State and Federal Communications

January 31, 2022  •  

Process Begins for $15 Minimum Wage in Federal Contracts

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On January 30, the process began for federal agencies to begin incorporating a $15 minimum wage in new contract solicitations. By March 30, 2022, all agencies will need to implement the minimum wage into new contracts. Federal agencies are also directed to implement the higher wage into existing contracts when the parties exercise their option to extend such contracts.

On April 27, 2021, President Joseph R. Biden had signed an executive order requiring federal contractors to pay $15 per hour for employees working on or in connection with a federal government contract. The Department of Defense, the General Services Administration, and the National Aeronautics and Space Administration issued an interim rule order on January 26, 2022, amending the Federal Acquisition Regulations to implement the executive order. Contractors and subcontractors for all federal agencies must certify they meet the conditions requiring the minimum wage. This certification is a condition of payment to the contractors from the government. The order applies, with certain exceptions, to any new contract; new contract-like instrument; new solicitation; extension or renewal of an existing contract or contract-like instrument; or exercise of an option on an existing contract or contract-like instrument. This order does not apply to grants; contracts, contract-like instruments, or certain specific type of agreements with Indian Tribes.

Starting January 1, 2023, the minimum wage will be adjusted annually, but not lowered, by the U.S. secretary of labor based on a consumer price index formula and rounded to the nearest multiple of $0.05. For tipped workers, the minimum wage mandated by the order is $10.50 per hour beginning January 30, 2022. Beginning January 1, 2023, tipped workers must receive 85% of the wage rate in effect for non-tipped employees, rounded to the nearest multiple of $0.05. Then beginning January 1, 2024, and for each subsequent year, tipped workers must receive 100% of the wage received by non-tipped worker, eliminating the difference between the type of workers. Adjustments must be considered by employers of tipped workers who do not receive a sufficient additional amount on account of tips to equal to the minimum wage of non-tipped workers. If a state or municipality has a higher minimum wage, the Executive Order does not excuse noncompliance with the laws requiring the higher wage.

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