Executive Order (EO) 13658 established a minimum wage for certain Federal contractors. Under the EO, effective January 1, 2018, an hourly minimum wage of $10.35 for calendar year 2018 applies to all contracts subject to the Service Contract Act(“SCA”) or the Davis-Bacon Act (“DBA”) for which the contract was awarded (and any solicitation was issued) on or after January 1, 2015. The EO minimum wage rate is adjusted annually. 

So yes, the new inflation adjusted Contractor Minimum Wage of $10.35 went into effect on January 1, 2018 and applies to all SCA and DBA covered contract which have the standard FAR Contractor Minimum Wage clause incorporated therein.  However, please note that if the contract itself was awarded prior to January 1, 2015, of course, that clause might not be in the contract, and the $10.35 minimum wage requirement would not be operative in those circumstances. Pre-existing or “grandfathered” contracts, including option years under those contracts, will continue to be governed by the Fair Labor Standards Act (“FLSA”) minimum wage of $7.25, or any applicable higher state minimum wages, and any applicable prevailing wage laws, but not the Contractor Minimum Wage unless an operative EO clause is placed in the contract by a modification.

If the EO clause is in the contract, then the contractor cannot pay nonexempt workers covered thereunder less than $10.35 per hour. Even if there is a lower rate in the wage determination the contractor cannot wait until the next option year to implement the higher minimum wage. In those circumstances, it went into effect on January 1, 2018.

Accordingly, the answer depends on when the contract was originally awarded and what clauses have been incorporated therein originally or by subsequent contract modifications. Read your contract(s)!

The more interesting question is whether the contractor is entitled to a price adjustment for the Contract Minimum Wage increase. The answer is generally yes, but we will leave that question for another day and another blog.