Earlier this year, we blogged about President Biden’s Executive Order (“EO 14026”) establishing a minimum wage of $15 per hour for workers employed by federal contractors. Today, the Department of Labor published its final rule – just in time to make the President’s November 24 deadline. The full text of the new regulations and the preamble is found at 86 FR 67126. The text of the regulations begins at 86 FR 67224.

The next step will be for the Federal Acquisition Regulation (“FAR”) Council to issue regulations and contract clauses that implement the new requirements for federal procurement contracts that are subject to the FAR. The FAR Council’s deadline is January 24, 2022. We expect that will not be a heavy lift given that DOL’s regulations for the new Executive Order are virtually identical those that have been in place since President Obama issued his Executive Order (EO No. 13658) that created the contractor minimum wage to begin with. Therefore, if you want a preview of the new contract clause, take a look at FAR 52.222-55 Minimum Wages under Executive Order 13658 (DEC 2015).

The new $15 minimum wage will be made applicable to “new” contracts and “contract-like instruments” for solicitations issued and contracts awarded beginning January 30, 2022—note that the exercise of an option in an existing contract will now be considered a “new” contract. New orders under multiple award vehicles such as Federal Supply Schedule contracts will not be new contracts unless the master contract vehicle is, itself, modified. In the meantime, contractors whose contracts are subject to the existing Executive Order will remain subject to its requirements.

As we noted in July, if you’ve been navigating the requirements of EO 13658, you likely won’t have new compliance tasks at least on the conceptual level. The major difference is the dollar value of the minimum wage. Up until now, almost all federally mandated prevailing wages such as those under the Davis-Bacon Act (“DBA”) and the Service Contract Act (“SCA”) exceeded the EO 13658 minimum that presently stands at $10.95/hour. The new rate, however, will be higher than some, perhaps, many existing rates depending on where covered work is being performed. Thus, we suspect that some contractors who may not have devoted much attention to the EO 13658 mandate will now have to be more cognizant of the new minimum—particularly as it relates to employees who work “in connection with” but not “on” EO-covered contracts.

Employees who work “in connection with” federal contracts are those who, in the words of the regulation, perform “activities [that] are necessary to the performance of a contract but are not the specific services called for by the contract.” This passage in the definition of the term “worker” was not heretofore set forth in the EO 13658 regulations. Some kinds of positions are relatively easy to evaluate. However, we see a gray zone in which a given worker might or might not be an “in connection with” worker. In response to concerns raised in comments on the new regulations, DOL has taken a stab at adding some illustrative examples in the preamble to the regulations published today.

For example, offsite employees who fabricate materials for use on DBA-covered projects or security guards who patrol construction sites would be considered as working in connection with the DBA contract. With respect to SCA-covered contracts, DOL proffered accounting clerks who process invoices for federal contract work and human resources staff who hire employees to work on the contract as examples of “in connection with” personnel. Companies that have concessions or licenses to operate tours in National Parks (for example) will have to pay the minimum wage to employees who handle billing or web advertising for excursions.

The concept of “in connection with” is not technically new; however, the examples are. They suggest that DOL could take an expansive view of what working “in connection with” a covered contract actually means. Absent painfully obvious situations or thorough records, a contractor may be on the hook for the new rate for all hours an employee works even if only part of their work is on or in connection with a covered contract.

Thus, companies that have federal contracts (procurement, concessions, leases or otherwise) may need to revisit who on their payrolls work in connection with the contract and assess whether their wages meet or exceed the minimum. Given the rates one finds, say, for entry-level clerical positions under SCA wage determinations around the country, some raises may be given out in the coming year.

Depending on your perspective, that might be cause for Thanksgiving. Is that good timing or what? We wish everybody a festive celebration tomorrow and safe travels if you’re on the road.