"It ain't over till it's over"

--Yogi Berra

With the new $15 an hour Contractor Minimum Wage (“MW”) set to go into effect on January 30, 2022, (see https://www.awrcounsel.com/blog/2021/11/24/dol-issues-final-contractor-minimum-wage-rule), more than one client has inquired about how to handle the overlapping requirements of the older MW Executive Order (“EO”).

As my colleague Howard Wolf-Rodda explained:

The New EO takes the place of the existing Executive Order 13658 issued during the Obama Administration (“Old EO”). For the time being, both orders will be in effect. For now, existing contracts will  continue to be covered by the Old EO (see 29 CFR part 10 for the particulars) The new regulations will be published as 29 CFR part 23; until then, they can be found in the Federal Register at 86 FR 67126.

If your contract is covered by the Old EO, your minimum wage is $11.25 and $7.90 for tipped employees (effective January 1, 2022).

If your contract is covered by the New EO, your minimum wage is $15.00 and $10.50 for tipped employees.

https://www.awrcounsel.com/blog/2022/1/12/your-federal-contractor-minimum-wage-to-do-list.

Under the EO, the $15 MW EO will be added to new contracts. “New” contracts also include extensions of an existing contract upon exercise of an option. When the option is exercised, the old EO $11.25 MW will be superseded and will then be subject to the new $15 MW EO. By its plain terms, the new EO $15 rate is not scheduled to go into effect until January 30, 2022. Thus, that is the earliest date of application of the new EO, while the old EO remains in effect in existing (i.e., not “new”) contracts.

That brings us to some confusing verbiage the Wage Determination Division of DOL inserted into a refresh across the board of wage determinations (“WDs”). These revisions are dated December 27, 2021. The very first provision of the new WDs addressed contractor minimum wages and states:

If the contract is entered into on or after January 30[,] 2022 or the contract is renewed or extended (e.g. an option is exercised) on or after January 30[,] 2022[,] Executive Order 14026 generally applies to the NEW contract. The contractor must pay all covered workers at least $15.00 per hour (or the applicable wage rate listed on this wage determination if it is higher) for all hours spent performing on that NEW contract in 2022.

(Emphasis added by underline). Thus, one client asked if they have to make the wage change retroactive to the period before the exercise of the option. If you applied the above directions literally, you would apply it retroactively to all hours worked in 2022.

But we don’t think that is what DOL meant. The $15 MW EO only applies on or after January 30, 2022, and then only to new contracts. It doesn’t apply to the time period worked in the prior contract under the old MW EO. For that period in 2022, all that is legally due is the $11.25 MW or any higher prevailing wage, even though the WD states that the new $15 MW must be paid to covered workers “for all hours spent performing on that new contract in 2022.” If this passage were read literally, it would include hours worked before the January 30, 2022 effective date.

Based on a recent DOL Field Assistance Bulletin No. 2022-1 issued on January 13, 2022 (i.e., after the new WD revisions), DOL does not intend to make the new wage rate applicable retroactively. https://www.dol.gov/sites/dolgov/files/WHD/fab/fab-2022-1.pdf. The Bulletin states that the new “requirement applies prospectively as of the date that such contract is renewed or extended on or after January 30, 2022 [and] does not apply retroactively.” It goes on to state that the old EO “will remain in effect for some existing contracts until they qualify as ‘new contracts’ subject to” the new EO.

This leads to our advice regarding the WD’s language. If you’re currently performing a service contract subject to the old EO, you can continue to comply with the old MW of $11.25 or the prevailing wages, if higher, and wait for the exercise of your next option period and the addition of the new WD and new EO $15 MW clause.

The Federal Acquisition Regulations presently have provisions implementing the old MW EO along with a contract clause that provides for a price adjustment. See FAR 52.222-55 Minimum Wages Under Executive Order 13658 (JAN 2022); https://www.acquisition.gov/far/52.222-55. FAR 22.1906 provides that this clause applies to both service contracts and construction contracts. Provisions for the new MW EO were due on January 24, 2022; however, we haven’t seen them yet. We trust they will have a price adjustment provision as has been the case with the old MW EO. We further trust they will cover both service and construction contracts, even though the Davis-Bacon Act regulations allow the Government to choose among a litany of contract price adjustment provisions, including a clause which otherwise imposes all the risk of wage and benefit escalation on the construction contractor. But that Davis-Bacon Act clause, even if invoked in the contract, presumably will be overridden for the minimum wage cost purposes by the specific Executive Order FAR clause that has yet to be issued.