About a month ago (August 8, 2022 to be exact), the Acting Administrator of the Wage and Hour Division (“WHD”) of the U.S. Department of Labor (“DOL”) issued All Agency Memorandum 240 (“AAM”). The AAM was sent to “all contracting agencies of the Federal Government and the District of Columbia” to provide guidance regarding the application of the federal contractor minimum wage under President Biden’s Executive Order 14026 and DOL’s regulations that implement that order. See 29 CFR, part 23.

In the grand scheme of DOL’s policy guidance on the contractor minimum wage, there’s nothing new here because the AAM essentially transmits DOL’s earlier-issued internal guidance to the Government at large—its main purpose being to clarify how President Biden’s version of the minimum wage EO differs from the contractor minimum wage Executive Order (EO 13658) issued by President Obama in 2014. Explaining the differences is necessary given that the two EOs will exist side-by-side during the transition of contracts from the Obama EO to the Biden EO.

I thought this would be a good opportunity to the recount the complexities of figuring out whether these EOs affect particular contracts or employees. First, let’s set aside a couple of obvious cases—if a contract is covered by the Service Contract Act (“SCA”) (aka Service Contract Labor Standards or “SCLS”), nonexempt employees who perform the contract services should be paid no less than the minimum wage required under whichever EO presently applies to the contract (yes, you need to read the contract). Second, laborers and mechanics must be paid the minimum wage if they are working at the construction site of a public building or a public work under contracts covered by the Davis-Bacon Act (but not those covered under “Davis Bacon Related Acts.”)

Concession contracts (e.g., for providing food services or lodging at federal sites) can be confusing. Some are SCA-covered; some are not. The contractor minimum wage applies to even though the SCA may not apply to a given concession contract. And there is no longer an exclusion for seasonal recreational services and equipment rentals under either EO.

One feature of these EOs (and the sick leave EO as well) can trip up even seasoned federal contractors. The EOs apply to workers who perform work “in connection with” contracts covered by the EO. But it does not apply to these workers if their work “in connection with” covered contracts takes up less than 20% of their time. But… if they do any work on the covered contract they must be paid the minimum wage for their covered contract work regardless of how little time they work on or in connection with these 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.” Some kinds of positions are relatively easy to evaluate. However, there’s a gray zone in which a given worker might or might not be an “in connection with” worker. DOL took a stab at adding illustrative examples in the preamble to the regulations published last year.

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.

These examples 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 that many minimum wage rates around the country are less than $15/hour (and even some of those found on SCA wage determinations) some raises may be due, particularly those employees who work in connection with, but not on, covered contracts.