Going; Going; Gone – Repeal of the $17.75 an Hour Contractor Minimum Wage
“You know what the issue is with this world? Everyone wants some magical solution for their problem and everyone refuses to believe in magic.”
—Lewis Carroll, Alice’s Adventures in Wonderland
I have been predicting that President Trump was going to stay away from the Contractor Minimum Wage Executive Order (“EO”) and let the courts do his dirty work for him. But so far, the courts have not cooperated, finding the Biden-era version (EO 14026) to be a proper exercise of Presidential power. The President must have decided that his need to save money for extension of tax breaks was more important than trying to hold together the working class base of his MAGA movement. Thus, in a blink of an eye -- now you see it, now you don’t -- an executive order issued by President Biden, which required contractors with recently awarded federal service and construction contracts to pay workers a minimum wage of $17.75 an hour, is gone.
The “presidential action” entitled “ADDITIONAL RESCISSIONS OF HAMRMFUL EXECUTIVE ORDERS AND ACTIONS” dated March 14, 2025, states in pertinent part as follows:
By the authority vested in me as President by the Constitution and the laws of the United States of America, it is hereby ordered:
I have determined that the following additional rescissions are necessary to advance the policy of the United States to restore common sense to the Federal Government and unleash the potential of American citizens.
Sec. 2. Revocation of Orders and Actions. The following executive actions are hereby revoked:
* * *
(d) Executive Order 14026 of April 27, 2021 (Increasing the Minimum Wage for Federal Contractors).
President Biden had initially raised the minimum wage to $15.00 an hour with automatic annual inflation updates, and it had risen to $17.75 by January 2025, just before Trump took office. Federal contractors are an important part of the labor force and are said to employ about 20% of the workers. Now those workers are less protected – albeit a legacy Obama-era EO remains in effect, as well as the prevailing wages of the Service Contract Act or Davis-Bacon Act, which most of the time exceed the Contractor Minimum Wage. Those requirements limits the impact of the repeal, contrary to the suggestion in the popular press that the workers are going to be busted down to the level of the Fair Labor Standards Act (“FLSA”) minimum wage of a mere $7.25 an hour.
Indeed, only a small slice of contractor workers were ever directly affected by the EO 14026, albeit the higher minimum wage had an inflationary bump up effect extending through to other workers in more skilled occupations. For now, at least, other executive orders and the statutory-based SCA and DBA remain in place and continue to require minimum or prevailing wages, which for most government service and construction workers is far above the FLSA minimum wage. The real impact of the EO repeal will be in the low-skilled services (such as janitors, food service workers, laborers, and more likely in rural locales).
Curiously, President Trump didn’t see fit to complete the job. During his first term in office, Trump left in place for all four years the Obama-era Contractor Minimum Wage, EO 13658. That EO still requires the payment of $13.30 an hour effective in January 2025. Thus, Biden grandfathered existing contracts covered by the Obama-era EO and agreed to let them runout their option years under that lower minimum wage. Biden also confusingly used the same name for his new EO and used the same FAR clause number. See https://www.awrcounsel.com/blog/2023/7/16/one-of-these-things-is-not-like-the-other-confusion-over-the-two-different-contractor-minimum-wage-executive-orders-clauses-with-the-same-far-section-number?rq=Contractor%20Minimum%20Wage. Thus, the Obama-era EO continued to apply to grandfathered contracts entered into before the Biden's similar order took effect on January 30, 2022.
Accordingly, since there has been no rescission of the Obama-era EO 13658, it is likely that going forward contractors will still be required to pay workers at least $13.30 an hour. It is not entirely clear what Trump intended, but in my opinion, the contracts now subject to the rescinded Biden-era EO, will fall back into the coverage of the Obama-era EO. Now with the apparent preservation of the Obama-era EO, it will likely have renewed importance going forward. Presumably, agencies can clear this up by deleting the Biden-era Contractor Minimum Wage clause found in the FAR and inserting the same numbered Obama-era Contractor Minimum Wage clause in its place. At some point, I would expect the FAR Council to issue some guidance to remove the Biden-era EO clause and substitute the Obama-era clause in its place. Of course, given the present lack of guidance, the transition may be bumpy and confusing. But at least the confusion over two EOs with the same name would end, and it would mean that there would only be one Contractor Minimum Wage of currently $13.30 an hour.
Of course, we also operate a federal and state system of government with overlapping minimum wage requirements. Federal law generally doesn’t preempt. Contractors will still be required to pay the FLSA minimum wage of $7.25 an hour or the applicable state minimum wages of up to $17.50 an hour in the highest wage jurisdiction (the District of Columbia). And local governments like City of Burien in Washington State have even higher minimum wages. As of January 2025, the minimum wage for employees of large employers in Burien, WA. is $21.16 per hour. But note that these local and state higher minimum wages will not apply in certain select federal enclaves establish before or during World War II, where state laws do not always apply. See https://www.awrcounsel.com/blog/2018/12/12/federal-enclave-doctrine-sometimes-state-wage-and-hour-claims-are-barred?rq=federal%20enclave.
While the net effect of this isn’t that extensive, it is no doubt going to be hurtful to the affected workers. These are employees laboring in some low wage occupations and have been impacted by the inflation of recent years. They are the most economically stressed of the government contractor work force. While nothing requires employers to cut their wages, sometimes employers are forced by the award of contracts based on price to mark them to the market. That results in unfortunate wage busting. Assign that blame to Mr. Trump. But contractors will still be required to pay workers $13.30 an hour under the Obama-era EO. For some employers, especially those performing lower skilled service work or rural construction projects, it will take inflationary pressure off employers to bump up future wages. When the minimum wage increases, there is wage compression which puts pressure on employers to give higher compensation up the ladder. The EO rescission bodes for some wage stagnation on the lower tiers of employment. But most government contract workers get paid more and are still protected by prevailing wage laws and often state and local minimum wages. And, unless Trump next repeals the Obama-era Executive Order 13658, even the workers who were entitled to $17,75 an hour will likely still find a floor of $13.30 an hour.
So, count me a little surprised, but not shocked. Trump has apparently stuck with his accommodation of the Obama-era Contractor Minimum Wage, as he did in his first term. But all things Biden must be erased.