On June 17, 2014, the Department of Labor published a Notice of Proposed Rulemaking (NPRM) regarding the enforcement of Executive Order 13658 that proposes to raise the minimum wage paid by federal contractors to $10.10 per hour.  Interested parties have until July 17, 2014, to provide comments on the proposed rule.

Highlights of the 179-Page NPRM

  • Increases the hourly minimum wage paid by federal contractors and subcontractors to $10.10 for contracts initiated or renewed on or after January 1, 2015.
  • Annual increases to the hourly minimum wage will be tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers and will be rounded to the nearest multiple of $0.05.
  • For tipped employees, the hourly minimum wage will be increased from $2.13 to $4.90. This will be increased annually by the lesser of 95 cents or the amount needed for the tipped minimum wage to reach 70% of the “untipped” minimum wage. The 70% goal will be reached in three years.
  • There is considerable discussion in the NPRM regarding tipped employees, what counts as a tip, and how to calculate overtime pay for a tipped employee. Contractors with tipped employees should give this section a close read.
  • The new minimum wage will be required only for employees actually performing work related to the federal contract. This is good news for employers for whom federal contracts constitute only a small part of their revenue.
  • The Executive Order extends coverage to FLSA-covered employees performing on a SCA-covered contract who provide support on a service contract but who are not “service employees” under the contract for purposes of the SCA. That is, a clerk spending 5% of his/her job processing invoices related to the contract, but not providing direct services related to the contract, would be covered under EO 13658 but would not have been under the SCA.
  • For SCA or Davis-Bacon Act (DBA) jobs, the higher of the prevailing wage or $10.10 must be paid.
  • Consistent with the SCA, but not the DBA, the value of fringe benefits may not be applied to meeting the minimum wage standard. However, deductions made for the reasonable cost or fair value of board, lodging, and other facilities are permitted.
  • Pay periods may not be longer than semi-monthly.
  • The Executive Order will be enforced by the Wage and Hour Division of the Department of Labor.
  • The Federal Government itself is not covered by the Executive Order.

By Mike Aamodt, Ph.D., Principal Consultant, DCI Consulting Group


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