Alert
01.27.22
Since President Biden issued his Executive Order 14026 in April 2021 (as reported previously), there have been several efforts made by the Department of Labor to fill in the contours of that Order. First, on September 16, 2021, the Department of Labor issued a Notice in the Federal Register that addressed how a prior Executive Order (13658) signed by President Obama on February 12, 2014 and implementing a minimum wage rate of $10.10 hour would be implemented and further explaining that the new minimum wage rate under that prior Order would increase to $11.25 on January 1, 2022. In this same Notice, the Department of Labor also devoted attention to President Biden’s later Executive Order 14026, and stated in part, “Covered contracts that are entered into on or after January 30, 2022, or that are renewed or extended [pursuant to an option or otherwise] on or after January 30, 2022 will be generally subject to a higher $15.00 minimum wage rate established by Executive Order 14026 . . . .” In this same notice, the Department of Labor also observed, “The Department anticipates that, in the relatively near future, essentially all covered contracts with the federal government will qualify as ‘new’ contracts under Executive Order 14026 and be subject to the higher minimum wage rate.”
Second, on November 24, 2021, the Department of Labor published its final rule implementing President Biden’s Executive Order 14026. The 348-page final rule “fills in the gaps” left by Executive Order 14026 but makes it clear that “executive departments and agencies shall . . . to the extent permitted by law, ensure that new covered contracts, contract-like instruments, and solicitations (collectively referred to as ‘contracts’) include a clause, which the contractor and any covered subcontractors shall incorporate into lower-tier subcontracts, specifying, as a condition of payment, that the minimum wage to be paid to workers . . . performing work on or in connection with the contract or any covered subcontract thereunder, shall be at least . . . $15.00 per hour beginning January 30, 2022.” The final rule provides that the Secretary of Labor will determine a new (and presumably higher) minimum wage beginning on January 1, 2023 and continuing each year thereafter.
Finally, Subpart C of the final rule sets forth “contractor requirements” to ensure compliance with the rule. Section 23.210 of Subpart C sets forth a short contract clause that essentially restates two basic requirements: (a) The contractor, as a condition of payment, must abide by the terms of the applicable Executive Order minimum wage, and (b) The contractor must flow-down the minimum wage contract clause to any covered subcontracts and such subcontractor must, in turn, flow-down the clause to any lower-tier subcontractor.
On January 26, 2022, the Federal Acquisition Regulatory Council (FAR Council) issued an interim rule, amending FAR 52.222-55, to implement the procedures and requirements set forth by the Department of Labor, as summarized above. The interim rule largely adopts the Department of Labor’s final rule with one technical, clarifying exception—the FAR interim rule does not adopt the Department of Labor’s definition of “new contract.” The applicability of the interim rule to new or existing contracts, nevertheless, tracks the reach and scope of the Department of Labor’s final rule.
Contractors subject to the new $15 minimum wage requirement as of January 30, 2022 should be prepared to give the contracting agency timely notice of their intention to recover their increased labor costs under the FAR Changes clause or one of the Service Contract Labor Standards price adjustment clauses found at FAR 52.222-43 or FAR 52.222-44, as applicable.