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Friday, September 18, 2015

Minimum Wage for Federal Contractors to Increase in 2016

By Tommy Eden & Cara Crotty


On February 14, 2014, President Obama's issued an Executive Ordering requiring certain federal contractors and subcontractors to pay an increased hourly minimum wage as mandated by the Secretary of Labor, who was also to determine increases to the wage rate on an annual basis. 

On Wednesday September 16, 2015, the Secretary of Labor Announced that, effective January 1, 2016, the new minimum wage will be increased from $10.10 to $10.15 per hour and that the rate for tipped employees will rise from $4.90 to $5.85 per hour.

What Contracts Are Covered?
The new rule applies to all "new contracts" with the federal government, provided that the contract
·      is a procurement contract for construction covered by the Davis Bacon Act, or
·      is a contract for services covered by the Service Contract Act, or
·      is a contract for concessions, including any concessions contract excluded from coverage under the Service Contract Act at 29 CFR § 4.133(b), or
·      is a contract in connection with Federal property or lands and related to offering services for Federal employees, their dependents, or the general public.

In addition, the wages of the workers under the contract must be governed by either the Fair Labor Standards Act, the Service Contract Act, or Davis Bacon. A "new contract" is defined as a new or replacement contract that results from a solicitation issued or after January 1, 2015, or that is awarded outside the solicitation process on or after January 1, 2015.

For contracts covered by the Service Contract Act or Davis Bacon, the Rule applies only to prime contracts at the thresholds specified in those statutes. For procurement contracts where workers' wages are governed by the FLSA, the minimum wage applies only when the prime contract exceeds the micro-purchase threshold as defined in 41 U.S.C. § 1902(a), or $3,000. The Rule provides that subcontracts are covered using the same "new contracts" test set forth above for prime contractors. Additionally, the minimum wage requirement applies only to contracts where the contract is performed, in whole or in part, within the United States.

The DOL estimates that "nearly" 200,000 American workers will benefit from this new minimum wage.

Common Sense Counsel: Those contractors involved solely in "supplying" goods to the government should not be covered by this Final Rule. On the other hand, contractors that are involved in construction projects or that provide "services" or concessions to the government or on government property should review new solicitations and contracts very carefully to determine whether the new contract clause is included. My law Partner Cara Crotty did an excellent analysis of this Final Rule found at: http://www.constangy.com/communications-548.html

Tommy Eden is a partner working out of the Constangy, Brooks & Smith, LLP offices in Opelika, AL and West Point, GA. Cara Crotty is the drafter of this update and a partner in the Columbia, South Carolina office of Constangy and Co-Chair of the firm’s Affirmative Action Practice Group. Tommy can be contacted at teden@constangy.com or 334-246-2901. Blog at www.alabamaatwork.com