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
