On June 17, the DOL published in the Federal Register its proposed regulations increasing the minimum wage for workers on federal contracts to $10.10 an hour. Announced by the agency last week, the proposed rule implements the provisions of Executive Order (EO) 13658 issued by President Obama and published in the Federal Register earlier this year on February 10. EO 13658 applies to new contracts and replacements for expiring contracts with the federal government that result from solicitations issued on or after January 1, 2015, as well as to contracts that are awarded outside the solicitation process on or after January 1, 2015.
The DOL’s notice of proposed rulemaking, which would amend Title 29 of the Code of Federal Regulations (CFR) by adding part 10, establishes standards and procedures for implementing and enforcing EO 13658. The publication of the proposed regulations means that the public may now submit comments on the proposed rulemaking.
According to a fact sheet released by the DOL in conjunction with its announcement of the proposal last week, The EO applies to four major categories of contractual agreements: (1) procurement contracts for construction covered by the Davis-Bacon Act (DBA); (2) service contracts covered by the Service Contract Act (SCA); (3) concessions contracts, including any concessions contract excluded from the SCA by the DOL’s regulations at 29 CFR 4.133(b); and (4) contracts in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public.
The EO and the proposed rule include what the DOL called “certain narrow exclusions” from coverage. Those exclusions apply to: (1) grants; (2) contracts and agreements with and grants to Indian Tribes under Public Law 93-638, as amended; (3) any procurement contracts for construction that are not subject to the DBA (i.e., procurement contracts for construction under $2,000); and (4) any contracts for services, except for those otherwise expressly covered by the proposed rule, that are exempted from coverage under the SCA or its implementing regulations (e.g., contracts for public utility services, including electric light and power, water, steam, and gas; employment contracts providing for direct services to a federal agency by an individual). The EO also does not apply to contracts for the manufacturing or furnishing of materials, supplies, articles, or equipment to the federal Government (i.e., those subject to the Walsh-Healey Public Contracts Act).
The proposed rule states that the Secretary of Labor is required by the EO to determine the minimum wage for covered contracts and solicitations on an annual basis beginning January 1, 2016, according to the proposed regulation. The new minimum wage rate is to be published in the Federal Register at least 90 days before it takes effect. The minimum wage, pursuant to the EO, is to be not less than the amount in effect on the date of the Secretary’s annual determination, and must be increased by the annual percentage increase, if any, in the Consumer Price Index for Urban Wage Earners and Clerical Workers (or its successor publication) as determined by the Bureau of Labor Statistics. The increase must be rounded to the nearest multiple of $0.05.
Pursuant to EO 13658, the minimum wage that must be paid to tipped workers of covered employers must be equal to an hourly cash wage of at least $4.90 beginning on January 1, 2015. For each succeeding one-year period after that, until the hourly minimum cash wage for tipped workers equals 70 percent of the minimum wage in effect under the EO for such period, the hourly cash wage must equal the minimum wage under the EO for the preceding year, increased by the lesser of $0.95 or the amount necessary for the hourly cash wage for tipped workers to equal 70 percent of the minimum wage. For each following year, the tipped rate must be at least 70 percent of the minimum wage in effect for that year, rounded to the nearest multiple of $0.05.
Where workers do not receive enough in tips, when combined with the hourly cash wage paid by the employer, to equal the minimum wage in effect, the cash wage paid by the employer must be increased to equal the minimum wage rate. Consistent with applicable law, if the wage required to be paid under the SCA or any other applicable law or regulation is higher than the minimum wage required by the EO, the employer must pay additional cash wages sufficient to meet the highest wage required to be paid.
Comment period open
Although the DOL previously released the proposed rule, its publication in the Federal Register signals that the public comment period is now open and will close on July 17, 2014. Instructions for submitting comments are provided in the notice of proposed rulemaking.
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