What the Executive Order Requiring Federal Contractors to Pay a $15 Minimum Wage Will Mean 

It will take some time for the full scale and scope of President Biden’s recent executive order directing federal contractors to pay a $15 minimum wage for their workers starting next year to be seen. 

Biden issued an executive order on April 27 that builds on one from President Obama in February 2014, which required federal contractors to pay their workers $10.10 per hour. Currently, the minimum wage for workers on federal contracts is $10.95 per hour and the tipped minimum wage is $7.65 per hour. 

“This order will raise wages for hundreds of thousands of workers, many of them women and people of color who are doing vital work for our nation,” said Labor Secretary Marty Walsh during a virtual event on April 27. “The areas that this includes [are] cleaning professionals, maintenance workers who make sure that federal employees have a safe place to work and a clean place to work, nurse assistants who care for our veterans, food workers who make sure military members are fed, laborers who build and repair federal infrastructure in our country.”

Laura Mitchell, principal at Jackson Lewis, a law firm that focuses on labor and employment law, told Government Executive, “the good news is that we do have a blue print because of what happened in 2014.” Like last time, the “difficulty” will be “defining what the population actually looks like” that will be impacted by the order, such as “will it be workers who work on a contract or in connection with a contract?” Once that is sorted out in the rulemaking process, employers will be impacted “from a budgetary standpoint.” 

In the upcoming rulemaking process for the order, there will be a discussion about the burden and impacts, in accordance with the Paperwork Reduction Act, which would give the specific number of how many employees will see a wage increase, Mitchell said. That was the case in 2014. The Economic Policy Institute, a nonprofit think tank, estimated up to 390,000 low-wage employees will be impacted, half of which will be women and another half will be Black or Hispanic.

Mitchell also noted that “some of these individuals could potentially already be covered by other laws,” such as the Davis-Bacon Act and Services Contracts Act and McNamara-O'Hara Service Contract Act, but others could not be. 

Given how close this executive order is to Obama’s, it will be interesting “whether or not we see a departure in the approach from the Department of Labor as far as implementation. Are they going to take the opportunity to expand coverage or are they going to stick pretty closely to what President Obama did?” 

Members of the law firm Wiley Rein published a post last week in which they raised some questions about the implications of the order. 

For example, it may “cause employee-relations concerns because it compresses the differences between the required wage rates for many labor categories in DOL wage determinations,” wrote partners Eric Leonard, Kara Sacilotto and Craig Smith, and associate Nicole Giles. “With many labor categories moving up to $15 per hour, contractors may have to increase wages of those already earning more than $15 per hour to continue attracting workers to those positions and maintain the satisfaction of workers already employed.” 

Also, the order “provides that if an agency issues a solicitation or enters into a contract within 60 days of the January 2022 effective date, it is strongly encouraged but not required to incorporate the new minimum wage, they wrote. “This means that some contracts may not see the wage increase until much further into 2022. On the other hand, agencies incorporating the new minimum wage early (as the EO encourages) might not appreciate that even early incorporation should not result in the new $15 minimum wage applying before January 30, 2022.” 

Ahead of the rulemaking, contractors should start identifying which employees will be subject to the wage increase and be on the lookout for any related guidance, they suggested. 

David Berteau, president and CEO of the Professional Services Council, which represents over 400 companies that contract with the federal government, asked, “How do you change the typical contracting process under which winning often goes to the lowest bid? Companies should not be forced to choose between compensating workers fairly or winning the bid.” In order to make this executive order feasible, “the government must change its contracting behavior.” 

Secondly, he asked how do you apply the order to existing contracts when “the options are exercised.” Applying the executive order to existing contracts must address how contractors get reimbursed for the increased costs, “especially under a fixed-price contract?”

The executive order says the Labor Secretary will issue regulations to implement the order by November 24, “shall include both definitions of relevant terms and, as appropriate, exclusions from the requirements of this order.” Then 60 days after the regulations are issued, “the Federal Acquisition Regulatory Council, to the extent permitted by law, shall amend the Federal Acquisition Regulation to provide for inclusion in federal procurement solicitations, contracts, and contract-like instruments subject to this order.” 

The Labor Department did not respond to Government Executive’s questions about the implications and scope of the order by the time of this article’s publication. 

Employees of Maximus––which employs one of the largest federal contracting workforces in the country, through a contract with the Centers for Medicare and Medicaid Services to handle phone calls from Medicare and Affordable Care Act participants––applauded the order.

“President Biden is delivering on his promises to lift up and empower workers,” said Sylvia Walker, an employee at a call center in Bogalusa, Louisiana, in a statement. “We have been underpaid and disrespected for too long. Maximus needs to recognize the essential work we do helping Americans get access to healthcare and implement a $15 minimum wage immediately.”

The reaction from lawmakers to this order from lawmakers was largely along party lines. 

Rep. Carolyn Maloney, D-N.Y., chairwoman of the House Oversight and Reform Committee, said this “ensures taxpayer dollars will uphold the dignity of work and will provide a living wage to essential workers like cleaning, maintenance, nursing, and food service staff whose efforts are critical to serving the American people.”

Meanwhile, Reps. James Comer, R-Ky., ranking member of the House Oversight and Reform Committee, and Jody Hice, R-Ga., ranking member of the committee’s panel on Government Operations, opposed it. 

“President Biden is unilaterally writing another progressive policy from the Oval Office and circumventing the legislative process,” said Comer. “Raising the minimum wage for federal contractors doesn’t make them work faster or more efficiently. This isn’t rewarding performance. This is just going to come from the pockets of taxpayers and worsen the ever-growing pile of debt.”