Labor Dept Issues Final Rule Requiring Federal Contractors to Pay $15 Minimum Wage

On Monday, the Biden administration announced its final rule directing federal contractors to pay their workers a $15 minimum wage starting next year.

The rule, promulgated by the Labor Department, follows a directive from President Biden issued shortly after Inauguration Day and builds on a prior Obama-era regulation. After issuing a notice of proposed rulemaking in July, the department received about 245 comments from the public. No significant changes were made in the final rule from what was proposed, said Jessica Looman, acting administrator of the Labor Department’s Wage and Hour Division, on a briefing call with reporters on Monday.

“Federal contract workers are essential workers and are critical to the federal government,” said Labor Secretary Marty Walsh on the call. Some of the things they do are: “clean and maintain federal buildings, they provide health care for veterans and childcare for kids, they provide food services for the military, they build and repair roads and bridges all across this country.” This initiative “makes progress towards reversing decades of income inequity” and “ensures the federal government leads by example.” 

This final rule, which will be indexed for inflation, applies to contracts starting on or after January 30, 2022, which can be new contracts or extensions to existing contracts. It applies to contracts in all 50 U.S. states and all U.S. territories. 

“The department estimates that of the 1.8 million potentially affected workers, 327,300 will be

affected and see an increase in wages,” said the text of the final rule. “Increasing the minimum wage of workers can reduce absenteeism and turnover in the workplace, improve employee morale and productivity, reduce supervisory costs, and increase the quality of services provided to the federal government and the general public.”

This regulation will apply to “procurement contracts for construction under the Davis Bacon Act; service contracts covered by the Service Contract Act, concessions contracts excluded by the [Service Contract Act] but covered by the regulation as well as contracts in connection with federal property or land,” said Looman.

The final rule also eliminates the tipped minimum wage for federal contractors by 2024, “so the workers are making the full minimum wage plus their tips on top of that.” Looman said. Also, it ensures workers with disabilities don’t earn a subminimum wage and protects outfitters and guides working on federal lands, reversing a policy from the Trump administration, she added. 

The Labor Department worked closely with the Small Business Administration to provide “outreach, education and guidance” for small businesses to implement the final rule, said Looman, in response to Government Executive’s question on the call asking if the department had any concerns about small businesses being able to implement the new rule. 

The final rule will be formally published in the Federal Register on Wednesday, a department spokesperson told Government Executive. 

Officials from the Federal Acquisition Regulatory Council are currently developing final regulations to actually make the contract language changes, so Looman said “there’s a couple more steps that have to happen before January 30, 2022.” 

The final rule garnered praise from Reps. Terri Sewell, D-Ala., who joined Walsh for his remarks in Alabama on Monday, and Bobby Scott, D-Va., chairman of the House Education and Labor Committee.

Meanwhile, Rep. Virginia Foxx, R-N.C., ranking member of the House Education and Labor Committee, said the initiative will lead to job losses and hurt small business in particular. 

“With months of forced shutdowns, inflation, a supply chain crisis, and a labor shortage, many job creators are trying to keep their heads above water—this move by the Biden administration will mean many never catch their breath,” she said in a statement.