Interim Rule Establishes Minimum Wage for Contractors

Federal Acquisition Circular 2005-79 contains an interim rule that amends the Federal Acquisition Regulation to implement Executive Order 13658, Establishing a Minimum Wage for Contractors, and a related rule issued by the Wage and Hour Division of the Department of Labor (79 FR 60634) that added new 29 CFR Part 10. The interim rule establishes a minimum wage of $10.10 per hour, beginning January 1, 2015, for covered service and construction contracts. DOL will adjust the amount annually beginning in 2016.

Applicability. The rule applies to all contracts and subcontracts performed in the United States that are covered by the Service Contract Labor Standards statute (41 USC Chapter 67; see FAR Subpart 22.10) or the Wage Rate Requirements (Construction) statute (40 USC Chapter 31, Subchapter IV; see FAR Subpart 22.4). The rule adds new FAR Subpart 22.19 to prescribe the policies and procedures for establishing the minimum wage.

Requirements. FAR 22.1901 provides a definition for “worker.” As stated in FAR 22.1902, nothing in the rule excuses a contractor’s noncompliance with any applicable federal or state prevailing wage law, or any law or municipal ordinance establishing a minimum wage higher than the E.O. minimum wage. FAR 22.1903(b) delineates the individuals to whom the rule applies. Agency labor advisors, as defined at FAR 22.001, are listed at http://www.wdol.gov, and are available to provide guidance and assistance with the application of the rule (FAR 22.1903(c)). FAR 22.1904 describes the methodology for determining the new E.O. minimum wage and for notifying the public of the new wage rate on an annual basis at least 90 days before any new minimum wage is to take effect. DOL will publish the rate on Wage Determinations OnLine site at http://www.wdol.gov. FAR 22.1905 provides information on enforcement authority, filing complaints, reporting and investigating complaints, remedies and sanctions, and retroactive inclusion of the contract clause.

Contract Clause. FAR 22.1906 prescribes the use of the new contract clause, FAR 52.222-55, Minimum Wages Under Executive Order 13658. The clause requires contractors to pay workers performing on contracts in the United States a minimum hourly wage rate of $10.10 per hour beginning January 1, 2015. Contractors will have to adjust the minimum wage paid, beginning January 1, 2016, and then annually, to comply with the Secretary of Labor’s published E.O. minimum wage. If a contractor does not comply with the clause requirements, contracting officers are authorized to withhold contract funds sufficient to pay workers the full amount of wages owed. The clause also holds prime contractors responsible for subcontractor compliance with these requirements.

Dates. As published in the December 15, 2015, Federal Register, the rule specifies February 13, 2015, as the effective date. This date, however, conflicts with the requirement to begin paying the new minimum wage on January 1, 2015, as well as the December 2014, date assigned to the contract clause. Wolters Kluwer contacted the rule’s procurement analyst who confirmed the February 13, 2015, date was a typographical error. A correction notice will be issued to specify December 15, 2014, as the rule’s effective date. Comments on the interim rule, identified by FAR Case 2015-003, are due February 13, 2015.

About George Gullo

George Gullo is a Senior Writer/Analyst in the Government Contracts group at Wolters Kluwer Law and Business. George serves as the principal editor of Cost Accounting Standards Guide and supports all of the group’s print and electronic publications, as well as legal research tools, including the Government Contracts Reporter, Board of Contract Appeals Decisions, and the FAR and DFARS Matrix Smart Charts. With more than 20 years experience in the legal publishing industry, including over 10 years in the government contracts area, George also has a background in legal and business transactions. He is a graduate of DePaul University College of Law and a licensed Illinois attorney.
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