On Tuesday, President Biden issued an executive order raising the minimum wage to $15 per hour for federal contractors. The new minimum wage will be indexed to inflation, so that every year after 2022, it will be automatically adjusted to reflect changes in the cost of living. The inflation-indexed minimum wage for workers performing work on covered federal contracts is currently $10.95 per hour and tipped minimum wage is $7.65 per hour.
The news is likely to affect wages far beyond those of federal workers. According to a news release issued by the White House, directly lifting the pay for hundreds of thousands of employees who are working on federal contracts “will have impacts beyond federal contracting, as competitors in the same labor markets as federal contractors may increase wages, too, as they seek to compete for workers.”
Starting January 30, 2022, all federal agencies will need to incorporate a $15 minimum wage in new contract solicitations, and by March 30, 2022, all agencies will need to implement the minimum wage into new contracts. They must also implement the higher wage into existing contracts when the parties exercise their option to extend such contracts.
The executive order also extends the required $15 minimum wage to federal contract workers with disabilities, restores minimum wage protections to outfitters and guides operating on federal lands, and eliminates the tipped minimum wage for federal contractors by 2024.
Federal statute allows employers of tipped workers to pay a sub-minimum wage as long as their tips bring their wage up to the level of the minimum wage. This executive order requires that tipped employees working on federal contracts earn the same minimum wage as other employees on federal contracts.
The U.S. Department of Labor’s Wage and Hour Division and the Federal Acquisition and Regulatory Council will engage in rulemaking to implement and enforce the executive order. The full text of the executive order is available here.
