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Minimum Wage Increase for Federal Contractors

Last month, President Obama signed an Executive Order (“Order”) raising the minimum wage for contractors on new federal contracts to $10.10 per hour, up from $7.25, effective January 1, 2015.  This hourly rate will be indexed to inflation effective January 1, 2016, so it may increase in the future without further government action.  The Order also increases the minimum hourly base rate for tipped employees from $2.13 per hour to $4.90, and this minimum hourly base rate will increase 95 cents per year until it reaches 70% of the minimum wage.  Government Contractor employers are also required to ensure tipped employees receive $10.10 per hour between the hourly rate and tips or make up the difference.

President Obama is hoping to raise the minimum wage to $10.10 per hour for all employees, not just those involved in federal contracts.  Currently, there is a bill in the Senate calling for such an increase in minimum wage over a three year period.

Employers with contracts covered under the Service Contract Act or Davis-Bacon Act are covered under this Order.  Employers with federal procurement contracts where wages fall under the Fair Labor Standards Act are also covered (assuming the applicable monetary threshold under that law is met).  This Order generally does not apply to grants or contracts/agreements with Indian Tribes under the Indian Self-Determination and Education Assistance Act.  The Order applies only to executive agencies, but independent agencies are strongly encouraged to comply.  A copy of the Executive Order is available at http://www.whitehouse.gov/the-press-office/2014/02/12/executive-order-minimum-wage-contractors.  If you are a federal contractor and you are unsure of whether you fall under this Order, you should consult counsel.

Brody and Associates regularly advises management on complying with state and federal employment laws including wage and hour laws.  If we can be of assistance in this area, please contact us at info@brodyandassociates.com or 203.965.0560.