As directed by President Barack Obama in Executive Order 13658, signed February 12, 2014, the U.S Department of Labor (DOL) has released its Notice of Proposed Rulemaking (NPRM) to increase the minimum wage for all workers on new federal contracts to $10.10 per hour by January 1, 2015, and to index the wage rate to inflation beginning January 1, 2016. 

The DOL must issue its final regulations by October 1, 2014. To meet this deadline, the NPRM provides for only a 30-day comment period from the date the NPRM is published in the Federal Register, which publication should occur soon. 

The $10.10 per hour rate increase will apply only to solicitations and contracts issued on or after January 1, 2015. Beginning January 1, 2016, and annually thereafter, the minimum wage will increase based on an increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers. 

The NPRM specifies the following types of contracts as subject to the new wage requirement: 

1. procurement contracts for construction covered by the Davis-Bacon Act (DBA)(but not contracts subject only to the Davis-Bacon and Related Acts);

2. service contracts covered by the Service Contract Act (SCA);

3. concessions contracts, including any concessions contract excluded from the SCA by the DOL’s regulations at 29 CFR 4.133(b); and

4. contracts in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public.

The NPRM also clarifies that the EO does not apply to contracts for manufacturing or furnishing of materials, supplies, articles, or equipment to the federal government (contracts covered by the Walsh-Healy Public Contracts Act). 

Significantly, the NPRM expands the new minimum wage requirement to cover not only workers who are considered covered by the SCA, and therefore subject to SCA prevailing wages (workers who directly perform contract work), but also workers covered only by the Fair Labor Standards Act (FLSA) who provide support work for the contract (e.g., payroll clerks and janitors). Similarly, for DBA contracts, the reach of the minimum wage requirement will extend beyond laborers and mechanics who work directly on site (and therefore are subject to DBA prevailing wages) to other workers covered only by the FLSA who support the DBA contract work. 

We will provide further updates on the NPRM. In the meantime, affected contractors should review the NPRM and consider filing comments.