Logging in at 338 pages, the Department of Labor (DOL) released final rules implementing Executive Order 13658 “Establishing a Minimum Wage for Contractors.”  The Rules are due to be published in the Federal Register on October 7, and will be effective on December 6, 2014.  However, as specified in the Executive Order, the minimum wage applies only to “new” covered contracts resulting from solicitations on or after January 1, 2015, or contracts awarded outside the solicitation process after January 1, 2015.

By-and-large, the final Rules adhere closely to the regulations proposed in June 2014.  DOL found most of the 6,500 comments to be helpful but unpersuasive and so rejected them.  However, DOL was persuaded by a number of comments.  Notable revisions include:

• The definition of “contractor” has been “simplified” and narrowed to mean only individuals and legal entities awarded a Federal Government Contract or subcontract under a Federal Government Contract.  The proposed regulation would have included prospective and former contractors who did not hold a current contract.

• The term “new contract” has also been clarified and refined.  The Rules apply only to new contracts after January 1, 2015 but amendments or modifications to pre-existing contracts may make them new contracts.

• In one of the more controversial aspects of the proposed rules, DOL stated that workers who perform support services “in connection with a covered contract” who are covered by the Fair Labor Standards Act (FLSA) must also be paid the minimum wage even though they are not “service workers” covered by the Service Contract Act (SCA) or onsite “laborers and mechanics” covered by the Davis-Bacon Act (DBA).  As a compromise, DOL has added new subsection 10.4(f) which provides that workers performing support work “in connection with a covered contract” less than 20% of their hours in a workweek are not entitled to the minimum wage.

• Section 10.4(d) clarifies that if a contract is exempt from the SCA, it is also exempt from the Executive Order, unless the contract is covered by one of the three other coverage provisions:  a covered concession contract or a contract in connection with Federal land and related to service offerings.

• While not explicitly stating that the minimum wage contract clause may be incorporated by reference into covered subcontracts, DOL acknowledges that the full contract clause will be deemed to have been incorporated by reference in a covered contract if the contract provides that “Executive Order 13658 – Establishing a Minimum Wage for Contractors, and its implementing regulations, including the applicable contract clause, are incorporated by reference into this contract as if fully set forth in this contract,’ with a citation to a webpage that contains the contract clause in full, to the provision of the Code of Federal Regulations containing the contract clause set forth at Appendix A of this part, or to the provision of the FAR containing the contract clause promulgated by the FARC to implement this rule.”

• If a contracting agency fails to put the minimum wage clause into a contract, and thus the contractor has no notice of the wage requirement, the contractor may be entitled to a contract adjustment to cover the additional costs.  This is clarified in Section 10.44(e).

• DOL has also added two new recordkeeping requirements to Section 10.26(a):  the requirement to maintain records reflecting each worker’s occupation or classification, and the requirement to maintain records reflecting total wages paid.

• Finally, DOL has imposed yet another notice requirement.  This may be accomplished in two ways:  prominently posting of the applicable wage determination which will include notice of minimum wage rights; and displaying a poster (to be provided by DOL) for support workers which may be posted electronically.

There remains a lot to be digested with these new Rules.  Fact sheets, FAQs and other resources can be found at the WHD Website.  Stay tuned to our Blog as we provide further insights.