On February 12, 2014, President Obama issued an Executive Order that raised the minimum wage for Federal contractors and subcontractors to $10.10 per hour. The Executive Order states that raising the minimum wage will increase the morale, productivity, and work quality of low-wage employees, while lowering attrition and supervisory costs. The minimum wage will be raised effective January 1, 2015 and only applies to Federal contracts and subcontracts solicited January 1, 2015 or later.

The Executive Order provides separate rules for tipped employees. The minimum wage for a tipped employee will be increased to $4.90 an hour, with an annual raise of $0.95. Tipped employees will receive an annual $0.95 raise until they have reached 70% of the Federal contractor minimum wage in effect at that time. If at any point the combination of minimum wage and tips does not equal the Federal contractor minimum wage, the hourly wage of tipped employees must be increased to equal the current Federal contracted minimum wage. Unfortunately, the Executive Order does not clarify whether this should be calculated on an hourly, per-shift, weekly or pay period basis.

The Secretary of Labor will raise the Federal contractor minimum wage annually, based on the Consumer Price Index for Urban Wage Earners and Clerical Workers. If any other applicable state, Federal or local prevailing wage law requires a higher minimum wage, then the Federal contractor or subcontractor must comply with the higher wage requirement.