On June 17, 2014, the U.S. Department of Labor (DOL) released its proposed regulations relating to Executive Order 13658, which established a minimum wage for federal contractors. The Executive Order – signed by President Obama on February 12, 2014 – raises the minimum wage on covered federal contracts from $7.25 to $10.10 per hour, beginning January 1, 2015. Thereafter, the Secretary of Labor will be required to set the amount of increase to take effect on January 1 of each year, indexed to inflation. The Notice of Proposed Rulemaking (NPRM) establishes procedures for implementing and enforcing the Executive Order.

The Executive Order applies to contracts for construction covered by the Davis-Bacon Act that exceed $2,000; contracts for services covered by the Service Contract Act that exceed $2,500; concessions contracts (for food, lodging, fuel, souvenirs, newspaper stands, or recreational equipment on federal property); and contracts to provide services, such as child care or dry cleaning, in federal buildings. In procurement contracts where workers’ wages are governed by the Fair Labor Standards Act (FLSA), the Executive Order applies only to contracts that exceed $3,000.

The NPRM defines key terms used in the Executive Order, including “contracts,” “contract-like instruments,” “concessions contracts,” and “workers.” A “contract” or “contract-like instrument” is defined as an agreement between two or more parties creating obligations that are enforceable or otherwise recognizable at law. A “concession contract” is a contract under which the federal government grants a right to use federal property, including land or facilities, for furnishing services. The proposed regulations use “worker” in a broad sense and covers those who would not otherwise be “service employees” under the SCA or “laborers” under the DBA.

Further, the NPRM establishes standards for contractors to apply in determining whether their employees are covered by the Executive Order. The regulations also contain recordkeeping requirements and directions for finding the required rate of pay for all workers, including tipped workers and workers with disabilities.

DOL plans to adopt existing mechanisms used for enforcing prevailing wage laws to enforce the provisions of the Executive Order. Under the proposal, any contractor who DOL determines has failed to pay the proper minimum wage will be notified and asked to remedy the violation. Additionally, the contracting agency may be directed to withhold payments under the contract. If a notice of violation is issued, the contractor may appeal to an administrative law judge.

This summary only scratches the surface of the propose rule. It is important for any employer who might be affected by the Executive Order to review the NPRM carefully. DOL will accept comments on the proposed rule until July 17, 2014, at http://www.regulations.gov. The regulation identification number is 1235-AA10. DOL expects to issue the final rule by October 1.