What Employers Need to Know About the $15.00 Federal Contractor Minimum Wage
How Did We Get Here?
In 2014, then-President Obama issued Executive Order 13658 which required federal contractors to pay employees working on federal contracts at a rate of $10.10 per hour, subsequently indexed to inflation. In 2021, most federal contractors now earn a minimum of $10.95 per hour. Those who earn tips as part of their employment are entitled to a minimum of $7.65 per hour.
Following the Senate’s failure to pass the “Raise the Wage Act of 2021” aimed at increasing the federal minimum wage to $15.00 per hour by 2025, President Biden continued the spirit of President Obama’s Executive Order and Congress’s proposed legislation by signing a new Executive Order that will raise the minimum wage for federal contractors, including those with disabilities, to $15.00 per hour.
What Will The Executive Order Do, Specifically?
As set forth in the timeline below, all agencies will need to incorporate a $15.00 minimum wage in new contract solicitations, new federal contracts, and existing federal contracts when the parties exercise their option to extend such contracts. Further, the minimum wage for federal contractors will be automatically adjusted to reflect changes in the cost of living every year beginning in 2023.
The Executive Order also eliminates the tipped minimum wage for federal contractors by 2024. The elimination will begin by increasing the minimum earnings for such workers from $7.65 per hour to $10.50 per hour, effective January 1, 2022. In 2023, tipped workers will receive 85% of the then-current federal minimum wage, irrespective of any tips earned. And by 2024, tipped workers will receive 100% of the then-current federal minimum wage, irrespective of any tips earned.
Finally, President Biden’s Executive Order revokes and supersedes Executive Order 13838 of May 25, 2018. Practically speaking, this means that federal contractors employed for Recreational Services on Federal Lands, such as outfitters and guides, will also receive the increases to the minimum wage as set forth in the Executive Order.
When Does Everything Go Into Effect?
| January 30, 2022: | $15.00 minimum wage implemented in new contract solicitations | |
| January 30, 2022: | $15.00 minimum wage implemented in existing contracts that are renewed | |
| January 30, 2022: | $10.50 minimum wage for federal contractors who receive tips | |
| March 30, 2022: | $15.00 minimum wage implemented in new contracts | |
| January 1, 2023: | Minimum wage for contractors is raised to adjust for inflation and cost of living | |
| January 1, 2023: | Minimum wage increase to 85% of the then-current federal minimum wage for federal contractors who receive tips | |
| January 1, 2024: | Minimum wage for contractors is raised to adjust for inflation and cost of living* | |
| January 1, 2024: | Minimum wage increases to 100% of the then-current federal minimum wage for federal contractors who receive tips |
*The federal minimum wage shall continue to be raised each year thereafter based on the cost of living and inflation.
What Do I Need to Do?
If your business has a federal contract or supplies contractors to the federal government, you will need to keep a close eye on these dates and ensure that your employees are appropriately compensated. Be aware that state or local minimum wage laws may also apply, as can requirements established through collective bargaining agreements. Rather than navigate these changes in law alone, we suggest seeking the assistance and advice of legal counsel with extensive experience in state and federal employment matters.