[co-author: Sibilla Grenon]

The U.S. Department of Labor (“DOL”) published a Final Rule on Monday November 22, 2021 raising the minimum wage for federal contractor employees to $15 an hour. The Rule takes effect on January 30, 2022 and will apply to new or updated contracts with the U.S. Government. The higher wage will apply to existing contracts when parties exercise their option to extend contracts, which often occurs annually.

The DOL Rule implements President Biden’s April 27, 2021 Executive Order titled “Increasing the Minimum Wage for Federal Contractors,” which was signed on April 27, 2021. That Order reforms President Obama’s 2014 Executive Order 13658, “Establishing a Minimum Wage for Contractors,” which established a minimum hourly wage of $10.95 for employees of federal contractors, but it only applied to new or renewed contracts. In addition to raising the minimum wage to $15 an hour, President Biden’s Order extends the requirement to circumstances where federal agencies exercise options on existing contracts to purchase additional supplies or services.

The Rule also eliminates the tipped minimum wage for federal contractors by 2024. The tipped minimum wage currently allows employees to be paid less than the federal minimum wage if employees make up the difference through tips.

In practice, the Rule establishes that any employees of companies that are contracted with the U.S. government must be paid a minimum wage of $15 an hour. According to the DOL, approximately 327,300 employees will receive a wage increase as a result of the Rule.

DOL Secretary Walsh stated that the new $15 minimum wage is “a step in the right direction and it also ensures the federal government leads by example.”

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