DOL Issues Final Rule Raising Minimum Wage For Federal Contractors to $10.10 Per Hour

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By Gayle Cinquegrani

Oct. 1 — Labor Secretary Thomas Perez Oct. 1 issued the final rule raising the minimum wage for workers on federal service and construction contracts to $10.10 per hour and indexing it to inflation in future years.

The rule will apply to new contracts with the federal government and replacements for expiring contracts that result from solicitations issued on or after Jan. 1 and to contracts that are awarded outside the solicitation process on or after Jan. 1.

Slated for publication in the Federal Register Oct. 7, the final rule (RIN 1235-AA10) implements Executive Order 13,658, which President Barack Obama announced Feb. 12.

The DOL issued a notice of proposed rulemaking June 12. In the preamble to the final rule, the Labor Department said it received more than 6,500 comments in response to the notice.

Business groups argued that Obama overreached executive authority and that the DOL should withdraw the proposed rule. Alternatively, the groups requested numerous changes to clarify exactly which contracts and employees will be covered.

Comments from several unions and other worker advocacy organizations commended the DOL's use of broad definitions to ensure the maximum number of workers will receive at least the $10.10 wage rate. However, they requested changes to the proposed rule to cover even more employees, such as those subject to the Walsh-Healey Public Contracts Act; to remove exemptions for certain workers already exempted by the SCA; and to impose harsher penalties on companies that fail to comply with the minimum wage.

In an Oct. 1 statement, the DOL estimated the rule “will benefit nearly 200,000 American workers.” It said the rulemaking is part of Obama's commitment to make 2014 a year of action to strengthen the economy and build the middle class. The current minimum wage under the Fair Labor Standards Act is $7.25.

“No one who works full time in America should have to raise their family in poverty, and if you serve meals to our troops for a living, then you shouldn't have to go on food stamps in order to serve a meal to your family at home,” Perez said in a statement. “By raising the minimum wage for workers on federal contracts, we're rewarding a hard day's work with fair pay.”

“This action will also benefit taxpayers. Boosting wages lowers turnover and increases morale, and will lead to higher productivity,” the labor secretary said.

Consumer Price Index Will Set Future Rates

The final rule clarifies that the federal contractor minimum wage applies to all contracts for construction covered by the Davis-Bacon Act; contracts for services covered by the Service Contract Act; concessions contracts, such as contracts to furnish food, lodging, automobile fuel, souvenirs, newspaper stands and recreational equipment; and contracts to provide services, such as child care or dry cleaning, on federal property for federal employees or the general public.

The rule establishes a minimum wage of $10.10 per hour starting Jan. 1, 2015. Beginning Jan. 1, 2016, and each year after that, the labor secretary will determine the minimum wage rate based on the Consumer Price Index for Urban Wage Earners and Clerical Workers.

The minimum wage for covered tipped employees will be $4.90 per hour beginning Jan. 1, 2015. It will increase in subsequent years until it is at least 70 percent of the federal contractors' minimum wage.

The labor secretary must publish the minimum wage rate at least 90 days before it takes effect.

Under the final rule, contractors and subcontractors must include the minimum wage contract clause in covered lower-tiered subcontracts. They also must notify all workers performing on a covered contract of the applicable minimum wage rate.

Contractors and subcontractors must pay covered workers the applicable minimum wage for all their work hours in connection with covered contracts and must comply with pay-frequency and record-keeping obligations.

Penalties Include Debarment

The final rule prohibits the taking of kickbacks from wages paid to workers on covered contracts as well as retaliation against workers who exercise their rights under the rule.

Contracting federal agencies are responsible for including language implementing the minimum-wage requirement in covered contracts or contract solicitations. Contracting agencies also are responsible for withholding funds when a contractor or subcontractor fails to pay the required minimum wage and for forwarding any complaints alleging noncompliance to DOL's Wage and Hour Division.

The final rule contains a mechanism for WHD investigations and informal complaint resolution. It also specifies penalties for violations, including the payment of back wages and debarment. In addition, the final rule sets forth an administrative process, including administrative hearings, to resolve disputes of fact or law.

To contact the reporter on this story: Gayle Cinquegrani in Washington at

To contact the editor responsible for this story: Susan J. McGolrick at

Text of the final rule is available at