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DOL Releases Proposed Rule Setting $10.10 As Minimum Wage for Federal Contractors

Monday, June 16, 2014

By Gayle Cinquegrani  

June 12 — The White House and the Labor Department June 12 released a proposed rule that would raise the minimum wage for workers on federal service and construction contracts to $10.10 per hour.

The proposed rule (RIN 1235-AA10) would increase wages for nearly 200,000 workers, according to an economic analysis included in the proposal. The final version of the rule is scheduled to be issued by Oct. 1.

The rulemaking is part of President Barack Obama's commitment to make 2014 a year of action to strengthen the economy and build the middle class, Labor Secretary Thomas Perez and White House Domestic Policy Council Director Cecilia Munoz said during a June 12 teleconference.

“A big piece of this” involves raising the minimum wage, Munoz said, so “we wanted the federal government to set an example for the rest of the country.”

“No person who works a full-time job should have to live in poverty,” Perez said. He predicted that an increase in the minimum wage for workers of federal contractors would reduce staff turnover and therefore “improve the quality of services they provide” to taxpayers.

The proposed rule is at the Office of Management and Budget and is expected to be published in the Federal Register in the near future, DOL staff members said during the teleconference. The public will have 30 days after publication to submit comments.

Follows Executive Order Issued in February

The proposed rule implements Executive Order 13,658, which the president signed Feb. 12. That order applies to new and renegotiated federal contracts starting Jan. 1, 2015.

The proposed rule would apply to all construction contracts covered by the Davis-Bacon Act; service contracts covered by the Service Contract Act; concessions contracts, such as contracts to furnish food and lodging on federal property; and contracts to provide services, such as child care or dry cleaning, in federal buildings.

In compliance with the executive order, the proposed rule would require government agencies to ensure that all their contractors and subcontractors pay their employees at least $10.10 per hour starting in 2015. The amount of the minimum wage would be adjusted each year to account for inflation.

The $10.10 minimum wage also would apply to workers with disabilities. Current law permits employers to pay workers with disabilities who are in specialized certificate programs less than other workers.

Tipped employees also would receive a raise under the proposed rule. Beginning in January 2015, tipped workers would be paid a minimum hourly wage of $4.90 by their employer in addition to the amount they earn in tips.

This new tipped wage is more than double the current federal tipped minimum wage of $2.13 per hour. Starting in 2016, the $4.90 minimum for tipped workers would climb by 95 cents per year until it equals 70 percent of the minimum wage for non-tipped workers under government contracts.

The Labor Department's Wage and Hour Division will be responsible for enforcing the rule. The proposed rule contains a mechanism for WHD investigations and informal complaint resolution as well as remedies for violations, including the payment of back wages and debarment of companies from being able to perform federal contracts.

Building ‘An Economy for All.'

Both Munoz and Perez called on Congress to raise the federal minimum wage for all workers. “This step isn't enough,” the labor secretary said. “Congress must now follow the president's lead.”

Raising the federal minimum wage to $10.10 an hour could help 2 million people, Perez said. The current minimum wage of $7.25 is worth 20 percent less than it was 30 years ago, according to the labor secretary. “It's time once again to give America a raise,” he said. “Many states and localities are already doing it.”

Munoz said the average minimum wage worker is 35 years old, and nearly one-third of minimum wage workers are raising children. “We're working hard to build an economy for all, not just the privileged few,” she said.

Reaction From Contractor Group

Perez said the proposed rule was developed after “extensive outreach to the contracting community and workers.”

Nevertheless, Roger Jordan, vice president for government relations at the Professional Services Council, a trade association for government contractors, told Bloomberg BNA June 12 that the Labor Department “hosted a few online sessions, but I would say that there has not been a significant amount of dialogue.”

“It's not that we were so bothered by the policy; it bothered us that it was one more example where the president seems to be focusing on federal contractors versus having the debate with Congress across all sectors of our economy,” Jordan said.

According to Jordan, the rule may not have that big an impact on members of the Professional Services Council. “Their employees are more from a professional and technical background and they're making well above the $10.10 per hour,” he said. “For the predominance of our membership, this might be a non-issue around the $10.10.”

The Labor Department said in a June 12 statement that, in conjunction with the Office of Management and Budget, it has issued guidance to federal agencies on steps they should take to begin implementing the increased minimum wage before the final rule is issued so workers on federal contracts can receive wage increases as soon as possible after Jan. 1.

To contact the reporter on this story: Gayle Cinquegrani in Washington at gcinquegrani@bna.com

To contact the editor responsible for this story: Susan J. McGolrick at smcgolrick@bna.com

Text of the proposed rule is available at http://op.bna.com/dlrcases.nsf/r?Open=gcii-9kznbf and the OMB guidance at http://op.bna.com/dlrcases.nsf/r?Open=gcii-9kzryc.

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