200K Federal Contractors Are About to Get a Pay Raise

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The Labor Department on Tuesday issued final rules for raising the minimum wage for employees of federal contractors, setting the stage for all such workers on new contracts to earn at least $10.10 per hour starting Jan. 1.

The regulation follows an executive order issued by President Obama in February and will benefit around 200,000 employees, according to Labor. The minimum wage will apply to most construction, service, concession and federal property contracts signed on or after Jan. 1, 2015. Labor said it received comments from more than 6,500 labor organizations, contractors, associations, advocates, agencies, small businesses, workers and other stakeholders advising the agency on its final rule.

Obama has been lobbying heavily in recent months for Congress to raise the federal minimum wage to $10.10 per hour for all American workers, but Republicans have so far stymied that effort. The current federal minimum wage is $7.25, and the president does not have unilateral authority to change it.

Still, Labor called the limited order an “important milestone.”

The executive order will apply to all employees covered by the Fair Labor Standards Act, the Service Contract Act and the Davis-Bacon Act. Both those who work directly on a contract as well as those who complete “other duties necessary to the performance of the contract” will earn at least $10.10 per hour.

Workers who spend less than 20 percent of their time on the contract in a given work week are excluded from the new minimum wage, the rule said. Students, apprentices and employees paid with grants are also exempt from the order. Those who work more than 20 percent are only required to receive at least $10.10 per hour for the time they spend working on the contract.

Contracting agencies will be responsible for including the executive order in new agreements, and withholding payments to contractors who fail to abide by its requirements. Contractors must similarly apply the executive order to their subcontractors, and are responsible for notifying all their employees of the minimum wage to which they are entitled.

The final rule provides Labor’s Wage and Hour Davison a mechanism for investigations and informal complaint resolutions as issues arise. It also allows for administrative hearings for complainants. Compliance with the order will require contractors to not just pay their employees appropriately, but to prohibit kickbacks and retaliation against workers who demand the new minimum wage.

Contractors must pay tipped employees at least $4.90 per hour.

Beginning Jan. 1, 2016, the Labor secretary will determine the minimum wage for contractors, and must publish the new wage 90 days before it would take effect. The secretary can reset the wage annually. 

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