Biden raises minimum wage to $15 for certain federal contractors

June 2021 employment law letter

Authors:

Jessica C. Abrahams, Lindsey M. Hogan, Dana B. Pashkoff, and Graciela M. Quintana, Faegre Drinker

President Joe Biden recently signed an Executive Order (EO) requiring certain federal contractors to pay workers on government contracts at least $15 per hour beginning January 30, 2022. Starting in 2023, the minimum wage will be adjusted annually for inflation at a rate set by the secretary of labor. The EO states raising the wage will promote efficiency in federal procurement through (1) enhanced productivity and generation of higher-quality work because of employees’ better health, morale, and effort, (2) reduced absenteeism and turnover, and (3) lowered supervisory and training costs.

Which contracts are covered

The new minimum wage requirement applies to new contracts entered into on or after January 30, 2022. It also covers existing contracts if they will be extended or renewed on or after that date.

Agencies are “strongly encouraged,” however, to include the higher minimum wage in contracts entered into between the date of the order (April 27, 2021) and January 30, 2022. New contracts also must include a clause requiring contractors and covered subcontractors to flow down the minimum wage requirement into lower-tier subcontracts.

Impact on tipped minimum wage

The EO also phases out the tipped minimum wage for certain federal contractors according to the following schedule:

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