Department requires $15 an hour minimum wage for federal contractors

Federal officials on Monday published a rule raising the minimum wage for federal contractors to $15 an hour, following an executive order from President Joe Biden.

The Department of Labor’s Wage and Hour Division announced a final rule Monday raising the minimum wage for federal contractors from $10.96 an hour to $15. The change, resulting from an executive order from Biden in April, will take effect on Jan. 30, overruling a previously scheduled increase in the minimum wage to $11.25.

The new minimum wage applies to most federal construction contracts, including those subject to the Davis-Bacon Act. The main exception is for federal contracts worth less than $2,000.

According to Biden’s executive order, the minimum wage increase aims to “bolster economy and efficiency in federal procurement.”

The new rule applies to new federal contracts signed after Jan. 30 but not retroactively to existing contracts. It stipulates that the minimum wage for federal contractors could continue to rise after early 2023 in an amount decided by the U.S. Labor Secretary. The rule also ends a credit for tips received on the job and a minimum-wage exemption for certain employees with disabilities.

Ben Brubeck, vice president of regulatory, labor and state affairs for the Associated Builders and Contractors, said the new rule is unlikely to have much of an effect on the construction industry because most contractors already pay workers more than $15 an hour. The federal Davis-Bacon Act also generally requires wages that are higher than $15 an hour on federal projects.

“This rulemaking will create unnecessary confusion and needlessly increase the compliance burden on ABC member contractors that build America’s infrastructure and perform other federal or federally assisted work,” Brubeck said.

The Department of Labor noted in its own statement Monday that about a third of workers affected by the change were likely to be in the service sector, although it did not produce a detailed estimate of who would benefit from the rule. The agency is expected to publish guidance soon detailing how contractors can comply with the mandate.

Editor’s note: This story has been corrected to state that it was the Department of Labor’s Wage and Hour Division that raised the minimum wage for federal contractors, not OSHA.