The Secretary of Labor announced proposed regulations raising the minimum wage for workers on federal contracts to $10.10 per hour. This new requirement applies to: (1) construction contracts covered by the Davis-Bacon Act (but not those covered only by the Davis-Bacon Related Acts); (2) procurement and nonprocurement contracts exceeding $2,500 covered by the Service Contract Act; (3) concession contracts with the federal government; and (4) contracts to provide services to federal employees, their dependents, or the general public on federal property. These proposed regulations implement Executive Order 13658, which we reported on previously. Interested parties can submit written comments until July 17, 2014. Final regulations will be issued by October 1, 2014. The new minimum wage will apply not just to companies with direct federal contracts but also to subcontractors providing goods or services being used in connection with covered federal contracts.

Notably, the  proposed rules define the class of covered workers broadly: (1) workers performing work within the scope of the services called for in the contract and (2) workers performing other duties necessary to the performance of the contract, unless specifically exempted. The minimum wage  must be paid  for all time spent working on federal contracts. Also of note, the proposed regulations require records of wages and hours worked be retained for three years.

Complaints about alleged violations of the Executive Order will be investigated by the Wage and Hour Division of the Department of Labor. The sanctions for suspected violations are steep—contracting agencies may withhold contract payments from employers found to be in violation, and the Department of Labor can order back pay.

The minimum wage will take effect on January 1, 2015 as to contracts where the solicitation for such contract has been issued on or after January 1, 2015. The Executive Order requires that contractors: (1) pay the minimum wage to covered workers and (2) include a minimum wage clause in covered subcontracts.

The $10.10 will increase yearly based on the Consumer Price Index.