As promised in the State of the Union address, President Obama signed an Executive Order on February 12, 2014 raising the minimum wage from $7.25 to $10.10 per hour for workers under federal contracts and subcontracts. Many details remain vague because the regulations interpreting and implementing the Executive Order are not due until October 1, 2014.
What is clear is this: Executive departments and agencies shall include in their "new contracts, contract-like instruments, and solicitations" a clause requiring the minimum wage to increase to $10.10 per hour effective January 1, 2015, and to increase annually to reflect changes in the Consumer Price Index as published by the Secretary of Labor. Contractors must incorporate this same minimum wage clause in their lower-tier subcontracts.
As a result, the new minimum wage will kick in when (1) new federal contracts are signed, or (2) existing contracts are renewed.
A practical question many contractors and subcontractors are asking is whether the new wage requirement applies to their entire workforce or only the employees working under the federal contract or subcontract? Based on the language of the Executive Order, the new minimum wage will likely only apply to those workers "in the performance of" any contract or any subcontract "covered" by the Service Contract Act. The Executive Order, however, does not indicate how contractors are to determine what work is "covered."
The new minimum wage will affect hundreds of thousands of workers whose jobs are supported by federal dollars, according to Valerie Jarrett, senior advisor to President Obama. Depending on what the Secretary of Labor's regulations require, the new minimum wage may substantially increase the cost of doing business for industries-including call centers.
We will continue to monitor this issue and provide an update as soon as the Secretary's regulations are released.
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