DOL Announces Minimum Wage Increase for Federal Contractors

On September 15, 2017, the U.S. Department of Labor (“DOL”) announced the 2018 minimum wage rate for covered federal contractors and subcontractors, as required by Executive Order 13658.

Beginning January 1, 2018, the minimum wage for covered contractors will increase from $10.20 per hour to $10.35 per hour. The minimum cash wage for tipped employees performing work on or in connection with a covered federal contract will also increase from $6.80 per hour to $7.25 per hour, effective January 1, 2018. If the worker’s tips combined with the required cash wage of at least $7.25 per hour do not equal the minimum rate, then the contractor must increase the cash wage paid to a tipped employee to bring him or her up to $10.35 per hour.

As a reminder, the contractor minimum wage requirement established by Executive Order 13658 only applies to four major categories of federal contractual agreements:

  1. Procurement contracts for services or construction covered by the Davis-Bacon Act (“DBA”) exceeding $2,000;
  2. Service contracts covered by the Service Contract Act (“SCA”) exceeding $2,500;
  3. Concession contracts with the federal government; and
  4. Contracts in connection with federal property or lands and related to offering services for federal employees, their dependents, or the general public.

The Executive Order generally applies to the following categories of workers for all time spent performing on or in connection with covered federal contracts: (1) employees who are entitled to the Fair Labor Standards Act (“FLSA”) minimum wage; (2) service employees who are entitled to prevailing wages under the SCA; and (3) laborers and mechanics who are entitled to prevailing wages under the DBA. The Executive Order also applies to individuals with disabilities who were previously paid below the minimum wage because their productivity was impaired by a physical or mental disability for the work to be performed, and as mentioned above, tipped employees.

Executive Order 13658 mandates that the DOL raise the hourly minimum wage paid by certain federal contractors every year based on inflation. The Executive Order also requires annual adjustments to the minimum cash wage rate for tipped employees performing work on or in connection with a covered federal contract. This will be the third increase to the minimum wage under Executive Order 13658, which first went into effect January 1, 2015.