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Business and Policy Areas
Business and Policy Areas

Proposed Rules Establish Minimum Wage for Federal Contractors

June 24, 2014

The Department of Labor (DOL) published a June 17 notice of proposed rulemaking relating to Executive Order 13658, which established a minimum wage for federal contractors. The Executive Order (EO)—signed by President Obama on February 12, 2014—raises the minimum wage on covered federal contracts from $7.25 to $10.10 per hour, beginning January 1, 2015, and to be indexed annually thereafter for inflation.

The Executive Order applies to:

  • contracts for construction covered by the Davis-Bacon Act that exceed $2,000;
  • contracts for services covered by the Service Contract Act that exceed $2,500;
  • concessions contracts (for food, lodging, fuel, souvenirs, newspaper stands, or recreational equipment on federal property); and
  • contracts to provide services, such as child care or dry cleaning, in federal buildings.

In procurement contracts where workers' wages are governed by the Fair Labor Standards Act (FLSA), the Executive Order applies only to contracts that exceed $3,000.

The higher wage will apply to new contracts and replacements for expiring contracts. Federal agencies will be required to include a clause in all covered contracts that specifies the minimum wage must be paid to the workers under that contract.

The Executive Order does not apply to grants, and some contracts are explicitly exempt under the Order (those with Indian Tribes under the Indian Self-Determination and Education Assistance Act). It also permits DOL to create additional exemptions. The notice proposes exempting student workers.

DOL also clarifies in the notice that the EO does not apply to executive, administrative and professional employees who are exempt from the Fair Labor Standards Act's overtime requirements.

Along with the notice, the department published a fact sheet and FAQsComments on the proposed rule are due by July 17.

A final rule is expected from DOL by October 1.


Mary Bachinger
Director, Tax Policy