On July 21, 2021, the U.S. Department of Labor (“DOL”) announced that a wide range of government contractors would be required to pay private sector employees at least $15 per hour, in a plan to carry out President Joe Biden’s executive order signed this past April.  Our blog post about President Biden’s executive order requiring the wage increase can be found here.

The new wage floor is set to take effect on new or extended contracts beginning on January 30, 2022.  The minimum wage would rise by $4.05 from its current level of $10.95.  In addition, the regulation would provide annual increases to keep pace with inflation, eliminate the lower minimum wage for tipped workers on federal contracts by 2024, cover workers with disabilities, and outfitters and guides operating on federal lands.  The DOL predicts that the pay raise would impact approximately 327,000 workers.

The DOL will accept public comments on the proposed rule for the next 30 days.  President Biden’s executive order requires that the DOL finalize the regulation by November 24th of this year.

Employers with federal contracts should carefully review their agreements to determine whether, and how, the proposed rule could impact rates of pay.  In the event that the proposed rule becomes final, going forward employers will need to be prepared to enter into agreements that comply with the new terms.