New Regulations Posted on New Minimum Wage for Government Contracts

In this year's State of the Union Address, the President promised to increase the minimum wage for Government contractors (see previous coverage). A few weeks later, the President issued an Executive Order telling the Department of Labor to draft up regulations that would increase the minimum wage for Government contractors (see previous coverage). Last week, the Labor department did just that, it issued proposed regulations that will raise the minimum wage for workers on Government contracts to $10.10 per hour. The proposed regulations also carries an escalation clause that will increase the rate each year based on increases in the Consumer Price Index (CPI).

There will be cases where contractors will have "covered" and "non-covered" work. This is going to require some tricky record-keeping. The new regulations anticipate some issues here and provides the following:

...the hours worked by a worker generally include all periods in which the worker is suffered or permitted to work, whether or not required to do so, and all time during which the worker is required to be on duty or to be on the employer's premises or to be at a prescribed workplace. The hours worked which are subject to the minimum wage requirement ... are those in which the worker is engaged in performing work on or in connection with a contract subject to the Executive Order. However, unless such hours are adequately segregated or there is affirmative proof to the contrary that such work did not continue throughout the workweek ... compensation in accordance with the Executive Order will be required for all hours of work in any workweek in which the worker performs any work in connection with a contract covered by the Executive Order.

Later, in discussing the record keeping requirements that would satisfy the "adequately segregated" provision, the proposed regulations state that

...an arbitrary assignment of time on the basis of a formula, as between covered and non-covered work, is not sufficient.

Contractors who maintain adequate timekeeping systems (where labor hours are tracked by the contract, job, or task should have no difficulty in differentiating between covered and non-covered contracts. However, unless the contractors are geared up for performing cost-reimbursable contracts, they probably do not have systems sufficient to segregate covered and non-covered work. That might be incentive enough for some contractors to enhance their timekeeping systems.

Interested parties can submit comments to the proposed regulations for the next 30 days. The final rule is set to be published by October 1, 2014. Once enacted, the new minimum wage will become effective next January (January 1, 2015) on contracts that result from solicitations issued after that day or, for contracts awarded outside of the solicitation process (RFQs, RFPs, etc), January 1, 2015.