General

  1. Why is the Department of Labor issuing this final rule?
  2. What is the minimum wage rate under E.O. 14026?
  3. Wasn’t there another E.O. about this?
  4. Is E.O. 14026 the same as E.O. 13658 just with a higher minimum wage?
  5. How will the Secretary determine the amount of the minimum wage under E.O. 14026?
  6. How will contracting agencies and contractors know what the new wage is since the minimum wage under E.O. 14026 may change annually on January 1?
 

1 Q. Why is the Department of Labor issuing this final rule?

On April 27, 2021, President Biden signed Executive Order (E.O.) 14026, “Increasing the Minimum Wage for Federal Contractors.” E.O. 14026 states that the Federal Government’s procurement interests in economy and efficiency are promoted when the Federal Government contracts with sources that adequately compensate their workers. The E.O. therefore raises the minimum wage paid by those contractors to workers performing work on or in connection with covered federal contracts to $15.00 per hour, beginning January 30, 2022; and annually thereafter beginning January 1, 2023, to an amount determined by the Secretary of Labor (Secretary). 

E.O. 14026 directs the Secretary to issue regulations to implement the requirements of the E.O. by November 24, 2021. The Department published a Notice of Proposed Rulemaking (NPRM) in the Federal Register on July 22, 2021. The NPRM proposed standards and procedures for implementing and enforcing the minimum wage protections of E.O. 14026 and invited comments on the proposed provisions. The Department received many comments from a variety of interested stakeholders, such as labor organizations; contractors and contractor associations; worker advocates; contracting agencies; small businesses; and workers.

After considering all timely comments, the Department has issued a final rule to implement the provisions of E.O. 14026. As required by the E.O. and to the extent practicable, the Department’s final rule incorporates existing definitions, procedures, remedies, and enforcement processes under the Fair Labor Standards Act (FLSA), the Service Contract Act (SCA), the Davis-Bacon Act (DBA), and E.O. 13658.

2 Q. What is the minimum wage rate under E.O. 14026?

E.O. 14026 increases the minimum wage requirement for Federal contractors and subcontractors. The E.O. provides that executive departments and agencies must, to the extent permitted by law, ensure that new covered contracts and solicitations (collectively referred to as “contracts”) include a clause, which the contractor and any subcontractors must incorporate into lower-tier subcontracts, specifying, as a condition of payment, that the minimum wage to be paid to workers performing on or in connection with the contract or any subcontract thereunder, must be at least:

  • $15.00 per hour beginning January 30, 2022; and
  • beginning January 1, 2023, and annually thereafter, an amount determined by the Secretary pursuant to the E.O.

The E.O. requires that tipped employees working on or in connection with covered contracts must be paid a cash wage of at least $10.50 an hour, beginning on January 30, 2022. The E.O. calls for the elimination of the tip credit beginning January 1, 2024.

3 Q. Wasn’t there another E.O. about this?

E.O. 14026 builds on the foundation established by Executive Order 13658, “Establishing a Minimum Wage for Contractors,” which was signed by President Barack Obama on February 12, 2014.  E.O. 13658 established a minimum wage for certain federal contractors. E.O. 13658 provided that workers performing on or in connection with covered federal contracts are entitled to a minimum wage of: (i) $10.10 per hour, beginning January 1, 2015; and (ii) beginning January 1, 2016, and annually thereafter, an amount determined and announced by the Secretary, accounting for changes in inflation as measured by the Consumer Price Index. That rate has increased each year since 2015. For calendar year 2021, E.O. 13658’s minimum wage requirement is $10.95 per hour. For calendar year 2022, the E.O. 13658 minimum wage will increase to $11.25 per hour. E.O. 13658 also established a minimum hourly cash wage requirement for tipped employees performing on or in connection with covered contracts, initially set at $4.90 per hour for 2015 and gradually increasing to 70 percent of the full E.O. 13658 minimum wage over a period of years. For calendar year 2021, the E.O. 13658 minimum cash wage requirement for tipped employees is $7.65 per hour. This rate will increase to $7.90 per hour on January 1, 2022.

4 Q. Is E.O. 14026 the same as E.O. 13658 just with a higher minimum wage?

No. While there are a number of similarities between the two executive orders, E.O. 14026 raises the minimum wage to $15.00 an hour, phases out a covered employer’s ability to claim a tip credit towards the E.O. minimum wage owed to tipped employees, and defines “new contract” differently, among other things. In addition, the regulations implementing E.O. 14026 provide that the E.O. applies to covered contracts in certain territories of the United States, whereas the regulations implementing E.O. 13658 did not. These differences and the interaction between the two executive orders are discussed in greater detail below, as well as in the final rule.

5 Q. How will the Secretary determine the amount of the minimum wage under E.O. 14026?

The Secretary will determine the inflation-based increases to the E.O. 14026 minimum wage beginning January 1, 2023, and annually thereafter. The methodology to update the wage rate under E.O. 14026 mirrors the E.O. 13658 methodology. The amount of the E.O. 14026 minimum wage will be published by the Secretary at least 90 days before such new minimum wage is to take effect and will be:

  • Not less than the amount in effect on the date of such determination;
  • Increased from such amount by the annual percentage increase in the Consumer Price Index for Urban Wage Earners and Clerical Workers (United States city average, all items, not seasonally adjusted), or its successor publication, as determined by the Bureau of Labor Statistics; and
  • Rounded to the nearest multiple of $0.05.

6 Q. How will contracting agencies and contractors know what the new wage is since the minimum wage under E.O. 14026 may change annually on January 1?

The new minimum wage rate under E.O. 14026 will publish in the Federal Register at least 90 days before it takes effect. It will also be posted on WHD’s website at http://www.dol.gov/agencies/whd and the Wage Determinations website at https://alpha.sam.gov/content/wage-determinations. The Department of Labor will also publish a prominent general notice, updated annually, on SCA and DBA wage determinations that states the E.O. minimum wage, and that it applies to SCA- and DBA-covered contracts. In addition, contractors are required to display a Department of Labor poster to provide notice of the E.O. minimum wage to FLSA-covered workers performing work on or in connection with covered contracts.



Contract Coverage

  1. What types of contracts are covered by E.O. 14026 and these regulations?
  2. What is a “contract or contract-like instrument”?
  3. What is a “new contract”?
  4. What is a “concessions contract”?
  5. What is a “contract or contract-like instrument entered into with the Federal Government in connection with federal property or lands and related to offering services for Federal employees, their dependents, or the general public”?
  6. If I enter into a contract with the Federal Government, will it be automatically covered by E.O. 14026?
  7. If an existing contract is covered by E.O. 13658, and we exercise the next option period on or after January 30, 2022, is the contract now covered by the E.O. 14026 minimum wage of $15 an hour?
  8. If I am currently subject to E.O. 13658 and I am receiving $10.95 an hour, how quickly will my wage rate increase to $15 an hour?
  9. Does E.O. 14026 cover AbilityOne contracts?
  10. Are any types of Federal contracts excluded from coverage under E.O. 14026 and this final rule?
  11. Will contracts specifically related to offering seasonal recreational services or seasonal recreation equipment rental for the general public be covered under E.O. 14026?
  12. Is work performed in Guam, the Commonwealth of the Northern Mariana Islands, or Puerto Rico covered by E.O. 14026?
  13. If I have an existing SCA-covered contract that is being performed in Puerto Rico, and we exercise the next option period on May 15, 2022, will the contract become covered by E.O. 14026?
  14. Are contracts entered into by the District of Columbia Government covered by E.O. 14026?
 

7 Q. What types of contracts are covered by E.O. 14026 and these regulations?

E.O. 14026 and the Department’s final rule are intended to apply to a wide range of contracts with the Federal Government for services or construction. Consistent with coverage under E.O. 13658, coverage under E.O. 14026 and the Department’s final rule generally extends to four major categories of contractual agreements:

  • Procurement contracts for construction covered by the DBA;
  • Service contracts covered by the SCA;
  • Concessions contracts, including any concessions contract excluded from the SCA by the Department’s regulations at 29 CFR 4.133(b); and
  • Contracts in connection with Federal property or lands and related to offering services for Federal employees, their dependents, or the general public.

The E.O. also establishes value threshold requirements for coverage. The E.O. only applies to prime contracts covered by the DBA that exceed $2,000 and prime contracts covered by the SCA that exceed $2,500. For procurement contracts where workers’ wages are governed by the FLSA, the E.O. specifies that it applies only to contracts that exceed $10,000. There is no value threshold requirement for subcontracts awarded under such prime contracts.

The E.O. minimum wage generally applies to workers performing on or in connection with the above types of contracts if the wages of such workers are governed by the DBA, the SCA, or the FLSA.

8 Q. What is a “contract or contract-like instrument”?

Under the regulations implementing E.O. 14026, “contract” and “contract-like instrument” means an agreement between two or more parties creating obligations that are enforceable or otherwise recognizable at law. The term “contract” broadly includes all contracts and any subcontracts of any tier thereunder, whether negotiated or advertised, including any procurement actions, lease agreements, cooperative agreements, provider agreements, intergovernmental service agreements, service agreements, licenses, permits, or any other type of agreement, regardless of nomenclature, type, or particular form, and whether entered into verbally or in writing. A contract that meets this definition is only covered by the E.O., however, if it fits within one of the four categories of agreements discussed above and also qualifies as a “new contract.”

9 Q. What is a “new contract”?

The minimum wage requirements of E.O. 14026 apply only to “new contracts” with the Federal Government. A “new contract” is a contract that is entered into on or after January 30, 2022. A contract that is entered into prior to January 30, 2022 will also constitute a “new contract” if, on or after January 30, 2022:

The contract is renewed;

    • The contract is extended; or
    • An option on the contract is exercised.

For contracts that were entered into prior to January 30, 2022, the E.O. minimum wage requirement applies prospectively as of the date that such contract is renewed or extended (pursuant to an exercised option or otherwise) on or after January 30, 2022, and not the date that the contract was originally entered into.

A key difference between E.O. 13658 and E.O. 14026 is that if the Federal Government decides to renew or extend an existing contract (including by exercising an option) on or after January 30, 2022, the contract will be subject to the requirements of E.O. 14026.

10 Q. What is a “concessions contract”?

A “concessions contract” is a contract under which the Federal Government grants a right to use federal property, including land or facilities, for furnishing services. The term “concessions contract” includes, but is not limited to, every contract with the principal purpose of furnishing food, lodging, automobile fuel, souvenirs, newspaper stands, and/or recreational equipment, regardless of whether the services are of direct benefit to the Government, its personnel, or the general public.

11 Q. What is a “contract or contract-like instrument entered into with the Federal Government in connection with federal property or lands and related to offering services for Federal employees, their dependents, or the general public”?

Pursuant to the Department’s final rule, this category of covered contracts refers to leases of federal property, including space and facilities, and licenses to use such property entered into by the Federal Government for the purpose of offering services to Federal employees, their dependents, or the general public.

Examples of such agreements include delegated leases of space in a Federal building from an agency to a contractor whereby the contractor operates a credit union, gift shop, barber shop, coffee shop, or fitness center in the Federal building to serve Federal employees and/or the general public.

The four categories of covered contracts are not mutually exclusive. For example, a contract in connection with Federal property or lands and related to offering services might also be covered by the SCA.

12 Q. If I enter into a contract with the Federal Government, will it be automatically covered by E.O. 14026?

No. In order for a contractual agreement to be covered by E.O. 14026, the agreement must (1) fall within the definition of a “contract or contract-like instrument” as set forth in the Department’s final rule, (2) qualify as one of the specifically enumerated types of contracts described in the E.O., and (3) qualify as a “new contract” as defined in the final rule.

For example, a provider agreement will not be covered by E.O. 14026 and the Department’s final rule unless it is subject to the DBA or SCA, is a concessions contract, or is entered into in connection with Federal property or lands and related to offering services for Federal employees, their dependents, or the general public. Moreover, the minimum wage requirements of E.O. 14026 apply only to “new contracts” with the Federal Government as defined in the final rule.

13 Q. If an existing contract is covered by E.O. 13658, and we exercise the next option period on or after January 30, 2022, is the contract now covered by the E.O. 14026 minimum wage of $15 an hour?

Yes. As of January 30, 2022, E.O. 14026 supersedes E.O. 13658 to the extent they are inconsistent. This means that workers performing on or in connection with covered new contracts that would otherwise have been subject to E.O. 13658 will be entitled to the higher minimum wage rate established by E.O. 14026 if they qualify as “new contracts” under E.O. 14026. E.O. 13658 will remain in effect for some existing contracts until they qualify as “new contracts” subject to the requirements of E.O. 14026.

14 Q. If I am currently subject to E.O. 13658 and I am receiving $10.95 an hour, how quickly will my wage rate increase to $15 an hour?

Workers performing work on or in connection with “new contracts,” as discussed above, will receive at least the minimum hourly wage of $15.00 beginning January 30, 2022.

The Department anticipates that some existing contracts with the Federal Government will not qualify as a “new contract” under E.O. 14026, and will remain subject to the minimum wage requirements of E.O. 13658 instead. For example, an SCA-covered contract entered into on February 15, 2021 is currently subject to the E.O. 13658 minimum wage rate. That contract will remain subject to the E.O. 13658 minimum wage rate until it is renewed or extended, through an exercised option or otherwise, on or after January 30, 2022, at which time it will become subject to the E.O. 14026 minimum wage rate.

15 Q. Does E.O. 14026 cover AbilityOne contracts?

Yes. Procurements through the AbilityOne program are presently subject to coverage under E.O. 13658 and will be covered in the same manner as any other contract under E.O. 14026.

16 Q. Are any types of Federal contracts excluded from coverage under E.O. 14026 and this final rule?

Yes. The E.O. and the Department’s final rule set forth the following narrow categories of contracts that are not subject to the E.O.’s minimum wage requirements:

  • Grants, within the meaning of the Federal Grant and Cooperative Agreement Act, as amended, 31 U.S.C. 6301 et seq.;
  • Contracts or agreements with Indian Tribes under the Indian Self-Determination and Education Assistance Act (Pub. L. 93-638), as amended;
  • Procurement contracts for construction that are excluded from coverage of the DBA;
  • Contracts for services that are exempted from coverage under the SCA, unless expressly covered by the E.O. and final rule.
  • Contracts that result from a solicitation issued prior to January 30, 2022 and that are entered into on or between January 30, 2022 and March 30, 2022.[1]
Contracts for the manufacturing or furnishing of materials, supplies, articles, or equipment to the Federal Government, including those subject to the Walsh-Healey Public Contracts Act, 41 U.S.C. 6501 et seq., are not covered by E.O. 14026.
 

[1] E.O. 14026 provides that agencies are strongly encouraged but not required to ensure that such contracts satisfy E.O. 14026’s wage requirements. However, if such a contract is subsequently extended or renewed, or an option is subsequently exercised under that contract, the E.O. will apply to that extension, renewal, or option.

17 Q. Will contracts specifically related to offering seasonal recreational services or seasonal recreation equipment rental for the general public be covered under E.O. 14026?

Yes. E.O. 14026 revokes E.O. 13838 as of January 30, 2022. Accordingly, as of January 30, 2022, contracts entered into with the Federal Government in connection with seasonal recreational services or seasonal recreational equipment rental for the general public on federal lands will be subject to the minimum wage requirements of either E.O. 13658 or E.O. 14026 depending on the date that the relevant contract was entered into, renewed, or extended and the appropriate steps taken by contracting agencies to insert the relevant E.O. clause into such contracts.

18 Q. Is work performed in Guam, the Commonwealth of the Northern Mariana Islands, or Puerto Rico covered by E.O. 14026?

Yes. E.O. 14026 applies to workers performing on or in connection with covered contracts in the 50 states, the District of Columbia, Puerto Rico, the Virgin Islands, Outer Continental Shelf lands as defined in the Outer Continental Shelf Lands Act, American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, Wake Island, and Johnston Island.

19 Q. If I have an existing SCA-covered contract that is being performed in Puerto Rico, and we exercise the next option period on May 15, 2022, will the contract become covered by E.O. 14026?

Yes. Although E.O. 13658 does not apply to existing contracts performed in Puerto Rico, E.O. 14026 will apply to covered contracts performed in Puerto Rico that are entered into on or after January 30, 2022, or to covered contracts that were awarded prior to January 30, 2022, but are subsequently extended or renewed (pursuant to an option or otherwise) on or after January 30, 2022. An existing SCA-covered contract will become subject to the minimum wage requirement of E.O. 14026 when it is extended or renewed on or after January 30, 2022; in this case, a contract will become subject to E.O. 14026 when the option period is exercised on May 15, 2022.

20 Q. Are contracts entered into by the District of Columbia Government covered by E.O. 14026?

No. E.O. 14026 only applies to contracts entered into by the Federal Government, not contracts entered into by the District of Columbia Government.



Worker Coverage

  1. Which workers are entitled to the E.O. 14026 minimum wage?
  2. Who qualifies as a “worker” covered under E.O. 14026?
  3. If a contractor enters into a new contract with the Federal Government that is covered by E.O. 14026, does that contractor have to pay all of its workers the E.O. minimum wage?
  4. Do the Department’s regulations exclude any workers from coverage under E.O. 14026?
 

21 Q. Which workers are entitled to the E.O. 14026 minimum wage?

Consistent with E.O. 13658, workers who perform on or in connection with covered contracts are entitled to the E.O. 14026 minimum wage if their wages under the contract are governed by the FLSA, the SCA, or the DBA. Categories of workers who are generally entitled to the E.O. minimum wage for all hours worked on or in connection with covered Federal contracts are:

  • Employees who are entitled to the minimum wage under FLSA section 6(a)(1), employees whose wages are calculated pursuant to certificates issued under FLSA section 14(c),[1] and tipped employees under FLSA section 3(t);
  • Service employees who are entitled to prevailing wages under the SCA; and
  • Laborers and mechanics who are entitled to prevailing wages under the DBA.

The Department’s final rule specifically notes that the E.O. 14026 minimum wage protections generally apply to FLSA-covered employees who provide support on a service or construction contract that is necessary for the performance of the contract but who are not “service employees” entitled to SCA prevailing wages or “laborers or mechanics” entitled to DBA prevailing wages.

For example, a payroll clerk who is covered by the FLSA and is responsible for maintaining payroll records for service employees employed on an SCA-covered contract for janitorial services would generally be covered by E.O. 14026 for the hours spent performing work in support of the covered contract, even though the payroll clerk may not qualify as a “service employee” entitled to SCA prevailing wages.

Similarly, the Department’s final rule states that E.O. 14026 generally applies to workers performing in connection with DBA-covered contracts for construction who are not laborers or mechanics but whose wages are governed by the FLSA. For example, the Department would generally view a security guard working in connection with a DBA-covered contract whose wages are governed by the FLSA as a covered worker entitled to the minimum wage established by the E.O.
 

[1] 29 U.S.C. 214(c) authorizes employers, after receiving a certificate from the Wage and Hour Division, to pay subminimum wages to workers whose earning or productive capacity is impaired by a physical or mental disability for the work to be performed.

22 Q. Who qualifies as a “worker” covered under E.O. 14026?

Consistent with E.O. 13658, the Department’s final rule defines the term “worker” as any person engaged in performing work on or in connection with a contract covered by the E.O., and whose wages under such contract are governed by the FLSA, the SCA, or the DBA, regardless of the contractual relationship alleged to exist between the individual and the employer. The term “worker” includes any individual performing on or in connection with a covered contract whose wages are calculated pursuant to certificates issued under 29 U.S.C. 214(c), as well as any person working on or in connection with a covered contract and individually registered in a bona fide apprenticeship or training program registered with the Department’s Employment and Training Administration, Office of Apprenticeship, or with a State Apprenticeship Agency recognized by the Office of Apprenticeship.

For purposes of the E.O., the Department views a worker performing “on” a covered contract as any worker who directly performs the specific services called for by the contract’s terms. The Department regards a worker performing “in connection with” a covered contract as any worker who performs work activities that, although are not the specific services called for by the contract’s terms, are necessary to the performance of those specific services.

23 Q. If a contractor enters into a new contract with the Federal Government that is covered by E.O. 14026, does that contractor have to pay all of its workers the E.O. minimum wage?

Contractors need only pay the E.O. 14026 minimum wage to workers performing work “on” or “in connection with” covered contracts whose wages are governed by the DBA, the SCA, or the FLSA. Moreover, such workers are only entitled to be paid the E.O. minimum wage for the time that they spend performing work on or in connection with covered contracts.

A worker who performs “on” a covered contract is any worker who directly performs the specific services called for by the contract’s terms. For example, a nurse or nurse’s aide at an assisted living facility who performs the specific medical services for veterans called for by an SCA contract is a worker that performs “on” the SCA contract. Workers such as the nurse or aide who perform “on” covered contracts are entitled to be paid at least the E.O. 14026 minimum wage for all hours that they spend performing on those contracts, regardless of how much time in a particular workweek they spend performing such work.

A worker who performs “in connection with” a covered contract is any worker who performs work activities that, although are not the specific services called for by the contract’s terms, are necessary to the performance of those specific services. For example, an FLSA-covered worker who washes laundry for all of the patients at the assisted living facility mentioned above is performing “in connection” with the SCA contract even though her specific services are not called for by the SCA contract itself. However, an important exclusion may apply to such workers. If an FLSA-covered worker performs “in connection with” covered contracts for less than 20 percent of their hours worked in a given workweek, that worker is not entitled to the E.O. minimum wage for any hours worked in that workweek.

Example: On April 15, 2022, a Federal agency enters into an SCA-covered contract with a skilled nursing center to provide lodging and nursing care to veterans. The nursing center houses and provides services to 100 patients, only 5 of whom are veterans whose services are paid for pursuant to an SCA contract. The center must pay at least the E.O. minimum wage to any workers that perform the specific services called for by the SCA contract for the hours that they spend performing such work. For example, the nurse or aide who directly provides the medical services to the veterans pursuant to the SCA contract is entitled to $15.00 for all the hours that she spends providing those services.

The center also employs a cook to prepare all of the meals that are served to the 100 patients and a janitor to clean all of the patients’ rooms. The cook and the janitor qualify as workers performing “in connection with” the SCA contract because their food preparation and room cleaning services are necessary to the provision of medical care and lodging for the veterans (even though the cook and the janitor do not directly perform the services called for by the SCA contract). However, assuming the time spent by the cook preparing meals for, and the janitor cleaning the rooms of, the five veterans is less than 20% of their work hours performing “in connection with” the SCA contract in a given workweek, the cook and janitor are not entitled to the E.O. minimum wage.

24 Q. Do the Department’s regulations exclude any workers from coverage under E.O. 14026?

The Department’s final rule provides that, except for workers whose wages are calculated pursuant to certificates issued under FLSA section 14(c) and workers who are otherwise covered by the SCA or DBA, employees who are exempt from the minimum wage protections of the FLSA are similarly not entitled to the minimum wage protections of E.O. 14026.

For example, the Department’s final rule provides that learners, apprentices, messengers, and full-time students employed under certificates pursuant to FLSA sections 14(a) and (b) are not entitled to the E.O. minimum wage. Similarly, individuals employed in a bona fide executive, administrative, or professional capacity, as those terms are defined in 29 CFR part 541, are exempt from coverage of the E.O. pursuant to the Department’s final rule.

As with E.O. 13658, there is an exclusion whereby any FLSA-covered worker performing “in connection with” covered contracts for less than 20 percent of their hours worked in a given workweek will not be entitled to the E.O. 14026 minimum wage for any hours worked. The Department created this exclusion based on comments expressing concern that the regulations could impose compliance and recordkeeping burdens on contractors with respect to workers who may only spend a very small amount of time working in connection with a contract covered by the E.O.

Importantly, however, this 20 percent exclusion only applies to FLSA-covered workers performing “in connection with” a covered contract for less than 20 percent of their hours worked in a given workweek. The exclusion does not apply to any workers performing “on” a covered contract, regardless of whether such covered work constitutes less than 20 percent of their overall hours worked in a particular workweek. For example, this exclusion does not apply to any workers entitled to DBA and SCA prevailing wages. Thus, a security guard patrolling a DBA-covered construction site would not be covered if the security guard spent less than 20 percent of her time at the DBA-covered site, whereas a laborer working on a DBA-covered construction project would be covered, even if he worked at the site less than 20 percent of his time.



Contracting Agency Requirements

  1. What are the responsibilities of contracting agencies in implementing E.O. 14026?
 

25 Q. What are the responsibilities of contracting agencies in implementing E.O. 14026?

Contracting agencies must include the E.O. 14026 contract clause in all new contracts or solicitations for contracts covered by the E.O. Contracting agencies must also forward any complaints alleging a contractor’s non-compliance with E.O. 14026 to the Wage and Hour Division, and withhold payments due on the contract to the extent considered necessary to pay workers the full amount of wages due under the E.O. if the agency has reason to believe a violation of the E.O. has occurred.



Contractor Requirements

  1. What are the responsibilities of contractors in complying with E.O. 14026?
  2. Will there be two different minimum wage requirements (E.O. 13658 and E.O. 14026) under Federal contracts?
  3. Will increases in the minimum wage under E.O. 14026 affect workers on covered multi-year contracts?
  4. Can a contractor rely on E.O. 14026 to pay a wage less than that required by another law?
  5. Does E.O. 14026 affect the prevailing wage rates required by the DBA and the SCA?
  6. Does E.O. 14026 apply to tipped employees?
  7. Does E.O. 14026 impact wage rates for service employees working on a covered contract if their wage rates have been determined under a collective bargaining agreement wage determination?
  8. How does E.O. 14026 affect the wage rates paid to workers whose wages are calculated pursuant to a certificate under section 14(c) of the Fair Labor Standards Act, 29 U.S.C. 214(c)?
  9. How does E.O. 14026 apply to other staff employed by an FLSA section 14(c) certificate holder on or in connection with a contract covered by the E.O.?
  10. Can a contractor make deductions from the wages of workers that bring the workers’ wages below the E.O. 14026 minimum wage?
  11. Can contractor contributions to fringe benefits be used to satisfy part of the E.O. 14026 minimum wage requirement?
  12. When the E.O. minimum wage increases in January, does the increase apply immediately to employees performing work on or in connection with covered contracts?


26 Q. What are the responsibilities of contractors in complying with E.O. 14026?

Contractors and subcontractors must include the E.O. 14026 contract clause in any covered lower-tiered subcontracts. They must also notify all workers performing on or in connection with a covered contract of the applicable minimum wage rate under the E.O. Contractors and subcontractors must pay all covered workers the E.O. minimum wage for all hours worked on or in connection with covered contracts, and must comply with pay frequency and recordkeeping requirements.

27 Q. Will there be two different minimum wage requirements (E.O. 13658 and E.O. 14026) under Federal contracts?

Some existing contracts will continue to be covered exclusively by E.O. 13658 and its lower minimum wage requirement until they are renewed or extended. As of January 30, 2022, all “new” contracts in the categories described earlier, including those which are renewed or extended on or after January 30, 2022, will be covered exclusively by E.O. 14026.

28 Q. Will increases in the minimum wage under E.O. 14026 affect workers on covered multi-year contracts?

Yes. The applicable minimum wage under E.O. 14026 may increase each year over the span of a covered multi-year contract. Contractors must ensure that their workers are being paid no less than the E.O. minimum wage in effect during each year of a multi-year contract. If appropriate, contractors are entitled to be compensated for the increase in labor costs resulting from the annual inflation increases in the E.O. 14026 minimum wage beginning on January 1, 2023.

29 Q. Can a contractor rely on E.O. 14026 to pay a wage less than that required by another law?

No. A contractor’s obligation to pay the minimum wage under E.O. 14026 on a covered contract does not excuse noncompliance with any other applicable Federal or State prevailing wage law, including SCA and DBA, or any applicable law or municipal ordinance establishing a minimum wage higher than the E.O. minimum wage.

30 Q. Does E.O. 14026 affect the prevailing wage rates required by the DBA and the SCA?

The minimum wage requirements of E.O. 14026 are separate and distinct legal obligations from the prevailing wage requirements of the DBA and SCA. If a contract is subject to the DBA or SCA and the prevailing wage rate on the applicable DBA or SCA wage determination for the classification of work a worker performs is less than the minimum wage under E.O. 14026, the contractor must pay the minimum wage under E.O. 14026 in order to comply with the E.O. If the applicable DBA or SCA rate is higher than rate under E.O. 14026, the contractor must pay the higher prevailing rate to the DBA or SCA covered worker in order to comply with the DBA or SCA.

31 Q. Does E.O. 14026 apply to tipped employees?

Yes. A covered worker employed in an occupation in which he or she receives tips is a “tipped employee” when he or she customarily and regularly receives more than $30 a month in tips. Only tips actually retained by the worker after any tip pooling may be counted in determining whether the person is a “tipped employee.” A worker may be a “tipped employee” regardless of whether the worker is employed full time or part time so long as the worker customarily and regularly receives more than $30 a month in tips.

Under E.O. 14026, the wage paid to a tipped employee may be composed of a cash wage and a credit based on tips. Beginning January 30, 2022, the cash wage that must be paid by an employer to such worker shall be at least:

  • $10.50 an hour;
  • beginning January 1, 2023, 85 percent of the full E.O. minimum wage, rounded to the nearest multiple of $0.05; and
  • beginning January 1, 2024, and for each subsequent year, 100 percent of the full E.O. minimum wage.

As indicated above, E.O. 14026 gradually phases out the ability for contractors to claim a tip credit for covered federal contract work. If a tipped employee does not receive enough tips, when combined with the hourly cash wage paid by the employer, to earn the required minimum wage under E.O. 14026, the employer must pay a cash wage such that the employee’s total earnings equal that minimum wage.

32 Q. Does E.O. 14026 impact wage rates for service employees working on a covered contract if their wage rates have been determined under a collective bargaining agreement wage determination?

Yes. Even if the contractor has negotiated a collective bargaining agreement wage rate lower than the minimum wage rate under E.O. 14026, the contractor must pay the minimum wage under E.O. 14026.

33 Q. How does E.O. 14026 affect the wage rates paid to workers whose wages are calculated pursuant to a certificate under section 14(c) of the Fair Labor Standards Act, 29 U.S.C. 214(c)?

Workers whose wages are calculated in accordance with section 14(c) certificates must receive at least the full E.O. 14026 minimum wage for hours worked on or in connection with contracts covered by the E.O.

The minimum wage requirements of E.O. 14026 are separate and distinct from the wage rates under FLSA section 14(c). If the commensurate wage rate paid to that worker, whether hourly or piece rate, is less than the minimum wage under E.O. 14026, the contractor must pay the minimum wage rate under E.O. 14026. If the commensurate wage due is higher than the E.O. 14026 minimum wage, then the contractor must pay the worker the higher commensurate wage, as well as full fringe benefits.

34 Q. How does E.O. 14026 apply to other staff employed by an FLSA section 14(c) certificate holder on or in connection with a contract covered by the E.O.?

Any FLSA-covered staff, whether a worker with a disability employed under an FLSA section 14(c) certificate or other staff of the certificate holder, who perform work on or in connection with a covered contract, generally must be paid at least the E.O. 14026 minimum wage for covered work, as well as full fringe benefits.

35 Q. Can a contractor make deductions from the wages of workers that bring the workers’ wages below the E.O. 14026 minimum wage?

Deductions that reduce a worker’s pay below the E.O. 14026 minimum wage can only be made when:

  • deductions are required by Federal, State or local law, including withholding taxes;
  • deductions are for payments made to third parties pursuant to court orders;
  • deductions are directed by a voluntary assignment of the worker (e.g., union dues, charitable contributions); or
  • deductions are for the reasonable cost or fair value of board, lodging, or other facilities as those terms are used in the FLSA.

36 Q. Can contractor contributions to fringe benefits be used to satisfy part of the E.O. 14026 minimum wage requirement?

No, a contractor cannot discharge its minimum wage obligation by furnishing fringe benefits. Although the DBA specifically includes fringe benefits within its definition of prevailing wage, E.O. 14026 contains no similar provision expressly authorizing a contractor to discharge its minimum wage obligation through the furnishing of fringe benefits.

37 Q. When the E.O. minimum wage increases in January, does the increase apply immediately to employees performing work on or in connection with covered contracts?

Yes. Employees who are working on or in connection with a covered contract are entitled to any increase in the E.O. minimum wage immediately on the effective date of the increase (e.g., on January 1, 2024).



Enforcement and Administrative Proceedings

  1. How will the Department enforce the provisions of E.O. 14026?
  2. How are complaints addressed and investigations conducted by the Department?
  3. What happens if a contractor is found to be in violation of the E.O. 14026 minimum wage?
  4. Is there an appeals process if a party is found to be in violation of the E.O.?
  5. What protections exist for workers who attempt to assert their rights under the E.O.?What protections exist for workers who attempt to assert their rights under the E.O.?


38 Q. How will the Department enforce the provisions of E.O. 14026?

The E.O. authorizes the Department to enforce the provisions of the E.O. WHD will enforce E.O. 14026 similar to its enforcement of the SCA, DBA, FLSA, and E.O. 13658. The final rule established remedies for violations of E.O. 14026 that are also available under the SCA, DBA, FLSA, and/or E.O. 13658, including payment of back wages, reinstatement, and debarment, as appropriate.

39 Q. How are complaints addressed and investigations conducted by the Department?

Workers may file a complaint with any WHD office. After receipt of the complaint, WHD may initiate an investigation as the result of the complaint and may also seek to resolve the complaint through conciliation.

In an investigation, WHD may inspect relevant records (e.g., contracts and payroll), as well as interview the contractor. The agency may also interview the contractor’s workers at the worksite during normal work hours. Contracting agencies and contractors are required to cooperate with authorized representatives of WHD in all aspects of the investigation. Through the entirety of the investigation, WHD will keep the complainant(s) information confidential.

40 Q. What happens if a contractor is found to be in violation of the E.O. 14026 minimum wage?

If WHD finds that a contractor has not paid the E.O. minimum wage to workers, the WHD will request that the contractor remedy the violation. WHD may also have the contracting agency withhold payments due to the contractor in order for workers to receive the full amount of wages due under E.O 14026. If the contract does not have sufficient funds to reimburse the workers’ lost wages, or if there are no payments to withhold, the Department may bring action against the contractor in court to recover the back wages owed to the workers. In addition, contactors found to be in violation of E.O. 14026 may be subject to contract termination and/or debarment from future contracts for a period up to three years.

41 Q. Is there an appeals process if a party is found to be in violation of the E.O.?

Yes. If an employer is found in violation of E.O. 14026, they will be notified in writing, and will be provided an opportunity to request a hearing with the Department’s Office of Administrative Law Judges. After the Administrative Law Judges issue an order, any party may appeal that order to the Administrative Review Board.

42 Q. What protections exist for workers who attempt to assert their rights under the E.O.?

The final rule incorporates the same broad prohibition against retaliation that exists to protect workers under the FLSA and E.O. 13658. It is against the law for an employer to discharge or discriminate against a worker who files a complaint related to E.O. 14026 or its implementing regulations. Employers also cannot retaliate against a worker who causes a proceeding, or testifies against the employer in a proceeding, related to E.O. 14026.