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Executive Order 13658 Frequently Asked Questions (FAQs)



General




Q. Why is the Department of Labor issuing these proposed regulations?

A. On February 12, 2014, President Barack Obama signed Executive Order 13658, Establishing a Minimum Wage for Contractors (the Executive Order or the Order). The Executive Order seeks to increase efficiency and cost savings in the work performed by parties that contract with the Federal Government by raising the hourly minimum wage paid by those contractors to workers performing on covered Federal contracts to: (i) $10.10 per hour, beginning January 1, 2015; and (ii) beginning January 1, 2016, and annually thereafter, an amount determined by the Secretary of Labor (the Secretary) in accordance with the Order.

The Executive Order directs the Department of Labor (the Department) to issue regulations to implement the requirements of the Order by October 1, 2014. The Departments Notice of Proposed Rulemaking (NPRM) therefore establishes standards and procedures for implementing and enforcing the minimum wage protections of Executive Order 13658.

As required by the Executive Order and to the extent practicable, the Departments proposed rule incorporates existing definitions, procedures, remedies, and enforcement processes under the Fair Labor Standards Act (FLSA), the Service Contract Act (SCA), and the Davis-Bacon Act (DBA).

Q. What is the Executive Order minimum wage for Federal contractors?

A. The Executive Order establishes a minimum wage requirement for Federal contractors and subcontractors. The Order provides that executive departments and agencies must, to the extent permitted by law, ensure that new covered contracts, contract-like instruments, 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 the contract or any subcontract thereunder, must be at least:

  1. $10.10 per hour beginning January 1, 2015; and
  2. beginning January 1, 2016, and annually thereafter, an amount determined by the Secretary pursuant to the Order.

Q. How will the Secretary determine the amount of the minimum wage under Executive Order 13658?

The Department proposes to establish the Executive Order minimum wage beginning January 1, 2016 and annually thereafter as:

1) Not less than the amount in effect on the date of such determination;

2) 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

3) Rounded to the nearest multiple of $0.05.

In calculating the annual percentage increase in the Consumer Price Index for the purpose of setting the Executive Order minimum wage, the Secretary shall compare such Consumer Price Index for the most recent year with the Consumer Price Index for the preceding year.

Q. How does one comment on the proposed rule implementing the Executive Order?

A. The Department of Labor encourages all interested parties to formally comment on the proposed rule implementing the Executive Order minimum wage requirement. The rule, in its entirety, may be accessed at www.regulations.gov; interested parties may submit comments on the proposed rule via that website. The Department will review the comments submitted and issue a Final Rule by October 1, 2014.



Coverage




Q. What types of contracts are covered by the Executive Order and these proposed regulations?

A. Executive Order 13658 and the Departments proposed rule are intended to apply to a wide range of contracts with the Federal Government for services or construction. Coverage of the Order and the Departments NPRM generally extend to four major categories of contractual agreements:

  1. Procurement contracts for construction covered by the DBA;
  2. Service contracts covered by the SCA;
  3. Concessions contracts, including any concessions contract excluded from the SCA by the Departments regulations at 29 C.F.R. 4.133(b); and
  4. (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 also establishes value threshold requirements for coverage. The Order 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 Order specifies that it applies only to contracts that exceed $3,000. There is no value threshold requirement for subcontracts awarded under such prime contracts.

The Executive Order minimum wage requirements apply to workers performing on the above types of contracts if the wages of such workers are governed by the DBA, the SCA, or the FLSA.

Q. What is a contract or contract-like instrument?

A. Workers performing on covered contracts or contract-like instruments are entitled to receive the Executive Order minimum wage for all time spent performing on such contracts. The Department has proposed to collectively define the terms contract and contract-like instrument for purposes of the Executive Order as an agreement between two or more parties creating obligations that are enforceable or otherwise recognizable at law. The proposed definition of 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.

Q. What is a new contract?

A. The minimum wage requirements of Executive Order 13658 apply only to new contracts with the Federal Government. As explained in the Departments proposed rule, a new contract is a contract that results from a solicitation issued on or after January 1, 2015, or a contract that is awarded outside the solicitation process on or after January 1, 2015. This term includes both new contracts and replacements for expiring contracts.

Pursuant to the Departments NPRM, the minimum wage requirements of the Executive Order do not apply to contracts entered into pursuant to solicitations issued prior to January 1, 2015, the automatic renewal of such contracts, or the exercise of options under such contracts. The minimum wage requirements do apply, however, to any renewals or extensions of contracts resulting from bilateral negotiations if they are awarded on or after January 1, 2015, even if such negotiations occur during option periods.

Q. What is a concessions contract?

A. The Departments NPRM defines a concessions contract as a contract under which the Federal Government grants a right to use Federal property, including land or facilities, for furnishing services. The proposed definition of the term concessions contract includes every contract the principal purpose of which is to furnish 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.

Examples of concessions contracts that are generally covered by the Executive Order and the Departments proposed rule include contracts with the Federal Government to operate souvenir shops in national parks or fast food restaurants in Federal buildings.

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?

A. Pursuant to the Departments proposed 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 the Federal Government, its personnel, 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 child care center, credit union, gift shop, barber shop, or fitness center in the Federal agency building to serve Federal employees and/or the general public.

Q. If I enter into a contract with the Federal Government, is it automatically covered by the Executive Order?

A. No. In order for a contractual agreement to be covered by the Executive Order, the agreement must (1) fall within the definition of a contract or contract-like instrument as set forth in the Departments proposed rule, and (2) qualify as one of the specifically enumerated types of contracts described in the Executive Order. For example, a provider agreement will not be covered by the Executive Order and the Departments proposed rule unless it is subject to the Davis-Bacon Act or the Service Contract Act, 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.

Q. Are any types of Federal contracts excluded from coverage of the Executive Order and these proposed regulations?

A. Yes. The Executive Order and the Departments proposed rule set forth the following narrow categories of contracts that are not subject to the Orders minimum wage requirements:

  1. Grants, within the meaning of the Federal Grant and Cooperative Agreement Act, as amended, 31 U.S.C. 6301 et seq.;
  2. Contracts and agreements with and grants to Indian Tribes under the Indian Self-Determination and Education Assistance Act, as amended, 25 U.S.C. 450 et seq.;
  3. Procurement contracts for construction that are excluded from coverage of the DBA; and
  4. Contracts for services that are exempted from coverage under the SCA, unless expressly covered by the Executive Order and its implementing regulations. For example, the SCA exempts contracts for public utility services, including electric light and power, water, steam, and gas, from its coverage. See 41 U.S.C. 6702(b)(5); 29 CFR 4.120. It additionally exempts employment contracts providing for direct services to a Federal agency by an individual. See 41 U.S.C. 6702(b)(6); 29 CFR 4.121. Such contracts would also be exempt from coverage of the Executive Order and the NPRM.

Thus, for example, Federal grants under Medicaid or under the Clean Water State Revolving Fund (CWSRS) programs are not covered by Executive Order 13658 or these proposed regulations, and contracts entered into by State or local governments to administer Medicaid or CWSRF programs therefore would not be subject to Executive Order 13658 or these proposed regulations by virtue of such Federal financial support. (However, contractors under such programs may be subject to the Fair Labor Standards Act or one or more of the Davis-Bacon Related Acts.)

The Department also notes that contracts for the manufacturing or furnishing of materials, supplies, articles, or equipment to the Federal Government, i.e., those subject to the Walsh-Healey Public Contracts Act, 41 U.S.C. 6501 et seq., are not covered by Executive Order 13658.

Q. Who is entitled to the Executive Order minimum wage?

A. Workers performing on covered contracts are entitled to the Executive Order minimum wage if their wages under the contract are governed by the FLSA, the SCA, or the DBA. The Departments proposed rule explains that the following categories of workers are entitled to the Executive Order minimum wage for all time spent performing on covered Federal contracts:

  1. Employees who are entitled to the minimum wage under FLSA section 6(a)(1), employees whose wages are calculated pursuant to special certificates issued under FLSA section 14(c),1 and tipped employees under FLSA section 3(t);
  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 Departments proposed rule specifically notes that the Executive Order minimum wage protections apply to FLSA-covered employees who provide support on a service contract that is necessary for the performance of the contract but who are not service employees under the contract for purposes of the SCA. For example, a non-exempt 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 be covered by the Executive Order for the hours spent performing work in support of the covered contract even though the non-exempt payroll clerk may not qualify as a service employee for purposes of the SCA.

Similarly, the Departments proposed rule states that the Executive Order applies to workers performing on DBA-covered contracts for construction who are not laborers or mechanics but whose wages are governed by the FLSA. For example, the Department would view a security guard working on a DBA-covered contract whose wages are governed by the FLSA as a covered worker entitled to the minimum wage established by the Executive Order.


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.

Q. Who qualifies as a worker covered under the Executive Order?

A. The Departments NPRM defines the term worker as any person engaged in the performance of a contract covered by the Executive Order, 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. As explained in the proposed rule, the term worker includes any individual performing on or in connection with a covered contract whose wages are calculated pursuant to special 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 Departments Employment and Training Administration, Office of Apprenticeship, or with a State Apprenticeship Agency recognized by the Office of Apprenticeship.

Q. Do the Departments proposed regulations exclude any workers from coverage under the Executive Order?

A. The Departments NPRM provides that, except for workers whose wages are calculated pursuant to special 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 Executive Order 13658.

For example, the Departments proposed rule provides that learners, apprentices, messengers, and full-time students employed under special certificates pursuant to FLSA sections 14(a) and (b) are not entitled to the Executive Order minimum wage. Similarly, individuals employed in a bona fide executive, administrative, or professional capacity, as those terms are defined in 29 C.F.R. part 541, are exempt from coverage of the Executive Order pursuant to the Departments proposed rule.



Contracting Agency Requirements




Q. What are the primary responsibilities of contractors in complying with the Executive Order?

A. Contractors and subcontractors must include the Executive Order contract clause in lower-tiered subcontracts. They must also pay all covered workers the Executive Order minimum wage for all hours spent performing work on covered contracts.

Q. How will contracting agencies and contractors know what the new wage is since the Executive Order minimum wage may change annually on January 1?

A. The Order requires the Secretary of Labor to determine the minimum wage for covered contracts and solicitations on an annual basis beginning January 1, 2016. The Secretary will publish the new minimum wage rate in the Federal Register at least 90 days before it takes effect. It will also be posted on WHDs website at www.dol.gov/whd/ and the Wage Determinations OnLine website at www.wdol.gov, as well as published in other media.



Contractor Requirements




Q. What are the responsibilities of contractors in complying with the Executive Order?

A. Contractors and subcontractors must include the Executive Order contract clause in lower-tiered subcontracts. They must also pay all covered workers the Executive Order minimum wage for all hours spent performing work on covered contracts.

Q. Will increases in the Executive Order minimum wage affect workers on multi-year contracts?

A. Yes. The applicable Executive Order minimum wage 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 Executive Order minimum wage in effect during each year of a multi-year contract.

Q. Can a contractor rely on the Executive Order to pay a wage less than that required by another law?

A. No. A contractors obligation to pay the Executive Order minimum wage on a covered contract does not excuse noncompliance with any other applicable Federal or State prevailing wage law, or any applicable law or municipal ordinance establishing a minimum wage higher than the Executive Order minimum wage.

Q. Does the Executive Order affect the prevailing wage rates required by the Davis-Bacon Act (DBA) and the Service Contract Act (SCA)?

A. The minimum wage requirements of the Executive Order 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 Executive Order minimum wage, the contractor must pay the Executive Order minimum wage in order to comply with the Order. If the applicable DBA or SCA rate is higher than the Executive Order rate, the contractor must pay the higher prevailing rate to the DBA or SCA covered worker in order to comply with the DBA or SCA.

Q. How does the Executive Order 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)?

A. The Executive Order specifically provides that workers whose wages are calculated pursuant to special certificates issued under 29 U.S.C. 214(c) are entitled to receive the full Executive Order minimum wage for all time spent working on contracts covered by the Order.

The minimum wage requirements of the Order are also separate and distinct from the wage rates under FLSA section 14(c). If the commensurate wage rate paid to a worker on a covered contract whose wages are calculated pursuant to a special certificate issued under FLSA section 14(c), whether hourly or piece rate, is less than the Executive Order minimum wage, the contractor must pay the Executive Order minimum wage rate. If the commensurate wage due under the section 14(c) certificate is higher than the Executive Order minimum wage, however, the contractor must pay the worker the higher commensurate wage.

Q. Does the Executive Order apply to tipped employees?

A. 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 employee after any tip pooling may be counted in determining whether the person is a tipped employee. An employee may be a tipped employee regardless of whether the employee is employed full time or part time so long as the employee customarily and regularly receives more than $30 a month in tips.

Under the Executive Order, the wage paid to a tipped employee may be composed of a cash wage and a credit based on tips. Beginning January 1, 2015, tipped employees to whom the Order applies must be paid a cash wage of at least $4.90 per hour. Tipped employees must receive tips amounting to at least the difference between the cash wage paid and the Executive Order minimum wage in 2015 of $10.10 per hour.

Q. Can a contractor make deductions from the wages of workers that bring the workers wages below the Executive Order minimum wage?

A. A contractor can only make deductions that reduce a workers wages below the Executive Order minimum wage under the following limited circumstances: (1) deductions required by Federal, State or local law, including withholding taxes; (2) deductions for payments made to third parties pursuant to court orders; (3) deductions directed by a voluntary assignment of the worker (e.g., union dues, charitable contributions); and (4) deductions for the reasonable cost or fair value of board, lodging or other facilities as those terms are used in the FLSA.

Q. Can contractor contributions to fringe benefits be used to satisfy part of the Executive Order minimum wage requirement?

A. No, a contractor cannot discharge its Executive Order minimum wage obligation by furnishing fringe benefits. The SCA and FLSA do not allow contractors to meet the statutes respective wage obligations through the furnishing of fringe benefits. Although the DBA specifically includes fringe benefits within its definition of minimum wage, thereby allowing a contractor to meet its minimum wage obligation, in part, through the furnishing of fringe benefits, 40 U.S.C. 3141(2), the Executive Order contains no similar provision expressly authorizing a contractor to discharge its Executive Order minimum wage obligation through the furnishing of fringe benefits. Consistent with the Executive Order, the NPRM would accordingly preclude a contractor from discharging its minimum wage obligation by furnishing fringe benefits. See also FAQ #4.



Enforcement and Administrative Proceedings




Q. How will the Department enforce the provisions of the Executive Order?

A. The Executive Order authorizes the Department to enforce the provisions of the Order. The proposed regulations set forth an enforcement scheme that closely follows the processes used in the SCA and DBA and proposes remedies for violations of the Executive Order that are available under the SCA, DBA and/or FLSA, including payment of back wages, reinstatement, and debarment, as appropriate.

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

A. Under the proposal, an individual may file a complaint with any office of the WHD. The complaint may be filed orally or in writing and the WHD will accept a complaint in any language. The WHD will treat information received related to a complaint confidentially in order to protect the identity of complainants and other confidential sources. The WHD may initiate an investigation as the result of the complaint and may also seek to resolve the complaint through conciliation.

The WHD may inspect relevant records (i.e., contracts and payroll), as well as interview the contractor. The agency may also interview the contractors workers at the worksite during normal work hours. Contracting agencies and contractors are required to cooperate with authorized representatives of the WHD in all aspects of the investigation, including through the production of documentary evidence that the WHD requests.

Q. What happens if a contractor is found to have failed to pay the Executive Order minimum wage?

A. Under the proposal, if the WHD determines that a contractor has failed to pay the Executive Order minimum wage to workers, the WHD will notify the contractor of, and request it to remedy, the violation. WHD may additionally direct that the applicable contracting agency withhold payments due on the contract or any other contract between the contractor and the Federal Government as considered necessary to pay workers the full amount of wages due under the Executive Order. Upon the final order of the Secretary of Labor, the WHD may direct the relevant contracting agency to transfer the withheld funds to the Department for disbursement to affected workers.

Q. Is there an appeals process if a party is found to be in violation of the Executive Order?

A. Yes. Under the proposed regulations, parties will be notified in writing of the violation findings and will be provided an opportunity to request a hearing with the Departments Office of Administrative Law Judges. Any party may appeal an order issued by the Office of Administrative Law Judge to the Departments Administrative Review Board