Executive Order: FAR Clause for Mandatory Minimum Wage by January 2015

Exercising his statutory authority to establish terms for procurement contracts under the Federal Property and Administrative Services Act (40 U.S. Code 101 et seq.), President Obama signed an Executive Order on February 12, 2014, that will increase the minimum wage for employees of certain Federal contractors and subcontractors from $7.25 to $10.10.

Beginning January 1, 2015, this mandate will require new or renewed federal contracts to include a clause:

… which the contractor and any subcontractors shall incorporate into lower-tier subcontracts, specifying, as a condition of payment, that the minimum wage to be paid to workers … shall be at least $10.10 per hour beginning January 1, 2015.

The order then goes on to summarize the processes necessary to manage the implementation and maintenance of the mandate.

The order only applies to Government contracts and subcontracts for services, construction, and concessions; contracts for commercial items are not covered. Federal assistance awards are also unaffected by the order.

The Department of Labor is obliged by the order to issue regulations by October 1, 2014, for its implementation. Following that, the Federal Acquisition Regulatory Council has 60 days to update the FAR to provide for inclusion of the contract clause in Federal procurement solicitations and contracts (above any applicable threshold—the current micro-threshold, in most cases) for contracts executed on or after January 1, 2015. The regulations will presumably provide guidance as to the definition of a “contract-like instrument.”

Read the full Executive Order here.

The views expressed in this article are those of the author and do not necessarily reflect the position or policy of Berkeley Research Group, LLC.