On February 12, 2014, President Obama signed an Executive Order that raises the iStock_000000406282XSmallminimum wage on federal construction projects to $10.10 per hour. The raise will not be effective until January 1, 2015, and every year afterwards, the minimum wage will be increased and is tied to the Consumer Price Index. Depending on the trade, this could require an increase in wages on projects, including those covered by Davis Bacon.

The Executive Order requires federal agencies to include language in their contracts requiring a minimum wage. Contractors and subcontractors must also incorporate the same language into their contracts and subcontracts. The Executive Order also encourages government agencies to take all reasonable steps to ensure that all new government contracts, including those that go into effect before January 1, 2015, include a provision specifying that the minimum wage for employees of government contractors is at least $10.10 per hour.

There are still a number of questions relating to the scope and impact of the Executive Order. For example, are all employees of the contractor entitled to the new minimum wage or only those working on the project? Questions relating to this Executive Order should be made clear through the implementing regulations that the Department of Labor will issue later this year.

Take Away

We will review the Department of Labor’s implementing regulations to see how broad the Executive Order is intended to be. In the meantime, closely review government contracts to see if they require the increased minimum wage.