On November 22, the federal Department of Labor issued final regulations implementing the provisions of an executive order to raise the minimum wage for employees working on federal contracts and subcontracts to $15.00 per hour as of January 20, 2022. For tipped employees, the cash wage increases to $10.50. In addition to the initial increase, DOL will adjust the minimum wage on an annual basis based on inflation. The lowered tipped employee wage will phase out as of January 1, 2024, at which point it will match the non-tipped wage.

The new minimum wage rates apply to most federal contracts over low threshold amounts, which range from $2,000 to $10,000 depending on the type of contract. Similar to the executive order requiring employee vaccinations, the order applies to new federal contracts, as well as those that are extended or have options exercised. While “contract like” instruments such as leases and licenses are covered, federal grants are not included under the new regulations.

Employees who do not perform duties related to the federal contract or subcontract are not subject to the new minimum wage requirements. Covered employees must be notified in writing of the new wage levels. Employers impacted by these changes should plan for implementing any required raises by January 20.