• President Obama Signs Executive Order Raising Minimum Wage for Government Contractors - February 19, 2014
  • February 26, 2014 | Author: Jennifer L. Craighead
  • Law Firm: Barley Snyder - Lancaster Office
  • On Wednesday, February 12, 2014, President Obama signed his promised Executive Order raising the minimum wage for government contractors and subcontractors. The Executive Order requires government contractors and subcontractors to raise the minimum wage to $10.10 per hour beginning January 1, 2015. Beginning January 1, 2016, further increases to the minimum wage will be tied to the Consumer Price Index. The Executive Order applies only to new contracts and subcontracts. Contractors must incorporate the new minimum wage into lower-tier subcontracts. The Executive Order also increases the minimum cash wage for tipped employees who work for government contractors from $2.13 to $4.90 per hour and requires that tips, when combined with the cash wage, equal at least $10.10 per hour. According to the Executive Order, “[r]aising the pay of low-wage workers increases their morale and the productivity and quality of their work, lowers turnover and its accompanying costs, and reduces supervisory costs.”

    The Secretary of Labor is directed to issue regulations by October 1, 2014 implementing the requirements of the Executive Order. One issue these regulations should address is whether the increased minimum wage applies only to employees who are working on government contracted work or whether it applies globally to an employer’s entire workforce.

    Businesses seeking to enter into new government contracts or subcontracts need to be aware of these increased costs and plan accordingly. We will keep you posted as developments on this topic unfold, including anticipated legal challenges to the Executive Order and the issuance of implementing regulations.