Proposed Rule2021-15348
Increasing the Minimum Wage for Federal Contractors
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
July 22, 2021
Issuing agencies
Labor Department
Abstract
This document proposes regulations to implement an Executive order titled "Increasing the Minimum Wage for Federal Contractors," which was signed by President Joseph R. Biden Jr. on April 27, 2021. The Executive order states that the Federal Government's procurement interests in economy and efficiency are promoted when the Federal Government contracts with sources that adequately compensate their workers. The Executive order therefore seeks to raise the hourly minimum wage paid by those contractors to workers performing work on or in connection with covered Federal contracts to $15.00 per hour, beginning January 30, 2022; and beginning January 1, 2023, and annually thereafter, an amount determined by the Secretary of Labor (Secretary). The Executive order directs the Secretary to issue regulations by November 24, 2021, consistent with applicable law, to implement the order's requirements. This proposed rule therefore establishes standards and procedures for implementing and enforcing the minimum wage protections of the Executive order. As required by the order, the proposed rule incorporates to the extent practicable existing definitions, principles, procedures, remedies, and enforcement processes under the Fair Labor Standards Act of 1938, the Service Contract Act, the Davis-Bacon Act, and the Executive order of February 12, 2014, entitled "Establishing a Minimum Wage for Contractors," as well as the regulations issued to implement that order.
Full Text
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<title>Federal Register, Volume 86 Issue 138 (Thursday, July 22, 2021)</title>
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[Federal Register Volume 86, Number 138 (Thursday, July 22, 2021)]
[Proposed Rules]
[Pages 38816-38897]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-15348]
[[Page 38815]]
Vol. 86
Thursday,
No. 138
July 22, 2021
Part II
Department of Labor
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29 CFR Parts 10 and 23
Increasing the Minimum Wage for Federal Contractors; Proposed Rule
Federal Register / Vol. 86, No. 138 / Thursday, July 22, 2021 /
Proposed Rules
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DEPARTMENT OF LABOR
Office of the Secretary of Labor
29 CFR Parts 10 and 23
RIN 1235-AA41
Increasing the Minimum Wage for Federal Contractors
AGENCY: Wage and Hour Division, Department of Labor.
ACTION: Notice of proposed rulemaking.
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SUMMARY: This document proposes regulations to implement an Executive
order titled ``Increasing the Minimum Wage for Federal Contractors,''
which was signed by President Joseph R. Biden Jr. on April 27, 2021.
The Executive order states that the Federal Government's procurement
interests in economy and efficiency are promoted when the Federal
Government contracts with sources that adequately compensate their
workers. The Executive order therefore seeks to raise the hourly
minimum wage paid by those contractors to workers performing work on or
in connection with covered Federal contracts to $15.00 per hour,
beginning January 30, 2022; and beginning January 1, 2023, and annually
thereafter, an amount determined by the Secretary of Labor (Secretary).
The Executive order directs the Secretary to issue regulations by
November 24, 2021, consistent with applicable law, to implement the
order's requirements. This proposed rule therefore establishes
standards and procedures for implementing and enforcing the minimum
wage protections of the Executive order. As required by the order, the
proposed rule incorporates to the extent practicable existing
definitions, principles, procedures, remedies, and enforcement
processes under the Fair Labor Standards Act of 1938, the Service
Contract Act, the Davis-Bacon Act, and the Executive order of February
12, 2014, entitled ``Establishing a Minimum Wage for Contractors,'' as
well as the regulations issued to implement that order.
DATES: Interested persons are invited to submit written comments on
this notice of proposed rulemaking on or before August 23, 2021.
ADDRESSES: You may submit comments, identified by Regulatory
Information Number (RIN) 1235-AA41, by either of the following methods:
Electronic Comments: Submit comments through the Federal eRulemaking
Portal at <a href="http://www.regulations.gov">http://www.regulations.gov</a>. Follow the instructions for
submitting comments. Mail: Address written submissions to Division of
Regulations, Legislation, and Interpretation, Wage and Hour Division,
U.S. Department of Labor, Room S-3502, 200 Constitution Avenue NW,
Washington, DC 20210. Instructions: Please submit only one copy of your
comments by only one method. Commenters submitting file attachments on
<a href="http://www.regulations.gov">www.regulations.gov</a> are advised that uploading text-recognized
documents--i.e., documents in a native file format or documents which
have undergone optical character recognition (OCR)--enable staff at the
Department to more easily search and retrieve specific content included
in your comment for consideration. Anyone who submits a comment
(including duplicate comments) should understand and expect that the
comment will become a matter of public record and will be posted
without change to <a href="https://www.regulations.gov">https://www.regulations.gov</a>, including any personal
information provided. The Wage and Hour Division (WHD) posts comments
gathered and submitted by a third-party organization as a group under a
single document ID number on <a href="https://www.regulations.gov">https://www.regulations.gov</a>. Comments must
be received by 11:59 p.m. on August 23, 2021 for consideration in this
rulemaking. Commenters should transmit comments early to ensure timely
receipt prior to the close of the comment period, as the Department
continues to experience delays in the receipt of mail. Submit only one
copy of your comments by only one method. Docket: For access to the
docket to read background documents or comments, go to the Federal
eRulemaking Portal at <a href="http://www.regulations.gov">http://www.regulations.gov</a>.
FOR FURTHER INFORMATION CONTACT: Amy DeBisschop, Director of the
Division of Regulations, Legislation, and Interpretation, Wage and Hour
Division, U.S. Department of Labor, Room S-3502, 200 Constitution
Avenue NW, Washington, DC 20210, telephone: (202) 693-0406 (this is not
a toll-free number). Accessible Format: Copies of this notice of
proposed rulemaking may be obtained in alternative formats (Rich Text
Format (RTF) or text format (txt), a thumb drive, an MP3 file, large
print, braille, audiotape, compact disc, or other accessible format),
upon request, by calling (202) 693-0675 (this is not a toll-free
number). TTY/TDD callers may dial toll-free (877) 889-5627 to obtain
information or request materials in alternative formats.
Questions of interpretation or enforcement of the agency's existing
regulations may be directed to the nearest WHD district office. Locate
the nearest office by calling the WHD's toll-free help line at (866)
4US-WAGE ((866) 487-9243) between 8 a.m. and 5 p.m. in your local time
zone, or log onto WHD's website at <a href="https://www.dol.gov//whd/contact/local-offices">https://www.dol.gov//whd/contact/local-offices</a> for a nationwide listing of WHD district and area
offices.
SUPPLEMENTARY INFORMATION:
I. Background
On April 27, 2021, President Joseph R. Biden Jr. issued Executive
Order 14026, ``Increasing the Minimum Wage for Federal Contractors.''
This Executive order explains that increasing the hourly minimum wage
paid to workers performing on or in connection with covered Federal
contracts to $15.00 beginning January 30, 2022 will ``bolster economy
and efficiency in Federal procurement.'' 86 FR 22835. The order builds
on the foundation established by Executive Order 13658, ``Establishing
a Minimum Wage for Contractors,'' which was signed by President Barack
Obama on February 12, 2014. See 79 FR 9851. Before discussing Executive
Order 14026 in greater detail, the Department provides a high-level
summary of the relevant history leading to the issuance of this order.
A. Prior Relevant Executive Orders
On February 12, 2014, President Barack Obama signed Executive Order
13658, ``Establishing a Minimum Wage for Contractors.'' See 79 FR 9851.
Executive Order 13658 stated that the Federal Government's procurement
interests in economy and efficiency are promoted when the Federal
Government contracts with sources that adequately compensate their
workers. Id. Executive Order 13658 therefore sought 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 or in connection
with 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 and announced by the Secretary,
accounting for changes in inflation as measured by the Consumer Price
Index. Id. Section 3 of Executive Order 13658 also established a
minimum hourly cash wage requirement for tipped employees performing on
or in connection with covered contracts, initially set at $4.90 per
hour for 2015 and gradually increasing to 70 percent of the full
Executive Order 13658 minimum wage over a period of years.
Section 4 of Executive Order 13658 directed the Secretary to issue
regulations to implement the order's requirements. See 79 FR 9852.
Accordingly, after engaging in notice-
[[Page 38817]]
and-comment rulemaking, the Department published a final rule on
October 7, 2014, to implement the Executive order. See 79 FR 60634. The
final regulations, set forth at 29 CFR part 10, established standards
and procedures for implementing and enforcing the minimum wage
protections of the Executive order. Pursuant to the methodology
established by Executive Order 13658, the applicable minimum wage rate
has increased each year since 2015. Executive Order 13658's minimum
wage requirement and its minimum cash wage requirement for tipped
employees were most recently increased on January 1, 2021, to $10.95
per hour and $7.65 per hour, respectively. See 85 FR 53850.
On May 25, 2018, President Donald J. Trump issued Executive Order
13838, titled ``Exemption from Executive Order 13658 for Recreational
Services on Federal Lands.'' See 83 FR 25341. Section 2 of Executive
Order 13838 amended Executive Order 13658 to add language providing
that the provisions of Executive Order 13658 do ``not apply to
[Federal] contracts or contract-like instruments'' entered into ``in
connection with seasonal recreational services or seasonal recreational
equipment rental.'' Id. Executive Order 13838 additionally stated that
seasonal recreational services include ``river running, hunting,
fishing, horseback riding, camping, mountaineering activities,
recreational ski services, and youth camps.'' Id. Executive Order 13838
further specified that this exemption does not apply to ``lodging and
food services associated with seasonal recreational activities.'' Id.
Executive Order 13838 did not otherwise amend Executive Order 13658. On
September 26, 2018, the Department implemented Executive Order 13838 by
adding the required exclusion to the regulations for Executive Order
13658 at 29 CFR 10.4(g). See 83 FR 48537.
B. Executive Order 14026
On April 27, 2021, President Joseph R. Biden Jr. signed Executive
Order 14026, ``Increasing the Minimum Wage for Federal Contractors.''
86 FR 22835. Executive Order 14026 states that the Federal Government's
procurement interests in economy and efficiency are promoted when the
Federal Government contracts with sources that adequately compensate
their workers. Id. Executive Order 14026 therefore seeks to promote
economy and efficiency in Federal procurement by raising the hourly
minimum wage paid by those contractors to workers performing work on or
in connection with covered Federal contracts to (i) $15.00 per hour,
beginning January 30, 2022; and (ii) beginning January 1, 2023, and
annually thereafter, an amount determined by the Secretary in
accordance with the Executive order. Id.
Section 1 of Executive Order 14026 sets forth a general position of
the Federal Government that increasing the hourly minimum wage paid by
Federal contractors to $15.00 will ``bolster economy and efficiency in
Federal procurement.'' 86 FR 22835. The order states that raising the
minimum wage ``enhances worker productivity and generates higher-
quality work by boosting workers' health, morale, and effort; reducing
absenteeism and turnover; and lowering supervisory and training
costs.'' Id. The order further states that these savings and quality
improvements will lead to improved economy and efficiency in Government
procurement. Id.
Section 2 of Executive Order 14026 therefore increases the minimum
wage for Federal contractors and subcontractors. 86 FR 22835. The order
provides that executive departments and agencies, including independent
establishments subject to the Federal Property and Administrative
Services Act, 40 U.S.C. 102(4)(A), (5) (agencies), shall, to the extent
permitted by law, ensure that contracts and contract-like instruments
(collectively referred to as ``contracts''), as described in section
8(a) of the order and defined in this rule, include a particular clause
that the contractor and any covered subcontractors shall incorporate
into lower-tier subcontracts. 86 FR 22835. That contractual clause, the
order states, shall specify, as a condition of payment, that the
minimum wage to be paid to workers employed in the performance of the
contract or any covered subcontract thereunder, including workers whose
wages are calculated pursuant to special certificates issued under
section 14(c) of the Fair Labor Standards Act of 1938 (FLSA), 29 U.S.C.
214(c),\1\ shall be at least: (i) $15.00 per hour beginning January 30,
2022; and (ii) beginning January 1, 2023, and annually thereafter, an
amount determined by the Secretary in accordance with the Executive
order. 86 FR 22835. As required by the order, the minimum wage amount
determined by the Secretary pursuant to this section shall be published
by the Secretary at least 90 days before such new minimum wage is to
take effect and shall be (A) not less than the amount in effect on the
date of such determination; (B) increased from such amount by the
annual percentage increase in the Consumer Price Index (CPI) for Urban
Wage Earners and Clerical Workers (United States city average, all
items, not seasonally adjusted) (CPI-W), or its successor publication,
as determined by the Bureau of Labor Statistics; and (C) rounded to the
nearest multiple of $0.05. Id.
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\1\ 29 U.S.C. 214(c) authorizes employers, after receiving a
certificate from the WHD, 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.
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Section 2 of the Executive order further explains that, in
calculating the annual percentage increase in the CPI for purposes of
that section, the Secretary shall compare such CPI for the most recent
month, quarter, or year available (as selected by the Secretary prior
to the first year for which a minimum wage determined by the Secretary
is in effect pursuant to this section) with the CPI for the same month
in the preceding year, the same quarter in the preceding year, or the
preceding year, respectively. 86 FR 22835-36. Pursuant to that section,
nothing in the order excuses noncompliance with any applicable Federal
or state prevailing wage law or any applicable law or municipal
ordinance establishing a minimum wage higher than the minimum wage
established under the order. 86 FR 22836.
Section 3 of Executive Order 14026 explains the application of the
order to tipped workers. 86 FR 22836. It provides that for workers
covered by section 2 of the order who are tipped employees pursuant to
section 3(t) of the FLSA, 29 U.S.C. 203(t), the cash wage that must be
paid by an employer to such workers shall be at least: (i) $10.50 an
hour, beginning on January 30, 2022; (ii) beginning January 1, 2023, 85
percent of the wage in effect under section 2 of the order, rounded to
the nearest multiple of $0.05; and (iii) beginning January 1, 2024, and
for each subsequent year, 100 percent of the wage in effect under
section 2 of the order. 86 FR 22836. Where workers do not receive a
sufficient additional amount on account of tips, when combined with the
hourly cash wage paid by the employer, such that their total earnings
are equal to the minimum wage under section 2 of the order, section 3
requires that the cash wage paid by the employer be increased such that
the workers' total earnings equal that minimum wage . Id. Consistent
with applicable law, if the wage required to be paid under the Service
Contract Act (SCA), 41 U.S.C. 6701 et seq., or any other applicable law
or regulation is higher than the wage required by section 2 of the
order, the employer must pay additional cash
[[Page 38818]]
wages sufficient to meet the highest wage required to be paid. 86 FR
22836.
Section 4 of Executive Order 14026 provides that the Secretary
shall, consistent with applicable law, issue regulations by November
24, 2021, to implement the requirements of the order, including
providing both definitions of relevant terms and exclusions from the
requirements set forth in the order where appropriate. 86 FR 22836. It
also requires that, to the extent permitted by law, within 60 days of
the Secretary issuing such regulations, the Federal Acquisition
Regulatory Council (FARC) shall amend the Federal Acquisition
Regulation (FAR) to provide for inclusion of the contract clause
described in section 2(a) of the order in Federal procurement
solicitations and contracts subject to the order. Id. Additionally,
section 4 states that within 60 days of the Secretary issuing
regulations pursuant to the order, agencies must take steps, to the
extent permitted by law, to exercise any applicable authority to ensure
that certain contracts--specifically, contracts for concessions and
contracts 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--entered into on or
after January 30, 2022, consistent with the effective date of such
agency action, comply with the requirements set forth in sections 2 and
3 of the order. Id. The order further specifies that any regulations
issued pursuant to section 4 of the order should, to the extent
practicable, incorporate existing definitions, principles, procedures,
remedies, and enforcement processes under the FLSA, 29 U.S.C. 201 et
seq.; the SCA; the Davis-Bacon Act (DBA), 40 U.S.C. 3141 et seq.;
Executive Order 13658 of February 12, 2014, ``Establishing a Minimum
Wage for Contractors''; and regulations issued to implement that order.
86 FR 22836.\2\
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\2\ The Department recognizes that the FAR has been amended to
refer to the Service Contract Act as the ``Service Contract Labor
Standards'' statute and the Davis-Bacon Act as the ``Wage Rate
Requirements (Construction)'' statute. See 79 FR 24192-02, 24193-95
(Apr. 29, 2014).
Consistent with the text of Executive Order 14026, as well as
with Executive Order 13658 and its implementing regulations, the
Department refers to these laws in this rule as the Service Contract
Act and the Davis-Bacon Act, respectively.
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Section 5 of Executive Order 14026 grants authority to the
Secretary to investigate potential violations of and obtain compliance
with the order. 86 FR 22836. It also explains that Executive Order
14026 does not create any rights under the Contract Disputes Act, 41
U.S.C. 7101 et seq., and that disputes regarding whether a contractor
has paid the wages prescribed by the order, as appropriate and
consistent with applicable law, shall be disposed of only as provided
by the Secretary in regulations issued pursuant to the order. Id.
Section 6 of Executive Order 14026 revokes and supersedes certain
presidential actions. 86 FR 22836-37. Specifically, section 6 of
Executive Order 14026 provides that Executive Order 13838 of May 25,
2018, ``Exemption From Executive Order 13658 for Recreational Services
on Federal Lands'' is revoked as of January 30, 2022. Id. Section 6 of
Executive Order 14026 also states that Executive Order 13658 of
February 12, 2014, ``Establishing a Minimum Wage for Contractors'' is
``superseded, as of January 30, 2022, to the extent it is inconsistent
with this order.'' Id.
Section 7 of Executive Order 14026 establishes that if any
provision of the order, or the application of any such provision to any
person or circumstance, is held to be invalid, the remainder of the
order and the application shall not be affected. 86 FR 22837.
Section 8 of Executive Order 14026 establishes that the order shall
apply to ``any new contract; new contract-like instrument; new
solicitation; extension or renewal of an existing contract or contract-
like instrument; and exercise of an option on an existing contract or
contract-like instrument,'' if: (i)(A) It is a procurement contract for
services or construction; (B) it is a contract for services covered by
the SCA; (C) it is a contract for concessions, including any
concessions contract excluded by Department of Labor (the Department)
regulations at 29 CFR 4.133(b); or (D) it is a contract 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; and (ii) the wages of workers under
such contract are governed by the FLSA, the SCA, or the DBA. 86 FR
22837. Section 8 of the order also states that, for contracts covered
by the SCA or the DBA, the order shall apply only to contracts at the
thresholds specified in those statutes.\3\ Id. Additionally, for
procurement contracts where workers' wages are governed by the FLSA,
the order specifies that it shall apply only to contracts that exceed
the micro-purchase threshold, as defined in 41 U.S.C. 1902(a),\4\
unless expressly made subject to the order pursuant to regulations or
actions taken under section 4 of the order. Id. The order specifies
that it shall not apply to grants; contracts or agreements with Indian
Tribes under the Indian Self-Determination and Education Assistance Act
(Public Law 93-638), as amended; or any contracts expressly excluded by
the regulations issued pursuant to section 4(a) of the order. Id.
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\3\ The prevailing wage requirements of the SCA apply to covered
prime contracts in excess of $2,500. See 41 U.S.C. 6702(a)(2)
(recodifying 41 U.S.C. 351(a)). The DBA applies to covered prime
contracts that exceed $2,000. See 40 U.S.C. 3142(a). There is no
value threshold requirement for subcontracts awarded under such
prime contracts.
\4\ 41 U.S.C. 1902(a) currently defines the micro-purchase
threshold as $10,000.
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Section 9(a) of Executive Order 14026 provides that the order is
effective immediately and shall apply to new contracts; new
solicitations; extensions or renewals of existing contracts; and
exercises of options on existing contracts, as described in section
8(a) of the order, where the relevant contract will be entered into,
the relevant contract will be extended or renewed, or the relevant
option will be exercised, on or after: (i) January 30, 2022, consistent
with the effective date for the action taken by the FARC pursuant to
section 4(a) of the order; or (ii) for contracts where an agency action
is taken pursuant to section 4(b) of the order, January 30, 2022,
consistent with the effective date for such action. 86 FR 22837.
Section 9(b) of Executive Order 14026 establishes an exception to
section 9(a) where agencies have issued a solicitation before the
effective date for the relevant action taken pursuant to section 4 of
the order and entered into a new contract resulting from such
solicitation within 60 days of such effective date. The order provides
that, in such a circumstance, such agencies are strongly encouraged but
not required to ensure that the minimum wages specified in sections 2
and 3 of the order are paid in the new contract. 86 FR 22837-38. The
order clarifies, however, that if such contract is subsequently
extended or renewed, or an option is subsequently exercised under that
contract, the minimum wages specified in sections 2 and 3 of the order
shall apply to that extension, renewal, or option. 86 FR 22838.
Section 9(c) also specifies that, for all existing contracts,
solicitations issued between the date of the order and the effective
dates set forth in that section, and contracts entered into between the
date of the order and the effective dates set forth in that section,
agencies are strongly encouraged, to the extent permitted by law, to
ensure that the hourly wages paid under such contracts
[[Page 38819]]
are consistent with the minimum wage rates specified in sections 2 and
3 of the order. 86 FR 22838.
Section 10 of Executive Order 14026 provides that nothing in the
order shall be construed to impair or otherwise affect the authority
granted by law to an executive department or agency, or the head
thereof; or the functions of the Director of the Office of Management
and Budget relating to budgetary, administrative, or legislative
proposals. 86 FR 22838. It also states that the order is to be
implemented consistent with applicable law and subject to the
availability of appropriations. Id. Finally, section 10 explains that
the order is not intended to, and does not, create any right or
benefit, substantive or procedural, enforceable at law or in equity by
any party against the United States, its departments, agencies, or
entities, its officers, employees, or agents, or any other person. Id.
II. Discussion of Proposed Rule
A. Legal Authority
President Biden issued Executive Order 14026 pursuant to his
authority under ``the Constitution and the laws of the United States,''
expressly including the Federal Property and Administrative Services
Act (Procurement Act), 40 U.S.C. 101 et seq. 86 FR 22835. The
Procurement Act authorizes the President to ``prescribe policies and
directives that the President considers necessary to carry out'' the
statutory purposes of ensuring ``economical and efficient'' government
procurement and administration of government property. 40 U.S.C. 101,
121(a). Executive Order 14026 delegates to the Secretary the authority
to issue regulations to ``implement the requirements of this order.''
86 FR 22836. The Secretary has delegated his authority to promulgate
these regulations to the Administrator of the WHD and to the Deputy
Administrator of the WHD if the Administrator position is vacant.
Secretary's Order 01-2014 (Dec. 19, 2014), 79 FR 77527 (published Dec.
24, 2014); Secretary's Order 01-2017 (Jan. 12, 2017), 82 FR 6653
(published Jan. 19, 2017).
B. Overview of the Proposed Rule
This notice of proposed rulemaking (NPRM), which amends Title 29 of
the Code of Federal Regulations (CFR) by revising part 10 and adding
part 23, proposes standards and procedures for implementing and
enforcing Executive Order 14026. Proposed subpart A of part 23 relates
to general matters, including the purpose and scope of the rule, as
well as the definitions, coverage, and exclusions that the rule
provides pursuant to the Executive order. It also sets forth the
general minimum wage requirement for contractors established by the
Executive order, an antiretaliation provision, a prohibition against
waiver of rights, and a severability clause. Proposed subpart B
establishes requirements for contracting agencies and the Department to
comply with the Executive order. Proposed subpart C establishes
requirements for contractors to comply with the Executive order.
Proposed subparts D and E specify standards and procedures related to
complaint intake, investigations, remedies, and administrative
enforcement proceedings. Proposed appendix A contains a contract clause
to implement Executive Order 14026. An additional appendix, which will
not publish in 29 CFR part 23, sets forth a poster regarding the
Executive Order 14026 minimum wage for contractors with FLSA-covered
workers performing work on or in connection with a covered contract.
The Department also proposes a few conforming revisions to the existing
regulations at part 10 implementing Executive Order 13658 to fully
implement the requirements of Executive Order 14026 and provide
additional clarity to the regulated community.
The following section-by-section discussion of this proposed rule
presents the contents of each section in more detail. The Department
invites comments on the issues addressed in this NPRM.
Part 23 Subpart A--General
Proposed subpart A of part 23 pertains to general matters,
including the purpose and scope of the rule, as well as the
definitions, coverage, and exclusions that the rule provides pursuant
to the order. Proposed subpart A also includes the Executive Order
14026 minimum wage requirement for contractors, an antiretaliation
provision, and a prohibition against waiver of rights.
Section 23.10 Purpose and Scope
Proposed Sec. 23.10(a) explains that the purpose of the proposed
rule is to implement Executive Order 14026, both in terms of its
administration and enforcement. The paragraph emphasizes that the
Executive order assigns responsibility for investigating potential
violations of and obtaining compliance with the Executive order to the
Department of Labor.
Proposed Sec. 23.10(b) explains the underlying policy of Executive
Order 14026. First, the paragraph repeats a statement from the
Executive order that the Federal Government's procurement interests in
economy and efficiency are promoted when the Federal Government
contracts with sources that adequately compensate their workers. The
proposed rule elaborates that raising the minimum wage enhances worker
productivity and generates higher-quality work by boosting workers'
health, morale, and effort; reducing absenteeism and turnover; and
lowering supervisory and training costs. It is for these reasons that
the Executive order concludes that raising, to $15.00 per hour, the
minimum wage for work performed by parties who contract with the
Federal Government will lead to improved economy and efficiency in
Federal procurement. As explained more fully in section IV.C.4, the
Department believes that, by increasing the quality and efficiency of
services provided to the Federal Government, the Executive order will
improve the value that taxpayers receive from the Federal Government's
investment.
Proposed Sec. 23.10(b) further explains the general requirement
established in Executive Order 14026 that new covered solicitations and
contracts with the Federal Government must include a clause, which the
contractor and any covered subcontractors shall incorporate into lower-
tier subcontracts, requiring, as a condition of payment, that the
contractor and any subcontractors pay workers performing work on or in
connection with the contract or any subcontract thereunder at least:
(i) $15.00 per hour beginning January 30, 2022; and (ii) beginning
January 1, 2023, and annually thereafter, an amount determined by the
Secretary pursuant to the Executive order. Proposed Sec. 23.10(b) also
clarifies that nothing in Executive Order 14026 or part 23 is to be
construed to excuse noncompliance with any applicable Federal or state
prevailing wage law or any applicable law or municipal ordinance
establishing a minimum wage higher than the minimum wage established
under the Executive order.
Proposed Sec. 23.10(c) outlines the scope of this proposed rule
and provides that neither Executive Order 14026 nor part 23 creates or
changes any rights under the Contract Disputes Act or any private right
of action. The Department does not interpret the Executive order as
limiting existing rights under the Contract Disputes Act. This
provision also restates the Executive order's directive that disputes
regarding whether a contractor has paid the minimum wages prescribed by
the Executive order, to the extent permitted by law, shall be disposed
of only as provided by the
[[Page 38820]]
Secretary in regulations issued under the Executive order. The
provision clarifies, however, that nothing in the Executive order is
intended to limit or preclude a civil action under the False Claims
Act, 31 U.S.C. 3730, or criminal prosecution under 18 U.S.C. 1001.
Finally, this paragraph clarifies that neither the Executive order nor
the proposed rule would preclude judicial review of final decisions by
the Secretary in accordance with the Administrative Procedure Act, 5
U.S.C. 701 et seq.
Section 23.20 Definitions
Proposed Sec. 23.20 defines terms for purposes of this rule
implementing Executive Order 14026. Section 4(c) of the Executive order
instructs that any regulations issued pursuant to the order should
``incorporate existing definitions'' under the FLSA, the SCA, the DBA,
Executive Order 13658, and the regulations at 29 CFR part 10
implementing Executive Order 13658 ``to the extent practicable.'' 86 FR
22836. Most of the definitions set forth in the Department's proposed
rule are therefore based on either Executive Order 14026 itself or the
definitions of relevant terms set forth in the statutory text or
implementing regulations of the FLSA, SCA, DBA, or Executive Order
13658. Several proposed definitions adopt or rely upon definitions
published by the FARC in section 2.101 of the FAR. 48 CFR 2.101. The
Department notes that, while the proposed definitions discussed in this
proposed rule would govern the implementation and enforcement of
Executive Order 14026, nothing in the proposed rule is intended to
alter the meaning of or to be interpreted inconsistently with the
definitions set forth in the FAR for purposes of that regulation.
The Department proposes to define the term agency head to mean the
Secretary, Attorney General, Administrator, Governor, Chairperson, or
other chief official of an executive agency, unless otherwise
indicated, including any deputy or assistant chief official of an
executive agency or any persons authorized to act on behalf of the
agency head. This proposed definition is based on the definition of the
term set forth in section 2.101 of the FAR, see 48 CFR 2.101, and is
identical to the definition provided in the implementing regulations
for Executive Order 13658, see 29 CFR 10.2.
The Department proposes to define concessions contract (or contract
for concessions) to mean a contract under which the Federal Government
grants a right to use Federal property, including land or facilities,
for furnishing services. This proposed definition does not contain a
limitation regarding the beneficiary of the services, and such
contracts may be of direct or indirect benefit to the Federal
Government, its property, its civilian or military personnel, or the
general public. See 29 CFR 4.133. The proposed definition covers but is
not limited to all concessions contracts excluded from the SCA by
Departmental regulations at 29 CFR 4.133(b). This definition is taken
from 29 CFR 10.2, which defined the same term for purposes of Executive
Order 13658.
The Department proposes to define contract and contract-like
instrument collectively for purposes of the Executive order as an
agreement between two or more parties creating obligations that are
enforceable or otherwise recognizable at law. This definition includes,
but is not limited to, a mutually binding legal relationship obligating
one party to furnish services (including construction) and another
party to pay for them. 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.
The proposed definition of the term contract is intended to be
interpreted broadly to include, but not be limited to, any contract
within the definition provided in the FAR or applicable Federal
statutes. The proposed definition includes, but is not to be limited
to, any contract that may be covered under any Federal procurement
statute. The Department notes that under this definition contracts may
be the result of competitive bidding or awarded to a single source
under applicable authority to do so. The proposed definition also
explains that, in addition to bilateral instruments, contracts include,
but are not limited to, awards and notices of awards; job orders or
task letters issued under basic ordering agreements; letter contracts;
orders, such as purchase orders, under which the contract becomes
effective by written acceptance or performance; exercised contract
options; and bilateral contract modifications. The proposed definition
also specifies that, for purposes of the minimum wage requirements of
the Executive order, the term contract includes contracts covered by
the SCA, contracts covered by the DBA, concessions contracts not
otherwise subject to the SCA, and contracts in connection with Federal
property or land and related to offering services for Federal
employees, their dependents, or the general public, as provided in
section 8(a) of the Executive order. See 86 FR 22837. The proposed
definition of contract discussed herein is identical to the definition
of contract in the regulations implementing Executive Order 13658, see
29 CFR 10.2, except that it includes ``exercised contract options'' as
an example of a contract. The addition of this example reflects that,
unlike Executive Order 13658, Executive Order 14026 expressly applies
to option periods on existing contracts that are exercised on or after
January 30, 2022. See 86 FR 22837.
As explained in the Department's final rule implementing Executive
Order 13658, this definition of contract was originally derived from
the definition of the term contract set forth in Black's Law Dictionary
(9th ed. 2009) and section 2.101 of the FAR (48 CFR 2.101), as well as
the descriptions of the term contract that appear in the SCA's
regulations at 29 CFR 4.110 and 4.111, 4.130. See 79 FR 60638-41. The
Department notes that the fact that a legal instrument constitutes a
contract under this definition does not mean that the contract is
covered by the Executive order. In order for a contract to be covered
by the Executive order and the proposed rule, the contract must satisfy
all of the following prongs: (1) It must qualify as a contract or
contract-like instrument under the proposed definition set forth in
part 23; (2) it must fall within one of the four specifically
enumerated types of contracts set forth in section 8(a) of the order
and Sec. 23.30; and (3) it must be a ``new contract'' pursuant to the
proposed definition described below. Further, in order for the minimum
wage protections of the Executive order to extend to a particular
worker performing work on or in connection with a covered contract,
that worker's wages must also be governed by the DBA, SCA, or FLSA. For
example, although an agreement between a contracting agency and a hotel
located on private property pursuant to which the hotel accepts the
General Services Administration (GSA) room rate for Federal Government
workers would likely be regarded as a ``contract'' or ``contract-like
instrument'' under the Department's proposed definition, such an
agreement would not be covered by the Executive order and part 23
because it is not subject to the
[[Page 38821]]
DBA or SCA, is not a concessions contract, and is not entered into in
connection with Federal property or lands. Similarly, a permit issued
by the National Park Service (NPS) to an individual for purposes of
conducting a wedding on Federal land would qualify as a ``contract'' or
``contract-like instrument'' but would not be subject to the Executive
order because it would not be a contract covered by the SCA or DBA, a
concessions contract, or a contract in connection with Federal property
related to offering services to Federal employees, their dependents, or
the general public.
The Department proposes to substantially adopt the definition of
contracting officer in section 2.101 of the FAR, which means a person
with the authority to enter into, administer, and/or terminate
contracts and make related determinations and findings. The term
includes certain authorized representatives of the contracting officer
acting within the limits of their authority as delegated by the
contracting officer. See 48 CFR 2.101. This definition is identical to
the definition provided in 29 CFR 10.2, which implemented Executive
Order 13658.
The Department proposes to define contractor to mean any individual
or other legal entity that is awarded a Federal Government contract or
subcontract under a Federal Government contract. The Department notes
that the term contractor refers to both a prime contractor and all of
its subcontractors of any tier on a contract with the Federal
Government. This proposed definition is consistent with the definition
set forth in 29 CFR 10.2, which incorporates relevant aspects of the
definitions of the term contractor in section 9.403 of the FAR, see 48
CFR 9.403, and the SCA's regulations at 29 CFR 4.1a(f). This proposed
definition includes lessors and lessees, as well as employers of
workers performing on or in connection with covered Federal contracts
whose wages are computed pursuant to special certificates issued under
29 U.S.C. 214(c). The Department notes that the term employer is used
interchangeably with the terms contractor and subcontractor in part 23.
The U.S. Government, its agencies, and its instrumentalities are not
considered contractors, subcontractors, employers, or joint employers
for purposes of compliance with the provisions of Executive Order
14026.
Importantly, the Department notes that the fact that an individual
or entity is a contractor under the Department's definition does not
mean that such an entity has legal obligations under the Executive
order. A contractor only has obligations under the Executive order if
it has a contract with the Federal Government that is specifically
covered by the order. Thus, an entity that is awarded a contract with
the Federal Government will qualify as a ``contractor'' pursuant to the
Department's definition, however, that entity will only be subject to
the minimum wage requirements of the Executive order if such contractor
is awarded or otherwise enters into a ``new'' contract that falls
within the scope of one of the four specifically enumerated categories
of contracts covered by the order.
The Department proposes to define the term Davis-Bacon Act to mean
the Davis-Bacon Act of 1931, as amended, 40 U.S.C. 3141 et seq., and
its implementing regulations. This proposed definition is taken from 29
CFR 10.2.
Consistent with the regulations implementing Executive Order 13658,
see 29 CFR 10.2, the Department proposes to define executive
departments and agencies that are subject to Executive Order 14026 by
adopting the definition of executive agency provided in section 2.101
of the FAR. 48 CFR 2.101. The Department therefore interprets the
Executive order to apply to executive departments within the meaning of
5 U.S.C. 101, military departments within the meaning of 5 U.S.C. 102,
independent establishments within the meaning of 5 U.S.C. 104(1), and
wholly owned Government corporations within the meaning of 31 U.S.C.
9101. The Department notes that this proposed definition includes
independent agencies. Such agencies were expressly excluded from
coverage of Executive Order 13658, which ``strongly encouraged'' but
did not require compliance by independent agencies. See 79 FR 9853
(section 7(g) of Executive Order 13658); see also 79 FR 60643, 60646
(final rule interpreting Executive Order 13658 to exclude from coverage
independent regulatory agencies within the meaning of 44 U.S.C.
3502(5)). Because Executive Order 14026 does not contain such
exclusionary language, independent agencies are covered by the order
and part 23. The inclusion of independent agencies is discussed in
greater detail below in the explanation of contracting agency coverage
set forth at Sec. 23.30. Finally, and consistent with the regulations
implementing Executive Order 13658, the Department does not interpret
the definition of executive departments and agencies as including the
District of Columbia or any Territory or possession of the United
States.
The Department proposes to define Executive Order 13658 to mean
Executive Order 13658 of February 12, 2014, ``Establishing a Minimum
Wage for Contractors,'' 79 FR 9851 (Feb. 20, 2014), and its
implementing regulations at 29 CFR part 10.
The Department proposes to define the term Executive Order 14026
minimum wage as a wage that is at least: (i) $15.00 per hour beginning
January 30, 2022; and (ii) beginning January 1, 2023, and annually
thereafter, an amount determined by the Secretary pursuant to section 2
of Executive Order 14026. This definition is based on the language set
forth in section 2 of the Executive order. 86 FR 22835.
The Department proposes to define Fair Labor Standards Act as the
Fair Labor Standards Act of 1938, as amended, 29 U.S.C. 201 et seq.,
and its implementing regulations. This definition is adopted from 29
CFR 10.2.
The Department proposes to define the term Federal Government as an
agency or instrumentality of the United States that enters into a
contract pursuant to authority derived from the Constitution or the
laws of the United States. This proposed definition is based on the
definition set forth in the regulations implementing Executive Order
13658. See 29 CFR 10.2. Consistent with that definition and the SCA,
the proposed definition of the term Federal Government includes
nonappropriated fund instrumentalities under the jurisdiction of the
Armed Forces or of other Federal agencies. See 29 CFR 4.107(a); 29 CFR
10.2. As explained above, and unlike the regulations implementing
Executive Order 13658, this proposed definition also includes
independent agencies because such agencies are subject to the order's
requirements. For purposes of Executive Order 14026 and part 23, the
Department's proposed definition does not include the District of
Columbia or any Territory or possession of the United States.
The Department proposes to define the term new contract as a
contract that is entered into on or after January 30, 2022, or a
contract that is renewed or extended (pursuant to an exercised option
or otherwise) on or after January 30, 2022. For purposes of Executive
Order 14026, a contract that is entered into prior to January 30, 2022
will constitute a new contract if, on or after January 30, 2022: (1)
The contract is renewed; (2) the contract is extended; or (3) an option
on the contract is exercised. Under the proposed definition, a new
contract includes contracts that result from solicitations issued prior
to January 30, 2022, but
[[Page 38822]]
that are entered into on or after January 30, 2022, unless otherwise
excluded by Sec. 23.40; contracts that result from solicitations
issued on or after January 30, 2022; contracts that are awarded outside
the solicitation process on or after January 30, 2022; and contracts
that were entered into prior to January 30, 2022 (an ``existing
contract'') but that are subsequently renewed or extended, pursuant to
an exercised option period or otherwise, on or after January 30, 2022.
This definition is based on sections 8(a) and 9(a) of Executive
Order 14026. See 86 FR 22837. The Department notes that the plain
language of Executive Order 14026 compels a more expansive definition
of the term new contract here than was promulgated under Executive
Order 13658. For example, the renewal or extension of a contract
pursuant to the exercise of an option period on or after January 30,
2022, will qualify as a new contract for purposes of Executive Order
14026 and part 23; exercised option periods, however, generally did not
qualify as ``new contracts'' under Executive Order 13658. See 29 CFR
10.2. The Department discusses the coverage of ``new contracts,'' and
the interaction of Executive Order 14026 and Executive Order 13658 with
respect to contract coverage, in more detail below in the preamble
discussion accompanying proposed Sec. 23.30.
Proposed Sec. 23.20 defines the term option by adopting the
definition set forth in 29 CFR 10.2 and in section 2.101 of the FAR,
which provides that the term option means a unilateral right in a
contract by which, for a specified time, the Federal Government may
elect to purchase additional supplies or services called for by the
contract, or may elect to extend the term of the contract. See 48 CFR
2.101. When used in this context, the Department notes that the
additional ``services'' called for by the contract would include
construction services. As discussed above, an option on an existing
covered contract that is exercised on or after January 30, 2022,
qualifies as a ``new contract'' subject to the Executive order and part
23.
The Department proposes to define the term procurement contract for
construction to mean a procurement contract for the construction,
alteration, or repair (including painting and decorating) of public
buildings or public works and which requires or involves the employment
of mechanics or laborers, and any subcontract of any tier thereunder.
The proposed definition includes any contract subject to the provisions
of the DBA, as amended, and its implementing regulations. This proposed
definition is identical to that set forth in 29 CFR 10.2, which in turn
was derived from language found at 40 U.S.C. 3142(a) and 29 CFR 5.2(h).
The Department proposes to define the term procurement contract for
services to mean a contract the principal purpose of which is to
furnish services in the United States through the use of service
employees, and any subcontract of any tier thereunder. This proposed
definition includes any contract subject to the provisions of the SCA,
as amended, and its implementing regulations. This proposed definition
is identical to that set forth in 29 CFR 10.2, which in turn was
derived from language set forth in 41 U.S.C. 6702(a) and 29 CFR
4.1a(e).
The Department proposes to define the term Service Contract Act to
mean the McNamara-O'Hara Service Contract Act of 1965, as amended, 41
U.S.C. 6701 et seq., and its implementing regulations. See 29 CFR
4.1a(a).
The term solicitation is proposed to be defined to mean any request
to submit offers, bids, or quotations to the Federal Government. This
definition is based on the definition set forth at 29 CFR 10.2. The
Department broadly interprets the term solicitation to apply to both
traditional and nontraditional methods of solicitation, including
informal requests by the Federal Government to submit offers or
quotations. However, the Department notes that requests for information
issued by Federal agencies and informal conversations with Federal
workers are not ``solicitations'' for purposes of the Executive order.
The Department proposes to adopt the definition of tipped employee
in section 3(t) of the FLSA, that is, any employee engaged in an
occupation in which the employee customarily and regularly receives
more than $30 a month in tips. See 29 U.S.C. 203(t). For purposes of
the Executive order, a worker performing on or in connection with a
contract covered by the Executive order who meets this definition is a
tipped employee.
The Department proposes to define the term United States as the
United States and all executive departments, independent
establishments, administrative agencies, and instrumentalities of the
United States, including corporations of which all or substantially all
of the stock is owned by the United States, by the foregoing
departments, establishments, agencies, instrumentalities, and including
nonappropriated fund instrumentalities. This portion of the proposed
definition is identical to the definition of United States in 29 CFR
10.2. When the term is used in a geographic sense, the Department
proposes that the United States means the 50 States, the District of
Columbia, Puerto Rico, the Virgin Islands, Outer Continental Shelf
lands as defined in the Outer Continental Shelf Lands Act, American
Samoa, Guam, the Commonwealth of the Northern Mariana Islands, Wake
Island, and Johnston Island.
The geographic scope component of this proposed definition is
derived from the definition of United States set forth in the
regulations implementing the SCA. See 29 CFR 4.112(a). Although the
Department only included the 50 States and the District of Columbia
within the geographic scope of the regulations implementing Executive
Order 13658, see 29 CFR 10.2, the Department notes that Executive Order
14026 directs the Department to establish ``definitions of relevant
terms'' in its regulations. 86 FR 22835. As previously discussed,
Executive Order 14026 also directs the Department to ``incorporate
existing definitions'' under the FLSA, SCA, DBA, and Executive Order
13658 ``to the extent practicable.'' 86 FR 22836. Each of the
territories listed above is covered by both the SCA, see 29 CFR
4.112(a), and the FLSA, see, e.g., 29 U.S.C. 213(f); 29 CFR 776.7; Fair
Minimum Wage Act of 2007, Pub. L. 110-28, 121 Stat. 112 (2007), but not
the DBA, 40 U.S.C. 3142(a). Accordingly, it is not practicable to adopt
all the cross-referenced existing definitions, and the Department must
choose between them to incorporate existing definitions ``to the extent
practicable.'' The Department proposes to exercise its discretion to
select a definition that tracks the SCA and FLSA, for the following
reasons. As reflected in the RIA, the Department has further examined
the issue since its prior rulemaking in 2014 and consequently
determined that the Federal Government's procurement interests in
economy and efficiency would be promoted by extending the Executive
Order 14026 minimum wage to workers performing on or in connection with
covered contracts in Puerto Rico, the Virgin Islands, Outer Continental
Shelf lands as defined in the Outer Continental Shelf Lands Act,
American Samoa, Guam, the Commonwealth of the Northern Mariana Islands,
Wake Island, and Johnston Island. To be clear, the Department is not
proposing to extend coverage of this Executive order to contracts
entered into with the governments of those territories, but rather is
proposing to expand coverage to covered contracts with the Federal
Government that are being performed inside the geographical limits of
those territories. Because
[[Page 38823]]
contractors operating in those territories will generally have
familiarity with many of the requirements set forth in part 23 based on
their coverage by the SCA and/or the FLSA, the Department does not
believe that the proposed extension of Executive Order 14026 and part
23 to such contractors will impose a significant burden.
The Department proposes to define wage determination as including
any determination of minimum hourly wage rates or fringe benefits made
by the Secretary pursuant to the provisions of the SCA or the DBA. This
term includes the original determination and any subsequent
determinations modifying, superseding, correcting, or otherwise
changing the provisions of the original determination. The proposed
definition is adopted from 29 CFR 10.2, which itself was derived from
29 CFR 4.1a(h) and 29 CFR 5.2(q).
The Department proposes to define worker as any person engaged in
performing work on or in connection with 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.
The proposed definition also incorporates the Executive order's
provision that 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). See 86
FR 22835. The proposed definition also includes 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
Department's Employment and Training Administration, Office of
Apprenticeship, or with a State Apprenticeship Agency recognized by the
Office of Apprenticeship. See 29 CFR 4.6(p) (SCA); 29 CFR 5.2(n) (DBA).
The Department has included in the proposed definition of worker here a
brief description of the meaning of working ``on or in connection
with'' a covered contract. Specifically, the definition provides that a
worker performs ``on'' a contract if the worker directly performs the
specific services called for by the contract and that a worker performs
``in connection with'' a contract if the worker's work activities are
necessary to the performance of a contract but are not the specific
services called for by the contract. These concepts are discussed in
greater detail below in the explanation of worker coverage set forth at
Sec. 23.30.
Consistent with the FLSA, SCA, and DBA and their implementing
regulations, this proposed definition of worker excludes from coverage
any person employed in a bona fide executive, administrative, or
professional capacity, as those terms are defined in 29 CFR part 541.
See 29 U.S.C. 213(a)(1) (FLSA); 41 U.S.C. 6701(3)(C) (SCA); 29 CFR
5.2(m) (DBA). The Department's proposed definition of worker is
substantively identical to the definition that appears in the
regulations implementing Executive Order 13658, see 29 CFR 10.2, but
contains additional clarifying language regarding the ``on or in
connection with'' standard in the proposed regulatory text itself.
Consistent with the Department's rulemaking under Executive Order
13658, as well as with the FLSA, DBA, and SCA, the Department
emphasizes the well-established principle that worker coverage does not
depend upon the existence or form of any contractual relationship that
may be alleged to exist between the contractor or subcontractor and
such persons. See, e.g., 29 U.S.C. 203(d), (e)(1), (g) (FLSA); 41
U.S.C. 6701(3)(B), 29 CFR 4.155 (SCA); 29 CFR 5.5(a)(1)(i) (DBA). The
Department notes that, as reflected in the proposed definition, the
Executive order is intended to apply to a wide range of employment
relationships. Neither an individual's subjective belief about his or
her employment status nor the existence of a contractual relationship
is determinative of whether a worker is covered by the Executive order.
Finally, the Department proposes to adopt the definitions of the
terms Administrative Review Board, Administrator, Office of
Administrative Law Judges, and Wage and Hour Division set forth in 29
CFR 10.2.
Section 23.30 Coverage
Proposed Sec. 23.30 addresses and implements the coverage
provisions of Executive Order 14026. Proposed Sec. 23.30 explains the
scope of the Executive order and its coverage of executive agencies,
new contracts, types of contractual arrangements, and workers. Proposed
Sec. 23.40 implements the exclusions expressly set forth in section
8(c) of the Executive order and provides other limited exclusions to
coverage as authorized by section 4(a) of the order. 86 FR 22836-37.
Executive Order 14026 provides that agencies must, to the extent
permitted by law, ensure that contracts, as defined in part 23 and as
described in section 8(a) of the order, include a clause specifying, as
a condition of payment, that the minimum wage to be paid to workers
employed in the performance of the contract shall be at least: (i)
$15.00 per hour beginning January 30, 2022; and (ii) beginning January
1, 2023, and annually thereafter, an amount determined by the
Secretary. 86 FR 22835. (See proposed Sec. 23.50(b) for a discussion
of the methodology established by the Executive order to determine the
future annual minimum wage increases.) Section 8(a) of the Executive
order establishes that the order's minimum wage requirement only
applies to a new contract, new solicitation, extension or renewal of an
existing contract, and exercise of an option on an existing contract
(which are collectively referred to in this proposed rule as ``new
contracts''), if: (i)(A) It is a procurement contract for services or
construction; (B) it is a contract for services covered by the SCA; (C)
it is a contract for concessions, including any concessions contract
excluded by the Department's regulations at 29 CFR 4.133(b); or (D) it
is a contract 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; and (ii)
the wages of workers under such contract are governed by the FLSA, the
SCA, or the DBA. 86 FR 22837. Section 8(b) of the order states that,
for contracts covered by the SCA or the DBA, the order applies only to
contracts at the thresholds specified in those statutes. Id. It also
specifies that, for procurement contracts where workers' wages are
governed by the FLSA, the order applies only to contracts that exceed
the micro-purchase threshold, as defined in 41 U.S.C. 1902(a), unless
expressly made subject to the order pursuant to regulations or actions
taken under section 4 of the order. Id. The Executive order states that
it does not apply to grants; contracts or agreements with Indian Tribes
under the Indian Self-Determination and Education Assistance Act (Pub.
L. 93-638), as amended; or any contracts expressly excluded by the
regulations issued pursuant to section 4(a) of the order. Id.
Proposed Sec. 23.30(a) implements these coverage provisions by
stating that Executive Order 14026 and part 23 apply to, unless
excluded by Sec. 23.40, any new contract as defined in Sec. 23.20,
provided that: (1)(i) It is a procurement contract for construction
covered by the DBA; (ii) it is a contract for services covered by the
SCA; (iii) it is a contract for concessions, including any concessions
contract excluded by Departmental regulations at 29 CFR 4.133(b); or
(iv) it is a contract in
[[Page 38824]]
connection with Federal property or lands and related to offering
services for Federal employees, their dependents, or the general
public; and (2) the wages of workers under such contract are governed
by the FLSA, the SCA, or the DBA. 86 FR 22837. Proposed Sec. 23.30(b)
incorporates the monetary value thresholds referred to in section 8(b)
of the Executive order. Id. Finally, proposed Sec. 23.30(c) states
that the Executive order and part 23 only apply to contracts with the
Federal Government requiring performance in whole or in part within the
United States. Several issues relating to the coverage provisions of
the Executive order and proposed Sec. 23.30 are discussed below.
Coverage of Executive Agencies and Departments
Executive Order 14026 applies to all ``[e]xecutive departments and
agencies, including independent establishments subject to the Federal
Property and Administrative Services Act, 40 U.S.C. 102(4)(A), (5).''
86 FR 22835. As explained above, the Department proposes to define
executive departments and agencies by adopting the definition of
executive agency provided in 29 CFR 10.2 and section 2.101 of the FAR.
48 CFR 2.101. The proposed rule therefore interprets the Executive
order as applying to executive departments within the meaning of 5
U.S.C. 101, military departments within the meaning of 5 U.S.C. 102,
independent establishments within the meaning of 5 U.S.C. 104(1), and
wholly owned Government corporations within the meaning of 31 U.S.C.
9101. As discussed above, this proposed definition includes independent
agencies. Accordingly, independent agencies are covered contracting
agencies for purposes of Executive Order 14026 and part 23.
Additionally, Section 7(g) of Executive Order 13658 ``strongly
encouraged'' but did not require independent agencies to comply with
its requirements. 79 FR 9853. Therefore, in the final rule implementing
Executive Order 13658, the Department interpreted such language to
exclude independent regulatory agencies as defined in 44 U.S.C. 3502(5)
from coverage of Executive Order 13658. See, e.g., 79 FR 60643, 60646.
Unlike Executive Order 13658, Executive Order 14026 does not set forth
any exclusion for independent agencies. Executive Order 14026 and part
23 thus apply to a broader universe of contracting agencies than were
covered by Executive Order 13658 and its implementing regulations at 29
CFR part 10.
Finally, pursuant to this proposed definition, contracts awarded by
the District of Columbia or any Territory or possession of the United
States would not be covered by the order.
Coverage of New Contracts With the Federal Government
Proposed Sec. 23.30(a) provides that the requirements of the
Executive order generally apply to ``contracts with the Federal
Government.'' As discussed above, and consistent with the Department's
regulations implementing Executive Order 13658, the Department proposes
to set forth a broadly inclusive definition of the term contract that
would include 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. The Department intends that the term contract be interpreted
broadly as to include, but not be limited to, any contract within the
definition provided in the FAR or applicable Federal statutes. This
definition includes, but is not limited to, any contract that may be
covered under any Federal procurement statute. Contracts may be the
result of competitive bidding or awarded to a single source under
applicable authority to do so. In addition to bilateral instruments,
contracts include, but are not limited to, awards and notices of
awards; job orders or task letters issued under basic ordering
agreements; letter contracts; orders, such as purchase orders, under
which the contract becomes effective by written acceptance or
performance; exercised contract options; and bilateral contract
modifications. Unless otherwise noted, the use of the term contract
throughout the Executive order and part 23 therefore includes contract-
like instruments and subcontracts of any tier.
As reflected in proposed Sec. 23.30(a), the minimum wage
requirements of Executive Order 14026 apply only to ``new contracts''
with the Federal Government within the meaning of sections 8(a) and
9(a) of the order and as defined in part 23. 86 FR 22837. Section 9 of
the Executive order states that the order shall apply to covered new
contracts, new solicitations, extensions or renewals of existing
contracts, and exercises of options on existing contracts, as described
in section 8(a) of the order, where the relevant contract is entered
into, or extended or renewed, or the relevant option will be exercised,
on or after: (i) January 30, 2022, consistent with the effective date
for the action taken by the FARC pursuant to section 4(a) of the order;
or (ii) for contracts where an agency action is taken pursuant to
section 4(b) of the order, on or after January 30, 2022, consistent
with the effective date for such action. Id. Proposed Sec. 23.30(a) of
this rule therefore states that, unless excluded by Sec. 23.40, part
23 applies to any new contract with the Federal Government as defined
in Sec. 23.20. As explained in the proposed definition of new contract
above, a new contract means a contract that is entered into on or after
January 30, 2022, or a contract that is renewed or extended (pursuant
to an exercised option or otherwise) on or after January 30, 2022. For
purposes of the Executive order, a contract that is entered into prior
to January 30, 2022 will constitute a new contract if, on or after
January 30, 2022: (1) The contract is renewed; (2) the contract is
extended; or (3) an option on the contract is exercised. To be clear,
for contracts that were entered into prior to January 30, 2022, the
Executive Order 14026 minimum wage requirement applies prospectively as
of the date that such contract is renewed or extended (pursuant to an
exercised option or otherwise) on or after January 30, 2022; the
Executive order does not apply retroactively to the date that the
contract was originally entered into.
The Department notes that the plain language of Executive Order
14026 compels a more expansive definition of the term new contract here
than under Executive Order 13658. For example, Executive Order 13658
coverage was not triggered by the unilateral exercise of a pre-
negotiated option to renew an existing contract by the Federal
Government, see 29 CFR 10.2. However, section 8(a) of this order makes
clear that Executive Order 14026 applies to the ``exercise of an option
on an existing contract'' where such exercise occurs on or after
January 30, 2022. 86 FR 22837. The Department notes that, under the SCA
and DBA, the Department and the FARC generally require the inclusion of
a new or current prevailing wage determination upon the exercise of an
option clause that extends the term of an existing contract. See, e.g.,
29 CFR 4.143(b); 48 CFR 22.404-1(a)(1); All Agency Memorandum (AAM) No.
157 (1992); In the Matter of the United States Army, ARB Case No. 96-
133,
[[Page 38825]]
1997 WL 399373 (ARB July 17, 1997).\5\ The SCA's regulations, for
example, provide that when the term of an existing contract is extended
pursuant to an option clause, the contract extension is viewed as a
``new contract'' for SCA purposes. See 29 CFR 4.143(b). The application
of Executive Order 14026's minimum wage requirements to contracts for
which an option period is exercised on or after January 30, 2022 should
be easily understood by contracting agencies and contractors.
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\5\ As stated in AAM 157, the Department does not assert that
the exercise of an option period qualifies as a new contract in all
cases for purposes of the DBA and SCA. See 63 FR 64542 (Nov. 20,
1998). The Department considers the specific contract requirements
at issue in making this determination. For example, under those
statutes, the Department does not consider that a new contract has
been created where a contractor is simply given additional time to
complete its original obligations under the contract. Id.
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Under this proposed rule, a contract awarded under the GSA
Schedules will be considered a ``new contract'' in certain situations.
Of particular note, any covered contracts that are added to the GSA
Schedule on or after January 30, 2022 will generally qualify as ``new
contracts'' subject to the order, unless excluded by Sec. 23.40; any
covered task orders issued pursuant to those contracts would also be
deemed to be ``new contracts.'' This would include contracts to add new
covered services as well as contracts to replace expiring contracts.
Consistent with section 9(c) of the Executive order, agencies are
strongly encouraged to bilaterally modify existing contracts, as
appropriate, to include the minimum wage requirements of this rule even
when such contracts are not otherwise considered to be a ``new
contract'' under the terms of this rule. 86 FR 22838. For example,
pursuant to the order, contracting officers are encouraged to modify
existing indefinite-delivery, indefinite-quantity contracts in
accordance with FAR section 1.108(d)(3) to include the Executive Order
14026 minimum wage requirements.
Interaction With Contract Coverage Under Executive Order 13658
Beginning January 1, 2015, covered contracts with the Federal
Government were generally subject to the minimum wage requirements of
Executive Order 13658 and its implementing regulations at 29 CFR part
10. Executive Order 13658, which was issued in February 2014, required
Federal contractors to pay workers working on or in connection with
covered Federal contracts at least $10.10 per hour beginning January 1,
2015 and, pursuant to that order, the minimum wage rate has increased
annually based on inflation. The Executive Order 13658 minimum wage is
currently $10.95 per hour and the minimum hourly cash wage for tipped
employees is $7.65 per hour. See 85 FR 53850. Executive Order 13658
applies to the same four types of Federal contracts as are covered by
Executive Order 14026. Compare 79 FR 9853 (section 7(d) of Executive
Order 13658) with 86 FR 22837 (section 8(a) of Executive Order 14026).
Section 6 of Executive Order 14026 states that, as of January 30,
2022, the order supersedes Executive Order 13658 to the extent that it
is inconsistent with this order. 86 FR 22836-37. The Department
interprets this language to mean that workers performing on or in
connection with a contract that would be covered by both Executive
Order 13658 and Executive Order 14026 are entitled to be paid the
higher minimum wage rate under this new order. The Department therefore
proposes to include language at Sec. 23.50(d) briefly discussing the
relationship between Executive Order 13658 and this order, namely to
make clear that workers performing on or in connection with a covered
new contract as defined in part 23 must be paid at least the higher
minimum wage rate established by Executive Order 14026 rather than the
lower minimum wage rate established by Executive Order 13658.
As explained above, however, Executive Order 14026 and part 23 only
apply to a ``new contract'' with the Federal Government, which means a
contract that is entered into on or after January 30, 2022, or a
contract that is renewed or extended (pursuant to an exercised option
or otherwise) on or after January 30, 2022. For some amount of time,
the Department anticipates that there will be some existing contracts
with the Federal Government that do not qualify as a ``new contract''
for purposes of Executive Order 14026 and thus will remain subject to
the minimum wage requirements of Executive Order 13658. For example, an
SCA-covered contract entered into on February 15, 2021 is currently
subject to the $10.95 minimum wage rate established by Executive Order
13658. That contract will remain subject to the minimum wage rate under
Executive Order 13658 until such time as it is renewed or extended,
pursuant to an exercised option or otherwise, on or after January 30,
2022, at which time it will become subject to the Executive Order 14026
minimum wage rate. For example, if that contract is subsequently
extended on February 15, 2022, the contract will become subject to the
$15.00 minimum wage rate established by Executive Order 14026 on the
date of extension, February 15, 2022. The Department anticipates that,
in the relatively near future, essentially all covered contracts with
the Federal Government will qualify as ``new contracts'' under part 23
and thus will be subject to the higher Executive Order 14026 minimum
wage rate; until such time, however, Executive Order 13658 and its
regulations at 29 CFR part 10 must remain in place.
In order to minimize potential stakeholder confusion as to whether
a particular contract is subject to Executive Order 13658 or to
Executive Order 14026, the Department is proposing to add clarifying
language to the definition of ``new contract'' in the regulations that
implemented Executive Order 13658, see 29 CFR 10.2, to make clear that
a contract that is entered into on or after January 30, 2022, or a
contract that was awarded prior to January 30, 2022, but is
subsequently extended or renewed (pursuant to an option or otherwise)
on or after January 30, 2022, is subject to Executive Order 14026 and
part 23 instead of Executive Order 13658 and the 29 CFR part 10
regulations. The provision at 29 CFR 10.2 currently defines a ``new
contract'' for purposes of Executive Order 13658 to mean ``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.'' That definition further provides, inter alia, that
Executive Order 13658 also applies to contracts entered into prior to
January 1, 2015, if, through bilateral negotiation, on or after January
1, 2015, the contract is renewed, extended, or amended pursuant to
certain specified limitations explained in that regulation. Id. To
provide clarity to stakeholders, the Department proposes to amend the
definition of a ``new contract'' under Executive Order 13658 in 29 CFR
10.2 by changing the three references to ``on or after January 1,
2015'' to ``on or between January 1, 2015 and January 29, 2022.'' This
clarifying edit is intended to assist stakeholders in recognizing that,
beginning January 30, 2022, the higher minimum wage requirement of
Executive Order 14026 applies to new contracts.
As previously mentioned, the Department also proposes to add
language to part 23 at Sec. 23.50(d) explaining that, unless otherwise
excluded by Sec. 23.40, workers performing on or in connection with a
covered new contract, as defined in Sec. 23.20, must be paid at least
the higher minimum hourly wage rate established
[[Page 38826]]
by Executive Order 14026 and part 23 rather than the lower hourly
minimum wage rate established by Executive Order 13658 and its
regulations. The Department further proposes to add substantially
similar language to the Executive Order 13658 regulations at Sec. 10.1
to ensure that the contracting community is fully aware of which
Executive order and regulations apply to their particular contract.
Specifically, the Department proposes to amend Sec. 10.1 by adding
paragraph (d), which explains that, as of January 30, 2022, Executive
Order 13658 is superseded to the extent that it is inconsistent with
Executive Order 14026 and part 23. The proposed new paragraph would
further clarify that a covered contract that is entered into on or
after January 30, 2022, or that is renewed or extended (pursuant to an
option or otherwise) on or after January 30, 2022, is generally subject
to the higher minimum wage rate established by Executive Order 14026
and part 23. The Department also proposes to add corresponding
information to Sec. 10.5(c) to ensure that stakeholders are aware of
their potential obligations under Executive Order 14026 and part 23
even if they inadvertently consult the regulations that were issued
under Executive Order 13658.
In sum, a Federal contract entered into on or after January 1,
2015, that falls within one of the four specified categories of
contracts described in part 23 will generally be subject to the minimum
wage requirements of either Executive Order 13658 or Executive Order
14026; the date upon which the relevant contract was entered into,
extended, or renewed will determine whether the contract qualifies as a
``new contract'' under this Executive order and part or whether it is
subject to the lower minimum wage requirement of Executive Order 13658
and the part 10 regulations.
The Department notes that contracts with independent regulatory
agencies and contracts performed in the territories (i.e., Puerto Rico,
the Virgin Islands, Outer Continental Shelf lands as defined in the
Outer Continental Shelf Lands Act, American Samoa, Guam, the
Commonwealth of the Northern Mariana Islands, Wake Island, and Johnston
Island) are not subject to Executive Order 13658 or part 10; this rule
does not alter that determination. However, as discussed above, such
contracts with the Federal Government are covered by Executive Order
14026 and part 23 to the extent that they fall within the four general
types of covered contracts and are entered into, extended, or renewed
on or after January 30, 2022. For example, a concessions contract with
the Federal Government that is performed wholly within Puerto Rico and
that was entered into on October 1, 2020, is not subject to the minimum
wage requirement of Executive Order 13658 or 14026. However, if that
contract is renewed on October 1, 2022, it will become subject to the
minimum wage requirement of Executive Order 14026.
Coverage of Types of Contractual Arrangements
Proposed Sec. 23.30(a)(1) sets forth the specific types of
contractual arrangements with the Federal Government that are covered
by Executive Order 14026. The Department notes that Executive Order
14026 and part 23 are intended to apply to a wide range of contracts
with the Federal Government for services or construction. Proposed
Sec. 23.30(a)(1) implements the Executive order by generally extending
coverage to procurement contracts for construction covered by the DBA;
service contracts covered by the SCA; concessions contracts, including
any concessions contract excluded by the Department's regulations at 29
CFR 4.133(b); and contracts in connection with Federal property or
lands and related to offering services for Federal employees, their
dependents, or the general public. Each of these categories of
contractual agreements is discussed in greater detail below. The
Department further notes that, as was also the case under the Executive
Order 13658 rulemaking, these categories are not mutually exclusive--a
concessions contract might also be covered by the SCA, as might a
contract in connection with Federal property or lands, for example. A
contract that falls within any one of the four categories is covered.
Procurement Contracts for Construction: Section 8(a)(i)(A) of the
Executive order extends coverage to ``procurement contract[s]'' for
``construction.'' 86 FR 22837. The proposed rule at Sec.
23.30(a)(1)(i) interprets this provision of the order as referring to
any contract covered by the DBA, as amended, and its implementing
regulations. The Department notes that this provision reflects that the
Executive order and part 23 apply to contracts subject to the DBA
itself, but do not apply to contracts subject only to the Davis-Bacon
Related Acts, including those set forth at 29 CFR 5.1(a)(2)-(60). This
interpretation is consistent with the discussion of procurement
contracts for construction set forth in the Department's final rule
implementing Executive Order 13658. See 79 FR 60650. For ease of
reference, much of that discussion is repeated here.
The DBA applies, in relevant part, to contracts to which the
Federal Government is a party, for the construction, alteration, or
repair, including painting and decorating, of public buildings and
public works of the Federal Government and which require or involve the
employment of mechanics or laborers. 40 U.S.C. 3142(a). The DBA's
regulatory definition of construction is expansive and includes all
types of work done on a particular building or work by laborers and
mechanics employed by a construction contractor or construction
subcontractor. See 29 CFR 5.2(j). For purposes of the DBA and thereby
the Executive order, a contract is ``for construction'' if ``more than
an incidental amount of construction-type activity'' is involved in its
performance. See, e.g., In the Matter of Crown Point, Indiana
Outpatient Clinic, WAB Case No. 86-33, 1987 WL 247049, at *2 (June 26,
1987) (citing In re: Military Housing, Fort Drum, New York, WAB Case
No. 85-16, 1985 WL 167239 (Aug. 23, 1985)), aff'd sub nom., Building
and Construction Trades Dep't, AFL-CIO v. Turnage, 705 F. Supp. 5
(D.D.C. 1988); 18 Op. O.L.C. 109, 1994 WL 810699, at *5 (May 23, 1994).
The term ``public building or public work'' includes any building or
work, the construction, prosecution, completion, or repair of which is
carried on directly by authority of or with funds of a Federal agency
to serve the interest of the general public. See 29 CFR 5.2(k).
Proposed Sec. 23.30(b) implements section 8(b) of Executive Order
14026, 86 FR 22837, which provides that the order applies only to DBA-
covered prime contracts that exceed the $2,000 value threshold
specified in the DBA. See 40 U.S.C. 3142(a). Consistent with the DBA,
there is no value threshold requirement for subcontracts awarded under
such prime contracts.
Contracts for Services: Proposed Sec. 23.30(a)(1)(ii) provides
that coverage of the Executive order and part 23 encompasses
``contract[s] for services covered by the Service Contract Act.'' This
proposed provision implements sections 8(a)(i)(A) and (B) of the
Executive order, which state that the order applies respectively to a
``procurement contract . . . for services'' and a ``contract or
contract-like instrument for services covered by the Service Contract
Act.'' 86 FR 22837. The Department interprets a ``procurement contract
. . . for services,'' as set forth in section 8(a)(i)(A) of the
Executive order, to mean a procurement contract that is
[[Page 38827]]
subject to the SCA, as amended, and its implementing regulations. The
Department views a ``contract . . . for services covered by the Service
Contract Act'' under section 8(a)(i)(B) of the order as including both
procurement and non-procurement contracts for services that are covered
by the SCA. The Department therefore incorporates sections 8(a)(i)(A)
and (B) of the Executive order in proposed Sec. 23.30(a)(1)(ii) by
expressly stating that the requirements of the order apply to service
contracts covered by the SCA. This interpretation and approach is
consistent with the treatment of service contracts set forth in the
Department's final rule implementing Executive Order 13658. See 79 FR
60650-51. For ease of reference, much of that discussion is repeated
here.
The SCA generally applies to every contract entered into by the
United States that ``has as its principal purpose the furnishing of
services in the United States through the use of service employees.''
41 U.S.C. 6702(a)(3). The SCA is intended to cover a wide variety of
service contracts with the Federal Government, so long as the principal
purpose of the contract is to provide services using service employees.
See, e.g., 29 CFR 4.130(a). As reflected in the SCA's regulations,
where the principal purpose of the contract with the Federal Government
is to provide services through the use of service employees, the
contract is covered by the SCA. See 29 CFR 4.133(a). Such coverage
exists regardless of the direct beneficiary of the services or the
source of the funds from which the contractor is paid for the service
and irrespective of whether the contractor performs the work in its own
establishment, on a Government installation, or elsewhere. Id. Coverage
of the SCA, however, does not extend to contracts for services to be
performed exclusively by persons who are not service employees, i.e.,
persons who qualify as bona fide executive, administrative, or
professional employees as defined in the FLSA's regulations at 29 CFR
part 541. Similarly, a contract for professional services performed
essentially by bona fide professional employees, with the use of
service employees being only a minor factor in contract performance, is
not covered by the SCA and thus would not be covered by the Executive
order or part 23. See 41 U.S.C. 6702(a)(3); 29 CFR 4.113(a), 4.156; WHD
Field Operations Handbook (FOH) ]] 14b05, 14c07.
Although the SCA covers contracts with the Federal Government that
have the ``principal purpose'' of furnishing services in the United
States through the use of service employees regardless of the value of
the contract, the prevailing wage requirements of the SCA only apply to
covered contracts in excess of $2,500. 41 U.S.C. 6702(a)(2)
(recodifying 41 U.S.C. 351(a)). Proposed Sec. 23.30(b) of this rule
implements section 8(b) of the Executive order, which provides that for
SCA-covered contracts, the Executive order applies only to those prime
contracts that exceed the $2,500 threshold for prevailing wage
requirements specified in the SCA. 86 FR 22837. Consistent with the
SCA, there is no value threshold requirement for subcontracts awarded
under such prime contracts.
The Department emphasizes that service contracts that are not
subject to the SCA may still be covered by the order if such contracts
qualify as concessions contracts or contracts in connection with
Federal property or lands and related to offering services to Federal
employees, their dependents, or the general public pursuant to sections
8(a)(i)(C) and (D) of the order. Because service contracts may be
covered by the order if they fall within any of these three categories
(e.g., SCA-covered contracts, concessions contracts, or contracts in
connection with Federal property and related to offering services), the
Department anticipates that most contracts for services with the
Federal Government will be covered by the Executive order and part 23.
Contracts for Concessions: Proposed Sec. 23.30(a)(1)(iii)
implements Executive Order 14026's coverage of a ``contract or
contract-like instrument for concessions, including any concessions
contract excluded by Department of Labor regulations at 29 CFR
4.133(b).'' 86 FR 22837. The proposed definition of concessions
contract is addressed in the discussion of proposed Sec. 23.20. The
discussion of covered concessions contracts herein is consistent with
the treatment of concessions contracts set forth in the Department's
final rule implementing Executive Order 13658. See 79 FR 60652.
The SCA generally covers contracts for concessionaire services. See
29 CFR 4.130(a)(11). Pursuant to the Secretary's authority under
section 4(b) of the SCA, however, the SCA's regulations specifically
exempt from coverage concession contracts ``principally for the
furnishing of food, lodging, automobile fuel, souvenirs, newspaper
stands, and recreational equipment to the general public.'' 29 CFR
4.133(b); 48 FR 49736, 49753 (Oct. 27, 1983).\6\
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\6\ This exemption applies to certain concessions contracts that
provide services to the general public, but does not apply to
concessions contracts that provide services to the Federal
Government or its personnel or to concessions services provided
incidentally to the principal purpose of a covered SCA contract.
See, e.g., 29 CFR 4.130 (providing an illustrative list of SCA-
covered contracts); In the Matter of Alcatraz Cruises, LLC, ARB Case
No. 07-024, 2009 WL 250456 (ARB Jan. 23, 2009) (holding that the SCA
regulatory exemption at 29 CFR 4.133(b) does not apply to National
Park Service contracts for ferry transportation services to and from
Alcatraz Island).
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Proposed Sec. 23.30(a)(1)(iii) extends coverage of the Executive
order and part 23 to all concession contracts with the Federal
Government, including those exempted from SCA coverage. For example,
the Executive order generally covers souvenir shops at national
monuments as well as boat rental facilities and fast food restaurants
at National Parks. The Department notes that Executive Order 14026 and
part 23 cover contracts in connection with both seasonal recreational
services and seasonal recreational equipment rental when such services
and equipment are offered to the general public on Federal lands. In
addition, consistent with the SCA's implementing regulations at 29 CFR
4.107(a), the Department notes that the Executive order generally
applies to concessions contracts with nonappropriated fund
instrumentalities under the jurisdiction of the Armed Forces or other
Federal agencies.
Proposed Sec. 23.30(b) is substantively identical to the analogous
provision in the regulations implementing Executive Order 13658, see 29
CFR 10.3(b), and implements the value threshold requirements of section
8(b) of Executive Order 14026. 86 FR 22837. Pursuant to that section,
the Executive order applies to an SCA-covered concessions contract only
if it exceeds $2,500. Id.; 41 U.S.C. 6702(a)(2). Section 8(b) of the
Executive order further provides that, for procurement contracts or
contract-like instruments where workers' wages are governed by the
FLSA, such as any procurement contracts for concessionaire services
that are excluded from SCA coverage under 29 CFR 4.133(b), part 23
applies only to contracts that exceed the $10,000 micro-purchase
threshold, as defined in 41 U.S.C. 1902(a). There is no value threshold
for application of Executive Order 14026 and part 23 to subcontracts
awarded under covered prime contracts or for non-procurement
concessions contracts that are not covered by the SCA.
Contracts in Connection with Federal Property or Lands and Related
to Offering Services: Proposed Sec. 23.30(a)(1)(iv) implements section
8(a)(i)(D) of the Executive order, which extends coverage to contracts
entered into with the Federal Government in
[[Page 38828]]
connection with Federal property or lands and related to offering
services for Federal employees, their dependents, or the general
public. See 86 FR 22837; see also 79 FR 60655 (Executive Order 13658
final rule preamble discussion of identical provisions in Executive
Order 13658 and 29 CFR part 10). To the extent that such agreements are
not otherwise covered by Sec. 23.30(a)(1), the Department interprets
this provision as generally including 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. In other words, a private entity that leases space in a Federal
building to provide services to Federal employees or the general public
would be covered by the Executive order and part 23 regardless of
whether the lease is subject to the SCA. Although evidence that an
agency has retained some measure of control over the terms and
conditions of the lease or license to provide services is not necessary
for purposes of determining applicability of this section, such a
circumstance strongly indicates that the agreement involved is covered
by section 8(a)(i)(D) of the Executive order and proposed Sec.
23.30(a)(1)(iv). For example, a private fast food or casual dining
restaurant that rents space in a Federal building and serves food to
the general public would be subject to the Executive order's minimum
wage requirements even if the contract does not constitute a
concessions contract for purposes of the order and part 23. Additional
examples of agreements that would generally be covered by the Executive
order and part 23 under this approach, regardless of whether they are
subject to the SCA, 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, health clinic, or fitness
center in the space to serve Federal employees and/or the general
public. Consistent with contract coverage under Executive Order 13658,
the Department reiterates that the four categories of contracts covered
by Executive Order 14026 are not mutually exclusive. A delegated lease
of space on a military base from an agency to a contractor whereby the
contractor operates a barber shop, for example, would likely qualify
both as an SCA-covered contract for services and as a contract 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.
Despite this broad definition, the Department notes some
limitations to the order's coverage. Coverage under this section only
extends to contracts that are in connection with Federal property or
lands. The Department does not interpret section 8(a)(i)(D)'s reference
to ``[F]ederal property'' to encompass money; as a result, purely
financial transactions with the Federal Government, i.e., contracts
that are not in connection with physical property or lands, would not
be covered by the Executive order or part 23. For example, if a Federal
agency contracts with an outside catering company to provide and
deliver coffee for a conference, such a contract will not be considered
a covered contract under section 8(a)(i)(D), although it would be a
covered contract under section 8(a)(i)(B) if it is covered by the SCA.
In addition, section 8(a)(i)(D) coverage only extends to contracts
``related to offering services for [F]ederal employees, their
dependents, or the general public.'' Therefore, if a Federal agency
contracts with a company to solely supply materials in connection with
Federal property or lands (such as napkins or utensils for a concession
stand), the Department will not consider the contract to be covered by
section 8(a)(i)(D) because it is not a contract related to offering
services. Likewise, because a license or permit to conduct a wedding on
Federal property or lands generally would not relate to offering
services for Federal employees, their dependents, or the general
public, but rather would only relate to offering services to the
specific individual applicant(s), the Department would not consider
such a contract covered by section 8(a)(i)(D).
Pursuant to section 8(b) of Executive Order 14026, 86 FR 22837, and
an analogous provision in the regulations implementing Executive Order
13658, see 29 CFR 10.3(b), proposed Sec. 23.30(b) explains that the
order and part 23 apply only to SCA-covered prime contracts in
connection with Federal property and related to offering services if
such contracts exceed $2,500. Id.; 41 U.S.C. 6702(a)(2). For
procurement contracts in connection with Federal property and related
to offering services where employees' wages are governed by the FLSA
(rather than the SCA), part 23 applies only to such contracts that
exceed the $10,000 micro-purchase threshold, as defined in 41 U.S.C.
1902(a). As to subcontracts awarded under prime contracts in this
category and non-procurement contracts in connection with Federal
property or lands and related to offering services for Federal
employees, their dependents, or the general public that are not SCA-
covered, there is no value threshold for coverage under Executive Order
14026 and part 23.
Relation to the Walsh-Healey Public Contracts Act: Finally, the
Department proposes to include as Sec. 23.30(d) a statement that
contracts for the manufacturing or furnishing of materials, supplies,
articles, or equipment to the Federal Government, including those
subject to the Walsh-Healey Public Contracts Act (PCA), 41 U.S.C. 6501
et seq., are not covered by Executive Order 14026 or part 23.
Consistent with the implementation of Executive Order 13658, see 79 FR
60657, the Department intends to follow the SCA's regulations at 29 CFR
4.117 in distinguishing between work that is subject to the PCA and
work that is subject to the SCA (and therefore Executive Order 14026).
The Department similarly proposes to follow the regulations set forth
in the FAR at 48 CFR 22.402(b) in addressing whether the DBA (and thus
the Executive order) applies to construction work on a PCA contract.
Under that proposed approach, where a PCA-covered contract involves a
substantial and segregable amount of construction work that is subject
to the DBA, workers whose wages are governed by the DBA or FLSA are
covered by the Executive order for the hours that they spend performing
on such DBA-covered construction work.
Coverage of Subcontracts
Consistent with the rulemaking implementing Executive Order 13658,
see 79 FR 60657-58, the Department notes that the same test for
determining application of Executive Order 14026 to prime contracts
applies to the determination of whether a subcontract is covered by the
order, with the sole distinction that the value threshold requirements
set forth in section 8(b) of the order do not apply to subcontracts. In
other words, in order for the requirements of Executive Order 14026 to
apply to a subcontract, the subcontract must satisfy all of the
following prongs: (1) It must qualify as a contract or contract-like
instrument under the definition set forth in part 23, (2) it must fall
within one of the four specifically enumerated types of contracts set
forth in section 8(a) of the order and Sec. 23.30, and (3) the wages
of workers under the contract must be governed by the DBA, SCA, or
FLSA.
Pursuant to this approach, only covered subcontracts of covered
prime contracts are subject to the requirements of the Executive order.
Just as the
[[Page 38829]]
Executive order does not apply to prime contracts for the manufacturing
or furnishing of materials, supplies, articles, or equipment, it
likewise does not apply to subcontracts for the manufacturing or
furnishing of materials, supplies, articles, or equipment. In other
words, the Executive order does not apply to subcontracts for the
manufacturing or furnishing of materials, supplies, articles, or
equipment between a manufacturer or other supplier and a covered
contractor for use on a covered Federal contract. For example, a
subcontract to supply napkins and utensils to a covered prime
contractor operating a fast food restaurant on a military base is not a
covered subcontract for purposes of this order. The Executive order
likewise does not apply to contracts under which a contractor orders
materials from a construction materials retailer.
Coverage of Workers
Proposed Sec. 23.30(a)(2) implements section 8(a)(ii) of Executive
Order 14026, which provides that the minimum wage requirements of the
order only apply to contracts covered by section 8(a)(i) of the order
if the wages of workers under such contracts are subject to the FLSA,
SCA, or DBA. 86 FR 22837. The Executive order thus provides that its
protections only extend to workers performing on or in connection with
contracts covered by the Executive order whose wages are governed by
the FLSA, SCA, or DBA. Id. For example, the order does not extend to
workers whose wages are governed by the PCA. Moreover, as discussed
below, the Department proposes that, except for workers whose wages are
calculated pursuant to special certificates issued under 29 U.S.C.
214(c) and workers who are otherwise covered by the SCA or DBA,
employees who are exempt from the minimum wage protections of the FLSA
under 29 U.S.C. 213(a) are similarly not subject to the minimum wage
protections of Executive Order 14026 and part 23. The following
discussion of worker coverage under Executive Order 14026 is consistent
with the analysis of worker coverage that appeared in the Department's
final rule implementing Executive Order 13658, see 79 FR 60658, but is
repeated here for ease of reference.
Workers Whose Wages Are ``Governed By'' the FLSA, SCA, or DBA
In determining whether a worker's wages are ``governed by'' the
FLSA for purposes of section 8(a)(ii) of the Executive order and part
23, the Department interprets this provision as referring to 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), and tipped employees under FLSA
section 3(t) who are not otherwise covered by the SCA or the DBA. See
29 U.S.C. 203(t), 206(a)(1), 214(c).
In evaluating whether a worker's wages are ``governed by'' the SCA
for purposes of the Executive order, the Department interprets such
provision as referring to service employees who are entitled to
prevailing wages under the SCA. See 29 CFR 4.150 through 4.156. The
Department notes that workers whose wages are subject to the SCA
include individuals who are employed on an SCA contract and
individually registered in a bona fide apprenticeship program
registered with the Department's Employment and Training
Administration, Office of Apprenticeship, or with a State
Apprenticeship Agency recognized by the Office of Apprenticeship.
The Department also interprets the language in section 8(a)(ii) of
Executive Order 14026 and proposed Sec. 23.30(a)(2) as extending
coverage to FLSA-covered employees who provide support on an SCA-
covered contract but who are not entitled to prevailing wages under the
SCA. 41 U.S.C. 6701(3).\7\ The Department notes that such workers would
be covered by the plain language of section 8(a) of the Executive order
because they are performing in connection with a contract covered by
the order and their wages are governed by the FLSA.
---------------------------------------------------------------------------
\7\ The Department notes that, under the SCA, ``service
employees'' directly engaged in providing specific services called
for by the SCA-covered contract are entitled to SCA prevailing wage
rates. Meanwhile, ``service employees'' who do not perform the
services required by an SCA-covered contract but whose duties are
necessary to the contract's performance must be paid at least the
FLSA minimum wage. See 29 CFR 4.150 through 4.155; WHD FOH ]
14b05(c). For purposes of clarity, the Department refers to this
latter category of workers who are entitled to receive the FLSA
minimum wage as ``FLSA-covered'' workers throughout this rule even
though those workers' right to the FLSA minimum wage technically
derives from the SCA itself. See 41 U.S.C. 6704(a).
---------------------------------------------------------------------------
In evaluating whether a worker's wages are ``governed by'' the DBA
for purposes of the order, the proposed rule interprets such language
as referring to laborers and mechanics who are covered by the DBA. This
includes any individual who is employed on a DBA-covered contract and
individually registered in a bona fide apprenticeship program
registered with the Department's Employment and Training
Administration, Office of Apprenticeship, or with a State
Apprenticeship Agency recognized by the Office of Apprenticeship. The
Department also interprets the language in section 8(a)(ii) of
Executive Order 14026 and proposed Sec. 23.30(a)(2) as extending
coverage to workers performing on or in connection with DBA-covered
contracts for construction who are not laborers or mechanics but whose
wages are governed by the FLSA. Although such workers are not covered
by the DBA itself because they are not ``laborers and mechanics,'' 40
U.S.C. 3142(b), such individuals are workers performing on or in
connection with a contract subject to the Executive order whose wages
are governed by the FLSA and thus are covered by the plain language of
section 8(a) of the Executive order. 86 FR 22837. The proposed rule
extends this coverage to FLSA-covered employees working on or in
connection with DBA-covered contracts regardless of whether such
employees are physically present on the DBA-covered construction
worksite.
The Department notes that where state or local government employees
are performing on or in connection with covered contracts and their
wages are subject to the FLSA or the SCA, such employees are entitled
to the protections of the Executive order and part 23. The DBA does not
apply to construction performed by state or local government employees.
Workers Performing ``On Or In Connection With'' Covered Contracts
Section 1 of Executive Order 14026 expressly states that the
minimum wage requirements of the order apply to workers performing work
``on or in connection with'' covered contracts. 86 FR 22835. Consistent
with the Executive Order 13658 rulemaking, see 79 FR 60659-62, the
Department proposes to interpret these terms in a manner consistent
with SCA regulations, see, e.g., 29 CFR 4.150-4.155. In this proposed
rule, the Department reiterates these interpretations, which are
summarized below and in the proposed regulatory text pertaining to the
definition of worker in Sec. 23.20 for purposes of clarity.
Specifically, the Department notes that workers performing ``on'' a
covered contract are those workers directly performing the specific
services called for by the contract, and whether a worker is performing
``on'' a covered contract would be determined, as explained in the
final rule implementing Executive Order 13658, see 79 FR 60660, in part
by the scope of work or a similar statement set forth in the covered
contract that identifies the work (e.g., the services or
[[Page 38830]]
construction) to be performed under the contract. Under this approach,
all laborers and mechanics engaged in the construction of a public
building or public work on the site of the work will be regarded as
performing ``on'' a DBA-covered contract, and all service employees
performing the specific services called for by an SCA-covered contract
will also be regarded as performing ``on'' a contract covered by the
Executive order. In other words, any worker who is entitled to be paid
prevailing wages under the DBA or SCA would necessarily be performing
``on'' a covered contract. For purposes of concessions contracts and
contracts in connection with Federal property or lands and related to
offering services for Federal employees, their dependents, or the
general public that are not covered by the SCA, the Department would
regard any worker performing the specific services called for by the
contract as performing ``on'' the covered contract.
The Department further notes that it would consider a worker
performing ``in connection with'' a covered contract to be any worker
who is performing work activities that are necessary to the performance
of a covered contract but who is not directly engaged in performing the
specific services called for by the contract itself. For example, a
payroll clerk who is not a DBA-covered laborer or mechanic directly
performing the construction identified in the DBA contract, but whose
services are necessary to the performance of the contract, would
necessarily be performing ``in connection with'' a covered contract.
This standard, also articulated in the Executive Order 13658
rulemaking, was derived from SCA regulations. See 79 FR 60659 (citing
29 CFR 4.150-4.155).
The Department notes that it is proposing to include, as it did in
the Executive Order 13658 rulemaking, an exclusion from coverage for
workers who spend less than 20 percent of their work hours in a
workweek performing ``in connection with'' covered contracts. This
proposed exclusion does not apply to any worker performing ``on'' a
covered contract whose wages are governed by the FLSA, SCA, or DBA. The
proposed exclusion, which appears in Sec. 23.40(f), is explained in
greater detail below in the discussion of the Exclusions section.
The Department noted in the final rule implementing Executive Order
13658 and reiterates here that the Executive order does not extend to
workers who are not engaged in working on or in connection with a
covered contract. For example, a technician who is hired to repair a
DBA contractor's electronic time system or a janitor who is hired to
clean the bathrooms at the DBA contractor's company headquarters are
not covered by the order because they are not performing the specific
duties called for by the contract or other services or work necessary
to the performance of the contract. Similarly, the Executive order
would not apply to a landscaper at the office of an SCA contractor
because that worker is not performing the specific duties called for by
the SCA contract or other services or work necessary to the performance
of the contract. Similarly, the Executive order would not apply to a
worker hired by a covered concessionaire to redesign the storefront
sign for a snack shop in a National Park unless the redesign of the
sign was called for by the concessions contract itself or otherwise
necessary to the performance of the contract. The Department notes that
because Executive Order 14026 and part 23 do not apply to workers of
Federal contractors who do no work on or in connection with a covered
contract, a contractor could be required to pay the Executive order
minimum wage to some of its workers but not others. In other words, it
is not the case that because a contractor has one or more Federal
contracts, all of its workers or projects are covered by the order.
The Department further notes that Executive Order 14026's minimum
wage requirements only extend to the hours worked by covered workers
performing on or in connection with covered contracts. As the
Department explained in the final rule implementing Executive Order
13658, see 79 FR 60672, in situations where contractors are not
exclusively engaged in contract work covered by the Executive order,
and there are adequate records segregating the periods in which work
was performed on or in connection with covered contracts subject to the
order from periods in which other work was performed, the Executive
order minimum wage does not apply to hours spent on work not covered by
the order. Accordingly, the proposed regulatory text at Sec. 23.220(a)
emphasizes that contractors must pay covered workers performing on or
in connection with a covered contract no less than the applicable
Executive order minimum wage for hours worked on or in connection with
the covered contract.
FLSA Section 14(c) Workers
Executive Order 14026 expressly provides that its minimum wage
protections extend to workers with disabilities whose wage rates are
calculated pursuant to special certificates issued under section 14(c)
of the FLSA. See 86 FR 22835. Consistent with the final rule
implementing Executive Order 13658, see 79 FR 60662, the Department has
proposed to include language in the contract clause set forth in
appendix A explicitly stating that workers with disabilities whose
wages are calculated pursuant to special certificates issued under
section 14(c) of the FLSA must be paid at least the Executive Order
14026 minimum wage (or the applicable commensurate wage rate under the
certificate, if such rate is higher than the Executive order minimum
wage) for hours spent performing on or in connection with covered
contracts. All workers performing on or in connection with covered
contracts whose wages are governed by FLSA section 14(c), regardless of
whether they are considered to be ``employees,'' ``clients,'' or
``consumers,'' are covered by the Executive order (unless the 20
percent of hours worked exclusion applies). Moreover, all of the
Federal contractor requirements set forth in this proposed rule apply
with equal force to contractors employing FLSA section 14(c) workers
performing on or in connection with covered contracts.
Apprentices, Students, Interns, and Seasonal Workers
Consistent with the Department's final rule implementing Executive
Order 13658, see 79 FR 60663, the Department's proposed rule explains
that individuals who are employed on an SCA- or DBA-covered contract
and individually registered in a bona fide apprenticeship program
registered with the Department's Employment and Training
Administration, Office of Apprenticeship, or with a State
Apprenticeship Agency recognized by the Office of Apprenticeship, are
entitled to the Executive order minimum wage for the hours they spend
working on or in connection with covered contracts.
The Department thus proposes that DBA- and SCA-covered apprentices
are subject to the Executive order but that workers whose wages are
governed by special subminimum wage certificates under FLSA sections
14(a) and (b) are excluded from the order (i.e., FLSA-covered learners,
apprentices, messengers, and full-time students). The Department notes
that the vast majority of apprentices employed by contractors on
covered contracts will be individuals who are registered in a bona fide
apprenticeship program registered with the Department's Employment and
Training Administration, Office of Apprenticeship, or with a State
[[Page 38831]]
Apprenticeship Agency recognized by the Office of Apprenticeship. Such
apprentices are entitled to receive the full Executive order minimum
wage for all hours worked on or in connection with a covered contract.
The Executive order directs that the minimum wage applies to workers
performing on or in connection with a covered contract whose wages are
governed by the DBA and the SCA. Moreover, the Department believes that
the Federal Government's interests in economy and efficiency are best
promoted by extending coverage of the order to apprentices covered by
the DBA and the SCA.
However, and consistent with the Department's final rule
implementing Executive Order 13658, see 79 FR 60663-64, the Department
proposes to interpret the plain language of the Executive order as
excluding workers whose wages are governed by FLSA sections 14(a) and
(b) subminimum wage certificates (i.e., FLSA-covered apprentices,
learners, messengers, and full-time students). The order expressly
states that the minimum wage must ``be paid to workers employed in the
performance of the contract or any covered subcontract thereunder,
including workers whose wages are calculated pursuant to special
certificates issued under section 14(c).'' 86 FR 22835. The Department
believes that the explicit inclusion of FLSA section 14(c) workers
reflects an intent to omit from coverage workers whose wages are
calculated pursuant to special certificates issued under FLSA sections
14(a) and (b).
The Department's proposed rule does not contain a general exclusion
for seasonal workers or students. However, except with respect to
workers who are otherwise covered by the SCA or the DBA, the proposed
rule states that part 23 does not apply to employees who are not
entitled to the minimum wage set forth at 29 U.S.C. 206(a)(1) of the
FLSA pursuant to 29 U.S.C. 213(a) and 214(a)-(b). Pursuant to this
exclusion, the Executive order does not apply to full-time students
whose wages are calculated pursuant to special certificates issued
under section 14(b) of the FLSA, unless they are otherwise covered by
the DBA or SCA. The exclusion would also apply to employees employed by
certain seasonal and recreational establishments pursuant to 29 U.S.C.
213(a)(3).
Geographic Scope
Finally, proposed Sec. 23.30(c) provides that the Executive order
and part 23 only apply to contracts with the Federal Government
requiring performance in whole or in part within the United States,
which is defined in proposed Sec. 23.20 to mean, when used in a
geographic sense, the 50 States, the District of Columbia, Puerto Rico,
the Virgin Islands, Outer Continental Shelf lands as defined in the
Outer Continental Shelf Lands Act, American Samoa, Guam, the
Commonwealth of the Northern Mariana Islands, Wake Island, and Johnston
Island. Under this approach, the minimum wage requirements of the
Executive order and part 23 would not apply to contracts with the
Federal Government to be performed in their entirety outside the
geographical limits of the United States as thus defined. However, if a
contract with the Federal Government is to be performed in part within
and in part outside these geographical limits and is otherwise covered
by the Executive order and part 23, the minimum wage requirements of
the order and part 23 would apply with respect to that part of the
contract that is performed within these geographical limits.
As explained above in the discussion of the proposed definition of
United States, the geographic scope of Executive Order 14026 and part
23 is more expansive than the regulations implementing Executive Order
13658, which only applied to contracts performed in the 50 States and
the District of Columbia. However, as noted above, each of the
territories listed above is covered by both the SCA, see 29 CFR
4.112(a), and the FLSA. See, e.g., 29 U.S.C. 213(f), 29 CFR 776.7; Fair
Minimum Wage Act of 2007, Public Law 110-28, 121 Stat. 112 (2007).
Contractors operating in those territories will therefore generally
have familiarity with many of the requirements set forth in part 23
based on their coverage by the SCA and/or the FLSA.
Section 23.40 Exclusions
Proposed Sec. 23.40 addresses and implements the exclusionary
provisions expressly set forth in section 8(c) of Executive Order 14026
and provides other limited exclusions to coverage as authorized by
section 4(a) of the Executive order. See 86 FR 22836-37. Specifically,
proposed Sec. 23.40(a) through (d) and (g) set forth the limited
categories of contractual arrangements for services or construction
that are excluded from the minimum wage requirements of the Executive
order and part 23, while proposed Sec. 23.40(e) and (f) establish
narrow categories of workers that are excluded from coverage of the
order and part 23. Each of these proposed exclusions is discussed
below.
Exclusion of grants: Proposed Sec. 23.40(a) implements section
8(c) of Executive Order 14026, which states that the order does not
apply to ``grants.'' 86 FR 22837. Consistent with the regulations
implementing Executive Order 13658, see 29 CFR 10.4(a), the Department
interprets this provision to mean that the minimum wage requirements of
the Executive order and part 23 do not apply to grants, as that term is
used in the Federal Grant and Cooperative Agreement Act, 31 U.S.C. 6301
et seq. That statute defines a ``grant agreement'' as ``the legal
instrument reflecting a relationship between the United States
Government and a State, a local government, or other recipient'' when
two conditions are satisfied. 31 U.S.C. 6304. First, ``the principal
purpose of the relationship is to transfer a thing of value to the
state or local government or other recipient to carry out a public
purpose of support or stimulation authorized by a law of the United
States instead of acquiring (by purchase, lease, or barter) property or
services for the direct benefit or use of the United States
Government.'' Id. Second, ``substantial involvement is not expected
between the executive agency and the State, local government, or other
recipient when carrying out the activity contemplated in the
agreement.'' Id. Section 2.101 of the FAR similarly excludes
``grants,'' as defined in the Federal Grant and Cooperative Agreement
Act, from its coverage of contracts. 48 CFR 2.101. Several appellate
courts have similarly adopted this construction of ``grants'' in
defining the term for purposes of other Federal statutory schemes. See,
e.g., Chem. Service, Inc. v. Environmental Monitoring Systems
Laboratory, 12 F.3d 1256, 1258 (3d Cir. 1993) (applying same definition
of ``grants'' for purposes of 15 U.S.C. 3710a); East Arkansas Legal
Services v. Legal Services Corp., 742 F.2d 1472, 1478 (D.C. Cir. 1984)
(applying same definition of ``grants'' in interpreting 42 U.S.C.
2996a). If a contract qualifies as a grant within the meaning of the
Federal Grant and Cooperative Agreement Act, it would thereby be
excluded from coverage of Executive Order 14026 and part 23 pursuant to
the proposed rule.
Exclusion of contracts or agreements with Indian Tribes: Proposed
Sec. 23.40(b) implements the other exclusion set forth in section 8(c)
of Executive Order 14026, which states that the order does not apply to
``contracts, contract-like instruments, or agreements with Indian
Tribes under the Indian Self-Determination and Education Assistance Act
(Pub. L. 93-638), as amended.'' 86 FR 22837.
The remaining exclusionary provisions of the proposed rule are
[[Page 38832]]
derived from the authority granted to the Secretary pursuant to section
4(a) of the Executive order to ``include . . . as appropriate,
exclusions from the requirements of this order'' in implementing
regulations. 86 FR 22836. In issuing such regulations, the Executive
order instructs the Secretary to ``incorporate existing definitions''
under the FLSA, SCA, DBA, and Executive Order 13658 ``to the extent
practicable.'' Id. Accordingly, the proposed exclusions discussed below
incorporate existing applicable statutory and regulatory exclusions and
exemptions set forth in the FLSA, SCA, DBA, and Executive Order 13658.
Exclusion for procurement contracts for construction that are
excluded from DBA coverage: As discussed in the coverage section above,
the Department proposes to interpret section 8(a)(i)(A) of the
Executive order, which states that the order applies to ``procurement
contract[s]'' for ``construction,'' 86 FR 22837, as referring to any
contract covered by the DBA, as amended, and its implementing
regulations. See proposed Sec. 23.30(a)(1)(i). In order to provide
further definitional clarity to the regulated community for purposes of
proposed Sec. 23.30(a)(1)(i), and consistent with the regulations
implementing Executive Order 13658, the Department thus establishes in
proposed Sec. 23.40(c) that any procurement contracts for construction
that are not subject to the DBA are similarly excluded from coverage of
the Executive order and part 23. For example, a prime procurement
contract for construction valued at less than $2,000 would not be
covered by the DBA and thus is not covered by Executive Order 14026 and
part 23. To assist all interested parties in understanding their rights
and obligations under Executive Order 14026, the Department proposes to
make coverage of construction contracts under Executive Order 14026 and
part 23 consistent with coverage under the DBA and Executive Order
13658 to the greatest extent possible.
Exclusion for contracts for services that are exempted from SCA
coverage: Similarly, the Department proposes to implement the coverage
provisions set forth in sections 8(a)(i)(A) and (B) of the Executive
order, which state that the order applies respectively to a
``procurement contract . . . for services'' and a ``contract or
contract-like instrument for services covered by the Service Contract
Act,'' 86 FR 22837, by providing that the requirements of the order
apply to all service contracts covered by the SCA. See proposed Sec.
23.30(a)(1)(ii). Proposed Sec. 23.40(d) provides additional
clarification by incorporating, where appropriate, the SCA's exclusion
of certain service contracts into the exclusionary provisions of the
Executive order. This proposed provision excludes from coverage of the
Executive order and part 23 any contracts for services, except for
those expressly covered by proposed Sec. 23.30(a)(1)(ii)-(iv), that
are exempted from coverage under the SCA. The SCA specifically exempts
from coverage seven types of contracts (or work) that might otherwise
be subject to its requirements. See 41 U.S.C. 6702(b). Pursuant to this
statutory provision, the SCA expressly does not apply to (1) a contract
of the Federal Government or the District of Columbia for the
construction, alteration, or repair, including painting and decorating,
of public buildings or public works; (2) any work required to be done
in accordance with chapter 65 of title 41; (3) a contract for the
carriage of freight or personnel by vessel, airplane, bus, truck,
express, railway line or oil or gas pipeline where published tariff
rates are in effect; (4) a contract for the furnishing of services by
radio, telephone, telegraph, or cable companies, subject to the
Communications Act of 1934, 47 U.S.C. 151 et seq.; (5) a contract for
public utility services, including electric light and power, water,
steam, and gas; (6) an employment contract providing for direct
services to a Federal agency by an individual; or (7) a contract with
the United States Postal Service, the principal purpose of which is the
operation of postal contract stations. Id.; see 29 CFR 4.115-4.122; WHD
FOH ] 14c00.
The SCA also authorizes the Secretary to ``provide reasonable
limitations'' and to prescribe regulations allowing reasonable
variation, tolerances, and exemptions with respect to the chapter but
only in special circumstances where the Secretary determines that the
limitation, variation, tolerance, or exemption is necessary and proper
in the public interest or to avoid the serious impairment of Federal
Government business, and is in accord with the remedial purpose of the
chapter to protect prevailing labor standards. 41 U.S.C. 6707(b); see
29 CFR 4.123. Pursuant to this authority, the Secretary has exempted a
specific list of contracts from SCA coverage to the extent regulatory
criteria for exclusion from coverage are satisfied as provided at 29
CFR 4.123(d) and (e). To assist all interested parties in understanding
their rights and obligations under Executive Order 14026, the
Department proposes to make coverage of service contracts under the
Executive order and part 23 consistent with coverage under the SCA to
the greatest extent possible.
Therefore, the Department provides in proposed Sec. 23.40(d) that
contracts for services that are exempt from SCA coverage pursuant to
its statutory language or implementing regulations are not subject to
part 23 unless expressly included by proposed Sec. 23.30(a)(1)(ii)-
(iv). 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. Such
contracts would also be excluded from coverage of the Executive order
and part 23 under the proposed rule. Similarly, certain contracts
principally for the maintenance, calibration, or repair of automated
data processing equipment and office information/word processing
systems are exempted from SCA coverage pursuant to the SCA's
implementing regulations at 29 CFR 4.123(e)(1)(i)(A); such contracts
would thus not be covered by the Executive order or the proposed rule.
However, certain types of concessions contracts are excluded from SCA
coverage pursuant to 29 CFR 4.133(b) but are explicitly covered by the
Executive order and part 23 under proposed Sec. 23.30(a)(1)(iii). 86
FR 22837. Moreover, to the extent that a contract is excluded from SCA
coverage but subject to the DBA (e.g., a contract with the Federal
Government for the construction, alteration, or repair, including
painting and decorating, of public buildings or public works that would
be excluded from the SCA under 41 U.S.C. 6702(b)(1)), such a contract
would be covered by the Executive order and part 23 as a ``procurement
contract'' for ``construction.'' 86 FR 22837; proposed Sec.
23.30(a)(1)(i). In sum, all of the SCA's exemptions are applicable to
the Executive order, unless such SCA-exempted contracts are otherwise
covered by the Executive order and this proposed rule (e.g., they
qualify as concessions contracts or contracts in connection with
Federal land and related to offering services). The Department notes
that subregulatory and other coverage determinations made by the
Department for purposes of the SCA will also govern whether a contract
is covered by the SCA for purposes of the Executive order. This
proposed exclusion is identical to that adopted in the regulations
implementing Executive Order 13658. See 29 CFR 10.4(d).
Exclusion for employees who are exempt from the minimum wage
requirements of the FLSA under 29
[[Page 38833]]
U.S.C. 213(a) and 214(a)-(b): Consistent with the regulations
implementing Executive Order 13658, the Department proposes to provide
in Sec. 23.40(e) that, except for workers whose wages are calculated
pursuant to special certificates issued under 29 U.S.C. 214(c) and
workers who are otherwise covered by the SCA or DBA, employees who are
exempt from the minimum wage protections of the FLSA under 29 U.S.C.
213(a) are similarly not subject to the minimum wage protections of
Executive Order 14026 and part 23. Proposed Sec. 23.40(e)(1) through
(3), which are discussed briefly below, highlighted some of the narrow
categories of employees that are not entitled to the minimum wage
protections of the order and part 23 pursuant to this exclusion.
Proposed Sec. 23.40(e)(1) and (2) specifically exclude from the
requirements of Executive Order 14026 and part 23 workers whose wages
are calculated pursuant to special certificates issued under 29 U.S.C.
214(a) and (b). Specifically, proposed Sec. 23.40(e)(1) excludes from
coverage learners, apprentices, or messengers employed under special
certificates pursuant to 29 U.S.C. 214(a). Id.; see 29 CFR part 520.
Proposed Sec. 23.40(e)(2) also excludes from coverage full-time
students employed under special certificates issued under 29 U.S.C.
214(b). Id.; see 29 CFR part 519. Proposed Sec. 23.40(e)(3) provides
that the Executive order and part 23 do not apply to individuals
employed in a bona fide executive, administrative, or professional
capacity, as those terms are defined and delimited in 29 CFR part 541.
This proposed exclusion is consistent with the regulations for
Executive Order 13658, see 29 CFR 10.4(e), as well as with the FLSA,
SCA, and DBA and their implementing regulations. See, e.g., 29 U.S.C.
213(a)(1) (FLSA); 41 U.S.C. 6701(3)(C) (SCA); 29 CFR 5.2(m) (DBA).
Exclusion for FLSA-covered workers performing in connection with
covered contracts for less than 20 percent of their work hours in a
given workweek: As discussed earlier in the context of the ``on or in
connection with'' standard for worker coverage, proposed Sec. 23.40(f)
establishes an explicit exclusion for FLSA-covered workers performing
``in connection with'' covered contracts for less than 20 percent of
their hours worked in a given workweek.
This exclusion is identical to the exclusion that appears in the
Department's regulations implementing Executive Order 13658. See 29 CFR
10.4(f). As the Department explained in the final rule for those
regulations, see 79 FR 60660, the Department has used a 20 percent
threshold for coverage determinations in a variety of SCA and DBA
contexts. For example, 29 CFR 4.123(e)(2) exempts from SCA coverage
contracts for seven types of commercial services, such as financial
services involving the issuance and servicing of cards (including
credit cards, debit cards, purchase cards, smart cards, and similar
card services), contracts with hotels for conferences, transportation
by common carriers of persons by air, real estate services, and
relocation services. Certain criteria must be satisfied for the
exemption to apply to a contract, including that each service employee
spend only ``a small portion of his or her time'' servicing the
contract. 29 CFR 4.123(e)(2)(ii)(D). The exemption defines ``small
portion'' in relative terms and as ``less than 20 percent'' of the
employee's available time. Id. Likewise, the Department has determined
that the DBA applies to certain categories of workers (i.e., air
balance engineers, employees of traffic service companies, material
suppliers, and repair employees) only if they spend 20 percent or more
of their hours worked in a workweek performing laborer or mechanic
duties on the covered site. See WHD FOH ]] 15e06, 15e10(b), 15e16(c),
and 15e19.
In light of the exclusion that was adopted in the Department's
regulations implementing Executive Order 13658, as well as the above-
discussed administrative practice under the SCA and the DBA of applying
a 20 percent threshold to certain coverage determinations, the
Department proposes an exclusion in Sec. 23.40(f) whereby any covered
worker performing only ``in connection with'' covered contracts for
less than 20 percent of his or her hours worked in a given workweek
will not be entitled to the Executive Order 14026 minimum wage for any
hours worked.
This proposed exclusion does not apply to any worker performing
``on'' a covered contract whose wages are governed by the FLSA, SCA, or
DBA. Such workers will be entitled to the Executive Order 14026 minimum
wage for all hours worked performing on or in connection with covered
contracts. However, for a worker solely performing ``in connection
with'' a covered contract, the Executive Order 14026 minimum wage
requirements will only apply if that worker spends 20 percent or more
of his or her hours worked in a given workweek performing in connection
with covered contracts. Thus, in order to apply this exclusion
correctly, contractors must accurately distinguish between workers
performing ``on'' a covered contract and those workers performing ``in
connection with'' a covered contract based on the guidance provided in
this section. The 20 percent of hours worked exclusion does not apply
to any worker who spends any hours performing ``on'' a covered
contract; rather, it applies only to workers performing ``in connection
with'' a covered contract who do not spend any hours worked performing
``on'' the contract in a given workweek.
For purposes of administering the 20 percent of hours worked
exclusion under the Executive order, the Department views workers
performing ``on'' a covered contract as those workers directly
performing the specific services called for by the contract. Whether a
worker is performing ``on'' a covered contract will be determined in
part by the scope of work or a similar statement set forth in the
covered contract that identifies the work (e.g., the services or
construction) to be performed under the contract. Specifically,
consistent with the SCA, see, e.g., 29 CFR 4.153, a worker will be
considered to be performing ``on'' a covered contract if the employee
is directly engaged in the performance of specified contract services
or construction. All laborers and mechanics engaged in the construction
of a public building or public work on the site of the work thus will
be regarded as performing ``on'' a DBA-covered contract. All service
employees performing the specific services called for by an SCA-covered
contract will also be regarded as performing ``on'' a contract covered
by the Executive order. In other words, any worker who is entitled to
be paid DBA or SCA prevailing wages is entitled to receive the
Executive Order 14026 minimum wage for all hours worked on covered
contracts, regardless of whether such covered work constitutes less
than 20 percent of his or her overall hours worked in a particular
workweek. For purposes of concessions contracts and contracts in
connection with Federal property and related to offering services that
are not covered by the SCA, the Department will regard any employee
performing the specific services called for by the contract as
performing ``on'' the covered contract in the same manner described
above. Such workers will therefore be entitled to receive the Executive
Order 14026 minimum wage for all hours worked on covered contracts,
even if such time represents less than 20 percent of his or her overall
work hours in a particular workweek.
However, for purposes of the Executive order, the Department will
view any worker who performs solely
[[Page 38834]]
``in connection with'' covered contracts for less than 20 percent of
his or her hours worked in a given workweek to be excluded from the
order and part 23. In other words, such workers will not be entitled to
be paid the Executive order minimum wage for any hours that they spend
performing in connection with a covered contract if such time
represents less than 20 percent of their hours worked in a given
workweek. For purposes of this proposed exclusion, the Department
regards a worker performing ``in connection with'' a covered contract
as any worker who is performing work activities that are necessary to
the performance of a covered contract but who are not directly engaged
in performing the specific services called for by the contract itself.
Therefore, the 20 percent of hours worked exclusion may apply to
any FLSA-covered employees who are not directly engaged in performing
the specific construction identified in a DBA contract (i.e., they are
not DBA-covered laborers or mechanics) but whose services are necessary
to the performance of the DBA contract. In other words, workers who may
fall within the scope of this exclusion are FLSA-covered workers who do
not perform the construction identified in the DBA contract either due
to the nature of their non-physical duties and/or because they are not
present on the site of the work, but whose duties would be regarded as
essential for the performance of the contract.
In the context of DBA-covered contracts, workers who may qualify
for this exclusion if they spend less than 20 percent of their hours
worked performing in connection with covered contracts could include an
FLSA-covered security guard patrolling or monitoring a construction
worksite where DBA-covered work is being performed or an FLSA-covered
clerk who processes the payroll for DBA contracts (either on or off the
site of the work). However, if the security guard or clerk in these
examples also performed the duties of a DBA-covered laborer or mechanic
(for example, by painting or moving construction materials), the 20
percent of hours worked exclusion would not apply to any hours worked
on or in connection with the contract because that worker performed
``on'' the covered contract at some point in the workweek.
The Department also reaffirms that the protections of the order do
not extend to workers who are not engaged in working on or in
connection with a covered contract. For example, an FLSA-covered
technician who is hired to repair a DBA contractor's electronic time
system or an FLSA-covered janitor who is hired to clean the bathrooms
at the DBA contractor's company headquarters are not covered by the
order because they are not performing the specific duties called for by
the contract or other services or work necessary to the performance of
the contract.
In the context of SCA-covered contracts, the 20 percent of hours
worked exclusion may apply to any FLSA-covered employees performing in
connection with an SCA contract who are not directly engaged in
performing the specific services identified in the contract (i.e., they
are not ``service employees'' entitled to SCA prevailing wages) but
whose services are necessary to the performance of the SCA contract.
Any workers performing work in connection with an SCA contract who are
not entitled to SCA prevailing wages but are entitled to at least the
FLSA minimum wage pursuant to 41 U.S.C. 6704(a) would fall within the
scope of this exclusion.
Examples of workers in the SCA context who may qualify for this
exclusion if they perform in connection with covered contracts for less
than 20 percent of their hours worked in a given workweek include an
accounting clerk who processes a few invoices for SCA contracts out of
thousands of other invoices for non-covered contracts during the
workweek or an FLSA-covered human resources employee who assists for
short periods of time in the hiring of the workers performing on the
SCA-covered contract in addition to the hiring of workers on other non-
covered projects. Neither the Executive order nor the exclusion would
apply, however, to an FLSA-covered landscaper at the office of an SCA
contractor because that worker is not performing the specific duties
called for by the SCA contract or other services or work necessary to
the performance of the contract.
With respect to concessions contracts and contracts in connection
with Federal property or lands and related to offering services, the 20
percent of hours worked exclusion may apply to any FLSA-covered
employees performing work in connection with such contracts who are not
at any time directly engaged in performing the specific services
identified in the contract but whose services or work duties are
necessary to the performance of the covered contract. One example of a
worker who may qualify for this exclusion if the worker performed work
in connection with covered contracts for less than 20 percent of his or
her hours in a given workweek includes an FLSA-covered clerk who
handles the payroll for a fitness center that leases space in a Federal
agency building as well as the center's other locations that are not
covered by the Executive order. Another such example of a worker who
may qualify for this exclusion if the worker performed work in
connection with covered contracts for less than 20 percent of his or
her hours worked in a given workweek would be a job coach whose wages
are governed by the FLSA who assists FLSA section 14(c) workers in
performing work at a fast food franchise located on a military base as
well as that franchisee's other restaurant locations off the base.
Neither the Executive order nor the exclusion would apply, however, to
an FLSA-covered employee hired by a covered concessionaire to redesign
the storefront sign for a snack shop in a national park unless the
redesign of the sign was called for by the SCA contract itself or
otherwise necessary to the performance of the contract.
As explained above, pursuant to this exclusion, if a covered worker
performs work ``in connection with'' contracts covered by the Executive
order as well as on other work that is not within the scope of the
order during a particular workweek, the Executive Order 14026 minimum
wage would not apply for any hours worked if the number of the
individual's work hours spent performing in connection with the covered
contract is less than 20 percent of that worker's total hours worked in
that workweek. Importantly, however, this rule is only applicable if
the contractor has correctly determined the hours worked and if it
appears from the contractor's properly kept records or other
affirmative proof that the contractor appropriately segregated the
hours worked in connection with the covered contract from other work
not subject to the Executive order for that worker. See, e.g., 29 CFR
4.169, 4.179. As discussed in greater detail in the preamble pertaining
to rate of pay and recordkeeping requirements in Sec. Sec. 23.220 and
23.260, if a covered contractor during any workweek is not exclusively
engaged in performing covered contracts, or if while so engaged it has
workers who spend a portion but not all of their hours worked in the
workweek in performing work on or in connection with such contracts, it
is necessary for the contractor to identify accurately in its records,
or by other means, those periods in each such workweek when the
contractor and each such worker performed work on or in connection with
such contracts. See 29 CFR 4.179.
[[Page 38835]]
In the absence of records adequately segregating non-covered work
from the work performed on or in connection with a covered contract,
all workers working in the establishment or department where such
covered work is performed will be presumed to have worked on or in
connection with the contract during the period of its performance,
unless affirmative proof establishing the contrary is presented.
Similarly, in the absence of such records, a worker performing any work
on or in connection with the contract in a workweek shall be presumed
to have continued to perform such work throughout the workweek, unless
affirmative proof establishing the contrary is presented. Id.
The quantum of affirmative proof necessary to adequately segregate
non-covered work from the work performed on or in connection with a
covered contract--or to establish, for example, that all of a worker's
time associated with a contract was spent performing ``in connection
with'' rather than ``on'' the contract--will vary with the
circumstances. For example, it may require considerably less
affirmative proof to satisfy the 20 percent of hours worked exclusion
with respect to an FLSA-covered accounting clerk who only occasionally
processes an SCA-contract-related invoice than would be necessary to
establish the 20 percent of hours worked exclusion with respect to a
security guard who works on a DBA-covered site at least several hours
each week.
Finally, the Department notes that in calculating hours worked by a
particular worker in connection with covered contracts for purposes of
determining whether this exclusion may apply, contractors must
determine the aggregate amount of hours worked on or in connection with
covered contracts in a given workweek by that worker. For example, if
an FLSA-covered administrative assistant works 40 hours per week and
spends two hours each week handling payroll for each of four separate
SCA contracts, the eight hours that the worker spends performing in
connection with the four covered contracts must be aggregated for that
workweek in order to determine whether the 20 percent of hours worked
exclusion applies; in this example, the worker would be entitled to the
Executive order minimum wage for all eight hours worked in connection
with the SCA contracts because such work constitutes 20 percent of her
total hours worked for that workweek.
Exclusion for contracts that result from a solicitation issued
before January 30, 2022 and that are entered into on or between January
30, 2022 and March 30, 2022: Section 9(b) of Executive Order 14026
provides that as an ``exception'' to the general coverage of new
contracts, where agencies have issued a solicitation before January 30,
2022, and entered into a new contract resulting from such solicitation
within 60 days of such date, such agencies are strongly encouraged but
not required to ensure that the Executive Order 14026 minimum wage
rates are paid under the new contract. 86 FR 22837-38. The order
further provides, however, that if such contract is subsequently
extended or renewed, or an option is subsequently exercised under that
contract, the Executive order 14026 minimum wage requirements will
apply to that extension, renewal, or option. 86 FR 22838. Accordingly,
the Department proposes to insert at Sec. 23.40(g) an exclusion
providing that part 23 does not apply to contracts that result from a
solicitation issued prior to January 30, 2022, and that are entered
into on or between January 30, 2022 and March 30, 2022. For stakeholder
clarity, and consistent with section 9(b) of the order, the proposed
exclusion states that, if such a contract is subsequently extended or
renewed, or an option is subsequently exercised under that contract,
the Executive order and part 23 will apply to that extension, renewal,
or option. The Department notes that, based on a plain reading of the
language of section 9(b) of the order, this exclusion is only
applicable to contracts resulting from solicitations that are issued
prior to January 30, 2022, and that are entered into by March 30, 2022.
Any covered contract entered into on or after March 31, 2022, will be
subject to Executive Order 14026 and part 23 regardless of when such
solicitation was issued. Moreover, the Department notes that this
exclusion does not apply to contracts that are awarded outside the
solicitation process.
Rescission of Executive Order 13838 Exemption for Contracts in
Connection with Seasonal Recreational Services and Seasonal
Recreational Equipment Rental Offered for Public Use on Federal Lands:
As previously discussed, Executive Order 13658 was issued on February
12, 2014, and established a minimum wage rate that applied to the same
four types of Federal contracts to which Executive Order 14026 applies.
On May 25, 2018, Executive Order 13838 amended Executive Order 13658 to
exclude from coverage contracts entered into with the Federal
Government in connection with seasonal recreational services or
seasonal recreational equipment rental for the general public on
Federal lands. On September 26, 2018, the Department implemented
Executive Order 13838 by adding the required exclusion to the
regulations for Executive Order 13658 at 29 CFR 10.4(g). See 83 FR
48537.
Section 6 of Executive Order 14026 revokes Executive Order 13838 as
of January 30, 2022. See 86 FR 22836. Accordingly, as of January 30,
2022, contracts entered into with the Federal Government in connection
with seasonal recreational services or seasonal recreational equipment
rental for the general public on Federal lands will be subject to the
minimum wage requirements of either Executive Order 13658 or Executive
Order 14026 depending on the date that the relevant contract was
entered into, renewed, or extended. (See the preamble discussion
accompanying proposed Sec. 23.30 above for more information regarding
the interaction between Executive Orders 13658 and 14026 with respect
to contract coverage.) Such contracts include contracts in connection
with river running, hunting, fishing, horseback riding, camping,
mountaineering activities, recreational ski services, and youth camps
offered for public use on Federal lands. To effectuate the rescission
of Executive Order 13838, the Department is proposing to remove in its
entirety the exclusion of such contracts set forth at Sec. 10.4(g) in
the regulations implementing Executive Order 13658. Consistent with
such rescission, the Department also declines to exclude such contracts
in part 23.
Section 23.50 Minimum Wage for Federal Contractors and Subcontractors
Proposed Sec. 23.50 sets forth the minimum wage rate requirement
for Federal contractors and subcontractors established in Executive
Order 14026. See 86 FR 22835-36. This section generally discusses the
minimum hourly wage protections provided by the Executive order for
workers performing on or in connection with covered contracts with the
Federal Government, as well as the methodology that the Secretary will
use for determining the applicable minimum wage rate under the
Executive order on an annual basis beginning at least 90 days before
January 1, 2023. The Executive order provides that the minimum wage
beginning January 1, 2023, and annually thereafter, will be an amount
determined by the Secretary. It further provides that such rates be
increased by the annual percentage increase in the CPI for the most
recent month, quarter, or year available as determined by the
Secretary. Consistent with the
[[Page 38836]]
regulations implementing Executive Order 13658, see 29 CFR 10.5, the
Secretary proposes to base such increases on the most recent year
available to minimize the impact of seasonal fluctuations on the
Executive order minimum wage rate. This section also emphasizes that
nothing in the Executive order or part 23 shall excuse noncompliance
with any applicable Federal or state prevailing wage law or any
applicable law or municipal ordinance establishing a minimum wage
higher than the minimum wage established under the Executive order and
part 23. See 86 FR 22836.
Finally, the Department proposes at Sec. 23.50(d) to add language
briefly discussing the relationship between Executive Order 13658 and
this order. Consistent with section 6 of Executive Order 14026, see 86
FR 22836-37, the proposed provision would explain that, as of January
30, 2022, Executive Order 13658 is superseded to the extent that it is
inconsistent with Executive Order 14026 and part 23. The Department
proposes to explain that, unless otherwise excluded by Sec. 23.40,
workers performing on or in connection with a covered new contract, as
defined in Sec. 23.20, must be paid the minimum hourly wage rate
established by Executive Order 14026 and part 23 rather than the lower
hourly minimum wage rate established by Executive Order 13658 and its
regulations. A more detailed discussion of the interaction between the
Executive orders appears above in the discussion of contract coverage
under Sec. 23.30.
Section 23.60 Antiretaliation
Proposed Sec. 23.60 establishes an antiretaliation provision
stating that it shall be unlawful for any person to discharge or in any
other manner discriminate against any worker because such worker has
filed any complaint or instituted or caused to be instituted any
proceeding under or related to Executive Order 14026 or part 23, or has
testified or is about to testify in any such proceeding. Consistent
with the Executive Order 13658 regulations, see 29 CFR 10.6, this
language is derived from the FLSA's antiretaliation provision set forth
at 29 U.S.C. 215(a)(3) and is consistent with the Executive order's
direction to adopt enforcement mechanisms as consistent as practicable
with the FLSA, SCA, or DBA. The Department believes that such a
provision will help ensure effective enforcement of Executive Order
14026. Consistent with the Supreme Court's observation in interpreting
the scope of the FLSA's antiretaliation provision, enforcement of
Executive Order 14026 will depend ``upon information and complaints
received from employees seeking to vindicate rights claimed to have
been denied.'' Kasten v. Saint-Gobain Performance Plastics Corp., 563
U.S. 1, 11 (2011) (internal quotation marks omitted). Accordingly, the
Department proposes to include an antiretaliation provision based on
the FLSA's antiretaliation provision. See 29 U.S.C. 215(a)(3).
Importantly, and consistent with the Supreme Court's interpretation of
the FLSA's antiretaliation provision, the Department's proposed rule
would protect workers who file oral as well as written complaints. See
Kasten, 563 U.S. at 17.
Moreover, as under the FLSA, the proposed antiretaliation provision
under part 23 would protect workers who complain to the Department as
well as those who complain internally to their employers about alleged
violations of the order or part 23. See, e.g., Greathouse v. JHS Sec.
Inc., 784 F.3d 105, 111-16 (2d Cir. 2015); Minor v. Bostwick Labs.
Inc., 669 F.3d 428, 438 (4th Cir. 2012); Hagan v. Echostar Satellite,
LLC, 529 F.3d 617, 626 (5th Cir. 2008); Lambert v. Ackerley, 180 F.3d
997, 1008 (9th Cir. 1999) (en banc); Valerio v. Putnam Assocs. Inc.,
173 F.3d 35, 43 (1st Cir. 1999); EEOC v. Romeo Comty Sch., 976 F.2d
985, 989 (6th Cir. 1992). The Department also notes that the
antiretaliation provision set forth in the proposed rule, like the
FLSA's antiretaliation provision, would apply in situations where there
is no current employment relationship between the parties; for example,
it would protect a worker from retaliation by a prospective or former
employer, or by a person acting directly or indirectly in the interest
of an employer. See Arias v. Raimondo, 860 F.3d 1185 (9th Cir. 2017);
see also WHD Fact Sheet #77A (``Prohibiting Retaliation Under the Fair
Labor Standards Act (FLSA)''), available at <a href="https://www.dol.gov/agencies/whd/fact-sheets/77a-flsa-prohibiting-retaliation">https://www.dol.gov/agencies/whd/fact-sheets/77a-flsa-prohibiting-retaliation</a>.
Section 23.70 Waiver of Rights
Proposed Sec. 23.70 provides that workers cannot waive, nor may
contractors induce workers to waive, their rights under Executive Order
14026 or part 23. The Supreme Court has consistently concluded that an
employee's rights and remedies under the FLSA, including payment of
minimum wage and back wages, cannot be waived or abridged by contract.
See, e.g., Tony & Susan Alamo Found. v. Sec'y of Labor, 471 U.S. 290,
302 (1985); Barrentine v. Arkansas-Best Freight Sys., Inc., 450 U.S.
728, 740 (1981); D.A. Schulte, Inc. v. Gangi, 328 U.S. 108, 112-16
(1946); Brooklyn Sav. Bank v. O'Neil, 324 U.S. 697, 706-07 (1945). The
Supreme Court has reasoned that the FLSA was intended to establish a
``uniform national policy of guaranteeing compensation for all work''
performed by covered employees. Jewell Ridge Coal Corp. v. Local No.
6167, United Mine Workers, 325 U.S. 161, 167 (1945) (internal quotation
marks omitted). Consequently, the Court has held that ``[a]ny custom or
contract falling short of that basic policy, like an agreement to pay
less than the minimum wage requirements, cannot be utilized to deprive
employees of their statutory rights.'' Id. (internal quotation marks
omitted). In Barrentine, the Supreme Court reaffirmed the ``nonwaivable
nature'' of these fundamental FLSA protections and stated that ``FLSA
rights cannot be abridged by contract or otherwise waived because this
would `nullify the purposes' of the statute and thwart the legislative
policies it was designed to effectuate.'' 450 U.S. at 740 (quoting
Brooklyn Sav. Bank, 324 U.S. at 707). Moreover, FLSA rights are not
subject to waiver because they serve an important public interest by
protecting employers against unfair methods of competition in the
national economy. See Tony & Susan Alamo Found., 471 U.S. at 302.
Releases and waivers executed by employees for unpaid wages (and fringe
benefits) due them under the SCA are similarly without legal effect. 29
CFR 4.187(d). Because the public policy interests underlying the
issuance of the Executive order would be similarly thwarted by
permitting workers to waive, or contractors to induce workers to waive,
their rights under Executive Order 14026 or part 23, proposed Sec.
23.70 makes clear that such waiver of rights is impermissible.
Section 23.80 Severability
Section 7 of Executive Order 14026 states that if any provision of
the order, or the application of any such provision to any person or
circumstance, is held to be invalid, the remainder of the order and the
application shall not be affected. See 86 FR 22837. Consistent with
this directive, the Department proposes to include a severability
clause in part 23. Proposed Sec. 23.80 explains that, if any provision
of part 23 is held to be invalid or unenforceable by its terms, or as
applied to any person or circumstance, or stayed pending further agency
action, the provision shall be construed so as to continue to give the
maximum effect to the provision permitted by law, unless such holding
shall be one of utter invalidity or
[[Page 38837]]
unenforceability, in which event the provision shall be severable from
part 23 and shall not affect the remainder thereof.
Subpart B--Federal Government Requirements
The Department proposes subpart B of part 23 to establish the
requirements for the Federal Government to implement and comply with
Executive Order 14026. The Department proposes Sec. 23.110 to address
contracting agency requirements and proposes Sec. 23.120 to address
the requirements placed upon the Department.
Section 23.110 Contracting Agency Requirements
Proposed Sec. 23.110(a) would implement section 2 of Executive
Order 14026, which directs that executive departments and agencies must
include a contract clause in any new contracts or solicitations for
contracts covered by the Executive order. 86 FR 22835. The proposed
section describes the basic function of the contract clause, which is
to require that workers performing work on or in connection with
covered contracts be paid the applicable Executive order minimum wage.
The proposed section states that for all contracts subject to Executive
Order 14026, except for procurement contracts subject to the FAR, the
contracting agency must include the Executive order minimum wage
contract clause set forth in appendix A of part 23 in all covered
contracts and solicitations for such contracts, as described in Sec.
23.30. It further states that the required contract clause directs, as
a condition of payment, that all workers performing work on or in
connection with covered contracts must be paid the applicable,
currently effective minimum wage under Executive Order 14026 and Sec.
23.50. The proposed section additionally provides that for procurement
contracts subject to the FAR, contracting agencies must use the clause
that will be set forth in the FAR to implement this rule. The FAR
clause will accomplish the same purposes as the clause set forth in
appendix A and be consistent with the requirements set forth in this
rule.
As the Department noted in the rulemaking for Executive Order
13658, including the full contract clause in a covered contract is an
effective and practical means of ensuring that contractors receive
notice of their obligations under the Executive order. See 79 FR 60668.
Therefore, the Department again prefers that covered contracts include
the contract clause in full. At the same time, there will be instances
in which a contracting agency, or a contractor, does not include the
entire contract clause verbatim in a covered contract, but the facts
and circumstances establish that the contracting agency, or contractor,
sufficiently apprised a prime or lower-tier contractor that the
Executive order and its requirements apply to the contract. It will be
appropriate to find in such circumstances that the full contract clause
has been properly incorporated by reference. See Nat'l Electro-
Coatings, Inc. v. Brock, Case No. C86-2188, 1988 WL 125784 (N.D. Ohio
1988); In re Progressive Design & Build, Inc., WAB Case No. 87-31, 1990
WL 484308 (WAB Feb. 21, 1990). The Department notes, for example, that
the full contract clause will be deemed to have been incorporated by
reference in a covered contract if the contract provides that
``Executive Order 14026 (Increasing the Minimum Wage for Federal
Contractors), and its implementing regulations, including the
applicable contract clause, are incorporated by reference into this
contract as if fully set forth in this contract,'' with a citation to a
web page that contains the contract clause in full, to the provision of
the Code of Federal Regulations containing the contract clause set
forth at appendix A, or to the provision of the FAR containing the
contract clause promulgated by the FARC to implement Executive Order
14026 and this rule.
The Department's decision to include verbal agreements as part of
its definition of the term ``contract'' derives from the SCA's
regulations. See 29 CFR 4.110. Under the SCA, a contract may be
embodied in a verbal agreement, see id., notwithstanding the regulatory
obligation to include the SCA contract clause found at 29 CFR 4.6 in
the contract. The purpose of including verbal agreements in the
definition of contract and contract-like instrument is to ensure that
the Executive order's minimum wage protections apply in instances where
the contracting parties, for whatever reason, rely on a verbal rather
than written contract. This is consistent with the regulations
implementing Executive Order 13658. See 29 CFR 10.2. As noted, such
instances are likely to be exceedingly rare, but workers should not be
deprived of the Executive order's minimum wage because contracting
parties neglected to memorialize their understanding in a written
contract.
As discussed more fully later in this preamble, the Department
believes requiring non-procurement contractors potentially to become
familiar with distinct Executive order contract clauses whenever they
contract with more than one Federal agency, as opposed to the single,
uniform clause attached as appendix A, imposes an unnecessary burden.
The Department additionally believes that requiring such contractors to
use multiple contract clauses could result in confusion, potentially
undercutting the Department's mandate under the Executive order to
adopt regulations that obtain compliance with the order.
Proposed Sec. 23.110(a) requires the contracting agency to include
the Executive order minimum wage contract clause set forth in appendix
A in all covered contracts and solicitations for such contracts, as
described in Sec. 23.30, except for procurement contracts subject to
the FAR. For procurement contracts subject to the FAR, contracting
agencies shall use the clause set forth in the FAR developed to
implement this rule; that clause must both accomplish the same purposes
as the clause set forth in appendix A and be consistent with the
requirements set forth in this rule.
Proposed Sec. 23.110(b) states the consequences in the event that
a contracting agency fails to include the contract clause in a covered
contract. Proposed Sec. 23.110(b) provides that if a contracting
agency made an erroneous determination that Executive Order 14026 or
part 23 did not apply to a particular contract or failed to include the
applicable contract clause in a contract to which the Executive order
applies, the contracting agency, on its own initiative or within 15
calendar days of notification by an authorized representative of the
Department, must include the clause in the contract retroactive to
commencement of performance under the contract through the exercise of
any and all authority that may be needed. The Department notes that the
Administrator possesses analogous authority under the DBA, see 29 CFR
1.6(f), and it believes that a similar mechanism for addressing an
agency's failure to include the contract clause in a contract subject
to the Executive order would enhance its ability to obtain compliance
with the Executive order.
Where a contract clause should have been originally inserted by the
contracting agency, a contractor is entitled to an adjustment where
necessary to pay any necessary additional costs when a contracting
agency initially omits and then subsequently includes the contract
clause in a covered contract. This approach, which is consistent with
the SCA's implementing regulations, see 29 CFR 4.5(c), is therefore
reflected in revised Sec. 23.440(e). The Department recognizes that
the mechanics of
[[Page 38838]]
providing such an adjustment may differ between covered procurement
contracts and the non-procurement contracts that the Department's
contract clause covers. With respect to covered non-procurement
contracts, the Department believes that the authority conferred on
agencies that enter into such contracts under section 4(b) of the
Executive order includes the authority to provide such an adjustment.
The Department notes that such an adjustment is not warranted under the
Executive order or part 23 when a contracting agency includes the
applicable Executive order contract clause but fails to include an
applicable SCA or DBA wage determination. This proposed rule would
require inclusion of a contract clause, not a wage determination, in
covered contracts; thus, unlike the DBA's regulations at 29 CFR 1.6(f),
it is a contracting agency's failure to include the required contract
clause, not a failure to include a wage determination, that would
trigger the entitlement to an adjustment as described in this
paragraph.
Proposed Sec. 23.110(c) addresses the obligations of a contracting
agency in the event that the contract clause has been included in a
covered contract but the contractor may not have complied with its
obligations under the Executive order or part 23. Specifically,
proposed Sec. 23.110(c) provides that the contracting agency must,
upon its own action or upon written request of an authorized
representative of the Department, withhold or cause to be withheld from
the prime contractor under the contract or any other Federal contract
with the same prime contractor, so much of the accrued payments or
advances as may be necessary to pay workers the full amount of wages
required by the Executive order. Both the SCA and DBA provide for
withholding to ensure the availability of monies for the payment of
back wages to covered workers when a contractor or subcontractor has
failed to pay the full amount of required wages. 29 CFR 4.6(i); 29 CFR
5.5(a)(2). Withholding likewise is an appropriate remedy under the
Executive order for all covered contracts because the order directs the
Department to adopt SCA and DBA enforcement processes to the extent
practicable and to exercise authority to obtain compliance with the
order. 86 FR 22836. Consistent with withholding procedures under the
SCA and DBA, proposed Sec. 23.110(c) allows the contracting agency and
the Department to withhold or cause to be withheld funds from the prime
contractor not only under the contract on which covered workers were
not paid the Executive order minimum wage, but also under any other
contract that the prime contractor has entered into with the Federal
Government. Finally, the Department notes that a withholding remedy is
consistent with the requirement in section 2(a) of the Executive order
that compliance with the specified obligations is an express
``condition of payment'' to a contractor or subcontractor. 86 FR 22835.
Proposed Sec. 23.110(d) describes a contracting agency's
responsibility to forward to the WHD any complaint alleging a
contractor's non-compliance with Executive Order 14026, as well as any
information related to the complaint. The Department recognizes that,
in addition to filing complaints with WHD, some workers or other
interested parties may file formal or informal complaints concerning
alleged violations of the Executive order or part 23 with contracting
agencies. Proposed Sec. 23.110(d) therefore specifically requires the
contracting agency to transmit the complaint-related information
identified in Sec. 23.110(d)(1)(ii)(A)-(E) to the WHD's Division of
Government Contracts Enforcement within 14 calendar days of receipt of
a complaint alleging a violation of the Executive order or part 23, or
within 14 calendar days of being contacted by the WHD regarding any
such complaint. This language is consistent with the Department's
regulations implementing Executive Order 13658. See 29 CFR 10.11(d).
The Department believes adoption of the language in proposed Sec.
23.110(d), which includes an obligation to send such complaint-related
information to WHD even absent a specific request (e.g., when a
complaint is filed with a contracting agency rather than with the WHD),
is appropriate because prompt receipt of such information from the
relevant contracting agency will allow the Department to fulfill its
charge under the order to implement enforcement mechanisms for
obtaining compliance with the order. 86 FR 22836.
Section 23.120 Department of Labor Requirements
Proposed Sec. 23.120 addresses the Department's requirements under
the Executive order. The order requires the Secretary to establish a
minimum wage that contractors must pay to workers performing on or in
connection with covered contracts. 86 FR 22835. Proposed Sec.
23.120(a) sets forth the Secretary's obligation to establish the
Executive order minimum wage on an annual basis in accordance with the
order.
Proposed Sec. 23.120(b) explains that the Secretary will determine
the applicable minimum wages on an annual basis by using the method set
forth in proposed Sec. 23.50(b). The Department notes that contractors
concerned about potential increases in the minimum wage provided under
the Executive order may consult the CPI-W, which the Federal Government
publishes monthly, to monitor the likely magnitude of the annual
increase. Furthermore, the Department proposes to include language in
the required contract clause (provided in appendix A) that, if
appropriate, requires contractors to be compensated only for the
increase in labor costs resulting from the annual inflation increases
in the Executive order minimum wage beginning on January 1, 2023. This
proposed provision in the contract clause should mitigate any potential
contractor concerns about unanticipated financial burdens associated
with annual increases in the Executive order minimum wage.
Proposed Sec. 23.120(c) explains how the Secretary will provide
notice to contractors and subcontractors of the applicable Executive
order minimum wage on an annual basis. The proposed section indicates
that the WHD Administrator will publish a notice in the Federal
Register on an annual basis at least 90 days before any new minimum
wage is to take effect. Additionally, the proposed provision states
that the Administrator will publish and maintain on <a href="https://alpha.sam.gov/content/wage-determinations">https://alpha.sam.gov/content/wage-determinations</a>, or any successor website,
the applicable minimum wage to be paid to workers performing on or in
connection with covered contracts, including the cash wage to be paid
to tipped employees. The proposed section further states that the
Administrator may also publish the applicable wage to be paid to
workers performing on or in connection with covered contracts,
including the cash wage to be paid to tipped employees, on an annual
basis at least 90 days before any such minimum wage is to take effect
in any other manner the Administrator deems appropriate.
Consistent with the rulemaking implementing Executive Order 13658,
see 29 CFR 10.12(c), the Department notes its intent to publish a
prominent general notice on SCA and DBA wage determinations, stating
the Executive Order 14026 minimum wage and that it applies to all DBA-
and SCA-covered contracts. The Department intends to update this
general notice on all DBA and SCA wage determinations annually to
reflect any inflation-based
[[Page 38839]]
adjustments to the Executive order minimum wage. As discussed in more
detail in the preamble section pertaining to proposed Sec. 23.290 in
subpart C, the Department also proposes developing a poster regarding
the Executive order minimum wage for contractors with FLSA-covered
workers performing on or in connection with a covered contract, as it
did in response to Executive Order 13658. See 79 FR 60670. The
Department proposes requiring that contractors provide notice of the
Executive order minimum wage to FLSA-covered workers performing work on
or in connection with covered contracts via posting of the poster that
will be provided by the Department. This notice provision is discussed
below in the preamble section pertaining to proposed Sec. 23.290, and
is also consistent with the rule implementing Executive Order 13658.
See 29 CFR 10.29(b)
Consistent with the regulations implementing Executive Order 13658,
proposed Sec. 23.120(d) addresses the Department's obligation to
notify a contractor in the event of a request for the withholding of
funds. Under proposed Sec. 23.110(c), the WHD Administrator may direct
that payments due on the covered contract or any other contract between
the contractor and the Federal Government may be withheld as may be
considered necessary to pay unpaid wages. If the Administrator
exercises his or her authority under Sec. 23.110(c) to request
withholding, proposed Sec. 23.120(d) requires the Administrator or the
contracting agency to notify the affected prime contractor of the
Administrator's withholding request to the contracting agency. The
Department notes that both the Administrator and the contracting agency
may notify the contractor in the event of a withholding even though
notice is required from only one of them.
Subpart C--Contractor Requirements
Proposed subpart C articulates the requirements that contractors
must comply with under Executive Order 14026 and part 23. The subpart
sets forth the general obligation to pay no less than the applicable
Executive order minimum wage to workers for all hours worked on or in
connection with the covered contract, and to include the Executive
order minimum wage contract clause in all contracts and subcontracts of
any tier thereunder. Proposed subpart C also sets forth contractor
requirements pertaining to permissible deductions, frequency of pay,
and recordkeeping, as well as a prohibition against taking kickbacks
from wages paid on covered contracts.
Section 23.210 Contract Clause
Proposed Sec. 23.210(a) requires the contractor, as a condition of
payment, to abide by the terms of the Executive order minimum wage
contract clause described in proposed Sec. 23.110(a). The contract
clause contains the obligations with which the contractor must comply
on the covered contract and is reflective of the contractor's
requirements as stated in the proposed regulations. Proposed Sec.
23.210(b) articulates the obligation that contractors and
subcontractors must insert the Executive order minimum wage contract
clause in any covered subcontracts and must require, as a condition of
payment, that subcontractors include the clause in all lower-tier
subcontracts. Under the proposal, the prime contractor and upper-tier
contractor would be responsible for compliance by any covered
subcontractor or lower-tier subcontractor with the Executive order
minimum wage contract clause. This responsibility on the part of prime
and upper-tier contractors for subcontractor compliance parallels that
of the SCA, DBA, and Executive Order 13658. See 29 CFR 4.114(b) (SCA);
29 CFR 5.5(a)(6) (DBA); 29 CFR 10.21 (Executive Order 13658).
Finally, the Department notes that, consistent with the rulemaking
implementing Executive Order 13658, a contractor under part 23 is
responsible for compliance by all covered lower-tier subcontractors.
This obligation applies whether or not the contractor has included the
Executive order contract clause, regardless of the number of covered
lower-tier subcontractors, and regardless of how many levels of
subcontractors separate the responsible prime or upper-tier contractor
from the subcontractor that failed to comply with the Executive order.
Section 23.220 Rate of Pay
Proposed Sec. 23.220 addresses contractors' obligations to pay the
Executive order minimum wage to workers performing work on or in
connection with a covered contract under Executive Order 14026.
Proposed Sec. 23.220(a) states the general obligation that contractors
must pay workers the applicable minimum wage under Executive Order
14026 for all hours spent performing work on or in connection with the
covered contract. The proposed section also provides that workers
performing work on or in connection with contracts covered by the
Executive order must receive not less than the minimum hourly wage of
$15.00 beginning January 30, 2022. Under the proposal, in order to
comply with the Executive order's minimum wage requirement, a
contractor could compensate workers on a daily, weekly, or other time
basis (no less often than semi-monthly), or by piece or task rates, so
long as the measure of work and compensation used, when translated or
reduced by computation to an hourly basis each workweek, will provide a
rate per hour that is no lower than the applicable Executive order
minimum wage. Whatever system of payment is used, however, must ensure
that each hour of work in performance of the contract is compensated at
not less than the required minimum rate. Failure to pay for certain
hours at the required rate cannot be transformed into compliance with
the Executive order or part 23 by reallocating portions of payments
made for other hours that are in excess of the specified minimum.
In determining whether a worker is performing within the scope of a
covered contract, the Department proposes that all workers who are
engaged in working on or in connection with the contract, either in
performing the specific services called for by its terms or in
performing other duties necessary to the performance of the contract,
are subject to the Executive order and part 23 unless a specific
exemption is applicable. This standard was derived from the SCA's
implementing regulations at 29 CFR 4.150, and is consistent with
Executive Order 13658's implementing regulations at 29 CFR 10.22.
Because workers covered by the Executive order are entitled to its
minimum wage protections for all hours spent performing work on or in
connection with a covered contract, a computation of their hours worked
on or in connection with the covered contract in each workweek is
essential. See 29 CFR 4.178. The proposed rule provides that, for
purposes of the Executive order, the hours worked by a worker generally
include all periods in which the worker is suffered or permitted to
work, whether or not required to do so, and all time during which the
worker is required to be on duty or to be on the employer's premises or
to be at a prescribed workplace. Id. The hours worked which are subject
to the minimum wage requirement of the Executive order are those in
which the worker is engaged in performing work on or in connection with
a contract subject to the Executive order. Id. However, unless such
hours are adequately segregated or there is affirmative proof to the
contrary that such work did not continue throughout
[[Page 38840]]
the workweek, as discussed below, compensation in accordance with the
Executive order will be required for all hours worked in any workweek
in which the worker performs any work on or in connection with a
contract covered by the Executive order. Id.
The Department further notes that, as explained in the rulemaking
to implement Executive Order 13658, 79 FR 60672, in situations where
contractors are not exclusively engaged in contract work covered by
Executive Order 14026, and there are adequate records segregating the
periods in which work was performed on or in connection with contracts
subject to the order from periods in which other work was performed,
the minimum wage requirement of Executive Order 14026 need not be paid
for hours spent on work not covered by the order. See 29 CFR 4.169,
4.178, and 4.179. However, in the absence of records adequately
segregating non-covered work from the work performed on or in
connection with the covered contract, all workers working in the
establishment or department where such covered work is performed shall
be presumed to have worked on or in connection with the contract during
the period of its performance, unless affirmative proof establishing
the contrary is presented. Id. Similarly, a worker performing any work
on or in connection with the covered contract in a workweek shall be
presumed to have continued to perform such work throughout the
workweek, unless affirmative proof establishing the contrary is
presented. Id.
The Department notes in this proposed rule that if a contractor
desires to segregate covered work from non-covered work under the
Executive order for purposes of applying the minimum wage established
in the order, the contractor must identify such covered work accurately
in its records or by other means. The Department believes that the
principles, processes, and practices that it uses in its implementing
regulations under the SCA, which incorporate the principles applied
under the FLSA as set forth in 29 CFR part 785, will be useful to
contractors in determining and segregating hours worked on contracts
with the Federal Government subject to the Executive order. See 29 CFR
4.169, 4.178, and 4.179; WHD FOH ]] 14c07, 14g00-01.\8\ In this regard,
an arbitrary assignment of time on the basis of a formula, as between
covered and non-covered work, is not sufficient. However, if the
contractor does not wish to keep detailed hour-by-hour records for
segregation purposes under the Executive order, records can be
segregated on the wider basis of departments, work shifts, days, or
weeks in which covered work was performed. For example, if on a given
day no work covered by the Executive order was performed by a
contractor, that day could be segregated and shown in the records. See
WHD FOH ] 14g00.
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\8\ In the rulemaking implementing Executive Order 13658, the
Department noted that contractors subject to the Executive order are
likely already familiar with these segregation principles and
should, as a matter of usual business practices, already have
recordkeeping systems in place that enable the segregation of hours
worked on different contracts or at different locations. 79 FR
60672, n.8. The Department further expressed its belief that such
systems will enable contractors to identify and pay for hours worked
subject to the Executive order without having to employ additional
systems or processes. Id.
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Finally, the Department notes that the Supreme Court has held that
when an employer has failed to keep adequate or accurate records of
employees' hours under the FLSA, employees should not effectively be
penalized by denying them recovery of back wages on the ground that the
precise extent of their uncompensated work cannot be established. See
Anderson v. Mt. Clemens Pottery Co., 328 U.S. 680, 687 (1946).
Specifically, the Supreme Court concluded that where an employer has
not maintained adequate or accurate records of hours worked, an
employee need only prove that ``he has in fact performed work for which
he was improperly compensated'' and produce ``sufficient evidence to
show the amount and extent of that work as a matter of just and
reasonable inference.'' Id. Once the employee establishes the amount of
uncompensated work as a matter of ``just and reasonable inference,''
the burden then shifts to the employer ``to come forward with evidence
of the precise amount of work performed or with evidence to negative
the reasonableness of the inference to be drawn from the employee's
evidence.'' Id. at 687-88. If the employer fails to meet this burden,
the court may award damages to the employee ``even though the result be
only approximate.'' Id. at 688. These principles for determining hours
worked and accompanying back wage liability apply with equal force to
the Executive order.
The Department notes that the applicable minimum wage rate under
Executive Order 14026 is subject to annual increases for the duration
of multi-year contracts. As was the case under Executive Order 13658,
nothing in Executive Order 14026 suggests that the minimum wage
requirement can remain stagnant during the span of a covered multi-year
contract. See 79 FR 60673 (discussing Executive Order 13658). Allowing
the applicable minimum wage to increase throughout the duration of
multi-year contracts fulfills the Executive order's intent to raise the
minimum wage of workers according to annual increases in the CPI-W. It
additionally ensures simultaneous application of the same minimum wage
rate to all covered workers. However, as mentioned in the preamble
section for Sec. 23.110(b) and discussed in further detail in relation
to Sec. 23.440(e), the language of the contract clause contained in
appendix A requires contracting agencies, if appropriate, to ensure the
contractor is compensated only for the increase in labor costs
resulting from the annual inflation increases in the Executive Order
14026 minimum wage beginning on January 1, 2023.
Proposed Sec. 23.220(a) explains that the contractor's obligation
to pay the applicable minimum wage to workers on or in connection with
covered contracts does not excuse noncompliance with any applicable
Federal or state prevailing wage law, or any applicable law or
municipal ordinance establishing a minimum wage higher than the minimum
wage established under Executive Order 14026. This provision implements
section 2(c) of the Executive order. 86 FR 22836.
The Department notes that the minimum wage requirements of
Executive Order 14026 are separate and distinct legal obligations from
the prevailing wage requirements of the SCA and the DBA. If a contract
is covered by the SCA or DBA and the wage rate on the applicable SCA or
DBA wage determination for the classification of work the worker
performs is less than the applicable Executive order minimum wage, the
contractor must pay the Executive order minimum wage in order to comply
with the Order and part 23. If, however, the applicable SCA or DBA
prevailing wage rate exceeds the Executive order minimum wage rate, the
contractor must pay that prevailing wage rate to the SCA- or DBA-
covered worker in order to be in compliance with the SCA or DBA.\9\
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\9\ The Department further notes that if a contract is covered
by a state prevailing wage law that establishes a higher wage rate
applicable to a particular worker than the Executive order minimum
wage, the contractor must pay that higher prevailing wage rate to
the worker. Section 2(c) of the order expressly provides that it
does not excuse noncompliance with any applicable state prevailing
wage law or any applicable law or municipal ordinance establishing a
minimum wage higher than the Executive order minimum wage.
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[[Page 38841]]
The Department also notes that the minimum wage requirements of
Executive Order 14026 are also separate and distinct from the
commensurate wage rates under 29 U.S.C. 214(c). If the commensurate
wage rate paid to a worker performing on or in connection with a
covered contract whose wages are calculated pursuant to a special
certificate issued under 29 U.S.C. 214(c), whether hourly or piece
rate, is less than the Executive Order 14026 minimum wage, the
contractor must pay the Executive Order 14026 minimum wage rate to
achieve compliance with the order. The Department notes that if the
commensurate wage due under the certificate is greater than the
Executive Order 14026 minimum wage, the contractor must pay the worker
the greater commensurate wage. Paragraph (b)(5) of the contract clause
states this point explicitly. A more detailed discussion of that
provision is included in the preamble section for appendix A.
As in the rulemaking implementing Executive Order 13658, the
Department notes that in the event that a collectively bargained wage
rate is below the applicable DBA rate, a DBA-covered contractor must
pay no less than the applicable DBA rate to covered workers on the
project. See 79 FR 60673. Although a successor contractor on an SCA-
covered contract is required only to pay wages and fringe benefits not
less than those contained in the predecessor contractor's CBA even if
an otherwise applicable area-wide SCA wage determination contains
higher wage and fringe benefit rates, that requirement is derived from
a specific statutory provision that expressly bases SCA obligations on
the predecessor contractor's CBA wage and fringe benefit rates in
particular circumstances. See 41 U.S.C. 6707(c); 29 CFR 4.1b. There is
no similar indication in the Executive order of an intent to permit a
CBA rate lower than the Executive order minimum wage rate to govern the
wages of workers covered by the order. The Department accordingly
proposes that the Executive order minimum wage will apply to a covered
contract even if the contractor has negotiated a CBA wage rate lower
than the order's minimum wage.
Proposed Sec. 23.220(b) explains how a contractor's obligation to
pay the applicable Executive order minimum wage applies to workers who
receive fringe benefits. It proposes that a contractor may not
discharge any part of its minimum wage obligation under the Executive
order by furnishing fringe benefits or, with respect to workers whose
wages are governed by the SCA, the cash equivalent thereof. Under the
proposed rule, contractors must pay the Executive order minimum wage
rate in monetary wages, and may not receive credit for the cost of
fringe benefits furnished.
Executive Order 14026 increases, initially to $15.00, ``the hourly
minimum wage'' paid by contractors with the Federal Government. 86 FR
22835. By repeatedly referencing that it is establishing a higher
hourly minimum wage, without any reference to fringe benefits, the text
of the Executive order makes clear that a contractor cannot discharge
its minimum wage obligation by furnishing fringe benefits. This
interpretation is consistent with the SCA, which does not permit a
contractor to meet its minimum wage obligation through the furnishing
of fringe benefits, but rather imposes distinct ``minimum wage'' and
``fringe benefit'' obligations on contractors. 41 U.S.C. 6703(1)-(2);
29 CFR 4.177(a). Similarly, the FLSA does not allow a contractor to
meet its minimum wage obligation 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), Executive Order 14026 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, and the Department's
regulations implementing Executive Order 13658, 29 CFR 10.22(b),
proposed Sec. 23.220(b) precludes a contractor from discharging its
minimum wage obligation by furnishing fringe benefits.
Proposed Sec. 23.220(b) also prohibits a contractor from
discharging its Executive order minimum wage obligation to workers
whose wages are governed by the SCA by furnishing the cash equivalent
of fringe benefits. As noted, the SCA imposes distinct ``minimum wage''
and ``fringe benefit'' obligations on contractors. 41 U.S.C. 6703(1)-
(2); 29 CFR 4.177(a). A contractor cannot satisfy any portion of its
SCA minimum wage obligation by furnishing fringe benefits or their cash
equivalent. Id. Consistent with the treatment of fringe benefits or
their cash equivalent under the SCA, Sec. 23.220(b) of this proposed
rule does not allow contractors to discharge any portion of their
minimum wage obligation under the Executive order to workers whose
wages are governed by the SCA through the provision of either fringe
benefits or their cash equivalent.
Proposed Sec. 23.220(c) states that a contractor may satisfy the
wage payment obligation to a tipped employee under the Executive order
through a combination of an hourly cash wage and a credit based on tips
received by such employee pursuant to the provisions in proposed Sec.
23.280.
Section 23.230 Deductions
Proposed Sec. 23.230 explains that deductions that reduce a
worker's wages below the E
[…truncated; see source link]Indexed from Federal Register on July 22, 2021.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.